INDEMNIFICATION AGREEMENT
Indemnification Agreement dated as of __________, 1997 by and among
BEC Group, Inc., a Delaware corporation ("BEC"), BILC Acquisition Corp., a
Delaware corporation, a wholly owned subsidiary of BEC ("Acquisition"), and
Bolle Inc., a Delaware corporation ("Bolle").
WHEREAS, BEC has determined to transfer to Bolle assets and
liabilities pursuant to the Xxxx of Sale and Assignment Agreement between BEC
and Bolle which will be dated as of October 1, 1997 a copy of which is attached
hereto as Exhibit 1 (the "Contribution Agreement"), and to distribute to the
holders of BEC common stock all of BEC's interest in Bolle (the "Spinoff"), and
the consummation of the Spinoff prior to the consummation of the Merger (as
defined below) is a condition precedent to the consummation of the Merger;
WHEREAS, BEC, Acquisition and ILC Technology, Inc. a California
corporation ("ILCT"), have previously entered into an Agreement and Plan of
Merger (the "Merger Agreement") dated October 30, 1997, a copy of which is
attached hereto as Exhibit 2, providing for the merger of ILCT with and into
Acquisition immediately after the consummation of the Spinoff and satisfaction
of the other conditions contained in the Merger Agreement (the "Merger");
WHEREAS, the closing of the Merger is conditioned upon the execution
of this Agreement by the parties;
WHEREAS, the parties hereto desire to enter into this Agreement in
consideration for, among other things, the benefits resulting from the transfer
to Bolle by BEC of various assets pursuant to the Contribution Agreement and in
satisfaction of the closing condition contained in the Merger Agreement;
WHEREAS, BEC and Acquisition desire to enter into this Agreement in
consideration for, among other things, the assumption of certain liabilities by
Bolle pursuant to the Contribution Agreement and the satisfaction of the
aforementioned closing condition; and
WHEREAS, the parties to this Agreement have determined that it is
necessary and desirable to set forth certain agreements that will govern
various tax matters, indemnity matters and other matters that may arise in
connection with the Spinoff;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions and covenants contained in this Agreement, the parties
agree as follows:
SECTION 1. Definitions. The following terms shall have the following
definitions:
"Bolle Group" shall have the meaning as defined in the Merger
Agreement.
"Consolidated Net Worth" of a person or entity means the consolidated
shareholders' equity in such person or entity calculated in accordance with
generally accepted accounting principles, applied on a basis consistent with
past practices and consistent with those applied in
preparing BEC's consolidated financial statements and Bolle's consolidated
financial statements.
"Environmental Laws" shall have the meaning as defined in the Merger
Agreement.
"Indemnification Period" shall mean from the date of the Spinoff until
June 30, 2000 with respect to all Losses for which indemnification is provided
pursuant to this Agreement, other than (i) Losses indemnified pursuant to
Section 2(a)(iii) hereunder in which case the "Indemnification Period" shall be
seven (7) years, or (ii) Losses indemnified against or arising as a result of
or in connection with Taxes which are the responsibility of the Indemnifying
Parties pursuant to Section 3 hereof, in which case the "Indemnification
Period" shall be the full period of any applicable statutes of limitations
(giving effect to any waiver, mitigation or extension thereof).
"Indemnified Parties" means BEC and Acquisition, together with any and
all other Subsidiaries and affiliates of BEC other than members of the Bolle
Group.
"Indemnifying Parties" means, jointly and severally, Bolle and such
other persons required to become Indemnifying Parties pursuant to this
Agreement.
"Loss" or "Losses" means any losses, claims, damages, deficiencies,
liabilities, costs and expenses (including reasonable expenses of investigation
and reasonable attorney's fees and disbursements), net of tax benefits received
as a result of such Loss and net of any insurance recoveries actually received
to the extent such recoveries do not adversely affect coverage under or the
future cost of such insurance or adversely affect the subrogation rights of any
insurer of the party that has received any such insurance recovery.
"Minimum Consolidated Tangible Net Worth" means the Consolidated
Tangible Net Worth (as defined below) of Bolle and its Subsidiaries, as of the
date of the Spinoff, plus the amount of any additional equity raised through
the public markets by Bolle or any member of the Bolle Group subsequent to the
Spinoff (while a member of the Bolle Group), net of all transactional expenses
associated therewith. The Consolidated Tangible Net Worth of Bolle and its
Subsidiaries shall be determined by subtracting all intangible assets included
in the computation of Consolidated Net Worth at the time in question from such
Consolidated Net Worth ("Consolidated Tangible Net Worth")) as evidenced by a
certificate to that effect issued by the Treasurer or Chief Financial Officer
of Bolle.
