Exhibit 10.1
AGREEMENT AND PLAN OF DISTRIBUTION
This AGREEMENT AND PLAN OF DISTRIBUTION (this Agreement), dated as of
_____________, 2002, by and between CT Holdings, Inc., a Delaware corporation
(Parent), and Citadel Security Software Inc., a Delaware corporation (SpinCo);
WHEREAS, SpinCo is a wholly owned subsidiary of Parent;
WHEREAS, Parent Group (as defined herein) currently conducts the Parent Business
(as defined herein), owns the Parent Assets (as defined herein) and is subject
to the Parent Liabilities (as defined herein);
WHEREAS, as of the Effective Time SpinCo (as defined herein) will conduct the
SpinCo Business (as defined herein), will own the SpinCo Assets (as defined
herein) and will be subject to the SpinCo Liabilities (as defined herein);
WHEREAS, the Board of Directors of Parent has authorized the distribution by
Parent to the holders of the issued and outstanding shares of common stock, par
value $0.01 per share, of Parent (the Parent Common Stock) as of the record date
of 100% of the issued and outstanding shares of common stock, par value $0.01
per share, of SpinCo (the SpinCo Common Stock, and each share of such stock, a
SpinCo Share), on the basis of one (1) SpinCo Share for each four (4) shares of
Parent Common Stock (the Distribution); and
WHEREAS, the parties hereto have determined to set forth the principal corporate
and other transactions required to effect the Distribution and to set forth
other agreements that will govern certain other matters prior to and following
the Distribution.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. GENERAL. Unless otherwise defined herein or unless the context
otherwise requires, as used in this Agreement, the following terms shall have
the following meanings:
(a) Action shall mean any demand, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority or any arbitration or
mediation tribunal.
(b) Affiliate shall mean, when used with respect to any specified Person, a
Person that directly or indirectly controls, is controlled by, or is under
common control with such specified Person; provided, however, that for purposes
of this Agreement, any Person who was a member of both Groups prior to the
Distribution shall be deemed to be an Affiliate only of the Group of which such
Person is a member following the Distribution. 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 Person, whether through the
ownership of voting securities or other interests, by contract or otherwise. Any
contrary provision of this Agreement notwithstanding, neither Parent nor any
Parent Subsidiaries shall be deemed to be an Affiliate of SpinCo, and neither
SpinCo nor any SpinCo Subsidiaries shall be deemed to be an Affiliate of Parent.
(c) Agent shall have the meaning set forth in Section 2.1(b) of this Agreement.
(d) Agreement shall mean this Agreement.
(e) Agreement Disputes shall have the meaning set forth in Section 5.1 of this
Agreement.
(f) Ancillary Agreements shall mean all of the written agreements, instruments,
understandings, assignments or other arrangements (other than this Agreement)
entered into by the parties hereto or any other member of their respective
Groups in connection with the transactions contemplated hereby, including the
Conveyancing and
Assumption Instruments, the Employee Benefits Agreement, the Tax Disaffiliation
Agreement, the Transition Services Agreement, and the Sublease.
(g) Applicable Rate shall mean the rate of interest per annum announced from
time to time by Bank One Texas, N.A., as its prime lending rate, plus four
percent (4%).
(h) Assets shall mean assets, properties and rights, wherever located (including
in the possession of vendors or other third parties or elsewhere), whether real,
personal or mixed, tangible, intangible or contingent, in each case whether or
not recorded or reflected or required to be recorded or reflected on the books
and records or financial statements of any Person, including the following:
(i) all accounting and other books, records and files, whether in paper,
microfilm, microfiche, computer tape or disc, magnetic tape or any other form;
(ii) all apparatus, computers and other electronic data processing equipment,
fixtures, machinery, equipment, furniture, office equipment, automobiles,
trucks, other transportation equipment, special and general tools, test devices,
prototypes and models and other tangible personal property;
(iii) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(iv) all interests in real property of whatever nature, including easements,
whether as owner, mortgagee or holder of a security interest in real property,
lessor, sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other equity interests of any
Subsidiary or any other Person; all bonds, notes, debentures or other securities
issued by any Subsidiary or any other Person; all loans, advances or other
extensions of credit or capital contributions to any Subsidiary or any other
Person; and all other investments in securities of any Person;
(vi) all customer contracts; service, maintenance, supply, vendor, consulting,
transportation and consignment agreements; collective bargaining agreements;
employment agreements; license agreements; leases and subleases of personal
property; open purchase orders for raw materials, supplies, parts or services;
unfilled orders for the manufacture and sale of products; and other contracts,
agreements or commitments (collectively, Contracts);
(vii) all deposits, letters of credit and performance and surety bonds;
(viii) all written technical information, data, specifications, research and
development information, engineering drawings, operating and maintenance
manuals, and materials and analyses prepared by consultants and other Third
Parties;
(ix) all domestic and foreign patents, copyrights, trade names, trademarks,
service marks, logos and registrations and applications for any of the
foregoing, together with the goodwill of the business symbolized by any of the
foregoing; mask works, trade secrets, inventions, data bases, and other
proprietary and confidential information; and licenses from Third Parties
granting the right to use any of the foregoing;
(x) all computer applications, programs and other software, including operating
software, network software, firmware, middleware, design software, design tools,
systems documentation and instructions;
(xi) all cost information, sales and pricing data, customer prospect lists,
vendor records, customer and vendor lists, customer and vendor data,
correspondence and lists, product literature, artwork, design, development and
manufacturing files, vendor and customer drawings, formulations and
specifications, quality records and reports and other books, records, studies,
surveys, reports, plans and documents;
(xii) all prepaid expenses, trade accounts and other accounts and notes
receivable;
(xiii) all rights, claims, demands, choses in action and similar rights relating
to the foregoing, whether accrued or contingent;
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(xiv) all rights under insurance policies and all rights in the nature of
insurance, indemnification or contribution;
(xv) all licenses, permits, approvals and authorizations which have been issued
by any Governmental Authority;
(xvi) cash or cash equivalents, bank accounts, lock boxes and other deposit
arrangements; and
(xvii) interest rate, currency, commodity or other swap, collar, cap or other
hedging or similar agreements or arrangements.
(i) Business Day shall mean any day other than a Saturday, Sunday or a day on
which commercial banking institutions located in The City of Dallas are
authorized or obligated by law or executive order to close.
(j) Claims Administration shall mean the processing of claims made under the
Parent Shared Policies, including the reporting of claims to the insurance
carriers, management and defense of claims and providing for appropriate
releases upon settlement of claims.
(k) Code shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder, including any successor
legislation.
(l) Commission shall mean the Securities and Exchange Commission.
(m) Contracts shall have the meaning set forth in the definition of Assets.
(n) Conveyancing and Assumption Instruments shall mean, collectively, the
various agreements, instruments and other documents to be or heretofore entered
into to effect the Corporate Transactions or otherwise to effect the transfer of
Assets and the assumption of Liabilities in the manner contemplated by this
Agreement, the Ancillary Agreements and the Corporate Transactions, including a
limited warranty deed in the form attached hereto as Exhibit B.
(o) Corporate Transactions shall mean, collectively, (a) each of the mergers,
transfers, conveyances, contributions, assignments, dividends, assumptions,
redemptions, purchases and other transactions described and set forth on
Schedule 1.1(p) attached hereto, and (b) such other mergers, transfers,
conveyances, contributions, assignments, dividends, assumptions, redemptions,
purchases and other transactions that may be appropriate or required to be
accomplished, effected or consummated by Parent or SpinCo or any of their
respective Subsidiaries and Affiliates so that: (i) the SpinCo Assets, SpinCo
Liabilities and SpinCo Business shall be owned, directly or indirectly, by
SpinCo after giving effect to the Distribution; and (ii) the Parent Assets,
Parent Liabilities and Parent Business shall be owned, directly or indirectly,
by Parent after giving effect to the Distribution.
(p) Distribution shall have the meaning set forth in the recitals to this
Agreement.
(q) Distribution Date shall mean such date as may be determined by the Board of
Directors of Parent, or such committee of such Board of Directors as shall be
designated by the Board of Directors of Parent, as the date as of which the
Distribution shall be effected.
(r) Distribution Record Date shall mean such date as may be determined by the
Board of Directors of Parent, or such committee of such Board of Directors as
shall be designated by the Board of Directors of Parent, as the record date for
the Distribution.
(s) Effective Time shall mean 11:59 p.m., Dallas time, on the Distribution Date.
(t) Employee Benefits Agreement shall mean the Employee Benefits Agreement by
and between Parent and SpinCo, which agreement shall be entered into prior to or
on the Distribution Date in the form attached hereto as Exhibit C.
(u) Environmental Laws shall mean any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, principles of common law,
judgments, orders, decrees, permits, concessions, grants, franchises,
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licenses, agreements or other governmental restrictions (including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq.), whether now or hereafter in existence, relating to the
environment, natural resources, human health or safety, endangered or threatened
species of fish, wildlife and plants, or to emissions, discharges or releases of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
(including indoor or outdoor air, surface water, groundwater and surface or
subsurface soils), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the investigation,
cleanup or other remediation thereof.
(v) Exchange Act shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
(w) Governmental Authority shall mean any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official, the OTCBB or other regulatory, administrative or governmental
authority.
(x) Group shall mean with respect to Parent, the Parent Group and, with respect
to SpinCo, the SpinCo Group.
(y) Indemnifiable Losses shall mean any and all Losses suffered by an
Indemnitee.
(z) Indemnifying Party shall have the meaning set forth in Section 3.3 of this
Agreement.
(aa) Indemnitee shall have the meaning set forth in Section 3.3 of this
Agreement.
(bb) Information Statement shall mean the Information Statement filed with the
Commission as part of the Registration Statement and mailed to the holders of
shares of Parent Common Stock in connection with the Distribution, including any
amendments or supplements thereto.
(cc) Insurance Administration shall mean, with respect to each Parent Shared
Policy, (i) the accounting for premiums, retrospectively rated premiums, defense
costs, indemnity payments, deductibles and retentions, as appropriate, under the
terms and conditions of each of the Parent Shared Policies; (ii) the reporting
to excess insurance carriers of any losses or claims which may cause the
applicable limits of any Parent Shared Policy to be exceeded; (iii) the
distribution of Insurance Proceeds as contemplated by this Agreement; and (iv)
any and all other actions reasonably necessary for the administration of the
Parent Shared Policies.
(dd) Insurance Proceeds shall mean those monies (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of an
insured.
