Exhibit 10.2
REORGANIZATION AGREEMENT
BY AND BETWEEN
EXECUTONE INFORMATION SYSTEMS, INC.
AND
UNISTAR GAMING CORP.
REORGANIZATION AGREEMENT
This REORGANIZATION (the "Agreement") is entered into as of September
__, 1998, by and between EXECUTONE INFORMATION SYSTEMS, INC., a Virginia
corporation ("Executone"), and its wholly-owned subsidiary, UNISTAR GAMING
CORP., a Delaware corporation ("Unistar").
WHEREAS, the Executone Board has determined it is appropriate and
desirable to separate Executone and Unistar, its wholly-owned subsidiary that,
through its wholly-owned subsidiary, UniStar Entertainment, Inc., an Idaho
corporation ("UEI"), conducts telephone and Internet-based national lotteries,
into two companies through the exchange of its shares of Unistar capital stock
for all of the outstanding shares of Preferred Stock of Executone and the
issuance (the "Rights Offering") to the holders of Executone common stock, $.01
par value per share (the "Executone Common Stock"), of transferable rights (the
"Rights") to purchase 85% of the outstanding shares of the common stock, $.01
par value per share, of Unistar (the "Unistar Common Stock"), all as set forth
herein; and
WHEREAS, Executone and Unistar have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such separation and the Rights Offering and to set forth other agreements that
will govern certain other matters following such transactions.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
1
ARTICLE I
DEFINITIONS
Section 1.01. General.
As used in this Agreement and the Ancillary Agreements, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Action: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: as defined in Rule 405 promulgated under the Securities Act
of 1933, as amended, as such rule is in effect on the date hereof.
Ancillary Agreements: all of the agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Exchange Agreement, the Services Agreement the Tax Sharing Agreement and the
Standby Agreement .
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
Commission: the Securities and Exchange Commission.
Excepted Liabilities: the Liabilities, subject to the limitations set
forth in Section 2.01(c), relating to any of the Unistar Businesses that accrue
before the Separation Date and are described on Schedule I.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Exchange Agreement: The Share Exchange Agreement dated August 12, 1998,
between Executone, Unistar and the Shareholders.
2
Executone Board: the Board of Directors of Executone.
Executone Businesses: the businesses, assets and operations of
Executone as heretofore, currently or hereafter conducted (other than such
businesses, assets, operations and subsidiaries as will become part of the
Unistar Businesses hereunder), including, without limitation, all businesses,
assets or operations managed or operated by, or operationally related to, any of
such businesses, that have been sold or otherwise disposed of or discontinued
prior to the Separation Date.
Executone Liabilities: all of (i) the Liabilities of Executone under
this Agreement or any of the Ancillary Agreements to which Executone is or
becomes a party; (ii) the Liabilities relating to any of the Executone
Businesses accrued or unaccrued, whenever arising; (iii) the Liabilities
relating to any of the Unistar Businesses that arise and are accrued before the
Separation Date other than the Excepted Liabilities, provided, however, that
such Liabilities shall be subject to the limitations set forth in Section
2.01(c); and (iv) all costs arising out of or in connection with the Rights
Offering.
Executone Policies: all insurance policies or binders held by or on
behalf of, or providing coverage for, Executone (which coverage includes Unistar
for periods prior to the Separation Date) or any director, officer or other
employee thereof.
Executone Preferred Stock: the Cumulative Convertible Preferred Stock,
Series A, and the Cumulative Contingently Convertible Preferred Stock, Series B,
of Executone.
Expiration Date: close of business on the date upon which the
Executone Board determines that the exercise period for the Rights will expire.
3
Form S-1: the registration statement on Form S-1 to be filed by Unistar
with the Commission to effect the registration of the Rights and the Unistar
Common Stock pursuant to the Securities Act.
Information: records, books, contracts, instruments, computer data and
other data and information.
Liabilities: any and all operating expenses, debts, liabilities and
obligations, including all costs and expenses relating thereto, and including,
without limitation, those debts, liabilities and obligations arising under
this Agreement, the Ancillary Agreements, any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity
or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking.
Prospectus: the prospectus (included in Form S-1) to be sent to the
shareholders of Executone.
