SEPARATION AGREEMENT
Separation Agreement (the "Agreement") dated as of August 31, 1999
between Xxxxx Corporation ("Xxxxx") and Xxxxx Interactive Corporation
("Interactive").
WHEREAS Xxxxx is distributing all of the stock of Interactive to its
shareholders (the "Spin-Off") pursuant to Section 355 of the Code;
WHEREAS, Xxxxx and Interactive want to set forth certain matters
concerning the relationship between the parties after the Spin-Off.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Definitions
1.1 Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" of any Person shall mean another Person that directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, such
first Person; provided however, that for the purposes of this Agreement from and
after the Time of Distribution, no Xxxxx Company shall be deemed to be an
Affiliate of any Interactive Company, and no Interactive Company shall be deemed
to be an Affiliate of any Xxxxx Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Distribution" shall mean the Spin-Off referred to in the
Recitals hereto.
"Former Employees" shall mean all employees of Xxxxx other than its
employee at the Time of Distribution.
"Interactive Assets" shall mean all assets of Interactive and
its Subsidiaries at the Time of Distribution.
"Interactive Businesses" shall mean all of the businesses
conducted at or at any time prior to the Distribution by the Interactive and
persons which are Subsidiaries of Interactive at the Time of the Distribution.
"Interactive Companies" shall mean Interactive and its Subsidiaries
(determined after giving effect to the Distribution).
"Interactive Liabilities" shall mean (i) all Liabilities or portions of
Liabilities arising primarily out of or in connection with the Interactive
Assets or Interactive Businesses; (ii) all Liabilities under contracts included
in the Interactive Assets, whether such Liabilities arise before, upon or after
the transactions contemplated by this Agreement and including any Liabilities
under such contracts resulting from the consummation of the transactions
contemplated by this Agreement (including actions, claims or proceedings
relating thereto); (iii) all Liabilities of Interactive and its Subsidiaries
pursuant to this Agreement; and (iv) all Liabilities for payment of outstanding
drafts and checks of Interactive Businesses existing as of the Time of
Distribution.
"Information" of a party shall mean any and all information
that such party or any of its Representatives whether furnished
orally or in writing or by any other means or gathered by inspection and
regardless of whether the same is specifically marked or designated as
"confidential" or "proprietary," together with any and all notes, memoranda,
analyses, compilations, studies or other documents (whether in hard copy or
electronic media) prepared by the receiving party of any of its Representatives
which contain or otherwise reflect such Information, together with any and all
copies, extracts or other reproductions of any of the same; provided however,
that for the purposes hereof all information relating to the Xxxxx Companies and
the Xxxxx Businesses in the possession of any Interactive Company at the Time of
Distribution shall be deemed to have been furnished by the Xxxxx Companies and
all information relating to the Interactive Companies and the Interactive
Businesses in the possession of any Xxxxx Company at the Time of Distribution
shall be deemed to have been furnished by the Interactive Companies; and further
provided that the term "Information" does not include information that:
(a) is or becomes generally available to the public
through no wrongful act of the receiving party or its
Representatives;
(b) is or becomes available to the receiving party on a
non-confidential basis from a source other than the providing party or its
Representatives, provided that such source is not known by the receiving party
to be subject to a confidentiality agreement with the providing party; or
(c) has been independently acquired or developed by the
receiving party without violation of any of the obligations of the receiving
party or its Representatives under this Agreement.
"IRS" shall mean the United States Internal Revenue Service.
"Liabilities" shall mean any and all debts, liabilities, commitments
and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by generally
accepted accounting principles to be reflected in financial statements or
disclosed in the notes thereto.
"Xxxxx Businesses" shall mean all of the businesses conducted
at any time prior to the Distribution by Xxxxx or its Subsidiaries
which are not Interactive Businesses.
"Xxxxx Companies" shall mean Xxxxx and its Subsidiaries (after giving
effect to the Distribution.
"Xxxxx Liabilities" shall mean (i) all Liabilities or portions of
Liabilities arising primarily out of or in connection with the Xxxxx Assets or
Xxxxx Businesses; (ii) all Liabilities under contracts included in the Xxxxx
Assets, whether such Liabilities arise before, upon or after the transactions
contemplated by this Agreement and including any Liabilities under such
contracts resulting from the consummation of the transactions contemplated by
this Agreement (including actions, claims or proceedings relating thereto);
(iii) all Liabilities of Xxxxx and its Subsidiaries pursuant to this Agreement;
and (iv) all Liabilities for payment of outstanding drafts and checks of Xxxxx
Businesses existing as of the Time of Distribution.
"Person" shall mean any natural person, corporation, general or limited
partnership, limited liability company, joint venture, trust, association or
entity of any kind.
