EXHIBIT 10.12
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement"), dated as of
___________________, 1999, is made by and between XXXxxxx.xxx, Inc., a
Delaware corporation (the "Company"), and _________________, a director
and/or officer of the Company (the "Indemnitee").
R E C I T A L S
WHEREAS, the Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations
unless they are protected by comprehensive liability insurance and/or
indemnification, 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;
WHEREAS, based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and
attract talented and experienced individuals to serve as officers and
directors of the Company, and to encourage such individuals to take the
business risks necessary for the success of the Company, it is necessary for
the Company contractually to indemnify officers and directors and to assume
for itself maximum liability for expenses and damages in connection with
claims against such officers and directors in connection with their service
to the Company;
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which the Company is organized ("Section 145"), empowers the
Company to indemnify by agreement its officers, directors, employees and
agents, and persons who serve, at the request of the Company, as directors,
officers, employees or agents of other corporations or enterprises, and
expressly provides that the indemnification provided by Section 145 is not
exclusive; and
WHEREAS, 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.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the meaning set forth herein:
"AGENT" of the Company means any person who is or was a director or
officer of the Company or a subsidiary of the Company; or is or was serving
at the request of, for the convenience of, or to represent the interest of
the Company or a subsidiary of the Company as a director or officer of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise or an affiliate of the Company; or was a director or officer
of another enterprise or affiliate of the Company at the request of, for the
convenience of, or to represent the interests of such predecessor
corporation. The term "enterprise" includes any employee benefit plan of the
Company, its subsidiaries, affiliates and predecessor corporations.
"EXPENSES" includes all direct and indirect costs of any type or
nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements and other out-of-pocket costs) actually and reasonably
incurred by the Indemnitee in connection with the investigation, defense or
appeal of a proceeding or establishing or enforcing a right to
indemnification or advancement of expenses under this Agreement, Section 145
or otherwise; provided, however, that expenses shall not include any
judgments, fines, ERISA excise taxes or penalties or amounts paid in
settlement of a proceeding.
"PROCEEDING" means any threatened, pending or completed action,
suit or other proceeding, whether civil, criminal, administrative,
investigative or any other type whatsoever.
"SUBSIDIARY" means any corporation of which more than 50% of the
outstanding voting securities is owned directly or indirectly by the Company,
by the Company and one or more of its subsidiaries or by one or more of the
Company's subsidiaries.
ARTICLE II
AGREEMENT TO SERVE
SECTION 2.1 AGREEMENT TO SERVE. The Indemnitee agrees to serve
and/or continue to serve as an agent of the Company, at the will of the
Company (or under separate agreement, if such agreement exists), in the
capacity the Indemnitee currently serves as an agent of the Company,
faithfully and to the best of his ability, so long as he is duly appointed or
elected and qualified in accordance with the applicable provisions of the
charter documents of the Company or any subsidiary of the Company; provided,
however, that the Indemnitee may at any time and for any reason resign from
such position (subject to any contractual obligation that the Indemnitee may
have assumed apart from this Agreement), and the Company or any subsidiary
shall have no obligation under this Agreement to continue the Indemnitee in
any such position.
ARTICLE III
INSURANCE AND INDEMNITY
SECTION 3.1 DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to
the extent that the Board determines it to be economically reasonable, maintain
a policy of directors' and
2
officers' liability insurance ("D&O Insurance"), on such terms and conditions
as may be approved by the Board.
SECTION 3.2 MANDATORY INDEMNIFICATION. Subject to Section 3.7 below,
the Company shall indemnify the Indemnitee:
(a) if the Indemnitee is a person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in the right of the Company) by reason of the fact that he is or was an agent
of the Company, or by reason of anything done or not done by him in any such
capacity, against any and all expenses and liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) actually and reasonably incurred by
him in connection with the investigation, defense, settlement or appeal of
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 Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; and
(b) if the Indemnitee is a person who was or is a party or is
threatened to be made a party to any proceeding by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is
or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of 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 Company; except that
no indemnification under this subsection shall be made in respect of any
claim, issue or matter as to which such person shall have been finally
adjudged to be liable to the Company by a court of competent jurisdiction due
to willful misconduct of a culpable nature in the performance of his duty to
the Company, unless and only to the extent that the Court of Chancery or the
court in which such proceeding was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the Court of Chancery or such other court
shall deem proper; and
Notwithstanding the foregoing, the Company shall not be obligated to
indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) to the extent such have been paid
directly to the Indemnitee by D&O Insurance.
SECTION 3.3 PARTIAL INDEMNIFICATION AND CONTRIBUTION.
