EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of March
24, 2000, by and among Strategic Industries, LLC, a Delaware limited liability
company ("Strategic"), U.S. Industries, Inc., a Delaware corporation ("USI"),
and JUSI Holdings, Inc., a Delaware corporation that is an indirect wholly-owned
subsidiary of USI ("JUSI" and, collectively with USI, "Seller").
RECITALS
A. Seller and Strategic have entered into a Securities Purchase
Agreement dated as of January 15, 2000 and amended and restated as of the date
hereof (the "Securities Purchase Agreement"), relating to the sale by JUSI to
Buyer of the Purchased Securities following completion of the Corporate
Reorganization.
B. The parties acknowledge that it is their intention that, effective
upon the closing of the transactions contemplated by the Securities Purchase
Agreement (the "Closing Date"), (i) USI shall assume and accept or retain
responsibility for the USI Liabilities (as hereinafter defined), and (ii)
Strategic shall assume and accept or retain responsibility for the Strategic
Liabilities (as hereinafter defined), in each case except as otherwise provided
in this Agreement, the Securities Purchase Agreement or the Tax Sharing and
Indemnification Agreement (as hereinafter defined).
C. It is a condition to the consummation of the transactions
contemplated by the Securities Purchase Agreement that the parties hereto enter
into this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
"Demerger Agreements" mean, collectively, the Subscription Agreement
and the agreements referred to in the annexes thereto.
"Environmental Losses" means any damage, claim, liability, cost of
defense, obligations, allegations, demands, cost, costs of closure, feasibility
studies, injury or any loss of any kind, including, but not limited to all
penalties, fines, consulting or contractors fees, capital expenses,
investigation or remediation costs, natural resource damages, diminution in
property values, attorneys fees, damages (including but not limited to actual,
foreseen or unforeseen, known or unknown), settlements, awards or judgments of
any kind which arise out of environmental matters, including, but not limited to
the release, disposal, exposure to, migration or presence of any hazardous
material or hazardous, toxic, industrial or other solid waste.
NY2:\785042\19\01\78595.0031
"Litigation and Claims" means litigation pending or threatened or
claims alleged against Strategic Parties and/or USI Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to any real property) and
threatened actions.
"Strategic Businesses" means the businesses, entities, operations,
assets and properties of Strategic and its subsidiaries and any other business,
entity, operation, asset or property transferred to Strategic or its
subsidiaries as part of the Corporate Reorganization, or any predecessor to such
business or operation (in any such event other than Rexair Holdings, Inc. and
its subsidiaries ("Rexair")), notwithstanding the fact that prior to the Closing
Date (i) any such business or operation was closed, wound up or otherwise
terminated, (ii) such asset ceased to be used in connection with such business
or operation or (iii) any such business, operation or asset was sold or
otherwise disposed of to any person other than USI or a subsidiary or affiliate
of USI that is not being transferred to Strategic or its subsidiaries as part of
or in connection with the Corporate Reorganization.
"Strategic Liabilities" means, except as otherwise expressly provided
for in this Agreement, the Securities Purchase Agreement or the Tax Sharing and
Indemnification Agreement, any and all of the obligations, liabilities and
expenses incurred by USI, Strategic or any of their respective subsidiaries and
affiliates arising out of any Litigation and Claims alleged to arise out of the
Strategic Businesses (but excluding the USI Specified Liabilities and the USI
Benefit Liabilities (as hereinafter defined)), whether or not in the ordinary
course of business, in each case whether matured or unmatured, liquidated or
unliquidated, fixed or contingent, known or unknown, and whether arising out of
circumstances existing prior to, on or subsequent to the Closing Date, and
regardless of where or against whom such obligations, liabilities and expenses
are asserted or determined or whether asserted or determined prior to, on or
subsequent to the Closing Date, and regardless of whether arising from or
alleged to arise from negligence, recklessness, violation of law, or
misrepresentation by any of the USI Parties, and including, without limitation,
the following items:
(i) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty, merchantability
or fitness for any particular purpose of goods, conformity of goods to
contractual requirements, deceptive trade practice, misrepresentation, or
any other alleged or actual breach or violation of any obligation or
