Exhibit 10.5
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement"), dated as of June
___, 2005, is made by and between Orchids Paper Products Company, a Delaware
corporation (the "Company") and _________________ (the "Indemnitee"), an "agent"
(as hereinafter defined) of the Company.
R E C I T A L S
A. The Company recognizes that competent and experienced persons
are reluctant to serve as directors or officers of corporations unless they are
protected by comprehensive liability insurance or indemnification, or both, due
to increased exposure to litigation costs and risks resulting from their service
to such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors and officers;
B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors and officers with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take;
C. The Company and the Indemnitee recognize that plaintiffs often
seek damages in such large amounts and the costs of litigation may be so
enormous (whether or not the case is meritorious), that the defense and/or
settlement of such litigation is often beyond the personal resources of
directors and officers;
D. The Company believes that it is unfair for its directors and
officers to assume the risk of huge judgments and other expenses which may occur
in cases in which the
director or officer received no personal profit and in cases where the director
or officer was not culpable;
E. The Company, after reasonable investigation, has determined that
the liability insurance coverage presently available to the Company may be
inadequate to cover all possible exposure for which the Indemnitee should be
protected. The Company believes that the interests of the Company and its
stockholders would best be served by a combination of such insurance and the
indemnification by the Company of the directors and officers of the Company;
F. Section 145 of the General Corporation Law of Delaware ("Section
145"), under which the Company is organized, empowers the Company to indemnify
its officers, directors, employees and agents by agreement and to indemnify
persons who serve, at the request of the Company, as the directors, officers,
managers, employees or agents of other corporations or enterprises, and
expressly provides that the indemnification provided by Section 145 is not
exclusive;
G. The Board of Directors has determined that contractual
indemnification as set forth herein is not only reasonable and prudent but
necessary to promote the best interests of the Company and its stockholders;
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company; and
I. The Indemnitee is willing to serve, or to continue to serve, the
Company, only on the condition that he or she is furnished the indemnity
provided for herein.
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A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. Definitions
(a) Agent. For purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, manager, employee or
other agent of the Company or a subsidiary of the Company; or is or was serving
at the request of the Company or a subsidiary of the Company as a director,
officer, manager, employee or agent of another foreign or domestic corporation,
partnership, limited liability company, joint venture, trust or other
enterprise; or was a director, officer, manager, employee or agent of a foreign
or domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company; or was a director, officer, manager, employee or
agent of another foreign or domestic corporation, partnership, limited liability
company, joint venture, trust or other enterprise at the request of, for the
convenience of, or to represent the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses"
includes all direct and indirect costs of any type or nature whatsoever
(including, without limitation, reasonable attorneys' fees and related
disbursements, other out-of-pocket costs and reasonable compensation for time
spent by the Indemnitee for which he or she is not otherwise compensated by the
Company or any third party, provided that the rate of compensation and estimated
time involved is approved by the Board of Directors, which approval shall not be
unreasonably withheld), actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense, settlement and/or appeal of a
proceeding or establishing or enforcing a
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right to indemnification under this Agreement, Section 145 or otherwise,
excluding the amount of any settlement, judgment, fine or penalty.
(c) Proceedings. For the purpose of this Agreement,
"proceeding" shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(d) Subsidiary. For purposes of this Agreement,
"subsidiary" means any foreign or domestic corporation, partnership, limited
liability company, joint venture, trust or other enterprise of which more than
50% of the outstanding voting securities (or comparable interests) are owned
directly or indirectly by the Company, by the Company and one or more other
subsidiaries, or by one or more other subsidiaries.
(e) Miscellaneous. For purposes of this Agreement,
"other enterprise" shall include employee benefit plans; references to "fines"
shall include any excise tax assessed with respect to any employee benefit
plans; references to "serving at the request of the Company" shall include any
service as a director, officer, manager, employee or agent of the Company which
imposes duties on, or involves services by, such director, officer, manager,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; any person who acts in good faith and in a manner he or she
reasonably believes to be in the best interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
(f) Company. "Company" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power
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and authority to indemnify its directors, officers, managers, employees or
agents, so that any person who is or was a director, officer, manager, employee
or agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, manager, employee or agent
of another corporation, partnership, limited liability company, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Agreement with respect to the resulting or surviving corporation as he
or she would have with respect to such constituent corporation if its separate
existence had continued.
