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