Exhibit 10.17
FORM OF
PGT, INC.
DIRECTOR INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made as of _______
___, 2006, between PGT, Inc., a Delaware corporation (the "Company"), and
[DIRECTOR] ("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors the most capable persons available;
WHEREAS, Indemnitee is a director of the Company;
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance and adequate indemnification
against risks of claims and actions against them arising out of their service to
and activities on behalf of the corporation;
WHEREAS, the Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and the Amended and Restated By-laws (the
"By-laws") of the Company require the Company to indemnify and advance expenses
to its directors and officers to the fullest extent permitted by law, and the
Indemnitee is serving as a director of the Company in part in reliance on such
Certificate of Incorporation and By-laws;
WHEREAS, the Board of Directors of the Company has determined that the
inability of the Company to retain and attract as directors the most capable
persons would be detrimental to the interests of the Company and that the
Company therefore should seek to assure such persons that indemnification will
be available in the future; and
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's service
to the Company in an effective manner and Indemnitee's reliance on the
Certificate of Incorporation and By-laws, and in part to provide Indemnitee with
specific contractual assurance that the protection promised by such Certificate
of Incorporation and By-laws will be available to Indemnitee (regardless of,
among other things, any amendment to or revocation of such Certificate of
Incorporation or By-laws or any change in the composition of the Company's Board
of Directors or acquisition transaction relating to the Company), the Company
wishes to provide in this Agreement for the indemnification of and the advancing
of expenses to 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 Indemnitee under the Company's
directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
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:
1. Certain Definitions. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement:
(a) Affiliate: means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For
purposes of this definition, "control," as used with respect to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by
agreement, or otherwise; provided that beneficial ownership of 10% or
more of the voting securities of a Person will be deemed to be
control. For purposes of this definition, the terms "controlling,"
"controlled by," and "under common control with" have correlative
meanings.
(b) Change in Control: shall be deemed to have occurred if:
(i) any Person acquires Disqualified Capital Stock in the Subsidiary;
(ii) prior to an Initial Public Offering, (1) the Permitted Holders
cease to own, or to have the power to vote or direct the voting
of, directly or indirectly, Voting Stock of the Company
representing a majority of the voting power of the total
outstanding Voting Stock of the Company or the Subsidiary or (2)
the Permitted Holders cease to own, directly or indirectly,
Equity Interests representing a majority of the total economic
interests of the Equity Interests of the Company or the
Subsidiary;
(iii) following an Initial Public Offering, any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause
such person or group shall be deemed to have "beneficial
ownership" of all securities that such person or group has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of
Voting Stock of the Company or the Subsidiary representing 50% or
more of the voting power of the total outstanding Voting Stock of
the Company or the Subsidiary; or
2
(iv) following an Initial Public Offering, during any period of two
consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of
Directors or whose nomination for election was approved by a vote
of a majority of the members of the Board of Directors of the
Company, which members constituting such majority are then still
in office and were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company.
For purposes of this definition of Change in Control:
"Control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise, and the
terms "Controlling" and "Controlled" have meanings correlative thereto.
"Controlled Investment Affiliate" means, as to any Person, any other Person
which directly or indirectly is in Control of, is Controlled by, or is under
common Control with, such Person and is organized by such Person (or any Person
Controlling such Person) primarily for making equity or debt investments in the
Company or other portfolio companies.
"Disqualified Capital Stock" means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to February 14, 2013, (b) is convertible into or exchangeable (unless at
the sole option of the issuer thereof) for (i) debt securities or (ii) any
Equity Interests referred to in (a) above, in each case at any time on or prior
to February 14, 2013, or (c) contains any repurchase obligation (other than
customary change of control or asset sale proceeds repurchase obligations).
"Equity Interest" shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such Person,
including, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of property of, such partnership, but excluding debt securities
convertible or exchangeable into such equity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
3
"Initial Public Offering" means the first underwritten public offering and sale
by the Company of Equity Interests pursuant to a registration statement filed
with the Securities and Exchange Commission in accordance with the Securities
Act of 1933, as amended.
"Permitted Holder" means JLL Partners Fund IV, L.P. and its Controlled
Investment Affiliates.
"Subsidiary" means PGT Industries, Inc., a Florida corporation.
"Voting Stock" means, with respect to any Person, any class or classes of Equity
Interests pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors (or the functional equivalent) of such Person.