2. Agreement to Serve. The Indemnitee agrees to serve and/or
continue to serve as an agent of the Company, at its will (or under separate
agreement, if such agreement now or hereafter exists), in the capacity
Indemnitee currently serves (or in such other positions which he or she agrees
to assume) as an agent of the Company, so long as he or she is duly appointed or
elected and qualified in accordance with the applicable provisions of the Bylaws
of the Company, any subsidiary of the Company, or any applicable other foreign
or domestic corporation, partnership, limited liability company, joint venture,
trust or other enterprise, or until such time as he or she tenders his or her
resignation in writing, provided, however, that nothing contained in this
Agreement is intended to create any right to continued employment by Indemnitee
in any capacity.
3. Indemnity in Third Party Proceedings. The Company shall
indemnify the Indemnitee if the Indemnitee is a party to or threatened to be
made a party to or otherwise involved in any proceeding (other than a proceeding
by or in the name of the Company to procure judgment in its favor) by reason of
the fact that the Indemnitee is or was an agent of the Company, or by reason of
any act or inaction by him or her in any such capacity, against any and all
expenses and liabilities of any type whatsoever (including, but not limited to,
settlements,
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judgments, fines and penalties), actually and reasonably incurred by him or her
in connection with the investigation, defense, settlement or appeal of such
proceeding, unless it is determined that the Indemnitee did not act in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any proceeding by judgment, order of court, settlement,
conviction or on plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not act in good faith in a
manner which he or she reasonably believed to be in the best interests of the
Company, and with respect to any criminal proceedings, that such person had
reasonable cause to believe that his or her conduct was unlawful.
4. Indemnity in Derivative Action. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or otherwise involved in any proceeding by or in the name of the Company to
procure a judgment in its favor by reason of the fact that the Indemnitee is or
was an agent of the Company, or by reason of any act or inaction by him or her
in any such capacity, against all expenses actually and reasonably incurred by
the Indemnitee in connection with the investigation, defense, settlement and/or
appeal of such proceeding, unless it is determined that the Indemnitee did not
act in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification
under this subsection shall be made in respect of any claim, issue or matter as
to which the Indemnitee shall have been finally adjudged to be liable to the
Company by a court of competent jurisdiction, unless and only to the extent that
any court in which such proceeding was brought or another court of competent
jurisdiction shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of
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the case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper.
5. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement, to the extent that the
Indemnitee has been successful on the merits or otherwise in defense of any
proceeding or in defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, the Company shall indemnify the
Indemnitee against all expenses actually and reasonably incurred in connection
with the investigation, defense or appeal of such proceeding.
6. Partial Indemnification. If the Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines or penalties), but is not entitled, however, to
indemnification for the total amount thereof, the Company shall nevertheless
indemnify the Indemnitee for the portion thereof to which the Indemnitee is
entitled.
7. Advancement of Expenses. Except as otherwise provided herein,
the Company shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement and/or appeal of any proceeding to
which the Indemnitee is a party or is threatened to be made a party by reason of
the fact that the Indemnitee is or was an agent of the Company. Indemnitee
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be finally determined that the Indemnitee is not
entitled to be indemnified by the Company as authorized by this Agreement or
otherwise. The advances to be made hereunder shall be paid by the Company to or
on behalf of the Indemnitee promptly and in any event within thirty (30) days
following delivery of a written request therefor by the Indemnitee to the
Company.
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8. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of
the commencement of or the threat of commencement of any proceeding, the
Indemnitee shall, if the Indemnitee believes that indemnification with respect
thereto may be sought from the Company under this Agreement, notify the Company
of the commencement or threat of commencement thereof, provided that the failure
to provide such notification shall not diminish Indemnitee's indemnification
hereunder, except to the extent that the Company can demonstrate that it was
actually prejudiced as a result thereof.
