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EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into as of the ___ day of _____________199_, by and between Palace REIT, a
Texas real estate investment trust (the "Trust"), and the undersigned trust
manager and/or officer of the Trust (the "Indemnitee").
RECITALS
WHEREAS, it is essential to the Trust to retain and attract as trust
managers and officers the most capable persons available;
WHEREAS, the Indemnitee is a trust manager and/or officer of the
Trust;
WHEREAS, both the Trust and the Indemnitee recognize the increased
risk of litigation and other claims being asserted against trust managers and
officers of companies in today's environment;
WHEREAS, the Trust's Declaration of Trust (the "Declaration of Trust")
provides that the Trust will indemnify its trust managers and officers to the
full extent permitted by law, and the Indemnitee's willingness to serve as a
trust manager and/or officer of the Trust is based in part on the Indemnitee's
reliance on such provisions; and
WHEREAS, the Texas Real Estate Investment Trust Act, as amended (the
"Texas Statute"), expressly recognizes that the indemnification provisions of
the Texas Statute are not exclusive of any other rights to which a person
seeking indemnification may be entitled under the Declaration of Trust or
Bylaws of the Trust, a resolution of the trust managers, an agreement or as
permitted or required by common law, and this Agreement is being entered into
pursuant to and in furtherance of the Declaration of Trust and Bylaws, as
permitted by the Texas Statute and as authorized by the Declaration of Trust
and the trust managers of the Trust (the "Trust Managers"); and
WHEREAS, in recognition of the Indemnitee's need for substantial
protection against personal liability in order to enhance the Indemnitee's
continued service to the Trust in an effective manner, and the Indemnitee's
reliance on the aforesaid provisions of the Declaration of Trust, and in part
to provide the Indemnitee with specific contractual assurance that the
protection promised by such provisions will be available to the Indemnitee
(regardless of, among other things, any amendment to or revocation of such
provisions or any change in the composition of the Trust Managers or any
acquisition or business combination transaction relating to the Trust), the
Trust wishes to provide in this Agreement for the indemnification of and the
advancement of expenses to the Indemnitee as set forth in this Agreement and,
to the extent insurance is maintained, for the continued coverage of the
Indemnitee under the Trust's trust managers' and officers' liability insurance
policies.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
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1. Indemnification.
(a) In accordance with the provisions of subsection (b) of this
Section 1, the Trust shall hold harmless and indemnify the Indemnitee against
any and all expenses, liabilities and losses (including, without limitation,
investigation expenses and expert witnesses' and attorneys' fees and expenses,
judgments, penalties, fines, ERISA excise taxes and amounts paid or to be paid
in settlement) actually incurred by the Indemnitee (net of any related
insurance proceeds or other amounts received by the Indemnitee or paid by or on
behalf of the Trust on the Indemnitee's behalf), in connection with any action,
suit, arbitration or proceeding (or any inquiry or investigation, whether
brought by or in the right of the Trust or otherwise, that the Indemnitee in
good faith believes might lead to the institution of any such action, suit,
arbitration or proceeding), whether civil, criminal, administrative or
investigative, or any appeal therefrom, in which the Indemnitee is a party, is
threatened to be made a party, is a witness or is participating (a
"Proceeding") based upon, arising from, relating to or by reason of the fact
that Indemnitee is, was, shall be or shall have been a trust manager and/or
officer of the Trust or is or was serving, shall serve, or shall have served at
the request of the Trust as a trust manager, officer, partner, trustee,
employee or agent ("Affiliate Indemnitee") of another foreign or domestic
corporation or non-profit corporation, cooperative, partnership, joint venture,
trust or other incorporated or unincorporated enterprise.
(b) In providing the foregoing indemnification, the Trust shall,
with respect to a Proceeding, hold harmless and indemnify the Indemnitee to the
fullest extent required by the Texas Statute and to the fullest extent
permitted by the Express Permitted Indemnification Provisions (as hereinafter
defined) of the Texas Statute. For purposes of this Agreement, the Express
Permitted Indemnification Provisions of the Texas Statute shall mean
indemnification as permitted by Section 9.20 of the Texas Statute or by any
amendment thereof or other statutory provisions expressly permitting such
indemnification which is adopted after the date hereof (but, in the case of any
such amendment, only to the extent that such amendment permits the Trust to
provide broader indemnification rights than said law required or permitted the
Trust to provide prior to such amendment).
