INDEMNIFICATION AGREEMENT
Exhibit 10.2
EXECUTION VERSION
THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of September 25, 2009 by and
among SANUWAVE, Inc. (“SANUWAVE”), a Delaware corporation, Rub Music Enterprises, Inc., a Nevada
corporation (“RME”) and Xxxxx X. Xxxxxxx (“Xxxxxxx”), an individual resident of the State of Utah.
RECITALS
WHEREAS, SANUWAVE, RME, and RME Delaware Merger Sub, Inc., a Delaware Corporation (“Merger
Sub”) entered into that certain Agreement and Plan of Merger, dated as of September 25, 2009 (the
“Merger Agreement”) whereby Merger Sub will merge with and into SANUWAVE, with SANUWAVE as the
surviving corporation (the “Merger”);
WHEREAS, Nemelka will directly benefit from the Merger; and
WHEREAS, the Merger Agreement requires, as one of the conditions to the obligation of SANUWAVE
to close the transactions contemplated by the Merger Agreement, that Nemelka provide the
indemnification detailed in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants hereinafter set forth
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Nemelka agrees to be legally bound as follows:
| 1. | Definitions. |
| a. | All capitalized terms not defined in this Agreement shall have the meanings
given such terms in the Merger Agreement. |
| b. | “Contract Documents” means the Merger Agreement and any and all other documents
comprising the entire documentation relating to, pertaining to or delivered in
connection with, the Merger Agreement. |
| c. | “Loss” or “Losses” means any and all damages (including incidental, punitive,
exemplary and consequential damages), fines, fees, penalties, deficiencies, diminution
in value, losses and expenses (including the fees of attorneys and accountants) whether
or not arising from a Third Party Claim. |
| 2. | Survival. Notwithstanding the provisions of the Merger Agreement with respect to survival,
or the merger clause set forth in the Merger Agreement, for purposes of this Agreement, all
representations and warranties contained in Article III of the Merger Agreement and
all covenants of RME and Merger Sub contained in the Merger Agreement shall survive the
Closing. |
| 3. | Indemnification by Nemelka. Subject to the other provisions of this Agreement, from and
after the Closing, Nemelka shall indemnify, hold harmless and reimburse RME, SANUWAVE and
its officers, directors, agents and representatives (each an “Indemnified
Party” and collectively, the “Indemnified Parties”) from and against and in respect of any and
all Losses that may be imposed on, sustained, incurred or suffered by or assessed against each
Indemnified Party, directly or indirectly, to the extent relating to or arising out of or in
connection with:
|
(i) any breach of any of the representations or warranties contained in Article III
of the Merger Agreement;
(ii) any failure by RME or Merger Sub to perform or comply with their covenants and
agreements contained in the Merger Agreement;
(iii) any liability or obligation of RME existing as of the Closing Date, other than those
liabilities and obligations set forth on Exhibit A; or
(iv) any Third Party Claim (defined below) asserted against any Indemnified Party related to
the operation of RME’s business, the sale or transfer of RME’s securities (including repurchases
and cancellations of securities effected immediately prior to the closing of the Merger) prior to
the closing of the Merger.
