Exhibit 10.2
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is entered into,
effective as of May 1, 2004, by and between Covenant Transport, Inc., a Nevada
corporation (the "Company"), and [Name of Board Member or Officer], a duly
elected and incumbent director and officer of the Company ("Indemnitee").
WHEREAS, it is essential for the Company to retain and attract as directors
and officers the most capable persons available;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims currently being asserted against directors and
officers of corporations;
WHEREAS, the Company's Restated Articles of Incorporation and Amended
Bylaws permit the Company to provide its directors and officers the maximum
indemnification permitted to be given by the Company under Nevada law, and to
enter into agreements to provide such indemnification;
WHEREAS, from time-to-time the Company has entered into indemnification
agreements with certain of its directors and officers (the "Prior Agreements");
and
WHEREAS, in recognition of Indemnitee's need for (i) substantial protection
against personal liability based on Indemnitee's reliance on the Company's
Restated Articles of Incorporation and Amended Bylaws; (ii) specific contractual
assurance that the protection promised by the Restated Articles of Incorporation
and Amended Bylaws will be available to Indemnitee (regardless of, among other
things, any amendment to or revocation of the Restated Articles of Incorporation
and Amended Bylaws or any change in the composition of the Board of Directors or
acquisition transaction relating to the Company); and (iii) an inducement to
provide effective services to the Company as a director and/or officer, the
Board of Directors of the Company has found it in the Company's best interests
(y) to supersede and replace any applicable Prior Agreement with this Agreement,
and (z) 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.
NOW, THEREFORE, in consideration of the above premises and of Indemnitee
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties agree as
follows:
1. Definitions. As used in Agreement:
(a) Board: the board of directors of the Company.
(b) Affiliate: any corporation or other person or entity that
directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person
specified.
(c) Change in Control: shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(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),
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is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange 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; (ii) during any
period of two consecutive years, individuals who at the beginning of
such period constitute the Board and any new director whose election
by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation that 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 (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company's assets.
Notwithstanding anything to the contrary herein, the following
transactions shall not constitute a Change of Control: (A) any
acquisition directly from the Company; (B) any acquisition by the
Company; (C) any acquisition by, or transfer for the benefit of, Xxxxx
X. Xxxxxx, Xxxxxxxxxx X. Xxxxxx, any Affiliate thereof, or any
immediate family member of Mr. or Xxx. Xxxxxx; or (D) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or an Affiliate thereof.
(d) Expenses: any expense, damages, liability, or loss, including
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments,
or other charges imposed thereon, any federal, state, local, or
foreign taxes imposed as a result of the actual or deemed receipt of
any payments under this Agreement, and all other costs and
obligations, paid or incurred in connection with investigating,
defending, being a witness in, participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding and all fees
and disbursements of attorneys, experts, or other professionals
relating to any Indemnifiable Event.
(e) Indemnifiable Event: any event or occurrence that takes place
either prior to or after the execution of this Agreement, related to
the fact that Indemnitee is or was a director or officer of the
Company, or while a director or officer is or was serving at the
request of the Company as a director, officer, employee, trustee,
agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, employee benefit plan, trust, or other
enterprise, or was a director, officer, employee, or agent of a
foreign or domestic corporation that was a predecessor corporation of
the Company or of another enterprise at the request of such
predecessor corporation, or related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent of the Company, as described
above. Notwithstanding anything in this Agreement to the contrary,
Indemnitee shall not be entitled to indemnification under this
Agreement (i) in any action in which there is a final adjudication
that Indemnitee's acts or omissions involved intentional misconduct,
fraud, or a knowing violation of law, a breach of Indemnitee's duty of
good faith or loyalty, or were not in the best interest of the
Company; (ii) on account of any Proceeding in which there is a final
adjudication against Indemnitee for an accounting of profits made from
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 laws; (iii) in any derivative action in which
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Indemnitee has been finally adjudged to be liable to the Company
unless and only to the extent that the court in which the proceeding
was brought shall determine that, despite the adjudication of
liability, the Indemnitee is entitled to indemnity for such expenses
as the court shall deem proper; and (iv) prior to a Change of Control,
in connection with any claim initiated by Indemnitee against the
Company or any officer or director thereof unless permitted under
Section 2(b).
(f) Independent Counsel: the person or body appointed in
connection with Section 4.