"Representatives" of a party shall mean such party's officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors, consultants and other representatives.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner or (ii) at
least 50% of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization or at
least 50% of the value of the outstanding equity is directly or indirectly owned
or controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income, gross
income, sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital stock, share, production,
business and occupation, disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes.
"Tax Return" shall mean any report, return or other information
required to be supplied to a governmental entity with respect to Taxes.
"Time of Distribution" shall mean the time as of which the
Spin-Off is effective.
ARTICLE II
Tax Matters
2.1 Assumption and Indemnification of Tax Liabilities. The respective
Tax Liabilities of Xxxxx and its Subsidiaries (other than Interactive and its
Subsidiaries) and of Interactive and its Subsidiaries, whether arising before,
at or after the Time of Distribution, will continue to be the Tax liabilities of
each such party, and each party hereto agrees to save, indemnify, defend and
hold harmless the other, its Subsidiaries and each of their respective
directors, officers, employees, agents, successors and assigns from and against
all such Tax liabilities.
2.2 Distribution Taxes. (a) "Distribution Taxes" means Taxes of any
member of the Xxxxx affiliated group (as in existence prior to the Distribution)
resulting from, or arising in connection with, the failure of the Distribution
to be tax-free to such member under Code Sections 355 and 368(a)(1)(D)
(including without limitation by reason of the application of Code Sections
355(d) or (e)).
(b) The members of the Xxxxx Companies shall be liable for any
Distribution Taxes that are primarily attributable to one or more of the
following:
(i) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) with respect to the Xxxxx
Companies (excluding members of the Interactive Companies) in the
Representations;
(ii) any action or omission by the Xxxxx Companies after the
Time of the Distribution, including without limitation, a
cessation, transfer to affiliates or disposition of its active trades or
businesses, or an issuance of stock, stock buyback or payment of an
extraordinary dividend by any member of the Xxxxx Companies following the Time
of the Distribution;
(iii) any acquisition of any stock or assets of any member of
the Xxxxx Companies by one or more other persons prior to or following the Time
of the Distribution; or
(iv) any issuance of stock by the Xxxxx Companies or change in
ownership of stock in the Xxxxx Companies, that causes Code Sections 355(d) or
355(e) to apply to the Time of the Distribution.
(c) The members of the Interactive Companies shall be liable for any
Distribution Taxes that are primarily attributable to one or more of the
following
(i) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) in the Representations that
relates to the Interactive Companies.
(ii) any action or omission by the Interactive Companies after
the date of the Distribution, including without limitation, a cessation,
transfer to affiliates or disposition of its active trades or businesses, or an
issuance of stock, stock buyback or payment of an extraordinary dividend by any
member of the Interactive Companies following the Distribution;
(iii) any acquisition of any stock or assets of any member of
the Interactive Companies by one or more other persons following the
Distribution; or
(iv) any issuance of stock by Interactive Companies, or change
in ownership of stock in Interactive Companies, that causes Code Sections 355(d)
or 355(e) to apply to the Distribution.
(d) The Xxxxx Companies and the Interactive Companies will each bear
their respective share1 of any Distribution Taxes not allocated in Section
2.2(b) or (c).
(d) The provisions of this Section 2.2 shall apply
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1What does this mean?
notwithstanding any other provisions of this Agreement.
2.3 Tax Returns/Cooperation. (a) Xxxxx will be responsible for the
preparation and filing of all Tax Returns with respect to all periods ending on
or before the Time of Distribution. Interactive and its Subsidiaries will be
responsible for the preparation and filing of all other Tax Returns relating to
them or their assets or the Interactive Businesses which are required to be
filed after the Time of Distribution and for the payment of all Taxes shown on
those Tax Returns to be due and all related estimated Taxes payable after the
Time of Distribution.
(b) Each of Xxxxx and Interactive will, and will cause their respective
personnel to, cooperate fully with each other of them in connection with the
preparation and review of Tax Returns and in connection with any examinations of
any Tax Returns filed by either of them or their respective Subsidiaries.
2.4 Indemnification Procedures. (a) Any claim for indemnification under
this Article II shall be made by written notice from the party seeking to be
indemnified (the "Tax Indemnitee") to the party from which indemnification is
sought (the "Tax Indemnifying
Party"). If a Tax Indemnitee becomes aware during an examination of a Tax Return
that the tax authority conducting the examination is considering asserting a Tax
subject to indemnification, the Tax Indemnitee will (i) promptly notify the Tax
Indemnifying Party of this fact, (ii) to the extent reasonably practicable,
segregate the issue from any other issues being examined, (iii) permit the Tax
Indemnifying Party to control the Tax examination insofar as it relates to that
issue and any administrative or judicial appeals relating to the issue
(including whether to settle the issue or to appeal from an adverse
determination with regard to the issue) and (iv) cooperate with the Tax
Indemnifying Party in all reasonable respects to establish that such Tax is not
due and payable.