(a) 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, ERISA excise taxes or penalties and amounts paid in
settlement) incurred by him in the investigation, defense, settlement or appeal
of a proceeding but is not entitled, however, to indemnification for all of the
total amount thereof,
3
then the Company shall nevertheless indemnify the Indemnitee for such total
amount except as to the portion thereof to which the Indemnitee is not
entitled to indemnification.
(c) If the Indemnitee is not entitled to the indemnification
provided in Section 3.2 for any reason other than the statutory limitations
set forth in the Delaware General Corporation Law, then in respect of any
threatened, pending or completed proceeding in which the Company is jointly
liable with the Indemnitee (or would be if joined in such proceeding), the
Company shall contribute to the amount of expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by the Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the
Company on the one hand and the Indemnitee on the other hand from the
transaction from which such proceeding arose and (ii) the relative fault of
the Company on the one hand and of the Indemnitee on the other hand in
connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Indemnitee on the other hand shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such
expenses, judgments, fines or settlement amounts. The Company agrees that it
would not be just and equitable if contribution pursuant to this Section 3.3
were determined by pro rata allocation or any other method of allocation
which does not take account of the foregoing equitable considerations.
SECTION 3.4 MANDATORY ADVANCEMENT OF EXPENSES.
(a) Subject to Section 3.7 below, the Company shall advance
all expenses incurred by the Indemnitee in connection with the investigation,
defense, settlement 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 or by reason of anything done or
not done by him in any such capacity. The Indemnitee hereby undertakes to
promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the General
Corporation Law of Delaware or otherwise. The advances to be made hereunder
shall be paid by the Company to the Indemnitee within thirty (30) days
following delivery of a written request therefor by the Indemnitee to the
Company.
(b) Notwithstanding the foregoing provisions of this Section
3.4, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
3.6(c), 3.6(d) and 3.6(e) hereof, with all references therein to
"indemnification" being deemed to refer to "advancement of expenses," and
4
the burden of proof shall be on the Company to demonstrate clearly and
convincingly that, based on the facts known at the time, the Indemnitee acted
in bad faith. The Company may not avail itself of this Section 3.4(b) as to a
given lawsuit if, at any time after the occurrence of the activities or
omissions that are the primary focus of the lawsuit, the Company has
undergone a change in control. For this purpose, a change in control shall
mean a given person or group of affiliated persons or groups increasing their
beneficial ownership interest in the Company by at least twenty (20)
percentage points without advance Board approval.
SECTION 3.5 NOTICE AND 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.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 3.5(a) hereof, the Company
has D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on
behalf of the Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such D&O Insurance policies.
(c) In the event the Company shall be obligated to advance
the expenses for any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel approved by the Indemnitee (which approval shall not be unreasonably
withheld), 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 own counsel in any such proceeding at the Indemnitee's expense; (ii) the
Indemnitee shall have the right to employ his own counsel in connection with
any such proceeding, at the expense of the Company, if such counsel serves in
a review, observer, advice and counseling capacity and does not otherwise
materially control or participate in the defense of such proceeding; and
(iii) if (A) the employment of counsel by the Indemnitee has been previously
authorized by the Company, (B) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the
Indemnitee in the conduct of any such defense or (C) the Company shall not,
in fact, have employed counsel to assume the defense of such proceeding, then
the fees and expenses of the Indemnitee's counsel shall be at the expense of
the Company.
SECTION 3.6 DETERMINATION OF RIGHT TO INDEMNIFICATION.
(a) To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section
3.4(a) or 3.4(b) of this Agreement
5
or in the defense of any claim, issue or matter described therein, the
Company shall indemnify the Indemnitee against expenses actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.
(b) In the event that Section 3.6(a) is inapplicable, or does
not apply to the entire proceeding, the Company shall nonetheless indemnify
the Indemnitee unless the Company shall prove by clear and convincing
evidence to a forum listed in Section 8.3 below that the Indemnitee has not
met the applicable standard of conduct required to entitle the Indemnitee to
such indemnification.
(c) The Indemnitee shall be entitled to select the forum in
which the validity of the Company's claim under Section 3.6(b) hereof that
the Indemnitee is not entitled to indemnification will be heard from among
the following, except that the Indemnitee can select a forum consisting of
the stockholders of the Company only with the approval of the Company:
(i) A quorum of the Board consisting of directors who are
not parties to the proceeding for which indemnification is being sought;
(ii) The stockholders of the Company;
(iii) Legal counsel mutually agreed upon by the Indemnitee
and the Board, which counsel shall make such determination in a written
opinion;
(iv) A panel of three 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; or
(v) The Court of Chancery of Delaware or other court having
jurisdiction of subject matter and the parties.
