Exhibit 10.13
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, dated March 30, 1999, is by and between
Kosmas Group International, Inc. ("KGI"), a Florida corporation, and the
undersigned subsidiaries and shareholders (collectively with KGI, the
"Sellers"), and Equivest Finance, Inc., a Delaware corporation ("Purchaser").
WITNESSETH:
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Purchaser is acquiring all of the issued and outstanding common stock of Avenue
Plaza, LLC, a Louisiana limited liability company; Bluebeard's Castle, Inc., a
U.S. Virgin Islands corporation; Castle Acquisition, Inc., a U.S. Virgin Island
corporation; Ocean City Coconut Malorie Resort, Inc., a Maryland corporation;
St. Augustine Resort Development Group, Inc., a Florida corporation, and
substantially all of the assets of Capital City Suites, Inc., a Washington,
D.C., corporation, which are all corporations engaged in the business of
developing, marketing, and managing resort properties that offer timeshare
condominiums, pursuant to the terms and conditions of that certain Purchase
Agreement, dated February 16, 1999 (the "Purchase Agreement"); and
WHEREAS, a condition precedent to Sellers' obligation to close the
transactions contemplated by the Purchase Agreement is the resolution of certain
obligations of Sellers to the Xxxxxxxxx Lenders (as that term is defined in the
Purchase Agreement), Castle Holdings, LLC, ("Castle Holdings" and, collectively
with the Xxxxxxxxx Lenders, the "Obligees"); and
WHEREAS, Purchaser was unable to resolve all obligations of Sellers to the
Xxxxxxxxx Lenders and Castle Holdings prior to the consummation of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, Purchaser and Sellers are presently in litigation with Castle Holdings in
the U.S. District Court for the Virgin Islands;
WHEREAS, Castle Holdings has made a variety of assertions regarding moneys
owed to it by Sellers or their affiliates, but has not provided any supporting
documentation therefor;
WHEREAS, the parties hereto believe that Castle Holdings has been paid on
certain of the aforementioned obligations and therefore that its claims are
substantially below what it has asserted;
WHEREAS, certain of the principals of Castle Holdings are employees and/or
officers of KGI or its subsidiaries and have breached the fiduciary duties they
owe to their employer;
WHEREAS, Purchaser is willing to enter into this Agreement to induce
Sellers to consummate the transactions contemplated by the Purchase Agreement
despite such resolution of obligations, and Sellers are only willing to
consummate such transactions if Purchaser indemnifies Sellers from damages
resulting from claims of Obligees as provided herein;
NOW THEREFORE, for and in consideration of the foregoing and the mutual
agreements set forth below, the parties agree as follows:
1. Indemnification. Purchaser agrees to indemnify and hold harmless
Sellers and any subsidiaries and the shareholders, directors, officers,
employees, and agents thereof (collectively, the "Indemnified Parties") from and
against any Adverse Consequences (as defined below) any of such Indemnified
Parties may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by any
claim of Obligees or any other party through Obligees as provided herein. For
purposes of this Agreement, the phrase "Adverse Consequences" means all claims,
losses, liabilities, costs, and expenses of any kind without limitation
(including but not limited to reasonable attorneys' fees and court costs) that
are incurred by the Indemnified Parties, including but not limited to all
charges, complaints, actions, suits, proceedings, hearings, investigations,
claims, damages, judgments, orders, decrees, stipulations, injunctions, damages,
dues, penalties, fines, costs, amounts paid in settlement, liabilities (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due), obligations, taxes, liens,
losses, expenses, and fees, including all attorneys' fees and court costs.
Provided however, Adverse Consequence shall not include any monetary award
pursuant to a judicial judgment in favor of Obligees which judgment is
specifically attributable to fraudulent representations of Sellers to the
Obligees in that certain lawsuit styled Castle Holdings, L.L.C., x. Xxxxxx Group
International, Inc., and Kosmas Caribbean Holdings Corporation but shall
specifically include any attorneys' fees and costs incurred by Sellers defending
such claim.
2. Amount of Indemnification.
(a) Indemnification Threshold. Purchaser's obligations hereunder
shall be limited to Five Million Nine Hundred Seventy-five Thousand Dollars
($5,975,000) (the "Indemnification Threshold"). Attorneys' fees and expenses
incurred by Sellers and/or Purchaser, as provided in paragraph 3 below, shall
not count toward the Indemnification Threshold. Of the Indemnification
Threshold, Purchaser shall not be obligated to deliver to Seller or any Obligee
more than One Million Eight Hundred and Fifty Thousand Dollars ($1,850,000) in
cash, with the remainder to be delivered in the form of Purchaser's common stock
valued at the average of the mid-market price for Purchaser's common stock on
the ten days prior to such payment that such common stock has traded. Purchaser
shall always have the right (but not the obligation) to deliver cash in lieu of
stock.
