FORM OF
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is dated as of this
___ day of _____________, 2001, by and among XXXXXXXXX & CO INC., a Delaware
corporation ("XXXXXXXXX"), and the persons listed on SCHEDULE A hereto (referred
to collectively as the "PARTICIPANTS" and individually as a "PARTICIPANT")
constituting all the eligible participants in the XXXX XXXX XxXXXXX Financial
Services, Inc. ("XXXX XXXX") Deferred Compensation Plan (the "PLAN"). XxXxxxxxx
and the Participants are referred to collectively herein as the "PARTIES."
WITNESSETH:
WHEREAS, XxXxxxxxx and Xxxx Xxxx have entered into an Agreement and
Plan of Merger dated as of January 18, 2001 (the "MERGER AGREEMENT"), whereby
Xxxx Xxxx will be merged into XxXxxxxxx, and all the issued and outstanding
shares of the Common Stock of Xxxx Xxxx will be exchanged for capital stock of
XxXxxxxxx;
WHEREAS, each Participant is also an Option Holder of Xxxx Xxxx;
WHEREAS, pursuant to the Merger Agreement, the holders of the
outstanding Common Stock of Xxxx Xxxx (the "STOCKHOLDERS," and each,
individually, a "STOCKHOLDER") and the Participants (as Option Holders) are
obligated to indemnify XxXxxxxxx for certain loss contingencies, and each of the
Stockholders has acknowledged such obligation in a separate RPM Stockholder
Agreement entered into by and between XxXxxxxxx and such Stockholder;
WHEREAS, it is a requirement under the Merger Agreement that XxXxxxxxx,
the Representatives and the Escrow Agent enter into an Escrow Agreement in the
form attached thereto, one of the purposes of which is to provide a fund
consisting of shares of Purchaser Series A Preferred Stock delivered to the
Escrow Agent pursuant to the Merger Agreement to satisfy the obligations of the
Stockholders to indemnify XxXxxxxxx pursuant to the Merger Agreement;
WHEREAS, the purpose of this Agreement is to acknowledge the
Participants' several obligations to indemnify XxXxxxxxx for certain loss
contingencies pursuant to the Merger Agreement, and to provide for satisfaction
of such indemnification obligations of the Participants from amounts payable to
the Participants pursuant to the Plan.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises herein contained, the Parties hereby agree as follows:
SECTION 1 DEFINITIONS. In this Agreement, the following words and
phrases shall have the meanings hereinafter set forth:
"FUND" shall mean the aggregate amount of Deferred Compensation and
Interest (each as defined in the Plan) which all Participants, as a group, are
eligible to receive under SECTION 2 of the Plan.
"MAXIMUM REDUCTION AMOUNT" shall mean an amount equal to the sum of (a)
10% of the sum of (i) the aggregate Closing Value of the shares of Purchaser
Common Stock for which the Purchaser Options received by the Participants
pursuant to Section 2.7(e) of the Merger Agreement are exercisable, plus (ii)
the amount of the benefits payable under the Plan (not including interest), plus
(b) an amount equal to the product of (i) the aggregate Equity Percentage of the
Participants, and (ii) $20,000,000.
"PARTICIPANT LOSSES" shall mean the amount of indemnifiable Liabilities
or Losses for which a Participant is finally determined to be liable pursuant
to, and in accordance with, Section 10.2(c) of the Merger Agreement, subject to
the limitations, terms and conditions with respect thereto contained in the
Merger Agreement.
"SET OFF AMOUNT" shall have the meaning set forth in SECTION 6(b)
hereof.
"TERMINATION DATE" shall mean the earlier of (i) the date which is
eighteen (18) months after the Closing Date, or (ii) the date on which XxXxxxxxx
and the Representatives terminate this Agreement pursuant to the terms hereof.
Other capitalized terms used herein without definition are used herein
as defined in the Merger Agreement.
