EXHIBIT 10.11
INDEMNITY AGREEMENT
This Indemnity Agreement is made as of May 28, 1999, between Xxxxxx-Xxxxxx
Company, a Virginia Corporation ("Seller"), Xxxx Capital, Inc., a Delaware
Corporation ("Bain") and MD Acquisition Corporation, a Virginia corporation
("Buyer").
RECITALS
A. Seller and Buyer have entered into a Transaction Agreement dated the
date hereof (the "Transaction Agreement"), providing, among other
things, for the contribution by Seller of the outstanding shares of
Mattress Discounters, TJB, and Bedding Experts to Oldco and for the
merger (the "Merger") of Buyer with and into Oldco.
X. Xxxx has arranged for part of its financing for the Merger and the
transactions contemplated by the Transaction Agreement under
Commitment Letters attached to the Transaction Agreement as Schedule
2.2(f) (the "Commitment Letters"). Oldco and the Companies will
collectively borrow and certain providers of the financing will lend
to Oldco and the Companies as described in the Commitment Letters,
Oldco will cause and Mattress Discounters will issue and sell senior
subordinated notes, and Chase Securities Inc. may sell or purchase
non-cash pay notes, preferred securities or other mezzanine
securities, all such financing as described in the Commitment Letters
(including any offering document registration statement, prospectus or
other document in connection therewith) (the "Debt Offering"). Bain
desires to take all steps necessary with respect to the Debt Offering
prior to the Merger so that the closing of the Debt Offering will
occur at or about the Effective Time.
C. Pursuant to Section 3.4 of the Transaction Agreement, Bain shall be
taking steps towards the consummation of the Debt Offering while
Mattress Discounters, Oldco and the Companies are subsidiaries of
Seller and Bain may request certain assistance from Seller, Oldco and
the Companies in connection therewith. Seller desires certain
protections and indemnities because it is only providing assistance on
behalf of Bain and Seller, Oldco and the Companies while under the
control of Seller, will not be responsible for the Debt Offering.
D. Terms used herein and not otherwise defined shall have the meanings
given to them in the Transaction Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Indemnification. (a) Bain agrees to indemnify and hold harmless
Seller, the directors, officers, employees and agents of Seller, and each person
who controls Seller (or under common control of Seller) within the meaning of
either Section 15 of the Securities Act of 1933 (the "Act") or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") and their respective
directors, officers, employees and agents as follows: against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject or incur, including, without limitation, under the
Act, the Exchange Act or any Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon the Debt
Offering, or are in connection with the Debt Offering, including without
limitation, any losses, claims, damages, or liabilities (or actions in respect
thereof) which arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any offering document or
registration statement or prospectus, or similar document, 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 in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that neither Bain nor the Surviving Corporation
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shall be liable for any loss, claim, damage, liability or expense to the extent
arising out of any untrue statement or omission or alleged untrue statement or
omission of a material fact required to be stated therein made in reliance upon
and in conformity with written information furnished to Bain, its affiliates or
representatives by or on behalf of Seller specifically for use in any offering
document, registration statement, prospectus or similar document in connection
with the Debt Offering.
(b) Promptly after receipt by Seller of notice of the commencement of
any action by any third party, Seller will, if a claim in respect thereof is to
be made against Bain under this Section 1, notify Bain in writing of the
commencement thereof, but the failure so to notify Bain will not relieve it from
liability under paragraph (a) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by
Bain of substantial rights and defenses. Bain shall be entitled to appoint
counsel of its choice at its expense to represent Seller in such proceeding in
any action for which indemnification is sought; provided, however, that such
counsel shall be reasonably satisfactory to Seller. Notwithstanding Xxxx'x
election to appoint counsel to represent Seller in an action, Seller shall have
the right to employ separate counsel, and Bain shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
Bain to represent Seller would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both Seller and Bain, (iii) the Seller shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to Bain, or (iv) Bain shall authorize in writing
the Seller to employ separate counsel at the expense of Bain. Bain will not,
without the prior written consent of Seller, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not Seller is an actual or potential party
to such claim or action) unless such settlement, compromise or consent includes
an
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unconditional release of Seller from all liability arising out of such claim,
action, suit or proceeding.
2. Expenses. Bain will pay, or after the Effective Time, shall cause the
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Surviving Corporation to pay, all costs and expenses of Seller, Oldco or the
Companies while under the control of Seller, related to or incurred in
connection with the Debt Offering, including, without limitation, reasonable
expenses of investigation and reasonable attorneys' or other consultants' fees
and expenses.
3. Covenants of Bain. Bain shall conduct the Debt Offering in compliance
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with all laws and regulations, and shall undertake to ensure that the Debt
Offering is not marketed, sold, relied upon as, or represented to be, an
offering or undertaking by Seller or its subsidiaries or affiliates. Except as
otherwise provided herein, Bain agrees that it shall be solely responsible and
liable for the Debt Offering prior to the Effective Time. At and after the
Effective Time, Bain shall be released from all obligations hereunder and the
Surviving Corporation shall be solely responsible and liable for Xxxx'x
obligations under this Indemnity Agreement.
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IN WITNESS WHEREOF, the parties have hereunto set their hands.
Xxxxxx-Xxxxxx Company
By: /s/ Xxxxxxx X. XxXxxxx
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Xxxxxxx X. XxXxxxx
Chairman; Chief Executive Officer
Xxxx Capital, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Managing Director
MD Acquisition Corporation
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Vice President
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