(g) Proceeding: any threatened, pending, or completed action,
suit, or proceeding (including an action by or in the right of the
Company), or any inquiry, hearing, or investigation, claim, demand,
method of alternative dispute resolution, notice, complaint, or other
proceeding, whether conducted by the Company 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.
(h) Reviewing Party: the person or body appointed in accordance
with Section 4.
(i) Voting Securities: any securities of the Company that vote
generally in the election of directors.
2. Agreement to Indemnify.
(a) General Agreement. During the Term (as defined in Section 3)
of this Agreement, 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 Proceeding by reason of
(or arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee from and against any and all Expenses to the
fullest extent permitted by law, as the same exists or may hereafter
be amended or interpreted (but in the case of any such amendment or
interpretation, only to the extent that such amendment or
interpretation permits the Company to provide broader indemnification
rights than were permitted prior thereto).
(b) Initiation of Proceeding. Notwithstanding anything in this
Agreement to the contrary, Indemnitee shall not be entitled to
indemnification or advance pursuant to this Agreement in connection
with any Proceeding initiated by Indemnitee against the Company or any
director or officer of the Company unless (i) the Company has joined
in or the Board has consented to the initiation of such Proceeding;
(ii) the Proceeding is one to enforce indemnification rights under
Section 5; or (iii) the Proceeding is instituted after a Change in
Control (other than a Change in Control approved by a majority of the
directors on the Board who were directors immediately prior to such
Change in Control) and Independent Counsel has approved its
initiation.
(c) Expense Advances. If so requested by Indemnitee, the Company
shall advance (within ten business days of such request) any and all
Expenses to Indemnitee (an "Expense Advance"); provided, that (i) such
an Expense Advance shall be made only upon delivery to the Company of
an undertaking by or on behalf of the Indemnitee to repay the amount
thereof if it is ultimately determined that Indemnitee is not entitled
to be indemnified by the Company; (ii) if 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;
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and (iii) such an Expense Advance shall only be made if permitted
under applicable law. If Indemnitee has commenced or commences legal
proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable
law, as provided in Section 5, 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 have lapsed).
Indemnitee's obligation to reimburse the Company for Expense Advances
shall be unsecured and no interest shall be charged thereon.
(d) Mandatory Indemnification. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding
relating in whole or in part to an Indemnifiable Event or in defense
of any issue or matter therein, Indemnitee shall be indemnified
against all Expenses incurred in connection therewith.
(e) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some
or a portion of Expenses, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.
3. Term. The indemnification herein given shall be deemed to have
commenced upon the commencement of Indemnitee's service as a director or
officer of the Company, even if such election occurred prior to the date of
this Agreement, and shall continue for the period of membership on the
Company's Board or as an officer of the Company and thereafter for any
Indemnifiable Event arising from actions or events occurring during service
as a director or officer even though he may have ceased to be a director or
officer and shall inure to the benefit of the estate, heirs, and personal
representatives of Indemnitee. If this Agreement is cancelled, modified, or
amended, in whole or in part, any claims arising from actions or events
occurring during the term of this Agreement shall be covered under the same
terms and conditions as described herein.
4. Reviewing Party. Prior to any Change in Control, the Reviewing
Party shall be any appropriate person or body consisting of a member or
members of the Board or any other person or body appointed by the Board who
is not a party to the particular Proceeding with respect to which
Indemnitee is seeking indemnification. After a Change in Control, the
Independent Counsel referred to below shall become the Reviewing Party.
With respect to all matters arising after a Change in Control (other than a
Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control) concerning the
rights of Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or under applicable law or the Company's
Restated Articles of Incorporation or Amended Bylaws now or hereafter in
effect relating to indemnification for Indemnifiable Events, the Company
shall seek legal advice only from Independent Counsel selected by
Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for
the Company or the Indemnitee (other than in connection with
indemnification matters) within the last five years. The Independent
Counsel shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. Such counsel, among other things,
shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee should be permitted to be
indemnified under applicable law. The Company agrees to pay the reasonable
fees of the Independent Counsel and to indemnify fully such counsel against
any and all expenses (including attorneys' fees), claims, liabilities,
loss, and damages arising out of or relating to this Agreement or the
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engagement of Independent Counsel pursuant hereto.
