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EXHIBIT 2.7
FORM OF
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
BETWEEN
QUANTUM CORPORATION
AND
SNAP APPLIANCES, INC.
_________, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I. MUTUAL RELEASES; INDEMNIFICATION......................................................1
Section 1.1. Release of Pre-Closing Claims...............................................1
Section 1.2. Indemnification by SNAP.....................................................2
Section 1.3. Indemnification by Quantum..................................................2
Section 1.4. Indemnification With Respect to Environmental Actions and Conditions........3
Section 1.5. Reductions for Insurance Proceeds and Other Recoveries......................4
Section 1.6. Procedures for Defense, Settlement and Indemnification of
Third Party Claims..........................................................4
Section 1.7. Additional Matters..........................................................5
Section 1.8. Survival of Indemnities.....................................................6
ARTICLE II. INSURANCE MATTERS....................................................................6
Section 2.1. SNAP Insurance Coverage During the Transition Period........................6
Section 2.2. Cooperation and Agreement Not to Release Carriers...........................7
Section 2.3. SNAP Insurance Coverage After the Insurance Transition Period...............7
Section 2.4. Responsibilities for Deductibles and/or Self-insured Obligations............7
Section 2.5. Procedures With Respect to Insured SNAP Liabilities.........................8
Section 2.6. Insufficient Limits of Liability for Quantum Liabilities and SNAP
Liabilities.................................................................8
Section 2.7. Cooperation.................................................................8
Section 2.8. No Assignment or Waiver.....................................................8
Section 2.9. No Liability................................................................8
Section 2.10. Additional or Alternate Insurance...........................................9
Section 2.11. Further Agreements..........................................................9
Section 2.12. Matters Governed by Employee Matters Agreement..............................9
ARTICLE III. MISCELLANEOUS.......................................................................9
Section 3.1. Entire Agreement............................................................9
Section 3.2. Governing Law...............................................................9
Section 3.3. Dispute Resolution..........................................................9
Section 3.4. Notices....................................................................10
Section 3.5. Parties in Interest........................................................11
Section 3.6. Other Agreements Evidencing Indemnification Obligations....................11
Section 3.7. Counterparts...............................................................11
Section 3.8. Assignment.................................................................11
Section 3.9. Severability...............................................................11
Section 3.10. Failure or Indulgence Not Waiver...........................................12
Section 3.11. Amendment..................................................................12
Section 3.12. Authority..................................................................12
Section 3.13. Interpretation.............................................................12
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE IV. DEFINITIONS.........................................................................12
Section 4.1. Action.....................................................................12
Section 4.2. Affiliated Company.........................................................12
Section 4.3. Ancillary Agreements.......................................................13
Section 4.4. Assets.....................................................................13
Section 4.5. Assignment Agreement.......................................................13
Section 4.6. Coverage Amount............................................................13
Section 4.7. Employee Matters Agreement.................................................13
Section 4.8. Environmental Actions......................................................13
Section 4.9. Environmental Conditions...................................................13
Section 4.10. Environmental Laws.........................................................13
Section 4.11. Hazardous Materials........................................................13
Section 4.12. Indemnitee.................................................................13
Section 4.13. Insurance Policies.........................................................13
Section 4.14. Insurance Proceeds.........................................................14
Section 4.15. Insurance Transition Period................................................14
Section 4.16. Insured SNAP Liability.....................................................14
Section 4.17. IPO Date...................................................................14
Section 4.18. IPO Liabilities............................................................14
Section 4.19. IPO Registration Statement.................................................14
Section 4.20. Liabilities................................................................14
Section 4.21. Person.....................................................................14
Section 4.22. Pre-Separation Third Party Site Liabilities................................14
Section 4.23. Release....................................................................14
Section 4.24. Separation.................................................................15
Section 4.25. Separation Agreement.......................................................15
Section 4.26. Separation Date............................................................15
Section 4.27. Shared Quantum Percentage..................................................15
Section 4.28. Shared SNAP Percentage.....................................................15
Section 4.29. Shared Percentage..........................................................15
Section 4.30. SNAP Business..............................................................15
Section 4.31. SNAP Contracts.............................................................15
Section 4.32. SNAP Covered Parties.......................................................15
Section 4.33. SNAP Facilities............................................................15
Section 4.34. SNAP Group.................................................................15
Section 4.35. SNAP Indemnitees...........................................................15
Section 4.36. SNAP Liabilities...........................................................16
Section 4.37. Subsidiary.................................................................16
Section 4.38. Tax Sharing Agreement......................................................16
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 4.39. Taxes......................................................................16
Section 4.40. Third Party Claim..........................................................16
Section 4.41. Quantum Business...........................................................16
Section 4.42. Quantum Facilities.........................................................16
Section 4.43. Quantum Group..............................................................16
Section 4.44. Quantum Indemnitees........................................................16
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INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
This Indemnification and Insurance Matters Agreement (this "AGREEMENT")
is entered into on ________, 2000 between Quantum Corporation, a Delaware
corporation ("QUANTUM"), and SNAP Appliances, Inc., a Delaware corporation
("SNAP"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the ARTICLE IV below.
