EXHIBIT 10.41
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of
the 20th day of February, 1998, by and among HI-RISE RECYCLING SYSTEMS, INC., a
Florida corporation ("Hi-Rise"), HS ACQUISITION CORP., a Florida corporation
wholly-owned by Hi-Rise ("Hesco Merger Sub"), AM ACQUISITION CORP., a Florida
corporation wholly-owned by Hi-Rise ("Atlantic Maintenance Merger Sub," and
together with Hi-Rise and Hesco Merger Sub, the "Hi-Rise Affiliates"), HESCO
SALES, INC. ("Hesco"), ATLANTIC MAINTENANCE OF MIAMI, INC. ("Atlantic
Maintenance"), and XXXXXX XXXXXX (the "Shareholder," and together with Hesco and
Atlantic Maintenance, the "Hesco Affiliates").
W I T N E S S E T H
WHEREAS, Parent, Hesco Merger Sub, Hesco and the Shareholder are
parties to an Agreement and Plan of Merger, dated as of February 11, 1998, (the
"Hesco Merger Agreement"), a copy of which is attached hereto as Exhibit "A";
and
WHEREAS, Parent, Atlantic Maintenance Merger Sub, Atlantic Maintenance
and the Shareholder are parties to an Agreement and Plan of Merger, dated as of
February 11, 1998 (the "Atlantic Maintenance Merger Agreement," and together
with the Hesco Merger Agreement, the "Merger Agreements"), a copy of which is
attached hereto as Exhibit "B"; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Merger Agreements that the Hesco Affiliates, on
the one hand, and the Hi-Rise Affiliates, on the other hand, execute and deliver
this Agreement, and the execution and delivery hereof by all of such parties is
a material inducement to the consummation of the transactions contemplated by
the Merger Agreements;
NOW, THEREFORE, in consideration of the premises and the mutual
benefits to be derived from this Agreement and the Merger Agreements, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INDEMNITY.
(a) Upon the terms and subject to the limitations and conditions
set forth herein, the Hesco Affiliates, jointly and severally, hereby agree to
indemnify and defend and hold harmless the Hi-Rise Affiliates against and with
respect to any and all damages, claims, losses, penalties, liabilities, actions,
fines, costs and expenses (including, without limitation, reasonable attorney's
fees and expenses) (all of the foregoing hereinafter collectively referred to as
a "Loss" or "Losses"), regardless of whether an action has been filed or
asserted against any of the Hi-Rise Affiliates after the
Closing Date (as defined in the Merger Agreements), arising from, in connection
with or with respect to the following items: (i) (A) any misrepresentation or
breach of warranty by any of the Hesco Affiliates under the Merger Agreements or
any Related Agreement (as defined in the Merger Agreements), or (B) any failure
to fulfill any agreement or covenant on the part of the Hesco Affiliates
contained in the Merger Agreements or any Related Agreement; and (ii) any and
all actions, suits, proceedings, judgments, settlements (to the extent approved
or entered into by any of the Hesco Affiliates as hereinafter provided), costs,
penalties and legal and other expenses incident to any of the foregoing.
(b) Upon the terms and subject to the limitations and conditions
set forth herein, the Hi-Rise Affiliates, jointly and severally, hereby agree to
indemnify and defend and hold harmless the Hesco Affiliates against and with
respect to any and all Losses, regardless of whether an action has been filed or
asserted against the Hesco Affiliates after the Closing Date, arising from, in
connection with or with respect to the following items: (i) (A) any
misrepresentation, breach of any warranty, or failure to fulfill any agreement
or covenant on the part of the Hi-Rise Affiliates under the Merger Agreements or
any Related Agreement, or (B) any failure to fulfill any agreement or covenant
on the part of the Hi-Rise Affiliates contained in the Merger Agreements or any
Related Agreement; and (ii) any and all actions, suits, proceedings, judgments,
settlements (to the extent approved or entered into by the Hi-Rise Affiliates as
hereinafter provided), costs, penalties and legal and other expenses incident to
any of the foregoing.