(b) Settlement of Adverse Consequences. Purchaser may settle any
Adverse Consequence with an Obligee hereunder, without compulsion from legal
decree, upon prior written notice to Sellers and receipt of Sellers' written
consent. Provided however, Sellers are not obligated to contribute or pay any
portion of an Adverse Consequence whether in excess or not of the remaining
outstanding Indemnification Threshold without its prior written consent.
(c) Applications Against Indemnification Threshold. The
Indemnification Threshold shall be reduced by any sums paid by Purchaser to
Castle Holdings, the Xxxxxxxxx Lenders and /or their affiliates after the
execution of this Agreement that are attributable to Sellers' actual or claimed
obligations to Castle Holdings, the Xxxxxxxxx Lenders and/or their affiliates
including but not limited to the costs of terminating the employment of any
affiliate of Castle Holdings employed by KGI or its subsidiaries or any costs of
replacing receivables owned by or pledged to Castle Holdings, the Xxxxxxxxx
Lenders or their respective affiliates.
(d) Further Reduction. The Indemnification Threshold shall also be
reduced by any amount included in the $9.2 million that Xxxxxxxxx, Castle
Holdings and their affiliates claim are owed which are determined not to be due
or owing. Purchaser shall provide Sellers with prior written notice of the
amount of such payment and the claim of such liability.
3. Indemnification for Attorneys Fees and Costs Incurred Defending or
Prosecuting Adverse Consequences. In addition to the Indemnification Threshold,
Purchaser shall pay the expense and costs of defending and prosecuting any
Adverse Consequence either on behalf of Purchaser or on behalf of Sellers to
legal counsel hired by Sellers pursuant to paragraph 4 below.
4. Procedure and Notice. If Sellers receive notice with respect to any
matter that may give rise to a claim for indemnification under this Agreement,
then Sellers shall notify Purchaser promptly in writing; provided, however, that
no delay on the part of Sellers in notifying Purchaser shall relieve Purchaser
from any liability or obligation hereunder unless (and then solely to the extent
that) Purchaser thereby is damaged. In the event Purchaser notifies Sellers,
within 15 business days after Sellers have given notice of the matter, that
Purchaser is assuming the defense thereof: (i) Purchaser will defend Sellers
against the matter with counsel of Purchaser's choice reasonably satisfactory to
Sellers; (ii) Sellers will cooperate fully with Purchaser and counsel in
defending any claims made by an Obligee of an affiliate as well as in
prosecuting claims against Obligees; (iii) Sellers may retain separate
co-counsel at its sole cost and expense (except that Purchaser will be
responsible for the fees and expenses of the separate co-counsel to the extent
Sellers reasonably conclude that Purchaser's counsel has a conflict of
interest); (iv) Sellers will not consent to the entry of any judgment or enter
into any settlement with respect to the matter that does not include full
release; and (v) Purchaser will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement that does not include a
provision whereby the Obligee releases Sellers from all liability with respect
thereof, without the written consent of Sellers not to be unreasonably withheld,
conditioned or delayed. If Purchaser assumes the defense of any such matter,
such action shall be deemed to be an admission by Purchaser of its
indemnification obligations hereunder and Sellers shall use all reasonable
efforts to cooperate fully in the defense of any claim, action, or proceeding
covered by this Agreement. In the event Purchaser does not notify Sellers,
within 15 business days after Sellers have given notice of the matter, that
Purchaser is assuming the defense thereof, Sellers may defend against, or enter
into any settlement with respect to, the matter in any manner it may reasonably
deem appropriate; provided, however, that prior to (i) settling any matter
without a complete release of Purchaser or (ii) making any admission of
liability, Sellers shall provide at least 7 days prior written notice of such
proposed settlement or admission. Notwithstanding the foregoing, Purchaser may,
at any time, assume the defense thereof (and thereby be deemed to admit its
indemnification obligations hereunder). Sellers are deemed to have provided
Purchaser with notice of that certain Adverse Consequence in that certain
lawsuit styled Castle Holdings, L.L.C., x. Xxxxxx Group International, Inc., and
Kosmas Caribbean Holdings Corporation, Purchaser is deemed to have and
Purchaser's shall be responsible for the fees and expenses of Sellers' separate
co-counsel to the extent incurred necessary due to conflicts on or after the
date of this Agreement.
