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EXHIBIT 10.16
INTERCOMPANY INDEMNIFICATION AGREEMENT
This INTERCOMPANY INDEMNIFICATION AGREEMENT (this "Agreement") dated as
of July 1, 1999 by and between XXXXXXXXXXXXX.XXX, INC., a Delaware corporation
("XxxxxxxXxxxxx.Xxx"), and VITAMIN SHOPPE INDUSTRIES INC., a New York
corporation ("VSI"),
W I T N E S S E T H:
WHEREAS, XxxxxxxXxxxxx.xxx and VSI have entered into a Trademark
License Agreement, a Supply and Fulfillment Agreement, a Co-Marketing Agreement,
an Administrative Services Agreement, a Database Agreement and a Tax Allocation
Agreement, each dated of even date herewith (collectively, the "Intercompany
Agreements");
WHEREAS, the execution and delivery of this Agreement by VSI is a
material inducement to XxxxxxxXxxxxx.xxx to consummate the transactions
contemplated by the Intercompany Agreements; and
WHEREAS, the execution and delivery of this Agreement by
XxxxxxxXxxxxx.xxx is a material inducement to VSI to consummate the transactions
contemplated by the Intercompany Agreements;
NOW, THEREFORE, the parties agree as follows:
1. INDEMNIFICATION. (a) XxxxxxxXxxxxx.xxx agrees to indemnify and hold
VSI and its officers, directors, employees, subsidiaries, affiliates other than
XxxxxxxXxxxxx.xxx and agents harmless against and in respect of any and all
Losses (as defined below) incurred by any of them and third-party claims against
any of them arising out of or otherwise relating to the management, conduct,
operations or activities of XxxxxxxXxxxxx.xxx after June 30, 1999. For the
purposes of this Agreement, "Losses" shall mean any and all actual costs or
expenses (including without limitation attorney fees billed at standard hourly
rates and expenses as and when incurred in connection with any action, claim or
proceeding relating thereto), judgments, amounts paid in settlement, fines,
penalties, assessments and taxes. Notwithstanding the foregoing, Losses shall be
reduced to reflect any insurance proceeds actually recovered by the indemnified
party relating to such claim; provided that this reduction shall not be applied
if to do so would excuse any insurer from any obligation to cover any loss. If
an indemnified party receives insurance proceeds after it receives indemnity
hereunder, then the indemnified party, within ten days after receipt of such
proceeds, shall pay to the indemnifying party the amount by which the
indemnifying party's payment would have been reduced if the insurance proceeds
had been received before the indemnity payments.
(b) VSI agrees to indemnify and hold XxxxxxxXxxxxx.xxx and its
officers, directors, employees, subsidiaries, affiliates other than VSI and
agents harmless against and in respect of any and all Losses incurred by any of
them and third-party claims against any of them arising out of or otherwise
relating to the management, conduct, operations or activities of VSI prior to,
on
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and after the date hereof unless such Losses or third-party claims have been
expressly assumed by XxxxxxxXxxxxx.xxx prior to the date hereof. Notwithstanding
the foregoing, Losses shall be reduced to reflect any insurance proceeds
actually recovered by the indemnified party relating to such claim; provided
that this reduction shall not be applied if to do so would excuse any insurer
from any obligation to cover any loss. If an indemnified party receives
insurance proceeds after it receives indemnity hereunder, then the indemnified
party, within ten days after receipt of such proceeds, shall pay to the
indemnifying party the amount by which the indemnifying party's payment would
have been reduced if the insurance proceeds had been received before the
indemnity payments.