(b) Upon a determination that a Tax Indemnifying Party is liable for a
payment of Taxes to a Tax Indemnitee, the Tax Indemnifying Party shall pay the
Tax Indemnitee such Taxes. Such payment will be made on an after-Tax basis
promptly following the submission by the Tax Indemnitee of written evidence of
the payment of indemnified Tax.
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ARTICLE III
Payment of Liabilities
3.1 Payment of Liabilities. From and after the Time of Distribution, (i)
Interactive shall indemnify Xxxxx and its Representatives with respect to any
claims relating to Interactive Businesses, Interactive Companies or Interactive
Liabilities, and (ii) Xxxxx shall indemnify Interactive and its Representatives
with respect to any claims relating to Xxxxx Businesses, Xxxxx Companies or
Xxxxx Liabilities.
ARTICLE IV
Other Agreements
4.1 Use of Names. Interactive shall have all rights in and use of the
name Xxxxx Interactive Corporation, Xxxxx Telephone Corporation, Xxxxx
Multimedia Corporation, Xxxxx Capital Corporation and all derivatives thereof
and Xxxxx shall have all rights in and use of the name Xxxxx Corporation, Xxxxx
Manufacturing Corporation, Xxxxx Display Technology, Inc., Xxxxx Systems, Inc.
and all derivatives thereof.
4.2 Books and Records. Prior to or as promptly as practicable after the
Time of Distribution, Xxxxx shall deliver to Interactive all corporate books and
records of the Interactive Companies in the possession of Xxxxx and the relevant
portions (or copies thereof) of all corporate books and records of Xxxxx
relating directly and primarily to the Interactive Companies, the Interactive
Businesses or the Interactive Liabilities, including, in each case, all
agreements, litigation files and government filings. From and after the Time of
Distribution, all such books, records and copies shall be the property of
Interactive. Xxxxx may retain copies of all such corporate books and records.
4.3 Access to Information. Upon reasonable notice, each party shall,
and shall cause its Subsidiaries to, afford to Representatives of the other
reasonable access, during normal business hours throughout the period prior to
and following the Time of Distribution, to all of its properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
and, during such period, each party shall, and hall cause its Subsidiaries to,
furnish promptly to the other (i) access to each report, schedule and other
document filed or received by it or any of its Subsidiaries pursuant to the
requirements of federal or
state securities laws or filed with or sent to the United States Securities and
Exchange Commission or any other federal or state regulatory agency or
commission and (ii) access to all information concerning themselves, their
Subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably requested by the other party in connection with any filings,
applications or approvals required or contemplated by this Agreement or for any
other reason related to the transactions contemplated by this Agreement;
provided, however, that the foregoing shall apply to Interactive and the
Interactive Companies only with respect to information and access necessary to
or required by Xxxxx in preparation of Tax Returns. Nothing in this Section 4.3
shall require the parties to take any action or furnish any access or
information which would cause or could reasonably be expected to cause the
waiver of any applicable attorney client privilege. In addition, nothing herein
shall require the parties to provide information other than with respect to
itself and its Subsidiaries, or the conduct of their businesses. Each of Xxxxx
and Interactive shall provide to the other copies of all documents filed with
the Securities and Exchange Commission pursuant to the periodic and interim
reporting requirement of the Securities Exchange Act of 1934, as amended.
4.4 Retention of Records. If any information relating to the
businesses, assets or liabilities of a Xxxxx Company or Interactive Company is
retained by a Interactive Company or Xxxxx Company, respectively, each of the
Xxxxx and Interactive shall, and shall cause the other Xxxxx Companies and
Interactive Companies, respectively, to retain all such information in the Xxxxx
Companies' or Interactive Companies' possession or under its control until such
information is at least ten years old except that if, prior to the expiration of
such period, any Xxxxx Company or Interactive Company wishes to destroy or
dispose of any such information that is at least three years old, prior to
destroying or disposing of any of such information, (a) Xxxxx or Interactive, on
behalf of the Xxxxx Company or the Interactive Company that is proposing to
dispose of or destroy any such information, shall provide no less than 45 days'
prior written notice to the other party, specifying the information proposed to
be destroyed or disposed of, and (b) if, prior to the scheduled date of such
destruction or disposal, the other party requests in writing that any of the
information proposed to be destroyed or disposed of be delivered to such other
party, Xxxxx or Interactive, as applicable, promptly shall arrange for the
delivery of the requested information to a location specified by, and at the
expense of, the
requesting party.
