EXHIBIT 10.1
AGREEMENT, entered into as of November 20, 1996, and made retroactively
effective as of June 24, 1996, between Kideo Productions, Inc., a Delaware
corporation (the "Company"), having its principal executive offices at 000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Xxxxxxx X. Xxxxxx* (the "Indemnitee"),
whose address is c/o Kideo Productions, Inc., 000 Xxxxxxxx, Xxx Xxxx, XX 00000.
WHEREAS, it is essential to the Company to retain and attract as directors
and officers the most capable persons available; and the Indemnitee is a
director or officer of the Company;
WHEREAS, on June 24, 1996 the Securities and Exchange Commission declared
effective the Company's Registration Statement relating to the initial public
offering of its Common Stock and Redeemable Warrants (the "IPO"), and both
Company and the Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors and officers of public companies in
today's environment;
WHEREAS, substantial changes in the marketplace for director and officer
liability insurance it has made it increasingly more difficult to obtain and
maintain such insurance on terms providing reasonable protection at reasonable
cost;
WHEREAS, the Certificate of Incorporation and By-Laws of the Company
require the Company to indemnify its directors and officers to the full extent
permitted by law; and the Certificate of Incorporation requires the Company to
advance expenses to them in connection therewith; and the Indemnitee has been
serving and continues to serve as a director or officer of the Company in part
in reliance on such requirements;
WHEREAS, in recognition of (i) the Indemnitee's need for substantial
protection against personal liability in order to enhance the Indemnitee's
continued service to the Company in an effective manner, (ii) the increasing
difficulty in obtaining satisfactory director and officer liability insurance
coverage, and (iii) the Indemnitee's reliance on the aforesaid Certificate of
Incorporation and By-Laws, and also in part to provide the Indemnitee with
specific contractual assurance that the protection promised by such Certificate
of Incorporation and By-Laws will be available to the Indemnitee (regardless of,
among other things, any amendment thereto or revocation thereof, or any change
in the composition of the Company's Board of Directors, or any acquisition
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[*Note: Agreements identical to this one in every respect were also entered into
(and made retroactively effective) as of the same dates as above with the
following persons (who, together with Xx. Xxxxxx, constitute all of the
Company's directors and executive officers: Xxxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxx,
Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx,
Xxxxxx Xxxx, and Xxxxxxx Xxxx.]
transaction relating to the Company), the Company wishes to provide in this
Agreement for the indemnification of and the advancing of expenses to the
Indemnitee to the fullest extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is maintained,
for the continued coverage of the Indemnitee under the Company's directors' and
officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and of the Indemnitee
continuing to serve the Company directly or, at its request, another enterprise,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Certain Definitions.
"Beneficial Owner" and "Beneficial Ownership" -- shall have the meanings
ascribed to such terms in Rule 13d-3 under the Exchange Act or in any successor
rule or regulation thereto.
"Change in Control" -- shall be deemed to have occurred if:
(i) any Person (other than an Excluded Person) becomes, after the IPO, the
Beneficial Owner, directly or indirectly, of securities of the Company
representing fifteen percent (15%) or more of the total voting power represented
by the Company's then-outstanding Voting Securities; or
(ii) during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors (or nomination for
election by the Company's stockholders) was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least eighty (80%) of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of (in
one transaction or a series of transactions) all or substantially all the
Company's assets.
"Claim" -- any threatened, pending or completed action, suit or proceeding,
whether instituted by the Company or any other party; or any inquiry or
investigation that the Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding; in each case whether civil,
criminal, administrative, investigative or other.
"Exchange Act" -- the Securities Exchange Act of 1934, as amended, or any
successor statute thereto.
"Excluded Person" -- any trustee or other fiduciary holding securities
under an employee benefit plan of the Company; or any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company; or Xxxxxxx X.
Xxxxxx or any Group of which he is part.
"Expenses" -- include attorneys' fees and all other costs, expenses,
liabilities and obligations paid or incurred (including on appeal) in connection
with investigating, defending, being a witness in or participating in, or
preparing to defend, be a witness in or participate in, any Claim relating to
any Indemnifiable Event.
"Group" -- any "group" as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (or in the corresponding sections or other provisions of any
successor statute thereto).
"Indemnifiable Event" -- any event or occurrence related to the fact that
the Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, managing member, trustee, agent or fiduciary of another
corporation, partnership, limited liability company, joint venture, employee
benefit plan, trust or other enterprise, or by reason of anything done or not
done by the Indemnitee in any such capacity.