(ee) Insured Claims shall mean those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Parent
Shared Policies, whether or not subject to deductibles, self-insured retentions,
co-insurance, uncollectibility or retrospectively rated premium adjustments.
(ff) IRS shall mean the Internal Revenue Service.
(gg) Law shall mean all laws, statutes and ordinances and all regulations, rules
and other pronouncements of Governmental Authorities having the effect of law of
the United States, any foreign country, or any domestic or foreign state,
province, commonwealth, city, country, municipality, territory, protectorate,
possession or similar instrumentality, or any Governmental Authority thereof.
(hh) Leases shall mean the leases by and between members of the Parent Group and
members of the SpinCo Group, which leases shall be entered into prior to or on
the Distribution Date in such form as is agreed to by Parent and SpinCo,
including the lease agreement, in the form attached hereto as Exhibit D,
pursuant to which Parent will lease to SpinCo a portion of Parent's corporate
headquarters.
(ii) Liabilities shall mean any and all debts, liabilities, obligations,
responsibilities, response actions, losses, damages
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(whether compensatory, punitive or treble), fines, penalties and sanctions,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
foreseen or unforeseen, joint, several or individual, asserted or unasserted,
accrued or unaccrued, known or unknown, whenever arising, including those
arising under or in connection with any Law (including any Environmental Law),
Action, threatened Action, order or consent decree of any Governmental
Authority, or any award of any arbitration tribunal, and those arising under any
contract, guarantee, commitment or undertaking, whether sought to be imposed by
a Governmental Authority, private party, or party to this Agreement, whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute, or otherwise, and including any costs, expenses, interest,
attorneys' fees, disbursements and expenses of counsel, expert and consulting
fees and costs related thereto or to the investigation or defense thereof.
(jj) Losses shall mean all losses, liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, liquidated or unliquidated, including all
reasonable costs and expenses (legal, accounting or otherwise as such costs are
incurred) relating thereto.
(kk) Notices shall have the meaning set forth in Section 7.6 of this Agreement.
(ll) OTCBB shall mean the Over The Counter Bulletin Board.
(mm) Parent shall have the meaning set forth in the preamble to this Agreement.
(nn) Parent Assets shall mean, collectively, all the Assets owned or held by
Parent or any Parent Subsidiary immediately after giving effect to the Corporate
Transactions, except the SpinCo Assets.
(oo) Parent Business shall mean each and every business conducted at any time by
Parent Group (including those businesses set forth on Schedule 1.1(oo)),
including each and every business conducted in the past and each and every
business which has been discontinued, sold or transferred (including those
businesses set forth on Schedule 1.1(oo)), but excluding the SpinCo Business.
(pp) Parent Common Stock shall have the meaning set forth in the recitals to
this Agreement.
(qq) Parent Group shall mean Parent and each Person (other than any member of
the SpinCo Group) that is a Parent Subsidiary.
(rr) Parent Indemnitee shall mean:
(i) Parent and each Affiliate thereof after giving effect to the Corporate
Transactions and the Distribution; and
(ii) each of the respective past, present and future Representatives of any of
the entities described in the immediately preceding clause (i) and each of the
heirs, executors, successors and assigns of any of such Representatives, except
in the case of clauses (i) and (ii), the SpinCo Indemnitees.
(ss) Parent Liabilities shall mean:
(i) any and all Liabilities that are expressly contemplated by this Agreement or
any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to
be retained or assumed by Parent or any member of the Parent Group, and all
agreements, obligations and Liabilities of any member of the Parent Group under
this Agreement or any of the Ancillary Agreements;
(ii) all Liabilities set forth on Schedule 1.1(tt)(ii); and
(iii) all Liabilities (other than Taxes and any employee-related Liabilities
which are specifically covered by the Tax Disaffiliation Agreement and the
Employee Benefits Agreement, respectively) primarily relating to, arising out of
or resulting from:
(A) the operation of the Parent Business, as conducted at any time prior to, on
or after the Distribution Date (including any Liability relating to, arising out
of or resulting from any act or failure to act by any Representative
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(whether or not such act or failure to act is or was within such Person's
authority));
(B) the operation of any business conducted by Parent or any Parent Subsidiary
at any time after the Distribution Date (including any Liability relating to,
arising out of or resulting from any act or failure to act by any Representative
(whether or not such act or failure to act is or was within such Person's
authority)); or
(C) any Parent Assets, whether arising before, on or after the Distribution
Date.
Notwithstanding the foregoing, the Parent Liabilities shall not include: (y) any
Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or
assumed by SpinCo or any member of the SpinCo Group; or (z) all agreements and
obligations of any member of the SpinCo Group under this Agreement or any of the
Ancillary Agreements. Any contrary provision of this Agreement notwithstanding,
any Liabilities or Losses in respect of any Action relating to the Parent
Business, including the matters set forth on Schedule 1.1(tt)(iii), shall
constitute Parent Liabilities.
(tt) Parent Policies shall mean all Policies, current or past, that are owned or
maintained by or on behalf of Parent or any Parent Subsidiary that do not
provide coverage to or with respect to the SpinCo Assets or the SpinCo Business,
or any part thereof, including those Policies set forth on Schedule 1.1(uu).
(uu) Parent Shared Policies shall mean all Policies, current or past, which are
owned or maintained by or on behalf of Parent or any Parent Subsidiary which
provide coverage to or with respect to the SpinCo Group, the SpinCo Assets or
the SpinCo Business, or any part thereof, other than SpinCo Policies, including
those Policies set forth on Schedule 1.1(uu).
(vv) Parent Subsidiaries shall mean all of the Subsidiaries of Parent other than
SpinCo and the SpinCo Subsidiaries.
(ww) Person shall mean any natural person, corporation, business trust, limited
liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
(xx) Policies shall mean insurance policies and insurance contracts of any kind
(other than life and benefits policies or contracts), including primary, excess
and umbrella policies, master comprehensive general liability policies, director
and officer liability, fiduciary liability, automobile, aircraft, property and
casualty, workers' compensation and employee dishonesty insurance policies,
bonds and self-insurance and captive insurance company arrangements, together
with the rights, benefits and privileges thereunder.
(yy) Records shall have the meaning set forth in Section 4.1 of this Agreement.
(zz) Registration Statement shall mean the registration statement on Form 10-SB
to effect the registration of the SpinCo Common Stock pursuant to the Exchange
Act.
(aaa) Representative shall mean, with respect to any Person, any of such
Person's directors, officers, members, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
(bbb) Rules shall have the meaning set forth in Section 5.3 of this Agreement.
(ccc) Securities Act shall mean the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
(ddd) SpinCo shall have the meaning set forth in the preamble to this Agreement.
(eee) SpinCo Assets shall mean collectively, all the Assets that are owned by
SpinCo or any SpinCo Subsidiaries as of the Effective Time and after giving
effect to the Corporate Transactions, including:
(i) the capital stock of the SpinCo Subsidiaries;
(ii) all of the Assets reflected on the SpinCo Balance Sheet or the accounting
records supporting such balance sheet;
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(iii) all of the Assets expressly allocated to SpinCo or any of the SpinCo
Subsidiaries under this Agreement or any of the Ancillary Agreements; and
(iv) any other Asset acquired by Parent or any of the Parent Subsidiaries from
the date of the SpinCo Balance Sheet to the Effective Time that is owned by
Parent, any of the Parent Subsidiaries, SpinCo or any of the SpinCo Subsidiaries
as of the Effective Time and that is of a nature or type that would have
resulted in such Asset being included as an Asset on the SpinCo Balance Sheet
had it been acquired on or prior to the date of the SpinCo Balance Sheet,
determined on a basis consistent with the determination of the Assets included
on the SpinCo Balance Sheet.
(fff) SpinCo Balance Sheet shall mean the combined balance sheet of the SpinCo
Group, including the notes thereto, as of December 31, 2001 set forth on
Schedule 1.1(fff).
(ggg) SpinCo Business shall mean each and every business conducted from and
after the Effective Time by SpinCo Group (including those businesses set forth
on Schedule 1.1(ggg)), and each and every business conducted prior to the
Effective Time by Parent Group that is of a nature or type that was or would
have been included in Parent's security software business for financial
reporting purposes that has been discontinued, sold or transferred by Parent
Group (including those businesses set forth on Schedule 1.1(ggg)).
(hhh) SpinCo Common Stock shall have the meaning set forth in the recitals to
this Agreement.
(iii) SpinCo Group shall mean SpinCo, the SpinCo Subsidiaries and the
corporations, partnerships and other entities which are contemplated to remain
or become a Subsidiary of SpinCo in connection with the Corporate Transactions
and the Distribution.
(jjj) SpinCo Indemnitees shall mean:
(i) SpinCo and each Affiliate thereof after giving effect to the Corporate
Transactions and the Distribution; and
(ii) each of the respective past, present and future Representatives of any of
the entities described in the immediately preceding clause (i) and each of the
heirs, executors, successors and assigns of any of such Representatives.
(kkk) SpinCo Liabilities shall mean
(i) any and all Liabilities that are expressly contemplated by this Agreement or
any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to
be retained or assumed by SpinCo or any member of the SpinCo Group, and all
agreements, obligations and Liabilities of any member of the SpinCo Group under
this Agreement or any of the Ancillary Agreements;
(ii) all Liabilities set forth on Schedule 1.1(kkk)(ii);
(iii) all Liabilities (other than Taxes and any employee-related Liabilities
which are specifically covered by the Tax Disaffiliation Agreement and the
Employee Benefits Agreement, respectively), primarily relating to, arising out
of or resulting from:
(A) the operation of the SpinCo Business, as conducted at any time prior to, on
or after the Distribution Date (including any Liability relating to, arising out
of or resulting from any act or failure to act by any Representative with
respect to the SpinCo Business (whether or not such act or failure to act is or
was within such Person's authority));
(B) the operation of any business conducted by SpinCo or any SpinCo Subsidiary
at any time after the Distribution Date (including any Liability relating to,
arising out of or resulting from any act or failure to act by any Representative
(whether or not such act or failure to act is or was within such Person's
authority)); or
(C) any SpinCo Assets, whether arising before, on or after the Distribution
Date; and
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(iv) all Liabilities reflected as liabilities or obligations on the SpinCo
Balance Sheet or the accounting records supporting such balance sheet, and all
Liabilities arising or assumed after the date of such balance sheet which, had
they arisen or been assumed on or before such date and been retained as of such
date, would have been reflected on such balance sheet, determined on a basis
consistent with the determination of the Liabilities included on the SpinCo
Balance Sheet, subject to any discharge of such Liabilities subsequent to the
date of the SpinCo Balance Sheet, including those liabilities set forth on
Schedule 1.1(kkk)(iv)(A).