Record Date: the close of business on __________, 1998, or such other
date as is determined by the Executone Board as the record date for the Rights
Offering.
Rights Agent: the rights agent for the shareholders of Executone, as
appointed by Executone to distribute the Rights and conduct the Rights Offering.
Rights Closing Date: the date determined by the Executone Board as of
which the transactions constituting the Rights Offering will be closed.
Securities Act: the Securities Act of 1933, as amended.
Separation Date: the Rights Closing Date.
4
Services Agreement: the Master Services Agreement, dated as of the
date of this Agreement, between Executone and Unistar, substantially in the form
of Exhibit A attached hereto.
Shareholders: Watertone Holdings L.P., Xxxxxx Life Sciences, Inc.,
Xxxx X. Xxxx, Xxxxxxx Xxxxxxxx, Xxxxx X. Xxxxxxx, 00-00 Xxxxxxx Xx. Associates,
Xxxxx X. Xxxxx and Resource Holdings Associates, being all of the holders of
Executone Preferred Stock.
Standby Agreement: the Standby Agreement, dated as of the date hereof,
between Unistar and Unistar Buying Group, LLC, a limited liability company
controlled by certain of the Shareholders.
Subscription Price: the subscription price of $0.05 per Right for
which each holder of five Rights may purchase one share of Unistar Common Stock.
Subsidiaries: the term "subsidiaries" as used herein with respect to
any entity shall, unless otherwise indicated, be deemed to refer to both direct
and indirect subsidiaries of such entity.
Tax Sharing Agreement: the Tax Sharing Agreement, dated as of the date
hereof, between Unistar and Executone, substantially in the form of Exhibit B
attached hereto.
Unistar Assets: collectively, all of the assets of Executone to be
transferred to Unistar, as identified on Schedule II.
Unistar Board: the Board of Directors of Unistar.
Unistar Businesses: the businesses, assets and operations of Unistar
and UEI.
Unistar By-Laws: the By-Laws of Unistar, substantially in the form of
Exhibit C attached hereto, to be in effect at the Separation Date.
5
Unistar Charter: the Amended and Restated Certificate of Incorporation
of Unistar to be in effect at the Separation Date.
Unistar Employee: any individual who, on or immediately prior to the
Separation Date, was employed by Unistar or UEI and who, on or after the
Separation Date, or otherwise in connection with the Rights Offering, is
employed by Unistar or UEI or in a Unistar Business.
Unistar Liabilities: all of (i) the Liabilities of Unistar under this
Agreement or any of the Ancillary Agreements to which Unistar is or becomes a
party; (ii) the Liabilities relating to any of the Unistar Businesses that arise
and are accrued after the Separation Date; (iii) the Liabilities described in
Section 2.01(c); (iv) the Liabilities of Unistar described in Section 5.8 of the
Exchange Agreement; (v) the Liabilities of Unistar pursuant to Paragraph 2 of
each of the Transition and Retention Plan dated _____________, 1998, among
Executone, Unistar and Xxxxxxx X. Xxxxxxx and the Transition and Retention Plan
dated _____________, 1998, among Executone, Unistar and Xxxxxx Xxxxxxx; and (vi)
the Excepted Liabilities.
Unistar Policies: all insurance policies or binders held by or on
behalf of Unistar or UEI or any director, officer or other employee thereof.
Unistar Preferred Stock: the Series A Preferred Stock of Unistar
consisting of 75,000 shares, each share of which is convertible upon the
occurrence of certain events into that number of shares of Unistar Common Stock
(the "Underlying Shares") such that, when added to the shares of Unistar Common
Stock outstanding as of the Separation Date (the "Original Issuance"), the
Shareholders will own 34% of the outstanding Unistar Common Stock, including
only the Original Issuance and the Underlying Shares.
6
Section 1.02. Exhibits, Etc.
Reference to an "Exhibit" or to a "Schedule" are, unless otherwise
specified, to one of the Exhibits or Schedules attached to this Agreement, and
references to a "Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
7
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.01. Recapitalization of Unistar.
Effective as of the Separation Date, Executone will surrender to
Unistar all ______ shares of Unistar Common Stock held beneficially and of
record by Executone in exchange for ____ shares of Unistar Common Stock and
_______ shares of Unistar Preferred Stock.
Section 2.02. Financing.
