DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT ("Agreement") dated as of November 26, 1996 by and
between Independence Holding Company, a Delaware corporation ("IHC"), and
Xxxxxxxxx Sign Company, a Texas corporation ("Xxxxxxxxx").
RECITALS
X. Xxxxxxxxx is presently a more than 80% owned subsidiary of IHC.
B. The Board of Directors of IHC has determined that it is in the
best interests of IHC and the stockholders of IHC to distribute (the
"Distribution") to the holders of IHC Common Stock (as defined herein) all of
the outstanding shares of Xxxxxxxxx Common Stock (as defined herein) owned by
IHC as of the Distribution Date (as defined herein.)
C. It is the intention of the parties that the Distribution will
not be taxable to the stockholders of IHC (pursuant to Section 355 of the
Code (as defined herein) as more fully described in that certain Internal
Revenue Service Ruling dated August 9, 1996, and Supplemental Ruling dated
November 8, 1996 (the "Ruling").
D. The parties have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect the
Distribution and to set forth other agreements that will govern certain other
matters.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements, provisions and covenants contained in this Agreement, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used herein, the following terms have the
following meanings:
"ACTION" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any other tribunal.
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"ANCILLARY AGREEMENTS" means all of the agreements, instruments,
understandings, assignments and other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Tax Sharing Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"DISTRIBUTION" has the meaning set forth in the Recitals to this
Agreement.
"DISTRIBUTION AGENT" means Fleet National Bank.
"DISTRIBUTION DATE" means the business day as of which the
Distribution shall be effective, as determined by the Board of Directors of IHC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM 10" means the registration statement on Form 10 to be filed by
Xxxxxxxxx with the Commission to effect the registration of Xxxxxxxxx Common
Stock pursuant to the Exchange Act, as such registration statement may be
amended from time to time.
"IHC COMMON STOCK" means the outstanding shares of common stock, par
value $1.00 per share, of IHC.
"IHC GROUP" means IHC and its direct or indirect subsidiaries (other
than Xxxxxxxxx) as of the date hereof.
"IHC LIABILITIES" means all of (i) the Liabilities of IHC under this
Agreement, (ii) the Liabilities of the IHC Group (other than any Xxxxxxxxx
Liabilities), whether arising before, on or after the Distribution Date, and
(iii) any third party claims arising from the conduct or operation of the
business of the IHC Group or the ownership or use of assets in connection
therewith.
"INDEMNIFIABLE LOSS" has the meaning set forth in Section 4.01.
"INFORMATION STATEMENT" means the information statement to be sent to
each holder of IHC Common Stock in connection with the Distribution.
"INSURANCE SWITCHOVER DATE" has the meaning set forth in Section 3.6.
"LIABILITIES" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including, without limitation, those debts, liabilities and obligations arising
under this Agreement, any law, rule, regulation, action, order or consent decree
of any
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governmental entity or any award of any arbitrator if any kind, and those
arising under any contract, commitment or undertaking.
"RECORD DATE" means the date determined by IHC's Board of Directors as
the record date for determining the stockholders of IHC entitled to receive
Xxxxxxxxx Common Stock in connection with the Distribution.
"RULING" has the meaning set forth in the Recitals to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TAX AUTHORITY" includes the Internal Revenue Service and any other
state, local or foreign governmental authority responsible for the
administration of Taxes.
"TAXES" means all federal, state, local, and foreign taxes, levies,
and other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement of January 1,
1985 by and between IHC and Xxxxxxxxx, as amended from time to time.
"XXXXXXXXX BUSINESS" means the business of Xxxxxxxxx to be described
in the Form 10.
"XXXXXXXXX BY-LAWS" means the Amended and Restated By-Laws of
Xxxxxxxxx in the form to be filed as an exhibit to the Form 10.
"XXXXXXXXX CERTIFICATE" means the Amended and Restated Certificate of
Incorporation of Xxxxxxxxx in the form to be filed as an exhibit to the Form 10.
"XXXXXXXXX COMMON STOCK" means the outstanding shares of common stock
of Xxxxxxxxx.
"XXXXXXXXX LIABILITIES" means all of (a) the Liabilities of Xxxxxxxxx
under this Agreement and (b) the Liabilities arising from the conduct or
operation of the Xxxxxxxxx Business or the ownership or use of assets or other
activities in connection therewith, whether arising before, on, or after the
Distribution Date, including but not limited to any third party claims arising
from the
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conduct or operation of the Xxxxxxxxx Business or the ownership or use of
assets in connection therewith, and any Liabilities set forth or referenced
in the audited financial statements of Xxxxxxxxx included in the Form 10.