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANTS. Each of
the Participants represents and warrants to XxXxxxxxx that the following
statements contained in this SECTION 2 are correct and complete as of the date
of this Agreement with respect to such Participant:
(a) OWNERSHIP. Such Participant owns beneficially the number of Target
Options set forth next to his, her or its name on SCHEDULE A hereto, free and
clear of any Liens. There are no outstanding options, warrants, convertible
securities, calls, rights, commitments, court orders, proceedings, preemptive
rights or agreements or instruments or understandings of any character to which
such Participant is a party or by which such Participant is bound, obligating
him, her or it to deliver or sell, or cause to be issued, delivered or sold,
contingently or otherwise, any Target Options owned by such Participant, or any
securities or obligations convertible into or exchangeable for such Target
Options, or to grant, extend or enter into any such option, warrant, convertible
security, call, right, commitment, preemptive right or agreement.
(b) AUTHORIZATION. Such Participant has full power and authority to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of such
Participant, enforceable in accordance with its terms and conditions.
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(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by such Participant, nor the performance by such Participant of his
obligations hereunder, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any government, governmental agency or court to which such Participant is
subject or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
such Participant is a party or by which he is bound or to which any of his
assets is subject, except, in any case, as would not have a material adverse
effect on such Participant's ability to perform his obligations hereunder.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF XXXXXXXXX. XxXxxxxxx
represents and warrants to each of the Participants that the statements
contained in this SECTION 3 are correct and complete as of the date of this
Agreement.
(a) AUTHORIZATION. XxXxxxxxx has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of XxXxxxxxx,
enforceable in accordance with its terms and conditions.
(b) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by XxXxxxxxx, nor the performance by XxXxxxxxx of its obligations
hereunder, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any
government, governmental agency or court to which XxXxxxxxx is subject or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which XxXxxxxxx is a party or by which it is
bound or to which any of its assets is subject, except, in any case, as would
not have a material adverse effect on XxXxxxxxx'x ability to perform its
obligations hereunder.
SECTION 4 LITIGATION SUPPORT. The Parties agree that following the
Closing, in the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any transaction contemplated
by the Merger Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction on or prior to the Closing Date involving Xxxx
Xxxx or any of its Subsidiaries, each of the other Parties will cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available its personnel, and provide such testimony and access to its books
and records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(except to the extent that the contesting or defending Party is entitled to
indemnification therefor under SECTION 10.2, 10.3 or 10.4 of the Merger
Agreement).
SECTION 5 INDEMNIFICATION PROVISIONS OF MERGER AGREEMENT.
(a) Each Participant acknowledges that he has received and reviewed a
copy of the Merger Agreement and agrees to be bound by the provisions of
SECTIONS 10.2(a) and 10.4 of the
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Merger Agreement provide for the indemnification of each Purchaser
Indemnified Party by the Participants and the Stockholders, subject to the
limitations contained in SECTION 10.5 of the Merger Agreement, for certain
Liabilities or Losses incurred or suffered by any Purchaser Indemnified Party.
(b) Each Participant agrees to be bound by the provisions of SECTION
10.2(c) of the Merger Agreement relating to the indemnification of XxXxxxxxx in
respect of any breach of the representations under SECTION 2 of this Agreement,
subject to the limitations contained in SECTION 10.5 of the Merger Agreement.
SECTION 6 SATISFACTION OF CLAIMS.
(a) The Maximum Reduction Amount shall be available as the sole source
of satisfaction by the Participants of their respective indemnification
obligations to XxXxxxxxx in accordance with the Merger Agreement for and in
respect of Liabilities and Losses for which XxXxxxxxx is entitled to
indemnification from the Participants under SECTIONS 10.2 and 10.4 of the Merger
Agreement. If XxXxxxxxx shall suffer or incur Liabilities or Losses, it shall
deliver to the Representatives a certificate ("CLAIM CERTIFICATE") signed by the
Chief Executive Officer or Chief Financial Officer of XxXxxxxxx stating that
XxXxxxxxx has suffered or incurred Liabilities or Losses for which XxXxxxxxx is
entitled to indemnification from the Participants under SECTION 10.2 or 10.4 of
the Merger Agreement in the amount specified in such Claim Certificate (which
shall not exceed the Maximum Reduction Amount) and setting forth (i) the basis
for such Liabilities or Losses (including whether such Liabilities or Losses are
Target Losses or Participant Losses), (ii) the amount of such Liabilities or
Losses for which XxXxxxxxx is entitled to indemnification under SECTIONS 10.2
and 10.4 of the Merger Agreement, subject to the limitations contained in
SECTION 10.5 of the Merger Agreement, and (iii) the portion of such Liabilities
or Losses for which each Participant is potentially liable. Except as otherwise
provided in SECTION 7 hereof, no Claim Certificate may be delivered by XxXxxxxxx
after the close of business on the Business Day immediately preceding the
Termination Date. If XxXxxxxxx does not receive, within twenty (20) Business
Days after the Representatives' receipt of the Claim Certificate, a written
notice from the Representatives stating that they dispute XxXxxxxxx'x assertion
that it is entitled to the amount specified in the Claim Certificate, then
except as otherwise provided herein, XxXxxxxxx shall reduce the Fund, in the
manner provided in Section 6(b) hereof, in an amount which shall not exceed the
Maximum Reduction Amount. If XxXxxxxxx receives, within twenty (20) Business
Days after the Representatives' receipt of the Claim Certificate, a written
notice from the Representatives stating that they dispute XxXxxxxxx'x assertion
that it is entitled to the amount specified in the Claim Certificate, XxXxxxxxx
shall thereafter reduce the Fund in the manner provided in SECTION 6(b) hereof
only if so instructed in writing by the Representatives or in a Final
Determination.