(a) Cash Management and Intercompany Accounts After the Separation
Date. Executone and Unistar shall establish and maintain a separate cash
management system with respect to the Unistar Businesses effective immediately
after the Separation Date. After the Separation Date, checks payable to Unistar,
but received by Executone, will be forwarded promptly to Unistar. Checks payable
to Executone, but received by Unistar, will be forwarded promptly to Executone.
The proceeds of checks payable to, and received by, Executone but for the
benefit of a Unistar Business, shall be remitted promptly to Unistar. The
proceeds of a check payable to, and received by, Unistar, but for the benefit of
an Executone Business, shall be remitted promptly to Executone.
(b) Letter of Credit. Notwithstanding the foregoing, Executone will
continue to maintain and renew the letter of credit with Bank of America
Illinois currently expiring on October 1, 1998, for the benefit of Unistar for
12 months following the Separation Date.
(c) Capital Contribution. At the Separation Date, Executone (i) will
provide Unistar with $3.0 million in cash and (ii) will assume responsibility
for, and pay when due, Liabilities relating to any of the Unistar Businesses
that have arisen and were accrued before the Separation Date; provided, however,
that the maximum of such Liabilities shall not exceed $500,000 based on
Executone's undertaking to keep current on expenses incurred by Unistar before
the Separation Date. All Liabilities described in subparagraph (ii) above that
exceed $500,000 shall become Unistar Liabilities.
8
Section 2.03. Executone Preferred Stock.
[Prior to the Separation Date, all of the Shareholders shall have
executed the Exchange Agreement.] Pursuant to the Exchange Agreement, on the
Separation Date, the Executone Preferred Stock held as of the Separation Date
will be exchanged automatically on a pro rata basis for: (i) ______ shares of
Unistar Common Stock, which will constitute 15% of the outstanding shares of
Unistar Common Stock, exclusive of any shares acquired pursuant to the Standby
Agreement or through the Rights Offering; and (ii) _______ shares of Unistar
Preferred Stock, which will constitute all of the shares of Unistar Preferred
Stock. No fractional shares of Unistar Common Stock or Unistar Preferred Stock
shall be issued.
Section 2.04. Reorganization of Operations.
(a) Transfer of Unistar Assets. Executone shall transfer to Unistar in
accordance with Section 2.07 all of Executone's right, title and interest in the
Unistar Assets.
(b) Issuance of Rights. Unistar shall issue to the shareholders of
Executone, as of the Record Date, a number of Rights equal to the numbers of
shares of Executone Common Stock outstanding on the Record Date.
Section 2.05. Transfers Not Effected Prior to the Separation Date;
Transfers Deemed Effective as of the Separation Date.
To the extent that any transfers and assumptions contemplated by this
Article II and Article III shall not have been consummated prior to the
Separation Date, the parties shall cooperate to effect such transfers as
9
promptly following the Separation Date as shall be practicable, it nonetheless
being agreed and understood by the parties that neither party shall be liable in
any manner to the other party for any failure of any of the transfers
contemplated by this Article II or Article III to be consummated prior to the
Separation Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities that by their terms or operation of
law cannot be transferred or assumed; provided, however, that Executone and
Unistar and their respective subsidiaries shall cooperate to seek to obtain all
necessary consents and approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Article II and Article III. In
the event that any such transfer of assets or Liabilities has not been
consummated, effective as of and after the Separation Date, the party retaining
such asset or Liability shall thereafter hold such asset for the party entitled
thereto (at the expense of the party entitled thereto) and retain such Liability
for the account of the party by whom such Liability is to be assumed, and take
such other action as may be reasonably requested by the party to whom such asset
is to be transferred, or by whom such Liability is to be assumed, as the case
may be, in order to place such party insofar as reasonably possible, in the same
position as would have existed had such asset or Liability been transferred as
of the Separation Date. As and when any such asset or Liability becomes
transferable, such transfer immediately shall be effected. The parties agree
that, as of the Separation Date, each party hereto shall be deemed to have
assumed in accordance with the terms of this Agreement and the Ancillary
Agreements all of the Liabilities, and all duties, obligations and
responsibilities incident thereto that such party is required to assume pursuant
to the terms hereof and thereof.