ARTICLE II
THE DISTRIBUTION
SECTION 2.1 COOPERATION PRIOR TO THE DISTRIBUTION.
(a) IHC and Xxxxxxxxx shall prepare, and IHC shall mail to the holders
of IHC Common Stock as of the Record Date, the Information Statement, which
shall set forth appropriate disclosure concerning Xxxxxxxxx, the Distribution
and any other appropriate matters. IHC and Xxxxxxxxx shall also prepare, and
Xxxxxxxxx shall file with the Commission, the Form 10, which shall include or
incorporate by reference the Information Statement. IHC and Xxxxxxxxx shall use
reasonable efforts to cause the Form 10 to become effective under the Exchange
Act; provided, however, that nothing contained in this Agreement shall create an
obligation for IHC to complete the Distribution, it being understood that IHC,
in its sole discretion, will decide if and when the Distribution shall occur.
(b) IHC and Xxxxxxxxx shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement.
SECTION 2.2 IHC BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION. IHC's Board of Directors may, in its discretion, establish the
Record Date and the Distribution Date and any appropriate procedures in
connection with the Distribution. In no event shall the Distribution occur
unless the following conditions shall, unless waived by IHC, have been
satisfied:
(a) all necessary regulatory approvals shall have been received;
(b) the Form 10 shall have become effective under the Exchange Act;
(c) Xxxxxxxxx'x Board of Directors, as named in the Form 10, shall
have been elected by its stockholders, and the Xxxxxxxxx Certificate and
Xxxxxxxxx By-laws shall be in effect;
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(d) IHC's Board of Directors shall have formally approved the
Distribution and shall not have abandoned, deferred or modified the Distribution
at any time prior to the Record Date;
(e) Xxxxxxxxx shall have obtained insurance (or binders therefor)
providing coverage to it similar to the types of coverage provided by insurance
in place prior to the Distribution Date;
(f) there shall have been no material adverse change in the financial
condition of either IHC or Xxxxxxxxx from the date hereof to the Distribution
Date; and
(g) there shall have been no material adverse change in market
conditions from the date hereof to the Distribution Date.
SECTION 2.3 THE DISTRIBUTION. On the Distribution Date or as soon
thereafter as practicable, subject to the conditions set forth in this
Agreement, IHC shall deliver to the Distribution Agent a certificate or
certificates representing all of the then outstanding shares of Xxxxxxxxx held
by the IHC Group, endorsed in blank, and shall instruct the Distribution Agent
to distribute to each holder of record of IHC Common Stock on the Record Date a
certificate or certificates representing one (1) share of Xxxxxxxxx Common Stock
for each five (5) shares of IHC Common Stock so held. Xxxxxxxxx agrees to
provide all certificates for shares of Xxxxxxxxx Common Stock that the
Distribution Agent shall require in order to effect the Distribution.
SECTION 2.4 FEES AND EXPENSES OF DISTRIBUTION AGENT. The fees and
expenses of the Distribution Agent shall be paid by IHC.
ARTICLE III
TRANSITION ARRANGEMENTS
SECTION 3.1 CONDUCT OF XXXXXXXXX BUSINESS PENDING DISTRIBUTION.
Pending consummation of the Distribution, and except as provided herein, the
business of Xxxxxxxxx shall be operated in the ordinary course consistent with
past practice.
SECTION 3.2 INSURANCE.
(a) On or prior to the Distribution Date, Xxxxxxxxx shall obtain
liability and other insurance providing coverage for the operations of
Xxxxxxxxx. From and after the effective date of the policies obtained by
Xxxxxxxxx in accordance with the preceding sentence ("Insurance Switchover
Date"), IHC may terminate coverage of Xxxxxxxxx under IHC's corporate policies.
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Until the Insurance Switchover Date, IHC shall either (i) keep in effect all
policies under its insurance program which provide coverage for the operations
of Xxxxxxxxx in effect as of the date hereof or (ii) arrange for substitute
insurance policies which provide coverage for the operations of Xxxxxxxxx which
is substantially similar to the coverage provided by policies under IHC's
insurance program in effect as of the date hereof. Prior to the Insurance
Switchover Date, and subsequent to the date hereof, Xxxxxxxxx shall pay to IHC
IHC's proportionate share of any insurance premiums paid by IHC for such
continued policies in accordance with the methods currently employed by IHC for
the allocation of such premiums among IHC and its affiliates.