(b) In the case of Target Losses, reduction of the Fund pursuant to
SECTION 6(a) hereof shall be made by setting off against the Deferred
Compensation to which each Participant is entitled under the Plan an amount
equal to the product of (i) the Liabilities and Losses specified in the Claim
Certificate with respect to which XxXxxxxxx is entitled to reduction pursuant to
SECTION 6(a) hereof, and (ii) such Participant's Equity Percentage, together
with the amount of Interest accrued with respect to such amount as of the date
of such set off. In the case of Participant Losses, reduction of the Fund
pursuant to SECTION 6(a) hereof shall be made by setting
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off against the Deferred Compensation to which such Participant is entitled
under the Plan an amount equal to such Participant Losses to the extent
XxXxxxxxx is entitled to reduction pursuant to SECTION 6(a) hereof. Any
amount set off pursuant to this SECTION 6(b) is referred to herein as the
"SET OFF AMOUNT". Notwithstanding anything to the contrary in this Agreement,
in no event shall (i) the aggregate Set Off Amount of all the Participants
pursuant to this Agreement exceed the Maximum Reduction Amount or (ii) the
reduction of any Participant's interest in the Fund pursuant to this
Agreement exceed the product of (1) the Maximum Reduction Amount and (2) such
Participant's Equity Percentage as a percentage of the aggregate Equity
Percentage of all the Participants.
SECTION 7 TERMINATION. Except as otherwise provided herein, this
Agreement shall terminate on the Termination Date. Notwithstanding the
foregoing, (i) if on or before the Termination Date, XxXxxxxxx has duly
delivered one or more Claim Certificates to the Representatives with respect to
a claim or claims for Liabilities or Losses for which XxXxxxxxx is entitled to
indemnification under SECTION 10.2(a) or SECTION 10.2(c) of the Merger Agreement
(other than with respect to claims for Losses and Liabilities arising out of,
based upon or resulting from a misrepresentation, breach or inaccuracy of any
representation or warranty contained in SECTION 4.17 or SECTION 4.18 of the
Merger Agreement) and which have not been satisfied pursuant to this Agreement,
then this Agreement shall not terminate with respect to such claims until all
such claims have been fully satisfied or resolved in writing by XxXxxxxxx and
the Representatives or a Final Determination has been rendered with respect
thereto, and (ii) with respect to (A) claims for Losses and Liabilities arising
out of, based upon or resulting from a misrepresentation, breach or inaccuracy
of any representation or warranty contained in SECTION 4.17 or SECTION 4.18 of
the Merger Agreement, and (B) claims for Losses and Liabilities asserted
pursuant to SECTION 10.4 of the Merger Agreement, this Agreement shall terminate
on the date on which the representations and warranties or Target contained in
SECTIONS 4.17 and 4.18 of the Merger Agreement expire pursuant to and in
accordance with SECTION 10.1 of the Merger Agreement; PROVIDED, HOWEVER, that in
any event, this Agreement shall terminate on the date on which the aggregate
amount of reductions to the Fund pursuant to this Agreement equals the Maximum
Reduction Amount.