(c) Any claim for indemnification under this Agreement may only be
asserted by written notice by a date which is no more than one (1) year
following the Closing Date, except that (i) any claim based upon a breach by the
Hesco Affiliates of the representations and warranties contained in the Merger
Agreements relating to Taxes and environmental compliance may be asserted until
the applicable statute of limitations shall have expired, (ii) any claim based
upon a claim relating to fraud may be asserted with no such time limitation. Any
claim for indemnification must state specifically the provision of the Merger
Agreements with respect to which the claim is made, the facts giving rise to an
alleged basis for such claim and, if then determinable, the amount of such
Losses by reasons thereof.
(d) If any action or proceeding shall be commenced, or if any
claim, demand or assessment shall be asserted, in respect of which any party
("Indemnitee") proposes to hold any other party ("Indemnitor") liable under this
Agreement (a "Claim"), then if the Indemnitor, at its option, acknowledges that
the Claim is, in whole or in part, subject to the Indemnitor's indemnification
obligations and notifies Indemnitee of its election to contest or defend any
such Claim, such Indemnitor shall be entitled, at its sole cost and expense, to
contest or defend the same with counsel of its own choosing, and Indemnitee
shall not admit any liability with respect thereto or settle, compromise, pay or
discharge the same without the prior written consent of the Indemnitor so long
as any Indemnitor is contesting or defending the same in good faith, and
Indemnitee (and its successors and assigns) shall cooperate with the Indemnitor
in the contest or defense
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thereof (and the Indemnitor shall reimburse Indemnitee for the Indemnitee's
reasonable actual out-of-pocket expenses incurred in connection with such
cooperation) and Indemnitee shall enter into any settlement with respect thereto
recommended by Indemnitor so long as the amount of such settlement is paid by
the Indemnitor and no obligation to perform or refrain from performing any
material act shall be imposed upon Indemnitee by reason thereof and such
settlement otherwise is reasonable.
(e) Notwithstanding the foregoing, any Indemnitee shall be
entitled to conduct its own defense at the reasonable cost and expense of the
Indemnitor if not doing so would materially prejudice the Indemnitee due to the
nature of any claims or counterclaims presented or by virtue of a conflict
between the interest of the Indemnitee and the Indemnitor, and provided further
that in any event the Indemnitee may participate in such defense at its own
expense. If Indemnitee shall have given Indemnitor at least thirty (30) days
prior written notice that it intends to assume the defense of any Claim and if
the Indemnitor fails to assume the defense of such Claim as provided above by
the end of such thirty (30) day period or such later reasonable time (which
shall be such period of time as will not result in prejudice to the rights of
the Indemnitee), then the Indemnitee shall have the right to prosecute and
conduct its own defense by counsel of its choice, and in connection therewith
shall have full right to conduct the defense thereof and to enter into any
compromise or settlement thereof with the consent of the Indemnitor (which shall
not unreasonably be withheld, conditioned or delayed). Such defense shall be at
the cost and expense of the Indemnitor if it is subsequently determined that the
Indemnitor was obligated to defend or indemnify the Indemnitee with respect to
such action, proceeding, claim, demand or assessment.
