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CZP Draft 05.02.

03

INDEMNITY AGREEMENT

This Indemnity Agreement (the “Agreement”) is entered on


____________ by and among:

__________________, a corporation duly organized and


validly existing under Philippine laws, with principal office
______________ (the “Surety”),

___________________, a corporation duly organized and


validly existing under Philippine laws, with principal office
at _____________ (“Power Corp.”),

_________________, a corporation duly organized and


validly existing under Philippine laws, with principal office
at ________________ (“Energy Corp.”),

_____________________, a corporation duly organized


and validly existing under Philippine laws, with principal
office at _______________ (“Bank”),

_______________, a corporation duly organized and


validly existing under Philippine laws, with principal office
at ______________ (“Invest Corp.”),

and

____________________, a corporation duly organized


and validly existing under Philippine laws, with principal
office at _____________ (“PM”, and together with Energy
Corp., Bank, and Invest Corp., the “Stockholders”).

WHEREAS, the Surety, upon application by Power Corp. and the


Stockholders, has issued Surety Bond No. _________ dated __________
(the “Bond”) in the amount of U.S. Dollars _______________ (US$_______)
in favor of the __________ (“Company A”) and ___________ (“Company
B”) to secure payment of the indemnities and other financial
obligations (the “Secured Obligations”) of Power Corp. under the
_________ Agreement dated ___________ (the “SPA”) among Company A,
Company B and Power Corp.;

WHEREAS, the parties have agreed that the Stockholders shall


undertake to indemnify the Surety upon the terms and conditions
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hereof for certain liabilities which the Surety may incur under the
Bond;

For and in consideration of these premises and the covenants


herein contained, the parties agree as follows:

1. Premium and Indemnity. The Stockholders bind


themselves to perform the following obligations in favor of the Surety:

(a) Upon execution of this Agreement, each of the


Stockholders will pay the Surety the sum set forth below
opposite their name as premium, documentary stamps and other
charges due on the Bond:

Stockholder Amount

Energy Corp. PhP

Bank

Invest Corp.

PM

TOTAL PhP

(b) Subject to the limits set forth in section 5, each of


the Stockholders shall indemnify the Surety, and keep it
indemnified for, and hold and save it harmless from, any and all
damages, payments, advances, losses, costs, stamps, taxes,
penalties, charges, attorney’s fees, expenses and other liabilities
of whatever kind and nature that the Surety may at any time
sustain or incur as a consequence of having become a surety
under the Bond, and to pay, reimburse and make good to the
Surety, its successors and assigns all sums of money which the
Surety shall pay or cause to be paid by virtue of the Bond; and

(c) If the Surety receives notice of any claim action or


proceeding for which it may seek indemnification under this
Agreement, the Surety shall promptly notify the Stockholders in
writing and upon receipt of such written notification, the
Stockholders shall assume the defense thereof; provided,
however, the Surety may retain, at the expense of the
Stockholders, separate counsel from counsel for the Stockholders
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and from any other party if the Surety reasonably determines a


conflict of interest exists. The Surety shall co-operate fully with
the Stockholders in connection with any such litigation or
proceeding the defense of which the Stockholders has assumed.
Notwithstanding anything herein to the contrary, the
Stockholders shall not, in connection with any one legal
proceeding or claim or separate but similar or related
proceedings or claims arising out of the same general allegations
or circumstances, be liable to the Surety under any of the
provisions of this Agreement for the fees or expenses of more
than one separate firm of attorneys in each jurisdiction in which
legal action is being taken or reasonably may be taken at any
time, which firm shall be selected by the Surety. The Surety may
not consent to entry of any judgment or enter into any
settlement of any claim, action or proceeding that would give
rise to any liability of the Stockholders hereunder without the
Stockholders’ prior written consent, which consent may not be
unreasonably withheld or delayed.

2. Due Date and Several Liability. The Surety, Power Corp.


and the Stockholders agree that:

(a) The indemnities and other obligations pursuant to


this Agreement shall be due and payable to the Surety upon
demand by the Surety, provided that with respect to the cash
collateral which Energy Corp. shall deposit with the Surety
pursuant to Section 6 (a) below, the Surety shall apply said cash
collateral as provided herein by mere written notice to Energy
Corp. of the application thereof to the indemnities and other
obligations due hereunder;

(b) The Surety may grant extensions to the


Stockholders, or to accept in any case and at Surety’s entire
discretion payment in full or in part from the Stockholders of the
indemnities and obligations due the Surety;

(c) The duties, obligations and liabilities of each of the


Stockholders hereunder are intended to be several and not
[deletion] solidary, and each Stockholder shall be liable solely for
its obligations under this Agreement.