(b) On and after the Distribution Date, IHC shall, in connection with
any claims arising from the conduct or operation of the Xxxxxxxxx Business or
the ownership or use of assets in connection therewith which are covered by the
insurance policies of IHC, instruct the applicable insurance carrier to
negotiate with, accept proof of loss and pay any claim directly to Xxxxxxxxx.
The parties hereto acknowledge that claims arising out of an occurrence or event
which occurred prior to the Insurance Switchover Date may be filed by Xxxxxxxxx
against "occurrence-based" insurance policies of IHC following the date hereof,
in accordance with the terms of such policies. IHC, with respect to claims
relating to the IHC Group, and Xxxxxxxxx, with respect to claims relating to it,
shall bear and be responsible for any deductible or retention or obligation to
indemnify any insurance carrier relating to any claims for which such party has
coverage.
(c) As to claims relating to the Xxxxxxxxx Business or the ownership
or use of assets in connection therewith which are covered by insurance policies
of IHC, IHC shall, and shall cause each of its affiliates to, cooperate fully
with Xxxxxxxxx and its designated insurance representatives, including providing
necessary documentation, assistance and, where appropriate, testimony. IHC and
Xxxxxxxxx will use their reasonable best efforts to collect under their
respective available insurance policies before seeking indemnification, where
allowed.
SECTION 3.3 REPAYMENT OF INTERCOMPANY DEBT. On or prior to the
Distribution Date, the parties shall pay in full any intercompany receivables
and payables between the parties; provided, that it is contemplated that
Xxxxxxxxx will have a fee payable to a subsidiary of IHC as of the Distribution
Date of $475,000 in consideration of such subsidiary's guaranty of a
subordinated term loan facility entered into by Xxxxxxxxx prior to the
Distribution.
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SECTION 3.4 TAX PAYMENT; TAX SHARING AGREEMENT. As between the
parties, the Tax Sharing Agreement shall terminate as of the Distribution Date
and, except as specifically provided in this Agreement, neither party shall have
any further obligation to the other in respect of Taxes (including, without
limitation, refunds of Taxes and subsequent adjustments and assessments of Taxes
previously reported) for periods before, on and after the Distribution Date;
provided, that the parties shall use their best efforts to agree upon a fair
apportionment of any Tax attributes required or permitted by applicable law to
be apportioned among the parties as a result of the Distribution; and provided
further, that any payments of Taxes due between the parties (as determined
pursuant to the Tax Sharing Agreement) applicable to periods ending on or prior
to the Distribution Date shall be settled on an estimated basis on or prior to
the Distribution Date, with any final adjustments to be based on actual results
of operations of Xxxxxxxxx through and including the Distribution Date and
settled on or prior to March 15, 1997.
SECTION 3.5 TAX RETURNS.
(a) IHC shall prepare and file with the appropriate Tax authorities
all Tax returns with respect to Xxxxxxxxx required or permitted to be filed on a
combined, unitary or consolidated basis with the IHC Group for any period ending
on or before the Distribution Date, and shall pay all Taxes due in respect of
any such return.
(b) Xxxxxxxxx shall prepare and file with the appropriate Tax
authorities all Tax returns with respect to Xxxxxxxxx other than those required
or permitted to be filed on a combined, unitary or consolidated basis with the
IHC Group for any period ending on or before the Distribution Date, and shall
pay all Taxes due in respect of any such return.
(c) The parties shall cooperate with each other in the preparation
and filing of such returns (and any claims for refunds or audits or other
proceedings related to Taxes) to the extent reasonably necessary or appropriate
to carry out the intent of this Section.
SECTION 3.6 CERTAIN REPRESENTATIONS AND COVENANTS OF XXXXXXXXX.