| 4. | Timing of Delivery of Notice of Claim. Nemelka’s obligations under Paragraph 3 of
this Agreement shall terminate at midnight on the first anniversary of the Closing Date
except with respect to any Claim asserted pursuant to this Agreement by an Indemnified Party
prior to such time and date, which shall survive until such Claim has been satisfied or
otherwise finally resolved as provided in this Agreement. |
| 5. | Limitation of Liability. The Indemnified Party’s maximum aggregate indemnification
liability pursuant to Paragraph 3 shall be an amount equal to one hundred thousand
dollars ($100,000) plus the net proceeds value of the RME stock held by Nemelka and his
Affiliates or his family members at the time a payment is made hereunder, plus the amount of
any proceeds Nemelka and his Affiliates or his family members have received from the sale of
RME stock at any time after the date hereof until midnight on the first anniversary of the
Closing Date. |
| 6. | Notice of Claim. If the Indemnified Party shall become aware of any claim, proceeding or
other matter (a “Claim”), that may give rise to a Loss that will be taken into account for
purposes of calculating the amount of any indemnity obligation under this Agreement, the
Indemnified Party shall promptly give notice thereof to Nemelka. Such notice shall specify
whether the Claim arises as a result of a Claim by a third party against the Indemnified
Party (a “Third Party Claim”) or whether the Claim does not so arise as a result of a Claim
by a third party against the Indemnified Party (a “Direct Claim”), and shall also specify
with reasonable particularity (to the extent that the information is available) the factual
basis for the Claim and the amount of the Claim, if known. If the Indemnified Party does not
promptly give Notice of any Claim as specified above, such failure shall not affect the
Indemnified Party’s right to indemnification hereunder for Losses in connection with such
Claim, except and only to the extent Nemelka’s rights are prejudiced by such failure. |
2
| 7. | Direct Claims. With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, Nemelka shall have ninety (90) days to make such
investigation of the Claim as he considers necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to Nemelka the information relied
upon by the Indemnified Party to substantiate the Claim, together with all such other
information as Nemelka may reasonably request. If all parties agree at or prior to the
expiration of such 90-day period (or any mutually agreed upon extension thereof) to the
validity and amount of such Claim, Nemelka shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim. If the parties do not agree, such dispute shall be
determined in accordance with Paragraph 19. |
| 8. | Third Party Claims. |
i. With respect to any Third Party Claims as to which the Indemnified Party intends to
seek indemnity from Nemelka, Nemelka shall have the right, at his expense and at his election,
to assume control of the negotiation, settlement and defense of the Claim through counsel of
his choice; provided, however, that Nemelka shall have no right to assume
control of the negotiation, settlement or defense of any Third Party Claim (i) insofar as such
Third Party Claim would have a material adverse effect on the Indemnified Party if resolved
adversely to the interests of the Indemnified Party, or seeks as a remedy against the
Indemnified Person any injunctive or other equitable relief or criminal penalty, and (ii)
unless Nemelka acknowledges in writing to the Indemnified Party his liability hereunder to
indemnify, hold harmless and reimburse the Indemnified Party in accordance herewith for all
Losses arising in connection with such Third Party Claim. The election of Nemelka to assume
such control shall be made within thirty (30) days of receipt of notice of the Third Party
Claim, failing which Nemelka shall be deemed to have elected not to assume such control. If
Nemelka elects to assume such control, the Indemnified Party shall have the right to be
informed and consulted with respect to the negotiation, settlement or defenses of such Third
Party Claim and to retain counsel to act on its behalf, but the fees and disbursements of such
counsel shall be paid by the Indemnified Party unless Nemelka consents to the retention of such
counsel or unless the named parties to any action or proceeding include both Nemelka and the
Indemnified Party and a representation of both Nemelka and the Indemnified Party by the same
counsel would be inappropriate due to the actual or potential differing interests between them
(such as the availability of different defenses). If Nemelka, having elected to assume such
control, thereafter fails to defend the Third Party Claim within a reasonable period of time,
the Indemnified Party shall be entitled to assume such control, and Nemelka shall be bound by
the results obtained by the Indemnified Party with respect to the Third Party Claim.
ii. If Nemelka assumes control of the negotiation, settlement or defense of any Third
Party Claim, Nemelka shall not settle any such Third Party Claim without the written consent of
the Indemnified Party (which consent shall not be unreasonably withheld).
iii. The Indemnified Party and Nemelka shall cooperate fully with each other with respect
to Third Party Claims and, regardless of which party has control thereof as provided for
herein, shall keep each other reasonably advised with respect thereto.
