1
Exhibit 10.5.4
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, is entered into as of March 18, 1998
(the "Agreement"), by and among Day International Group, Inc., a Delaware
corporation (the "Company"), and SG Capital Partners, LLC, a Delaware limited
liability company ("SG"). Capitalized terms used herein and not defined in
Section 1 or elsewhere in this Agreement have the respective meanings set forth
in the Purchase Agreement referred to below.
WHEREAS, pursuant to a Purchase Agreement, dated as of December 18,
1997 (the "Purchase Agreement"), GSD Acquisition Corp., a Delaware corporation
("GSD"), and SG acquired approximately 93.9% of the common stock of the Company
(on a fully-diluted basis) from American Industrial Partners Capital Fund, L.P.,
American Industrial Partners Capital Fund II, L.P. (together, "AIP"), certain
affiliates of AIP and certain management stockholders of the Company on January
16, 1998 (the "Acquisition");
WHEREAS, as of the date hereof, SG and the Company have entered into
the Consulting Agreement, dated as of March 18, 1998 (the "Consulting
Agreement");
WHEREAS, at the request of the Company and its Subsidiaries (the
"Company Group"), SG has performed and will perform for the benefit of the
Company Group, certain financial, management advisory and other services in
connection with the transactions contemplated by the Purchase Agreement and the
financing arrangements relating to such transactions, including but not limited
to services performed and to be performed in consultation with the (i) Company
Group officials, structuring and implementing a management organization
designed to meet the requirements of the Company Group upon consummation of the
Acquisition, together with related compensation arrangements, (ii) preparation,
negotiation, execution and delivery of the Purchase Agreement and other
agreements, instruments and documents relating to the transactions contemplated
by the Purchase Agreement, (iii) preparation, negotiation, execution and
delivery of commitment, fee and engagement letters, credit agreements,
guarantees, pledge agreements and other security agreements, offerings documents
and other agreements, instruments and documents relating to the financings to
be entered into by the Company Group at the closing, (iv) structuring,
implementation and consummation of the foregoing transactions and (v) retention
of legal, accounting, environmental, insurance, employee benefits, financial and
other advisors and consultants in connection with the foregoing (such services
being referred to collectively as the "Services"), but not including services to
be performed by SG pursuant to the Consulting Agreement;
2
WHEREAS, the Company Group or one or more of their Subsidiaries from
time to time in the future may offer and sell or cause to be offered and sold
equity or debt securities (such offerings being hereinafter referred to as the
"Securities Offerings"), including (i) offerings of shares of capital stock of
the Company Group, and/or options to purchase such shares, to employees,
directors, managers and consultants of and to the Company Group or any
Subsidiary (each, a "Management Offering"), and (ii) one or more offerings of
debt securities for the purpose of providing funds for the Acquisition or for
refinancing any indebtedness of any of the Company Group or for other corporate
purposes;
WHEREAS, the parties hereto recognize the possibility that claims
might be made against and liabilities incurred by SG or Related Persons (as
defined herein) or affiliates, under applicable securities laws or otherwise, in
connection with the Securities Offerings, or relating to other actions or
omissions of or by any of the Company Group, or relating to the provision by SG
of management consulting, monitoring and financial advisory services to any of
the Company Group, and the parties hereto accordingly wish to provide for SG and
Related Persons and affiliates to be indemnified in respect of such claims and
liabilities as herein provided;
WHEREAS, the parties hereto recognize that claims might be made
against and liabilities incurred by directors and officers of members of the
Company Group in connection with their acting in such capacity, and accordingly
wish to provide for such directors and officers to be indemnified to the fullest
extent permitted by law in respect of any such claims and liabilities; and
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements covenants and provisions herein set forth, the parties hereto
hereby agree as follows:
1. Definitions. (a) Whenever used in this Agreement, the following
terms shall have the respective meanings given to them below or in the other
Sections indicated below:
Claim: with respect to any Indemnitee, any claim against such
Indemnitee involving any Obligation with respect to which such Indemnitee
may be entitled to be defended and indemnified by the Company Group under
this Agreement.
Commission: the United States Securities and Exchange Commission.
2
3
Indemnitee: each of SG, Societe Generale, Societe Generale
Securities Corporation, their affiliates (within the meaning of the
Securities Act), their respective successors and assigns, and their
respective directors, officers, partners, employees, agents, advisors,
representatives and controlling persons (within the meaning of the
Securities Act), and each other person who is or becomes a director or an
officer of the Company Group or any Subsidiary.