(c) Claim: means any threatened, asserted, pending, or completed action,
suit, or proceeding, or appeal thereof, or any inquiry or
investigation, whether instituted by the Company or any governmental
agency or any other party, that Indemnitee in good faith believes
might lead to the institution of any such action, suit, or proceeding,
whether civil, criminal, administrative, investigative, or other,
including any arbitration or other alternative dispute resolution
mechanism.
(d) Expenses: include attorneys' fees and all other costs, expenses, and
obligations (including, without limitation, experts' fees, court
costs, retainers, transcript fees, duplicating, printing, and binding
costs, as well as telecommunications, postage and courier charges)
paid or incurred in connection with investigating, defending, being a
witness in, or participating in (including on appeal), or preparing to
investigate, defend, be a witness in, or participate in, any Claim
relating to any Indemnifiable Event.
(e) Indemnifiable Amounts: means any and all Expenses, damages, judgments,
fines, penalties, ERISA excise taxes, 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, excise taxes, or amounts paid in settlement) arising
out of or resulting from any Claim relating to an Indemnifiable Event.
(f) Indemnifiable Event: means any event or occurrence, whether occurring
before, on, or after the date of this Agreement, related to the fact
that Indemnitee is or was a director or officer 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, limited liability company, partnership, joint venture,
employee benefit plan, trust, or other entity or enterprise, or by
reason of anything done or not done by Indemnitee in any such
capacity.
4
(g) Independent Legal Counsel: means an attorney or firm of attorneys,
selected in accordance with the provisions of Section 3 hereof, who is
experienced in matters of corporate law and who shall not have
otherwise performed services for the Company or Indemnitee within the
last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees
under similar indemnity agreements).
(h) Person: means any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership
or government, or any agency or political subdivision thereof, in any
case, whether acting in a personal, fiduciary or other capacity.
(i) Reviewing Party: means any appropriate individual or body consisting
of a member or members of the Company's Board of Directors or any
other individual 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.
2. Basic Indemnification Arrangement; Advancement of Expenses.
(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 Indemnifiable Amounts.
(b) If so requested by Indemnitee, the Company shall advance (within
two business days of such request) any and all Expenses incurred by Indemnitee
(an "Expense Advance"). The Company shall, in accordance with such request (but
without duplication), either (i) pay such Expenses on behalf of Indemnitee or
(ii) reimburse Indemnitee for such Expenses. Indemnitee's right to an Expense
Advance is absolute and shall not be subject to any prior determination by the
Reviewing Party that the Indemnitee has satisfied any applicable standard of
conduct for indemnification.
(c) Notwithstanding anything in this Agreement to the contrary,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
pursuant to this Agreement in connection with any Claim initiated by Indemnitee
unless (i) the Company has joined in or the Company's Board of Directors has
authorized or consented to the initiation of such Claim or (ii) the Claim is one
to enforce Indemnitee's rights under this Agreement.
(d) Notwithstanding the foregoing, (i) the indemnification 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
5
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(b)
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 (it being understood and agreed that the foregoing agreement by
Indemnitee shall be deemed to satisfy any requirement that Indemnitee provide
the Company with an undertaking to repay any Expense Advance if it is ultimately
determined that the Indemnitee is not entitled to indemnification under
applicable law); 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).
Indemnitee's undertaking to repay such Expense Advances shall be unsecured and
interest-free. If there has not been a Change in Control, the Reviewing Party
shall be selected by the Company's Board of Directors, and if there has been
such a 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 within thirty days after written demand is presented to the
Company or if the Reviewing Party determines that Indemnitee 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 the State of
Delaware having subject matter jurisdiction thereof and in which venue is proper
to seek an initial determination by the court or to challenge 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 to appear in any such proceeding. 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, then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and Expense Advances
under this Agreement or any Company By-law or charter provision now or hereafter
in effect, 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 delayed, conditioned, or withheld). Such counsel, among
other things, shall render its written opinion to the Company and Indemnitee as
to whether and to what extent the Indemnitee would be permitted to be
indemnified under applicable law. The Company agrees to pay the reasonable fees
of the Independent Legal Counsel 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.
4. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all Expenses and, if requested by Indemnitee, shall
advance
6
such Expenses to Indemnitee, subject to and in accordance with Section 2(b), as
are incurred by Indemnitee in connection with any action brought by Indemnitee
for (i) indemnification or an Expense Advance by the Company under this
Agreement or any Company By-law or charter provision now or hereafter in effect
and/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, Expense Advance, or
insurance recovery, as the case may be.