"ORC Business" means the businesses, assets and liabilities of, or
directly related to, ORC Technologies, Inc., ORC Caribe, Optical Radiation
Foreign Sales Corporation, Voltarc Technologies, Inc. ("Voltarc"), including
the businesses, assets and liabilities of ILC, and including all assets and
liabilities included in BEC's pro forma balance sheet included in Schedule 2.6
to the Merger Agreement; provided, that "ORC Business" shall not include any
items or matters identified in Schedule A or Schedule B to the Contribution
Agreement.
"Post-Spinoff Tax Period" means any Tax period beginning after the end
of the date of the Spinoff; provided that with respect to a Tax period that
begins on or before the date of the
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Spinoff and ends thereafter, the portion of such Tax period beginning after the
date of the Spinoff shall also be a Post-Spinoff Tax Period.
"Pre-Spinoff Tax Period" means any Tax period ending on or before the
end of the date of the Spinoff; provided that, with respect to a Tax period
that begins on or before the date of the Spinoff and ends thereafter, the
portion of such Tax period up to and including the date of the Spinoff shall
also be a Pre-Spinoff Tax Period.
"Restricted Payments" means (i) the payment or declaration of any
dividend, in cash or otherwise, or the making of any similar payment or
distribution on common stock of any Indemnifying Party or any of their
Subsidiaries, other than dividends or distributions payable in shares of
capital stock of the Indemnifying Party or any of their Subsidiaries, provided
that such distributed capital stock shall not have any mandatory redemption or
other payment requirements; (ii) the purchase, redemption or other acquisition
or retirement for value of any common or other voting class of stock of any
Indemnifying Party or any of their Subsidiaries; (iii) any loan or advance to,
or guarantee of any indebtedness of, non-affiliates of any Indemnifying Party
or non-affiliates of any Indemnifying Party's Subsidiaries; (iv) any direct or
indirect purchase or other acquisition (other than a purchase or acquisition
where the consideration to be paid is comprised substantially of capital stock
of any Indemnifying Party or any of their Subsidiaries) by any Indemnifying
Party or any of their Subsidiaries of a beneficial or equity interest in any
person other than in, or which results in, a direct or indirect 50% or more
owned subsidiary of any Indemnifying Party; or (v) any capital contribution to
any subsidiary that is not a direct or indirect 50% or more owned Subsidiary of
any Indemnifying Party; or (vi) except as permitted pursuant to Section 5(f)
herein, the sale or distribution (other than to another Indemnifying Party) of
more than 50% of the outstanding capital stock of any Subsidiary of any
Indemnifying Party, provided that in the case of clauses (iv) and (v) hereof
the portion of such subsidiary not owned directly or indirectly by Bolle is
owned by a person or entity who is not an Affiliate of Bolle.
"Subsidiaries" or "Subsidiary" of a person or entity means any entity
or entities 50% or more of which is directly or indirectly owned or which are
controlled by such person or entity and, in the case of BEC, includes Voltarc.
"Tax" or "Taxes" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, without limitation,
withholding on amounts paid to or by any person), together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign), (ii) liability for the payment of any amounts of the
type described in (i) as a result of BEC or any Subsidiary being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement as a result of which liability of BEC or any
Subsidiary to a Taxing Authority is determined or taken into account with
reference to the liability of any other person, and (iii) liability of BEC or
any Subsidiary for the payment of any amount as a result of being party to any
tax sharing agreement or arrangement, or with respect to the payment of any
amount of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other Person.