(c) VSI agrees to indemnify and hold XxxxxxxXxxxxx.xxx and its
officers, directors, employees, subsidiaries, affiliates other than VSI and
agents harmless against and in respect of any and all Losses incurred by any of
them by reason of, or arising out of, (i) any liability for income and franchise
taxes arising out of the inclusion of XxxxxxxXxxxxx.xxx and any subsidiary of
XxxxxxxXxxxxx.xxx in any consolidated federal income tax return, or any
consolidated, combined or unitary state or local tax return, of VSI, except for
any such liability as is directly attributable to the operations of
XxxxxxxXxxxxx.xxx and any such subsidiaries, (ii) any liability or obligations
of any entity, whether or not incorporated, which is or was part of a controlled
group or under common control with XxxxxxxXxxxxx.xxx or otherwise treated as a
"single employer" with XxxxxxxXxxxxx.xxx within the meaning of section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended and (iii) any
liability or obligations of VSI under the Employees Retirement Income Security
Act of 1974, as amended. Notwithstanding the foregoing, Losses shall be reduced
to reflect any insurance proceeds actually recovered by the indemnified party
relating to such claim; provided that this reduction shall not be applied if to
do so would excuse any insurer from any obligation to cover any loss. If an
indemnified party receives insurance proceeds after it receives indemnity
hereunder, then the indemnified party, within ten days after receipt of such
proceeds, shall pay to the indemnifying party the amount by which the
indemnifying party's payment would have been reduced if the insurance proceeds
had been received before the indemnity payments.
2. INDEMNIFICATION PROCEDURES. (a) In the event that any third-party
claim in respect of which an indemnified party might seek indemnity is asserted
against or sought to be collected from such indemnified party, the indemnified
party shall deliver a notice (a "Claim Notice") with reasonable promptness to
the indemnifying party, which Claim Notice shall include the amount of the
Losses claimed to the extent known. The indemnifying party shall notify the
indemnified party within 60 days of its receipt of a Claim Notice whether the
indemnifying party disputes its liability to the indemnified party and whether
the indemnifying party desires, at its sole cost and expense, to defend the
indemnified party against such third-party claim.
(b) If the indemnifying party notifies the indemnified party within 60
days after its receipt of a Claim Notice that the indemnifying party desires to
defend the indemnified party with respect to the third-party claim pursuant to
this paragraph 2(b), then the indemnifying party shall have the right to defend,
with counsel reasonably satisfactory to the indemnified party, at
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the sole cost and expense of the indemnifying party, such third-party claim by
all appropriate proceedings, which proceedings must be vigorously and diligently
prosecuted by the indemnifying party to a final conclusion or may be settled at
the discretion of the indemnifying party; provided that the indemnifying party
shall not be permitted to effect any settlement without the written consent of
the indemnified party unless (i) the sole relief provided in connection with
such settlement is monetary damages that are paid in full by the indemnifying
party, (ii) such settlement involves no finding or admission of any wrongdoing,
violation or breach by any indemnified party of any right of any other person or
any laws, contracts or governmental permits and (iii) such settlement has no
effect on any other claims that may be made against or liabilities of any
indemnified party. The indemnifying party shall have full control of such
defense and proceedings, including any compromise or settlement thereof (except
as provided in the preceding sentence); provided that the indemnified party may,
at its sole cost and expense, at any time prior to the indemnifying party's
delivery of the notice referred to in the first sentence of this paragraph 2(b),
file any motion, answer or other pleadings or take any other action that the
indemnified party reasonably believes to be necessary or appropriate to protect
its interests if such indemnified party has been advised by legal counsel that
it may have one or more legal defenses available to it that are not available to
the indemnifying party; and provided further that if requested by the
indemnifying party, the indemnified party shall, at the sole cost and expense of
the indemnifying party, provide reasonable cooperation to the indemnifying party
in contesting any third-party claim that the indemnifying party elects to
contest. The indemnified party may participate in but not control any defense or
settlement of any third-party claim controlled by the indemnifying party
pursuant to this paragraph 2(b) and, except as provided in the first sentence of
this paragraph 2(b) and the preceding sentence, the indemnified party shall bear
its own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the indemnified party may take over the control of the defense or
settlement of a third-party claim at any time if it irrevocably waives its right
to indemnity with respect to such third-party claim.