(c) Without limiting the generality of the foregoing, the
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1 for any expenses, liabilities and losses actually incurred in any
Proceeding initiated by or in the right of the Trust, provided that in the
event that the Indemnitee shall have been adjudged to be liable to the Trust or
shall have been adjudged liable on the basis that personal benefit was
improperly received by the Indemnitee, indemnification (i) is limited to
reasonable expenses actually incurred by the Indemnitee in connection with the
Proceeding; and (ii) shall not be made in respect of any Proceeding in which
the person shall have been found liable for wilful or intentional misconduct in
the performance of his duty to the Trust.
(d) If the Indemnitee is entitled under this Agreement to
indemnification by the Trust for some or a portion of the Indemnified Amounts
(as hereinafter defined) but not, however, for all of the total amount thereof,
the Trust shall nevertheless indemnify the Indemnitee for the portion thereof
to which Indemnitee is entitled.
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2. Other Indemnification Arrangements. The Texas Statute and the
Declaration of Trust permit the Trust to purchase and maintain insurance or
furnish similar protection or make other arrangements, including, without
limitation, securing indemnification obligations by granting a security
interest or other lien on the assets of the Trust and providing self insurance,
a letter of credit, guaranty or surety bond (collectively, the "Indemnity
Arrangements") on behalf of the Indemnitee against any liability asserted
against him or incurred by or on behalf of him in such capacity as a trust
manager or officer of the Trust or as an Affiliate Indemnitee, or arising out
of his status as such, whether or not the Trust would have the power to
indemnify him against such liability under the provisions of this Agreement or
under the Texas Statute, as it may then be in effect. The purchase,
establishment and maintenance of any such Indemnity Arrangement shall not in
any way limit or affect the rights and obligations of the Trust or of the
Indemnitee under this Agreement except as expressly provided herein, and the
execution and delivery of this Agreement by the Trust and the Indemnitee shall
not in any way limit or affect the rights and obligations of the Trust or the
other party or parties thereto under any such Indemnification Agreement. All
amounts payable by the Trust pursuant to this Section 2 and Section 1 hereof
are herein referred to as "Indemnified Amounts."
3. Advance Payment of Indemnified Amounts.
(a) The Indemnitee hereby is granted the right to receive in
advance of a final, nonappealable judgment or other final adjudication of a
Proceeding (a "Final Determination") the amount of any and all expenses,
including, without limitation, investigation expenses, expert witness' and
attorneys' fees and other expenses expended or incurred by the Indemnitee in
connection with any Proceeding or otherwise expended or incurred by the
Indemnitee (such amounts so expended or incurred being referred to as "Advanced
Amounts").
(b) In making any written request for the Advanced Amounts, the
Indemnitee shall submit to the Trust a schedule setting forth in reasonable
detail the dollar amount expended or incurred and expected to be expended.
Each such listing shall be supported by the xxxx, agreement or other
documentation relating thereto, each of which shall be appended to the schedule
as an exhibit. In addition, before the Indemnitee may receive Advanced Amounts
from the Trust, the Indemnitee shall provide to the Trust (i) a written
affirmation of the Indemnitee's good faith belief that the applicable standard
of conduct required for indemnification by the Trust has been satisfied by the
Indemnitee, and (ii) a written undertaking by or on behalf of the Indemnitee to
repay the Advanced Amounts if it shall ultimately be determined that the
Indemnitee has not satisfied any applicable standard of conduct. The written
undertaking required from the Indemnitee shall be an unlimited general
obligation of the Indemnitee but need not be secured. The Trust shall pay to
the Indemnitee all Advanced Amounts within ten (10) business days after receipt
by the Trust of all information and documentation required to be provided by
the Indemnitee pursuant to this subsection (b).
4. Procedure for Payment of Indemnified Amounts.
(a) To obtain indemnification under this Agreement, the Indemnitee
shall submit to the Trust a written request for payment of the appropriate
Indemnified Amounts, including with such request such documentation and
information as is reasonably available to the Indemnitee and
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reasonably necessary to determine whether and to what extent the Indemnitee is
entitled to indemnification. The Secretary of the Trust shall, promptly upon
receipt of such a request for indemnification, advise the Trust Managers in
writing that the Indemnitee has requested indemnification.