"Independent Legal Counsel" -- an attorney or firm of attorneys, selected
in accordance with the provisions of Section 3, who shall not have otherwise
performed services for the Company or the Indemnitee within the last three (3)
years (other than with respect to matters concerning the rights of the
Indemnitee under this Agreement or of other indemnitees under similar indemnity
agreements).
"Person" -- any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (or in the corresponding sections or other provisions of any
successor statute thereto).
"Potential Change in Control" -- shall be deemed to have occurred if: (i)
the Company enters into an agreement the consummation of which would result in
the occurrence of a Change in Control; (ii) any Person (including the Company,
but excluding Xxxxxxx X. Xxxxxx or any Group of which he is part) publicly
announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any Person (other than
an Excluded Person) who currently is, or after the IPO becomes, the Beneficial
Owner, directly or indirectly, of securities of the Company representing nine
percent (9.0%) or more of the combined voting power of the Company's then
outstanding Voting Securities, increases his Beneficial Ownership of such
securities by five percentage points (5%) or more over the percentage so owned
by such Person; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
"Reviewing Party" -- shall mean one of the following (as determined
pursuant to Sections 2.3 and 3.1 below): (i) any person or persons, not party to
the particular Claim for which the Indemnitee is seeking indemnification,
selected by the Board of Directors from among its own members and/or such other
individuals as the Board may deem appropriate in its discretion; or (ii)
Independent Legal Counsel.
"Voting Securities" -- any securities of the Company which vote generally
in the election of directors.
Section 2. Basic Indemnification Arrangement.
2.1 If the Indemnitee was, is or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, then the Company shall indemnify the Indemnitee to the
fullest extent permitted by law as soon as practicable (but in any event no
later than thirty (30) days after written demand is presented to the Company)
against any and all Expenses, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of such Claim. If so requested by the
Indemnitee, the Company shall advance (within five (5) business days of such
request) any and all Expenses to the Indemnitee (an "Expense Advance").
2.2 Notwithstanding Section 2.1 above: (i) the Company shall have no
obligations under said Section if the Reviewing Party shall have determined (in
a written opinion, in any case in which the Independent Legal Counsel referred
to in Section 3 hereof is involved) that the Indemnitee would not be permitted
to be indemnified under applicable law; and (ii) the obligation of the Company
to make an Expense Advance pursuant to Section 2.1 shall be subject to the
condition that, if, when and to the extent that the Reviewing Party determines
that the Indemnitee would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by the Indemnitee (who
hereby agrees to reimburse the Company) for all such amounts theretofore paid;
provided that, if the Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination that
the Indemnitee should be indemnified under applicable law, then, until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have
been exhausted or lapsed), (a) any determination made by the Reviewing Party
that the Indemnitee would not be permitted to be indemnified under applicable
law shall not be binding, and (b) the Indemnitee shall not be required to
reimburse the Company for any Expense Advance.
2.3 If there has not been a Change in Control, then the Reviewing Party
shall be selected by the Board of Directors. If there has been such a Change in
Control (other than a Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors immediately prior to such
Change in Control), then the Reviewing Party shall be the Independent Legal
Counsel referred to in Section 3 hereof. If there has been no determination by
the Reviewing Party, or if the Reviewing Party determines that the Indemnitee
substantively would not be permitted to be indemnified in whole or in part under
applicable law, then: (i) the Indemnitee shall have the right to commence
litigation in any court in the State of Delaware having subject matter
jurisdiction thereof seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor; and (ii) the Company hereby
consents to service of process and to appear in any such proceeding.
2.4 Except as provided to the contrary in the foregoing provisions of this
Section 2 or elsewhere in this Agreement, any determination by the Reviewing
Party shall be conclusive and binding on the Company and the Indemnitee.
2.5 Notwithstanding anything in this Agreement to the contrary, the
Indemnitee shall not be entitled, prior to a Change in Control, to
indemnification pursuant to this Agreement in connection with any Claim
initiated by the Indemnitee unless the Board of Directors has authorized or
consented to the initiation of such Claim.
Section 3. Change in Control.
3.1 The Company agrees that, if there is a Change in Control of the Company
(other than a Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately prior to such Change
in Control), then with respect to all matters thereafter arising concerning the
rights of the Indemnitee to indemnity payments and Expense Advances under this
Agreement (or any other agreement or provision of the Company's Certificate of
Incorporation or By-Laws now or hereafter in effect relating to Claims for
Indemnifiable Events), the Company shall seek legal advice only from Independent
Legal Counsel selected by the Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld). Such counsel, among other things,
shall render its written opinion to the Company and the Indemnitee as to whether
and to what extent the Indemnitee would be permitted to be indemnified under
applicable law.
