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Exhibit 10(c)
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this ____ day of _______________, 1997, by and between Kennametal Inc., a
Pennsylvania corporation ("Kennametal"), and JLK Direct Distribution Inc., a
Pennsylvania corporation ("JLK")
RECITALS
A. Kennametal owns all of the issued and outstanding Class B
Common Stock, par value $.01 per share, of JLK, and JLK is a
member of Kennametal's "affiliated group" of corporations for
federal income tax purposes.
B. JLK is effecting an initial public offering (the "Offering")
of shares of the Class A Common Stock, par value $.01 per
share, of JLK (the "Class A Common Stock").
C. Upon completion of the Offering, JLK will cease to be a
wholly-owned subsidiary of Kennametal.
D. In connection with the Offering, JLK has filed a registration
statement with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the
"1933 Act").
E. Each of Kennametal and JLK desires to indemnify the other,
and to be indemnified by the other, against certain
liabilities relating to, arising out of or resulting from
their respective businesses, operations and assets and the
above-mentioned registration statement, on the terms set
forth in this Agreement.
NOW, THEREFORE, the parties hereto agree, intending to be legally
bound hereby, as follows:
1.1 DEFINITIONS. As used in this Agreement, in addition to the terms
defined in the Preamble and Recitals hereof, the following terms shall have the
following meanings, applicable to both the singular and plural forms of the
terms described:
"1933 ACT" shall have the meaning ascribed to it in Recital D.
"1934 ACT" means the Securities and Exchange Act of 1934, as
amended.
"AGREEMENT" shall have the meaning ascribed to it in the
Preamble.
"BUSINESS DAY" means any calendar day which is not a Saturday,
Sunday or public holiday under the laws of the Commonwealth of
Pennsylvania.
"CLASS A COMMON STOCK" shall have the meaning ascribed to it in
Recital B.
"CLOSING" means the consummation of the first purchase and sale
of shares of the Class A Common Stock pursuant to the Offering.
"CLOSING DATE" means the date on which the Closing occurs.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"CORPORATE AGREEMENT" means that certain Corporate Agreement by
and between Kennametal and JLK dated as of the date hereof.
"EFFECTIVE DATE" means the date on which the purchase and sale of
shares of Class A Common Stock pursuant to the Offering first
occurs.
"INDEMNIFIABLE LOSSES" shall have the meaning ascribed to it in
Section 2.
"INDEMNIFYING PARTY" shall have the meaning ascribed to it in
Section 5(a).
"INDEMNITEE" shall have the meaning ascribed to it in Section
5(a).
"JLK" shall have the meaning ascribed to it in the Preamble.
"JLK COMPANIES" means JLK and each of its direct and indirect
subsidiaries.
"JLK EMPLOYEES" means all employees or former employees of any of
the JLK Companies other than any person who as of the Closing is
an employee of any of the Kennametal Companies.
"JLK LIABILITIES" means all Liabilities (other than Liabilities
for Taxes that are allocated pursuant to the Tax Agreement)
relating to, resulting from or arising out of the businesses or
operations conducted or formerly conducted or assets owned or
formerly owned by any of the JLK Companies.
"JLK SECURITIES LIABILITIES" means any Liability under the 1933
Act, the 1934 Act, or any other federal or state securities law
or regulation resulting from or arising out of the Offering,
including, without limitation, any such Liability arising out of
or based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement or in any Prospectus; or (ii) the omission or alleged
omission to state in a Registration Statement or Prospectus a
material fact required to be stated therein or necessary to make
the statements made therein not misleading, but only to the
extent that such Liability arises out of or is based upon any
such untrue statement or alleged untrue statement or any such
omission or alleged omission concerning the businesses and
operations of any of the JLK Companies.
"KENNAMETAL" shall have the meaning ascribed to it in the
Prospectus.
"KENNAMETAL COMPANIES" means (unless otherwise expressly
provided) Kennametal and each of its direct and indirect
subsidiaries other than JLK and its subsidiaries.
"KENNAMETAL EMPLOYEES" means all employees or former employees of
any of the Kennametal Companies other than the current or former
JLK Employees.