Obligations: collectively, any and all claims, obligations,
liabilities, causes of action, actions, suits, proceedings,
investigations, judgments, assessments, decrees, losses, damages,
reasonable fees, costs and expenses (including interest, penalties and
reasonable fees and disbursements of attorneys, accountants, investment
bankers and other professional advisors), in each case whether incurred,
arising or existing with respect to third parties or otherwise at any time
or from time to time; provided that the term "Obligations" shall not
include losses, damages and related costs and expenses incurred (i) by any
Indemnitee, in its capacity as a shareholder of the Company, upon its
disposition of Common Stock or otherwise resulting solely from and limited
to any diminution in value of Common Stock held by such Indemnitee or (ii)
by the Company and as a result of any indemnity payment required to be
made by the Company pursuant to the Purchase Agreement.
Related Document: any agreement, certificate, instrument or other
document to which the Company Group or any Subsidiaries may be a party or
by which they or any of their properties or assets may be bound or
affected from time to time relating in any way to the Acquisition or any
Securities Offering or any of the other transactions contemplated thereby,
including, in each case, as the same may be amended, modified, waived or
supplemented from time to time, (i) any registration statement filed by or
on behalf of the Company Group or any Subsidiary with the Commission in
connection with any Securities Offering, including all exhibits, financial
statements and schedules appended thereto, and any submissions to the
Commission in connection therewith, (ii) any prospectus, preliminary or
otherwise, included in such registration statements or otherwise filed by
or on behalf of the Company Group or any Subsidiary in connection with any
Securities Offering or used to offer or confirm sales of their respective
securities in any Securities Offering, (iii) any private placement or
offering memorandum or circular, or other information or materials
distributed by or on behalf of the Company Group, any Subsidiary or any
placement agent or underwriter in connection with any Securities Offering,
(iv) any federal, state or foreign securities law or other governmental or
regulatory filings or applications made in connection with any Securities
Offering, the Acquisition or any of the
3
4
transactions contemplated thereby, (v) any dealer-manager, underwriting,
subscription, purchase, stockholders, option or registration rights
agreement or plan entered into or adopted by the Company Group or any
Subsidiary in connection with any Securities Offering or (iv) any
quarterly, annual or current reports or financial statements filed by the
Company Group or any Subsidiary with the Commission or any other
governmental authority.
Subsidiary: (i) each corporation or other person or entity in which
the Company Group own or control, directly or indirectly, capital stock or
other equity interests representing at least 50% of the outstanding voting
stock or other equity interests, and (ii) any other affiliate of the
Company Group.
Transactions: (i) the Acquisition, (ii) the Senior Secured
Agreement, dated as of January 15, 1998, among GSD, the several lenders
from time to time parties thereto, Societe Generale Securities
Corporation, as arranger, and Societe Generale, as administrative agent,
(iii) the Holdings Senior Credit Agreement, dated as of January 15, 1998,
among GSD, GSD Acquisition II Corp., Societe Generale Securities
Corporation and Societe Generale, (iv) the Indenture dated as of March 18,
1998 between Group, Day International, Inc. and the Bank of New York, (v)
the Certificate of Designation, dated March 18, 1998 and filed on such
date with the Secretary of State of the State of Delaware, and (vi) the
transactions contemplated thereby and related thereto.
(b) The words "hereby", "herein", "hereof", "hereunder" and words of
similar import refer to this Agreement as a whole and not merely to the specific
Section, paragraph or clause in which such word appears. All references herein
to Sections shall be deemed references to Sections of this Agreement unless the
context shall otherwise require. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." The
definitions given for terms in this Section 1 and elsewhere in this Agreement
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. Except as otherwise expressly provided
herein, all references to "dollars" or "$" shall be deemed references to the
lawful money of the United States of America.
