INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, made and entered into
as of the 8th day of November, 1995 ("Agreement"), by and between Paradigm Music
Entertainment Co., a Delaware corporation (the "Corporation"), and Xxxxxx X.
Xxxxxxxxx ("Indemnitee").
WHEREAS, recently, highly competent persons have become
more reluctant to serve both privately and publicly-held corporations as
directors, officers, or in other capacities, unless they are provided with
better protection from the risk of claims and actions against them arising out
of their service to and activities on behalf of such corporations; and
WHEREAS, the current impracticability of obtaining
adequate insurance and the uncertainties related to indemnification have
increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that the ability to attract and retain such persons is
in the best interests of the Corporation's shareholders and that such persons
should be assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for
the Corporation to obligate itself contractually to indemnify such persons to
the fullest extent permitted by applicable law, so that such persons will serve
or continue to serve the Corporation free from undue concern that they will not
be adequately indemnified; and
WHEREAS, this Agreement is a supplement to and in
furtherance of Article SEVENTH of the Certificate of Incorporation of the
Corporation (the "Certificate") and Article V of the By-Laws of the Corporation
("By-Laws"); any rights granted under the Certificate or By-Laws and any
resolutions adopted pursuant thereto shall not be deemed to be a substitute
therefor nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve, continue to
serve and to take on additional service for or on behalf of the Corporation on
the condition that he be indemnified according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and
the covenants contained herein, the Corporation and Indemnitee do hereby
covenant and agree as follows:
Section 1. Definitions. For purposes of this Agreement:
(a) "Change in Control" means a change in control of
the Corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule l4A of Regulation l4A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934 (the "Act"), whether or not the Corporation is then subject to such
reporting requirement; provided, however, that, without limitation, such a
Change in Control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule l3d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in office
immediately prior to such person attaining such percentage interest; (ii) the
Corporation is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of the
Board in office immediately prior to such transaction or event constitute less
than a majority of the Board thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board (including for this purpose any new director whose election or
nomination for election by the Corporation's shareholders was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the beginning of such period) cease for any reason to constitute at least a
majority of the Board.
(b) "Corporate Status" means the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Corporation
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request of
the Corporation.
(c) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Expenses" means all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(e) "Independent Counsel" means a law firm, or a member
of a law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Corporation or Indemnitee in any other matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
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(f) "Proceeding" means any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other proceeding, whether civil, criminal, administrative or investigative,
except one initiated by an Indemnitee pursuant to Section 11 of this Agreement
to enforce his rights under this Agreement.
Section 2. Services by Indemnitee. Indemnitee agrees to
serve as a director of the Corporation. Indemnitee may at any time and for any
reason resign from any such position (subject to any other contractual
obligation or any obligation imposed by operation of law).
Section 3. Indemnification - General. The Corporation
shall indemnify, and advance Expenses to, Indemnitee as provided in this
Agreement to the fullest extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement and shall cover any claims or actions arising
from or based upon the Corporation's Confidential Private Placement Memorandum
dated October 6, 1995 and the statements made therein.
Section 4. Proceedings Other Than Proceedings by or in
the Right of the Corporation. Indemnitee shall be entitled to the rights of
indemnification provided in this Section if, by reason of his Corporate Status,
he is, or is threatened to be made, a party to any threatened, pending, or
completed Proceeding, other than a Proceeding by or in the right of the
Corporation. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 5. Proceedings by or in the Right of the
Corporation. Indemnitee shall be entitled to the rights of indemnification
provided in this Section if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending, or completed
Proceeding brought by or in the right of the Corporation to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation. Notwithstanding
the foregoing, no indemnification against such Expenses shall be made in respect
of any claim, issue or matter in any such Proceeding as to which Indemnitee
shall have been adjudged to be liable to the Corporation if applicable law
prohibits such indemnification unless the Chancery Court of the State of
Delaware, or the court in which such Proceeding shall have been brought or is
pending, shall determine that indemnification against Expenses may nevertheless
be made by the Corporation.
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Section 7. Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
Section 8. Advancement of Expenses. The Corporation
shall advance all Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within twenty days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding and
prior to a determination as to whether Indemnitee is entitled to indemnification
under Section 9 below. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section 9. Procedure for Determination of Entitlement
to Indemnification.
(a) To obtain indemnification under this Agreement in
connection with any Proceeding, and for the duration thereof, Indemnitee shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Corporation shall, promptly
upon receipt of any such request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for
indemnification pursuant to Section 9(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in such case: (i) if a Change in Control shall have occurred, by Independent
Counsel (unless Indemnitee shall request that such determination be made by the
Board or the shareholders, in which case in the manner provided for in clauses
(ii) or (iii) of this Section 9(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall not
have occurred, (A) by the Board by a majority vote of a quorum consisting of
Disinterested Directors, or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if such quorum is obtainable,
if such quorum of Disinterested Directors so directs, either (x) by Independent
Counsel in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee, or (y) by the shareholders of the Corporation, as determined by such
quorum of Disinterested Directors, or a quorum of the Board, as the case may be;
or (iii) as provided in Section 10(b) of this Agreement. If it is so determined
that Indemnitee is entitled to indemnification, payment to Indemnitee shall be
made within ten (10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
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indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) If required, Independent Counsel shall be selected
as follows: (i) if a Change of Control shall not have occurred, Independent
Counsel shall be selected by the Board, and the Corporation shall give written
notice to Indemnitee advising him of the identity of Independent Counsel so
selected; or (ii) if a Change of Control shall have occurred, Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board, in which event (i) shall apply), and
Indemnitee shall give written notice to the Corporation advising it of the
identity of Independent Counsel so selected. In either event, Indemnitee or the
Corporation, as the case may be, may within 7 days after such written notice of
selection shall have been given, deliver to the Corporation or to Indemnitee, as
the case may be, a written objection to such selection. Such objection may be
asserted only on the grounds that Independent Counsel so selected does not meet
the requirements of "Independent Counsel" as defined in Section 1 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, Independent Counsel
so selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 9(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Corporation or Indemnitee may petition the Chancery
Court of the State of Delaware, or other court of competent jurisdiction, for
resolution of any objection which shall have been made by the Corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by such court or by such
other person as such court shall designate, and the person with respect to whom
an objection is so resolved or the person so appointed shall act as Independent
Counsel under Section 9(b) hereof. The Corporation shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such Independent
Counsel in connection with its actions pursuant to this Agreement, and the
Corporation shall pay all reasonable fees and expenses incident to the
procedures of this Section 9(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due commencement date of
any judicial proceeding or arbitration pursuant to Section 11(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 10. Presumption and Effects of Certain
Proceedings.