RECITALS
WHEREAS, Quantum and its Subsidiaries have transferred or will transfer
to SNAP and its Subsidiaries effective as of the Separation Date, substantially
all of the assets of the SNAP Business in accordance with the Master Separation
and Distribution Agreement dated as of October , 2000 between Quantum and SNAP
(the "SEPARATION AGREEMENT").
WHEREAS, the parties desire to set forth certain agreements regarding
indemnification and insurance.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
MUTUAL RELEASES; INDEMNIFICATION
SECTION 1.1. RELEASE OF PRE-CLOSING CLAIMS.
(a) SNAP Release. Except as provided in SECTION 1.1(c) and SCHEDULE 1.1
to this Agreement, effective as of the Separation Date, SNAP does hereby, for
itself and as agent for each member of the SNAP Group, remise, release and
forever discharge the Quantum Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Separation Date, including
in connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(b) Quantum Release. Except as provided in SECTION 1.1(c) and SCHEDULE
1.1 to this Agreement, effective as of the Separation Date, Quantum does hereby,
for itself and as agent for each member of the Quantum Group, remise, release
and forever discharge the SNAP Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Separation Date, including
in connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
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(c) No Impairment. Nothing contained in SECTION 1.1(a) or (b) shall
impair any right of any Person to enforce the Separation Agreement or any other
Ancillary Agreement (including this Agreement), in each case in accordance with
its terms.
(d) No Actions as to Released Claims. SNAP agrees, for itself and as
agent for each member of the SNAP Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including any claim of
contribution or any indemnification, against Quantum or any member of the
Quantum Group, or any other Person released pursuant to SECTION 1.1(a), with
respect to any Liabilities released pursuant to SECTION 1.1(a). Quantum agrees,
for itself and as agent for each member of the Quantum Group, not to make any
claim or demand, or commence any Action asserting any claim or demand, including
any claim of contribution or any indemnification, against SNAP or any member of
the SNAP Group, or any other Person released pursuant to SECTION 1.1(b), with
respect to any Liabilities released pursuant to SECTION 1.1(b).
(e) Further Instruments. At any time, at the request of any other party,
each party shall cause each member of its respective Group to execute and
deliver releases reflecting the provisions hereof.
SECTION 1.2. INDEMNIFICATION BY SNAP. Except as otherwise provided in
this Agreement, SNAP shall, for itself and as agent for each member of the SNAP
Group, indemnify, defend (or, where applicable, pay the defense costs for) and
hold harmless the Quantum Indemnitees from and against any and all Liabilities
that any third party seeks to impose upon the Quantum Indemnitees, or which are
imposed upon the Quantum Indemnitees, and that relate to, arise out of or result
from any of the following items (without duplication):
(i) the SNAP Business, any SNAP Liability or any SNAP Contract;
(ii) any breach by SNAP or any member of the SNAP Group of the
Separation Agreement or any of the Ancillary Agreements (including this
Agreement); and
(iii) any IPO Liabilities.
In the event that any member of the SNAP Group makes a payment to the Quantum
Indemnitees hereunder, and any of the Quantum Indemnitees subsequently
diminishes the Liability on account of which such payment was made, either
directly or through a third-party recovery, Quantum will promptly repay (or will
procure a Quantum Indemnitee to promptly repay) such member of the SNAP Group
the amount by which the payment made by such member of the SNAP Group exceeds
the actual cost of the associated indemnified Liability. This SECTION 1.2 shall
not apply to any Liability indemnified under SECTION 1.4.
SECTION 1.3. INDEMNIFICATION BY QUANTUM. Except as otherwise provided in
this Agreement, Quantum shall, for itself and as agent for each member of the
Quantum Group, indemnify, defend (or, where applicable, pay the defense costs
for) and hold harmless the SNAP Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the SNAP Indemnitees, or
which are imposed upon the SNAP Indemnitees, and that relate to, arise out of or
result from any of the following items (without duplication):
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(i) the Quantum Business or any Liability of the Quantum Group
other than the SNAP Liabilities; and
(ii) any breach by Quantum or any member of the Quantum Group of
the Separation Agreement or any of the Ancillary Agreements (including this
Agreement).
In the event that any member of the Quantum Group makes a payment to the SNAP
Indemnitees hereunder, and any of the SNAP Indemnitees subsequently diminishes
the Liability on account of which such payment was made, either directly or
through a third-party recovery, SNAP will promptly repay (or will procure a SNAP
Indemnitee to promptly repay) such member of the Quantum Group the amount by
which the payment made by such member of the Quantum Group exceeds the actual
cost of the indemnified Liability. This SECTION 1.3 shall not apply to any
Liability indemnified under SECTION 1.4.
SECTION 1.4. INDEMNIFICATION WITH RESPECT TO ENVIRONMENTAL ACTIONS AND
CONDITIONS.
(a) Indemnification by SNAP. SNAP shall, for itself and as agent for
each member of the SNAP Group, indemnify, defend and hold harmless the Quantum
Indemnitees from and against any and all Environmental Actions relating to,
arising out of or resulting from Environmental Conditions (i) arising out of
operations occurring on and after the Separation Date at any of the SNAP
Facilities, or (ii) on any of the SNAP Facilities arising from an event causing
contamination that first occurs on or after the Separation Date (including any
Release of Hazardous Materials occurring after the Separation Date that migrates
to any of the SNAP Facilities), except to the extent that such Environmental
Conditions arise out of the operations of the Quantum Group on and after the
Separation Date.