(b) The Trust shall pay the Indemnitee the appropriate Indemnified
Amounts unless it is established that the Indemnitee has not met any applicable
standard of conduct of the Express Permitted Indemnification Provisions. For
purposes of determining whether the Indemnitee is entitled to Indemnified
Amounts, in order to deny indemnification to the Indemnitee the Trust has the
burden of proof in establishing that the Indemnitee did not meet the applicable
standard of conduct. In this regard, a termination of any Proceeding by
judgment, order, settlement, conviction, pleading of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, does not
create a presumption that the Indemnitee did not meet the requisite standard of
conduct.
(c) Any determination that the Indemnitee has not met the
applicable standard of conduct required to qualify for indemnification shall be
made either (i) by the Trust Managers by a majority vote of a quorum
consisting of trust managers who were not parties to such action, suit or
proceeding; or (ii) by independent legal counsel (who may be the outside
counsel regularly employed by the Trust), provided that the manner in which
(and, if applicable, the counsel by which) the right to indemnification is to
be determined shall be approved in advance in writing by both the highest
ranking executive officer of the Trust who is not party to such action
(sometimes hereinafter referred to as "Senior Officer") and by the Indemnitee.
In the event that such parties are unable to agree on the manner in which any
such determination is to be made, such determination shall be made by
independent legal counsel retained by the Trust especially for such purpose,
provided that such counsel be approved in advance in writing by both the said
Senior Officer and Indemnitee and provided further, that such counsel shall not
be outside counsel regularly employed by the Trust. The fees and expenses of
counsel in connection with making said determination contemplated hereunder
shall be paid by the Trust, and if requested by such counsel, the Trust shall
give such counsel an appropriate written agreement with respect to the payment
of their fees and expenses and such other matters as may be reasonably
requested by counsel.
(d) The Trust will use its best efforts to conclude as soon as
practicable any required determination pursuant to subsection (c) above and
promptly will advise the Indemnitee in writing with respect to any
determination that the Indemnitee is or is not entitled to indemnification,
including a description of any reason or basis for which indemnification has
been denied. Payment of any applicable Indemnified Amounts will be made to the
Indemnitee within ten (10) days after any determination of the Indemnitee's
entitlement to indemnification.
(e) Notwithstanding the foregoing, the Indemnitee may, at any time
after sixty (60) days after a claim for Indemnified Amounts has been filed with
the Trust (or upon receipt of written notice that a claim for Indemnified
Amounts has been rejected, if earlier) and before three (3) years after a claim
for Indemnified Amounts has been filed, petition a court of competent
jurisdiction to determine whether the Indemnitee is entitled to indemnification
under the provisions of this Agreement, and such court shall thereupon have the
exclusive authority to make such determination unless and until such court
dismisses or otherwise terminates such action without having made such
determination. The court shall, as petitioned, make an independent
determination of whether the
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Indemnitee is entitled to indemnification as provided under this Agreement,
irrespective of any prior determination made by the Trust Managers or
independent counsel. If the court shall determine that the Indemnitee is
entitled to indemnification as to any claim, issue or matter involved in the
Proceeding with respect to which there has been no prior determination pursuant
to this Agreement or with respect to which there has been a prior determination
that the Indemnitee was not entitled to indemnification hereunder, the Trust
shall pay all expenses (including attorneys' fees) actually incurred by the
Indemnitee in connection with such judicial determination.
5. Agreement Not Exclusive; Subrogation Rights, etc.
(a) This Agreement shall not be deemed exclusive of and shall not
diminish any other rights the Indemnitee may have to be indemnified or insured
or otherwise protected against any liability, loss or expense by the Trust, any
subsidiary of the Trust or any other person or entity under any declaration of
trust, charter, bylaws, law, agreement, policy of insurance or similar
protection, vote of shareholders or Trust Managers, disinterested or not, or
otherwise, whether or not now in effect, both as to actions in the Indemnitee's
official capacity, and as to actions in another capacity while holding such
office. The Trust's obligations to make payments of Indemnified Amounts
hereunder shall be satisfied to the extent that payments with respect to the
same Proceeding (or part thereof) have been made to or for the benefit of the
Indemnitee by reason of the indemnification of the Indemnitee pursuant to any
other arrangement made by the Trust for the benefit of the Indemnitee.