requirement arising out of the Strategic Businesses, including, without
limitation (A) all product warranty obligations with respect to products
developed, produced, manufactured, marketed, used or distributed by the
Strategic Businesses ("Strategic Products"), whether shipped prior to, on
or subsequent to the Closing Date, and (B) all liabilities resulting from
claims for real or alleged personal injury or consequential damage which
is caused or alleged to have been or to be caused by any defect in or
breach of warranty related to any Strategic Product or other asset of the
Strategic Businesses, unless covered by (v) below;
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(ii) all Litigation and Claims pending as of the Closing
Date against Strategic, USI and/or any of their respective subsidiaries
and affiliates ("Pending Strategic Litigation") and all Litigation and
Claims brought, threatened or alleged against Strategic, USI or any of
their respective subsidiaries and affiliates after the Closing Date ("New
Strategic Litigation"), in each case if and solely to the extent that such
Litigation and Claims (in whole or in part) arise out of or are alleged
(regardless of the party named in the allegation or complaint) to arise
out of the Strategic Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Strategic or USI or any of their respective
subsidiaries and affiliates arising under any federal, state, local or
foreign statutes, laws (including common law), codes, rules, regulations,
policies or guidelines or any administrative or judicial interpretations
thereof relating to the environment, natural resources and public or
employee health and safety arising out of or relating to, or alleged to
arise out of or relate to, the Strategic Businesses;
(iv) any Litigation and Claims brought after the Closing
Date against USI or its subsidiaries and affiliates by employees of USI or
Strategic or any of their respective subsidiaries and affiliates claiming
that they suffered personal injuries of any kind, whether prior to, on or
subsequent to the Closing Date, arising out of, or alleged to arise out
of, the Strategic Businesses;
(v) all obligations, liabilities and expenses (other than
those arising solely due to joint and several liability under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with respect
to any employee benefit plan within the meaning of Section 3(3) of ERISA
(excluding any multiemployer plan within the meaning of Section 3(37) of
ERISA) sponsored by, maintained by, contributed to, or obligated to be
contributed to at any time, by Strategic or any of its subsidiaries (other
than any employee benefit plan which will, following the Closing Date,
continue to be sponsored by or maintained by USI or a subsidiary or
affiliate of USI that is not being transferred to Strategic or its
subsidiaries as part of or in connection with the Corporate Reorganization
and employee benefit plans sponsored or maintained by Rexair), including
but not limited to any liability with respect to: (A) the Pension Benefit
Guaranty Corporation under Title IV of ERISA; (B) any non-compliance with
the notice and benefit continuation requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended; (C) any
non-compliance with ERISA or any other applicable laws; and (D) any suit,
proceeding or claim which is brought against USI or any of its affiliates,
any USI plan, and any fiduciary or former fiduciary of any such plan, but
excluding any and all obligations, liabilities and expenses with respect
to (x) contributions that are, or will be, required to be made by Section
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302 of ERISA or section 412 of the Internal Revenue Code of 1986 as
amended, to any such employee benefit plan which is a defined benefit
pension plan for the plan year of any such employee benefit plan beginning
or ending in 1999 (the "1999 Strategic Benefit Contributions") and (y) the
Bearing Inspection Inc. Money Purchase Plan;
(vi) all obligations, liabilities and expenses with respect
to the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of Strategic or any of its subsidiaries) by (A) Strategic or any
of the Strategic Businesses or (B) any officer, director, employee or
agent of Strategic or any of Strategic Businesses attributable to any
action or inaction by Strategic or any of the Strategic Businesses.
"Strategic Parties" means Strategic and any direct or indirect
subsidiary or affiliate (other than USI and Rexair) of Strategic, and any of
their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Subscription Agreement" means the Subscription Agreement, dated May
31, 1995, between USI and Xxxxxx PLC.
"USI Businesses" means all of the businesses, operations and assets
of USI and its subsidiaries (or any predecessor to such businesses or
operations), except for the Strategic Businesses.