(a) Xxxxxxxxx represents to IHC, as of the date of the Ruling and as
of the Distribution Date, as follows:
(i) The five years of financial information submitted on behalf
of Xxxxxxxxx in connection with the request for the Ruling is representative of
Xxxxxxxxx'x present
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operations and there has been no substantial operational changes since the
date of the last financial statement so submitted;
(ii) Xxxxxxxxx has no plan or intention to liquidate, to merge
with any other corporation or to sell, exchange or otherwise dispose of any
substantial portion of its assets, other than in the ordinary course of
business;
(iii) Xxxxxxxxx has no plan or intention to reacquire any
shares of its outstanding stock, to issue any stock or any options, warrants,
rights or other securities evidencing a right to acquire shares of its stock or
to enter into any agreement providing for the sale, exchange or other
disposition of any shares of its outstanding stock, (other than transfers of
Xxxxxxxxx stock described in the Ruling or the request for Ruling dated March 5,
1996 (the "Ruling Request") including the initial public offering of shares of
Xxxxxxxxx common stock) and issuances of employee stock options in the ordinary
course of business; and
(iv) Management of Xxxxxxxxx is not aware of any plan or
intention on the part of the shareholders of IHC to sell, exchange, transfer by
gift or otherwise dispose of any of the shares of Xxxxxxxxx stock to be
distributed to them pursuant to the Distribution (other than pursuant to
transactions permitted by Section 4.052(b) of Rev. Proc. 86-41, as modified by
Rev. Proc. 91-63).
(b) Xxxxxxxxx covenants and agrees with IHC as follows:
(i) During the two year period following the Distribution Date,
Xxxxxxxxx will continue the active conduct of its business, independently and
with its separate employees, unless, in the prior written opinion of tax counsel
selected by IHC, failure to do so would not adversely affect qualification of
the Distribution under Section 355 of the Code;
(ii) During the two year period following the Distribution Date,
Xxxxxxxxx will not reacquire any shares of its outstanding stock, issue any
stock or any options, warrants, rights or other securities evidencing a right to
acquire shares of its stock or enter into any agreement providing for the sale,
exchange or other disposition of any shares of its outstanding stock (other than
transfers of Xxxxxxxxx stock described in the Ruling or the Ruling Request,
including the initial public offering of shares of Xxxxxxxxx common stock) and
issuances of employee stock options in the ordinary course of business unless,
in the prior written opinion of tax counsel selected
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by IHC, such would not adversely affect qualification of the Distribution
under Section 355 of the Code; and
(iii) During the twelve month period following the
Distribution, Xxxxxxxxx will use its best efforts to consummate an initial
public offering of shares of its common stock as described in the Ruling,
provided, that Xxxxxxxxx shall have no liability hereunder if the failure to so
consummate such offering results from adverse business, financial or market
conditions not within Xxxxxxxxx'x control.
ARTICLE IV
INDEMNIFICATION
SECTION 4.1 XXXXXXXXX INDEMNIFICATION OF THE IHC GROUP.
(a) Subject to Section 4.3, Xxxxxxxxx shall indemnify, defend and hold
harmless the IHC Group, and each of their respective directors, officers,
employees, shareholders, representatives and agents (the "IHC Indemnitees") from
and against (i) any Taxes incurred by the IHC Group as a result of the failure
of the Distribution to qualify for nonrecognition treatment under Section 355 of
the Code but only to the extent that such failure results from the breach by
Xxxxxxxxx of any of the representations or covenants set forth in Section 3.6
hereof, and (ii) any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all Actions or
threatened Actions) (collectively, "Indemnifiable Losses") incurred or suffered
by any of the IHC Indemnitees and arising out of, or due to the failure of
Xxxxxxxxx to pay, perform or otherwise discharge, any of the Xxxxxxxxx
Liabilities other than for Taxes required pursuant to Section 3.5(a) hereof to
be paid by IHC.
(b) Subject to Section 4.3, Xxxxxxxxx shall indemnify, defend and hold
harmless the IHC Indemnitees and each person, if any, who controls any of the
IHC Indemnitees within the meaning of Section 15 of the Securities Act from any
Indemnifiable Losses, joint or several, to which they or any of them may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, as and when incurred,
insofar as such Indemnifiable Losses (or Actions in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Form 10 or in the
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Information Statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or arise
out of or are based upon any violation by Xxxxxxxxx of the Securities Act,
any blue sky laws, securities laws or other applicable laws of any state or
country in which the securities covered by the Form 10 are offered or
distributed and relating to action or inaction required of Xxxxxxxxx in
connection with such offering or distribution, and agrees to promptly
reimburse each such IHC Indemnitee or such person controlling such IHC
Indemnitee, as and when incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Indemnifiable Losses; provided, HOWEVER, that Xxxxxxxxx will not be liable in
any such case to the extent that any such Indemnifiable Losses arise out of,
or are based upon, any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to Xxxxxxxxx by IHC specifically for use
in connection with the preparation thereof.