(b) In the event the Indemnitee shall receive payment from any
insurance carrier or from the plaintiff in any Proceeding against the
Indemnitee in respect of Indemnified Amounts after payments on account of all
or part of such Indemnified Amounts have been made by the Trust pursuant
hereto, the Indemnitee shall promptly reimburse to the Trust the amount, if
any, by which the sum of such payment by such insurance carrier or such
plaintiff and payments by the Trust or pursuant to arrangements made by the
Trust to Indemnitee exceeds such Indemnified Amounts; provided, however, that
such portions, if any, of such insurance proceeds that are required to be
reimbursed to the insurance carrier under the terms of its insurance policy,
such as deductible or co-insurance payments, shall not be deemed to be payments
to the Indemnitee hereunder. In addition, upon payment of Indemnified Amounts
hereunder, the Trust shall be subrogated to the rights of the Indemnitee
receiving such payments (to the extent thereof) against any insurance carrier
(to the extent permitted under such insurance policies) or plaintiff in respect
of such Indemnified Amounts and the Indemnitee shall execute and deliver any
and all instruments and documents and perform any and all other acts or deeds
which the Trust deems necessary or advisable to secure such rights. Such right
of subrogation shall be terminated upon receipt by the Trust of the amount to
be reimbursed by the Indemnitee pursuant to the first sentence of this
subsection (b).
6. Insurance Coverage. In the event that the Trust maintains
trust managers' and officers' liability insurance to protect itself and any
trust manager or officer of the Trust against any expense, liability or loss,
such insurance shall cover the Indemnitee to at least the same extent as any
other trust manager or officer of the Trust.
7. Establishment of Trust. The Trust may, in its sole
discretion, create a trust (the "Indemnification Trust") for the benefit of the
Indemnitee and, to the extent such Indemnification
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Trust has been created, from time to time upon written request of Indemnitee
shall fund the Indemnification Trust in an amount sufficient to satisfy any and
all Indemnified Amounts (including Advanced Amounts) which are actually paid or
which Indemnitee reasonably determines from time to time may be payable by the
Trust under this Agreement. The amount or amounts to be deposited in the
Indemnification Trust pursuant to the foregoing funding obligation shall be
determined by the independent legal counsel appointed under Section 4 hereof.
If such Indemnification Trust is established, the terms thereof shall provide
that (i) the Indemnification Trust shall not be revoked or the principal
thereof invaded without the written consent of the Indemnitee; (ii) the trustee
of the Indemnification Trust (the "Trustee") shall advance, within ten (10)
business days of a request by the Indemnitee, any and all Advanced Amounts to
the Indemnitee (and the Indemnitee hereby agrees to reimburse the
Indemnification Trust under the circumstances under which the Indemnitee would
be required to reimburse the Trust under Section 3(b)(ii) hereof); (iii) the
Trust shall continue to fund the Indemnification Trust from time to time in
accordance with the funding obligations set forth above; (iv) the Trustee shall
promptly pay to the Indemnitee all Indemnified Amounts for which the Indemnitee
shall be entitled to indemnification pursuant to this Agreement; and (v) all
unexpended funds in the Indemnification Trust shall revert to the Trust upon a
final determination by a court of competent jurisdiction in a final decision
from which there is no further right of appeal that the Indemnitee has been
fully indemnified under the terms of this Agreement. The Trustee shall be
chosen by the Indemnitee. Nothing in this Section 7 shall relieve the Trust of
any of its obligations under this Agreement.
8. Continuation of Indemnity. All agreements and obligations of
the Trust contained herein shall continue during the period the Indemnitee is a
trust manager or officer of the Trust (or is serving at the request of the
Trust as an Affiliate Indemnitee) and shall continue thereafter for a period of
ten (10) years from the date the Indemnitee ceases to serve as a trust manager
or officer of the Trust or ceases to serve as an Affiliate Indemnitee
(whichever is later).