"USI Liabilities" means, except (i) to the extent included as (x) a
current liability (other than current Debt, Taxes based on income and accruals
with respect to the USI Benefits Liabilities) accrued or reflected on the
combined financial statements of the Company and the Company Subsidiaries as of
the Closing Date in accordance with Applied GAAP (as defined in the Securities
Purchase Agreement) or (y) Debt as of the Closing Date (other than the Jade
Technologies Singapore, Ltd. debt to be assumed by Strategic as contemplated in
the Securities Purchase Agreement and Debt which arises from a guarantee of or a
security interest for obligations of any of the USI Parties) or (ii) as
otherwise expressly provided for in this Agreement, the Securities Purchase
Agreement or the Tax Sharing and Indemnification Agreement, the USI Specified
Liabilities, the USI Benefit Liabilities and any and all of the obligations,
liabilities and expenses incurred by USI, Strategic or any of their respective
subsidiaries and affiliates arising out of any Litigation and Claims alleged to
arise out of the USI Businesses, whether or not in the ordinary course of
business, in each case whether matured or unmatured, liquidated or unliquidated,
fixed or contingent, known or unknown, and whether arising out of circumstances
existing prior to, on or subsequent to the Closing Date and regardless of where
or against whom such obligations, liabilities and expenses are asserted or
determined or whether asserted or determined prior to, on or subsequent to the
Closing Date, and regardless of whether arising from or alleged to arise from
negligence, recklessness, violation of law, or misrepresentation by any of the
Strategic Parties, and including, without limitation, the following items:
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(i) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty, merchantability
or fitness for any particular purpose of goods, conformity of goods to
contractual requirements, deceptive trade practice, misrepresentation, or
any other alleged or actual breach or violation of any obligation or
requirement arising out of, or associated with, the USI Businesses,
including, without limitation, (A) all product warranty obligations with
respect to products developed, produced, manufactured, marketed, used or
distributed by the USI Businesses ("USI Products"), whether shipped prior
to, on or subsequent to the Closing Date, and (B) all liabilities
resulting from claims for real or alleged personal injury or consequential
damage which is caused or alleged to have been or to be caused by any
defect in or breach of warranty related to any USI Products or other
assets of the USI Businesses, unless covered by (v) below;
(ii) all Litigation and Claims pending as of the Closing
Date against Strategic, USI and/or any of their respective subsidiaries
and affiliates ("Pending USI Litigation") and all Litigation and Claims
brought, threatened or alleged against Strategic, USI or any of their
respective subsidiaries and affiliates after the Closing Date ("New USI
Litigation"), in each case if and solely to the extent that such
Litigation and Claims (in whole or in part) arise out of or are alleged
(regardless of the party named in the allegation or complaint) to arise
out of the USI Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees or
remediation costs) of Strategic, USI or any of their respective
subsidiaries and affiliates arising under any federal, state, local or
foreign statutes, laws (including common law), codes, rules, regulations,
policies or guidelines or any administrative or judicial interpretations
thereof relating to the environment, natural resources and public or
employee health and safety arising out of or relating to, or alleged to
arise out of or relate to, the USI Businesses;
(iv) any Litigation and Claims brought after the Closing
Date against Strategic or its subsidiaries and affiliates by employees of
Strategic or USI or any of their respective subsidiaries and affiliates
claiming that they suffered personal injuries of any kind, whether prior
to, on or subsequent to, the Closing Date, arising out of, or alleged to
arise out of, the USI Businesses;
(v) all obligations, liabilities and expenses (including
those arising solely due to joint and several liability under ERISA) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of Section
3(37) of ERISA), sponsored by, maintained by, contributed to, or obligated
to be contributed to, at any time, by USI or any of its subsidiaries other
than any employee benefit plan sponsored as of the Closing Date by any
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company or business transferred to Strategic or its subsidiaries as part
of or in connection with the Corporate Reorganization, including but not
limited to any liability with respect to: (A) the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (B) a multiemployer plan (within the
meaning of Section 3(37) of ERISA); (C) any non-compliance with the notice
and benefit continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended; (D) any non-compliance with ERISA
or any other applicable laws; and (E) any suit, proceeding or claim which
is brought against Strategic or any of the Strategic Parties, any
Strategic plan, and any fiduciary or former fiduciary of any such plan;
and, without limiting the generality of, and notwithstanding the
foregoing, all obligations, liabilities and expenses (including without
limitation any penalties and taxes) arising with respect to (x) any
multiemployer plan (within the meaning of Section 3(37) of ERISA) other
than a multiemployer plan to which Strategic or its subsidiaries first
become obligated to contribute after the Closing Date, (y) the 1999