Notwithstanding the foregoing, the SpinCo Liabilities shall not include: (y) any
Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or
assumed by Parent or any member of the Parent Group; or (z) all agreements and
obligations of any member of the Parent Group under this Agreement or any of the
Ancillary Agreements. Any contrary provision of this Agreement notwithstanding,
any Liabilities or Losses in respect of any Action relating to the SpinCo
Business, including the matters set forth on Schedule 1.1(kkk)(iv)(B), shall
constitute SpinCo Liabilities.
(lll) SpinCo Policies shall mean all Policies, current or past, which are owned
or maintained by or on behalf of Parent or any Parent Subsidiary, which relate
specifically to the SpinCo Assets or the SpinCo Business but do not relate to
the Parent Business or the Parent Assets, and which Policies are either
maintained by SpinCo or a member of the SpinCo Group or assignable to SpinCo or
a member of the SpinCo Group, including those Policies set forth on Schedule
1.1(lll).
(mmm) SpinCo Share shall have the meaning set forth in the recitals to this
Agreement.
(nnn) SpinCo Subsidiaries shall mean all of the Subsidiaries listed on Schedule
1.1(nnn).
(ooo) Subleases shall mean the subleases, if any, by and between members of the
Parent Group and members of the SpinCo Group, which subleases shall be entered
into prior to or on the Distribution Date in such form as is agreed to by Parent
and SpinCo.
(ppp) Subsidiary shall mean with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of members to
the board of directors or similar governing body.
(qqq) Tax shall have the meaning set forth in the Tax Disaffiliation Agreement.
(rrr) Tax Disaffiliation Agreement shall mean the Tax Disaffiliation Agreement
by and between Parent and SpinCo, which agreement shall be entered into prior to
or on the Distribution Date in the form attached hereto as Exhibit E.
(sss) Third Party shall mean a Person who is not a party hereto or a Subsidiary
thereof.
(ttt) Third-Party Claim shall have the meaning set forth in Section 3.3 of this
Agreement.
(uuu) Transition Services Agreement shall mean the Transition Services Agreement
by and between Parent and SpinCo, which agreement shall be entered into prior to
or on the Distribution Date in the form attached hereto as Exhibit F.
SECTION 1.2. REFERENCE; INTERPRETATION. References in this Agreement to any
gender include references to all genders, and references to the singular include
references to the plural and vice versa. The words include, includes and
including when used in this Agreement shall be deemed to be followed by the
phrase without limitation. Unless the context otherwise requires, references in
this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement. Unless the context otherwise requires, the words hereof, hereby and
herein and words of similar meaning when used in this Agreement refer to this
Agreement in its entirety and not to any particular Article, Section or
provision of this Agreement. Neither this Agreement nor any Ancillary Agreement
shall be construed against either party as the principal draftsperson hereof or
thereof.
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ARTICLE II
DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS
SECTION 2.1. THE DISTRIBUTION AND OTHER TRANSACTIONS.
(a) Certain Transactions. On or prior to the Distribution Date:
(i) Pursuant to the Corporate Transactions, Parent Group owns the Parent Assets
and is subject to the Parent Liabilities.
(ii) Pursuant to the Corporate Transactions, SpinCo Group owns the SpinCo Assets
and is subject to the SpinCo Liabilities.
(b) Distribution to Parent.
(i) On or prior to the Distribution Date, Parent shall deliver to Parent's stock
transfer agent (the Agent) a certificate or certificates representing the SpinCo
Shares which are to be distributed to Parent's stockholders in the Distribution,
endorsed by Parent in blank, for the benefit of the holders of Parent Common
Stock, and Parent shall authorize the Agent to distribute, on or as soon as
practicable following the Distribution Date, such SpinCo Shares to holders of
record of shares of Parent Common Stock on the Distribution Record Date as
further contemplated by the Information Statement and hereby. SpinCo shall
provide any share certificates that the Agent shall require in order to effect
the Distribution.
(ii) The SpinCo Shares distributed in the Distribution will be distributed
pursuant to a book entry system or by delivery of physical certificates. Parent
shall authorize the Agent to deliver the SpinCo Shares previously delivered to
the Agent to a depositary and to mail to each holder of record of Parent Common
Stock on the Distribution Record Date, a statement of the whole SpinCo Shares
credited to such holder's account. If following the Distribution a holder of
SpinCo Common Stock requests physical certificates instead of participating in
the book entry system, the Agent will issue certificates for such shares, but
only for whole numbers of SpinCo Shares.
(c) Charter; Bylaws. On or prior to the Distribution Date, SpinCo and Parent
shall have taken all necessary actions to provide for the adoption of the form
of Certificate of Incorporation and Bylaws, in substantially the form filed by
SpinCo with the Commission as Exhibits to the Registration Statement.
(d) Directors. On or prior to the Distribution Date, SpinCo and Enterprises or
Parent, as the case may be, shall have taken all necessary action to cause the
Board of Directors of SpinCo to consist of the individuals identified in the
Information Statement as directors of SpinCo.
(e) Certain Licenses and Permits. On or prior to the Distribution Date or as
soon as reasonably practicable thereafter:
(i) Parent shall use its commercially reasonable efforts to transfer or cause to
be transferred all transferable licenses, permits and authorizations issued by
any Governmental Authority which relate solely to the SpinCo Business but which
are held in the name of any member of the Parent Group, or in the name of any
Representative of any such member on behalf of a member of the SpinCo Group, to
the appropriate member of the SpinCo Group; and
(ii) SpinCo shall use its commercially reasonable efforts to transfer or cause
to be transferred all transferable licenses, permits and authorizations issued
by Governmental Authorities which relate solely to the Parent Business but which
are held in the name of any member of the SpinCo Group, or in the name of any
Representative of any such member on behalf of a member of the Parent Group, to
the appropriate member of the Parent Group.
(f) Consents. The parties hereto shall use their commercially reasonable efforts
to obtain those types of required consents and approvals to transfer and/or
assign licenses, permits and authorizations of Governmental Authorities and
those types of consents and approvals to transfer and/or assign Contracts from
Third Parties set forth in Schedule 2.1(f); provided, however, that no party
shall be obligated to pay any consideration therefor (except for filing fees or
other similar charges) to any Third Party from whom such consent or approval is
requested. Whether
9
or not such consent or approval is obtained, nothing in this Section 2.1(f)
shall in any way limit the obligations of the parties under Article III.
(g) Certain Liabilities. For purposes of this Agreement, including Article III
hereof, Parent and SpinCo agree that (i) any and all Liabilities arising from or
based upon misstatements in or omissions from the Registration Statement or the
Information Statement under the captions set forth on Part 1 of Schedule 2.1(g)
to this Agreement (insofar as such information relates to Parent or the terms of
the Distribution) shall be deemed to be Parent Liabilities and not SpinCo
Liabilities, (ii) fifty percent (50%) of any and all Liabilities arising from or
based upon misstatements in or omissions from the Registration Statement or the
Information Statement under the captions set forth on Part 2 of Schedule 2.1(g)
to this Agreement shall be deemed to be Parent Liabilities and fifty percent
(50%) of such Liabilities shall be deemed to be SpinCo Liabilities, and (iii)
any and all Liabilities arising from or based upon misstatements in or omissions
from the Registration Statement or the Information Statement other than those
specified in Sections 2.1(g)(i) and (ii) shall be deemed to be SpinCo
Liabilities and not Parent Liabilities.
(h) Election of Officers. On or prior to the Distribution Date, SpinCo shall
take all actions necessary and desirable so that as of the Distribution Date the
executive officers of SpinCo will be as set forth in the Information Statement.
(i) State Securities Laws. Prior to the Distribution Date, Parent and SpinCo
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 order to effect the Distribution.
(j) Listing Application; Notice to OTCBB.
(i) Prior to the Distribution Date, Parent and SpinCo shall prepare and file
with the OTCBB a listing application and related documents and shall take all
such other actions with respect thereto as shall be necessary or desirable in
order to cause the OTCBB to list on or prior to the Distribution Date, subject
to official notice of issuance, the SpinCo Shares.
(ii) Prior to the Distribution, Parent shall, to the extent possible, give the
OTCBB not less than ten (10) days advance notice of the Distribution Record Date
in compliance with Rule 10b-17 under the Exchange Act.
(k) Other Transactions. On or prior to the Distribution Date, the parties hereto
shall have consummated those other transactions in connection with the Corporate
Transactions and the Distribution that are contemplated by the Information
Statement and not specifically referred to in this Section 2.1.
SECTION 2.2. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as otherwise
specifically set forth in any Ancillary Agreement, from and after the Effective
Time, (i) Parent shall, or shall cause the applicable member of the Parent Group
to, assume, pay, perform and discharge all Parent Liabilities in the ordinary
course of business, consistent with past practice, and (ii) SpinCo shall, or
shall cause the applicable member of the SpinCo Group to, assume, pay, perform
and discharge all SpinCo Liabilities in the ordinary course of business,
consistent with past practice. To the extent reasonably requested to do so by
another party hereto, each party hereto agrees to execute and deliver such
documents, in a form reasonably satisfactory to such party, as may be reasonably
necessary to evidence the assumption of any Liabilities hereunder.
SECTION 2.3. RESIGNATIONS. If requested by Spinco, Parent shall cause all its
employees to resign, effective as of the Effective Time, from all positions as
officers or directors of any member of the SpinCo Group in which they serve,
and, if requested by Parent, SpinCo shall cause all its employees to resign,
effective as of the Effective Time, from all positions as officers or directors
of any members of the Parent Group in which they serve.
SECTION 2.4. LIMITED REPRESENTATIONS OR WARRANTIES. Each of the parties hereto
agrees that no party hereto is, in this Agreement or in any other agreement or
document contemplated by this Agreement or otherwise, making any representation
or warranty whatsoever, as to title or value of Assets being transferred. It is
also agreed that all Assets either transferred to or retained by the parties, as
the case may be, shall be as is, where is and that (subject to Section 2.13) the
party to which such Assets are to be transferred hereunder shall bear the
economic and legal risk that such party's or any of the Subsidiaries' title to
any such Assets shall be other than good and marketable and free from
encumbrances. Similarly, each party hereto agrees that no party hereto is
representing
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or warranting in any way that the obtaining of any consents or approvals, the
execution and delivery of any agreements and the making of any filings or
applications contemplated by this Agreement will satisfy the provisions of any
or all applicable Contracts or other agreements or the requirements of any or
all applicable Laws or judgments, it being agreed that the party to which any
Assets are transferred shall bear the economic and legal risk that any necessary
consents or approvals are not obtained or that any requirements of Laws or
judgments are not complied with. Notwithstanding the foregoing, however, except
as otherwise provided in Section 2.5 or Section 2.6 hereof, from and after the
Effective Time, the Parent Group shall continue to be solely responsible for
Parent Liabilities, and the SpinCo Group shall continue to be solely responsible
for SpinCo Liabilities.