5. Covenant. Purchaser covenants that it will continue to use all
reasonable efforts to settle subject to the Indemnification Threshold set forth
herein all outstanding obligations to Castle Holdings, L.L.C. and the Xxxxxxxxx
Lenders with the intent of settling all outstanding obligations to the Obligees
within two weeks of the date hereof. Sellers covenant that they will, and will
cause their affiliates to: (i) refrain from having any discussions with any of
Castle Holdings, L.L.C., the Xxxxxxxxx Lenders or their affiliates concerning
any claims that Castle Holdings, L.L.C. or the Xxxxxxxxx Lenders have or may
have against Sellers or Purchaser without the express written consent of
Purchaser, and (ii) refer to Purchaser or its counsel all inquiries or contacts
from Castle Holdings, L.L.C. or the Xxxxxxxxx Lenders to Sellers.
6. Sale of Assets. If, prior to the expiration of the statute of
limitations for Obligees to file any claim for relief in any judicial tribunal,
Purchaser sells all or substantially all of its assets or such portion of its
assets which makes Purchaser's compliance with its indemnification obligations
under this Agreement unlikely (and Purchaser fails to provide Seller with
reasonable comfort of its ability to satisfy its obligations hereunder
thereafter), Purchaser shall either (1) require such liability and obligations
hereunder to be expressly assumed by the buyer of such assets without the
release of Purchaser's liability hereunder, or (ii) deposit cash or a cash
equivalents into an escrow account to be held under commercially reasonable
terms and by an entity mutually-agreeable to the parties.
7. General Provisions.
(a) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, transmitted by
facsimile (receipt confirmed), sent by national overnight courier service, or
mailed by registered or certified United States Mail (return receipt requested)
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, provided that notices
of a change of address shall be effective only on receipt of such notice):
To Sellers:
Kosmas Group International, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxx Xxxx & Xxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esquire
Fax: (000) 000-0000
To Purchaser:
Equivest Finance, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxx X. Xxxxxx, Esquire
Fax: (000) 000-0000
(b) Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement of the parties
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(c) Severability. The validity or enforceability of any term or
provision of this Agreement shall in no way affect the validity or
enforceability of any other term or provision. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
(d) Headings. The headings contained in this Agreement are solely
for reference purposes and shall not affect the meaning or interpretation of
this Agreement in any way.
(e) Governing Law. The parties agree that the laws of the State of
New York will govern the formation, interpretation and enforcement of this
Agreement without giving effect to principles of conflicts of law. The parties
hereby consents to service of process by registered mail delivered in accordance
with the provisions of paragraph 4 of this Agreement, or service of process in
any other legal manner.
(f) Jurisdiction, Venue, and Service of Process. The parties consent
to and waive any objection to the jurisdiction of the United States District
Court for the Northern District of New York, or any state court located in
County, Florida, over the person of any party to this Agreement, for purposes of
any action brought (i) to enforce this Agreement, (ii) to recover damages for
breach of this Agreement, or (iii) to enforce rights provided by this Agreement.
The Parties agree that venue of any action brought as provided herein shall be
proper in the courts named above, and each party waives any objection to such
venue.
(g) Attorneys' Fees. Should any party employ an attorney or
attorneys to enforce any of the provisions of this Agreements or to protect its
interests in any manner arising under this Agreement or to recover damages for
the breach of this Agreement, the prevailing party shall be entitled to recover
from the other party all reasonable costs, charges, and expenses, including
reasonable attorneys' fees, expended or incurred in connection therewith.
(h) Right to Injunctive Relief. Each of the parties hereto agrees
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by him, her or it in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that any
harmed party hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any party is
entitled at law or in equity.
(i) No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any person other than KGI, Sellers or Purchaser, or their respective
successors and assigns as permitted under this Agreement, to any claim, cause of
action, remedy, or right of any kind. No current or former employee of KGI or
any of its affiliates has any right to enforce this agreement against any party.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PURCHASER
EQUIVEST FINANCE, INC.
By:
Its:
Xxxxxxx Xxxxxxx
XXXXXXX
XXXXXX GROUP INTERNATIONAL, INC.
By:
Its:
AVENUE PLAZA, LLC
By:
Its:
OCEAN CITY COCONUT MALORIE RESORT, INC.
By:
Its:
CAPITAL CITY SUITES, INC.
By:
Its:
KOSMAS CARIBBEAN HOLDING CORPORATION
By:
Its:
ST. AUGUSTINE RESORT DEVELOPMENT GROUP, INC.
By:
Its:
Xxxxxx Xxxxxx
Xxxx Xxxxxx
Xxxx Xxxxx
Xxxxxxxx Xxxxxx