Strategic Benefit Contributions and (z) the Bearing Inspection, Inc. Money
Purchase Plan (the obligations, liabilities and expenses described in
clauses (x), (y) and (z) in this paragraph (v), the "USI Benefit
Liabilities");
(vi) all obligations, liabilities and expenses with respect
to the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of USI or any of its subsidiaries) by (A) USI or any USI Business
or (B) any officer, director, employee or agent of USI or any USI Business
attributable to any action or inaction by USI or any USI Business;
(vii) all obligations, liabilities and expenses arising
under the Demerger Agreements except to the extent attributable to any of
the Strategic Parties. For the avoidance of doubt, any liability arising
under Section 4.1 of the Subscription Agreement shall be the sole
responsibility of USI;
(viii) any liability, obligation or expense attributable to
the Strategic Parties to the extent that the amount of such liability,
obligation or expense is covered by a policy of insurance (excluding any
deductible or self insurance retention) or an indemnity agreement
maintained by or for the benefit of any of the USI Parties and to the
extent that cash is received (net of any expenses incurred for collection
thereof) by any of the USI parties pursuant to such policy or agreement,
unless the rights under such policy of insurance or indemnity agreement
have been assigned to the Strategic Parties; and
(ix) all obligations, liabilities and expenses (the "USI
Specified Liabilities") incurred by USI, Strategic or any of their
respective subsidiaries and Affiliates arising out of, or any Litigation
or Claims arising out of, or alleged to arise out of third party personal
injury, property damage, workers' compensation claims and any other claims
relating to an entire and distinct company, division, operating unit or
product line formerly owned or operated by a Strategic Business that has
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been sold, closed down, wound up, terminated or otherwise transferred by
such Strategic Business prior to the Closing Date, except for a specific
product line which has been closed down, wound up or terminated (as
opposed to a specific product line which has been sold or otherwise
transferred). As an illustration of the principles set forth above, (y)
the aforementioned obligations, liabilities and expenses of such companies
or businesses as BiltBest of California, Inc., Spartus, Sunlite Casual
Furniture, Inc., the lace division of Native Textiles and Carisbrook's
Xxxxxxxx, Blue Mountain, Franklin Dyed Yarns and Tube-Tex divisions and
the Trimfoot Business, which were discontinued in their entirety and
liquidated or sold prior to the Closing Date, would be the type of
liability included in "USI Liabilities", (x) the aforementioned
obligations, liabilities and expenses of FSM Europe B.V. associated with
the production of color monitor tubes, which product line was discontinued
(as opposed to sold or otherwise transferred) although such company
continued to operate as a functioning business unit, would be the type of
liability included in "Strategic Liabilities" and (z) except with respect
to environmental matters set forth in Section 2.2, the aforementioned
obligations, liabilities and expenses of Bearing Inspection associated
with the manufacturing plant in Sante Fe Springs, California from which
such company relocated while continuing to operate as a functioning
business unit following such relocation, would be the type of liability
included in "Strategic Liabilities."
"USI Parties" means USI and any direct or indirect subsidiary or
Affiliate of USI, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
Words and expressions defined in the Securities Purchase Agreement
shall have the same meaning herein, except that, to the extent that such
definitions are inconsistent with any definitions in this Agreement, the
definitions herein shall take precedence.
ARTICLE II.
INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Section 6.4 and Article IV
hereof, Seller shall, without any further responsibility or liability of, or
recourse to, any of the Strategic Parties, absolutely and irrevocably be solely
liable and responsible for the USI Liabilities. None of the Strategic Parties
shall be liable to any of the USI Parties for any reason whatsoever on account
of any USI Liabilities. The sole exception to the foregoing shall be with regard
to environmental matters, which shall be governed by the terms of Section 2.2
hereof.
Seller shall jointly and severally indemnify, defend, save and hold
harmless each of the Strategic Parties from and against all claims, liabilities,
obligations, losses, costs, costs of defense (as and when incurred, and
including reasonable outside attorneys' and consultants' fees), expenses, fines,
charges, penalties, allegations, demands, damages (including but not limited to
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actual, punitive or consequential, foreseen or unforeseen, known or unknown),
settlements, awards or judgments of any kind or nature whatsoever (all of which
are hereinafter collectively referred to as the "Strategic Damages"), arising
out of (i) the USI Liabilities, (ii) the breach by the USI Parties of any of
their obligations under this Agreement or the Securities Purchase Agreement or
any agreement executed at the Closing thereunder and (iii) any misrepresentation
or breach of representation or warranty of Seller contained in Sections
3.01(Corporate Organization), 3.02 (Capitalization), 3.04 (Seller's Authority
Relative to the Agreement) and 3.16 (Brokers and Finders) of the Securities
Purchase Agreement, which representations and warranties shall survive
indefinitely.