SECTION 2.5. REMOVAL OF PARENT GROUP FROM CERTAIN GUARANTEES; RELEASES OF PARENT
GROUP FROM LIABILITIES.
(a) Except as otherwise specified in any Ancillary Agreement, SpinCo shall use
its commercially reasonable efforts to have, on or prior to the Distribution
Date, or as soon as practicable thereafter, any member of the Parent Group
removed as guarantor of or obligor for any SpinCo Liability, including in
respect of those guarantees set forth on Schedule 2.5(a) of this Agreement.
(b) If SpinCo is unable to obtain, or to cause to be obtained, any such required
removal as set forth in clause (a) of this Section 2.5, the applicable guarantor
or obligor shall continue to be bound as such and, unless not permitted by law
or the terms thereof, the relevant beneficiary shall or shall cause one of its
Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay,
perform and discharge fully all the obligations or other liabilities of such
guarantor or obligor thereunder from and after the date hereof.
(c) If (i) SpinCo is unable to obtain, or to cause to be obtained, any such
required removal as set forth in clause (a) of this Section 2.5, or (ii) SpinCo
Liabilities arise from and after the Effective Time but before a member of the
Parent Group which is a guarantor or obligor with reference to any such SpinCo
Liability is removed pursuant to Section 2.5(a), then such guarantor or obligor
shall be indemnified by SpinCo for all Liabilities incurred by it in its
capacity as guarantor or obligor in accordance with Article III hereof. Without
limiting the foregoing, SpinCo shall, or shall cause a member of the SpinCo
Group to, reimburse any such member of the Parent Group which is a guarantor or
obligor as soon as practicable (but in no event later than thirty (30) days)
following delivery by Parent to SpinCo of notice of a payment made pursuant to
this Section 2.5 in respect of SpinCo Liabilities.
(d) In the event that, at any time before or after the Distribution Date, Parent
identifies any letters of credit, interest rate or foreign exchange contracts,
surety bonds or other Contracts (excluding guarantees) that relate primarily to
the SpinCo Business but for which a member of the Parent Group has contingent,
secondary, joint, several or other Liability of any nature whatsoever, SpinCo
shall, at its expense, take such actions and enter into such agreements and
arrangements as Parent may reasonably request to effect Parent's (or a member of
the Parent Group's ) release or substitution.
SECTION 2.6. REMOVAL OF SPINCO FROM CERTAIN GUARANTEES; RELEASES OF SPINCO FROM
LIABILITIES.
(a) Except as otherwise specified in any Ancillary Agreement, Parent shall use
its commercially reasonable efforts to have, on or prior to the Distribution
Date, or as soon as practicable thereafter, any member of the SpinCo Group
removed as guarantor of or obligor for any Parent Liability, including in
respect of those guarantees set forth on Schedule 2.6(a) of this Agreement.
(b) If Parent is unable to obtain, or to cause to be obtained, any such required
removal as set forth in clause (a) of this Section 2.6, the applicable guarantor
or obligor shall continue to be bound as such and, unless not permitted by law
or the terms thereof, the relevant beneficiary shall or shall cause one of its
Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay,
perform and discharge fully all the obligations or other liabilities of such
guarantor or obligor thereunder from and after the date hereof.
(c) If (i) Parent is unable to obtain, or to cause to be obtained, any such
required removal as set forth in clause (a) of this Section 2.6, or (ii) Parent
Liabilities arise from and after the Effective Time but before a member of the
SpinCo Group which is a guarantor or obligor with reference to any such Parent
Liability is removed pursuant to Section
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2.6(a), then such guarantor or obligor shall be indemnified by Parent for all
Liabilities incurred by it in its capacity as guarantor or obligor in accordance
with Article III hereof. Without limiting the foregoing, Parent shall, or shall
cause a member of the Parent Group to, reimburse any such member of the SpinCo
Group which is a guarantor or obligor as soon as practicable (but in no event
later than thirty (30) days) following delivery by SpinCo to Parent of notice of
a payment made pursuant to this Section 2.6 in respect of Parent Liabilities.
(d) In the event that, at any time before or after the Distribution Date, SpinCo
identifies any letters of credit, interest rate or foreign exchange contracts,
surety bonds or other Contracts (excluding guarantees) that relate primarily to
the Parent Business but for which a member of the SpinCo Group has contingent,
secondary, joint, several or other Liability of any nature whatsoever, Parent
shall, at its expense, take such actions and enter into such agreements and
arrangements as SpinCo may reasonably request to effect SpinCo's (or a member of
the SpinCo Group's ) release or substitution.
SECTION 2.7. WITNESS SERVICES. At all times from and after the Distribution
Date, each of Parent and SpinCo shall use their commercially reasonable efforts
to make available to the other, upon reasonable request, its and its
Subsidiaries' Representatives as witnesses to the extent that (i) such Persons
may reasonably be required in connection with the prosecution or defense of any
Action in which the requesting party from time to time be involved and (ii)
there is no conflict in the Action between the requesting party and Parent and
SpinCo, as applicable. A party providing witness services to the other party
under this Section shall be entitled to receive from the recipient of such
services, upon the presentation of invoices therefor, reimbursement for payments
made for any out-of-pocket expenses (which shall exclude the costs of salaries
and benefits of employees who are witnesses) as may be reasonably incurred in
providing such witness services. Witness services in connection with
indemnification claims under Article III shall be handled as provided in Article
III.
SECTION 2.8. CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with the
transfers of Assets and the assumptions of Liabilities contemplated by this
Agreement, on or prior to the Distribution Date, the parties shall execute or
cause to be executed by the appropriate entities the Conveyancing and Assumption
Instruments contemplated hereby for transfers to be effected pursuant to
Delaware law or the Laws of one of the other states of the United States or, if
not appropriate for a given transfer, and for transfers to be effected pursuant
to non-U.S. Laws, in such other form as the parties shall reasonably agree. The
transfer of capital stock shall be effected by means of delivery of stock
certificates and executed stock powers and notation on the stock record books of
the corporation or other legal entities involved, or by such other means as may
be required in any non-U.S. jurisdiction to transfer title to stock and, to the
extent required by applicable Law, by notation on public registries.
SECTION 2.9. ANCILLARY AGREEMENTS. Prior to the Distribution Date, each of
Parent and SpinCo shall enter into, and/or (where applicable) shall cause
members of their respective Groups to enter into, the Ancillary Agreements and
any other agreements in respect of the Distribution reasonably necessary or
appropriate in connection with the transactions contemplated hereby and thereby.
SECTION 2.10. CORPORATE NAMES; TRADEMARKS.
(a) Except as otherwise specifically provided in any Ancillary Agreement:
(i) if requested by Parent, as soon as reasonably practicable after the
Distribution Date but in any event within twelve (12) months thereafter, SpinCo
will, and will cause the SpinCo Subsidiaries to, each at its own expense, remove
(or, if necessary, on an interim basis, cover up) any and all exterior signs and
other identifiers located on any of its real property or premises or on the real
property or premises used by SpinCo or the SpinCo Subsidiaries which refer or
pertain to Parent or which include the Parent or any Parent Subsidiary name,
logo or other trademark or service xxxx or any similar xxxx or any derivative
thereof or other intellectual property included in the Parent Assets;
(ii) if requested by Parent, as soon as is reasonably practicable after the
Distribution Date but in any event within twelve (12) months thereafter, SpinCo
will, and will cause the SpinCo Subsidiaries to, remove from all letterhead,
envelopes, invoices, products, product labels, product literature, brochures and
other communications media of any kind, all references to Parent, including the
CT Holdings, Inc. name, logo and any other trademark or service xxxx or other
intellectual property included in the Parent Assets (except that SpinCo shall
not be required to take any such
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action with respect to materials in the possession of Third Parties);
(iii) if requested by Spinco, as soon as reasonably practicable after the
Distribution Date but in any event within twelve (12) months thereafter, Parent
will, and will cause the Parent Subsidiaries to, each at its own expense, remove
(or, if necessary, on an interim basis, cover up) any and all exterior signs and
other identifiers located on any of its real property or premises or on the real
property or premises used by Parent or the Parent Subsidiaries which refer or
pertain to SpinCo or which include the SpinCo or any SpinCo Subsidiary name,
logo or other trademark or any similar xxxx or any derivative thereof or other
intellectual property included in the SpinCo Assets; and
(iv) if requested by Spinco, as soon as is reasonably practicable after the
Distribution Date but in any event within twelve (12) months thereafter, Parent
will, and will cause the Parent Subsidiaries to, remove from all letterhead,
envelopes, invoices, products, product labels, product literature, brochures and
other communications media of any kind, all references to SpinCo and its
Subsidiaries including the Citadel Security name, logo and any other trademark
or service xxxx or other intellectual property included in the SpinCo Assets
(except that Parent shall not be required to take any such action with respect
to materials in the possession of Third Parties).
SECTION 2.11. POST-DISTRIBUTION REMITTANCES.
(a) Following the Distribution Date, Parent will promptly remit to SpinCo, or
reimburse SpinCo for, all amounts, and endorse or remit to SpinCo the proceeds
of all checks, drafts, notes or other documents, received by Parent or a Parent
Subsidiary, that should have otherwise been paid to SpinCo or a SpinCo
Subsidiary.
(b) Following the Distribution Date, SpinCo will promptly remit to Parent, or
reimburse Parent for, all amounts, and endorse or remit to Parent the proceeds
of all checks, drafts, notes or other documents, received by Parent or a Parent
Subsidiary, that should have otherwise been paid to SpinCo.
SECTION 2.12. NON-SOLICITATION.
