EXHIBIT 10.4
INDEMNITY AGREEMENT
This INDEMNITY AGREEMENT is dated as of December 20, 2002 by and among
Xxxxxxxx Group Holdings, Inc., a Delaware corporation (the "Company"), The
Xxxxxxxx Group, Ltd., a Delaware corporation ("Xxxxxxxx Ltd."), and the direct
and indirect stockholders of Xxxxxxxx Ltd. listed on Exhibit A hereto (the
"Xxxxxxxx Investors").
BACKGROUND
A. The Xxxxxxxx Investors own 245,252 shares of Xxxxxxxx Ltd.
Series A Preferred Stock, par value $.01 (the "Xxxxxxxx Preferred Stock"), which
ownership is set forth in greater detail on Exhibit A hereto.
B. The Xxxxxxxx Investors desire to contribute to the Company, and
the Company desires to acquire from the Xxxxxxxx Investors, the Xxxxxxxx
Preferred Stock in exchange for shares of the Company's Class A Common Stock,
upon the terms and subject to the conditions set forth in the Recapitalization
Agreement dated as of December 20, 2002 by and among the Company, Xxxxxxxx Ltd.,
the Xxxxxxxx Investors and other shareholders of Xxxxxxxx Ltd. (the
"Recapitalization Agreement").
C. The exchange of Xxxxxxxx Preferred Stock for shares of the
Company's Class A Common Stock is intended to qualify as a tax-free exchange
under Section 351 of the Internal Revenue of 1986, as amended (the "Code").
D. The parties hereto desire to provide further assurance that the
Xxxxxxxx Investors will not incur income tax costs in connection with the
exchange of Xxxxxxxx Preferred Stock for shares of the Company's Class A Common
Stock pursuant to the Recapitalization Agreement.
Accordingly, intending to be legally bound, the parties hereto hereby agree
as follow:
(a) Indemnification. Xxxxxxxx Ltd. and the Company jointly and severally
shall indemnify and hold harmless, on an after-tax basis, the Xxxxxxxx Investors
against any federal, state or local income taxes, any related interest costs and
penalties and any reasonable related out-of-pocket costs (including professional
fees), in each case arising from any assertion by the Internal Revenue Service
or other tax authority that the Xxxxxxxx Investors are required to recognize
income or gain for federal, state or local income tax purposes in connection
with the exchange of Xxxxxxxx Preferred Stock for shares of the Company's Class
A Common Stock pursuant to the Recapitalization Agreement (the "Losses");
provided that neither the Company nor Xxxxxxxx Ltd. shall have any obligation to
make any payment under this section (a) to the extent that such payment is
prohibited under the terms of the Credit Agreement (as defined below). As a
condition of such person's indemnification under this provision, each Xxxxxxxx
Investor hereby agrees to promptly notify Xxxxxxxx Ltd. of any claim that is
asserted against such person after such person has obtained actual knowledge of
such claim and shall afford Xxxxxxxx Ltd. the opportunity to control the defense
of such claim at Xxxxxxxx Ltd.'s sole cost and expense. No settlement shall be
entered into or admission of liability made with respect to any such claims
without Xxxxxxxx Ltd.'s prior written consent (such consent not to be
unreasonably withheld).
(b) Contribution. If any Xxxxxxxx Investor receives a payment under this
Indemnity Agreement in excess of such Xxxxxxxx Investor's Pro Rata Share of the
aggregate payments made to all Xxxxxxxx Investors under this Indemnity
Agreement, then such Xxxxxxxx Investor shall contribute such excess to the other
Xxxxxxxx Investors pro rata based on the excess, if any, of (i) such other
Xxxxxxxx Investor's Pro Rata Share of the aggregate payments made to all
Xxxxxxxx Investors under this Indemnity Agreement, over (ii) the payments made
to such other Xxxxxxxx Investor under this Indemnity Agreement. For purposes of
this section (b), a Xxxxxxxx Investor's "Pro Rata Share" means a fraction, the
numerator of which is the amount of Losses incurred by such Xxxxxxxx Investor
and the denominator of which is the aggregate amount of Losses incurred by all
Xxxxxxxx Investors.