Strategic Damages with respect to which, but only to the extent that,
any proceeds are received by, or on behalf of, Strategic or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Strategic or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
Section 2.2. The Strategic Parties' sole remedy with regard to any
Environmental Losses shall be governed by the terms of this Section 2.2. All
other remedies are hereby expressly waived.
Seller shall jointly and severally indemnify, defend, save and hold
harmless the Strategic Parties from and against Environmental Losses associated
with the categories of USI Specified Liabilities set forth in Exhibit 2.2 of
this Agreement, which indemnities shall run from the date of this Agreement
until the dates of expiration, if any, set forth in said exhibit. The Strategic
Parties and their agents shall take no voluntary, non-required action whose
primary purpose is to increase or accelerate the timing or cost of Seller's
indemnity obligations hereunder, provided, however, that any action necessary to
comply with an Environmental Law or any action to sell or finance a facility,
company, subsidiary or division thereof or any investigation conducted in
connection with such a sale or closure of a facility shall in no event be deemed
an action to increase or accelerate the timing or cost of Seller's indemnity
obligations hereunder.
ARTICLE III.
INDEMNIFICATION BY STRATEGIC
Section 3.1. Subject to the provisions of Section 6.4 and Article IV
hereof, Strategic shall, without any further responsibility or liability of, or
recourse to, any of the USI Parties, absolutely and irrevocably be solely liable
and responsible for the Strategic Liabilities. None of the USI Parties shall be
liable to any of the Strategic Parties for any reason whatsoever on account of
any Strategic Liabilities. The sole exception to the foregoing shall be with
regard to environmental matters, which shall be governed by Section 3.2 hereof.
Strategic shall indemnify, defend, save and hold harmless each of the
USI Parties from and against all claims, liabilities, obligations, losses,
costs, costs of defense (as and when incurred, and including reasonable outside
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attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever (all of which are hereinafter
collectively referred to as the "USI Damages"), arising out of (i) the Strategic
Liabilities and (ii) the breach by any of the Strategic Parties of any of their
obligations under this Agreement or the Securities Purchase Agreement or any
agreement executed at the Closing thereunder.
USI Damages with respect to which, but only to the extent
that, any proceeds are received by USI, or by any of its subsidiaries or
affiliates, from any third party insurance policy (and are non-reimbursable by
USI or any of its subsidiaries or affiliates under any self insurance policy),
shall not be the subject of indemnification under this Agreement.
Section 3.2. Strategic expressly assumes the Environmental Losses set forth in
the column entitled "Strategic Assumed Liability" in Exhibit 2.2 hereto and USI
expressly retains the Environmental Losses set forth in the column entitled
"Seller's Indemnity Obligations" in Exhibit 2.2 hereto.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or proceeding is
brought by a third party (other than with respect to Taxes) in which the
liability as between a USI Liability and a Strategic Liability is determined
after trial in any judgment, award or decree to be joint or concurrent and in
which the entitlement to indemnification hereunder is not readily determinable
or if no judgment exists and the allocation of such liability or entitlement is
unknown (e.g., a settlement), the parties shall negotiate in good faith in an
effort to agree, as between USI and Strategic, on the proper allocation of such
liability or entitlement to indemnification, as well as the proper allocation of
the costs of any joint defense or settlement pursuant to Section 6.4, all in
accordance with the provisions of, and the principles set forth in, this
Agreement. In the absence of any such agreement, such allocation of liability,
entitlement to indemnification and allocation of costs shall be subject to
ultimate resolution between USI and Strategic pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing Date the
parties may have arms-length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply
materials, products, services and leases after the Closing Date. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
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Section 4.3. It is acknowledged and agreed that on or prior to the
Closing Date (i) Strategic shall name Seller as an "additional insured" on all
of Strategic's insurance policies with respect to matters for which Seller is
indemnified under Article III and (ii) USI shall novate all of the insurance
policies covering the businesses, entities, operations, assets and properties of
Strategic and its subsidiaries transferred to Strategic or its subsidiaries as
part of the Corporate Reorganization. Seller shall promptly reimburse all of
Strategic's expenses incurred to provide the Seller with the benefit of being
named as an "additional insured," including, but not limited to, deductibles and
premium increases and, Strategic shall have no liability for any shortfall or
other coverage limitations.