(a) For the period beginning on the Distribution Date and ending on the second
anniversary of the Distribution Date, SpinCo will not and will not permit any
member of the SpinCo Group to, directly or indirectly, solicit or recruit for
its employment any employee of the Parent Group as of the Distribution without
the prior written consent of Parent; provided, however, that nothing in this
Section 2.12(a) shall (i) prohibit the hiring of any natural person who applied
for employment with the SpinCo Group solely in response to any public medium
advertising, (ii) prohibit the hiring of any natural person referred by any
Person whose principal business is the recruiting of prospective employees, or
(iii) prohibit the hiring of any natural person whose employment with a member
of the Parent Group terminated at least three (3) months prior to the date of
such solicitation or recruitment for a bona fide reason not designed or intended
to circumvent the provisions of this Section 2.12(a) and so long as such natural
person was not solicited or recruited by SpinCo or any member of the SpinCo
Group prior to the expiration of such three (3) month period.
(b) For the period beginning on the Distribution Date and ending on the second
anniversary of the Distribution Date, Parent will not and will not permit any
member of the Parent Group to, directly or indirectly, solicit or recruit for
its employment any employee of the SpinCo Group as of the Distribution without
the prior written consent of SpinCo; provided, however, that nothing in this
Section 2.12(b) shall (i) prohibit the hiring of any natural person who applied
for employment with the Parent Group solely in response to any public medium
advertising, (ii) prohibit the hiring of any natural person referred by any
Person whose principal business is the recruiting of prospective employees, or
(iii) prohibit the hiring of any natural person whose employment with a member
of the SpinCo Group terminated at least three (3) months prior to the date of
such solicitation or recruitment for a bona fide reason not designed or intended
to circumvent the provisions of this Section 2.12(b) and so long as such natural
person was not solicited or recruited by Parent or any member of the Parent
Group prior to the expiration of such three (3) month period.
SECTION 2.13. FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for elsewhere in this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to 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 to consummate
13
and make effective the transactions contemplated by this Agreement. Without
limiting the foregoing, each party hereto shall cooperate with the other party,
and execute and deliver, or use commercially reasonable efforts to cause to be
executed and delivered, all instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with, and to obtain all
consents, approvals or authorizations of, any Governmental Authority or any
other Person under any permit, license, agreement, indenture or other
instrument, and take all such other actions as such party may reasonably be
requested to take by the other party hereto from time to time, consistent with
the terms of this Agreement, the Corporate Transactions, and the Ancillary
Agreements, in order to effectuate the provisions and purposes of this Agreement
and the transfers of Assets and assumptions of Liabilities and the other
transactions contemplated hereby.
(b) If any such transfer of Assets or Liabilities is not consummated prior to or
at the Effective Time, then the party hereto retaining such Asset or Liability
shall continue to take the actions required by Section 2.13(a) to consummate and
make effective such transfer as soon as practicable after the Distribution Date
and, in the case of Assets, shall use its commercially reasonable efforts to
preserve the value of such Assets until the time of transfer. If and when any
such Asset or Liability becomes transferable, such transfer shall be effected
forthwith. The parties hereto agree that, no later than the Distribution Date,
each party hereto shall be deemed to have acquired complete and sole beneficial
ownership to all of the Assets, together with all rights, powers and privileges
incident thereto, and shall be deemed to have assumed in accordance with the
terms of this Agreement and the Ancillary Agreements all of the Liabilities, and
all duties, obligations and responsibilities incident thereto, that such party
is entitled or required to hold or assume pursuant to this Agreement.
(c) Any disagreement regarding whether any Asset or Liability was or should have
been transferred to, retained by or assumed by the Parent Group or the SpinCo
Group shall be resolved in accordance with the provisions of Article V.
ARTICLE III
INDEMNIFICATION
SECTION 3.1. INDEMNIFICATION BY PARENT. Parent shall, and shall cause each
member of the Parent Group to, indemnify, defend and hold harmless the SpinCo
Indemnitees from and against any and all Indemnifiable Losses of the SpinCo
Indemnitees arising out of, by reason of or otherwise in connection with the
Parent Liabilities or alleged Parent Liabilities, including any breach by Parent
of any provision of this Section 3.1. Parent and each member of the Parent Group
shall be jointly and severally liable for the indemnification obligations
imposed by this Section 3.1. Subject to the last sentence of Section 7.1, this
Agreement is not intended to address, and should not be interpreted to address,
the matters specifically and expressly covered by the Ancillary Agreements.
SECTION 3.2. INDEMNIFICATION BY SPINCO. SpinCo shall, and shall cause each
member of the SpinCo Group to, indemnify, defend and hold harmless the Parent
Indemnitees from and against any and all Indemnifiable Losses of the Parent
Indemnitees arising out of, by reason of or otherwise in connection with the
SpinCo Liabilities or alleged SpinCo Liabilities, including any breach by SpinCo
of any provision of this Section 3.2. Spinco and each member of the SpinCo Group
shall be jointly and severally liable for the indemnification obligations
imposed by this Section 3.2. Subject to the last sentence of Section 7.1, this
Agreement is not intended to address, and should not be interpreted to address,
the matters specifically and expressly covered by the Ancillary Agreements.
SECTION 3.3. PROCEDURES FOR INDEMNIFICATION.
(a) Third-Party Claims. If a claim or demand is made against a SpinCo Indemnitee
or an Parent Indemnitee (each, an Indemnitee) by any Third Party (a Third-Party
Claim) as to which such Indemnitee is entitled to indemnification pursuant to
this Agreement, such Indemnitee shall notify the party which is or may be
required pursuant to Section 3.1 or Section 3.2 hereof to make such
indemnification (the Indemnifying Party) in writing, and in reasonable detail,
of the Third-Party Claim promptly (and in any event within fifteen (15) Business
Days) after receipt by such Indemnitee of written notice of the Third-Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party,
promptly (and in any event within ten (10) Business Days) after the Indemnitee's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnitee relating to the Third-Party Claim.
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If a Third-Party Claim is made against an Indemnitee, the Indemnifying Party
shall be entitled to participate in the defense thereof and, if it so elects in
accordance with this Section 3.3(a), to assume the defense thereof with counsel
selected by the Indemnifying Party; provided, however, that such counsel is not
reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect
to assume the defense of a Third-Party Claim, the Indemnifying Party shall,
within thirty (30) days (or sooner if the nature of the Third-Party Claim so
requires), notify the Indemnitee in writing of its intent to do so, and the
Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, however, that such Indemnitee shall have the right to
employ counsel to represent such Indemnitee if, in such Indemnitee's reasonable
judgment, a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim that would make representation of both
such parties by one counsel inappropriate, and in such event the fees and
expenses of such separate counsel shall be paid by such Indemnifying Party. If
the Indemnifying Party elects to assume such defense, the Indemnitee shall have
the right to participate in the defense thereof and to employ counsel, subject
to the proviso of the preceding sentence, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood that the
Indemnifying Party shall control such defense. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof (other than during the period prior to the time the Indemnitee shall
have given notice of the Third-Party Claim as provided above). If the
Indemnifying Party so elects to assume the defense of any Third-Party Claim, all
of the Indemnitees shall cooperate with the Indemnifying Party in the defense or
prosecution thereof, including by providing or causing to be provided, Records
and witnesses as soon as reasonably practicable after receiving any request
therefor from or on behalf of the Indemnifying Party.
If an Indemnifying Party elects to assume the defense of a Third-Party Claim as
provided above, in no event will the Indemnitee admit any liability with respect
to, or settle, compromise or discharge, any Third-Party Claim without the
Indemnifying Party's prior written consent; provided, however, that the
Indemnitee shall have the right to settle, compromise or discharge such
Third-Party Claim without the consent of the Indemnifying Party if the
Indemnitee releases the Indemnifying Party from its indemnification obligation
hereunder with respect to such Third-Party Claim and such settlement, compromise
or discharge would not otherwise adversely affect the Indemnifying Party. If an
Indemnifying Party elects to assume the defense of a Third-Party Claim as
provided above, the Indemnitee will agree to any settlement, compromise or
discharge of a Third-Party Claim that the Indemnifying Party may recommend and
that by its terms obligates the Indemnifying Party to pay the full amount of the
liability in connection with such Third-Party Claim and releases the Indemnitee
completely in connection with such Third-Party Claim; provided, however, that,
notwithstanding the foregoing, the Indemnitee shall not be required hereunder to
agree to any such settlement, compromise or discharge involving the stipulation
of facts or the adjudication of any question that the Indemnitee determines in
its discretion would have an adverse effect on the Indemnitee in any other
proceeding or otherwise would affect adversely the Indemnitee. If an
Indemnifying Party elects not to assume the defense of a Third-Party Claim, or
fails to notify an Indemnitee of its election to do so as provided herein, such
Indemnitee may compromise, settle or defend such Third-Party Claim, and such
Indemnitee may recover the Indemnifiable Losses in connection with such
compromise, settlement or defense from the Indemnifying Party.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
assume the defense of any Third-Party Claim (and shall be liable for the fees
and expenses of counsel incurred by the Indemnitee in defending such Third-Party
Claim) if the Third-Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnitee which the
Indemnitee reasonably determines, after conferring with its counsel, cannot be
separated from any related claim for money damages. If such equitable relief or
other relief portion of the Third-Party Claim can be so separated from that for
money damages, the Indemnifying Party shall be entitled to assume the defense of
the portion relating to money damages.
(b) In the event of payment by an Indemnifying Party to 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 as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. 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 or claim.
15
(c) The remedies provided in this Article III shall be cumulative and shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.
SECTION 3.4. INDEMNIFICATION PAYMENTS. Unless otherwise agreed to in writing,
indemnification required by this Article III shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnifiable Losses are incurred. If the
Indemnifying Party fails to make an indemnification payment required by this
Article III within thirty (30) days after receipt of a xxxx therefor or notice
that an Indemnifiable Loss has been incurred, the Indemnifying Party shall also
be required to pay interest on the amount of such indemnification payment, from
the date of receipt of the xxxx or notice of the Indemnifiable Loss to, but not
including the date of payment, at the Applicable Rate.
ARTICLE IV
ACCESS TO INFORMATION
SECTION 4.1. PROVISION OF CORPORATE RECORDS.
(a) Except as otherwise provided in Article III, after the Distribution Date,
upon the prior written request by SpinCo for specific and identified agreements,
documents, books, records or files (collectively, Records) which relate to (x)
SpinCo, the conduct of the SpinCo Business up to the Effective Time or the
ownership of the SpinCo Assets up to the Effective Time, or (y) any Ancillary
Agreement (other than the Tax Disaffiliation Agreement), Parent shall arrange,
as soon as reasonably practicable following the receipt of such request, to
provide such Records (or appropriate copies thereof if Parent has a reasonable
need to retain the originals) in the possession or control of Parent or any of
the Parent Subsidiaries, but only to the extent such items are not already in
the possession or control of SpinCo.