(c) No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the Xxxxxxxx Investors and nothing herein expressed or implied shall give or
be construed to give to any person or entity, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
(d) Consent to Jurisdiction. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of (i) the state courts of the
Commonwealth of Pennsylvania, Bucks County, and (ii) the United States District
Court for the Eastern District of Pennsylvania, for the purposes of any suit,
action or other proceeding arising out of this Agreement or any transactions
contemplated hereby.
(e) Action or Inaction Inconsistent with the Tax-Free Exchange. Each of
the parties hereto agrees that, unless otherwise required by law, it shall not,
nor shall any of its affiliates, take any position on any tax return or for any
other tax purpose that is inconsistent with the treatment of the exchange as a
tax-free exchange under Section 351 of the Code (and any applicable provision of
state, local or non-U.S. law).
(f) No Double Recovery. No provision of this Agreement shall be construed
to provide an indemnity or other recovery for any interest costs, penalties, or
other amounts to the extent the Xxxxxxxx Investors have been compensated under
any other agreement or action at law or equity.
(g) Subordination. The holders of the 11 3/4% Senior Subordinated Notes
due 2009 of Xxxxxxxx Ltd. (the "Notes") and the lenders (the "Lenders") party to
that certain Credit Agreement, dated as of December 20, 2002, by and among
Xxxxxxxx Ltd., the guarantors party thereto, the Lenders and Antares Capital
Corporation, as agent (the "Credit Agreement") will be entitled to receive
payment in full in cash of all amounts due on or in respect of all the Notes and
the Credit Agreement, as applicable, before the Xxxxxxxx Investors will be
entitled to receive any payment from Xxxxxxxx Ltd. under section (a) above in
the event of any distribution to creditors of Xxxxxxxx Ltd.:
(i) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Xxxxxxxx Ltd. or to its
creditors, as such, or to its assets;
(ii) in a liquidation, dissolution or other winding-up of Xxxxxxxx
Ltd.;
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(iii) in an assignment for the benefit of creditors; or
(iv) in any marshalling of assets or liabilities of Xxxxxxxx Ltd.
(h) Waiver. Waiver of any term or condition of this Agreement by any party
shall be effective if in writing and shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a waiver of any
other term of this Agreement. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(i) Counterparts. This Agreement may be executed in any number of
counterparts (including by means of facsimile), 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.
(j) Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and understandings, oral or written, relating to
such subject matter.
(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania applicable
to agreements made and to be performed entirely within the Commonwealth of
Pennsylvania, without regard to the conflicts of law principles thereof.
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[Signature Pages to Indemnity Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE XXXXXXXX GROUP, LTD.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: XXXXX XXXXXXXX
Title: CHIEF EXECUTIVE OFFICER
XXXXXXXX GROUP HOLDINGS, INC.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: XXXXX XXXXXXXX
Title: CHIEF EXECUTIVE OFFICER
[Signature Pages to Indemnity Agreement]
XXXXXXXX INVESTORS:
/s/ Xxxxxxxx X. Xxxxxxxx, Xx.
------------------------------------
Xxxxxxxx X. Xxxxxxxx, Xx.
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxx X. XxXxxxx
------------------------------------
Xxxxx X. XxXxxxx
/s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx
/s/ Xxxx Xxxx
------------------------------------
Xxxx Xxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxx
------------------------------------
Xxxxxx Xxx
/s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx
CIVC PARTNERS III-B
By: /s/ Xxxxxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
Title: Partner
EXHIBIT A
Shares of Series A
Stockholder Preferred Stock
----------- ------------------
Xxxxx X. Xxxxxxxx 112,564
Xxxxxxxx X. and Xxxxx X. Xxxxxxxx 57,502
Xxxxxx X. Xxxxxxxx 11,541
Xxxxx X. XxXxxxx 11,541
Xxxxx X. Xxxx 11,541
CIVC Partners III-B, Xxxxxx X. Xxxxx, 29,561
Xxxxxxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx
Xxxxxxx Xxxxxx 522
Xxxx Xxxx 8,107
Xxxxxx Xxxxxxx 354
Xxxxxxx Xxxxxxxxx 354
Xxxxxxx Xxxxxx 709
Xxxxxx Xxx 425
Xxxxx Xxxxx 354
Xxxx Xxxxxx 177
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TOTAL: 245,252