(b) Partial Indemnification by Quantum. Quantum shall, for itself and as
agent for each member of the Quantum Group, indemnify, defend and hold harmless,
up to a maximum of one-half of the total Liability arising from a particular
Environmental Action, the SNAP Indemnitees from and against any and all
Environmental Actions relating to, arising out of or resulting from any of the
following items:
(i) Environmental Conditions (x) existing on, under, about or in
the vicinity of any of the SNAP Facilities prior to the Separation Date, or (y)
arising out of operations occurring on or before the Separation Date at any of
the SNAP Facilities;
(ii) Except as arising out of the operations of the SNAP Group
on and after the Separation Date, Environmental Conditions on, under, about or
arising out of operations occurring at any time, whether before or after the
Separation Date, at any of the Quantum Facilities; and
(iii) Pre-Separation Third Party Site Liabilities.
(c) Agreement Regarding Payments to Indemnitee. In the event an
Indemnifying Party makes any payment to or on behalf of an Indemnitee with
respect to an Environmental Action for which the Indemnifying Party is obligated
to indemnify under this SECTION 1.4, and the Indemnitee subsequently receives
any payment from a third party on account of the same financial obligation
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covered by the payment made by the Indemnifying Party for that Environmental
Action or otherwise diminishes the financial obligation, the Indemnitee will
promptly pay the Indemnifying Party the amount by which the payment made by the
Indemnifying Party, exceeds the actual cost of the financial obligation.
SECTION 1.5. REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER RECOVERIES. The
amount that any party (an "INDEMNIFYING PARTY") is or may be required to pay to
any other Person (an "INDEMNITEE") pursuant to Section 1.2, 1.3 or 1.4, as
applicable, shall be reduced (retroactively or prospectively) by any Insurance
Proceeds or other amounts actually recovered from third parties by or on behalf
of such Indemnitee in respect of the related loss. The existence of a claim by
an Indemnitee for monies from an insurer or against a third party in respect of
any indemnifiable loss shall not, however, delay any payment pursuant to the
indemnification provisions contained herein and otherwise determined to be due
and owing by an Indemnifying Party. Rather the Indemnifying Party shall make
payment in full of the amount determined to be due and owing by it against an
assignment by the Indemnitee to the Indemnifying Party of the entire claim of
the Indemnitee for Insurance Proceeds or against such third party.
Notwithstanding any other provisions of this Agreement, it is the intention of
the parties that no insurer or any other third party shall be (i) entitled to a
benefit it would not be entitled to receive in the absence of the foregoing
indemnification provisions, or (ii) relieved of the responsibility to pay any
claims for which it is obligated. If an Indemnitee has received the payment
required by this Agreement from an Indemnifying Party in respect of any
indemnifiable loss and later receives Insurance Proceeds or other amounts in
respect of such indemnifiable loss, then such Indemnitee shall hold such
Insurance Proceeds or other amounts in trust for the benefit of the Indemnifying
Party (or Indemnifying Parties) and shall pay to the Indemnifying Party, as
promptly as practicable after receipt, a sum equal to the amount of such
Insurance Proceeds or other amounts received, up to the aggregate amount of any
payments received from the Indemnifying Party pursuant to this Agreement in
respect of such indemnifiable loss (or, if there is more than one Indemnifying
Party, the Indemnitee shall pay each Indemnifying Party, its proportionate share
(based on payments received from the Indemnifying Parties) of such Insurance
Proceeds).
SECTION 1.6. PROCEDURES FOR DEFENSE, SETTLEMENT AND INDEMNIFICATION OF
THIRD PARTY CLAIMS.
(a) Notice of Claims. If a Quantum Indemnitee or a SNAP Indemnitee (as
applicable) (an "INDEMNITEE") shall receive notice or otherwise learn of the
assertion by a Person (including any Governmental Authority) who is not a member
of the Quantum Group or the SNAP Group of any claim or of the commencement by
any such Person of any Action (collectively, a "THIRD PARTY CLAIM") with respect
to which a party (an "INDEMNIFYING PARTY") may be obligated to provide
indemnification to such Indemnitee pursuant to SECTION 1.2, 1.3 or 1.4, or any
other section of the Separation Agreement or any Ancillary Agreement (including
this Agreement), Quantum and SNAP (as applicable) will ensure that such
Indemnitee shall give such Indemnifying Party written notice thereof within 30
days after becoming aware of such Third Party Claim. Any such notice shall
describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the delay or failure of any Indemnitee or other Person to give notice
as provided in this Section 1.6(a) shall not relieve the related Indemnifying
Party of its obligations under this ARTICLE I, except to the extent that
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such Indemnifying Party is actually and substantially prejudiced by such delay
or failure to give notice.
(b) Defense By Indemnifying Party. An Indemnifying Party will manage the
defense of and may settle or compromise any Third Party Claim. Within 30 days
after the receipt of notice from an Indemnitee in accordance with SECTION 1.6(a)
(or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee that the Indemnifying Party will
assume responsibility for managing the defense of such Third Party Claim, which
notice shall specify any reservations or exceptions.