2. Indemnification. (a) The Company Group (each, an "Indemnifying
Party" and collectively, the "Indemnifying Parties"), jointly and severally,
agree to indemnify, defend, hold harmless and reimburse each Indemnitee:
4
5
(i) from and against any and all Obligations in any way resulting
from, arising out of or in connection with, based upon or relating to (A)
the performance by SG of management consulting, monitoring, financial
advisory or other services for the Company Group or any Subsidiary
(whether performed prior to the date hereof, hereafter, pursuant to the
Consulting Agreement, or otherwise), except to the extent that any such
Obligation of any Indemnitee is found in a final judgment by a court of
competent jurisdiction to have resulted from the gross negligence or
intentional misconduct of such Indemnitee or its directors, officers,
partners, employees, agents, advisors, representatives or controlling
persons (within the meaning of the Securities Act) and, in each case,
acting in such capacity (with respect to any Indemnitee, its "Related
Persons"), (B) the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any other applicable securities or other
laws, in connection with any Securities Offering, any Related Document or
any of the transactions contemplated thereby, in each case, except to the
extent already indemnified for pursuant to Section 2(b), or (C) any other
action or failure to act of the Company Group, any Subsidiary or any of
their respective predecessors, whether such action or failure has occurred
or is yet to occur; and
(ii) to the fullest extent permitted by Delaware law, from and
against any and all Obligations in any way resulting from, arising out of
or in connection with, based upon or relating to (A) the fact that such
Indemnitee is or was a director or an officer of the Company Group or any
Subsidiary, as the case may be, or is or was serving at the request of
such corporation as a director, officer, employee or agent of or advisor
or consultant to another corporation, partnership, joint venture, trust or
other enterprise or (B) any breach or alleged breach by such Indemnitee of
his or her fiduciary duty as a director or an officer of the Company Group
or any Subsidiary, as the case may be;
in each case including any and all fees, costs and expenses (including
reasonable fees and disbursements of attorneys) incurred by or on behalf of any
Indemnitee in asserting, exercising or enforcing any of its rights, powers,
privileges or remedies in respect of this Agreement or the Consulting Agreement
(except to the extent previously paid to SG pursuant to the terms thereof).
(b) Without in any way limiting the foregoing Section 2(a), each of
the Indemnifying Parties agrees, jointly and severally, to indemnify, defend and
hold harmless each Indemnitee from and against any and all Obligations resulting
from, arising out of or in connection with, based upon or relating to
liabilities under the Securities Act, the Exchange Act, or any other applicable
securities or other laws, rules
5
6
or regulations in connection with (i) the inaccuracy or breach of or default
under any representation, warranty, covenant or agreement in any Related
Document, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any Related Document or (iii) any omission or alleged omission
to state in any Related Document a material fact required to be stated therein
or necessary to make the statements therein not misleading. Notwithstanding the
foregoing, none of the Indemnifying Parties shall be obligated to indemnify such
Indemnitee from and against any such Obligation to the extent that such
Obligation arises out of or is based upon an untrue statement or omission made
in such Related Document in reliance upon and in conformity with written
information furnished to the Company Group in an instrument duly executed by
such Indemnitee and specifically stating that it is for use in the preparation
of such Related Document.
3. Contribution. (a) Except to the extent that Section 3(b) is
applicable, if for any reason the indemnity provided for in Section 2(a) is
unavailable or is insufficient to hold harmless any Indemnitee from any of the
Obligations covered by such indemnity, then each of the Indemnifying Parties,
jointly and severally, shall contribute to the amount paid or payable by such
Indemnitee as a result of such Obligation in such proportion as is appropriate
to reflect (i) the relative fault of each of the Company Group and the
Subsidiaries, on the one hand, and such Indemnitee, on the other, in
connection with the state of facts giving rise to such Obligation, (ii) if such
Obligation results from, arises out of, is based upon or relates to any
Securities Offering, the relative benefits received by each of the Company Group
and the Subsidiaries, on the one hand, and such Indemnitee, on the other, from
such Securities Offering and (iii) if required by applicable law, any other
relevant equitable considerations.
(b) If for any reason the indemnity specifically provided for in
Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee
from any of the Obligations covered by such indemnity, and the indemnification
of such Obligations under Section 2(a)(i) is similarly unavailable or
insufficient, then the Indemnifying Parties, jointly and severally, shall
contribute to the amount paid or payable by such Indemnitee as a result of such
Obligation in such proportion as is appropriate to reflect (i) the relative
fault of each of the Company Group and the Subsidiaries, on the one hand, and
such Indemnitee, on the other, in connection with the information contained in
or omitted from any Related Document, which inclusion or omission resulted in
the inaccuracy or breach of or default under any representation, warranty,
covenant or agreement therein, or which information is or is alleged to be
untrue, required to be stated therein or necessary to make the statements
therein not misleading, (ii) the relative benefits received by the Company Group
and the Subsidiaries, on the one hand, and such Indem-
6
7
xxxxx, on the other, from such Securities Offering and (iii) if required by
applicable law, any other relevant equitable considerations.