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Section 2. Indemnification. In addition to the obligations of the
parties contained in Sections 3 and 4 hereof, after the effective date of the
Spinoff:
(a) The Indemnifying Parties agree to indemnify and hold
harmless the Indemnified Parties from and against any and all Losses as
incurred or suffered by an Indemnified Party, arising out of or in connection
with or related to:
(i)(x) BEC and its Subsidiaries, excluding the ORC
Business for purposes of this Section 2(a)(i)(x), up until the Spinoff, whether
or not the Loss is based upon any breach of any agreement, obligation, covenant
or warranty in this Agreement by the Indemnified Parties or the Indemnifying
Parties or any misrepresentation by any of them contained in the Merger
Agreement or this Agreement or any set of facts, which is disclosed in any
section of the Merger Agreement or any agreements, schedules or documents
referred to therein, and (y) Bolle and its Subsidiaries or their respective
successors, subsequent to the Spinoff;
(ii) the enforcement by the Indemnified Parties of
their rights under this Agreement;
(iii) any Environmental Laws, whether asserted
against BEC and/or Bolle or any other Subsidiary of BEC before or after the
Spinoff, at, or in connection with (A) the business operations of BEC or its
Subsidiaries or predecessors prior to the date of the Spinoff and the current,
past or future business operations of the Bolle Group or any of its
predecessors, (B) the ownership, lease or operation of any facility or property
presently or previously owned, leased or operated by BEC or its Subsidiaries or
predecessors, to the extent any Loss in connection therewith relates to any
condition existing at or prior to the date of the Spinoff or any facility or
property presently, previously or in the future owned, leased or operated by an
Indemnifying Party or any of its Subsidiaries or predecessors, or (C) items
disclosed on Schedule 2.17 of the Merger Agreement;
(iv) any and all claims by Monsanto Corporation, or
its successors or assigns for indemnification obligations of BEC or any of its
Subsidiaries in connection with the Asset Purchase Agreement among Xxxxxx
Eyecare Corporation, BEC, ORC Technologies, Inc. and Monsanto Corporation dated
February 11, 1996;
(v) the items identified in (i) Schedule A to the
Contribution Agreement other than to the extent relating to the ORC Business
and (ii) Schedule B to the Contribution Agreement; and
(vi) any untrue statement or alleged untrue
statement of a material fact contained in the Form S-1 registration statement
filed by Bolle with the Securities and Exchange Commission with respect to the
Spinoff or any amendment thereof or any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) The Indemnified Parties jointly and severally agree to
indemnify and hold
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harmless the Indemnifying Parties from and against any and all Losses, as they
are incurred or suffered by the Bolle Group, arising out of or in connection
with or related to (i) the conduct of the business of BEC and its Subsidiaries,
after the Spinoff, (ii) other than as provided in Section 2(a)(iii), the
conduct of the ORC Business before or after the Spinoff, or (iii) the
Indemnifying Parties in enforcing their rights under this Agreement.
Section 3. Taxes.
(a) BEC, Bolle and Acquisition agree that Bolle and its
Subsidiaries shall be included in the consolidated Federal income tax return
filed by BEC for the period from January 1, 1997 through December 31, 1997
unless another date is required by federal tax law, and BEC shall be
responsible for making all payments for such periods to the extent required to
be made by BEC under applicable law, including, without limitation, all taxes,
if any, arising out of or as a result of the Merger or Spinoff, subject to the
Indemnifying Parties' indemnification and payment obligations as set forth in
this Section 3.
(b)(i) The Indemnifying Parties shall indemnify and hold the
Indemnified Parties harmless from and against any and all (x) Taxes of BEC or
any of its Subsidiaries (including the Bolle Group) except to the extent such
Taxes arise from or in connection with the ORC Business, (y) Taxes imposed as a
result of the Spinoff or any transaction described on Schedule 4.2 of the
Merger Agreement and (z) liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments directly
arising out of or incident to the imposition, assessment or assertion of any
Tax described in (x) or (y), including those incurred in the contest in good
faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax. If Bolle or any of its Subsidiaries has a current
year loss or credit, computed on a stand-alone basis, in the tax period in
which the Spinoff occurs which reduces the Tax liability for such period
attributable to the ORC Business for which BEC is liable hereunder, the
Indemnifying Parties' liability for Taxes under this Section shall be reduced
by the amount by which the Tax liability for such period attributable to the
ORC Business is reduced by such losses or credits. Furthermore, if BEC, Bolle
or any of their respective Subsidiaries has an unutilized net operating loss,
capital loss or tax credit carryforward or similar tax asset incurred in
periods prior to the Spinoff, after effecting any carryback required by law,
such carryforward or other asset, to the maximum extent permitted by law, (A)
shall first be claimed as a deduction or a credit (as the case may be) in
computing the Taxes for the tax period in which the Spinoff occurred for which
the Indemnifying Parties have the responsibility of indemnifying the
Indemnified Parties under this Agreement and thereafter shall be allocated to
reduce the income of whichever party can utilize such carryforward or other
asset or, if both the Indemnifying Parties and the Indemnified Parties can
utilize such carryforward or other assets, shall be divided equally between
them in computing their relative tax liabilities in the tax period which
includes the Spinoff, and (B) to the extent that any such carryforward or other
asset still exists for carryover after effecting the provisions of clause (A)
such carryforward or other asset shall, to the maximum extent permitted by
applicable Tax laws, including by reattribution under Reg. Section
1.1502-20(g), be apportioned to the Indemnified Parties without any payment or
reimbursement if such losses or credits are used to offset any Taxes that the
Indemnified Parties
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have incurred or will incur.
(ii) The Indemnified Parties shall be entitled to
all refunds of Taxes attributable to a Pre-Spinoff Tax Period, except to the
extent such refund is attributable to a Tax for which the Indemnifying Parties
have made an indemnity payment pursuant to this Agreement.
(iii) The Indemnified Parties shall indemnify and
hold the Indemnifying Parties harmless from and against any Taxes attributable
to the ORC Business for all tax periods whether before or after the Spinoff, as
well as all other Taxes attributable to BEC for any Post-Spinoff Tax Period,
except as otherwise provided hereunder.