4.5 Confidentiality. (a) Each party hereto shall keep, and shall cause
its Representatives to keep, the other party's Information strictly confidential
and will disclose such Information only to such of its Representatives who need
to know such Information and who agree to be bound by this Section 4.5 and not
to disclose such Information to any other Person. Without the prior written
consent of the other party, neither party nor any of their respective
Representatives shall disclose the other party's Information to any Person or
entity except as may be required by law or judicial process and in accordance
with this Section 4.5.
(b) In the event that either party or any of its Representatives
receives a request or is required by law or judicial process to disclose to a
court or other tribunal all or any part of the other party's Information, the
receiving party or its Representatives shall promptly notify the other party of
the request in writing, and consult with and assist the other party in seeking a
protective order or request for other appropriate remedy. In the event that such
protective order or other remedy is not obtained or the other party waives
compliance with the terms
hereof, such receiving party or its Representatives, as the case may be, shall
disclose only that portion of the Information or facts which, in the written
opinion of the receiving party's outside counsel, is legally required to be
disclosed, and will exercise its respective reasonable best efforts to assure
that confidential treatment will be accorded such Information or facts by the
Persons or entities receiving the same. The providing party will be given an
opportunity to review the Information or facts prior to disclosure.
4.6 Further Assurances. Each of the parties hereto, at its own cost and
expense, promptly shall, or shall cause its Subsidiaries to, execute such
documents (the "Transaction Documents") and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
4.7 Cooperation. The parties shall cooperate with each other in all
reasonable respects to ensure that the transactions contemplated herein are
carried out in accordance with their terms.
4.8 No Representations as to Interactive Assets. INTERACTIVE
AGREES THAT THE TRANSFER BY XXXXX TO INTERACTIVE OF THE INTERACTIVE ASSETS AND
THE INTERACTIVE BUSINESSES IS ON AN "AS IS, WHERE IS" BASIS, AND NO
REPRESENTATIONS OR WARRANTIES ARE BEING MADE BY XXXXX WITH RESPECT THERETO.
4.9 Rent, Furniture, Equipment, etc. Interactive shall be added with
Xxxxx to the lease for the premises at 000 Xxxxxxxx Xxxxx Xxxxxx, Xxx, XX and,
to the extent feasible, substituted on any leased office equipment. Interactive
shall bear the cost of such leases, which costs may be deemed to be General
Overhead Expenses under Article VII. All furniture, office equipment and
supplies and related property owned by Xxxxx at the Time of Distribution and
located at the Rye, NY premises, shall become the property of Interactive
without payment to Xxxxx.
4.10 Spinnaker Stock. If Interactive wants to make a public offering of
its Spinnaker Industries, Inc. stock, Xxxxx will use reasonable efforts to cause
Spinnaker to register one time, at Interactive's expense, all or a portion of
such stock in a timely manner under the Securities Act and any related state
securities laws. In addition, Xxxxx will use reasonable efforts to permit
Interactive, without cost to Interactive, to piggy-back on any
other registration statements filed by Spinnaker (including for continuous
offering), provided, in Spinnaker's opinion, such piggyback rights do not
interfere with the other offering.
4.11 Transaction Expenses. Except as otherwise agreed between the
parties, all out-of-pocket expenses related to the Spin-Off shall be divided
equally between Xxxxx and Interactive.
ARTICLE V
Indemnification and Releases
5.1 Mutual Release. Effective as of the Time of Distribution and except
as otherwise specifically set forth in this Agreement, each of Xxxxx, on the one
hand, and Interactive, on the other hand, releases and forever discharges the
other and its affiliates, and its and their directors, officers, employees and
agents of and from all debts, demands, actions, causes of action, suits,
accounts, covenants, contracts, agreements, damages, and any and all claims,
demands and liabilities whatsoever of every name and nature, both in law and in
equity, against such other party or any of its assigns, which the releasing
party has or ever had, which arise out
of or relate to events, circumstances or actions taken by such other party prior
to the Time of Distribution; provided, however, that the foregoing general
release shall not apply to this Agreement, or the transactions contemplated
hereby and shall not affect either party's right to enforce this Agreement or
any other agreement contemplated hereby in accordance with its terms. Each party
understands and agrees that, except as otherwise specifically provided herein,
neither the other party nor any of its Subsidiaries is, in this Agreement or any
other agreement or document, representing or warranting to such party in any way
as to the assets, business or Liabilities transferred or assumed as contemplated
hereby or thereby or as to any consents or approvals required in connection with
the consummation of the transactions contemplated by this Agreement.