5. Indemnification Process and Appeal.
(a) Indemnification Payment. Indemnitee shall be entitled to
indemnification and advance of Expenses, and shall receive payment thereof,
from the Company in accordance with this Agreement as soon as practicable
after Indemnitee has made written demand on the Company for such
indemnification or advance, unless the Reviewing Party has given a written
opinion to the Company that Indemnitee is not entitled to indemnification
or advance under applicable law.
(b) Suit to Enforce Rights. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification or advance
within thirty days after making a demand in accordance with Section 5(a),
Indemnitee shall have the right to enforce its indemnification rights under
this Agreement by commencing litigation in any court having subject matter
jurisdiction, which seeks an initial determination by the court or
challenges any determination by the Reviewing Party or any aspect thereof.
The Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party not challenged by the
Indemnitee shall be binding on the Company and Indemnitee. The remedy
provided for in this Section 5(b) shall be in addition to any other
remedies available to Indemnitee at law or in equity.
(c) Defense to Indemnification, Burden of Proof, and Presumptions. It
shall be a defense to any action brought by Indemnitee against the Company
to enforce this Agreement that it is not permissible under applicable law
for the Company to indemnify, or provide an advance to, Indemnitee for the
amount claimed. In connection with any such action or any determination by
the Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified or receive an advance hereunder, the burden of proving such a
defense or determination shall be on the Company. Neither the failure of
the Reviewing Party or the Company (including its Board, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action by Indemnitee that indemnification of the
claimant or an advance relating thereto is proper under the circumstances
because Indemnitee has met the standard of conduct set forth in applicable
law, nor an actual determination by the Reviewing Party or Company
(including its Board, independent legal counsel, or its stockholders) that
the Indemnitee had not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the Indemnitee has not
met the applicable standard of conduct.
6. Indemnification for Expenses Incurred in Enforcing Rights. The Company
shall indemnify Indemnitee against any and all Expenses that are incurred by
Indemnitee in connection with any action brought by Indemnitee for (i)
indemnification or advance payment of Expenses by the Company under this
Agreement or any other agreement or under applicable law or the Company's
Restated Articles of Incorporation or Amended Bylaws now or hereafter in effect
relating to indemnification for Indemnifiable Events; and/or (ii) recovery under
directors' and officers' liability insurance policies maintained by the Company,
but only in the event that Indemnitee ultimately is determined to be entitled to
such indemnification or insurance recovery, as the case may be. In addition, the
Company shall, if so requested by Indemnitee, advance the foregoing Expenses to
Indemnitee, subject to and in accordance with Section 2(c).
7. Notification and Defense of Proceeding.
(a) Notice. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee shall, if a claim in respect
thereof is to be made against the Company
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under this Agreement, notify the Company of the commencement thereof; but
the omission so to notify the Company will not relieve the Company from any
liability that it may have to Indemnitee, except as provided in Section
7(c).
(b) Defense. With respect to any Proceeding as to which Indemnitee
notifies the Company of the commencement thereof, the Company will be
entitled to participate in the Proceeding at its own expense and except as
otherwise provided below, to the extent the Company so wishes, it may
assume the defense thereof with counsel reasonably satisfactory to
Indemnitee. After notice from the Company to Indemnitee of its election to
assume the defense of any Proceeding, the Company shall not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding
other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ legal counsel in such
Proceeding, but all Expenses related thereto incurred after notice from the
Company of its assumption of the defense shall be at Indemnitee's expense
unless: (i) the employment of legal counsel by Indemnitee has been
authorized by the Company; (ii) Indemnitee has reasonably determined that
there may be a conflict of interest between Indemnitee and the Company in
the defense of the Proceeding; (iii) after a Change in Control (other than
a Change in Control approved by a majority of the directors on the Board
who were directors immediately prior to such Change in Control), the
employment of counsel by Indemnitee has been approved by the Independent
Counsel; or (iv) the Company shall not in fact have employed counsel to
assume the defense of such Proceeding, in each of which cases all Expenses
of the Proceeding shall be borne by the Company. The Company shall not be
entitled to assume the defense of any Proceeding brought by or on behalf of
the Company or in the event (ii), (iii) or (iv) above exists.