3.2 The Company agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to indemnify fully such 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 hereto.
Section 4. Establishment of Trust.
4.1 In the event of a Potential Change in Control, the Company shall (i)
upon written request by the Indemnitee, create a trust for the benefit of the
Indemnitee, and (ii) from time to time upon the written request(s) of the
Indemnitee, fund such trust in an amount sufficient to satisfy all of the
following: (a) all Expenses reasonably anticipated, at the time of the
Indemnitee's request at issue, to be incurred in connection with investigating,
preparing for and defending any Claim relating to an Indemnifiable Event; and
(b) all judgments, fines and penalties relating to, and all settlement amounts
of all Claims relating to, any Indemnifiable Event which, at the time of the
Indemnitee's request at issue, (1) have not previously been advanced or
reimbursed to the Indemnitee pursuant hereto and (2) have actually been paid by
the Indemnitee, or have been agreed or proposed to be paid by the Indemnitee, or
have been determined to be payable by the Indemnitee pursuant to an order or
decree of a court (or other legally constituted adjudicative body) of competent
jurisdiction, or are then otherwise reasonably anticipated to be paid by the
Indemnitee.
4.2 The trustee shall be chosen by the Indemnitee. In any case in which an
Independent Legal Counsel is the Reviewing Party, the amount or amounts to be
deposited in the trust pursuant to the foregoing funding obligation shall be
determined by such Independent Legal Counsel, whose determination shall be
Section 6. Partial Indemnity, etc.
6.1 If the Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of a Claim but not, however, for
all of the total amount thereof, then the Company shall nevertheless indemnify
the Indemnitee for the portion thereof to which the Indemnitee is entitled.
6.2 Notwithstanding any other provision of this Agreement, to the extent
that the Indemnitee has been successful on the merits or otherwise in defense of
any or all Claims relating in whole or in part to an Indemnifiable Event or in
defense of any issue or matter therein, including dismissal without prejudice,
the Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
Section 7. Burden of Proof and Presumptions.
7.1 In connection with any determination by the Reviewing Party or
otherwise as to whether the Indemnitee is entitled to be indemnified hereunder,
the burden of proof shall be on the Company to establish that the Indemnitee is
not so entitled.
7.2 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 the 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.
7.3 Prior to the commencement of legal proceedings by the Indemnitee to
secure a judicial determination that the Indemnitee should be indemnified under
applicable law, neither (i) the failure of the Reviewing Party to have made a
determination as to whether the Indemnitee has met any particular standard of
conduct or had any particular belief, nor (ii) an actual determination by the
Reviewing Party that the Indemnitee has not met such standard of conduct or did
not have such belief, shall either (a) be a defense to the Indemnitee's claim
that he should be indemnified under applicable law or (b) create a presumption
that the Indemnitee has not met any particular standard of conduct or did not
have any particular belief.
Section 8. Remedies Cumulative. The rights of the Indemnitee hereunder
shall be in addition to any other rights the Indemnitee may have under the
Company's Certificate of Incorporation or By-laws, the Delaware General
Corporation Law, or otherwise. To the extent that a change in the Delaware
General Corporation Law (whether by statute or judicial decision) permits
greater indemnification by agreement than would be afforded currently under the
Company's Certificate of Incorporation and By-laws and this Agreement, it is the
intent of the parties hereto that the Indemnitee shall enjoy by this Agreement
the greater benefits so afforded by such change. The Indemnitee's exercise of
any one of his rights or remedies available hereunder shall not preclude his
exercise of any other right or remedy then available to him, whether hereunder
or at law or in equity.
Section 9. Liability Insurance. The Company shall: (i) obtain promptly
after the date hereof, to the extent available, an insurance policy (or
policies) providing to the Indemnitee, in accordance with the terms thereof,
directors' and officers' liability insurance; and (ii) maintain such policy (or
policies) in effect for not less than five (5) years from the date hereof. At
all times during the period such policy is (or policies are) maintained, the
Indemnitee shall be covered thereby, in accordance with the terms thereof, to
the maximum extent of the coverage available for any other director or officer
of the Company. Notwithstanding the foregoing, the Company may at any time
substitute for such policy (or policies) one or more new directors' and
officers' liability insurance policies which (a) provide for substantially the
same coverage with respect to the Company's directors and officers and (b)
contain terms and conditions no less advantageous to the Indemnitee than the
then-existing policy (or policies).