9. Notice and Defense of Claim. Indemnitee agrees promptly to
notify the Trust in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
expenses covered hereunder. Notwithstanding any other provision of this
Agreement, with respect to any such Proceeding or matter as to which Indemnitee
notifies the Trust of the commencement thereof:
(a) The Trust will be entitled to participate therein at its own
expense.
(b) Except as otherwise provided in this Section 9(b), to the
extent it desires, the Trust, jointly with any other indemnifying party
similarly notified, shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Indemnitee. After notice from the Trust to
Indemnitee of its election to so assume the defense thereof, the Trust shall
not be liable to Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by Indemnitee in connection with the defense
thereof other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ his own counsel in such
Proceeding or matter, but the fees and expenses of such counsel incurred after
notice from the Trust of its assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Trust; (ii) Indemnitee shall have reasonably
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concluded that there may be a conflict of interest between the Trust and
Indemnitee in the conduct of the defense of such action; or (iii) the Trust
shall not in fact have employed counsel to assume the defense of such
Proceeding or matter, in each of which cases the fees and expenses of counsel
shall be at the expense of the Trust. The Trust shall not be entitled to
assume the defense of any Proceeding or matter brought by or on behalf of the
Trust or as to which Indemnitee shall have made the conclusion provided for in
(ii) above.
(c) The Trust shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Proceeding or matter
affected without its written consent. The Trust shall not settle any
Proceeding or matter in any manner that would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the Trust nor
Indemnitee will unreasonably withhold their consent to any proposed settlement.
10. Defense Counsel. Indemnitee hereby agrees that in any
Proceeding in which Indemnitee and other past or present trust managers or
officers of the Trust (or its successor) who are entitled to indemnification
from the Trust are named defendants or respondents, Indemnitee and such other
past or present trust managers or officers shall collectively select one firm
of attorneys in any jurisdiction to defend all such defendants and respondents
in such Proceeding unless counsel for Indemnitee advises that there are issues
which may raise conflicts of interest between Indemnitee and such other
persons.
11. Indemnification for Negligence. TO THE EXTENT PERMITTED BY
THEN APPLICABLE LAW AND SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, THE
PARTIES HERETO RECOGNIZE AND ACKNOWLEDGE THAT INDEMNITEE MAY BE INDEMNIFIED IN
ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT IN PROCEEDINGS INVOLVING THE
NEGLIGENCE OF INDEMNITEE.
12. Successors; Binding Agreement. This Agreement shall be
binding on and shall inure to the benefit of and be enforceable by the Trust's
successors and assigns and by the Indemnitee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. The Trust shall require any successor or assignee
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Trust, by
written agreement in form and substance reasonably satisfactory to the Trust
and to the Indemnitee, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Trust would be required to
perform if no such succession or assignment had taken place.
13. Enforcement. The Trust has entered into this Agreement and
assumed the obligations imposed on the Trust hereby in order to induce the
Indemnitee to act as a trust manager or officer, as the case may be, of the
Trust, and acknowledges that the Indemnitee is relying upon this Agreement in
continuing in such capacity. In the event the Indemnitee is required to bring
any action to enforce rights or to collect moneys due under this Agreement and
is successful in such action, the Trust shall reimburse the Indemnitee for all
of the Indemnitee's fees and expenses in bringing and pursuing such action.
The Indemnitee shall be entitled to the advancement of Indemnified Amounts to
the full extent contemplated by Section 3 hereof in connection with such
proceeding.
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14. Severability. Each of the provisions of this Agreement is a
separate and distinct agreement independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, which other provisions shall
remain in full force and effect, and, to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of
any section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held illegal, invalid or unenforceable.
15. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by the Indemnitee and either the President and
Chief Executive Officer of the Trust or another officer of the Trust
specifically designated by the Trust Managers. No waiver by either party at
any time of any breach by the other party of, or of 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 time or at any prior or subsequent times. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas, without giving effect to the principles of conflicts of laws thereof.
16. Notices. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, as follows:
If to the Indemnitee:
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If to the Trust:
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: President
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
18. Effectiveness. This Agreement shall be effective as of the
date first above written.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
PALACE REIT
By:
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Name:
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Title:
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INDEMNITEE
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