SECTION 4.2 IHC INDEMNIFICATION OF XXXXXXXXX.
(a) Subject to Section 4.3, IHC shall indemnify, defend and hold
harmless, Xxxxxxxxx, and its directors, officers, employees, representatives and
agents (the "Xxxxxxxxx Indemnitees") from and against any and all Indemnifiable
Losses incurred or suffered by any of the Xxxxxxxxx Indemnitees and arising out
of, or due to the failure of any member of the IHC Group to pay, perform or
otherwise discharge, any of the IHC Liabilities, including without limitation,
any liability for Taxes resulting from the Distribution, other than any
liabilities subject to indemnification by Xxxxxxxxx pursuant to Section
4.1(a)(i).
(b) Subject to Section 4.3, IHC shall indemnify, defend and hold
harmless the Xxxxxxxxx Indemnitees and each person, if any, who controls any of
the Xxxxxxxxx Indemnities within the meaning of Section 15 of the Securities Act
from any Indemnifiable Losses, joint or several, to which they or any of them
may become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, as and when
incurred, insofar as such Indemnifiable Losses (or Actions in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Form 10, or in the Information
Statement, or arise out of or are based upon the omission or alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that the same was made therein in reliance
upon and in conformity with written information furnished to Xxxxxxxxx by
IHC specifically for use in connection with the preparation thereof, or
arise out of or are based upon any violation or alleged violation by IHC of
the Securities Act, any blue sky laws, securities laws or other applicable
laws of any state or country in which the securities covered the Form 10
are offered or distributed and relating to action or inaction required of
IHC in connection with such offering or distribution, and agrees to promptly
reimburse each such Xxxxxxxxx Indemnitee or such person controlling such
Xxxxxxxxx Indemnitee, as and when incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such Indemnifiable Losses.
SECTION 4.3 INSURANCE AND THIRD-PARTY OBLIGATIONS. Any indemnification
pursuant to Section 4.1 or 4.2 shall be paid net of the amount of any insurance
(other than any insurance paid for by the applicable Indemnitee) or other
amounts that would be payable by any third party to the indemnified party in the
absence of this Agreement. It is expressly agreed that no insurer or any other
third party shall be (a) entitled to a benefit it would not be entitled to
receive in the absence of the foregoing indemnification provisions, (b) relieved
of the responsibility to pay any claims to which it is obligated or (c) entitled
to any subrogation rights with respect to any obligation hereunder.
SECTION 4.4 INFORMATION PROVIDED BY XXXXXXXXX. For purposes of
Sections 4.1(b) and 4.2(b), the written information furnished to Xxxxxxxxx by
IHC specifically for use in connection with the preparation of the Form 10 and
the Information Statement, consists only of the information set forth under
those headings of the Information Statement which are identified in Annex A
hereto, which the parties agree is preliminary. At the time of the mailing of
the Information Statement, the information listed on Annex A shall be revised
and initialed by the proper officer or officers of each of IHC and Xxxxxxxxx,
such initials representing the parties' agreement thereto.
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ARTICLE V
INDEMNIFICATION PROCEDURES
SECTION 5.1 NOTICE AND PAYMENT OF CLAIMS. If any IHC or Xxxxxxxxx
Indemnitee (the "Indemnified Party") determines that it is or may be entitled to
indemnification by any party (the "Indemnifying Party") under Article IV (other
than in connection with any Action or claim subject to Section 5.2), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. After the Indemnifying Party shall
have been notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days after receipt of
such notice, pay the Indemnified Party such amount in cash or other immediately
available funds unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof, in which case the parties shall comply
with Section 7.11 hereof. If the Indemnifying Party does not give the
Indemnified Party written notice objecting to such claim and setting forth the
grounds therefor within the same 30-day period, the Indemnifying Party shall be
deemed to have acknowledged its liability for such claim and the Indemnified
Party may exercise any and all of its rights under applicable law to collect
such amount.