(c) Defense By Indemnitee. If an Indemnifying Party fails to assume
responsibility for managing the defense of a Third Party Claim, or fails to
notify an Indemnitee that it will assume responsibility as provided in SECTION
1.6(a), such Indemnitee may manage the defense of such Third Party Claim;
provided, however, that the Indemnifying Party shall reimburse all such costs
and expenses in the event it is ultimately determined that the Indemnifying
Party is obligated to indemnify the Indemnitee with respect to such Third Party
Claim.
(d) No Settlement By Indemnitee Without Consent. Unless the Indemnifying
Party has failed to manage the defense of the Third Party Claim in accordance
with the terms of this Agreement, no Indemnitee may settle or compromise any
Third Party Claim without the consent of the Indemnifying Party.
(e) No Consent to Certain Judgments or Settlements Without Consent.
Notwithstanding any provision of this SECTION 1.6, no party shall consent to
entry of any judgment or enter into any settlement of a Third Party Claim
without the consent of the other party (such consent not to be unreasonably
withheld) if the effect of such judgment or settlement is to (A) permit any
injunction, declaratory judgment, other order or other nonmonetary relief to be
entered, directly or indirectly, against the other party or (B) affect the other
party in a material fashion due to the allocation of Liabilities and related
indemnities set forth in the Separation Agreement, this Agreement or any other
Ancillary Agreement.
SECTION 1.7. ADDITIONAL MATTERS.
(a) Cooperation in Defense and Settlement. With respect to any Third
Party Claim that implicates both SNAP and Quantum in a material fashion due to
the allocation of Liabilities, responsibilities for management of defense and
related indemnities set forth in the Separation Agreement, this Agreement or any
of the Ancillary Agreements, the parties agree to cooperate fully and maintain a
joint defense (in a manner that will preserve the attorney-client privilege with
respect thereto) so as to minimize such Liabilities and defense costs associated
therewith. The party that is not responsible for managing the defense of such
Third Party Claims shall, upon reasonable request, be consulted with respect to
significant matters relating thereto and may, if necessary or helpful, associate
counsel to assist in the defense of such claims.
(b) Substitution. In the event of an Action in which the Indemnifying
Party is not a named defendant, if either the Indemnitee or the Indemnifying
Party shall so request, the parties shall endeavor to substitute the
Indemnifying Party for the named defendant. If such substitution or
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addition cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this ARTICLE I shall not be altered.
(c) Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(d) Not Applicable to Taxes. This Agreement shall not apply to Taxes
(which are covered by the Tax Sharing Agreement).
SECTION 1.8. SURVIVAL OF INDEMNITIES. Subject to SECTION 3.8, the rights
and obligations of the members of the Quantum Group and the SNAP Group under
this ARTICLE I shall survive the sale or other transfer by any party of any
Assets or businesses or the assignment by it of any Liabilities or the sale by
any member of the Quantum Group or the SNAP Group of the capital stock or other
equity interests of any Subsidiary to any Person.
ARTICLE II .
INSURANCE MATTERS
SECTION 2.1. SNAP INSURANCE COVERAGE DURING THE TRANSITION PERIOD.
(a) Maintain Comparable Insurance. Throughout the period beginning on
the Separation Date and ending on the Distribution Date (i.e., the "INSURANCE
TRANSITION PERIOD"), Quantum shall, subject to insurance market conditions and
other factors beyond its control, maintain policies of insurance, including for
the benefit of SNAP or any of its Subsidiaries, directors, officers, employees
or other covered parties (collectively, the "SNAP COVERED PARTIES") which are
comparable to those maintained generally by Quantum; provided, however, that if
Quantum determines that (i) the amount or scope of such coverage will be reduced
to a level materially inferior to the level of coverage in existence immediately
prior to the Insurance Transition Period or (ii) the retention or deductible
level applicable to such coverage, if any, will be increased to a level
materially greater than the levels in existence immediately prior to the
Insurance Transition Period, Quantum shall give SNAP notice of such
determination as promptly as practicable. Upon notice of such determination,
SNAP shall be entitled to no less than 60 days to evaluate its options regarding
continuance of coverage hereunder and may cancel its interest in all or any
portion of such coverage as of any day within such 60 day period.
(b) Reimbursement for Premiums. SNAP shall promptly pay or reimburse
Quantum, as the case may be, for premium expenses, and SNAP Covered Parties
shall promptly pay or reimburse
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Quantum for any costs and expenses which Quantum may incur in connection with
the insurance coverages maintained pursuant to this SECTION 2.1, including but
not limited to any subsequent premium adjustments. All payments and
reimbursements by SNAP and SNAP Covered Parties to Quantum shall be made within
thirty (30) days after SNAP's receipt of an invoice from Quantum.