(c) Settlement of Claims. The Company shall not be liable to indemnify
Indemnitee under this Agreement or otherwise for any amounts paid in
settlement of any Proceeding effected without the Company's written
consent, such consent not to be unreasonably withheld; provided, however,
that if a Change in Control has occurred (other than a Change in Control
approved by a majority of the directors on the Board who were directors
immediately prior to such Change in Control), the Company shall be liable
for indemnification of Indemnitee for amounts paid in settlement if the
Independent Counsel has approved the settlement. The Company shall not
settle any Proceeding in any manner that would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. The Company
shall not be liable to indemnify the Indemnitee under this Agreement with
regard to any judicial award if the Company was not given a reasonable and
timely opportunity, at its expense, to participate in the defense of such
action; the Company's liability hereunder shall not be excused if
participation in the Proceeding by the Company was barred by this
Agreement.
8. Service. It is contemplated that Indemnitee will continue to serve as a
director and officer of the Company. However, nothing herein contained shall
obligate Indemnitee to such continued service; it being acknowledged by the
Company that Indemnitee retains the right to resign as a director or officer of
the Company for any reason whatsoever. Neither shall this Agreement be construed
as obligating either the Company or the stockholders to continue to elect
Indemnitee to the Company's Board, or as an officer of the corporation.
9. Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition
to any other rights Indemnitee may have under the Company's Restated Articles of
Incorporation, Amended Bylaws, applicable law, or otherwise; provided, however,
this Agreement shall supersede any Prior Agreement between the Company and the
Indemnitee, subject to Section 16. To the extent that a change in applicable law
(whether by statute or judicial decision) permits greater indemnification than
would be
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afforded currently under the Company's Restated Articles of Incorporation,
Amended Bylaws, applicable law, or this Agreement, it is the intent of the
parties that Indemnitee enjoy by this Agreement the greater benefits so afforded
by such change.
10. Liability Insurance. The Company currently does not maintain an
insurance policy or policies for liabilities of its directors and officers;
however, to the extent the Company decides to maintain or has maintained an
insurance policy or policies providing general and/or 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 director or officer.
11. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company or any Affiliate of the
Company against Indemnitee, 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, or such longer period as may be required by
state law under the circumstances. Any claim or cause of action of the Company
or its Affiliate shall be extinguished and deemed released unless asserted by
the timely filing and notice of a legal action within such period; provided,
however, that if any shorter period of limitations is otherwise applicable to
any such cause of action, the shorter period shall govern.
12. Amendment of this Agreement. 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
binding unless in the form of a writing signed by the party against whom
enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver. Except as specifically provided herein,
no failure to exercise or any delay in exercising any right or remedy hereunder
shall constitute a waiver thereof.
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 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 (unless such action would make Indemnitee liable under
applicable documents).
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 received payment (under any
insurance policy, article, bylaw, or otherwise) of the amounts otherwise
indemnifiable hereunder.
15. 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 and/or
assets of the Company), assigns, spouses, heirs, 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,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
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. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity pertaining to an Indemnifiable Event even though he
may have ceased to serve in such capacity at the time of any Proceeding.
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16. Severability; Reinstatement of Prior Agreements. If any provision (or
portion thereof) of this Agreement shall be held by a court of competent
jurisdiction to be invalid, void, or otherwise unenforceable, (i) the remaining
provisions of this Agreement shall remain enforceable to the fullest extent
permitted by law, and (ii) any Prior Agreement with Indemnitee shall be
re-instated ab initio, and without further act by the Company or the Indemnitee,
and Indemnitee shall be entitled to seek indemnification thereunder.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void, or otherwise unenforceable, which is not
itself invalid, void, or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, void, or unenforceable.
17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Nevada applicable to
contracts made and to be performed in such state without giving effect to its
principles of conflicts of laws.
18. Notices. All notices, demands, and other communications required or
permitted hereunder may be effected by personal delivery in writing, by
facsimile, or by registered or certified mail, postage prepaid, return receipt
requested, and shall be deemed communicated as of the date of personal delivery,
facsimile, or mailing. Mailed notices shall be addressed as set forth below, but
each party may change its address by written notice in accordance with this
Section 18.
Covenant Transport, Inc.
Attention: Chief Financial Officer
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Fax Number: 000-000-0000
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.
INDEMNITEE: COVENANT TRANSPORT, INC., a Nevada
corporation
_________________________________ By: _______________________________________
[Name of Board Member or Officer] Xxxxx X. Xxxxxx, Chairman of the Board,
President, and Chief Executive Officer
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