(c)(i) The Indemnified Parties agree that they shall be
responsible for the preparation and filing of all combined, consolidated, and
unitary returns filed with respect to at least one Indemnified Party and at
least one Indemnifying Party (each a "Consolidated Return") and separate
returns filed with respect to any Indemnified Party, in respect of any
Pre-Spinoff Tax Period and any Tax period that includes (but does not end on)
the date of the Spinoff. Any such return shall be prepared in a manner
consistent with past practice and without a change of any election or any
accounting method and shall be submitted by the Indemnified Parties to the
Indemnifying Parties at least 30 days prior to the due date (including
extensions) of such return. With respect to any such return for which the
Indemnifying Parties have an indemnification obligation hereunder, the
Indemnifying Parties and their professional advisors shall have the right, at
the Indemnifying Parties' expense, to review such return. If the Indemnifying
Parties, within ten (10) business days after delivery of any such return,
notify the Indemnified Parties in writing that they object to any items in such
return for which the Indemnifying Parties have an indemnification obligation
hereunder, the disputed items shall be resolved (within a reasonable time,
taking into account the deadline for filing such return) in the manner set
forth in Section 3(e) hereof. To the extent that such returns require a tax
payment indemnified against by the Indemnifying Parties as provided in Section
3(b)(i) hereof, the Indemnifying Parties shall, no later than five (5) business
days before the due date for payment of Taxes with respect to any such return,
deliver such payment by check (subject to collection) made out to the
appropriate Taxing Authority. The Indemnified Parties shall sign and file such
return with the proper Taxing Authority, together with such Bolle check and
together with any additional amounts required to be paid by the Indemnified
Parties and for which the Indemnified Parties are not indemnified under this
Agreement. In the case of any Consolidated Return related to a Pre-Spinoff Tax
Period, the Indemnifying Parties' liability shall be the Indemnifying Parties'
share of the Tax liability of the consolidated, combined or unitary group,
computed in a manner consistent with past practice. If upon audit it is found
that the payment from Indemnifying Parties was not adequate to discharge their
liability as set forth herein, then Indemnifying Parties shall pay such
additional Taxes as may be incurred with respect thereto; if upon review or
audit it is found that the payment from the Indemnifying Parties exceeded their
respective liability as set forth herein, then the Indemnified Parties shall
deliver to the Indemnifying Parties the amount of any Tax refund including
interest received with respect to any such excess.
(c)(ii) The Indemnifying Parties shall be responsible for
preparing and filing any
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xxxxxxx, xxxxxxx, xxxxx and local tax returns relating solely to any
Indemnifying Party.
(c)(iii) The parties shall cooperate with each other in the
preparation of any return and the conduct of any audit or other proceedings
involving any Indemnified Party and any Indemnifying Party. The Indemnified
Parties and the Indemnifying Parties, without charge, shall provide the
requesting party with such assistance and documents as may be reasonably
requested by such party in connection with the preparation of any return or the
conduct of any audit or other proceeding. The Indemnified Parties and the
Indemnifying Parties agree to keep each other fully informed of all matters
relating to any tax return, audit or judicial or administrative proceeding,
including without limitation any settlement negotiations. In the event of an
audit or contest with any Taxing Authority relating to Taxes for a Pre-Spinoff
Tax Period for which the Indemnifying Parties may be liable under this
Agreement, the Indemnified Parties shall be responsible for conducting all Tax
audits with the participation (at the Indemnifying Parties' expense) of the
Indemnifying Parties and the Indemnified Parties, shall have the right to
control at their sole expense subject to Section 3(b)(i), and make all
decisions regarding such audit or contest (except that the Indemnifying Parties
and the Indemnified Parties shall mutually select a forum for contest), so long
as such control and/or decisions by the Indemnified Parties do not have an
adverse effect on the Indemnifying Parties' tax liability or the amount of the
Indemnifying Parties' indemnification hereunder. If such control or any
decision may have such an adverse effect on the Indemnifying Parties, then the
written consent of the party or parties so adversely or potentially adversely
affected shall be required, which consent shall not be unreasonably withheld or
delayed. The parties agree to use their reasonable best efforts to conclude all
Tax audits as quickly as possible.