(b) Any indemnification requested by the Indemnitee under
Section 3 and/or 4 hereof shall be made no later than forty-five (45) days after
receipt of the written request of Indemnitee unless a determination is made
within said forty-five (45) day period (i) by the Board of Directors of the
Company by a majority vote of a quorum thereof consisting of directors who are
not parties to such proceedings, or (ii) in the event such quorum is not
obtainable, at the election of the Company, either by independent legal counsel
in a written opinion or by a panel of arbitrators, one of whom is selected by
the Company, another of whom is selected by the Indemnitee and the last of whom
is selected by the first two arbitrators so selected, that the Indemnitee has or
has not met the relevant standard for indemnification set forth in Section 3 and
4 hereof.
(c) Notwithstanding a determination under Section 8(b)
above that the Indemnitee is not entitled to indemnification with respect to any
specific proceeding, the Indemnitee shall have the right to apply to any court
of competent jurisdiction for the purpose of enforcing the Indemnitee's right to
indemnification pursuant to this Agreement. The burden of proving that the
indemnification or advances are not appropriate shall be on the Company.
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Neither the failure of the Company (including its Board of Directors or
independent legal counsel or the panel of arbitrators) to have made a
determination prior to the commencement of such action that indemnification or
advances are proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, nor an actual determination by the Company
(including its Board of Directors or independent legal counsel or the panel or
arbitrators) that the Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create any presumption that the
Indemnitee has or has not met the applicable standard of conduct.
(d) The Company shall indemnify the Indemnitee against
all expenses incurred in connection with any hearing or proceeding under this
Section 8 so long as such claims and/or defenses of the Indemnitee were made or
asserted in good faith.
9. Assumption of Defense. In the event the Company shall be
obligated to pay the expenses of any proceeding against or involving the
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel reasonably acceptable to the Indemnitee, upon
the delivery to the Indemnitee of written notice of its election to do so. After
delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
the Indemnitee with respect to the same proceeding, provided that: (i) the
Indemnitee shall have the right to employ his or her counsel in such proceeding
at the Indemnitee's expense; and (ii) if (a) the employment of counsel by the
Indemnitee is subsequently authorized in writing by the Company, (b) the Company
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of such defense, or (c) the
Company shall not, in
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fact, have employed counsel to assume the defense of such proceeding, the
reasonable fees and expenses of the Indemnitee's counsel shall be at the expense
of the Company.
10. Insurance. The Company may, but is not obligated to, obtain
directors' and officers' liability insurance ("D&O Insurance") with respect to
which the Indemnitee is named as an insured. Notwithstanding any other provision
of the Agreement, the Company shall not be obligated to indemnify the Indemnitee
for expenses, judgments, settlements, fines or penalties, which have been paid
directly to or on behalf of the Indemnitee by D&O Insurance. If the Company has
D&O Insurance in effect at the time the Company receives from the Indemnitee any
notice of the commencement of a proceeding, the Company shall give notice of the
commencement of such proceeding to the insurer in accordance with the procedures
set forth in the policy. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, to or on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policy.
11. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to the Indemnitee with respect to proceedings or claims
initiated or brought voluntarily by the Indemnitee and not by way of defense,
except with respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as
required under Section 145, but such indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board of Directors finds
it to be appropriate; or
(b) Action for Indemnification. To indemnify the
Indemnitee for any expenses incurred by the Indemnitee with respect to any
proceeding instituted by the Indemnitee
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to enforce or interpret this Agreement if the material assertions made by the
Indemnitee in such proceeding were not made in good faith or were frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of a proceeding effected
without the Company's written consent, provided such consent shall not
unreasonably withheld; or
(d) Non-compete and Non-disclosure. To indemnify the
Indemnitee in connection with proceedings or claims involving the enforcement of
non-compete and/or non-disclosure agreements or the non-compete and/or
non-disclosure provisions of employment, consulting or similar agreements the
Indemnitee may be a party to with the Company, any subsidiary of the Company or
any other applicable foreign or domestic corporation, partnership, limited
liability company, joint venture, trust or other enterprise, if any; or
(e) Certain Matters. To indemnify the Indemnitee on
account of any proceeding with respect to (i) remuneration paid to Indemnitee if
it is determined by final judgment or other final adjudication that such
remuneration was in violation of law, (ii) which final judgment is rendered
against the Indemnitee for an accounting of profits made by the purchase or sale
by Indemnitee of securities of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions
of any federal, state or local statute, (iii) which it is determined by final
judgment or other final adjudication that the Indemnitee's conduct was knowingly
fraudulent or intentionally dishonest, or (iv) which it is determined by final
judgment or other final adjudication by a court having jurisdiction in the
matter that such indemnification is not lawful; or
(f) Amounts Otherwise Covered. To indemnify the Indemnitee under
this Agreement for any amounts indemnified by the Company other than pursuant to
this
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Agreement or amounts paid to or for the benefit of Indemnitee by D&O Insurance
pursuant to Section 10 hereof.
12. Nonexclusivity. The provisions for indemnification and
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of, but shall be in addition to and shall not be deemed to diminish or
otherwise restrict, any other rights which the Indemnitee may have under any
provision of law, the Company's Certificate of Incorporation or Bylaws, in any
court in which a proceeding is brought, the vote of the Company's stockholders
or disinterested directors, other agreements or otherwise, both as to action in
his or her official capacity and to action in another capacity while occupying
his or her position as an agent of the Company. To the extent applicable law or
the Company's Certificate of Incorporation or Bylaws permit greater
indemnification than as provided for in this Agreement, the parties hereto agree
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such law or provision of Certificate of Incorporation or Bylaws, and this
Agreement shall be deemed amended without any further action by the Company or
Indemnitee to grant such greater benefits.
13. Settlement. The Company shall not settle any proceeding in any
manner that would impose any fine or other obligation on Indemnitee without the
Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold consent to any proposed settlement.
14. 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 reasonably be necessary to secure such rights, including
the execution of such documents necessary to enable
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the Company effectively to bring suit to enforce such rights. The Company shall
pay or reimburse all reasonable expenses incurred by Indemnitee in connection
with such subrogation.
15. Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.
16. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby,
and (iii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any paragraph of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifested by the provision held invalid, illegal
or unenforceable and to give effect to Section 12 and Section 15 hereof.
17. 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 to this Agreement
shall be deemed or shall constitute a waiver of
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any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
18. Continuance of Rights; Successor and Assigns. The Indemnitee's
rights hereunder shall continue after the Indemnitee has ceased acting as an
agent of the Company. The terms of this Agreement shall bind, and shall inure to
the benefit of, the successor and assigns of the parties hereto.
19. Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressee, (ii) if
mailed by certified or registered mail with postage prepaid, on the third
business day after the mailing date, or (iii) if transmitted electronically by a
means by which receipt thereof can be demonstrated. Addresses for notice to
either party are set out on the signature page hereof and may be subsequently
modified by written notice.
20. Supersedes Prior Agreement. This Agreement supersedes any
prior indemnification agreement between Indemnitee and the Company or its
predecessors.
21. Service of Process and Venue. For purposes of any claims or
proceeding to enforce this agreement, the Company consents to the jurisdiction
and venue of any federal or state court of competent jurisdiction in the states
of Delaware and Missouri, and waives and agrees not to raise any defense that
any such court is an inconvenient forum or any similar claim.
22. Governing Law. This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware. If a court of competent jurisdiction shall make a final
determination that the provisions of the law of any state other than Delaware
govern indemnification by the Company of its officers and directors, then
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the indemnification provided under this Agreement shall in all instances be
enforceable to the fullest extent permitted under such law, notwithstanding any
provision of this Agreement to the contrary.
The parties hereto have entered into this Indemnification Agreement
effective as of the date first above written.
ORCHIDS PAPER PRODUCTS COMPANY
By
-------------------------------
Name:
Title:
Address: 0000 Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Indemnitee:
By
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Name:
Address:
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