EXHIBIT 10.2
INDEMNITY AGREEMENT
THIS AGREEMENT ("Agreement") is made as of ___________, 1997, by
and between XXXXXX EXPLORATION COMPANY, a Delaware corporation (the
"Company"), and ______________________ ("Indemnitee").
It is essential to the Company to attract and retain as directors
and officers the most capable persons available. The substantial increase
in corporate litigation subjects directors and officers of publicly-traded
companies to expensive litigation risks at the same time that the
availability of economic directors' and officers' liability insurance has
been severely limited. In furtherance of the express policy of the Company
to indemnify its directors and officers so as to provide them with the
maximum possible protection permitted by law, and in consideration of
Indemnitee's agreement to serve as a director or officer of the Company,
the parties are entering into this Agreement.
ACCORDINGLY, the parties agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement:
(a) "Expenses" means all costs, expenses and obligations paid or
incurred in connection with investigating, litigating, being a witness
in, defending or participating in, or preparing to litigate, defend,
be a witness in or participate in any matter that is the subject of a
Proceeding (as defined below), including attorneys' and accountants'
fees and court costs.
(b) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation, whether
brought by or in the right of the Company or otherwise and whether of
a civil, criminal, administrative or investigative nature, in which
Indemnitee may be or may have been involved as a party or otherwise by
reason of the fact that Indemnitee is or was a director, officer,
employee, agent or fiduciary of the Company, or by reason of any
action taken by Indemnitee or any inaction on Indemnitee's part while
acting as a director, officer, employee, agent or fiduciary of the
Company, or by reason of the fact that Indemnitee is or was serving at
the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or
other enterprise.
(c) "Resolution Costs" includes any amount paid in connection
with a Proceeding and in satisfaction of a judgment, fine, penalty or
any amount paid in settlement.
SECTION 2. AGREEMENT TO SERVE. Indemnitee agrees to serve as a
director and/or officer of the Company for so long as Indemnitee is duly
elected or appointed or until the tender of Indemnitee's written
resignation.
SECTION 3. INDEMNIFICATION. The indemnification provided under this
Agreement shall be as follows:
(a) The Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee in connection with any
Proceeding. Additionally, in any Proceeding other than a Proceeding
by or in the right of the Company, the Company shall indemnify
Indemnitee against all Resolution Costs actually and reasonably
incurred by Indemnitee in connection with the Proceeding. No
indemnification shall be made under this subsection:
(i) with respect to remuneration paid to Indemnitee if it
is determined by a final judgment or other final adjudication
that the remuneration was in violation of law;
(ii) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the
purchase or sale by Indemnitee of securities of the Company
pursuant to the provisions of Section 16 of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state or local law;
(iii) on account of Indemnitee's conduct that is determined
by a final judgment or other final adjudication to have been
knowingly fraudulent, deliberately dishonest or willful
misconduct;
(iv) on account of Indemnitee's conduct that a final
judgment or other final adjudication is determined to have been
in bad faith, in opposition to best interests of the Company or
produced an unlawful personal benefit;
(v) with respect to a criminal proceeding if the Indemnitee
knew or reasonably should have known that Indemnitee's conduct
was illegal; or
(vi) if a final decision by a court having jurisdiction in
the matter determines that indemnification under this Agreement
is not lawful.
(b) In addition to any indemnification provided under Subsection
3(a) above, the Company shall indemnify Indemnitee against any
Expenses or Resolution Costs incurred by Indemnitee, regardless of the
-2-
nature of the Proceeding that Expenses and/or Resolution Costs were
incurred, if the Expenses or Resolution Costs would have been covered
under any directors' and officers' liability insurance policies in
effect on the effective date of this Agreement or that become
effective on any later date.
(c) In addition to any indemnification provided under
Subsections 3(a) and 3(b) above, the Company shall provide Indemnitee,
to the fullest extent allowed by law as now or later enacted or
interpreted, with indemnification against any Expenses and/or
Resolution Costs incurred by Indemnitee in connection with any
Proceeding. To the extent a change in the laws of the State of
Delaware (whether by statute or judicial decision) permits greater
indemnification, either by agreement or otherwise, than presently
provided by law or this Agreement, it is the intent of the parties
that Indemnitee shall enjoy by this Agreement the greater benefits
afforded by the change.