SECTION 8 DEFERRED COMPENSATION PLAN. Each Participant shall be
entitled to participate in and receive the benefits provided under the Plan.
Neither the Plan nor such Participant's eligibility and benefits thereunder
shall be amended or modified in any way by XxXxxxxxx except in accordance with
the terms of the Plan.
SECTION 9 MISCELLANEOUS.
(a) NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand, by
telecopier, by nationally recognized overnight courier, by fax or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:
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If to a Participant, to the Representatives at:
c/o Xxxxxx X. Xxxxxx
XxXxxxxxx & Co. LLC
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
and
c/o Xxxxxx X. Xxxx, Xx.
XxXxxxxxx & Co. LLC
Xxx Xxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxx X. XxXxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
If to XxXxxxxxx, to it at:
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx XxXxxxxxx
Fax: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
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(Or at such other address or addresses as may have been furnished in writing by
the Parties by notice given pursuant to this SECTION 9(a)).
Notices provided in accordance with this SECTION 9(a) shall be deemed delivered
upon personal delivery, receipt by telecopy, fax or nationally recognized
overnight courier, or 48 hours after deposit in the mail in accordance with the
above.
(b) THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended to, or shall be construed so as to, create any third party
beneficiary to this Agreement or otherwise confer any rights upon any
person, firm or corporation that is not a Party.
(c) ASSIGNMENT: SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon, and inure to the benefit of, the respective
successors, assigns, heirs, executors and administrators of the Parties. This
Agreement shall not be assignable by XxXxxxxxx without the prior written consent
of each Participant, and by any Participant without the prior written consent of
XxXxxxxxx.
(d) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) GOVERNING LAW. This Agreement shall be governed by and
interpreted and construed in accordance with the laws of the State of New
York, without reference to its conflicts of laws provisions.
(g) AMENDMENTS AND WAIVERS. This Agreement may not be amended or waived
(either generally or in a particular instance and either retroactively or
prospectively) except by a written instrument signed by the Party against whom
enforcement of such amendment, modification or waiver is sought. No waivers of
or exceptions to any term, condition or provision of 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, condition or provision.
(h) SEVERABILITY. Any term or provision of this Agreement that is
invalid 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.
(i) ATTORNEYS-IN-FACT. Each of the Participants hereby (i) irrevocably
constitute and appoint Xxxxxx X. Xxxx, Xx. and Xxxxxx X. Xxxxxx (the
"REPRESENTATIVES"), and each of them, acting unanimously, as his true and lawful
agents and attorneys-in-fact with full power to appoint a substitute or
substitutes to act hereunder, with respect to all matters arising in connection
with the Merger and the transactions contemplated thereunder and hereby with
full power and authority to execute and deliver for and on behalf of the
Participant all such contracts, consents and other documents in connection
therewith as the Representatives may deem necessary or
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advisable and to do and perform any and all acts and things whatsoever
necessary or advisable in the premises as fully as the Participant might or
could do and (ii) ratify and confirm all that the Representatives, or any
substitute or substitutes, shall do or cause to be done by virtue hereof. The
Representatives shall have no liability for any actions taken or omitted by
them in the performance of their duties as Representatives unless in respect
of such actions or omissions they shall be finally adjudged by an arbitrator
or court of competent jurisdiction to have acted in bad faith or to have been
grossly negligent. Each Participant shall indemnify (pro rata based on his,
her or its Equity Percentage) each of the Representatives and hold each of
them harmless from all liabilities, losses, costs and expenses (including
reasonable attorneys' fees in respect of the investigation and defense of
claims) which may be incurred by him in connection with the performance of
his duties as a Representative, except to the extent, if any, that such
liabilities, losses, costs and expenses shall be finally adjudged by an
arbitrator or court of competent jurisdiction to have resulted from the bad
faith or gross negligence of such Representative.
(j) CONSTRUCTION. Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires. The word
"including" shall mean including without limitation. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice versa.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as an instrument of the date first above written.
XXXXXXXXX & CO INC.
By:
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Name:
Title:
THE PARTICIPANTS
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INDEMNIFICATION AGREEMENT
SCHEDULE A
PARTICIPANTS
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NAME OF PARTICIPANT
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