2. LIMITATIONS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the Hesco Affiliates shall have no obligation to indemnify the
Hi-Rise Affiliates hereunder:
(i) unless, with respect to matters unrelated to Taxes (as
defined in the Merger Agreements), the aggregate amount of Losses incurred by
the Hi-Rise Affiliates to which the Hi-Rise Affiliates have the right to be
indemnified under this Agreement exceeds $250,000 (and then from the first
dollar of such Losses) (the "Hesco Basket"); and
(ii) with respect to matters related to Taxes (including, but
not limited to penalties and interest), unless and only to the extent the
aggregate amount of Losses incurred by the Hi-Rise Affiliates to which the
Hi-Rise Affiliates have the right to be indemnified hereunder exceeds $350,000
without giving effect to the Hesco Basket (the "Hesco Tax Basket"); PROVIDED,
HOWEVER, that the Hesco Tax Basket shall be inapplicable with respect to (A)
Losses arising from Taxes directly attributable to the disallowance of
deductions claimed by the Hesco Affiliates which are determined by applicable
taxing authorities to be expenses of or benefiting the Shareholder and/or (B)
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Losses arising from Taxes directly attributable to the underreporting of gross
income of the Hesco Affiliates as determined by applicable taxing authorities;
and
(iii) for any amount of Losses in excess of $4,500,000, it
being understood that the sole recourse of the Hi-Rise Affiliates to recover
such $4,500,000 shall be to (i) $1,000,000 cash and (b) the shares of the common
stock, par value $.01, of Hi-Rise received by the Shareholder pursuant to the
terms of the Merger Agreements (and the proceeds thereof) (the "Hesco Cap");
PROVIDED, HOWEVER, the Hesco Basket, the Hesco Tax Basket and the Hesco Cap
shall not apply to any Losses relating to the breach of any representation
and/or warranty contained in the Merger Agreements relating to (i) the ownership
of the capital stock of Hesco and its subsidiaries and Atlantic Maintenance and
(ii) environmental liabilities; PROVIDED FURTHER, HOWEVER, the Hesco Cap shall
not apply to Losses relating to the breach of any representation and/or warranty
contained in the Merger Agreement relating to Taxes.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Hi-Rise Affiliates shall have no obligation to indemnify the
Hesco Affiliates hereunder:
(i) unless the aggregate amount of Losses incurred by the
Hesco Affiliates to which the Hesco Affiliates have the right to be indemnified
under this Agreement exceeds $ 250,000 (and then from the first dollar of such
Losses) (the "Hi-Rise Basket"); and
(ii) for any amount of Losses in excess of $4,500,000 (the
"Hi-Rise Cap").
(d) Notwithstanding anything to the contrary contained herein, no
party shall be liable for incidental, consequential, exemplary, punitive or
similar damages in connection herewith.
(e) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, absent fraud including, without limitation,
misrepresentations which are clearly shown to be made with the intent to
deceive, the remedies of the parties under this Agreement and the Merger
Agreements with respect to breaches of representations and warranties shall be
strictly limited to those contained in Section 1 hereof, and except for
equitable remedies such indemnification obligations shall be the sole and
exclusive remedies of the parties subsequent to the Closing Date with respect to
any matter relating to this Agreement or the Merger Agreements.
(f) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, Losses shall be calculated after giving effect to any
insurance benefits or tax benefits actually realized in respect of the Losses
for which indemnification payments are sought.
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(g) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, none of the Hi-Rise Affiliates shall have any right of
set-off with respect to any obligations to any of the Hesco Affiliates.
3. AMENDMENT; WAIVER. This Agreement may not be amended or modified in
any respect, except by the mutual written agreement of the parties hereto. No
provision of this Agreement may be modified, waived, or discharged unless such
waiver, modification, or discharge is agreed to in writing and signed by the
party to be bound thereby. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties hereto in separate counterparts, each
of which shall be deemed to be one and the same instrument.
5. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns, provided that the Hesco Affiliates may not
assign this Agreement.
6. APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the internal laws of the
State of Florida.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written.
HESCO SALES, INC.
By: /s/ XXXXXX XXXXXX
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Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
ATLANTIC MAINTENANCE
OF MIAMI, INC.
By: /s/ XXXXXX XXXXXX
------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
/s/ XXXXXX XXXXXX
-----------------------------------
XXXXXX XXXXXX
HI-RISE RECYCLING SYSTEMS, INC.
By: /s/ J. XXXX XXXXXXX
---------------------------------------
Name: J. Xxxx XxXxxxx
Title: Chief Operating Officer
HS ACQUISITION CORP.
By: /s/ J. XXXX XXXXXXX
---------------------------------------
Name: J. Xxxx XxXxxxx
Title: Chief Operating Officer
AM ACQUISITION CORP.
By: /s/ J. XXXX XXXXXXX
---------------------------------------
Name: J. Xxxx XxXxxxx
Title: Chief Operating Officer
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