5.2 Indemnification by Xxxxx. Xxxxx shall indemnify, defend and hold
harmless Interactive and any of its Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates, and each of the heirs,
executors, successors and assigns of any of the foregoing (the Interactive
Indemnities") from and against the Xxxxx Liabilities and any and all losses,
Liabilities and damages, including the costs and expenses of any
and all actions, threatened actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such actions or threatened actions (collectively, "Interactive
Indemnifiable Losses" ad, individually, a "Interactive Indemnifiable Loss") of
the Interactive Indemnitees arising out of or due to the failure or alleged
failure of Xxxxx or any of its Subsidiaries to pay, perform or otherwise
discharge in due course any of the Xxxxx Liabilities.
5.3 Indemnification by Interactive. Interactive shall indemnify, defend
and hold harmless Xxxxx and each of its Subsidiaries, and each of their
directors, officers, employees, agents and Liabilities and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Xxxxx
Indemnitees") from and against the Interactive Liabilities and any and all
losses, Liabilities and damages, including the costs and expenses of any and all
actions, threatened actions, demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such
actions or threatened actions (collectively, "Xxxxx Indemnifiable Losses" and,
individually, a Xxxxx Indemnifiable Loss") of the Xxxxx Indemnitees arising out
of or due to the failure or alleged failure of Interactive or any of its
Affiliates to pay, perform or otherwise discharge in due course any of the
Interactive Liabilities. The "Interactive Indemnifiable Losses" and the Xxxxx
Indemnifiable Losses" are collectively referred to as the "Indemnifiable
Losses."
5.4 Insurance Proceeds, Tax Benefits; Mitigation. The amount which any
party (an "Indemnifying Party") is or may be required to pay to any other Person
(an "Intemnitee") pursuant to Sections 5.2 or 5.3 shall be reduced (including
retroactively) by (i) any insurance proceeds or other amounts actually recovered
by or on behalf of such Indemnitee in reduction of the related Indemnifiable
Loss and (ii) any Tax benefits realized or realizable by such Indemnitee based
on the present value thereof by reason of such loss and shall be increased by
any Tax liability incurred by such Indemnitee based on such indemnity payment.
If an Indemnitee shall have received the payment required by this Agreement from
an Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently
actually receive insurance proceeds, Tax benefits or
other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such insurance proceeds, Tax benefits or other amounts actually received. The
Indemnitee shall take all reasonable steps to mitigate all Losses, including
availing itself of any defenses, limitations, rights of contribution, claims
against third parties and other rights at law (it being understood that any
out-of-pocket costs paid to third parties in connection with such mitigation
shall constitute Losses), and shall provide such evidence and documentation of
the nature and extent of any Loss as may be reasonably requested by the
Indemnifying Party.
5.5 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including any governmental entity) who is not a party to
this Agreement or to any of the Transaction Documents of any claim or of the
commencement by any such Person of any action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Idemnitee shall give such
Indemnifying party written notice thereof promptly after becoming
aware of such Third-Party Claim; provided, however, that the failure of any
Indemnitee to give notice as required by this Section 5.5 shall not relieve the
Indemnifying Party of its obligations under this Article V, except to the extent
that such Indemnifying Party is prejudiced by such failure to give notice. Such
notice shall describe the Third-Party Claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the Indemnifiable Loss that has
been or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel reasonably acceptable to the Indemnitee, any Third-Party
Claim, provided that the Indemnifying Party must confirm in writing that it
agrees that the Indemnitee is entitled to indemnification hereunder in respect
of such Third-Party Claim. Within 30 days of the receipt of notice from an
Indemnitee in accordance with Section 5.5(a) (or sooner, if the nature of such
Third-Party Claim so requires), the Indemnifying Party shall notify the
Indemnitee of its election whether to assume responsibility for such Third-Party
Claim (provided that if the Indemnifying Party does not so notify the Indemnitee
of its
election within 30 days after receipt of such notice from the Indemnitee, the
Indemnifying Party shall be deemed to have elected not to assume responsibility
for such Third-Party Claim), and such Indemnitee shall cooperate in the defense
or settlement or compromise of such Third-Party Claim. After notice from an
Indemnifying Party to an Indemnitee of its election to assume responsibility for
a Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article V for any legal or other expenses (except expenses
approved in advance by the Indemnifying Party) subsequently incurred by such
Indemnitee in connection with the defense thereof; provided, however, that if
the defendants in any such claim include both the Indemnifying Party and one or
more Indemnitees and in such Indemnitees' reasonable judgment there exists a
conflict of interest between such Indemnitees and the Indemnifying Party such
Indenmitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered
under Section 5.2 or 5.3, as the case may be) such Indemnitee may defend or
(subject to the following sentence) seek to compromise or settle such
Third-Party Claim without prior written notice to the Indemnifying Party, which
shall have the option within fifteen days following the receipt of such notice
(i) to disapprove the settlement and assume all past and future responsibility
for the claim, including reimbursing the Indemnitee for prior expenditures in
connection with the claim, or (ii) to disapprove the settlement and continue to
refrain from participation in the defense of the claim, in which event the
Indemnifying Party shall have no further right to contest the amount or
reasonableness of the settlement if the Indemnitee elects to proceed therewith,
or (iii) to approve the amount of the settlement, reserving the Indemnifying
Party's right to contest the Indemnitee's right to indemnity, or (iv) to approve
and agree to pay the settlement. In the vent the Indemnifying Party makes no
response to such written notice from the Indemnitee, the Indemnifying Party
shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnitee shall make available to such Indemnifying
Party any personnel and any books, records or other documents within its control
or which it otherwise
has the ability to make available that are necessary or appropriate
for such defense.