Section 2.06. No Representations or Warranties; Consents.
Each party hereto understands and agrees that neither party hereto is,
in this Agreement or in any other agreement or document contemplated by this
10
Agreement or otherwise, representing or warranting in any way (i) the value or
freedom from encumbrance of, or any other matter concerning, any assets of such
party or (ii) as to the legal sufficiency to convey title to any asset or the
execution, delivery and filing of this Agreement or any Ancillary Agreement,
including, without limitation, any conveyancing or assumption instruments, it
being agreed and understood that all such assets are to be transferred, "as is,
where is" and that the party to which such assets are being transferred
hereunder shall bear the economic and legal risk that any conveyances of such
assets shall prove to be insufficient or that such party or any of its
subsidiaries' title to any such assets shall be other than good and marketable
and free from encumbrances. Similarly, each party hereto understands and agrees
that neither party hereto is, in this Agreement or in any other agreement or
document contemplated by this Agreement or otherwise, representing or warranting
in any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications contemplated by this Agreement will satisfy the provisions of any
applicable laws or judgments, it being agreed and understood that the party to
which any assets are transferred shall bear the economic and legal risk that any
necessary consents or approvals are not obtained or any requirements of law or
judgments are not complied with. Notwithstanding the foregoing, the parties
shall use reasonable efforts to obtain all consents and approvals to enter into
all amendatory agreements and to make all filings and applications that may be
required for the consummation of the transactions contemplated by this
Agreement.
Section 2.07. Conveyancing and Assumption Instruments.
In connection with the transfers of assets and the assumptions of
Liabilities contemplated by this Agreement, the parties shall execute or cause
11
to be executed by the appropriate entities conveyancing and assumption
instruments in such forms as the parties shall agree.
ARTICLE III
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Liabilities.
Except as provided in the Ancillary Agreements and in the Exhibits
hereto, Unistar shall assume, pay, perform and discharge in accordance with
their terms all Unistar Liabilities, whether heretofore or hereafter arising or
incurred; and Executone shall pay, perform and discharge in accordance with
their terms all Executone Liabilities, whether heretofore or hereafter arising
or incurred.
ARTICLE IV
THE RIGHTS OFFERING
Section 4.01. Cooperation Prior to the Rights Offering
(a) Executone and Unistar shall prepare, and
Unistar shall mail to the holders of Executone Common Stock as of the Record
Date, the Prospectus, which shall set forth appropriate disclosure concerning
Unistar, the Rights Offering and any other matters. Executone and Unistar
shall also prepare, and Unistar shall file with the Commission, the Form S-1,
which shall include and incorporate by reference the Prospectus. Executone
and Unistar shall use reasonable efforts to cause the Form S-1 to become
effective under the Securities Act.
(b) Executone and Unistar shall cooperate in
preparing, filing with the Commission and causing to become effective any
registration statements or
12
amendments thereof that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by this
Agreement.
(c) Executone and Unistar shall take all such action as
may be necessary or appropriate under the securities or blue sky laws of states
or other political subdivisions of the United States in connection with
the transactions contemplated by this Agreement and the Ancillary Agreements.
(d) Unistar shall prepare, and Unistar shall file and
pursue, an application to permit listing of the Unistar Common Stock on the
Nasdaq Stock Market.
Section 4.02. Executone Board Action; Conditions Precedent to the
Rights Offering.
The Executone Board shall, in its good faith business judgment,
establish the Record Date and the Separation Date and any appropriate procedures
in connection with the Rights Offering. In no event shall the Rights Offering
occur prior to such time as the following conditions shall have been satisfied:
(i) the transactions contemplated by
Sections 2.01, 2.02 and 2.03 shall have been consummated in all material
respects;
(ii) the Unistar Common Stock shall have
been approved for listing on the Nasdaq Stock Market subject to official notice
of issuance;
(iii) the Unistar Board shall have adopted
the Unistar Charter and Unistar By-laws and the Unistar Charter and Unistar
By-laws shall be in effect; and
(iv) the Form S-1 shall have been declared
effective by the Commission or become effective under the Securities Act;
provided, however, that the satisfaction of such conditions shall not create any
obligation on the part of Executone or any other party hereto to effect the
Rights Offering.