(d) No party will, nor will it cause or permit any of its
Subsidiaries to, initiate contact with any Taxing Authority, volunteer
information to any Taxing Authority, make any changes in tax accounting methods
or conventions, make or rescind any election, or report or treat any specified
item on any Tax return for any Post-Spinoff Tax Period, in a manner
inconsistent with the manner in which such specific item was reported or
treated on any such Tax return for any Pre-Spinoff Tax Period, if any such
action would have an effect of either increasing the Tax liability or reducing
the Tax assets of another party for any Pre-Spinoff Tax Period. The
Indemnifying Parties agree not to take or cause or permit any of their
Subsidiaries to take any action that is inconsistent with the prior practices
of BEC in connection with any tax return, audit, or judicial or administrative
proceeding, including, without limitation, the making or rescinding of any
election, which would have an effect of increasing the Tax liability or
reducing the Tax assets of the Indemnified Parties or the ORC Business, without
the prior written consent of BEC. Nothing herein shall restrict any of the
parties from treating any item for tax purposes in a manner which is consistent
with the practices of each of BEC and Bolle prior to the day of Spinoff.
Furthermore, all Taxes of Bolle, BEC, and their respective Subsidiaries will be
apportioned to the period up to and including the Spinoff and the period after
the Spinoff by closing the books of Bolle, BEC and the Subsidiaries as of the
end of the day of the Spinoff and any Taxes computed on the basis of passage of
time shall be pro-rated on a daily basis. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of BEC and its Subsidiaries.
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(e) If the parties disagree as to the amount of any payment
to be made under or on any other matter arising under this Section 3, the
parties shall attempt in good faith to resolve such dispute, and any
agreed-upon amount shall be paid to the appropriate party. If such dispute is
not resolved within 15 days following written notice from any party hereto to
any other party hereto that a dispute subject to this subsection (e) exists,
then the parties shall jointly retain an independent accounting firm to resolve
the dispute. If and to the extent that a dispute presents legal issues, the
independent accounting firm shall have authority to consult an independent law
firm. The fees of the independent accounting firm and the independent law firm
shall be borne equally by the Indemnifying Parties and the Indemnified Parties,
and the decision of such independent accounting firm and/or the independent law
firm which shall be rendered within ten (10) days following final submissions
by the parties to such firm shall be final and binding on all parties.
Following the decision of the independent accounting firm and/or the
independent law firm, the parties shall each take or cause to be taken any
action that is necessary or appropriate to implement such decision of the
independent accounting firm and/or the independent law firm.
(f) Any payment made between an Indemnified Party and an
Indemnifying Party under this Agreement shall be appropriately adjusted to take
account of any subsequent change or adjustment (as a result of an audit or
other proceeding or otherwise) in the circumstances as a result of which the
payment was originally required hereunder. Any such adjustment shall be made
when there has been a "Final Determination" of the adjustment. For purposes of
this Agreement, "Final Determination" shall mean (i) with respect to federal
taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by any
Indemnified Party, any Indemnifying Party or any of their Affiliates, whichever
is responsible for payment of such Tax under applicable law, with respect to
any item disallowed or adjusted by a Taxing Authority, provided that such
responsible party determines that no action should be taken to recoup such
payment and the Indemnifying Parties or the Indemnified Parties, as the case
may be, agree. The party to the Final Determination of the adjustment shall
provide notice of such Final Determination to the other party within five (5)
business days of such Final Determination. The parties shall in good faith
agree, in accordance with the principles of this Agreement, as to the amount of
adjustment as it relates to any payment made under this Agreement. In the event
the parties do not agree, the dispute shall be resolved as provided in Section
3(e) hereof. Payment of the amount due pursuant to this Section 3(f) shall be
made within five (5) business days after agreement by the parties (or the
resolution pursuant to Section 3(e) hereof).
(g) The Indemnified Parties, on the one hand, and the
Indemnifying Parties, on the other hand, shall retain all Tax returns,
schedules and workpapers, and all material records or other documents relating
thereto, until the earlier of (i) the expiration of the statute of limitations
(including extensions, waivers and mitigations thereof) of the taxable years to
which such Tax returns and other documents relate or (ii) one hundred twenty
(120) days after
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the delivery of notice to the other party to the effect that it shall dispose
of such Tax returns or other documents, unless it is requested by such party
within one hundred twenty (120) days of delivery of such notice (with which
request it shall comply within thirty (30) days of receipt) that it transfer
such Tax returns or other documents to such other party. Any information
obtained under this Section 3 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of Tax returns or claims for
refund or in conducting any audit or other proceeding.
Section 4. Termination of Tax Sharing Agreement. All tax sharing or
similar agreements (if any) between BEC and its Subsidiaries, on the one hand,
and Bolle and its Subsidiaries, on the other, are terminated as of the Spinoff
and shall be of no further, force and effect. All claims for indemnification
for Taxes between the parties shall be made and resolved in accordance with
terms of this Agreement.
Section 5. Limitations on Indemnifying Parties.