SECTION 2.2. COOPERATION AND AGREEMENT NOT TO RELEASE CARRIERS. Each of
Quantum and SNAP will share such information as is reasonably necessary in order
to permit the other to manage and conduct its insurance matters in an orderly
fashion. Each of Quantum and SNAP, at the request of the other, shall cooperate
with and use commercially reasonable efforts to assist the other in recoveries
for claims made under any insurance policy for the benefit of any insured party,
and neither Quantum nor SNAP, nor any of their Subsidiaries, shall take any
action which would intentionally jeopardize or otherwise interfere with either
party's ability to collect any proceeds payable pursuant to any insurance
policy. Except as otherwise contemplated by the Separation Agreement, this
Agreement or any Ancillary Agreement, after the Separation Date, neither Quantum
nor SNAP shall (and shall ensure that no member of their respective Groups
shall), without the consent of the other, provide any insurance carrier with a
release, or amend, modify or waive any rights under any such policy or
agreement, if such release, amendment, modification or waiver would adversely
affect any rights or potential rights of any member of the other Group
thereunder. However, nothing in this SECTION 2.2 shall (A) preclude any member
of any Group from presenting any claim or from exhausting any policy limit, (B)
require any member of any Group to pay any premium or other amount or to incur
any Liability, or (C) require any member of any Group to renew, extend or
continue any policy in force.
SECTION 2.3. SNAP INSURANCE COVERAGE AFTER THE INSURANCE TRANSITION
PERIOD. From and after expiration of the Insurance Transition Period, SNAP shall
be responsible for obtaining and maintaining insurance programs for its risk of
loss and such insurance arrangements shall be separate and apart from Quantum's
insurance programs. Notwithstanding the foregoing, Quantum, upon the request of
SNAP, shall use all commercially reasonable efforts to assist SNAP in the
transition to its own separate insurance programs from and after the Insurance
Transition Period, and shall provide SNAP with any information that is in the
possession of Quantum and is reasonably available and necessary to either obtain
insurance coverages for SNAP or to assist SNAP in preventing unintended
self-insurance, in whatever form.
SECTION 2.4. RESPONSIBILITIES FOR DEDUCTIBLES AND/OR SELF-INSURED
OBLIGATIONS. SNAP will reimburse Quantum for all amounts necessary to exhaust or
otherwise satisfy all applicable self-insured retentions, amounts for fronted
policies, deductibles and retrospective premium adjustments and similar amounts
not covered by Insurance Policies in connection with SNAP Liabilities and
Insured SNAP Liabilities.
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SECTION 2.5. PROCEDURES WITH RESPECT TO INSURED SNAP LIABILITIES.
(a) Reimbursement. SNAP will reimburse Quantum for all amounts incurred
to pursue insurance recoveries from Insurance Policies for Insured SNAP
Liabilities.
(b) Management of Claims. The defense of claims, suits or actions giving
rise to potential or actual Insured SNAP Liabilities will be managed (in
conjunction with Quantum's insurers, as appropriate) by Quantum and SNAP.
SECTION 2.6. INSUFFICIENT LIMITS OF LIABILITY FOR QUANTUM LIABILITIES
AND SNAP LIABILITIES.
In the event that there are insufficient limits of liability available
under Quantum's Insurance Policies in effect prior to the Distribution Date to
cover the Liabilities of Quantum and/or SNAP that would otherwise be covered by
such Insurance Policies, then to the extent that other insurance is not
available to Quantum and/or SNAP for such Liabilities an adjustment will be made
in accordance with the following procedures:
(a) Each party will be allocated an amount equal to their Shared
Percentage of the lesser of (A) the available limits of liability available
under Quantum's Insurance Policies in effect prior to the Distribution Date net
of uncollectible amounts attributable to insurer insolvencies, and (B) the
proceeds received from Quantum's Insurance Policies if the Liabilities are the
subject of disputed coverage claims and, following consultation with each other,
Quantum and/or SNAP agree to accept less than full policy limits from Quantum's
and SNAP's insurers (the "COVERAGE AMOUNT").
(b) A party who receives more than its share of the Coverage Amount (the
"OVERALLOCATED PARTY") agrees to reimburse the other party (the "UNDERALLOCATED
PARTY") to the extent that the Liabilities of the Underallocated Party that
would have been covered under such Insurance Policies is less than the
Underallocated Party's share of the Coverage Amount.
(c) This SECTION 2.6 shall terminate ten years following the
Distribution Date.
SECTION 2.7. COOPERATION. Quantum and SNAP will cooperate with each
other in all respects, and they shall execute any additional documents which are
reasonably necessary, to effectuate the provisions of this ARTICLE II.
SECTION 2.8. NO ASSIGNMENT OR WAIVER. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy of
any member of the Quantum Group in respect of any Insurance Policy or any other
contract or policy of insurance.
SECTION 2.9 NO LIABILITY. SNAP does hereby, for itself and as agent for
each other member of the SNAP Group, agree that no member of the Quantum Group
or any Quantum Indemnitee shall have any Liability whatsoever as a result of the
insurance policies and practices of Quantum and its Subsidiaries as in effect at
any time prior to the Distribution Date, including as a result of the level or
scope of any such insurance, the creditworthiness of any insurance carrier, the
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terms and conditions of any policy, the adequacy or timeliness of any notice to
any insurance carrier with respect to any claim or potential claim or otherwise.
SECTION 2.10. ADDITIONAL OR ALTERNATE INSURANCE. Notwithstanding any
provision of this Agreement, during the Insurance Transition Period, Quantum and
SNAP shall work together to evaluate insurance options and secure additional or
alternate insurance for SNAP and/or Quantum if desired and cost effective.
Nothing in this Agreement shall be deemed to restrict any member of the SNAP
Group from acquiring at its own expense any other insurance policy in respect of
any Liabilities or covering any period.