(d) Notwithstanding anything else in this Section 5.5 to the contrary,
an Indemnifying Party shall not settle or compromise any Third-Party Claim
unless (i) such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim and (ii) such
settlement does not provide for any non-monetary relief by Indemnitee unless
Indemnitee consents thereto. In the event the Indemnitee shall notify the
Indemnifying Party in writing that such Indemnitee declines to accept any such
settlement or compromise, such Indemnitee may continue to contest such
Third-Party Claim free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such ThirdParty Claim shall be equal to
(i) the costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of such offer of settlement or
compromise (to the extent such costs and expenses are otherwise indemnifiable
hereunder) plus (ii) the less of (A) the amount of any offer of settlement or
compromise which such Indemnitee declined to accept and (B) the actual
out-of-pocket amount such Indemnitee is obligated to pay subsequent to such date
as a result of such Indemnitee's continuing to pursue such Third-Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days after the receipt of such notice within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement, the Merger Agreement or the
Indemnification Agreement.
(f) In addition to any adjustments required pursuant to Section 5.4, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such
reduction, less any expenses incurred in connection therewith, shall promptly be
repaid by the Indemnitee to the Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
5.6 Remedies Cumulative. The remedies provided in this Article V shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
5.7 Survival of Indemnities. The obligations of each of Interactive and
Xxxxx under this Article V shall survive the sale
or other transfer by it of any assets or businesses or the assignment by it of
any Liabilities, with respect to any Indemnifiable Loss of the other related to
such assets, businesses or Liabilities.
5.8 Tax Matters. Notwithstanding anything to the contrary in this
Article V, any claim for indemnification with respect to any Liabilities which
are Tax liabilities of Xxxxx and Interactive shall be governed by the terms and
provisions of Article II hereof.
ARTICLE VI
Employee Matters
6.1 Employees. Immediately prior to, and subject to, the Distribution,
Xxxxx shall transfer to Interactive all of the employees of Xxxxx, so that no
such employee who becomes employed by Interactive experiences any termination or
other interruption in employment. The employees who become employees of
Interactive upon the Distribution shall not be employees of Xxxxx or any
Subsidiary of Xxxxx after the Time of Distribution, except as otherwise agreed
to in writing by the parties. Nothing contained in this Section
6.1 shall confer on any Xxxxx or any Interactive employee any right to continued
employment after the Time of Distribution, and such employees shall continue to
be employed "at-will." At and from the Time of Distribution, except as set forth
in this Article VI, (i) Interactive shall assume all obligations relating to all
employees transferred thereto arising on or after the Time of Distribution (with
Xxxxx retaining all obligations relating to all employees transferred to
Interactive arising prior to the Time of Distribution except as contemplated
herein), including all obligations or liabilities relating to employee benefits,
health insurance and severance, if any, and (ii) Xxxxx shall retain all
obligations relating to Former Employees, including all obligations or
liabilities relating to employee benefits or health insurance.
6.2 Employee Benefits. Without limiting the generality of
Section 6.1 above:
(a) Accrued Vacation. Xxxxx and Interactive agree that all accrued
vacation for Xxxxx Employees on and after the Time of Distribution shall be
Interactive's obligation.
(b) 401(k) Plan. The Xxxxx Corporation 401(k) Plan (the
"401(k) Plan") shall remain the plan and obligation of Xxxxx after the
Distribution. After the Distribution, Interactive shall be a participating
employer in the 401(k) Plan, and Interactive employees shall remain participants
in the 401(k) Plan until such time as Interactive determines otherwise. If and
when Interactive wants to remove its employees from the 401(k) Plan, the parties
will cooperate to accomplish that.