13
Section 4.03. The Rights Offering.
(a) On the Record Date, subject to the conditions and
rights of termination set forth in this Agreement, Unistar shall deliver to
the Rights Agent a certificate representing all of the Rights and shall
instruct the Rights Agent to distribute, as soon as practicable following
the Record Date, certificates representing the Rights to holders of record of
Executone Common Stock on the Record Date. Each holder of Executone Common
Stock will receive one Right for each share of Executone Common Stock held.
Each Right will be transferable and each five Rights will entitle the holder to
acquire one share of Unistar Common Stock at the Subscription Price until the
Expiration Date.
(b) A holder of Executone Common Stock may exercise the
Rights by completing and signing the election to purchase form that appears
on the back of each Rights certificate. The holder must send the completed and
signed form, along with payment in full of the Subscription Price for all
shares that such holder wishes to purchase to the Rights Agent. The Rights
Agent must receive these documents and the payment by 5:00 p.m. on the
Expiration Date. Unistar will not honor the exercise of Rights received by the
Rights Agent after the Expiration Date.
(c) The Rights Agent will issue certificates to each
Holder representing the Unistar Common Stock purchased through the
exercise of Rights on or about ______________, 1998. Until such date,
the Rights Agent will hold all funds received in payment of the Subscription
Price in escrow and will not deliver any funds to Unistar until the shares of
Unistar Common Stock have been issued.
(d) Executone will decide all questions as to the
validity, form, eligibility (including times of receipt and beneficial
ownership) and acceptance of subscription forms.
14
(e) A holder may transfer all or a portion of its
Rights by endorsing and delivering to the Rights Agent its Rights certificate.
The holder must properly endorse the certificate for transfer, the signature
must be guaranteed by a bank or securities broker and the certificate must
be accompanied by instructions to reissue the Rights in the name of the person
purchasing the Rights. The Rights Agent will reissue certificates for the
transferred Rights to the purchaser, and will reissue a certificate for the
balance, if any, to such holder if it is able to do so before the Expiration
Date.
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01. The Unistar Board.
Unistar and Executone shall take all actions that may be required to
elect or otherwise appoint, as of the Separation Date, at least seven persons as
directors of Unistar. The directors will be divided into three substantially
equal classes and will serve staggered terms of three years each. Each director
in Class I will hold office initially for a term expiring at the first annual
meeting of stockholders of Unistar, each director in Class II will hold office
initially for a term expiring at the second annual meeting of stockholders of
Unistar and each director in Class III will hold office for an initial term
expiring at the third annual meeting of stockholders of Unistar. The directors
of Unistar initially will include the following persons:
Name Class
---- -----
Xxxxxx Xxxxxx III
Xxxxx X. Xxxxxxx XX
Xxxxxxx X. Xxxx XX
Xxxx Xxxxxxx I
Xxxxxxx X. Xxxxxxx III
15
Two additional persons will constitute the additional Class I and Class
III directors, which persons shall be recommended to the Executone Board by the
Unistar Advisory Board; provided, however, that, in the business judgment of the
Executone Board reasonably exercised, such persons are suitable candidates, and
if such persons are not so suitable, the Executone Board may consider other
nominees.
Section 5.02. Resale Shelf.
Unistar will file, and use it best efforts to have declared effective
by the Commission, a Registration Statement on Form S-3 as soon as practicable
after the conditions for use of such form are satisfied to register the resale
of the shares of Unistar Common Stock received by the Shareholders pursuant to
the Exchange Agreement and the Underlying Shares.
Section 5.03. Resignations.
Unistar shall cause all Unistar Employees to resign, effective as of
the Separation Date, from all boards of directors or similar governing bodies of
Executone on which they serve, and from all positions as officers of Executone
in which they serve. Executone shall cause all of its employees and directors to
resign effective as of the Separation Date from all boards of directors or
similar governing bodies of Unistar or UEI on which they serve, and from all
positions as officers of Unistar or UEI in which they serve (other than Unistar
Employees and those directors of Executone who will continue to serve as
directors of Unistar pursuant to Section 5.01).