(c) If the indemnifying party fails to notify the indemnified party
within 60 days of its receipt of a Claim Notice that the indemnifying party
desires to defend the third-party claim pursuant to this paragraph 2 or if the
indemnifying party gives such notice but fails to prosecute vigorously and
diligently or settle such third-party claim (in each case in accordance with
paragraph 2(b)), or if the indemnifying party fails to give any notice
whatsoever within such 60-day period, then the indemnified party shall have the
right to defend, at the sole cost and expense of the indemnifying party, the
third-party claim by all appropriate proceedings, which proceedings shall be
prosecuted by the indemnified party in a reasonable manner and in good faith or
may be settled at the discretion of the indemnified party (with the consent of
the indemnifying party, which consent shall not be unreasonably withheld).
Subject to the immediately preceding sentence, the indemnified party shall have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided that if requested by the indemnified party, the
indemnifying party shall, at the sole cost and expense of the indemnifying
party, provide reasonable cooperation to the indemnified party and its counsel
in contesting any third-party claim that the indemnified party is contesting.
The indemnifying party may participate in but not control any defense or
settlement controlled by the indemnified party
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pursuant to this paragraph 2(c), and the indemnifying party shall bear its own
costs and expenses with respect to such participation.
3. TERM. This Agreement shall commence on the date hereof and continue
for an indefinite period in full force and effect until the third anniversary of
the date upon which all of the Intercompany Agreements have terminated.
4. MISCELLANEOUS. (a) Neither party may assign this Agreement or its
rights and obligations hereunder in whole or in part without the other party's
prior written consent. Any attempt to assign this Agreement without such consent
shall be void and of no effect. Notwithstanding the foregoing, either party may
assign this Agreement or its rights and obligations hereunder to any entity
controlled by it or to any entity by which it is acquired by merger, purchase of
capital stock, transfer of substantially all assets or otherwise; provided that
such entity shall thereafter succeed to all obligations of such party under this
Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such state, without regard to the principles
of conflicts of law of such state.
(c) Each party hereto irrevocably and unconditionally consents to the
exclusive jurisdiction of the Supreme Court of the State of New York, New York
County, or the United States District Court for the Southern District of New
York for the purposes of any suit, action or proceeding arising out of this
Agreement or any transaction contemplated hereby. Each party agrees to commence
any such action, suit or proceeding either in the United States District Court
for the Southern District of New York, or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the State of New York, New York County. Each party further
agrees that service of any process, summons, notice or documents by United
States registered mail to such party's address set forth pursuant to paragraph
4(e) shall be effective service of process for any action, suit or proceeding in
respect to any matters to which such party has submitted to jurisdiction in this
paragraph 4(c). Each party irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or any transaction contemplated hereby in the Supreme Court of the
State of New York, New York County, or the United States District Court for the
Southern District of New York. Each party irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in either such court has been brought in an inconvenient
forum.
(d) If any provision of this Agreement or any portion thereof, or the
application of any such provision or portion thereof, to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or the remaining portion thereof or
the application of such provision to any other persons or circumstances.
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(e) All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (or one business day in the case of express
mail or overnight courier service), as follows:
If to XxxxxxxXxxxxx.xxx, to:
XxxxxxxXxxxxx.xxx, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: President and Chief Executive Officer
If to VSI, to:
Vitamin Shoppe Industries Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: President and Chief Executive Officer
(f) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
(g) This Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. Neither party shall be liable or bound to any other party in any manner
by any representations, warranties or covenants relating to the subject matter
except as specifically set forth herein. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been executed and delivered by both parties.
(h) This Agreement may be amended only by an instrument in writing
signed on behalf of each party. As long as VSI owns at least 30% of the voting
power of the capital stock of XxxxxxxXxxxxx.xxx, no material term of this
Agreement may be amended or waived without the approval of a majority of the
directors of XxxxxxxXxxxxx.xxx who are not directors, officers or more than 5%
stockholders of VSI (or the designee of a more than 5% stockholder).
(i) This Agreement is for the sole benefit of the parties hereto.
Nothing herein expressed or implied shall give or be construed to give to any
other person or entity any legal or equitable rights hereunder.
(j) The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement. When
reference is made in this Agreement to a paragraph, such reference shall be to a
paragraph of this Agreement unless otherwise indicated.
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(k) The provisions of this paragraph 4 shall survive any termination of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
VITAMIN SHOPPE INDUSTRIES INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief
Executive Officer