(c) Welfare Plans. Immediately prior to, and subject to, the
Distribution, Interactive shall assume all Xxxxx employee benefit plans that are
employee welfare benefit plans, as defined in Section 3(1) of ERISA (the
"Existing Welfare Plans") but Xxxxx shall reimburse Interactive for the costs of
any Former Employees, if any.
(d) Phantom Stock Plan. With respect to the 43,000 units outstanding
under Xxxxx'x Phantom Stock Plan, each representing one share of Xxxxx stock
outstanding at the Time of the Distribution, the units will be divided into two
units, one representing one share of Interactive stock and one representing one
share of Xxxxx stock. The original unit xxxxx xxxxx will be divided between the
two new units based upon the average relative market price of
Interactive stock versus Xxxxx stock for the five trading days beginning on the
eleventh trading day after the Time of the Distribution. Each of Interactive and
Xxxxx will bear its own cost of the divided units.
(e) 1999 Bonus Plan. Bonuses for corporate headquarters employees in
1999 are expected to be determined under Xxxxx'x bonus plans as if the
Distribution had not occurred, and Interactive is expected to bear its
appropriate share of the cost based upon relative profitability, accomplishments
and other factors. Beginning in 2000, each of Interactive and Xxxxx will
determine their own bonuses for corporate office staff and bear the cost
thereof.
ARTICLE VII
Provision of Management Services to Xxxxx
7.1 Provision of Services. Commencing at the Time of the Distribution,
Interactive shall provide general corporate management services (the "Services")
to Xxxxx, which may include, but not be limited to, operations, supervision of
operating
subsidiaries, strategic planning, acquisition analysis, investment banking and
financial advisory services, supervision of the preparation of corporate tax
returns, and supervision of financial reporting and other regulatory matters
applicable to a public company. In providing the Services, Interactive may
employ consultants and other advisers at its discretion, in addition to
utilizing its own employees. Such Services are intended to be generally
comparable in type and quantity to that which the transferred employees provided
to Xxxxx prior to the Time of the Distribution. Either party may terminate for
any reason such Services upon 30 days written notice by Xxxxx to Interactive or
60 days written notice from Interactive to Xxxxx. Provision of Services
hereunder shall terminate no later than the third anniversary of the Time of
Distribution.
7.2 Payment. All out-of-pocket expenses related specifically to the
provision of services to Xxxxx, including without limitation outside counsel,
auditors, and tax advisors expenses, shall be charged to and paid promptly by
Xxxxx. In addition, Xxxxx shall pay to Interactive initially 25% of the General
Overhead Expense (employee expense (other than bonus and phantom stock plan
expense), rent, general airplane expense, business equipment and
supplies and other non-specifically chargeable expenses)2. Such amounts shall be
paid monthly. Either party may change the percentage of the General Overhead
Expense to be borne by Xxxxx to reflect changing time estimates or other factors
determined to be relevant at the time, by 60 days written notice to the other,
or such shorter period as both parties shall agree to.
7.3 (a) DISCLAIMER OF WARRANTIES. INTERACTIVE DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SERVICES. INTERACTIVE MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY,
SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE.
(b) Limitations of Liability/Indemnification of Xxxxx.
Interactive shall have no Liability to Xxxxx with respect to its furnishing any
of the Services hereunder except for liabilities arising out of willful
misconduct occurring after the Time of Distribution of Interactive. Interactive
will indemnify, defend and hold harmless Xxxxx'x Indemnities in respect of all
liabilities
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related to, arising from, asserted against or associated with such willful
misconduct. Such indemnification obligation shall be a liability of Interactive
and the provisions of Article with respect to indemnification shall govern with
respect thereto. In no event shall Interactive have any liability for any
incidental, indirect, special or consequential damages, whether or not caused by
or resulting from negligence or breach of obligations hereunder and whether or
not endorsed of the possibility of the existence of such damages.
(c) Limitation of Liability; Indemnification of Interactive.
Xxxxx shall indemnify and hold harmless Interactive Indemnities in respect of
all liabilities related to, arising from, asserted against or associated with
Interactive's furnishing or failing to furnish the Services provided for in this
Agreement, other than liabilities arising out of the willful misconduct of
Interactive following the Closing Date of Interactive. Such indemnification
obligation shall be a liability of Xxxxx, and the provisions of Article V with
respect to indemnification shall govern with respect thereto. In no event shall
Xxxxx have any liability for any incidental, indirect, special or consequential
damages, whether or not caused by or resulting from negligence or
breach of obligations hereunder and whether or not informed of the
possibility of the existence of such damages.
(d) Subrogation of Rights Vis-A-Vis Third Party Contractors.