SECTION 2.11. FURTHER AGREEMENTS. The Parties acknowledge that they
intend to allocate financial obligations without violating any laws regarding
insurance, self-insurance or other financial responsibility. If it is determined
that any action undertaken pursuant to the Separation Agreement, this Agreement
or any Ancillary Agreement is violative of any insurance, self-insurance or
related financial responsibility law or regulation, the parties agree to work
together to do whatever is necessary to comply with such law or regulation while
trying to accomplish, as much as possible, the allocation of financial
obligations as intended in the Separation Agreement, this Agreement and any
Ancillary Agreement.
SECTION 2.12. MATTERS GOVERNED BY EMPLOYEE MATTERS AGREEMENT. This
ARTICLE II shall not apply to any insurance policies that are the subject of the
Employee Matters Agreement.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. ENTIRE AGREEMENT. This Agreement, the Master Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
SECTION 3.2. GOVERNING LAW. This Agreement shall be construed in
accordance with and all Disputes hereunder shall be governed by the laws of the
State of California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior Court
of Santa Xxxxx County and/or the United States District Court for the Northern
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to SECTION 3.3.
SECTION 3.3 DISPUTE RESOLUTION. If a dispute, controversy or claim
("Dispute") arises between the parties relating to the interpretation or
performance of this Agreement, or the grounds for the termination hereof,
appropriate senior executives (e.g. director or vice-president level) of each
party who shall have the authority to resolve the matter shall meet to attempt
in good faith to negotiate a resolution of the Dispute prior to pursuing other
available remedies. The initial meeting between the appropriate senior
executives shall be referred to herein as the "Dispute Resolution Commencement
Date." Discussions and correspondence relating to trying to resolve such Dispute
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shall be treated as confidential information developed for the purpose of
settlement and shall be exempt from discovery or production and shall not be
admissible. If the senior executives are unable to resolve the Dispute within
thirty (30) days from the Dispute Resolution Commencement Date, and either party
wishes to pursue its rights relating to such Dispute, then the Dispute will be
mediated by a mutually acceptable mediator appointed pursuant to the mediation
rules of JAMS/Endispute within thirty (30) days after written notice by one
party to the other demanding non-binding mediation. Neither party may
unreasonably withhold consent to the selection of a mediator or the location of
the mediation. Both parties will share the costs of the mediation equally,
except that each party shall bear its own costs and expenses, including
attorney's fees, witness fees, travel expenses, and preparation costs. The
parties may also agree to replace mediation with some other form of non-binding
or binding ADR.
Any Dispute which the parties cannot resolve through mediation within
ninety (90) days of the Dispute Resolution Commencement Date, unless otherwise
mutually agreed, shall be submitted to final and binding arbitration under the
then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by three (3) arbitrators in Santa Xxxxx County, California.
Such arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA rules.
The arbitrators will be instructed to prepare and deliver a written, reasoned
opinion stating their decision within thirty (30) days of the completion of the
arbitration. The prevailing party in such arbitration shall be entitled to
expenses, including costs and attorneys' and other professional fees, incurred
in connection with the arbitration (but excluding any costs and fees associated
with prior negotiation or mediation). The decision of the arbitrator shall be
final and non-appealable and may be enforced in any court of competent
jurisdiction. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to adversely affect the rights of either
party.
Any Dispute regarding the following is not required to be negotiated,
mediated or arbitrated prior to seeking relief from a court of competent
jurisdiction: breach of any obligation of confidentiality; infringement,
misappropriation, or misuse of any intellectual property right; any other claim
where interim relief from the court is sought to prevent serious and irreparable
injury to one of the parties or to others. However, the parties to the Dispute
shall make a good faith effort to negotiate and mediate such Dispute, according
to the above procedures, while such court action is pending.
SECTION 3.4. NOTICES. Notices, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be given in writing to the respective parties to the following
addresses:
if to Quantum: Quantum Corporation
000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Director, Risk Management
and Worldwide Import/Export
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if to SNAP: Snap Appliances, Inc.
0000 Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Chief Financial Officer
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
SECTION 3.5. PARTIES IN INTEREST. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein, shall
be binding upon Quantum, Quantum's Subsidiaries, SNAP and SNAP's Subsidiaries
and inure solely to the benefit of the SNAP Indemnitees and the Quantum
Indemnitees and their respective permitted assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 3.6. OTHER AGREEMENTS EVIDENCING INDEMNIFICATION OBLIGATIONS.
Quantum hereby agrees to execute, for the benefit of any SNAP Indemnitee, such
documents as may be reasonably requested by such SNAP Indemnitee, evidencing
Quantum's agreement that the indemnification obligations of Quantum set forth in
this Agreement inure to the benefit of and are enforceable by such SNAP
Indemnitee. SNAP hereby agrees to execute, for the benefit of any Quantum
Indemnitee, such documents as may be reasonably requested by such Quantum
Indemnitee, evidencing SNAP's agreement that the indemnification obligations of
SNAP set forth in this Agreement inure to the benefit of and are enforceable by
such Quantum Indemnitee.
SECTION 3.7. COUNTERPARTS. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
SECTION 3.8. ASSIGNMENT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced separately by each member of the Quantum Group and each member of
the SNAP Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party, and
any such assignment shall be void; provided, however, either party may assign
this Agreement to a successor entity in conjunction with such party's
reincorporation.