(a) Except to the extent this provision is waived in writing
by and in the sole discretion of BEC and subject to Section 5(f), the
Indemnifying Parties covenant and agree that subsequent to the Spinoff, no
Restricted Payments shall be made by any Indemnifying Party or any of its
Subsidiaries in violation of the provisions of Section 5(f), if, immediately
prior to or subsequent to such payment (after giving pro forma effect to the
making of such Restricted Payment), the Consolidated Tangible Net Worth of the
Indemnifying Parties does not and will not be at least equal to the Minimum
Consolidated Tangible Net Worth of the Indemnifying Parties. Upon the request
of any Indemnified Party, an Indemnifying Party intending to make a Restricted
Payment shall provide a certificate issued by an officer of such Indemnifying
Party certifying that such Restricted Payment (except for payments made by one
Indemnifying Party to any other Indemnifying Party or any of their
Subsidiaries) is permitted within the terms of this Agreement. Provided the
Indemnifying Parties are not then in default of any of their obligations under
this Agreement and that there are no claims for indemnification under this
Agreement then pending, this Section 5(a) shall expire on the later of: (i) the
date when all tax liabilities for any Pre-Spinoff Tax Liability, including
without limitation, Taxes arising out of or resulting from the Spinoff or any
transaction described on Schedule 4.2 of the Merger Agreement, have been
finally determined and paid in full or the applicable statutes of limitations
have run (giving effect to any waiver, extension or mitigation thereof), or
(ii) the date BEC's obligations under the Essilor Agreement have terminated
(the "Restriction Period").
(b) Subsequent to the Spinoff and during the Restriction
Period, no Indemnifying Party shall and no Indemnifying Party shall permit any
of its Subsidiaries to (directly or indirectly) consolidate or merge with or
into any other person (whether or not such Indemnifying Party or such
Subsidiary is the surviving corporation) or (directly or indirectly) transfer
all or substantially all of its properties and assets as an entirety to any
person (whether by sale, merger or consolidation or otherwise), unless:
(i) such Indemnifying Party or such Subsidiary shall
be the continuing person, or the person formed by such consolidation with or
into which such Indemnifying Party
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or such Subsidiary is merged or to which the properties and assets of such
Indemnifying Party or such Subsidiary substantially as an entirety are
transferred shall be a corporation organized and existing under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and delivered
to the Indemnified Parties, in form reasonably satisfactory to the Indemnified
Parties, all the obligations and restrictions of the Indemnifying Parties under
this Agreement; and
(ii) such surviving corporation or transferee shall
in the case of a merger or consolidation or sale of substantially all assets of
an Indemnifying Party or any of their Subsidiaries, have a Consolidated
Tangible Net Worth immediately after giving effect to such transaction on a pro
forma basis that when aggregated with the Consolidated Tangible Net Worth of
all other surviving Indemnifying Parties not a party to such transaction (and
after taking into account all intercompany adjustments which would be required
by GAAP to consolidate such Consolidated Tangible Net Worths) equals or exceeds
the Minimum Consolidated Tangible Net Worth.
(c) In connection with any consolidation, merger or transfer
of substantially all the assets of an Indemnifying Party or any of their
Subsidiaries contemplated by Section 5(b) hereof, the Indemnifying Parties
shall deliver, or cause to be delivered, to the Indemnified Parties, in form
and substance reasonably satisfactory to the Indemnified Parties, an officer's
certificate stating that such consolidation, merger, transfer or lease and the
supplemental agreement in respect thereto comply with Section 5(b) and that all
conditions precedent therein provided for relating to such transaction have
been complied with.
Thereafter the predecessor corporation in the case of a consolidation
or merger or the transferor in the case of a transfer of all of the properties
and assets shall be relieved of all obligations and covenants under this
Agreement and its corporate existence may be terminated (by merger, dissolution
or otherwise), but the predecessor corporation in the case of a transfer of
less than substantially all the assets shall not be released from its
obligation hereunder.
(d) Upon any consolidation or merger, or conveyance or
transfer of all or substantially all of the properties and assets of an
Indemnifying Party or any of their Subsidiaries as the case may be, in
accordance with Section 5(b) and 5(c), the successor corporation formed by such
consolidation or into which such Indemnifying Party or such Subsidiary, as the
case may be, is merged or to which such conveyance or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
such Indemnifying Party or such Subsidiary, as the case may be, under this
Agreement with the same effect as if such successor corporation had been named
as an Indemnifying Party herein.
(e) Subsequent to the Spinoff and during the Restriction
Period, no Indemnifying Party nor any of their Subsidiaries may enter into a
liquidation or dissolution without the prior written consent of the Indemnified
Parties.