Section 5.04. Unistar Charter and By-Laws.
Prior to the Separation Date, the restatement and amendment of the
Unistar Charter and the amended Unistar By-Laws shall have been adopted and the
restatement and amendment of the Unistar Charter shall have been made effective
by the Secretary of State of the State of Delaware.
16
Section 5.05. Use of Executone Name.
Any existing printed material, signs, graphics or Internet websites
displaying any affiliation or connection of Unistar or UEI with Executone may be
used by Unistar or UEI only so long as necessary but in no event after the date
more than six months after the Separation Date. On and after the Separation
Date, Unistar or UEI shall not otherwise represent to third parties that any of
them is affiliated with Executone.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
Section 6.01. Access to Information.
From and after the Separation Date, each party hereto shall afford to
the other party and the other party's authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all Information within such party's
possession relating to the other party's businesses, insofar as such access is
reasonably required by the other party.
Section 6.02. Provision of Services.
In addition to any services contemplated to be provided following the
Separation Date by the Services Agreement or any subsidiary agreement thereto or
any other Ancillary Agreement (subject to the limitations regarding such
services set forth in such agreements), each party shall make available to the
other party during normal business hours and in a manner that will not
unreasonably interfere with such party's business, its administrative staff and
services (collectively, "Services") whenever and to the extent that they may be
reasonably required in connection with effecting an orderly transition following
the Rights Offering.
17
Section 6.03. Reimbursement.
Except to the extent otherwise contemplated by the Services Agreement
or any other Ancillary Agreement, a party providing Information or Services to
the other party under this Article VI shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such Information or Services.
Section 6.04. Retention of Records.
Except as otherwise required by law or agreed to in writing, each party
shall not destroy any Information relating to the other party (not transferred
to such other party) and the other party's subsidiaries without first offering
the Information to the other party or the other party's subsidiaries, as
applicable, and, if so requested, providing such party the reasonable
opportunity to retrieve such Information at its own expense.
Section 6.05. Confidentiality.
To the extent it can reasonably do so, Executone on the one hand, and
Unistar and UEI on the other hand, shall hold, and shall cause its consultants
and advisors to hold, in strict confidence, all Information concerning the other
in its possession or furnished by the other or the other's representatives
pursuant to this Agreement (except to the extent that such Information has been
(a) in the public domain through no fault of such party or (b) later lawfully
acquired from other sources by such party), and each party shall not release or
disclose such Information to any other person, except its auditors, attorneys,
financial advisors, bankers and other consultants and advisors, unless compelled
to disclose by judicial or administrative process or, as advised by its counsel,
by other requirements of law.
18
ARTICLE VII
INSURANCE
Section 7.01. Claims and Insurance Policies.
The parties agree that (i) where any Unistar Liability is specifically
covered under an Executone Policy, then Unistar may claim under such Policy as
and to the extent such coverage is available; and (ii) where any Executone
Liability is specifically covered under a Unistar Policy, then Executone may
claim under such Policy as and to the extent such coverage is available.
Executone, for Executone Liabilities, and Unistar, for Unistar Liabilities, each
shall bear and be responsible for any deductible or retention or obligation to
indemnify any insurance carrier relating to any claims for which such party has
coverage. Executone's designated insurance representatives will continue to
manage all claims made under the Executone Policies in accordance with
Executone's customary practices. Unistar's designated insurance representatives
will manage all claims made under the Unistar Policies. As to claims made by one
party covered by insurance policies of the other party, each party shall, and
shall cause each of its Affiliates to, cooperate fully with the other party and
the other party's designated insurance representatives, including providing
necessary documentation, assistance and, where appropriate, testimony.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Executone.
Except as set forth in the Tax Sharing Agreement, Executone shall
indemnify, defend and hold harmless Unistar and each of its Affiliates, each of
their respective directors, officers, employees and agents and each of the
19
heirs, executors, successors and assigns of any of the foregoing (the "Unistar
Indemnitees") from and against any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses, matured or not matured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown
(including without limitation, the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions) (collectively, "Indemnifiable Losses" and,
individually, an "Indemnifiable Loss") of the Unistar Indemnitees arising out of
or due to the failure or alleged failure of Executone or any of its Affiliates
to pay, perform or otherwise discharge in due course any of the Executone
Liabilities.