(d) As soon as practicable, and in no event later than thirty
(30) days after the forum has been selected pursuant to Section 3.6(c) above,
the Company shall, at its own expense, submit to the selected forum its claim
that the Indemnitee is not entitled to indemnification, and the Company shall
act in the utmost good faith to assure the Indemnitee a complete opportunity
to defend against such claim.
(e) If the forum selected in accordance with Section 3.c(c)
hereof is not a court, then after the final decision of such forum is
rendered, the Company or the Indemnitee shall have the right to apply to the
Court of Chancery of Delaware, the court in which the proceeding giving rise
to the Indemnitee's claim for indemnification is or was pending or any other
court of competent jurisdiction, for the purpose of appealing the decision of
such forum, provided that such right is executed within sixty (60) days after
the final decision of such forum is rendered. If the forum selected in
accordance with Section 3.6(c) hereof is a court, then the
6
rights of the Company or the Indemnitee to appeal any decision of such court
shall be governed by the applicable laws and rules governing appeals of the
decision of such court.
(f) Notwithstanding any other provision in this Agreement to
the contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by
the Indemnitee in connection with any other proceeding between the Company
and the Indemnitee involving the interpretation or enforcement of the rights
of the Indemnitee under this Agreement unless a court of competent
jurisdiction finds that each of the material claims and/or defenses of the
Indemnitee in any such proceeding was frivolous or not made in good faith.
SECTION 3.7 EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) 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
specifically authorized by the Board or brought to establish or enforce a
right to indemnification and/or advancement of expenses arising under this
Agreement, the charter documents of the Company or any subsidiary or any
statute or law or otherwise, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board finds
it to be appropriate; or
(b) to indemnify the Indemnitee hereunder for any amounts
paid in settlement of a proceeding unless the Company consents in advance in
writing to such settlement, which consent shall not be unreasonably withheld;
or
(c) to indemnify the Indemnitee on account of any suit in
which judgment is rendered against the Indemnitee for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of the
Company pursuant to the provisions of Section l6(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or
(d) to indemnify the Indemnitee if a final decision by a
court having jurisdiction in the matter shall determine that such
indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission
takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication.
SECTION 3.8 NON-EXCLUSIVITY. The provisions for indemnification and
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any
provision of law, the Company's Certificate of Incorporation or Bylaws, the
vote of the Company's stockholders or disinterested directors, other
agreements or otherwise, both as to action in the Indemnitee's official
capacity and to action in another capacity
7
while occupying his position as an agent of the Company, and the Indemnitee's
rights hereunder shall continue after the Indemnitee has ceased acting as an
agent of the Company and shall inure to the benefit of the heirs, executors
and administrators of the Indemnitee.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1 INTERPRETATION OF AGREEMENT. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.
SECTION 4.2 SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any
reason whatsoever, then: (a) the validity, legality and enforceability of the
remaining provisions of this 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 (b) to the fullest extent possible, the provisions of this
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 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 4.1 hereof.
SECTION 4.3 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 provision
hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
SECTION 4.4 SUBROGATION. In the event of full 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
documents required and shall do all acts that may be necessary or desirable
to secure such rights and to enable the Company effectively to bring suit to
enforce such rights.
SECTION 4.5 COUNTERPARTS. This Agreement may be executed in one or
more counter-parts, which shall together constitute one agreement.
SECTION 4.6 SUCCESSORS AND ASSIGNS. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
SECTION 4.7 NOTICE. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
duly given: (a) if delivered by hand and receipted for by the party
addressee; or (b) if mailed by certified or registered mail, with postage
8
prepaid, on the third business day after the mailing date. Addresses for
notice to either party are as shown on the signature page of this Agreement
or as subsequently modified by written notice.
SECTION 4.8 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.
SECTION 4.9 CONSENT TO JURISDICTION. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the
State of Illinois for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement.
SECTION 4.10 ATTORNEYS' FEES. In the event Indemnitee is required to
bring any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3, the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing
and pursuing such action, unless a court of competent jurisdiction finds each
of the material claims of the Indemnitee in any such action was frivolous and
not made in good faith.
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity
Agreement effective as of the date first written above.
XXXXXXX.XXX, INC. INDEMNITEE:
By:
----------------------------- ---------------------------------
Name: Name:
---------------------- ---------------------------
Title:
----------------------
Address: Address:
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000 ---------------------------------
---------------------------------
9