Section 4.4. It is acknowledged and agreed that if, after the Closing
Date, there shall be a draw down on any letter of credit which is either (a)
guaranteed by the Seller or one of Seller's subsidiaries for any of the
Strategic Businesses, or (b) issued by the Seller or one of Seller's
subsidiaries for any of the Strategic Businesses, then within five (5) business
days of such draw down, Strategic shall reimburse, or cause one of its
subsidiaries to reimburse, the Seller or Seller's subsidiary, as the case may
be, for such amount drawn to the extent such drawn amount is in satisfaction of
a liability or obligation of a Strategic Business.
ARTICLE V.
NOTICE AND PAYMENT OF THIRD PARTY CLAIMS
Section 5.1. If as the result of any Litigation and Claims any person
entitled to a defense and/or indemnification under this Agreement (the
"Indemnified Party") determines that it is or may be entitled to a defense or
indemnification by Strategic or USI, as the case may be (the "Indemnifying
Party"), under this Agreement:
(a) The Indemnified Party shall deliver promptly to the Indemnifying
Party a written notice and demand for a defense or indemnification, specifying
the basis for the claim for defense and/or indemnification, the nature of the
claim, and if known, the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Nothing in this subparagraph shall be
interpreted to invalidate any claim by the Indemnified Party to be entitled to
indemnification, except to the extent that the Indemnifying Party can show that
it is actually prejudiced by the failure of the Indemnified Party to deliver
such notice.
(b) The Indemnifying Party shall have the right, exercisable by
written notice to the Indemnified Party within 30 days from receipt of the
notice requesting indemnification, to either: (A) assume the defense of,
litigate or control the settlement of any Litigation and Claim which involves
(and continues to involve) solely monetary damages; (B) pay the claim in
immediately available funds; (C) reserve its rights pending negotiations under
Section 6.4; or (D) object in accordance with Section 5.2. This 30-day period
may be extended by agreement of the parties. Nothing in this subparagraph shall
be interpreted to abrogate or delay a party's obligation to provide the other
with a defense under this Agreement.
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Section 5.2. The Indemnifying Party may object to the claim for
defense and/or indemnification set forth in any notice; provided, however, that
if the Indemnifying Party does not give the Indemnified Party written notice
setting forth its objection to such claim (or the amount thereof if reasonably
determinable) and the grounds therefor within the same 30 day period (or any
extended period), the Indemnifying Party shall be deemed to have acknowledged
its liability to provide a defense and the Indemnified Party may exercise any
and all of its rights under applicable law to obtain such defense and the
Indemnified Party shall be reimbursed by the Indemnifying Party for the
reasonable attorneys' fees and other reasonable expenses incurred in obtaining
such defense. Any objection to a claim for a defense or indemnification shall be
resolved in accordance with Section 8.8.
Section 5.3. The right to a defense or indemnification under this
Agreement applies only insofar as defense and indemnification are not provided
for by insurance. Nevertheless, the potential availability of insurance coverage
to USI or Strategic shall not relieve the other party of its obligations for
defense or indemnification hereunder, or delay either party's obligation to the
other to assume a defense or pay any sums due hereunder.
Section 5.4. Payments due to an Indemnified Party under this
Agreement shall carry interest from the date on which the Indemnified Party
became entitled to indemnification until the date of actual payment (whether
before or after judgment) at the prime rate charged by The Chase Manhattan Bank
to its corporate customers in effect during such period.
Section 5.5. Payments due to be made under this Agreement shall be
free and clear of all set-offs or counterclaims whatsoever, except as may be
required by law.
Section 5.6. Payments due to be made under this Agreement shall not
include the amount by which any taxes for which the Indemnified Party would have
been accountable or liable to be assessed are (i) actually reduced prior to
payment falling due hereunder or (ii) likely to be reduced subsequent to payment
falling due hereunder in the reasonable opinion of the Indemnified Party acting
in good faith in the light of the circumstances prevailing at the time of
delivery of written notice in accordance with Section 5.1. The reduction of any
payments in accordance with this Section 5.6 shall be made without regard to the
time value of money. The parties hereto agree to treat the indemnification
payments hereunder as adjustments to the purchase price.
Section 5.7. The parties to this Agreement may enter into agreements
or other arrangements providing for the set-off of payments due to be made by
way of indemnification to both USI and Strategic.