In the event any liability arises from the performance of Services hereunder by
a third party contractor, Xxxxx shall be subrogated to such rights, if any, as
Interactive may have against such third party contractor with respect to the
Services provided by such third party contractor to or on behalf of Xxxxx.
(e) Taxes. Xxxxx shall bear all taxes, duties and other
similar charges (and any related interest and penalties), imposed as a result of
its receipt of Services under this Agreement, including any tax which Xxxxx is
required to withhold or deduct from payments to Interactive, except (a) any tax
allowable at a credit against the U.S. Federal income tax of Interactive, and
(b) any net income tax imposed upon Interactive by the country of its
incorporation or any governmental entity within its country of incorporation. To
assist Interactive in obtaining the credit identified is subsection (b) of this
Section (v), Xxxxx shall furnish Interactive with such evidence as may be
required by the
relevant taxing authorities to establish that any such tax has been
paid.
(f) Laws and Governmental Regulations. Xxxxx shall be
responsible for (i) compliance with all laws and governmental regulations
effecting its business and (ii) any use Xxxxx may make of the Services to assist
it in complying with such laws and governmental regulations.
(g) Relationship of Parties. Nothing in this Agreement shall
be deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no actions of the parties, shall be deemed to create any relationship between
the parties other than the relationship of independent contractor nor be deemed
to vest any rights, interest or claims in any third parties.
ARTICLE VIII
Miscellaneous and General
8.1 Non-Arms Length. EACH OF THE PARTIES HERETO RECOGNIZES AND AGREES
THAT THIS AGREEMENT AND CERTAIN DECISIONS AND/OR ACTIONS WHICH MAY BE MADE OR
TAKEN PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT AND/OR OTHER AGREEMENTS,
ARRANGEMENTS OR RELATIONS HAVE NOT BEEN OR MAY NOT IN THE FUTURE BE THE RESULT
OF ARMS-LENGTH NEGOTIATIONS, AND AS A RESULT MAY BE MORE OR LESS FAVORABLE TO
ONE PARTY OR THE OTHER THAN MIGHT OTHERWISE RESULT.
8.2 Modification or Amendment. The parties hereto may modify or amend
this Agreement by written agreement executed ad delivered by authorized officers
of the respective parties.
8.3 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart being
deemed to be an original instrument, ad which counterparts shall together
constitute the same agreement.
8.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to its
conflicts of law principles.
8.5 Notices. Any notice, request, instruction or other
document to be given hereunder by any party to the other shall be in writing and
shall be deemed to have been duly given (i) on the date of delivery if delivered
by facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other next-day courier service, or (iii) on the third business day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
If to Xxxxx:
Xxxxx Manufacturing Corporation
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, XX 00000
Attn: Chief Financial Officer
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
If to Interactive to:
Xxxxx Interactive Corporation
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, XX 00000
Attn: Chief Financial Officer
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
8.6 Captions. All Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.7 No Third Party Beneficiary. This Agreement is for the purpose of
defining the respective rights and obligations of the parties hereto and is not
for the benefit of any employee, creditor or other third party, except as may be
expressly set forth herein.
8.8 Successors and Assigns. No party to this Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party hereto in its
sole and absolute discretion. Any such conveyance, assignment or transfer
without the express written consent of the other party shall be void ab initio.
No assignment of this Agreement or any rights hereunder shall relieve the
assigning party of its obligations hereunder. Any successor by merger to a party
to this Agreement shall be substituted for such party as a party to this
Agreement, and all obligations, duties and liabilities of the substituted party
under this Agreement shall continue in full force and effect as
obligations, duties and liabilities of the substituting party, enforceable
against the substituting party as a principal, as though no substitution had
been made.
8.9 Certain Obligations. Whenever this Agreement requires any of the
Subsidiaries of any party to take any action, this Agreement will be deemed to
include an undertaking on the part of such party to cause such Subsidiary to
take such action.
8.10 Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are or are to be thereby aggrieved shall
have the right of specific performance and injunctive relief giving effect to
its or their rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
8.11 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined to be invalid,
void or unenforceable, the remaining provisions hereof, or the application of
such provision to Persons or circumstances other than those remaining provisions
hereof, or the application of such provision to Persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon any such determination, the parties shall negotiate in good faith in
an effort to agree upon a suitable and equitable substitute provision to effect
the original intent of the parties.
8.12 Arbitration. any dispute with respect to this Agreement shall be
arbitrated in New York City or Westchester County, NY in accordance with the
rules of the American Arbitration Association.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
XXXXX CORPORATION
By:
Name:
Title:
XXXXX INTERACTIVE CORPORATION
By:
Name:
Title