SECTION 5.2 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. Promptly
following the earlier of (a) receipt of notice of the commencement by a third
party of any Action against or otherwise involving any Indemnified Party or (b)
receipt of information from a third party alleging the existence of a claim
against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the Indemnified Party to give notice as provided in this
Section 5.2 shall not relieve the Indemnifying Party of its obligations under
this Agreement, except to the extent that the Indemnifying Party is prejudiced
by such failure to give notice. Within 30 days after receipt of such notice, the
Indemnifying Party may (a) by giving written notice thereof to the Indemnified
Party, acknowledge liability for, and at its option elect to assume the defense
of, such Third-Party Claim at its sole cost and expense or (b) object to the
claim of indemnification set forth in the notice delivered by the Indemnified
Party
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pursuant to the first sentence of this Section 5.2; provided, that if the
Indemnifying Party does not within the same 30-day period give the
Indemnified Party written notice objecting to such claim and setting forth
the grounds therefor or electing to assume the defense, the Indemnifying
Party shall be deemed to have acknowledged its liability for such Third-Party
Claim. Any contest of a Third-Party Claim as to which the Indemnifying Party
has elected to assume the defense shall be conducted by attorneys employed by
the Indemnifying Party and reasonably satisfactory to the Indemnified Party;
provided, that the Indemnified Party shall have the right to participate in
such proceedings and to be represented by attorneys of its own choosing at
the Indemnified Party's sole cost and expense. If the Indemnifying Party
assumes the defense of a Third-Party Claim, the Indemnifying Party may settle
or compromise the claim without the prior written consent of the Indemnified
Party; provided, that the Indemnifying Party may not agree to any such
settlement pursuant to which any such remedy or relief, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder,
shall be applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. If the Indemnifying Party does not assume the defense
of a Third-Party Claim for which it has acknowledged liability for
indemnification under Article IV, the Indemnified Party may require the
Indemnifying Party to reimburse it on a current basis for its reasonable
expenses of investigation, reasonable attorneys' fees and reasonable
out-of-pocket expenses incurred in defending against such Third-Party Claim
and the Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party; provided, that the Indemnifying Party shall
not be liable for any settlement effected without its consent, which consent
shall not be unreasonably withheld. The Indemnifying Party shall pay to the
Indemnified Party in cash the amount for which the Indemnified Party is
entitled to be indemnified (if any) within 15 days after the final
resolution of such Third-Party Claim (whether by the final nonappealable
judgment of a court of competent jurisdiction or otherwise) or, in the case
of any Third-Party Claim as to which the Indemnifying Party has not
acknowledged liability, within 15 days after such Indemnifying Party's
objection has been resolved pursuant to Section 7.11 or by settlement,
compromise or the final nonappealable judgment of a court of competent
jurisdiction.
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ARTICLE VI
SERVICES
SECTION 6.1 PROVISION OF SERVICES. Subject to the provisions of the
Tax Sharing Agreement, each party shall make available to the other party during
normal business hours and in a manner that will not unreasonably interfere with
such party's business, its financial, tax, accounting, and similar staff and
services (collectively, "Services") whenever and to the extent that they may be
reasonably required in connection with the preparation of returns of Taxes,
audits, claims or litigation and otherwise to assist in effecting an orderly
transition following the date hereof. The Services shall be provided for a
period of up to one year following the Distribution Date.
SECTION 6.2 REIMBURSEMENT. A party providing Services to the other
party pursuant to this Article VI shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses, exclusive of wages and salaries of employees,
as may be reasonably incurred in providing such Services. Payments made in
connection with any continuing transactions between the parties will be for fair
market value based on terms and conditions arrived at by the parties bargaining
at arm's length.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 CONFIDENTIALITY. Each party shall hold and shall cause its
directors, officers, employees, agents, consultants and advisors to holder in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
information (other than any such information relating solely to the business or
affairs of such party) concerning the other party (except to the extent that
such information can be shown to have been (a) in the public domain through no
fault of such party or (b) later lawfully acquired on a non-confidential basis
from other sources by the party to which it was furnished), and neither party
shall release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and agree to comply with the provisions of this
Section 7.1. Each party shall be deemed to have satisfied
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its obligation to hold confidential information concerning or supplied by the
other party if it exercises the same care as it takes to preserve
confidentiality for its own similar information.
SECTION 7.2 EXPENSES. Except as specifically provided in this
Agreement (or the Tax Sharing Agreement, if relevant) or except as otherwise
agreed to in writing between IHC and Xxxxxxxxx, all costs and expenses incurred
in connection with the preparation, execution, delivery and implementation of
this Agreement and with the consummation of the transactions contemplated by
this Agreement (including transfer Taxes and the fees and expenses of all
counsel, accountants and financial and other advisors) shall be paid by the
party incurring such cost or expense. Notwithstanding the foregoing, Xxxxxxxxx
shall be obligated to pay the legal, filing, accounting, printing and other
accountable and out-of-pocket expenditures in connection with the preparation,
printing and filing of the Form 10 and IHC shall be obligated to pay the costs
of mailing the Information Statement to its shareholders.