(c) For purposes of Section 3(a), the relative fault of each of the
Company Group and the Subsidiaries, on the one hand, and of the Indemnitee, on
the other, shall be determined by reference to, among other things, their
respective relative intent, knowledge, access to information and opportunity to
correct the state of facts giving rise to such Obligation. For purposes of
Section 3(b), the relative fault of each of the Company Group and the
Subsidiaries, on the one hand, and of the Indemnitee, on the other, shall be
determined by reference to, among other things, (i) whether the included or
omitted information relates to information supplied by the Company Group and the
Subsidiaries, on the one hand, or by such Indemnitee, on the other, and (ii)
their respective relative intent, knowledge, access to information and
opportunity to correct such inaccuracy, breach, default, untrue or alleged
untrue statement, or omission or alleged omission. For purposes of Section 3(a)
or 3(b), the relative benefits received by each of the Company Group and the
Subsidiaries, on the one hand, and the Indemnitee, on the other, shall be
determined by weighing the direct monetary proceeds to the Company Group and the
Subsidiaries, on the one hand, and such Indemnitee, on the other, from such
Securities Offering.
(d) The parties hereto acknowledge and agree that it would not be
just and equitable if contributions pursuant to Section 3(a) or 3(b) were
determined by pro-rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in such
respective Section. The Indemnifying Parties shall not be liable under Section
3(a) or 3(b), as applicable, for contribution to the amount paid or payable by
any Indemnitee except to the extent and under such circumstances any
Indemnifying Party would have been liable to indemnify, defend and hold harmless
such Indemnitee under the corresponding Section 2(a) or 2(b), as applicable, if
such indemnity were enforceable under applicable law. No Indemnitee shall be
entitled to contribution from any Indemnifying Party with respect to any
Obligation covered by the indemnity specifically provided for in Section 2(b) in
the event that such Indemnitee is finally determined to be guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) in
connection with such Obligation and the Indemnifying Parties are not guilty of
such fraudulent misrepresentation.
4. Indemnification Procedures. (a) Whenever any Indemnitee shall
have actual knowledge of the reasonable likelihood of the assertion of a Claim,
such Indemnitee or, if requested, by any other Indemnitee on behalf of such
Indemnitee (in such capacity the "Indemnitee Representative"), shall notify any
Indemnifying Party in writing of the Claim (the "Notice of Claim") with
reasonable promptness after such
7
8
Indemnitee has such knowledge relating to such Claim and, in the case of the
Indemnitee Representative, has notified SG thereof. The Notice of Claim shall
specify all material facts known to the Indemnitee Representative (or, if given
by such Indemnitee, such Indemnitee) that may give rise to such Claim and the
monetary amount or an estimate of the monetary amount of the Obligation involved
if the Indemnitee Representative (or, if given by such Indemnitee, such
Indemnitee) has knowledge of such amount or a reasonable basis for making such
an estimate. The failure of the Indemnitee or the Indemnitee Representative, as
applicable, to give such Notice of Claim shall not relieve any Indemnifying
Party of its indemnification obligations under this Agreement except to the
extent that such omission results in a failure of actual notice to it and it is
materially injured as a result of the failure to give such Notice of Claim. The
Indemnifying Parties shall, at their expense, undertake the defense of such
Claim with attorneys of their own choosing satisfactory in all respects to the
Indemnitee or the Indemnitee Representative, as applicable. In the event the
Indemnitee or the Indemnitee Representative reasonably concludes that the Claim
or the circumstances giving rise thereto may present a conflict of interest
between one or more of the Indemnifying Parties and one or more Indemnitee, such
Indemnitee or the Indemnitee Representative may participate in such defense with
counsel of its choosing at the expense of the Indemnifying Parties. In the event
that none of the Indemnifying Parties undertakes the defense of the Claim within
a reasonable time after the Indemnitee or the Indemnitee Representative, as
applicable, has given the Notice of Claim, the Indemnitee or the Indemnitee
Representative, as applicable, may, at the expense of the Indemnifying Parties
and after giving notice to any Indemnifying Party of such action, undertake the
defense of the Claim and compromise or settle the Claim, all for the account of
and at the risk of the Indemnifying Parties. In the defense of any Claim, the
Indemnifying Parties shall not, except with the consent of the Indemnitee or the
Indemnitee Representative, as applicable, consent to entry of any judgment or
enter into any settlement that includes any injunctive or other non-monetary
relief, or that does not include as an unconditional term thereof the giving by
the person or persons asserting such Claim to such Indemnitee of a release from
all liability with respect to such Claim. In each case, the Indemnitee
Representative and each Indemnitee seeking indemnification hereunder will
cooperate with the Indemnifying Parties, so long as the Indemnifying Parties are
conducting the defense of the Claim, in the preparation for and the prosecution
of the defense of such Claim, including making available evidence within the
control of the Indemnitee Representative or such Indemnitee, as the case may be,
and persons needed as witnesses who are employed by SG or such Indemnitee, as
the case may be, in each case as reasonably needed for such defense and at
actual cost (exclusive of overhead charges), which cost, to the extent
reasonably incurred, shall be paid by the Indemnifying Parties.