SECTION 3.9. SEVERABILITY. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of
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law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
fullest extent possible.
SECTION 3.10. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of either party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.
SECTION 3.11. AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.
SECTION 3.12. AUTHORITY. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
SECTION 3.13. INTERPRETATION. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table or contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
ARTICLE IV.
DEFINITIONS
SECTION 4.1. ACTION. "ACTION" means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before any
federal, state, local, foreign or international governmental authority or any
arbitration or mediation tribunal.
SECTION 4.2. AFFILIATED COMPANY. "AFFILIATED COMPANY" of any Person
means any entity that controls, is controlled by, or is under common control
with such Person. As used herein, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such entity, whether through ownership of voting securities or other
interests, by contract or otherwise.
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SECTION 4.3. ANCILLARY AGREEMENTS. "ANCILLARY AGREEMENTS" has the
meaning set forth in Section 2.1 of the Separation Agreement.
SECTION 4.4. ASSETS. "ASSETS" has the meaning set forth in SECTION 4.5
of the Assignment Agreement.
SECTION 4.5. ASSIGNMENT AGREEMENT. "ASSIGNMENT AGREEMENT" means the
General Assignment and Assumption Agreement attached as EXHIBIT C to the
Separation Agreement.
SECTION 4.6. COVERAGE AMOUNT. "COVERAGE AMOUNT" has the meaning set
forth in SECTION 2.6(a) of this Agreement.
SECTION 4.7. EMPLOYEE MATTERS AGREEMENt. "EMPLOYEE MATTERS AGREEMENT"
means the Employee Matters Agreement attached as EXHIBIT E to the Separation
Agreement.
SECTION 4.8. ENVIRONMENTAL ACTIONS. "ENVIRONMENTAL ACTIONS" means any
notice, claim, act, cause of action, order, decree or investigation by any third
party (including, without limitation, any Governmental Authority) alleging
potential liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, damage to
flora or fauna caused by Environmental Conditions, real property damages,
personal injuries or penalties) arising out of, based on or resulting from the
Release of or exposure of any individual to any Hazardous Materials.
SECTION 4.9. ENVIRONMENTAL CONDITIONS. "ENVIRONMENTAL CONDITIONS" means
the presence in the environment, including the soil, groundwater, surface water
or ambient air, of any Hazardous Material at a level which exceeds any
applicable standard or threshold under any Environmental Law or otherwise
requires investigation or remediation (including, without limitation,
investigation, study, health or risk assessment, monitoring, removal, treatment
or transport) under any applicable Environmental Laws.
SECTION 4.10. ENVIRONMENTAL LAWS. "ENVIRONMENTAL LAWS" means all laws
and regulations of any Governmental Authority with jurisdiction that relate to
the protection of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) including laws and regulations
relating to the Release of Hazardous Materials, or otherwise relating to the
treatment, storage, disposal, transport or handling of Hazardous Materials, or
to the exposure of any individual to a Release of Hazardous Materials.
SECTION 4.11. HAZARDOUS MATERIALS. "HAZARDOUS MATERIALS" means
chemicals, pollutants, contaminants, wastes, toxic substances, radioactive and
biological materials, hazardous substances, petroleum and petroleum products or
any fraction thereof.
SECTION 4.12. INDEMNITEE. "INDEMNITEE" has the meaning set forth in
SECTION 1.6(a) hereof.
SECTION 4.13. INSURANCE POLICIES. "INSURANCE POLICIES" means insurance
policies pursuant to which a Person makes a true risk transfer to an insurer.
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SECTION 4.14. INSURANCE PROCEEDS. "INSURANCE PROCEEDS" means those
monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
from Insurance Policies.
SECTION 4.15. INSURANCE TRANSITION PERIOD. "INSURANCE TRANSITION PERIOD"
has the meaning set forth in SECTION 2.1(a) of this Agreement.
SECTION 4.16. INSURED SNAP LIABILITY. "Insured SNAP Liability" means any
SNAP Liability to the extent that (i) it is covered under the terms of Quantum's
Insurance Policies in effect prior to the Distribution Date, and (ii) SNAP is
not a named insured under, or otherwise entitled to the benefits of, such
Insurance Policies.
SECTION 4.17. IPO DATE. "IPO DATE" means the date on which SNAP effects
its initial public offering of common stock. Scheduled to occur on or before
[ ].
SECTION 4.18. IPO LIABILITIES. "IPO LIABILITIES" means any Liabilities
relating to, arising out of or resulting from any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, with respect to all information contained in the IPO
Registration Statement or any preliminary, final or supplemental prospectus
forming a part of a IPO Registration Statement.
SECTION 4.19. IPO REGISTRATION STATEMENT. "IPO REGISTRATION STATEMENT"
means the registration statement on Form S-1 pursuant to the Securities Act to
be filed with the SEC registering the shares of common stock of SNAP to be
issued in the IPO, together with all amendments thereto.
SECTION 4.20. LIABILITIES. "LIABILITIES" has the meaning set forth in
SECTION 4.17 of the Assignment Agreement.