5. Partial Indemnity, etc. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
Expenses or other Indemnifiable Amounts in respect of a Claim but not, however,
for 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 Reviewing Party or court shall presume that the Indemnitee has
satisfied the applicable standard of conduct and is entitled to indemnification,
and the burden of proof shall be on the Company to establish, by clear and
convincing evidence, that Indemnitee is not so entitled.
7. Reliance as Safe Harbor. For purposes of this Agreement, Indemnitee
shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company if
Indemnitee's actions or omissions to act are taken in good faith reliance upon
the records of the Company, including its financial statements, or upon
information, opinions, reports, or statements furnished to Indemnitee by the
officers or employees of the Company in the course of their duties, or by
committees of the Company's Board of Directors, or by any other person
(including legal counsel, accountants, and financial advisors) as to matters
Indemnitee reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Company. In addition, the knowledge, actions, or failures to act of any
director, officer, agent, or employee of the Company shall not be imputed to
Indemnitee for purposes of determining the right to indemnity hereunder.
8. No Other 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 of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party
7
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
Indemnitee has not met any particular standard of conduct or did not have any
particular belief.
9. Nonexclusivity, etc. The rights of the Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Certificate
of Incorporation or By-laws or the Delaware General Corporation Law or
otherwise. To the extent that a change in applicable law (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Company's Certificate of Incorporation or By-laws
or 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.
10. 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.
11. 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 Indemnitee or
Indemnitee's spouse, heirs, executors, or personal or legal representatives
after the expiration of two 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, however, that, if any shorter period of
limitations is otherwise applicable to any such cause of action, such shorter
period shall govern.
12. Amendments, etc. 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.
13. 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 reasonably required and
shall do everything that may be reasonably necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
14. 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, By-law, charter provision, or otherwise) of the
amounts otherwise indemnifiable hereunder.
8
15. Defense of Claims. The Company shall be entitled to participate in the
defense of any Claim relating to an Indemnifiable Event or to assume the defense
thereof, with counsel reasonably satisfactory to the Indemnitee; provided that,
if Indemnitee believes, after consultation with counsel selected by Indemnitee,
that (i) the use of counsel chosen by the Company to represent Indemnitee would
present such counsel with an actual or potential conflict of interest, (ii) the
named parties in any such Claim (including any impleaded parties) include both
the Company and Indemnitee and Indemnitee concludes that there may be one or
more legal defenses available to him that are different from or in addition to
those available to the Company, or (iii) any such representation by such counsel
would be precluded under the applicable standards of professional conduct then
prevailing, then Indemnitee shall be entitled to retain separate counsel (but
not more than one law firm plus, if applicable, local counsel in respect of any
particular Claim) at the Company's expense. The Company shall not be liable to
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
relating to an Indemnifiable Event effected without the Company's prior written
consent. The Company shall not, without the prior written consent of the
Indemnitee, effect any settlement of any Claim relating to an Indemnifiable
Event to which the Indemnitee is or could have been a party unless such
settlement solely involves the payment of money and includes a complete and
unconditional release of Indemnitee from all liability on all claims that are
the subject matter of such Claim. Neither the Company nor Indemnitee shall
unreasonably withhold or delay its or his consent to any proposed settlement;
provided that Indemnitee may withhold consent to any settlement that does not
provide a complete and unconditional release of Indemnitee.
16. 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, (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), assigns, spouses, heirs, executors, and personal and
legal representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation, or otherwise) to
all or substantially all of the business and/or assets of the Company, by
written agreement in form and substance satisfactory to Indemnitee and his
counsel, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as an officer or director of
the Company or of any other entity or enterprise at the Company's request.
17. 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) are 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.
18. Specific Performance, etc. The parties recognize that if any provision
of this Agreement is violated by the Company, Indemnitee may be without an
adequate
9
remedy at law. Accordingly, in the event of any such violation, Indemnitee shall
be entitled, if Indemnitee so elects, to institute proceedings, either in law or
at equity, to obtain damages, to enforce specific performance, to enjoin such
violation, or to obtain any relief or any combination of the foregoing as
Indemnitee may elect to pursue.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same agreement. Only one such counterpart
signed by the party against whom enforceability is sought need be produced to
evidence the existence of this Agreement.
20. Headings. The headings of the sections and paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction or interpretation thereof.
21. 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.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PGT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
[NAME]
11