(d) Without limiting Indemnitee's right to indemnification under
any other provision of this Agreement, the Company shall indemnify
Indemnitee in accordance with the provisions of this subsection if
Indemnitee is a party to or threatened to be made a party to or
otherwise involved in any Proceeding by or in the right of the Company
to procure a judgment in its favor by reason of the fact that
Indemnitee was or is a director and/or officer of the Company or is or
was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against all Expenses actually and
reasonably incurred by Indemnitee and any amounts paid by Indemnitee
in settlement of the Proceeding, but only if Indemnitee acted in good
faith in a manner that Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, except that no
indemnification shall be made under this subsection in respect of any
claim, issue or matter that Indemnitee shall have been adjudged to be
liable to the Company in the performance of his duty to the Company,
unless and only to the extent that any court in which the Proceeding
was brought determines upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity, in which
event indemnification shall be limited to expenses actually and
reasonably incurred.
(e) Notwithstanding anything in this Agreement to the contrary,
before a Change in Control (as defined in Section 5 below), Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in
connection with any Proceeding initiated by Indemnitee against the
Company or any director, officer, employee, agent or fiduciary of the
Company (in such capacity) unless the Company has joined in or
consented to the initiation of the Proceeding.
-3-
SECTION 4. PAYMENT OF INDEMNIFICATION.
(a) Expenses incurred by the Indemnitee and subject to
indemnification under Section 3 above shall be paid directly by the
Company or reimbursed to the Indemnitee within two (2) days after the
receipt of a written request of the Indemnitee providing that
Indemnitee undertakes to repay any amount paid or advanced under this
Section to the extent that it is ultimately determined that Indemnitee
is not entitled to indemnification under Section 3.
(b) Except as otherwise provided in Section 4(a) above, any
indemnification under Section 3 above shall be made no later than
thirty (30) days after receipt by the Company of the written request
of Indemnitee, unless within that 30-day period the Board of
Directors, by a majority vote of a quorum consisting of directors who
are not parties to the Proceeding, determines that the Indemnitee is
not entitled to the indemnification set forth in Section 3 or unless
the Board of Directors refers the Indemnitee's indemnification request
to independent legal counsel. In cases where there are no directors
who are not parties to the Proceeding, the indemnification request
shall be referred to independent legal counsel. If the
indemnification request is referred to independent legal counsel, then
Indemnitee shall be paid no later than forty-five (45) days after
Indemnitee's initial request to the Company unless within that time
independent legal counsel presents to the Board of Directors a written
opinion stating in unconditional terms that indemnification is not
allowed under Section 3 of this Agreement. If a Change in Control
occurs and results in individuals who were directors before the
circumstances giving rise to the Change in Control ceasing for any
reason to constitute a majority of the Board of Directors, the above
determination, if any, shall be made by independent legal counsel and
not the Board of Directors. The Company agrees to pay the reasonable
fees of the independent legal counsel and to fully indemnify that
counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant to this Agreement. If there has
not been a Change in Control, independent legal counsel shall be
selected by the Board of Directors, and if there has been a Change in
Control, the independent legal counsel shall be selected by
Indemnitee.
(c) The right to indemnification payments as provided by this
Agreement shall be enforceable by Indemnitee in any court of competent
jurisdiction. The burden of proving that indemnification is not
permitted by this Agreement shall be on the Company or on the person
challenging the indemnification. Neither the failure of the Company,
including its Board of Directors, to have made a determination prior
to the commencement of any Proceeding that indemnification is proper,
-4-
nor an actual determination by the Company, including its Board of
Directors or independent legal counsel, that indemnification is not
proper, shall bar an action by Indemnitee to enforce this Agreement or
create a presumption that Indemnitee is not entitled to
indemnification under this Agreement. If the Board of Directors or
independent legal counsel determines in accordance with Section 4(b)
above that Indemnitee would not be permitted to be indemnified in
whole or in part, Indemnitee shall have the right to commence
litigation in any court in the State of Michigan having subject
matter jurisdiction and that venue is proper seeking an independent
determination by the court or challenging the determination by the
Board of Directors or independent legal counsel, and the Company
hereby consents to service of process and to appear in that
Proceeding. Expenses incurred by Indemnitee in connection with
successfully establishing Indemnitee's right to indemnification, in
whole or in part, shall also be reimbursed by the Company.