(a) If a Change of Control shall have occurred, in
making a determination with respect to entitlement to indemnification hereunder,
the person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9(a) of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or
selected under Section 9 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60 days
after receipt by the Corporation of the request
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therefor, the requisite determination of entitlement to indemnification shall be
deemed to have been made and Indemnitee shall be entitled to such
indemnification, absent (i) a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(ii) prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not to
exceed an additional 30 days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
require(s) such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; and provided, further, that the foregoing
provisions of this Section 10(b) shall not apply (i) if the determination of
entitlement to indemnification is to be made by the shareholders pursuant to
Section 9(b) of this Agreement and if (A) within 15 days after receipt by the
Corporation of the request for such determination the Board has resolved to
submit such determination to the shareholders for their consideration at an
annual meeting thereof to be held within 75 days after such receipt and such
determination is made thereat, or (B) a special meeting of shareholders is
called within 15 days after such receipt for the purpose of making such
determination, such meeting is held for such purpose within 60 days after having
been so called and such determination is made thereat, or (ii) if the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9(b) of this Agreement.
(c) The termination of any Proceeding or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.
Section 11. Remedies of Indemnitee.
(a) In the event that (i) a determination is made
pursuant to Section 9 of this Agreement, (ii) advancement of Expenses is not
timely made pursuant to Section 8 of this Agreement, (iii) the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 9(b) of this Agreement and such determination shall not have been made
and delivered in a written opinion within 90 days after receipt by the
Corporation of the request for indemnification, (iv) payment of indemnification
is not made pursuant to Section 7 of this Agreement within ten (10) days after
receipt by the Corporation of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification or such determination is
deemed to have been made pursuant to Section 9 or 10 of this Agreement,
Indemnitee shall be entitled to an adjudication in the Chancery Court of the
State of Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by a
single arbitrator in Delaware. The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
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(b) In the event that a determination shall have been
made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred in any
judicial proceeding or arbitration commenced pursuant to this Section, the
Corporation shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed
to have been made pursuant to Section 9 or 10 of this Agreement that Indemnitee
is entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section, absent (i) a misstatement by Indemnitee of a material fact, or an
omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(ii) prohibition of such indemnification under applicable law.
(d) The Corporation shall be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to this Section
that the procedures and presumptions of this Agreement are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.
(e) In the event that Indemnitee, pursuant to this
Section, seeks a judicial adjudication of, or an award in arbitration to
enforce, his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any and all expenses (of the kinds
described in the definition of Expenses) actually and reasonably incurred by him
in such judicial adjudication or arbitration, but only if he prevails therein.
If it shall be determined in such judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
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Section 12. Non-Exclusivity; Survival of Rights;
Insurance; Subrogation.
(a) The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the certificate of incorporation or by-laws of the
Corporation, any agreement, a vote of shareholders for a resolution of
directors, or otherwise. No amendment, alteration or repeal of this Agreement or
any provision hereof shall be effective as to any Indemnitee with respect to any
action taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal.
(b) To the extent that the Corporation maintains an
insurance policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person serves at the request of the Corporation,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, employee, agent or fiduciary under such policy or policies.
(c) In the event of any payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights.
(d) The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.
Section 13. Duration of Agreement. This Agreement shall
continue until and terminate upon the later of: (a) 10 years after the date that
Indemnitee shall have ceased to serve as a director, officer, employee, agent or
fiduciary of the Corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the request of the Corporation; or (b) the final termination of all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 11 of this Agreement. This Agreement
shall be binding upon the Corporation and its successors and assigns and shall
inure to the benefit of Indemnitee and his heirs, executors and administrators.
Section 14. Severability. If any provision or
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining 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, that is not itself
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement
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containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section 15. Exception to Right of Indemnification or
Advancement of Expenses. Except as provided in Section 11(e), Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding, or any claim therein, brought or made
by him against the Corporation.
Section 16. Identical Counterparts. This Agreement may
be executed in one or more counterparts, each of which shall for all purposes be
deemed to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 17. Headings. The headings of the paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees
promptly to notify the Corporation 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.
Section 20. Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to whom
such notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to:
Xxxxxx Xxxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
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with a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Simon, Meyrowitz, Xxxxxxxxx & Schlussel
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) If to the Corporation, to:
Paradigm Music Entertainment Co.
00 Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York.
Section 22. Miscellaneous. Use of the masculine pronoun
shall be deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
PARADIGM MUSIC ENTERTAINMENT CO.
By: /s/ Xxxxxx XxXxxxxxxx
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Xxxxxx XxXxxxxxxx, President and
Chief Executive Officer
INDEMNITEE
/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
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