8
9
(b) The Indemnifying Parties hereby agree to advance costs and
expenses, including reasonable attorney's fees, incurred by any Indemnitee or
the Indemnitee Representative in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of such
Indemnitee or the Indemnitee Representative to repay amounts so advanced if it
shall ultimately be determined that the relevant Indemnitee is not entitled to
be indemnified by any Indemnifying Party as authorized by this Agreement.
(c) Any Indemnitee seeking indemnification under this Agreement
shall notify the Indemnifying Parties in writing of the amount of any Claim
actually paid by such Indemnitee (the "Notice of Payment"). The amount of any
Claim actually paid by such Indemnitee shall bear simple interest at the rate
equal to The Chase Manhattan Bank's prime rate as of the date of such payment
plus 2% per annum, from the date any Indemnifying Party receives the Notice of
Payment to the date on which any Indemnifying Party shall repay the amount of
such Claim plus interest thereon to such Indemnitee.
5. Certain Covenants; Other Indemnities. The rights of each
Indemnitee to be indemnified under any other agreement, document, certificate or
instrument or applicable law are independent of and in addition to any rights of
such Indemnitee to be indemnified under this Agreement, provided that nothing
contained herein shall provide any Indemnitee a right to recover from any
Indemnifying Party in the aggregate any amount in excess of its Obligations. The
rights of each Indemnitee and the obligations of the Company Group hereunder
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnitee. The Company Group shall maintain the State of
Delaware as their state of incorporation and shall implement and maintain in
full force and effect any and all corporate charter and by-law provisions that
may be necessary or appropriate to enable them to carry out their obligations
hereunder to the fullest extent permitted by Delaware corporate law, including a
provision of their respective certificates of incorporation eliminating
liability of a director for breach of fiduciary duty to the fullest extent
permitted by Section 102(b)(7) (or any successor section thereto) of the General
Corporation Law of the State of Delaware, as it may be amended from time to
time.
9
10
6. Notices. Notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) If to the Company Group, to:
Day International Group, Inc.
X.X. Xxx 000
000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxx 00000-0000
Attn.: Xxxxx X. Xxxxxxxx
or to such other person or address as the Company Group shall furnish to SG in
writing.
(ii) If to SG, to:
SG Capital Partners LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other person or address as SG shall furnish to the Company Group in
writing.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery, (x) if by certified or registered
mail, on the fifth business day after the mailing thereof, (y) if by next-day or
overnight mail delivery, on the day delivered or (z) if by telecopy or telegram,
on the day on which such telecopy or telegram was sent, provided that a copy is
also sent by certified or registered mail.
10
11
7. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the law of the State of New
York, regardless of the law that might be applied under principles of conflicts
of laws, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies, in which case such law shall apply.
8. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement shall be binding upon and inure
to the benefit of each party hereto, its successors and permitted assigns, and
each other Indemnitee. By operation of merger, this Agreement shall be binding
upon and inure to the benefit of the surviving entity of the merger. This
Agreement is not intended to confer any right or remedy hereunder upon any
person other than each of the parties hereto, their respective successors and
permitted assigns and each other Indemnitee. No amendment, modification,
supplement or discharge of this Agreement, and no waiver hereunder shall be
valid and binding unless set forth in writing and duly executed by the party or
other Indemnitee against whom enforcement of the amendment, modification,
supplement or discharge is sought and acknowledged by the other party. Neither
the waiver by any of the parties hereto or any other Indemnitee of a breach of
or a default under any of the provisions of this Agreement, nor the failure by
any party hereto or any other Indemnitee on one or more occasions, to enforce
any of the provisions of this Agreement or to exercise any rights, powers or
privileges hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any provisions hereof, or any
rights, powers or privileges hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party or
other Indemnitee may otherwise have at law or in equity or otherwise. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
11
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by their authorized representatives as of the date first above
written.
DAY INTERNATIONAL GROUP, INC.
By:__________________________________
Name: Xxxxxxxxx X. Vanden Beukel
Title: Vice President and Secretary
SG CAPITAL PARTNERS LLC
By:__________________________________
Name:
Title:
S-1