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ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for indemnification is
based, under this Agreement, on a claim, demand, investigation, action or
proceeding, judicial or otherwise, brought by a third party, and the
Indemnifying Party does not object under Section 5.2 hereof, the Indemnifying
Party shall, within the 30-day period (or any extended period) referred to in
Section 5.1(b) above, assume and conduct the defense of such third-party claim
at its sole cost and expense (thereafter designated as the "Case Handler"), with
attorneys employed by the Indemnifying Party and reasonably acceptable to the
Indemnified Party; provided that (i) the third party claim solely seeks (and
continues to seek) monetary damages and (ii) the Indemnifying Party expressly
agrees in writing that as between the Indemnifying Party and the Indemnified
Party, the Indemnifying Party shall be solely obligated to satisfy and discharge
the third party claim (the conditions set forth in clauses (i) and (ii) are
collectively referred to as "Litigation Conditions"). The Indemnifying Party or
the Indemnified Party, as the case may be, may retain attorneys of its own
choosing to participate in (but not control) the defense of any third party
claim which the other is defending at its sole cost and expense.
Section 6.2. If the Indemnifying Party has assumed the defense of a
third party claim as provided in Section 6.1, the Indemnifying Party will not be
liable for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof; provided, however, that if (i) the
Litigation Conditions cease to be met, or (ii) the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such third party claim, the
Indemnified Party may assume its own defense, and the Indemnifying Party will be
liable for all reasonable costs or expenses paid or incurred in connection
therewith. If the Indemnifying Party assumes the defense of any such third-party
claim, the Indemnifying Party may settle or compromise the claim without the
prior consent of the Indemnified Party so long as all present and future claims
relating to the compromised claim against the Indemnified Party (i) are
irrevocably and unconditionally released in full and (ii) do not involve the
grant of any injunctive or equitable relief.
Section 6.3. The Indemnifying Party shall pay to the Indemnified
Party in immediately available funds the amount for which the Indemnified Party
is entitled to be indemnified within 30 days after the settlement or compromise
of such third-party claim or the judgment of a court of competent jurisdiction
(or within such longer period as agreed to by the parties). If the Indemnifying
Party does not assume the defense of any such third-party claim, the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party, except that the Indemnifying Party has the right to
contest that it is obligated to the Indemnified Party under the terms of this
Agreement, provided the Indemnifying Party shall have raised its objection in a
timely manner under Section 5.2 and prior to any settlement or result the
Indemnifying Party shall have the right to consent to such settlement or result,
which consent shall not be unreasonably withheld.
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Section 6.4. In the event a claim, demand, action or proceeding is
brought by a third party (other than with respect to Taxes) in which the
liability as between a Strategic Liability and a USI Liability is alleged to be
joint and in which the entitlement to indemnification hereunder is not readily
determinable, the parties shall cooperate in a joint defense. Such joint defense
shall be under the general management and supervision of the party which is
expected to bear the greater share of the liability, and which will be
considered the Case Handler, unless otherwise agreed; provided, however, that
neither party shall settle or compromise any such joint defense matter without
the written consent of the other. The costs of such joint defense, any
settlement and any award or judgment (unless the award or judgment specifies
otherwise) shall be borne as the parties may agree; or in the absence of such
agreement, such costs shall be borne by the party incurring such costs, subject
to ultimate resolution between Strategic and USI pursuant to Section 8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. The Strategic Parties and USI Parties shall use
reasonable efforts to cooperate with one another fully and in a timely manner in
connection with the defense of any Pending Strategic Litigation, New Strategic
Litigation, Pending USI Litigation, New USI Litigation or any other actual or
threatened claim, including the pursuit of any rights pursuant to indemnity
agreements under (viii) of the definition of USI Liabilities in Article I and
Section 2.2 hereof.
Section 7.2. Such cooperation shall include, without limitation,
making available to the other party, during normal business hours and upon
reasonable notice, all books, records and information ("Litigation Records"),
officers and employees (without substantial interruption of employment) insofar
as such Litigation Records and officers and employees are reasonably necessary
in connection with any actual or threatened claim, investigation, audit, action
or proceeding; provided, however, that no party shall be under any obligation by
reason of this Section 7.2 to make available any of the foregoing persons or
Litigation Records in connection with any action commenced or threatened against
such party.
Section 7.3. The party requesting access to Litigation Records or
officers and employees pursuant to Section 7.2 shall bear all reasonable
out-of-pocket expenses (except reimbursement of salaries and employee benefits)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.4. The party providing Litigation Records under Section 7.2
may elect, upon a reasonable basis and within a reasonable time, to designate
all or a portion of the Litigation Records as confidential or proprietary. If
Litigation Records are so designated, the party receiving them will treat them
as it would its own confidential or proprietary information and will take all
reasonable steps to protect and safeguard the Litigation Records while in its
own custody and will attempt to shield such information from disclosure by
motions to quash, motions for a protective order, redaction or other appropriate
actions.