Section 10. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against the
Indemnitee or the Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two (2) years from the date of accrual
of such cause of action, and any claim or cause of action of the Company shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such two-year period; provided that, if any shorter period
of limitations is otherwise applicable to any such cause of action, then such
shorter period shall govern.
Section 11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
Section 12. No Duplication or Set-Off.
12.1 The Company shall not be liable under this Agreement to make any
payment in connection with any Claim made against the Indemnitee to the extent
that the Indemnitee has otherwise actually received payment (under any insurance
policy, By-Law or otherwise) of the amounts otherwise indemnifiable hereunder.
12.2 No unpaid sums accrued, due or otherwise owing to the Indemnitee which
are owing to him from the Company (or another enterprise to which the Indemnitee
is rendering services at the Company's request) as a result of any obligations
or liabilities unrelated to the Company's obligations hereunder (any such sums,
"Unrelated Payments"), and which are subsequently paid to him, shall operate in
any way as a set-off or deduction against any amount that the Indemnitee is
entitled to receive hereunder. Similarly, no payment to the Indemnitee of any
amount that he is entitled to receive hereunder shall operate in any way as a
deduction or set-off against any Unrelated Payments. In addition, no amount that
the Indemnitee is entitled to receive hereunder shall be subject to any
deduction, counterclaim, set-off, recoupment or other reduction of any kind that
may be asserted or claimed for any reason whatsoever by the Company (or another
enterprise to which the Indemnitee is rendering services at the Company's
request).
Section 13. Governing Law; Jurisdiction; Service of Process.
13.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in such state (without giving effect to the principles of
conflicts of laws).
13.2 In respect of any action or proceeding arising out of or relating to
this Agreement or instituted hereunder, or based upon any document subsequently
delivered pursuant hereto, the Company and the Indemnitee each irrevocably (i)
consents to the jurisdiction of any state or federal court located within the
State of Delaware and (ii) waives any objection to venue, or to the
inconvenience of the forum, of any such court.
13.3 In any such action or proceeding, the Company and the Indemnitee each
hereby (i) waives personal service of any summons, complaint or other process
and (ii) agrees that service thereof may be made by certified mail (postage
prepaid, return receipt requested), by FedEx, or by U.S. Express Mail, in each
case addressed to the recipient at its address specified below, and that service
so made shall be deemed to have the same force and effect as personal service
made in compliance with all applicable Delaware laws and rules.
If to the Company: At its address specified on the first page hereof (or
at such other address as may then be the location of
the Company's principal executive offices)
If to Indemnitee: At his address specified on the first page hereof (or
at such other address as may then be the last address
of the Indemnitee's known to the Company as being the
address of his principal residence)
Section 14. Miscellaneous.
14.1 Amendments, etc. No supplement, modification, amendment or termination
of this Agreement or any part hereof shall be binding unless executed in writing
by both parties hereto.
14.2 Waivers and Delays. Any party's failure to comply or delay in
complying with any obligation, covenant or condition herein may be waived by the
party entitled to the benefits thereof only by a written instrument signed by
such party. Except to the extent that any such instrument shall expressly
provide otherwise, no waiver of any such failure, and no other failure to insist
or delay in insisting upon strict compliance with any obligation, covenant or
condition herein, shall operate as a waiver of, or estoppel with respect to, any
subsequent or other such failure (whether or not similar or identical to the
failure in question). In addition, no failure or delay on the part of any party
in exercising any right, remedy, power or privilege hereunder shall operate as a
waiver thereof unless (i) the same is subsequently expressly waived in a written
instrument signed by such party or (ii) this Agreement expressly provides that
the same may be exercised only at or during a specified time.
14.3 Binding Effect, etc. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto 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
and/or assets of the Company), spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
the Indemnitee continues to serve as an officer or director of the Company or of
any other enterprise at the Company's request. This Agreement supersedes all
prior oral and written agreements and understandings (if any) between the
Indemnitee and the Company concerning any contractual right of the Indemnitee to
be indemnified by the Company upon grounds or under circumstances identical or
similar to those contemplated herein.
14.4 Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect,
and of the remaining provisions hereof, shall not be in any way impaired and
shall remain enforceable to the fullest extent permitted by law.
14.5 Headings; Counterparts. Section headings are used for convenience only
and shall in no way affect the construction of this Agreement. This Agreement
may be executed in any number of counterparts, each of which shall be deemed an
original, and all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
KIDEO PRODUCTIONS, INC.
By /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
President
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