(f) Notwithstanding anything contained in this Section 5, an
Indemnifying Party may sell all the issued and outstanding stock of any
Subsidiary of such Indemnifying Party,
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or sell all or a substantial part of the assets of any Subsidiary of such
Indemnifying Party so long as, (i) such sale is for fair market value, (ii) the
sale price is retained by an Indemnifying Party, (iii) after given effect to
such transaction, the aggregate Consolidated Tangible Net Worth of all
remaining Indemnifying Parties equals or exceeds the Minimum Consolidated
Tangible Net Worth, and (iv) such Indemnifying Party delivers to the
Indemnified Parties in form and substance reasonably satisfactory to the
Indemnified Parties, an officer's certificate stating that such sale complies
with this Section 5 and that all conditions precedent contained therein
relating to such transaction have been complied with.
(g) Notwithstanding anything contained in this Section 5, an
Indemnifying Party may, spinoff, distribute, transfer, liquidate or sell all of
the issued and outstanding stock of any Subsidiary, provided that such
Subsidiary shall assume, jointly and severally with all other Indemnifying
Parties all obligations for indemnification and restrictions of an Indemnifying
Party pursuant to this Agreement, unless where as a result of such Spinoff
distribution, transfer, liquidation or sale the aggregate Consolidated Tangible
Net Worth of all remaining Indemnifying Parties, after giving effect to such
spinoff, distribution, transfer or sale, equals or exceeds the Minimum
Consolidated Tangible Net Worth, in which event such Subsidiary shall not be
obligated to assume any such liability.
Section 6. Indemnification Procedure and Indemnification Period.
(a) Except as may be otherwise provided pursuant to Section 3
hereof, the Indemnified Parties shall, with respect to claims asserted against
the Indemnified Parties by any third party, give written notice to the
Indemnifying Parties of any liability which might give rise to a claim for
indemnity hereunder within thirty (30) days of the receipt of any written claim
or notice from any such third party, but no later than twenty (20) days prior
to the date any answer, responsive pleading or other response may be due with
respect thereto, and with respect to any other matter for which the Indemnified
Parties may seek indemnification hereunder, the Indemnified Parties shall give
prompt written notice to the Indemnifying Parties of any liability which might
give rise to a claim for indemnity; provided, however that any failure to give
such notice will not constitute a waiver of any rights of the Indemnified
Parties except to the extent that the rights of the Indemnifying Parties are
materially prejudiced thereby.
(b) Except with respect to claims governed by Section 3
hereof, the Indemnifying Parties, or any of them, shall have the right, and
their election, to take over the defense or settlement of any such claim by
giving written notice to the Indemnified Parties at least fifteen (15) days
prior to the time with an answer or other responsive pleading or notice with
respect thereto may be required. If the Indemnifying Parties make such an
election, they may conduct the defense of such claim through counsel of their
choosing (subject to the Indemnified Parties' approval of such counsel, which
shall not be withheld unreasonably), and shall be solely responsible for all
expenses in connection therewith. The Indemnifying Parties shall not settle any
such claim without prior notice to and consultation with the Indemnified
Parties, and no such settlement involving any equitable relief or which might
have an adverse effect on the Indemnified Parties may be agreed to without the
prior written consent of the Indemnified Parties. So long as the Indemnifying
Parties are diligently contesting in good faith
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any such claim, the Indemnified Parties may pay or settle such claim only at
their expense and the Indemnifying Parties will not be responsible for the use
of separate legal counsel to the Indemnified Parties unless the named parties
to any proceeding include both Indemnifying Parties and Indemnified Parties in
representation of both by the same counsel would be inappropriate under the
circumstances. If the Indemnifying Parties do not make such a election, or
having made such election do not, in the reasonable opinion of the Indemnified
Parties proceed diligently to defend such claim, then the Indemnified Parties
may (after written notice to the Indemnifying Parties), at the expense of the
Indemnifying Parties pursuant to the terms of this Agreement, take over defense
of such claim and handle such claim at their sole discretion, and the
Indemnifying Parties shall be bound by any defense or settlement that the
Indemnified Parties may make in good faith with respect to any such claim in
accordance with and subject to the terms hereof.
(c) The parties agree to cooperate in defending such third
party claims and the Indemnified Parties shall provide such cooperation and
such access to their books, records and properties as the Indemnifying Parties
may reasonably request with respect to any matter for which indemnification is
sought hereunder, and the parties hereto agree to cooperate with each other in
order to insure the proper and adequate defense thereof.
(d) With regard to claims of third parties for which
indemnification is payable hereunder, indemnification shall be paid by the
Indemnifying Parties within five (5) business days following the earlier to
occur of:
(i) entry of a judgment against the Indemnified
Parties; or
(ii) a settlement of the claim, in accordance with
the terms of such settlement.
With regard to any claim for Taxes subject to Section 3 hereof,
indemnification shall be paid by the Indemnifying Parties within five (5)
business days following receipt by the Indemnifying Parties of written notice
from any Indemnified Party stating that any amount subject to indemnification
under such Section 3 has been paid by an Indemnified Party and the amount
thereof and the indemnity payment requested.