SECTION 5. ESTABLISHMENT OF TRUST. In the event of a Potential
Change in Control of the Company (as defined below), the Company shall,
upon written request by Indemnitee, create a trust for the benefit of the
Indemnitee and from time to time upon written request of Indemnitee shall
fund the trust in an amount sufficient to satisfy any and all Expenses or
Resolution Costs that may properly be subject to indemnification under
Section 3 above anticipated at the time of each request. The amount or
amounts to be deposited in the trust pursuant to this funding obligation
shall be determined by a majority vote of a quorum consisting of directors
who are not parties to the Proceeding or the Chief Executive Officer of the
Company. If all of those individuals are parties to the Proceeding, the
amount or amounts to be deposited in the trust shall be determined by
independent legal counsel. The terms of the trust shall provide that upon
a Change in Control (i) the trust shall not be revoked or the principal of
the trust fund invaded, without the written consent of the Indemnitee; (ii)
the trustee shall advance, within two (2) business days of a request by the
Indemnitee, any amount properly payable to Indemnitee under Subsection 4(a)
of this Agreement; (iii) the trust shall continue to be funded by the
Company in accordance with the funding obligation set forth above; (iv) the
trustee shall promptly pay to the Indemnitee all amounts that the
Indemnitee shall be entitled to indemnification pursuant to this Agreement
or otherwise; and (v) all unexpended funds in the trust shall revert to the
Company upon a final determination by a court of competent jurisdiction
that the Indemnitee has been fully indemnified under the terms of this
Agreement. The trustee shall be chosen by the Indemnitee and shall be a
national or state bank having a combined capital and surplus of not less
than $50,000,000. At the time of each draw from the trust fund, the
Indemnitee shall provide the trustee with a written request providing that
Indemnitee undertakes to repay the amount to the extent that it is
ultimately determined that Indemnitee is not entitled to indemnification.
Any funds, including interest or investment earnings, remaining in the
-5-
trust fund shall revert and be paid to the Company if (i) a Change in
Control has not occurred; and (ii) if the Board of Directors or the Chief
Executive Officer of the Company determines that the circumstances giving
rise to that particular funding of the trust no longer exists. Nothing in
this section shall relieve the Company of any of its obligations under this
Agreement.
For purposes of this Agreement, the following definitions shall
apply:
(a) "Change in Control" shall mean (i) the failure of the
Continuing Directors at any time to constitute at least a majority of
the members of the Company's Board of Directors; (ii) the acquisition
by any Person (as defined in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) other than an
Excluded Holder of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Act) of twenty percent (20%) or more of
the outstanding Common Stock or the combined voting power of the
Company's outstanding securities entitled to vote generally in the
election of directors; (iii) the approval by the shareholders of the
Company of a reorganization, merger or consolidation, unless with or
into a Permitted Successor; or (iv) the approval by the shareholders
of the Company of a complete liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets
of the Company other than to a Permitted Successor.
(b) "Continuing Directors" mean the individuals constituting the
Company's Board of Directors as of the date of this Agreement and any
subsequent directors whose election or nomination for election by the
Company's shareholders was approved by a vote of two-thirds (2/3) of
the individuals who are then Continuing Directors, but specifically
excluding any individual whose initial assumption of office occurs as
a result of either an actual or threatened election contest (as the
term is used in Rule 14a-11 of Regulation 14A promulgated under the
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Company's Board of
Directors.
(c) "Excluded Holder" means the Company, a Subsidiary or any
employee benefit plan (i.e., any plan or program established by the
Company or a Subsidiary for the compensation or benefit of employees
of the Company or any of its Subsidiaries) of the Company or a
Subsidiary or any trust holding Common Stock or other securities
pursuant to the terms of an employee benefit plan.
(d) "Permitted Successor" means a corporation that, immediately
following the consummation of a transaction specified in clauses (iii)
and (iv) of the definition of "Change in Control" above, satisfies
-6-
each of the following criteria: (A) sixty percent (60%) or more of
the outstanding common stock of the corporation and the combined
voting power of the outstanding securities of the corporation entitled
to vote generally in the election of directors (in each case
determined immediately following the consummation of the applicable
transaction) is beneficially owned, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Company's outstanding Common Stock and outstanding securities entitled
to vote generally in the election of directors (respectively)
immediately prior to the applicable transaction, (B) no Person other
than an Excluded Holder beneficially owns, directly or indirectly,
twenty percent (20%) or more of the outstanding common stock of the
corporation or the combined voting power of the outstanding securities
of the corporation entitled to vote generally in the election of
directors (for these purposes the term Excluded Holder shall include
the corporation, any Subsidiary of the corporation and any employee
benefit plan of the corporation or any such Subsidiary or any trust
holding common stock or other securities of the corporation pursuant
to the terms of any such employee benefit plan), and (C) at least a
majority of the board of directors is comprised of Continuing
Directors.
(e) "Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization or other entity or governmental body.
(f) A "Potential Change in Control" shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation
of that would result in the occurrence of a Change in Control; (ii)
any person (including the Company) publicly announces an intention to
take or to consider taking actions that once consummated would
constitute a Change in Control; or (iii) the Board of Directors adopts
a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(g) "Subsidiary" means any corporation or other entity of which
fifty percent (50%) or more of the outstanding voting stock or voting
ownership interest is directly or indirectly owned or controlled by
the Company or by one or more Subsidiaries of the Company.
