INDEMNIFICATION AGREEMENT
This AGREEMENT is made and entered into as of the 24/th/ day of November,
1999, by and between ERC Industries, Inc., a Delaware corporation (the
"Company"), and ________________. ("Indemnitee").
WHEREAS, it is essential to the Company and its mission to retain and
attract as directors the most capable persons available;
WHEREAS, Indemnitee is a director of the Company;
WHEREAS, both the Company and Indemnitee recognize the omnipresent
risk of litigation and other claims that are routinely asserted against
directors of companies operating in the public arena in today's environment, and
the attendant costs of defending even wholly frivolous claims;
WHEREAS, it has become increasingly difficult to obtain insurance
against the risk of personal liability of directors on terms providing
reasonable protection to the individual at reasonable cost to the companies;
WHEREAS, the Bylaws of the Company provide certain indemnification
rights to the directors of the Company, and its directors have relied on this
assurance of indemnification, as provided by Delaware law;
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's continued
service to the Company in an effective manner, the increasing difficulty in
obtaining and maintaining satisfactory insurance coverage, and Indemnitee's
reliance on assurance of indemnification, the Company wishes to provide in this
Agreement for the indemnification of and the advancing of expenses to Indemnitee
to the fullest extent permitted by law (whether partial or complete) and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies;
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and Indemnitee's continuing to serve as a
director of the Company, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS:
(a) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under such Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the
Company's then outstanding Voting Securities (other than any such person or
any affiliate thereof that is such a 20% beneficial owner as of the date
hereof), or (ii) during any period of two 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
of 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 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 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 of the Company's assets.
(b) 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 Indemnitee in good faith believes might lead
to the institution of any such action, suit or proceeding, whether civil
(including intentional or unintentional tort claims), criminal,
administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other costs, expenses
and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating
to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to the fact
that 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, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by Indemnitee
in any such capacity.
(e) 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 Indemnitee within the last
five years (other than with respect to matters concerning the rights of
Indemnitee under this Agreement, or of other indemnities under similar
indemnification agreements).
(f) Reviewing Party: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any other person
or body appointed by the Company's Board of Directors who is not a party to
the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(g) Voting Securities: any securities of the Company which vote
generally in the election of directors.
2. BASIC INDEMNIFICATION ARRANGEMENT.
(a) In the event 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, the Company shall indemnify Indemnitee to the
fullest extent permitted by law as soon as practicable but in any event no
later than thirty 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 Indemnitee, the Company shall advance (within two business
days of such request) any and all Expenses to Indemnitee (an "Expense
Advance") upon compliance by Indemnitee with Section 145(e) of the Delaware
General Corporation Law.
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion, in any case in which
the Independent Legal Counsel referred to in Section 3 hereof is involved)
that 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(a) shall be subject to the condition that, if, when
and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company
shall be entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding, and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted or lapsed).
If there has not been a Change in Control, the Reviewing Party shall be
selected by the Board of Directors, and if there has been such a Change of
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), 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 Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have
the right to commence litigation in any court in Delaware having subject
matter jurisdiction thereof and in which venue is proper 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 the Company hereby consents to service of process and agrees
to appear in any such proceedings. Any determination by the Reviewing
Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
3. CHANGE IN CONTROL. 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 Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or Company Bylaw now or hereafter in effect
relating to Claims for Indemnifiable Events, the Company shall seek legal advice
only from Independent Legal Counsel selected by 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 Indemnitee as
to whether or to what extent Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify 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.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any action brought by Indemnitee (whether pursuant to Section 17
of this Agreement or otherwise) for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or Company
Bylaw now or hereafter in effect relating to Claims for Indemnifiable Events or
(ii) recovery under any directors' and officers' liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
5. PARTIAL INDEMNITY. If 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, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of 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 an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
6. BURDEN OF PROOF. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
7. NO PRESUMPTIONS. 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. In addition,
neither the failure of the Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard or conduct or had any
particular belief, or an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law shall be a defense to Indemnitee's claim or create a presumption that the
Indemnitee has not met any particular standard of conduct or did not have any
particular belief.
8. NONEXCLUSIVITY; SUBSEQUENT CHANGE IN LAW. The rights of the
Indemnitee hereunder shall be in addition to any other rights Indemnitee may
have under the Company's Bylaws or under Delaware law, or otherwise. To the
extent that a change in Delaware law (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Company's Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change.
9. LIABILITY INSURANCE. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
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 Company
director or officer.
10. AMENDMENTS, 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.
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 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.
12. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors (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), assigns, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director of the Company or of any other
enterprise at the Company's request.
14. 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 provision hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.
15. EFFECTIVE DATE. This Agreement shall be effective as of the date
hereof and shall apply to any claim for indemnification by the Indemnitee on or
after such date.
16. GOVERNING LAW. 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.
17. INJUNCTIVE RELIEF. The parties hereto agree that Indemnitee may
enforce this Agreement by seeking specific performance hereof, without any
necessity of showing irreparable harm or posting a bond, which requirements are
hereby waived, and that by seeking specific performance, Indemnitee shall not be
precluded from seeking or obtaining any other relief to which he may be
entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ERC INDUSTRIES, INC.
By:
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Title:
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