INDEMNIFICATION AGREEMENT
This Agreement is by and among ARROW-MAGNOLIA INTERNATIONAL, INC., a Texas
corporation ("Arrow-Magnolia"), ARROW ACQUISITION LP, a Texas limited
partnership ("Arrow Acquisition"), and XXXXXXX XXXXXX ("Xxxxxx").
RECITALS
A. Arrow Acquisition and Arrow-Magnolia (collectively hereinafter
referred to as the "Arrow Entities") are parties to that certain Agreement
and Plan of Merger dated as of October 7, 2004, as amended by that certain
Amended and Restated Merger Agreement dated as of the date hereof (as so
amended, the "Merger Agreement") pursuant to which a merger (the "Merger")
of Arrow Acquisition with and into Arrow-Magnolia is to be consummated; and
X. Xxxxxx has agreed to indemnify the Arrow Entities against certain
indemnification claims.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good consideration, the parties, intending to be
legally bound, agree as follows:
1. Indemnification. Until the "Maturity Date" set forth in that certain
promissory note (the "Note") in the original principal amount of $200,000.00
to be executed and delivered by Arrow Acquisition to Shwiff at the Closing
of the Merger Agreement, Shwiff agrees to indemnify and hold harmless the
Arrow Entities from and against any and all amounts, including reasonable
attorneys' fees and expenses, which the Arrow Entities may incur (a) with
respect to indemnification and advance of expenses the Arrow Entities may be
required or permitted to provide under the various Mutual Release and
Indemnification Agreements (the "Releases") executed by the Arrow Entities
and the various directors, officers and employees of Arrow-Magnolia in
connection with the Merger and/or (b) with respect to any and all claims by
any holder(s) of any "Dissenting Share(s)," as defined in Section 3.6 of
the Merger Agreement. Notwithstanding the foregoing, Shwiff shall not be
required to indemnify and hold the Arrow Entities harmless with respect to
the first $1.60 per Dissenting Share and the maximum amount that Shwiff
shall be required to indemnify and hold the Arrow Entities harmless for
shall be limited to $200,000.00.
2. Offset. If any claims are made on or prior to the Maturity Date with
respect to which the Arrow Entities may be entitled to indemnification
hereunder, then Arrow Acquisition shall be entitled to withhold the amount
of such claims from amounts payable under the Note until such time as such
claims are resolved. Pending resolution of any such claims, no interest
shall accrue with respect to the amounts owed under the Note. If such
claims result in the Arrow Entities being entitled to indemnification under
this Agreement, then Arrow Acquisition shall be entitled to offset such
amounts from amounts due and payable under the Note. If a dispute arises as
to whether or not a valid claim for indemnification hereunder exists, the
parties hereto agree that such dispute shall be resolved pursuant to the
expedited procedures of the commercial arbitration rules of the American
Arbitration Association regardless of the amount in controversy, with each
party to bear its own arbitration costs and expenses. The parties stipulate
that the hearing locale for any such arbitration proceeding will be Dallas,
Texas. Judgment upon the award rendered as a result of such arbitration may
be entered in any court having jurisdiction thereof. The parties further
stipulate that the provisions hereof shall be a complete defense to any
suit, action or proceeding instituted in any federal, state or local court
or before any administrative tribunal with respect to any controversy or
dispute arising out of or relating to whether any such valid claim exists.
If it is so determined that the Arrow Entities have withheld amounts as to
an invalid claim or have withheld amounts in excess of the ultimate claims
paid, the Arrow Entities shall, immediately upon such determination, pay
such improperly withheld or excess amounts to Shwiff, together with interest
at the rate set forth in the introductory paragraph of the Note.
3. Health Insurance. Until the payment or satisfaction of all amounts due
under the Note (whether by actual payment or offset pursuant to Section 2
above), the Arrow Entities shall pay the premiums (up to $460 per month) for
and maintain in effect for the benefit of Shwiff health insurance providing
coverage no less favorable than that which is currently provided to Shwiff
by Arrow Magnolia.
4. Controlling Law; Construction. All questions concerning the validity,
operation and interpretation of this Agreement and the performance of the
obligations imposed on the parties hereunder shall be governed by the laws
of the State of Texas. This Agreement is executed and delivered in
connection with and pursuant to the Merger Agreement, and shall be construed
as a part of the transactions contemplated by the Merger Agreement.
5. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original, and all of such
counterparts together shall constitute but one and the same instrument.
6. Assignability. No party may assign its rights or delegate its duties
hereunder without the prior written consent of the other parties.
7. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, legal
representatives and permitted assigns. No person or entity not a party to
this Agreement shall have rights hereunder as a third party beneficiary or
otherwise.
8. Entire Agreement. This Agreement constitutes the full understanding of
the parties and a complete and exclusive statement of the terms and
conditions of their agreement relating to the subject matter hereof and
supersedes any and all prior agreements, whether written or oral, that may
exist between the parties with respect thereto. Except as otherwise
specifically provided in this Agreement, no conditions, usage of trade,
course of dealing or performance, understanding or agreement purporting to
modify, vary, explain or supplement the terms or conditions of this
Agreement shall be binding unless hereafter made in writing and signed by
the parties hereto, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement.
9. Modification and Severability. If a court of competent jurisdiction
declares that any provision of this Agreement is illegal, invalid or
unenforceable, then such provision shall be modified automatically to the
extent necessary to make such provision fully enforceable. If such court
does not modify any such provision as contemplated herein, but instead
declares it to be wholly illegal, invalid or unenforceable, then such
provision shall be severed from this Agreement, and such declaration shall
in no way affect the legality, validity and enforceability of the other
provisions of this Agreement to which such declaration does not relate. In
this event, this Agreement shall be construed as if it did not contain the
particular provision held to be illegal, invalid or unenforceable, the
rights and obligations of the parties hereto shall be construed and enforced
accordingly, and this Agreement otherwise shall remain in full force and
effect.
10. Headings. Headings of particular sections of this Agreement are for
convenience only and are in no way to be construed as part of this Agreement
or as a limitation of the scope of the particular sections to which they
refer.
11. Notices. Any notice provided for by this Agreement and any other
notice, demand or communication that any party may wish to send to another
party shall be in writing and either delivered in person or sent by
registered or certified United States mail, first-class postage prepaid,
return receipt requested in a properly sealed envelope, and addressed to the
party for which such notice, demand or communication is intended at such
party's address as set forth below:
If to Shwiff:
At the address set forth opposite
the Shwiff's
name on the signature page of this
Agreement
If to the Arrow Entities:
ARROW ACQUISITION LP
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx Xxxx
Any address or name specified above may be changed by a notice given by the
addressee to the other parties in accordance with this Section 11. Any
notice, demand or other communication shall be deemed given and effective as
of the date of delivery in person or upon receipt as set forth on the return
receipt. The inability to deliver because of changed address of which no
notice was given, or the rejection or other refusal to accept any notice,
demand or other communication, shall be deemed to be receipt of the notice,
demand or other communication as of the date of such inability to deliver or
the rejection or refusal to accept.
12. Amendments and Waivers. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement or any
provision hereof shall be effective for any purpose unless specifically set
forth in a writing signed by the parties hereto. No waiver of any breach or
default or of any right or remedy herein provided or otherwise available
shall be effective for any purpose unless specifically set forth in a
writing signed by the party to be bound thereby. The waiver of any right or
remedy in respect of any occurrence or event on one occasion shall not be
deemed a waiver of such right or remedy in respect of such occurrence or
event on any other occasion.
13. Termination of Merger Agreement. This Agreement is executed and
delivered contemporaneously with the execution and delivery of the Merger
Agreement, but shall become effective on and as of the Effective Date (as
defined in the Merger Agreement) of the Merger. If the Effective Date (as
defined in the Merger Agreement) of the Merger shall not occur, this
Agreement shall not become effective but shall be void and of no force or
effect.
14. Previous Agreement. This Agreement supercedes and replaces that
certain Indemnification Agreement previously executed by the parties hereto
on or about October 7, 2004.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
____ day of December, 2004.
ARROW ACQUISITION LLP
By: AM Management LLC, General
Partner
By
___________________________________
Xxxxx Xxxx, Manager
ARROW-MAGNOLIA INTERNATIONAL, INC.
By
___________________________________
Xxxx X. Xxxxxx, Chief Executive
Officer
_______________________________________
Xxxxxxx Xxxxxx
Address for Xxxxxxx Xxxxxx:
_______________________________________
_______________________________________