With regard to any other claim for which indemnification is payable
hereunder, indemnification shall be paid promptly by the Indemnifying Parties
upon demand by the Indemnified Parties but in any event within five (5)
business days following such demands.
(e) In the event any claims are asserted against the
Indemnifying Parties by any third party or by an Indemnified Party, or with
respect to any other matter which might give rise to a claim for
indemnification hereunder or for which the Indemnifying Parties may seek
indemnification hereunder, the procedures set forth in Sections 6(a) through
6(d) above and Section 7 below shall apply as if the Indemnifying Parties were
the "Indemnified Parties", and as if the Indemnified Parties were the
"Indemnifying Parties" for such purposes.
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(f) The liability of any party to indemnify any other under
the terms of this Agreement shall expire with respect to all claims and/or
potential claims thirty (30) days after the expiration of the relevant
Indemnification Period, other than claims or potential claims with respect to
which written notice has been duly given with respect thereto for which the
indemnified party shall continue to be entitled to indemnification hereunder
until the claim for such indemnity has been finally determined provided,
however, except for claims relating to Losses indemnified pursuant to Section
2(a)(iii), all claims shall expire six (6) months from the date such claim is
made unless such claim is being diligently prosecuted in good faith by the
party seeking indemnification hereunder, except if failure to proceed results
after an indemnifying party hereunder has assumed control of the defense or
settlement of such claim.
Section 7. No Contribution. The Indemnifying Parties shall not be
entitled to seek or obtain any contribution, reimbursement or other
participation, direct or indirect, from the Indemnified Parties in respect of
any payment made or to be made by the Indemnifying Parties hereunder or arising
out of this Agreement, notwithstanding the fact that the Loss for which the
Indemnifying Parties are liable results from or is contributed to by any breach
by an Indemnified Party or any misrepresentation by BEC or any of their
respective Subsidiaries contained in the Merger Agreement or any agreement,
document, instrument or schedule referred to therein or contemplated thereby.
Section 8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability or
any other provision of this Agreement, which shall remain in full force and
effect; provided, however that if any mutual covenant contained herein is
declared invalid or unenforceable with respect to the Indemnified Parties, on
the one hand, or the Indemnifying Parties, on the other hand, by any court of
competent jurisdiction or governmental authority, such mutual covenant shall
become invalid or unenforceable with respect to the opposite group to such
covenant and provided further, that this ss.8 shall not be construed to affect
any other rights of any party hereto under applicable principles of contract
law, including without limitation the principles of failure of consideration
and mutual dependency.
Section 9. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by verified telecopy, by expedited
delivery service (such as Federal Express) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
(i) if to any of the Indemnified Parties, at:
BEC Group, Inc.
000 Xxxxxxxx Xxxxx Xxxxxx
Xxxxx X-000
Xxx, Xxx Xxxx 00000
Telecopy No.: 914-967-9405
ATTN: Xxxxxx X. Xxxxxxxx
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with copy to:
BEC Group, Inc.
0000 Xxxxx Xxxx
0xx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
(ii) if to any of the Indemnifying Parties, at:
Bolle Inc.
000 Xxxxxxxx Xxxxx Xxx
Xxx, Xxx Xxxx 00000
Telecopy No.: 914-967-9405
ATTN: Xxxx Xxxxxxxxx
with copy to:
Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ATTN: Xxxxxx X. Xxxxxxxx, Esq.
Such notice shall be effective on the day following receipt of delivery in
person, by verified telecopy or by expedited delivery service and shall be
effective four days after mailing in accordance with the foregoing. The person
to whom notice is to be given, and any address, may be changed from time to
time in the manner set forth above (provided that any such change shall be
effective only upon receipt thereof).
Section 10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Venue for any legal action under this Agreement shall be in
the federal or state courts located in the State and County of New York, All
parties hereunder hereto hereby submit themselves to the jurisdiction of such
courts for the purpose of this Agreement and hereby waive trial by jury in any
action, counterclaim or proceeding of any kind arising under or out of or in
connection with this Agreement, the negotiations leading thereto, the
inducements to the parties to enter into this Agreement and to the transactions
it contemplates.
Section 11. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 12. Parties-in-Interest. This Agreement shall be binding upon
and inure solely
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to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement, provided that at least one
counterpart is executed by each party herein named.
Section 14. Successors. All agreements of the parties in this
Agreement shall bind their respective successors.
Section 15. Assignment. This Agreement is not assignable by any of the
parties hereto without the prior written consent of the other parties hereto.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above mentioned.
BEC GROUP, INC.
By:
------------------------------
Its:
-----------------------------
BILC ACQUISITION CORP.
By:
------------------------------
Its:
-----------------------------
BOLLE INC.
By:
------------------------------
Its:
-----------------------------
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