SECTION 6. PARTIAL INDEMNIFICATION; SUCCESSFUL DEFENSE. If
Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses or
Resolution Costs actually and reasonably incurred by Indemnitee but not,
however, for the total amount, the Company shall nevertheless indemnify
Indemnitee for the portion of the Expenses or Resolution Costs that
Indemnitee is entitled. Moreover, notwithstanding any other provision of
-7-
this Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any or all claims relating in whole or in
part to a Proceeding or in defense of any issue or matter in a Proceeding,
including dismissal without prejudice, Indemnitee shall be indemnified
against all Expenses incurred in connection with that Proceeding.
SECTION 7. CONSENT. Unless a Change in Control has occurred, the
Company shall not be liable to indemnify Indemnitee under this Agreement
for any amounts paid in settlement of any Proceeding made without the
Company's written consent. The Company shall not settle any Proceeding in
any manner that would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Company nor the
Indemnitee shall unreasonably withhold their consent to any proposed
settlement.
SECTION 8. SEVERABILITY. If this Agreement or any portion of this
Agreement (including any provision within a single section, subsection or
sentence) shall be held to be invalid, void or otherwise unenforceable on
any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify Indemnitee as to any Expenses or Resolution Costs
with respect to any Proceeding to the full extent permitted by law or any
applicable portion of this Agreement that shall not have been invalidated,
declared void or otherwise held to be unenforceable.
SECTION 9. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The
indemnification provided by this Agreement shall be in addition to any
other rights that Indemnitee may be entitled under the Certificate of
Incorporation, the Bylaws, any agreement, any vote of shareholders or
disinterested directors, the Delaware General Corporation Law, or
otherwise, both as to actions in Indemnitee's official capacity and as to
actions in another capacity while holding office.
SECTION 10. NO PRESUMPTION. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon
a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct
or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law.
SECTION 11. SUBROGATION. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of the payment to
all of the rights of recovery of Indemnitee, who shall execute all
documents required and shall do everything that may be necessary to secure
those rights, including the execution of all documents necessary to enable
the Company to effectively bring suit to enforce those rights.
-8-
SECTION 12. NO DUPLICATION OF PAYMENTS. The Company shall not be
liable under this Agreement to make any payment to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, Bylaw
or otherwise) of the amounts otherwise indemnifiable under this Agreement.
SECTION 13. NOTICE. Indemnitee shall, as a condition precedent to
his right to be indemnified under this Agreement, give to the Company
notice in writing as soon as practicable of any claim for which indemnity
will or could be sought under this Agreement. Notice to the Company shall
be directed to Xxxxxx Exploration Company, 0000 Xxxxx Xxxxxx Xxxx, Xxxxxxxx
Xxxx, Xxxxxxxx 00000, Attention: Chairman of the Board, with a copy to the
President (or to any other individual or address that the Company
designates in writing to Indemnitee). Notice shall be deemed received
three (3) days after the date postmarked if sent by prepaid mail properly
addressed. In addition, Indemnitee shall give the Company any information
and cooperation that it may reasonably require and is within Indemnitee's
power to give.
SECTION 14. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original, and all
of which taken together shall constitute a single document.
SECTION 15. CONTINUATION OF INDEMNIFICATION. The indemnification
rights provided to Indemnitee under this Agreement, including the right
provided under Subsection 4(a) above, shall continue after Indemnitee has
ceased to be a director, officer, employee, agent or fiduciary of the
Company or any other corporation, partnership, joint venture, trust or
other enterprise that Indemnitee served in any of those capacities at the
request of the Company.
SECTION 16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company and Indemnitee and their
respective successors and assigns, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company, spouses, heirs,
and personal and legal representatives.
SECTION 17. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in that State without giving effects
to the principles of conflicts of laws.
SECTION 18. LIABILITY INSURANCE. To the extent the Company maintains
an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by the policy or policies,
in accordance with its or their terms, to the maximum extent of the
coverage available for any officer, employee, agent or fiduciary of the
Company.
-9-
SECTION 19. PERIOD OF LIMITATIONS. No legal action shall be brought
and no cause of action shall be asserted by or on behalf of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse,
heirs, executors or personal or legal representatives after the expiration
of two (2) years from the date of accrual of the cause of action, and any
claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within the two (2) year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any cause of
action the shorter period shall govern.
SECTION 20. AMENDMENTS; WAIVER. No supplement, modification,
amendment, or waiver of this Agreement or any of its terms shall be binding
unless executed in writing by all of the parties to this Agreement or, in
the case of waiver, by the party against whom the waiver is asserted. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions of this Agreement (whether or
not similar) nor shall any waiver constitute a continuing waiver.
The parties have executed this Agreement as of the date stated in the
first paragraph of this Agreement.
ATTEST: XXXXXX EXPLORATION COMPANY
___________________________ By _____________________________________
Secretary
Its _________________________________
INDEMNITEE
________________________________________
-10-