"KENNAMETAL GUARANTEE" means any guarantee, surety or performance
bond, letter of credit or other contractual arrangement in effect
as of the Closing pursuant to which any Kennametal Company has
guaranteed or secured, or caused a Third-Party to guarantee or
secure, any liability or obligation of any JLK Company.
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"KENNAMETAL LIABILITIES" means all Liabilities (other than any
Liabilities for Taxes which are allocated pursuant to the Tax
Agreement) relating to, resulting from or arising out of the
businesses or operations conducted or assets owned by any of the
Kennametal Companies.
"KENNAMETAL SECURITIES LIABILITIES" means any Liability under the
1933 Act, the 1934 Act or any other federal or state securities
law or regulation resulting from or arising out of the Offering,
including, without limitation, any such Liabilities arising out
of or based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement or in any Prospectus; or (ii) the omission or alleged
omission to state in a Registration Statement or Prospectus a
material fact required to be stated therein or necessary to make
the statements made therein not misleading; but only to the
extent that such Liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or
alleged omission concerning the business and operations of any of
the Kennametal Companies.
"LIABILITIES" means all liabilities and obligations, actual or
contingent, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever and however arising, including all
costs and expenses (including reasonable fees and disbursements
of counsel) relating thereto, and including without limitation
liabilities and obligations arising in connection with any actual
or threatened claim, action, suit or proceeding by or before any
court or regulatory or administrative agency or commission or any
arbitration panel.
"OFFERING" shall have the meaning ascribed to it in Recital B.
"PROSPECTUS" means any prospectus relating to the Offering or any
amendment or supplement thereto.
"PURCHASE AGREEMENT" means that certain Purchase Agreement
between and among Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporation and Xxxxxxx, Sachs & Co. (as representatives of the
several underwriters) and Kennametal and JLK dated ___________
___, 1997.
"REGISTRATION STATEMENT" means any registration statement filed
with the SEC in connection with the Offering or any amendment or
supplement thereto.
"SEC" shall have the meaning ascribed to it in Recital D.
"TAX AGREEMENT" means that certain Tax Sharing Agreement between
Kennametal and JLK dated as of the date hereof.
"TAXES" means any and all taxes (including interest, penalties
and additions to tax), fees and charges (including sales, use,
excise, value added, personal property and other taxes) imposed
by any federal, state or local or government tax authority in the
United States of America or by any foreign government or taxing
authority.
"THIRD-PARTY CLAIM" shall have the meaning ascribed to it in
Section 5(a).
1.2 INTERNAL REFERENCES. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
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2. INDEMNIFICATION BY JLK. JLK shall indemnify, defend and hold
harmless the Kennametal Companies and the respective past, present and future
directors, officers, employees, agents and representatives thereof (regardless
in each case of whether any such person serves in one or more similar
capacities for the JLK Companies) from and against any and all losses, claims,
damages, liabilities, demands, suits and actions, including all reasonable
attorneys' fees and disbursements and other costs and expenses incurred in
connection therewith (collectively, "Indemnifiable Losses"), relating to,
resulting from or arising out of: (a) any JLK Liabilities; (b) any JLK
Securities Liabilities; or (c) any misrepresentation or material breach by JLK
of any covenant of JLK or any failure by JLK to satisfy any condition required
to be satisfied by JLK, contained in this Agreement, the Purchase Agreement or
any other agreement executed by JLK in connection with the Offering, including,
without limitation, the Corporate Agreement and the Tax Agreement, and in
addition to and notwithstanding any other indemnification between the parties
hereto as provided in any such agreement, except to the extent that such
misrepresentation, breach or failure was caused by or resulted from any
statement, act or omission within the exclusive knowledge or control of
Kennametal.
3. INDEMNIFICATION BY KENNAMETAL. Kennametal shall indemnify, defend
and hold harmless the JLK Companies and the respective past, present and future
directors, officers, employees, agents and representatives thereof (regardless
in each case of whether any such person serves in one or more similar
capacities for the Kennametal Companies) from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of: (a) any
Kennametal Liabilities; (b) any Kennametal Securities Liabilities; or (c) any
misrepresentation or material breach by Kennametal of any covenant of
Kennametal or any failure of Kennametal to satisfy any condition required to be
satisfied by Kennametal, contained in this Agreement, the Purchase Agreement,
or any other agreement executed by Kennametal in connection with the Offering,
including, without limitation, the Corporate Agreement and the Tax Agreement,
and in addition to and notwithstanding any other indemnification between the
parties hereto as provided in any such agreement, except to the extent that
such misrepresentation, breach or failure was caused by or resulted from any
statement, act or omission within the exclusive knowledge or control of JLK.