3. Interest and Liquidated Damages. Subject to the limits set


forth in section 5, in case the Stockholders delay in the payment of
indemnities and obligations due under this Agreement in favor of the
Surety, the Stockholders agree to pay the Surety (a) interest on said
indemnities and obligations at the rate of ________ percent (___%) per
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month computed and compounded monthly from the date of delay


until full payment and (b) in addition to said interest, liquidated
damages equal to thirty percent (30%) of all amounts due and
demandable under this Agreement, including said interest.

4. Payments Made by the Surety. The parties agree and


understand that the Bond, this Agreement and the Surety’s
involvement with the SPA are the result of Power Corp.’s negotiations
with Company A and Company B. Accordingly, Power Corp. shall have
the sole and absolute discretion whether to pay the Secured
Obligations under the Bond. Any payment or disbursement made by
the Surety on account of the Bond shall be made only with Power
Corp.’s prior written consent, and shall thereafter be final and binding
on the Stockholders, provided that the Surety need not obtain Power
Corp.’s prior written consent if the Surety makes the payment or
disbursement in compliance with a final and executory award (a) by
the arbitral tribunal as provided in the penultimate paragraph of the
terms and conditions of the Bond or (b) by any court having jurisdiction
over the Surety.

5. Limits of Liabilities. The parties acknowledge and agree


that notwithstanding any provision in this Agreement to the contrary,
(a) the maximum liability of Energy Corp. under this Agreement shall in
no event exceed the sum of U.S. Dollars ______________ and [pro rata
share of Energy Corp. in cap to indemnity to be agreed upon] and (b)
the Stockholders shall pay the indemnities and other obligations due
and payable under this Agreement to the Surety in accordance with
the following proportion:

Stockholder Share in Payment of


Indemnities and Other
Obligations Due Surety

Energy Corp.

Bank

Invest Corp.

PM

TOTAL

Upon recovery by the Surety of the said amount from Energy Corp., the
Surety shall no longer proceed against Energy Corp. to recover any
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other payment of the indemnities and obligations due under this


Agreement and shall limit recovery of the balance of such indemnities
and obligations only from Bank, Invest Corp. and PM.

6. Security. To secure payment by the Stockholders of their


obligations hereunder, the Stockholders shall provide the Surety the
following collaterals or securities upon signing hereof:

(a) Energy Corp. shall deposit with the Surety a cash


collateral in the amount of U.S. Dollars _______________
(US$___________); and

(b) Bank, Invest Corp. and PM shall each execute in


favor of the Surety a Joint and Several Undertaking in such form
and substance acceptable to the Surety.

If, upon the later of (i) the termination of this Agreement, (ii) the
termination of the Bond or the Surety’s liability thereunder, or (iii) the
passage of nine (9) months from the consummation of the Closing of
the SPA, Surety has not paid any claim by Company A or Company B,
then Surety shall return the cash collateral to Energy Corp..

7. Joinder in Actions. By executing this Agreement, Power


Corp. and the Stockholders irrevocably authorize the Surety to join
Power Corp. and the Stockholders as party defendants in any action,
regardless of venue, against the Surety on account of the Bond, and to
enforce the obligations hereunder directly against the relevant parties
as provided herein.

8. Notices. Any notice to be given hereunder shall be in


writing in English and may be delivered by hand (including, without
limitation, by international express courier against written receipt) or
sent by prepaid first class registered letter or post or (where
subsequently confirmed by letter) by facsimile copy to the persons and
addresses specified below (or such other person or address as the
relevant party may have previously notified the other party in writing
for that purpose). A notice shall be deemed to have been served when
delivered by hand to that address or received by facsimile copy, or if
sent by post as aforesaid, ten (10) days after it was posted. In proving
service by registered post, it shall be sufficient to prove that the letter
containing the notice was properly addressed and stamped and
posted. The names and addresses for the service of notices referred to
in this Section are:

If to Bank: If to Surety:
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________________ ________________
________________ ________________

Telephone: _________ Telephone: _________


Facsimile: _________ Facsimile: _________
Attention: President Attention: President

If to Invest Corp.: If to PM:

________________ ________________
________________ ________________

Telephone: _________ Telephone: _________


Facsimile: _________ Facsimile: _________
Attention: President Attention: President

If to Energy Corp.: If to Power Corp.:

________________ ________________
________________ ________________

Telephone: _________ Telephone: _________


Facsimile: _________ Facsimile: _________
Attention: President Attention: President

9. Waiver of Compliance. Any failure by any party to comply


with any obligation, covenant, agreement or condition herein may be
waived by the other parties only by a written instrument signed by the
party or parties granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.

10. Termination. This Agreement shall terminate automatically


upon the earlier to occur of termination of the Bond.

11. Venue. Any and all suits arising out of or in connection


with this Agreement and its terms and conditions shall be filed only
with the court of competent jurisdiction in Makati City, Philippines.

12. Miscellaneous. (a) Confidentiality. Except as appropriate


or necessary to obtain consents from the relevant third parties, the
parties to this Agreement agree that the terms and conditions of this
Agreement shall be kept confidential in all respects and shall not be
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disclosed to any other person or entity without the prior written


approval of the other parties. No confidential information shall be
reproduced, published or disclosed to any third party without the prior
written consent of the other parties, except as may be otherwise
required by law.

(b) Publicity. Except as required by any applicable law, rules or


regulation, each party shall make, and shall cause its affiliates to
make, any public announcement or filing with or notification to any
governmental authority regarding the other parties, the Bond, Power
Corp. or this Agreement only with the other parties’ prior written
consent. If a party or its affiliate is required to make such an
announcement, filing or notification pursuant to any applicable law,
rule or regulation, it shall, to the fullest extent possible in light of such
requirements, provide the other parties advance notice of such
announcement, filing or notification and a copy of same, and shall
entertain in good faith suggestions from the other parties regarding
the announcement, filing or notification

(c) Governing Law. Philippine law shall govern this


Agreement.

(d) Entire Agreement. This Agreement constitutes the entire


agreement of the parties hereto in connection with the subject matter
hereof. This Agreement supersedes all prior representations,
arrangements, understandings, and agreements, oral or written,
inconsistent herewith among the parties relating to the subject matter
hereof.

(e) Further Assurances. Each party shall take all


additional actions and shall execute all other and further instruments
and documents as are necessary or appropriate to give full effect to
the provisions of this Agreement.

(f) No Further Relationship. The parties agree that no


party is the agent of any other party and no such person is authorized
to take any action on behalf of the other, except as expressly provided
in this Agreement.

(g) Binding Effect; Assignment. All the terms of this


Agreement shall be binding on and inure to the benefit of the parties,
their permitted successors-in-interest and permitted assigns.

(h) Amendment. An amendment or modification of this


Agreement shall be effective or binding on the parties only if it is in
writing and signed by all the parties.
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(i) No Third-Party Beneficiaries. Except as provided herein,


this Agreement is solely for the benefit of the parties and their
respective permitted successors and permitted assigns, and this
Agreement shall not otherwise be deemed to confer upon or give to
any other third party any remedy, claim, liability, reimbursement,
cause of action or other right.

(j) Severability. If any of the provisions of this Agreement are


held to be invalid or unenforceable under the applicable law of any
jurisdiction, the remaining provisions shall not be affected, and any
such invalidity or unenforceability shall not invalidate or render
unenforceable that provision in any other jurisdiction. In that event,
the parties agree that the provisions of this Agreement shall be
modified and reformed so as to effect the original intent of the parties
as closely as possible with respect to those provisions that were held
to be invalid or unenforceable.

(k) Counterparts. This Agreement may be executed in two or


more counterparts, each of which shall be deemed an original, but all
of which constitute but one agreement.

(l) Drafting Interpretation. Preparation of this Agreement has


been a joint effort of all the parties and the resulting document shall
not be construed more severely against one of the parties than against
the others.

(m) Titles. Titles or captions of Sections or Articles contained in


this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.

IN WITNESS WHEREOF, the parties have executed this


Agreement on the date written above.

(parties)
(witnesses)
(acknowledgment)

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