Section 8.02. Indemnification by Unistar.
Except as set forth in the Tax Sharing Agreement, Unistar shall
indemnify, defend and hold harmless Executone and each of its Affiliates, each
of their respective directors, officers, employees and agents and each of the
heirs, executors, successors and assigns of any of the foregoing (the "Executone
Indemnitees") from and against any and all Indemnifiable Losses of the Executone
Indemnitees arising out of or due to the failure or alleged failure of Unistar
or any of its Affiliates to pay, perform or otherwise discharge in due course
any of the Unistar Liabilities.
Section 8.03. Notice of Third Party Claims.
Each party indemnified under Section 8.01 or 8.02, promptly following
the earlier of (i) receipt of notice of the commencement of any Action, or (ii)
receipt of information regarding the alleged existence of a claim against such
indemnitee with respect to which an indemnity may be sought pursuant to this
Agreement (a "Third Party Claim"), shall give the indemnifying party written
20
notice thereof. The failure of any indemnitee to give notice as provided in this
Section 8.03 shall not relieve the indemnifying party of its obligations under
this Agreement, except to the extent that such indemnifying party is prejudiced
by such failure to give notice.
Section 8.04. Defense of Third Party Claims.
In case an Action shall be brought, or such an Action is threatened,
against any indemnitee and it shall notify promptly an indemnifying party of the
existence thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish to assume the defense thereof,
engage counsel satisfactory to such indemnitee. If the indemnifying party so
assumes the defense thereof, it may not agree to any settlement of such Action
as the result of which, any remedy or relief, other than monetary damages for
which the indemnifying party shall be responsible hereunder, shall be applied to
or against the indemnitee, without the prior written consent of the indemnitee.
If the indemnifying party does not assume the defense thereof, it shall, to the
extent that it has any indemnification obligations with respect thereto, be
bound by any settlement to which the indemnitee agrees, irrespective of whether
the indemnifying party consents thereto; provided, however, if any settlement of
any claim is effected by the indemnitee prior to commencement of any Action
relating thereto, the indemnifying party shall be bound thereby only if it has
consented in writing thereto or has unreasonably withheld its consent. The
indemnitee shall have the right to employ its own counsel in any such case,
including circumstances in which the indemnitee shall have reasonably concluded
that there may be defenses available to it that are different from or in
21
addition to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to direct any such different or
additional defense of such Action on behalf of the indemnitee, but the fees and
expenses of such counsel shall be at the expense of such indemnitee unless the
employment of such counsel shall have been authorized in writing in advance by
the indemnifying party in connection with the defense of such Action or the
indemnifying party shall not have employed counsel promptly to take charge of
the defense of such Action, in any of which events such fees and expenses shall
be borne by the indemnifying party). Except as expressly provided above, the
indemnifying party shall not be liable to any indemnitee for the costs of
investigating, preparing or defending against such Action subsequent to such
time as the indemnifying party assumes the defense of such Action, unless such
investigation, preparation or defense shall have been conducted at the request
of the indemnifying party, its counsel or the insurer. In the event that any
Actions could result in both parties being liable to the other under these
indemnification provisions, the parties shall endeavor, acting reasonably and in
good faith, to agree upon a manner of conducting the defense and/or settlement
of such Action with a view to minimizing the legal expenses and associated costs
that might otherwise be incurred by the parties under the provisions of this
Section 8.04. To the extent possible, the costs of such defense and/or
settlement shall be allocated by the parties on the basis of the eventual
determination of liability.
Section 8.05. Other Claims.
Any claim on account of an Indemnifiable Loss that does not result from
a Third Party Claim shall be asserted by written notice given by the indemnitee
to the indemnifying party within 60 days of the indemnitee's discovery of such
Indemnifiable Loss. Such indemnifying party shall have a period of 60 days after
the receipt of such notice within which to respond thereto. If such indemnifying
party does not respond within such 60-day period, such indemnifying party shall
be deemed to have accepted responsibility to make payment and shall have no
22
further right to contest the validity of such claim. If such indemnifying party
does not respond within such 60-day period and rejects such claim in whole or in
part, such indemnitee shall be free to pursue such remedies as may be available
to such party under applicable law and this Agreement.