3
| 9. | Effect of Investigation. The right to indemnification, payment of Losses of an Indemnified
Party or for other remedies based on any representation, warranty, covenant or obligation of
RME or Merger Sub contained in or made pursuant to the Merger Agreement shall not be affected
by (i) any investigation conducted with respect to, or any knowledge acquired (or capable or
being acquired) at any time, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation, or (ii) the waiver of any
condition based on the accuracy of any representation or warranty, or on the performance of
or compliance with any covenant or obligation. |
||
| 10. | Notices. All notices, requests, demands, tenders or other communications required or
permitted hereunder must be in writing and are deemed to have been duly given if (a)
delivered personally, (b) mailed, certified or registered mail, return receipt requested,
postage prepaid, (c) sent by Federal Express or other nationally recognized overnight courier
service or overnight express U.S. Mail, postage prepaid, or (d) sent by facsimile or e-mail
transmission, followed with an original sent in accordance with (a), (b) or (c) above, as
follows: |
| If to “Nemelka” | If to “SANUWAVE” or “RME” | |||
| 2662 Stonebury Loop Road | SANUWAVE, Inc. | |||
| Xxxxxxxxxxx, Xxxx 00000 | 00000 Xxxxx Xxxx Xxx, Xxxxx 000 | |||
| Fax: 000-000-0000 | Xxxxxxxxxx, Xxxxxxx 00000 | |||
| Attn: Xxxxx Xxxxxxx | ||||
| Fax: 000-000-0000 | ||||
| With copies to (which shall not constitute notice): | With copies to (which shall not constitute notice): |
|||
| Xxxxxx X. Xxxxxxxxx, Esq. | Xxxx X. Xxxxxxxx, Xx., Esq. | |||
| Attorney at Law | Xxxxx, Xxxxxxxx & Xxxxxxx, LLP | |||
| 0000 Xxxx Xxxxxx Xxxxxx | Xxxxxxxxx XX, Xxxxx 0000 | |||
| Xxxxx, Xxxx 00000 | 0000 Xxxxxxxxx Xxxxxx, X.X. | |||
| Xxxxxxx, Xxxxxxx 00000-0000 | ||||
| Fax: 000-000-0000 |
Notices personally delivered or transmitted by facsimile (with confirmation of delivery) are
deemed to have been given on the date so delivered or transmitted; provided, that if the
confirmation of delivery sets forth a delivery time later than 5:00PM on any Business Day, then
the facsimile will be deemed delivered on the succeeding Business Day. Notices mailed are
deemed to have been given on the date three (3) Business Days after the date posted, and
notices sent in accordance with (c) above are deemed to have been given on the next Business
Day after delivery to the courier service or U.S. Mail (in time for next day delivery). The
parties may change their address for receipt of Notices by delivery of a Notice of change of
address in accordance with the terms of this Paragraph 10.
4
| 11. | Successors and Assigns. This Agreement shall be binding upon Nemelka and his heirs,
successors, and assigns and shall inure to the benefit of each Indemnified Party and the
heirs, successors and assigns of each respective Indemnified Party. |
| 12. | Conflict. To the extent there is any conflict between the provisions of this Agreement and
the Merger Agreement or the other Contract Documents, the terms of this Agreement shall
control. |
| 13. | No Waiver. No delay, forbearance or neglect by an Indemnified Party in the enforcement of
any of the conditions of this Agreement or any of the Indemnified Parties rights or remedies
hereunder shall constitute or be construed as a waiver thereof. No waiver of any provision
hereof, or any consent required hereunder, shall be effective unless made in writing signed
by or on behalf of the party to be charged with such waiver. No waiver shall be or be deemed
to be a continuing waiver or waiver in respect of any subsequent condition, breach or
default, either of a similar or different nature, unless expressly so stated in such writing
by an Indemnified Party. |
| 14. | Amendment. This Agreement may only be amended, changed or modified in a writing signed by
Nemelka and SANUWAVE. |
| 15. | Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument. In the execution of this Agreement, facsimile or scanned and emailed manual
signatures shall be fully effective for all purposes. |
| 16. | Severability. Any term or provision of this Agreement that is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable Law in an
acceptable manner to the end that the transactions are fulfilled to the extent possible. |
| 17. | Captions and Section Headings. Captions and section headings used herein are for
convenience only and shall not control or affect the meaning or construction of any provision
of this Agreement. |
| 18. | Interpretation. Words in the singular number shall be held to include the plural and vice
versa and words of one gender shall be held to include the other genders as the context
requires. The terms “hereof,” “herein” and “herewith” and words of similar import shall be
construed to refer to this Agreement in its entirety and not to any particular provision
unless otherwise stated. |
5
| 19. | Governing Law. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of [Nevada] excluding its conflicts of laws provisions. |
| 20. | Construction. This Agreement shall be construed without regard to any presumption or rule
requiring construction against the party drafting any instrument or causing any instrument to
be drafted. |
| 21. | Entire Agreement. This Agreement represents the entire agreement of the undersigned
regarding the subject matter hereof, and supersedes all prior written or oral understandings
or agreements between the parties. |
[Signature page follows]
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.
| Xxxxx X. Xxxxxxx | ||||
| SANUWAVE, Inc. | ||||
| By: | ||||
| Xxxxxxxxxxx X. Xxxxxxx | ||||
| President and CEO | ||||
| RME |
||||
| By: | ||||
| Xxxxxxxxx Xxxxxx President |
||||
Signature Page to the Indemnification Agreement
EXHIBIT A
Liabilities and Obligations
None.