(b) Except as otherwise provided in Article III, after the Distribution Date,
upon the prior written request by Parent for specific and identified Records
which relate to (x) Parent, the conduct of the Parent Business up to the
Effective Time or the ownership of the Parent Assets up to the Effective Time,
or (y) any Ancillary Agreement (other than the Tax Disaffiliation Agreement),
SpinCo shall arrange, as soon as reasonably practicable following the receipt of
such request, to provide such Records (or appropriate copies thereof if SpinCo
has a reasonable need to retain the originals) in the possession or control of
SpinCo or any of the SpinCo Subsidiaries, but only to the extent such items are
not already in the possession or control of Parent.
SECTION 4.2. ACCESS TO INFORMATION. Except as otherwise provided in Article III,
from and after the Distribution Date, each of Parent and SpinCo shall afford to
the other and its authorized Representatives reasonable access during normal
business hours, subject to appropriate restrictions for classified, privileged
or confidential information, to the personnel, properties, and Records of such
party and its Subsidiaries insofar as such access is reasonably required by the
other party and relates to (x) such other party or the conduct of its business
or ownership of its Assets prior to the Effective Time or (y) any Ancillary
Agreement.
SECTION 4.3. REIMBURSEMENT; OTHER MATTERS. Except to the extent otherwise
contemplated by any Ancillary Agreement, a party providing Records or access to
information to the other party under this Article IV shall be entitled to
receive from the recipient, upon the presentation of invoices therefor,
reimbursement for payments made for supplies, disbursements and other
out-of-pocket expenses (including attorneys' fees and disbursements), as may be
reasonably incurred in providing such Records or access to information.
SECTION 4.4. CONFIDENTIALITY. Neither (i) Parent nor the Parent Subsidiaries nor
(ii) SpinCo nor the SpinCo Subsidiaries shall use or permit the use of (without
the prior written consent of the other) and each such entity shall keep, and
shall cause its Representatives to keep, confidential all information concerning
the other party in its possession, its custody or under its control (except to
the extent that (A) such information has been in the public domain through no
fault of such party or (B) such information has been later lawfully acquired
from other sources by such party or (C) this Agreement or any other Ancillary
Agreement or any other agreement entered into pursuant hereto permits the use or
disclosure of such information) to the extent such information, (w) relates to
or was acquired during the period up to the Effective Time, (x) relates to any
Ancillary Agreement, (y) is obtained in the course of performing services for
the other party pursuant to any Ancillary Agreement, or (z) is based upon or is
derived from information described in the preceding clauses (w), (x) or (y), and
each party shall not (without the
16
prior written consent of the other) otherwise release or disclose such
information to any other Person, except such party's Representatives, unless
compelled to disclose such information by judicial or administrative process or
unless such disclosure is required by Law and such party has provided the other
party with prompt notice of such requirement in order to afford the other party
the opportunity to seek an appropriate protective order or other remedy.
SECTION 4.5. PRIVILEGED MATTERS. The parties hereto recognize that legal and
other professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of each of the
members of the Parent Group, and each of the members of the SpinCo Group, and
that each of the members of the Parent Group, and each of the members of the
SpinCo Group should be deemed to be the client for the purposes of asserting all
privileges which may be asserted under applicable Law. Except as otherwise
specifically provided in the Tax Disaffiliation Agreement with respect to tax
matters, to allocate the interests of each party in the information as to which
any party is entitled to assert a privilege, the parties agree as follows:
(a) Parent shall be entitled, in perpetuity, to control the assertion or waiver
of all privileges in connection with privileged information which relates solely
to the Parent Business, whether or not the privileged information is in the
possession of or under the control of Parent or SpinCo. Parent shall also be
entitled, in perpetuity, to control the assertion or waiver of all privileges in
connection with privileged information that relates solely to the subject matter
of any claims constituting Parent Liabilities, now pending or which may be
asserted in the future, in any Action initiated against or by Parent, whether or
not the privileged information is in the possession of or under the control of
Parent or SpinCo.
(b) SpinCo shall be entitled, in perpetuity, to control the assertion or waiver
of all privileges in connection with privileged information which relates solely
to the SpinCo Business, whether or not the privileged information is in the
possession of or under the control of Parent or SpinCo. SpinCo shall also be
entitled, in perpetuity, to control the assertion or waiver of all privileges in
connection with privileged information which relates solely to the subject
matter of any claims constituting SpinCo Liabilities, now pending or which may
be asserted in the future, in any Action initiated against or by SpinCo, whether
or not the privileged information is in the possession of SpinCo or under the
control of Parent or SpinCo.
(c) The parties hereto agree that they shall have a shared privilege, with equal
right to assert or waive, subject to the restrictions in this Section 4.5, with
respect to all privileges not allocated pursuant to the terms of Sections 4.5(a)
and (b). All privileges relating to any Action, disputes or other matters which
involve Parent and SpinCo in respect of which such parties retain any
responsibility or liability under this Agreement, shall be subject to a shared
privilege among them.
(d) No party hereto may waive any privilege which could be asserted under any
applicable Law, and in which any other party hereto has a shared privilege,
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed, except to the extent reasonably required in connection with
any Action with Third Parties or as provided in subsection (e) below. Consent
shall be in writing, or shall be deemed to be granted unless written objection
is made within twenty (20) days after notice upon the other party requesting
such consent.
(e) In the event of any Action or dispute between any of the parties hereto, any
party and a Subsidiary of another party hereto, or a Subsidiary of one party
hereto and a Subsidiary of another party hereto, either such party, to the
extent necessary in connection with such Action or dispute, may waive a
privilege in which the other party has a shared privilege, without obtaining the
consent of the other party, provided that such waiver of a shared privilege
shall be effective only as to the use of information with respect to such Action
or dispute between the relevant parties and/or their Subsidiaries, and shall not
operate as a waiver of the shared privilege with respect to Third Parties.
(f) If a dispute arises between or among the parties hereto or their respective
Subsidiaries regarding whether a privilege should be waived to protect or
advance the interest of any party, each party agrees that it shall negotiate in
good faith, shall endeavor to minimize any prejudice to the rights of the other
parties, and shall not unreasonably withhold consent to any request for waiver
by another party. Each party hereto specifically agrees that it will not
withhold consent to waiver for any purpose except to protect its own legitimate
interests.
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(g) Upon receipt by any party hereto or by any Subsidiary thereof of any
subpoena, discovery or other request which arguably calls for the production or
disclosure of information subject to a shared privilege or as to which another
party has the sole right hereunder to assert a privilege, or if any party
obtains knowledge that any of its or any of its Subsidiaries' current or former
Representatives has received any subpoena, discovery or other requests which
arguably calls for the production or disclosure of such privileged information,
such party shall promptly notify the other party of the existence of the request
and shall provide the other party a reasonable opportunity to review the
information (to the extent such information is available to such party) and to
assert any rights it or they may have under this Section 4.5 or otherwise to
prevent the production or disclosure of such privileged information.
(h) The transfer of all Records and other information pursuant to this Agreement
is made in reliance on the agreement of Parent and SpinCo, as set forth in
Sections 4.4 and 4.5, to maintain the confidentiality of privileged information
and to assert and maintain all applicable privileges. The access to information
being granted pursuant to Sections 4.1 and 4.2 hereof, the agreement to provide
witnesses and individuals pursuant to Sections 2.7 and 3.3 hereof, the
furnishing of notices and documents and other cooperative efforts contemplated
by Section 3.3 hereof, and the transfer of privileged information between and
among the parties and their respective Subsidiaries pursuant to this Agreement
shall not be deemed a waiver of any privilege that has been or may be asserted
under this Agreement or otherwise.
SECTION 4.6. OWNERSHIP OF INFORMATION. Any information owned by one party or any
of its Subsidiaries that is provided to a requesting party pursuant to Article
III or this Article IV shall be deemed to remain the property of the providing
party. Unless specifically set forth herein, nothing contained in this Agreement
shall be construed as granting or conferring rights of license or otherwise in
any such information.
SECTION 4.7. RETENTION OF RECORDS.
(a) Parent shall deliver to SpinCo upon SpinCo's request all Records that are
specifically identified by SpinCo and known by Parent, after reasonable inquiry,
to be in its control or possession relating to SpinCo Assets, SpinCo Liabilities
or the SpinCo Business. Except (a) as provided in the Tax Disaffiliation
Agreement or (b) when a longer retention period is otherwise required by Law or
agreed to in writing, the Parent Group and the SpinCo Group shall retain in a
reasonably retrievable format, for a period of at least six (6) years, all
Records relating to the SpinCo Business as of the Effective Time.
Notwithstanding the foregoing, in lieu of retaining any specific Records, Parent
may offer in writing to deliver such Records to SpinCo and, if such offer is not
accepted within ninety (90) days, the offered Records may be destroyed or
otherwise disposed of at any time. If SpinCo shall request in writing prior to
the expiration of such 90-day period that any of Records proposed to be
destroyed or disposed of be delivered to SpinCo, Parent shall promptly arrange
for delivery of such requested Records (at SpinCo's cost).
(b) SpinCo shall deliver to Parent upon Parent's request all Records that are
specifically identified by Parent and known by SpinCo, after reasonable inquiry,
to be in its control or possession relating to Parent Assets, Parent Liabilities
or the Parent Business. Except (a) as provided in the Tax Disaffiliation
Agreement or (b) when a longer retention period is otherwise required by Law or
agreed to in writing, the Parent Group and the SpinCo Group shall retain in a
reasonably retrievable format, for a period of at least six (6) years, all
Records relating to the Parent Business as of the Effective Time.
Notwithstanding the foregoing, in lieu of retaining any specific Records, SpinCo
may offer in writing to deliver such Records to Parent and, if such offer is not
accepted within ninety (90) days, the offered Records may be destroyed or
otherwise disposed of at any time. If Parent shall request in writing prior to
the expiration of such 90-day period that any of Records proposed to be
destroyed or disposed of be delivered to Parent, SpinCo shall promptly arrange
for delivery of such requested Records (at Parent's cost).
SECTION 4.8. LIMITATION OF LIABILITY; RELEASE.
(a) No party shall have any liability to any other party in the event that any
information exchanged or provided pursuant to this Agreement which is an
estimate or forecast, or which is based on an estimate or forecast, is found to
be inaccurate.