Section 8.06. Miscellaneous Provisions Relating to Indemnification.
The indemnification provided for in this Article VIII shall be subject
to the following provisions:
(a) any amounts payable from Executone to Unistar and from
Unistar to Executone shall be offset against each other; and
(b) the amounts for which the indemnifying party shall be liable under
this Article VIII shall be net of any insurance proceeds the benefits of which
the indemnitee has received in connection with the facts giving rise to the
rights of indemnification.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Complete Agreement; Construction.
This Agreement, including the Schedules and Exhibits and the Ancillary
Agreements and other agreements and documents referred to herein, shall
constitute the entire agreement among the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this Agreement and the
provisions of the Exchange Agreement, the Tax Sharing Agreement or the Services
Agreement, the Exchange Agreement, the Tax Sharing Agreement or the Services
Agreement, as the case may be, shall control.
23
Section 9.02. Survival of Agreements.
Except as otherwise contemplated by this Agreement and the Ancillary
Agreements, all covenants and agreements of the parties contained in this
Agreement and in the Ancillary Agreements shall survive the Separation Date.
Section 9.03. Expenses.
Except as otherwise set forth in this Agreement or any Ancillary
Agreement, Executone shall bear all costs and expenses in connection with the
preparation, execution, delivery and implementation of this Agreement and the
Ancillary Agreements and with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
Section 9.04. Governing Law.
This Agreement and the Ancillary Agreements shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without
regard to the principles of conflicts of laws thereof.
Section 9.05. Notices.
All notices and other communications hereunder and under any of the
Ancillary Agreements shall be in writing and shall be delivered by hand or
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:
to Executone:
Executone Information Systems, Inc.
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
24
to Unistar:
Unistar Gaming Corp.
Attention:
Section 9.06. Amendments.
This Agreement and the Ancillary Agreements may not be modified or
amended except by an agreement in writing signed by the parties.
Section 9.07. Successors and Assigns.
This Agreement and the Ancillary Agreements and all of the provisions
hereof and thereof shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns.
Section 9.08. Subsidiaries.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any subsidiary of such party that is contemplated by
this Agreement and the Ancillary Agreements to be a subsidiary of such party on
and after the Separation Date.
Section 9.09. No Third Party Beneficiaries.
Except for the provisions of Article VIII of this Agreement relating to
Indemnitees (as defined therein) and Section 9.07 of this Agreement, this
Agreement and the Ancillary Agreements are solely for the benefit of the parties
hereto and their respective subsidiaries and their Affiliates and shall not be
deemed to confer upon third parties any remedy, claim, Liability, reimbursement,
claim of action or other right.
25
Section 9.10. Titles and Headings.
Titles and headings to sections herein are inserted for the convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement and the Ancillary Agreements.
Section 9.11. Exhibits and Schedules.
The Exhibits and Schedules shall be construed with and as an integral
part of this Agreement and the Ancillary Agreements to the same extent as if the
same had been set forth verbatim herein.
26
IN WITNESS WHEREOF, Executone and Unistar have caused this Agreement to
be duly executed by their respective officers, each of whom is duly authorized,
as of the day and year first above written.
EXECUTONE INFORMATION SYSTEMS, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
UNISTAR GAMING CORP.
By: _____________________________
Name: ___________________________
Title: __________________________
27
EXHIBITS
A. Services Agreement
B. Tax Sharing Agreement
C. Unistar Bylaws
SCHEDULES
I. Excepted Liabilities
II. Unistar Assets
28
SCHEDULE I
Excepted Liabilities
All Liabilities arising out of litigation to which Unistar or a
subsidiary is or becomes a party, including any claims of patent infringement or
contract claims, regardless of the date as of which such claims arise; provided
that all expenses and costs incurred on or prior to the Separation Date in
connection with currently pending litigation to which Unistar or a subsidiary is
a party shall be Executone Liabilities.
29
SCHEDULE II
Unistar Assets
30
Exhibit A
Master Services Agreement
31
Exhibit B
Tax Sharing Agreement
32
Exhibit C
Unistar Bylaws
33