SECTION 4.21. PERSON. "PERSON" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
SECTION 4.22. PRE-SEPARATION THIRD PARTY SITE LIABILITIES.
"PRE-SEPARATION THIRD PARTY SITE LIABILITIES" means any and all Environmental
Actions arising out of Hazardous Materials found on, under or about any landfill
any waste, storage, transfer or recycling site and resulting from or arising out
of Hazardous Materials stored, treated, recycled disposed or otherwise handled
at such site prior to the Separation Date (whether for the operation of the SNAP
Business or for the operation of any past or presently (as of the date hereof)
existing Quantum Business as operated on or before the Separation Date).
SECTION 4.23. RELEASE. "RELEASE" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor
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environment, including, without limitation, the movement of Hazardous Materials
through ambient air, soil, surface water, groundwater, wetlands, land or
subsurface strata.
SECTION 4.24. SEPARATION. "SEPARATION" means the transfer and
contribution from Quantum to SNAP, and SNAP's receipt and assumption of,
directly or indirectly, substantially all of the Assets and Liabilities
currently associated with the SNAP Business and the stock, investments or
similar interests currently held by Quantum in subsidiaries and other entities
that conduct such business.
SECTION 4.25. SEPARATION AGREEMENT. "SEPARATION AGREEMENT" means the
Master Separation and Distribution Agreement dated as of October , 2000, of
which this Agreement is an Exhibit thereto.
SECTION 4.26. SEPARATION DATE. "SEPARATION DATE" means the effective
date and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation, which shall be
12:01 a.m., Pacific Time, _____________________________, or such date as may be
fixed by the Board of Directors of Quantum.
SECTION 4.27. SHARED QUANTUM PERCENTAGE. "SHARED QUANTUM PERCENTAGE"
means 90%.
SECTION 4.28. SHARED SNAP PERCENTAGE. "SHARED SNAP PERCENTAGE" means
10%.
SECTION 4.29. SHARED PERCENTAGE. "SHARED PERCENTAGE" means the Shared
SNAP Percentage or the Shared Quantum Percentage, as the case may be.
SECTION 4.30. SNAP BUSINESS. "SNAP BUSINESS" means the business and
operations of SNAP, as described in the IPO Registration Statement and except as
otherwise expressly provided herein, any terminated, divested or discontinued
businesses or operations that at the time of termination, divestiture or
discontinuation primarily related to the SNAP Business as then conducted.
SECTION 4.31. SNAP CONTRACTS. "SNAP CONTRACTS" has the meaning set forth
in SECTION 4.23 of the Assignment Agreement.
SECTION 4.32. SNAP COVERED PARTIES. "SNAP COVERED PARTIES" shall have
the meaning set forth in SECTION 2.1(a) of this Agreement.
SECTION 4.33. SNAP FACILITIES. "SNAP FACILITIES" means all of those
facilities to be transferred to SNAP on the Separation Date.
SECTION 4.34. SNAP GROUP. "SNAP GROUP" means SNAP, each Subsidiary and
Affiliated Company of SNAP immediately after the Separation Date and each Person
that becomes a Subsidiary or Affiliate Company of SNAP after the Separation
Date.
SECTION 4.35. SNAP INDEMNITEES. "SNAP INDEMNITEES" means SNAP, each
member of the SNAP Group and each of their respective directors, officers and
employees.
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SECTION 4.36. SNAP LIABILITIES. "SNAP LIABILITIES" has the meaning set
forth in SECTION 1.3 of the Assignment Agreement.
SECTION 4.37. SUBSIDIARY. "SUBSIDIARY" of any Person means a corporation
or other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person.
SECTION 4.38. TAX SHARING AGREEMENT. "TAX SHARING AGREEMENT" means the
Tax Sharing Agreement, attached as EXHIBIT F to the Separation Agreement.
SECTION 4.39. TAXES. "TAXES" has the meaning set forth in the Tax
Sharing Agreement.
SECTION 4.40. THIRD PARTY CLAIM. "THIRD PARTY CLAIM" has the meaning set
forth in SECTION 1.6 of this Agreement.
SECTION 4.41. QUANTUM BUSINESS. "QUANTUM BUSINESS" means any business of
Quantum other than the SNAP Business.
SECTION 4.42. QUANTUM FACILITIES. "QUANTUM FACILITIES" means all of the
real property and improvements thereon owned or occupied at any time on or
before the Separation Date by any member of the Quantum Group, whether for the
Quantum Business or the SNAP Business, excluding the SNAP Facilities.
SECTION 4.43. QUANTUM GROUP. "QUANTUM GROUP" means Quantum, each
Subsidiary and Affiliated Company of Quantum (other than any member of the SNAP
Group) immediately after the Separation Date and each Person that becomes a
Subsidiary or Affiliate Company of Quantum after the Separation Date.
SECTION 4.44. QUANTUM INDEMNITEES. "QUANTUM INDEMNITEES" means Quantum,
each member of the Quantum Group and each of their respective directors,
officers and employees.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this Indemnification
and Insurance Matters Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.
QUANTUM CORPORATION SNAP APPLIANCES, INC.
By: By:
-------------------------- --------------------------
Name: Name:
------------------------ ------------------------
TITLE: TITLE:
----------------------- -----------------------
22
SCHEDULE 1.1
NOT APPLICABLE.