4. GUARANTEES. JLK shall indemnify, defend and hold harmless the
Kennametal Companies, and their respective directors, officers, employees,
agents and representatives, from and against any Indemnifiable Losses relating
to, resulting from, or arising out of any Kennametal Guarantee. Kennametal
shall not terminate unilaterally or withdraw any Kennametal Guarantee and shall
abide by the terms of the Kennametal Guarantees. JLK shall reimburse each
Kennametal Company for its direct costs (or, in the case of any Kennametal
Guarantee that relates to both liabilities or obligations of one or more JLK
Companies and one or more third parties, a pro rata share of such direct
costs), if any, of maintaining the Kennametal Guarantees.
5. THIRD-PARTY CLAIMS.
(a) If any person entitled to indemnification under this
Agreement (an "Indemnitee") receives notice of the assertion
of any claim or of the commencement of any action or
proceeding by any person that is not a party to this
Agreement or a subsidiary of any such party (a "Third-Party
Claim") against such Indemnitee, the Indemnitee shall
promptly provide written notice thereof (including a
description of the Third-Party Claim and an estimate of any
Indemnifiable Losses (which estimate shall not be conclusive
as to the final amount of such Indemnifiable Losses) to the
party required to provide indemnification under this
Agreement (the "Indemnifying Party") within ten (10)
Business Days after the Indemnitee's receipt of notice of
such Third-Party Claim. Any delay by the Indemnitee in
providing such written notice shall not relieve the
Indemnifying Party of any liability for indemnification
hereunder except to the extent that the rights of the
Indemnifying Party are materially prejudiced by such delay.
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(b) The Indemnifying Party shall have the right to participate
in or, by giving written notice to the Indemnitee, to assume
the defense of any Third-Party Claim at such Indemnifying
Party's expense and by such Indemnifying Party's own counsel
(which shall be reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such
defense. The Indemnifying Party shall not be liable for any
legal expenses incurred by the Indemnitee after the
Indemnitee has received notice of the Indemnifying Party's
intent to assume the defense of a Third-Party Claim;
provided, however, that if the Indemnifying Party fails to
take steps reasonably necessary to diligently pursue the
defense of such Third-Party Claim within ten (10) Business
Days of receipt of notice from the Indemnitee that such
steps are not being taken, the Indemnitee may assume its own
defense and the Indemnifying Party shall be liable for the
reasonable costs thereof.
(c) The Indemnifying Party may settle any Third-Party Claim
which it has elected to defend so long as the written
consent of the Indemnitee to such settlement is first
obtained (which consent shall not be unreasonably withheld).
The Indemnified Party shall not settle any Third-Party Claim
without the written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld).
(d) In the event that a Third-Party Claim involves a proceeding
as to which both Kennametal and JLK may be Indemnifying
Parties, the parties hereto agree to cooperate in good faith
in a joint defense of such Third-Party Claim.
6. CONTRIBUTION. If the indemnification provided for in this
Agreement with respect to JLK Securities Liabilities or Kennametal Securities
Liabilities is for any reason held by a court or other tribunal to be
unavailable on policy grounds or otherwise, Kennametal and JLK shall contribute
to any Indemnifiable Losses relating to, resulting from or arising out of the
JLK Securities Liabilities or the Kennametal Securities Liabilities in such
proportion as to reflect each party's relative fault in connection with such
Indemnifiable Losses. The relative fault of the parties shall be determined by
reference to, among other things, whether the conduct or information giving
rise to the Indemnifiable Losses is attributable to Kennametal or JLK and each
party's relative intent, access to information and opportunity to prevent or
correct the Indemnifiable Losses. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any person who is not guilty of fraudulent
misrepresentation.