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ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.2. This Agreement may be amended, modified or supplemented
only by a written agreement signed by the parties hereto. Section 8.3. This
Agreement may not be assigned by the Seller without the prior written consent of
Strategic, which shall not be unreasonably withheld. This Agreement may be
assigned by Strategic to any Affiliate or to one or more of its lenders if
required by same without the prior written consent of Seller. In the event that
Strategic sells or otherwise transfers any business, entity, operation, asset or
property included in the Strategic Businesses, such purchaser or transferee
shall be entitled to all or a portion of the indemnification provided in Article
II herein.
Section 8.4. This Agreement is solely for the benefit of the USI
Parties and the Strategic Parties and is not intended to confer upon any other
Person except the parties any rights or remedies hereunder. There are no third
party beneficiaries to this Agreement other than the USI Parties and the
Strategic Parties.
Section 8.5. This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall be held
to be illegal or unenforceable, in whole or in part, under any enactment or rule
of law, such term or provision or part shall to that extent be deemed not to
form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected. Subject thereto, should any term or provision
of this Agreement be or become ineffective, in whole or in part, for reasons
beyond the control of the parties, the parties shall use reasonable efforts to
agree upon a new provision which shall as nearly as possible have the same
commercial effect as the ineffective term or provision or part thereof.
Section 8.7. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission or telexed or three days after
being mailed by registered or certified mail (return receipt requested), postage
prepaid, and one Business Day after deposited with an overnight courier service
if delivered by overnight courier, 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 upon
receipt thereof):
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if to USI, to:
c/o U.S. Industries Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
if to Strategic, to:
Automotive Interior Products LLC
c/o Citicorp Venture Capital Ltd.
000 Xxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: G. Xxxxxx X'Xxxxxxx
Section 8.8. Resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude a party hereto from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Any party hereto
may commence proceedings hereunder against any other party hereto (each a
"Party") by delivering a written notice (a "Demand") to the other Parties
providing a reasonable description of the Dispute and expressly requesting
arbitration hereunder. The parties hereto hereby agree to submit all Disputes to
arbitration under the terms hereof, which arbitration shall be final, conclusive
and binding upon the parties, their successors and assigns. The arbitration
shall be conducted in New York City by three neutral arbitrators acting by
majority vote (the "Panel") selected by agreement of the Parties not later than
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ten (10) days after delivery of the Demand or, failing such agreement, appointed
pursuant to the commercial arbitration rules of the American Arbitration
Association, as amended from time to time (the "AAA Rules"). If an arbitrator so
selected becomes unable to serve, his or her successors shall be similarly
selected or appointed. The arbitration shall be conducted pursuant to the
Federal Arbitration Act and such procedures as the Parties may agree, or, in the
absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding
the foregoing: (i) each Party shall have the right to have an independent third
party audit the books and records of the other Party that are reasonably related
to the Dispute upon reasonable advance notice and during normal business hours;
(ii) each Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Party intends to present in such
hearing; and (iii) each Party shall be allowed to conduct reasonable discovery
through written requests for information, document requests, requests for
stipulation of fact and depositions, the nature and extent of which discovery
shall be determined by the Panel, taking into account the needs of the Parties
and the desirability of making discovery expeditious and cost effective. All
hearings shall be conducted on an expedited schedule, and all proceedings shall
be confidential. A Party may at its expense make a stenographic record thereof.
The Panel shall complete all hearings not later than ninety (90) days after its
selection or appointment, and shall make a final award not later than thirty
(30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. None of the parties hereto shall impeach this Agreement
on the grounds that any of the Directors of Seller stand in any fiduciary
position to Strategic or that any of the Directors of Strategic stand in any
fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
STRATEGIC INDUSTRIES, LLC
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
U.S. INDUSTRIES, INC.
By: /s/ Xxxxxx X. XxxXxxx
----------------------------------
Name: Xxxxxx X. XxxXxxx
Title: Vice President
JUSI HOLDINGS, INC.
By: /s/ Xxxxxx X. XxxXxxx
----------------------------------
Name: Xxxxxx X. XxxXxxx
Title: Vice President
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