(b) Effective upon the Distribution and except as otherwise specifically set
forth in this Agreement, each of Parent and SpinCo releases and forever
discharges the other and its Representatives and Subsidiaries, of and from all
Liabilities against such other party, its Representatives and Subsidiaries or
any of its successors or assigns, which
18
the releasing party has or ever had, which arise out of or relate to events,
circumstances or actions taken by such other party prior to the Distribution;
provided, however, that the foregoing general release shall not apply to this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby and shall not affect either party's right to enforce this Agreement or
any of the Ancillary Agreements in accordance with their terms.
SECTION 4.9. OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The rights
and obligations granted under this Article IV are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of information set forth in any Ancillary Agreement.
ARTICLE V
DISPUTE RESOLUTION
SECTION 5.1. NEGOTIATION. In the event of a controversy, dispute or claim
arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including any claim based on contract, tort, statute or
constitution (but excluding any controversy, dispute or claim arising out of any
agreement relating to the use or lease of real property if any Third Party is a
party to such controversy, dispute or claim) (collectively, Agreement Disputes),
the management of the parties shall negotiate in good faith for a reasonable
period of time to settle such Agreement Dispute; provided, however, such
reasonable period shall not, unless otherwise agreed by the parties in writing,
exceed sixty (60) days from the time the parties began such negotiations; and
provided further, however, that in the event of any mediation or arbitration in
accordance with Sections 5.2 and 5.3 hereof, (i) the parties shall not assert
the defenses of statute of limitations and laches arising for the period
beginning after the date the parties began negotiations hereunder, and (ii) any
statute of limitations or any contractual time period or deadline under this
Agreement or any Ancillary Agreement shall not be deemed to have passed with
respect to such Agreement Dispute until such Agreement Dispute has been
resolved.
SECTION 5.2. MEDIATION. If after such reasonable period such management are
unable to settle such Agreement Dispute (and in any event, unless otherwise
agreed in writing by the parties, after ninety (90) days have elapsed from the
time the parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of less than $500,000, such Agreement Dispute
shall be determined, at the request of any party, by mediation conducted in
Dallas, Texas or at another location which the parties mutually select, before a
retired judge sitting on the panel of Judicial Arbitration & Mediation Services,
Inc. The mediation process shall continue as the exclusive method of resolving
the Agreement Dispute (other than negotiation between the parties) until the
earlier of the Agreement Dispute being resolved or the mediator finding in good
faith that all settlement possibilities have been exhausted and that the matter
is not resolvable through mediation. If the mediator makes such a finding, at
the request of any party, the Agreement Dispute shall then be determined by
binding arbitration in accordance with Section 5.3 hereof.
SECTION 5.3. ARBITRATION. If after such reasonable period such management are
unable to settle such Agreement Dispute (and in any event, unless otherwise
agreed in writing by the parties, after ninety (90) days have elapsed from the
time the parties began such negotiations) and the Agreement Dispute involves a
controversy, dispute or claim of $500,000 or more, or a mediator makes a finding
under Section 5.2 hereof that all settlement possibilities have been exhausted
and that a matter is not resolvable through mediation, such Agreement Dispute
shall be determined, at the demand of any party, by binding arbitration
conducted in Dallas, Texas or at another location which the parties mutually
select, before and in accordance with the then-existing Commercial Arbitration
Rules of the American Arbitration Association (the Rules). In any Agreement
Dispute between the parties hereto, the numbers of arbitrators shall be three
(3) (one selected by Parent, one selected by SpinCo, and one jointly selected by
the two arbitrators so selected). Any judgment or award rendered by the
arbitrator shall be final, binding and nonappealable (except upon grounds
specified in 9 U.S.C. Section 10(a) as in effect on the date hereof). If the
parties are unable to agree on the arbitrators, the arbitrators shall be
selected in accordance with the Rules. Except as otherwise provided herein, any
controversy concerning whether an Agreement Dispute is an arbitrable Agreement
Dispute, whether arbitration has been waived, whether an assignee of this
Agreement is bound to arbitrate, or as to the interpretation of enforceability
of this Article V shall be determined by the arbitrators. In resolving any
Agreement Dispute, the parties intend that the arbitrators apply the terms and
conditions of this Agreement and the substantive laws of the State of Delaware,
without regard to the choice of law principles thereof. The parties intend that
the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable. The parties agree to comply
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with any award made in any such arbitration proceedings that has become final in
accordance with the Rules and agree to enforcement of or entry of judgment upon
such award, by any court of competent jurisdiction, including (a) the state
courts of the State of Texas, located in Dallas, or (b) the United States
District Court in Dallas, Texas, in accordance with Section 7.16 hereof. The
arbitrators shall be entitled, if appropriate, to award any remedy in such
proceedings, including monetary damages, specific performance and all other
forms of legal and equitable relief; provided, however, the arbitrators shall
not be entitled to award punitive damages. Without limiting the provisions of
the Rules, unless otherwise agreed in writing by or among the parties or
permitted by this Agreement, the parties shall keep confidential all matters
relating to the arbitration or the award, provided such matters may be disclosed
(i) to the extent reasonably necessary in any proceeding brought to enforce the
award or for entry of a judgment upon the award and (ii) to the extent otherwise
required by Law. Nothing contained herein is intended to or shall be construed
to prevent any party, in accordance with Article 21(3) of the Rules or
otherwise, from applying to any court of competent jurisdiction for interim
measures or other provisional relief in connection with the subject matter of
any Agreement Disputes.
SECTION 5.4. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article V with respect
to all matters not subject to such dispute, controversy or claim.
SECTION 5.5. OTHER REMEDIES. Nothing in this Article V shall limit the right
that any party may otherwise have to seek to obtain from any court to which the
parties consent to jurisdiction under Section 7.16 (a) preliminary injunctive
relief in order to preserve the status quo pending the resolution of a dispute
or (b) temporary or permanent injunctive relief from any breach of any
provisions of this Agreement. By seeking such relief, a party in no way waives
its arbitration rights under this Agreement.
ARTICLE VI
INSURANCE
SECTION 6.1. POLICIES AND RIGHTS INCLUDED WITHIN ASSETS. The SpinCo Assets shall
include (a) any and all rights of an insured party under each of the Parent
Shared Policies, subject to the terms of such Parent Shared Policies and any
limitations or obligations of SpinCo contemplated by this Article VI,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, with respect to all claims, suits, actions,
proceedings, injuries, losses, liabilities, damages and expenses incurred or
claimed to have been incurred prior to the Effective Time by any party in or in
connection with the conduct of the SpinCo Business or the ownership of the
SpinCo Assets or, to the extent any claim is made against SpinCo or any of the
SpinCo Subsidiaries, the conduct of the Parent Business or the ownership of the
Parent Assets, and which claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses may arise out of an insured or insurable
occurrence under one or more of such Parent Shared Policies, and (b) the SpinCo
Policies.
SECTION 6.2. POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the Distribution
Date, any Person shall assert a claim against SpinCo or any of the SpinCo
Subsidiaries (including where SpinCo or the SpinCo Subsidiaries are joint
defendants with other Persons) with respect to any claim, suit, action,
proceeding, injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Effective Time in or in connection with the
conduct of the SpinCo Business or the ownership of the SpinCo Assets or, to the
extent any claim is made against SpinCo or any of the SpinCo Subsidiaries
(including where SpinCo or the SpinCo Subsidiaries are joint defendants with
other Persons), the conduct of the Parent Business or the ownership of the
Parent Assets, and which claim, suit, action, proceeding, injury, loss,
liability, damage or expense may arise out of an insured or insurable occurrence
under one or more of the Parent Shared Policies, Parent shall assert and collect
any related Insurance Proceeds under such Parent Shared Policy on behalf of
SpinCo and remit promptly to SpinCo any Insurance Proceeds so collected, and
Parent shall further on behalf of SpinCo assert any and all rights of an insured
party under such Parent Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder. The parties hereby acknowledge and agree that nothing herein shall
limit SpinCo's right to assert directly and collect any related Insurance
Proceeds under any Parent Shared Policy and that, should SpinCo become liable
for any Parent Liabilities covered by any Parent Shared Policy or any Parent
Policy, SpinCo shall have the right to assert directly and collect any related
Insurance Proceeds under any such Parent Shared Policy or Parent Policy.
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SECTION 6.3. ADMINISTRATION; OTHER MATTERS.
(a) Administration. Subject to Section 6.3(c) and Section 6.3(d), from and after
the Distribution Date, (i) Parent shall be responsible for (A) Insurance
Administration of the Parent Shared Policies with respect to all Liabilities
except SpinCo Liabilities and (B) Claims Administration (except as provided
below) under such Parent Shared Policies with respect to all Liabilities except
SpinCo Liabilities, and (ii) SpinCo shall be responsible for (A) Insurance
Administration of the Parent Shared Policies with respect to all SpinCo
Liabilities and (B) Claims Administration (except as provided below) under such
Parent Shared Policies with respect to all SpinCo Liabilities; provided,
however, that the retention of such responsibilities by Parent or SpinCo, as the
case may be, is in no way intended to limit, inhibit or preclude (i) any right
to insurance coverage for any Insured Claim of a named insured under such
Policies as contemplated by the terms of this Agreement or (ii) the sharing
between Parent and SpinCo of information relating to the matters addressed in
this Article VI; and provided further that Parent's retention or SpinCo's
retention, as the case may be, of the administrative responsibilities for the
Parent Shared Policies shall not relieve the party submitting any Insured Claim
of the primary responsibility for reporting such Insured Claim accurately,
completely and in a timely manner or of such party's authority to settle any
such Insured Claim within any period permitted or required by the relevant
Policy. Parent or SpinCo, as the case may be, may discharge its administrative
responsibilities under this Section 6.3 by contracting for the provision of
services by independent parties. Each of the parties hereto shall administer and
pay any costs relating to defending its respective Insured Claims under Parent
Shared Policies to the extent such defense costs are not covered under such
Policies and shall be responsible for obtaining or reviewing the appropriateness
of releases upon settlement of its respective Insured Claims under Parent Shared
Policies. SpinCo shall reimburse Parent promptly for all disbursements,
out-of-pocket expenses and direct and indirect costs of employees or agents of
Parent relating to Claims Administration and Insurance Administration
contemplated by this Section 6.3(a) on behalf of SpinCo. Likewise, Parent shall
reimburse SpinCo promptly for all disbursements, out-of-pocket expenses and
direct and indirect costs of employees or agents of SpinCo relating to Claims
Administration and Insurance Administration contemplated by this Section 6.3(a)
on behalf of Parent.