SECTION 7.3 NOTICES. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to IHC to:
00 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Corporate Secretary
If to Xxxxxxxxx to:
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Any party may, by written notice so delivered to the other parties, change
the address to which delivery of any notice shall thereafter be made.
SECTION 7.4 AMENDMENT AND WAIVER. This Agreement may not be altered or
amended, nor may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver. No
waiver of any terms, provision
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or condition of or failure to exercise or delay in exercising any rights or
remedies under this Agreement, in any one or more instances, shall be deemed
to be, or construed as, a further or continuing waiver of any such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of this Agreement.
SECTION 7.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same Agreement.
SECTION 7.6 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware, without
regard to the conflicts of law rules of such state.
SECTION 7.7 ENTIRE AGREEMENT. This Agreement, together with the
Ancillary Agreements, constitutes the entire understanding of the parties hereto
with respect to the subject matter hereof, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter. To the extent that the provisions of this Agreement are inconsistent
with the provisions of any Ancillary Agreements, the provisions of such
Ancillary Agreement shall prevail.
SECTION 7.8 PARTIES IN INTEREST. None of the parties hereto may assign
its rights or delegate any of its duties under this Agreement without the prior
written consent of each other party. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express
or implied, is intended to confer any benefits, rights or remedies upon any
person or entity other than IHC and Xxxxxxxxx, and the IHC and Xxxxxxxxx
Indemnitees under Articles IV and V hereof.
SECTION 7.9 FURTHER ASSURANCES AND CONSENTS. In addition to the
actions specifically provided for elsewhere in this Agreement, each of the
parties hereto will use its reasonable efforts to (i) execute and deliver such
further instruments and documents and take such other actions as the other party
may reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions
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contemplated by this Agreement, including, without limitation, using its
reasonable efforts to obtain any consents and approvals and to make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement; provided, that no party hereto
shall be obligated to pay any consideration therefor (except for filing fees
and other similar charges) to any third party from whom such consents,
approvals and amendments are requested or to take any action or omit to take
any action if the taking of or the omission to take such action would be
unreasonably burdensome to the party or its business.
SECTION 7.10 MEDIATION. The parties hereto shall attempt in good faith
to resolve any controversy, claim or dispute of whatever nature arising out of
this Agreement or the breach or enforceability thereof (a "Dispute"). If a
Dispute has not been resolved within thirty (30) days after the Dispute arose,
any party ("Disputing Party") may give the other ("Non-Disputing Party") written
notice ("Dispute Notice") which includes a description of the Dispute and a
statement that the Disputing Party thereby invokes the mediation procedures set
forth herein. Within fifteen (15) days after the delivery of the Dispute Notice,
the parties shall mutually select a mediator. To the extent an agreement on a
mediator cannot be reached, the parties shall request the American Arbitration
Association to select a mediator. The mediation shall be conducted in accordance
with the Commercial Mediation Rules of the American Arbitration Association and
any decision of the mediator shall not be binding upon the parties. Unless
otherwise agreed by the Disputing Party and the Non-Disputing Party, in the
event that the Dispute is not resolved by mediation hereunder within sixty (60)
days subsequent to submitting the Dispute to a mediator, the mediation shall
then terminate and the Disputing Party shall have all rights and remedies
otherwise available to it. All conferences and discussions which occur in
connection with mediation pursuant to this Agreement shall be deemed settlement
discussions and nothing said or disclosed, nor any document produced, which is
not otherwise independently discoverable, shall be offered or received as
evidence or used for impeachment or for any other purpose in any current or
future litigation. The fees and expenses of the mediator, including any filing
or other fees of the American Arbitration Association, shall be paid by the
non-prevailing party, of if none, equally by IHC and Xxxxxxxxx.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
INDEPENDENCE HOLDING COMPANY
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
President
XXXXXXXXX SIGN COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxx
Chairman
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ANNEX A
SUMMARY
- Background -- first paragraph
- The Distribution -- except for "Dividends" and "Special Factors"
THE DISTRIBUTION
- Background; Reasons for the Distribution
- Listing and Trading of Xxxxxxxxx Common Stock -- last two paragraphs
- Federal Income Tax Consequences of the Distribution
- Reasons for Furnishing Information Statement
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