7. COOPERATION. So long as any books, records and files retained
after the Closing Date by Kennametal (or any of the other Kennametal
Companies), on the one hand, or JLK (or any of the other JLK Companies), on the
other hand, relating to the businesses, operations or assets of the other party
and its subsidiaries (including any books, records and files retained by the
JLK Companies relating to the conduct of their businesses or operations or the
ownership of their assets prior to the Closing) remain in existence and are
available, such other party shall have the right upon prior written notice to
inspect and copy the same at any time during business hours for any proper
purpose, provided that such right will not extend to any books, records or
files the disclosure of which in accordance herewith would result in a waiver
of the attorney-client, work-product or other privileges which permit
non-disclosure of otherwise relevant material in litigation or other
proceedings, or which are subject on the date hereof and at the time inspection
is requested to a non-disclosure agreement with a Third-Party and a waiver
cannot reasonably be obtained. Kennametal and JLK agree that neither they nor
any of their subsidiaries shall destroy any such books, records or files
without reasonable notice to the other party or if such party receives within
ten (10) Business Days of such notice any reasonable objection from the other
party to such destruction. Except in the case of dispute between the parties
hereto, Kennametal and JLK shall cooperate with one another in a timely manner
in any administrative or judicial proceeding involving any matter affecting the
actual or potential liability of either party hereunder. Such cooperation shall
include, without limitation,
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making available to the other party during normal business hours all books,
records and information, and officers and employees (without substantial
disruption of operations or employment) necessary or useful in connection with
any inquiry, audit, investigation or dispute, any litigation or any other
matter requiring any such books, records, information, officers or employees
for any reasonable business purpose. The party requesting or otherwise entitled
to any books, records, information, officers or employees pursuant to this
Section 7 shall bear all reasonable out-of-pocket costs and expenses (except
for salaries, employee benefits and general overhead) incurred in connection
with providing such books, records, information, officers or employees.
8. EFFECTIVENESS. This Agreement shall become effective at Closing.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and permitted assigns and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned by either party hereto to
any other person without the prior written consent of the other party hereto.
10. NO THIRD-PARTY BENEFICIARIES. Except for the persons entitled to
indemnification pursuant to Section 2 or Section 3 hereof, each of whom is an
intended third-party beneficiary hereunder, nothing expressed or implied in
this Agreement shall be construed to give any person or entity other than the
parties hereto any legal or equitable rights hereunder.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof.
12. AMENDMENT. This Agreement may not be amended except by an
instrument signed by the parties hereto.
13. WAIVERS. No waiver of any term shall be construed as a subsequent
waiver of the same term, or a waiver of any other term, of this Agreement. The
failure of any party to assert any of its rights hereunder will not constitute
a waiver of any such rights.
14. SEVERABILITY. If any provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy,
such provision shall be deemed severable and all other provisions of this
Agreement shall nevertheless remain in full force and effect.
15. HEADINGS. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
16. NOTICES. All notices given in connection with this Agreement
shall be in writing. Service of such notices shall be deemed complete: (i) if
hand delivered, on the date of delivery; (ii) if by mail, on the fourth
business day following the day of deposit in the United States mail, by
certified or registered mail, first-class postage prepaid; (iii) if sent by
Federal Express or equivalent courier service, on the next business day; or
(iv) if by telecopier, upon receipt by the sender of confirmation of successful
transmission. Such notices shall be addressed to the parties at the following
addresses or at such other address for a party as shall be specified by like
notice (except that notices of change of address shall be effective upon
receipt):
IF TO KENNAMETAL: Kennametal Inc.
State Xxxxx 000 xxxxx
X. X. Xxx 000
Xxxxxxx, XX 00000
Attn:
Fax No.:
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IF TO JLK: JLK Direct Distribution Inc.
Xxxxx Xxxxx 000 Xxxxx
X. X. Xxx 000
Xxxxxxx, XX 00000
Attn:
Fax No.:
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with, the laws of the Commonwealth of Pennsylvania, without
giving effect to the principles of conflict of laws of such Commonwealth or any
other jurisdiction.
18. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this
Indemnification Agreement as of the date first above written.
KENNAMETAL INC. JLK DIRECT DISTRIBUTION INC.
By _______________________________ By ______________________________
Name _____________________________ Name ____________________________
Title ____________________________ Title ___________________________
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