(b) Claims. Where a Parent Shared Policy specifically covers SpinCo Liabilities
for periods prior to the Distribution Date or covers claims made after the
Distribution Date with respect to an occurrence prior to the Distribution Date,
then from and after the Distribution Date SpinCo may, subject to Section 6.3(c)
and Section 6.3(d), claim coverage for Insured Claims under such Parent Shared
Policy as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability of such Parent Shared Policy (and
may receive any Insurance Proceeds with respect thereto as contemplated by
Section 6.2 or Section 6.3(c) hereof), subject to the terms of this Section 6.3.
(c) Allocation of Insurance Proceeds. Insurance Proceeds received with respect
to claims, costs and expenses under the Parent Shared Policies shall be paid
directly to the appropriate Person or to Parent, which shall thereafter
administer the Parent Shared Policies by paying the Insurance Proceeds, as
appropriate, to Parent with respect to Parent Liabilities and to SpinCo with
respect to the SpinCo Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from such Policies will be made
by Parent to the appropriate Person upon receipt from the insurance carrier. In
the event that the applicable limits on any particular Parent Shared Policy are
exceeded by the amount of outstanding Insured Claims by the relevant parties
hereto, such parties agree to allocate the Insurance Proceeds received
thereunder based upon their respective percentage of the total of their bona
fide claims (measured as of the date costs related to such bona fide claims were
incurred, such incurrence to be measured, (i) in the case of fees and expenses
incurred for services performed that are attributable to the defense or
disposition of Insured Claims, as of the date such fees and expenses are billed
to an insurance carrier, and (ii) in the case of sums payable in settlement or
satisfaction of a judgment attributable to Insured Claims, as of the date of any
such judgment) which were covered under such Parent Shared Policy (their
allocable portion of Insurance Proceeds), and any party who has received
Insurance Proceeds in excess of such party's allocable portion of Insurance
Proceeds shall pay to the other party the appropriate amount so that each party
will have received its allocable portion of Insurance Proceeds pursuant hereto.
Each of the parties agrees to use commercially reasonable efforts to maximize
available coverage under those Parent Shared Policies applicable to it, and to
take all commercially reasonable steps to recover from all other responsible
parties in respect of an Insured Claim to the extent coverage limits under a
particular Parent Shared Policy have been exceeded or would be exceeded as a
result of such Insured Claim.
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(d) Allocation of Deductibles, Etc. In the event that the parties have bona fide
claims under any Parent Shared Policy for which a deductible or a
retrospectively rated premium adjustment is payable or for which a
self-insurance retention amount has been applied, the parties agree that the
aggregate amount of the deductible or retrospectively rated premium adjustment
paid or retention amount applied shall be borne by the parties in the same
proportion which the Insurance Proceeds received by each such party bears to the
total Insurance Proceeds received under the applicable Parent Shared Policy
(their allocable share of the deductible, premium adjustment or retention
amount), and any party who has paid more than its allocable share of the
deductible, premium adjustment or retention amount shall be entitled to receive
from the other party an appropriate amount so that each party has borne its
allocable share of the deductible, premium adjustment or retention amount
pursuant hereto. Further, if a party receives no Insurance Proceeds under that
applicable Parent Shared Policy, that party shall have no allocable share of the
deductible, premium adjustment or retention amount under that applicable Parent
Shared Policy, and the other party shall bear all of the allocable share of the
deductible, premium adjustment or retention amount under that applicable Parent
Shared Policy.
(e) Continued Responsibility. Notwithstanding anything in this Article VI to the
contrary, the Parent Group shall remain liable to the SpinCo Indemnitees for the
indemnification obligations contemplated by Section 3.1, and the SpinCo Group
shall remain liable to the Parent Indemnitees for the indemnification
obligations contemplated by Section 3.2, in each case, to the extent any Loss or
Liability is not fully paid to or on behalf of the applicable party by Insurance
Proceeds.
SECTION 6.4. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In the event
that Insured Claims of more than one of the parties hereto exist relating to the
same occurrence, the parties shall jointly defend and waive any conflict of
interest necessary to the conduct of the joint defense. Nothing in this Article
VI shall be construed to limit or otherwise alter in any way the obligations of
the parties to this Agreement, including those created by this Agreement, by
operation of Law or otherwise.
SECTION 6.5. COOPERATION. The parties agree to use their commercially reasonable
efforts to cooperate with respect to the various insurance matters contemplated
by this Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this Agreement
and any Schedule hereto, the Schedule shall prevail. Other than Section 2.4,
Section 4.5 and Article V, which shall prevail over any inconsistent or
conflicting provisions in any Ancillary Agreement, notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this Agreement and the
provisions of any Ancillary Agreement, such Ancillary Agreement shall control.
SECTION 7.2. ANCILLARY AGREEMENTS. Subject to the last sentence of Section 7.1,
this Agreement is not intended to address, and should not be interpreted to
address, the matters specifically and expressly covered by the Ancillary
Agreements.
SECTION 7.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 7.4. SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 7.5. DISTRIBUTION EXPENSES. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, all costs and expenses incurred on or
prior to the Distribution Date and which are outstanding as of the Distribution
Date or arise after the Distribution Date in connection with the preparation,
execution, delivery, printing and implementation of this Agreement and any
Ancillary Agreement, the Information Statement (including the
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Registration Statement) and the Distribution and the consummation of the
transactions contemplated thereby (including (i) costs and expenses incurred
pursuant to Sections 2.1(e), 2.1(i), and 2.10 and (ii) any transfer taxes
imposed on the transfer of real or personal property in the Corporate
Transactions) shall be charged to and paid by SpinCo, and such costs and
expenses shall be deemed to be SpinCo Liabilities. Further, except as otherwise
set forth in this Agreement or any Ancillary Agreement (including the retention
and assumption by the Parent Group of the Parent Liabilities and the retention
and assumption by the SpinCo Group of the SpinCo Liabilities in accordance with
Section 2.2 hereof), all other Liabilities (to the extent not otherwise
satisfied prior to the Effective Time) directly resulting from actions taken
prior to the Effective Time in connection with the preparation, execution,
delivery, printing and implementation of this Agreement and any Ancillary
Agreement, the Information Statement (including the Registration Statement) and
the Distribution and the consummation of the transactions contemplated thereby
shall be deemed to be SpinCo Liabilities. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, each party shall bear its own costs and
expenses incurred after the Distribution Date, and any amount or expense to be
paid or reimbursed by any party hereto to any other party hereto shall be so
paid or reimbursed promptly after the existence and amount of such obligation is
determined and written demand therefor is made.
SECTION 7.6. NOTICES. All notices and other communications hereunder shall be in
writing, shall reference this Agreement and shall be hand delivered or mailed by
registered or certified mail (return receipt requested) or sent by any means of
electronic message transmission with delivery confirmed (by voice or otherwise)
to the parties at the following addresses (or at such other addresses for a
party as shall be specified by like notice) and will be deemed given on the date
on which such notice is received (Notices):
To Parent:
CT Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To SpinCo:
Citadel Security Software Inc.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SECTION 7.7. WAIVERS. The failure of any party to require strict performance by
any other party of any provision in this Agreement will not waive or diminish
that party's right to demand strict performance thereafter of that or any other
provision hereof.
SECTION 7.8. AMENDMENTS. Subject to the terms of Section 7.10 hereof, this
Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
SECTION 7.9. SUCCESSORS AND ASSIGNS. The provisions to this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 7.10. TERMINATION. This Agreement (including Article III hereof) may be
terminated and the Distribution may be amended, modified or abandoned at any
time prior to the Distribution by and in the sole discretion of Parent without
the approval of SpinCo or the stockholders of Parent. In the event of such
termination, no party shall have any liability of any kind to any other party or
any other Person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the parties; provided, however, that
Article III shall not be terminated or amended after the Distribution in respect
of any Indemnitees not a party to this
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Agreement without the consent of such Persons.
SECTION 7.11. SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party or
by any entity that is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
SECTION 7.12. THIRD-PARTY BENEFICIARIES. Except for the right of Indemnitees to
enforce the provisions of Article III hereof, this Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries and Affiliates
and should not be deemed to confer upon Third Parties any remedy, claim,
liability, reimbursement, cause of action or other right in excess of those
existing without reference to this Agreement.
SECTION 7.13. TITLE AND HEADINGS. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
SECTION 7.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE.
SECTION 7.16. CONSENT TO JURISDICTION. Without limiting the provisions of
Article V hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the state courts of the State of Texas, located in the City
of Dallas, and (b) the United States District Court in Dallas, Texas, for the
purposes of any suit, action or other proceeding arising out of this Agreement,
the Ancillary Agreements or any transaction contemplated hereby or thereby. Each
of the parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court in Dallas or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the state courts of the State of Texas, located in the City of Dallas. Each of
the parties irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby in (i)
the state courts of the State of Texas, located in the City of Dallas, or (ii)
the United States District Court located in Dallas, Texas, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 7.17. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic or operational effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7.18. CONSOLIDATION, MERGER, ETC.
(a) Involving SpinCo. SpinCo shall not consolidate with or merge into any other
Person or convey, transfer or lease all or any substantial portion of its
properties and assets to any Person, and SpinCo shall not permit any Person to
consolidate with or merge into SpinCo or convey, transfer or lease all or any
substantial portion of its properties and assets to SpinCo, unless, in each case
such Person is a corporation, partnership, limited liability company or trust
and expressly assumes, by a written agreement, executed and delivered to Parent,
in form reasonably satisfactory to Parent, all of the liabilities, obligations
and expenses to be assumed by SpinCo under this Agreement and the due and
punctual performance or observance of every agreement and covenant of this
Agreement and the Ancillary Agreements on the part of SpinCo to be performed or
observed.
(b) Involving Parent. Parent shall not consolidate with or merge into any other
Person or convey, transfer or lease all or any substantial portion of its
properties and assets to any Person, and Parent shall not permit any Person to
consolidate with or merge into Parent or convey, transfer or lease all or any
substantial portion of its properties and assets to Parent, unless, in each case
such Person is a corporation, partnership, limited liability company or trust
and
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expressly assumes, by a written agreement, executed and delivered to SpinCo, in
form reasonably satisfactory to SpinCo, all of the liabilities, obligations and
expenses to be assumed by Parent under this Agreement and the due and punctual
performance or observance of every agreement and covenant of this Agreement and
the Ancillary Agreements on the part of Parent to be performed or observed.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
CT HOLDINGS, INC.
By _____________________________
Name: _____________________________
Title: _____________________________
CITADEL SECURITY SOFTWARE INC.
By _____________________________
Name: _____________________________
Title: _____________________________
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