Exhibit 10.3
FORM OF
-------
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of this
___ day of _______________, 1998, by and between DIVERSIFIED FOOD GROUP, INC., a
Delaware corporation (the "Corporation"), and ____________________
("Indemnitee").
RECITALS
--------
A. The Corporation is aware that because of the increased exposure to
litigation costs and risks resulting from service to corporations, talented and
experienced persons are increasingly reluctant to serve or continue serving as
directors or executive officers of corporations unless they are protected by
comprehensive liability insurance and indemnification;
B. Plaintiffs often seek damages in such large amounts, and the costs of
litigation may be so great (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is usually beyond the personal
resources of directors and executive officers;
C. Based upon their experience as business managers, the Board of
Directors of the Corporation (the "Board") has concluded that, to retain and
attract talented and experienced individuals to serve as directors and executive
officers of the Corporation, it is appropriate for the Corporation to
contractually indemnify its directors and certain of its executive officers, and
to assume for itself liability for expenses and damages in connection with
claims against such directors and executive officers in connection with their
service to the Corporation; and
D. The Corporation believes that it is fair and proper to protect its
directors and certain executive officers of the Corporation from the risk of
judgments, settlements and other expenses which may occur as a result of their
service to the Corporation.
NOW, THEREFORE, the parties, intending to be legally bound, for good and
valuable consideration, hereby agree as follows:
1. Definitions.
-----------
(a) Agent. "Agent" means a director or executive officer of the
Corporation or a director or executive officer of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise
serving at the request, for the convenience, or to represent the interests
of the Corporation.
(b) Corporation. "Corporation" means Diversified Food Group, Inc., a
Delaware corporation, its successors or assigns, or any Subsidiary of the
Corporation. "Subsidiary" means, and "Subsidiaries" include, (i) any
company of which more than fifty percent (50%) of the outstanding voting
securities are owned directly or indirectly
by the Corporation, or which is otherwise controlled by the Corporation,
and (ii) any partnership, joint venture, trust or other entity of which
more than fifty percent (50%) of the equity interest is owned directly or
indirectly by the Corporation, or which is otherwise controlled by the
Corporation.
(c) Liabilities. "Liabilities" means losses, claims, damages,
liabilities, obligations, penalties, judgments, fines, settlement payments,
awards, costs, expenses and disbursements (and any and all costs, expenses
or disbursements in giving testimony or furnishing documents in response to
a subpoena or otherwise), including, without limitation, all reasonable
attorneys' fees, costs, expenses and disbursements, as and when incurred.
(d) Proceeding. "Proceeding" means any threatened, pending, or
completed action, suit or other proceeding, whether civil, criminal,
administrative, investigative or any other type whatsoever.
(e) Control. "Control" means, with respect to any person or entity,
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities, by contract or otherwise.
2. Maintenance of Liability Insurance.
----------------------------------
The Corporation hereby covenants and agrees to and with Indemnitee
that, so long as Indemnitee shall continue to serve as an Agent and
thereafter so long as Indemnitee shall be subject to any claim or
Proceeding by reason of the fact that Indemnitee was an Agent or in
connection with Indemnitee's acts as such an Agent, the Corporation shall
obtain and maintain in full force and effect directors' and officers'
liability insurance ("D&O Insurance") in reasonable amounts from
established and reputable insurers. In all policies of D&O Insurance,
Indemnitee shall be named as an insured.
3. Indemnification of Agent.
------------------------
(a) Third Party Actions. If 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 Corporation) by reason of the fact that
Indemnitee is or was an Agent of the Corporation, or by reason of anything
done or not done by Indemnitee in any such capacity or otherwise at the
request of the Corporation or of its officers, directors or stockholders,
the Corporation shall indemnify, defend and hold harmless Indemnitee
against any and all Liabilities actually and reasonably incurred by
Indemnitee in connection with the investigation, defense, settlement or
appeal of such Proceeding, so long as Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal action
or Proceeding, if Indemnitee had no reasonable cause to believe his conduct
was unlawful.
-2-
(b) Derivative Actions. If 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 Corporation to procure a judgment in its favor by reason of
the fact that Indemnitee is or was an Agent of the Corporation, or by
reason of anything done or not done by Indemnitee in any such capacity or
otherwise at the request of the Corporation or of its officers, directors
or stockholders, the Corporation shall indemnify, defend and hold harmless
Indemnitee against all Liabilities actually and reasonably incurred by such
person in connection with the investigation, defense, settlement or appeal
of such Proceeding, if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Corporation; provided, however, that no indemnification
under this Section 3(b) shall be made in respect of any claim, issue or
matter for which such person is adjudged to be liable for gross negligence
or willful misconduct in the performance of Indemnitee's duties to the
Corporation, unless, and only to the extent that, 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, Indemnitee is fairly and reasonably entitled to indemnity for such
Liabilities as the court shall deem proper.
(c) Actions Where Indemnitee Is Deceased. If Indemnitee is a person
who was or is a party or is threatened to be made a party to any Proceeding
by reason of the fact that he is or was an Agent of the Corporation, or by
reason of anything done or not done by Indemnitee in any such capacity, and
prior to, during the pendency of, or after completion of, such Proceeding,
Indemnitee shall die, then the Corporation shall indemnify, defend and hold
harmless the estate, heirs and legatees of Indemnitee against any and all
Liabilities incurred by such estate, heirs or legatees in connection with
the investigation, defense, settlement or appeal of such Proceeding on the
same basis as provided for Indemnitee in Sections 3(a) and 3(b) above.
(d) Reduction of Liabilities. The Liabilities covered hereby shall be
net of any payments to or on behalf of Indemnitee by D&O Insurance carriers
or others with respect to the subject Proceeding.
4. Indemnification as Witness.
--------------------------
Notwithstanding any other provision of this Agreement, to the extent
Indemnitee is, by reason of the fact that Indemnitee is or was an Agent of
the Corporation, involved in any investigative Proceeding, including, but
not limited to, testifying as a witness or furnishing documents in response
to a subpoena or otherwise, Indemnitee shall be indemnified against any and
all Liabilities actually and reasonably incurred by or for Indemnitee in
connection therewith.
5. Advancement of Liabilities.
--------------------------
Subject to the provisions of Section 6(c), until a determination that
Indemnitee is not entitled to be indemnified by the Corporation under the
terms hereof, and unless the provisions of Section 9 apply, the Corporation
shall reimburse Indemnitee for Liabilities previously paid by Indemnitee
and may advance Liabilities which the
-3-
Corporation reasonably determines will be due and payable by Indemnitee
within a reasonable time after a request for advancement is made by
Indemnitee. The execution and delivery of this Agreement by the Corporation
evidences the specific approval by the Board of the reimbursement and
advancement of Liabilities as provided for in this Section 5. As a
condition to such reimbursement and/or advancement, Indemnitee shall, at
the request of the Corporation, undertake in a manner satisfactory to the
Corporation to repay such amounts reimbursed and/or advanced, without
interest, if it shall ultimately be determined pursuant to Section 7 or 9
below that Indemnitee is not entitled to be indemnified by the Corporation
under the terms of this Agreement. Subject to the foregoing, the
reimbursement and/or advances to be made hereunder shall be paid by the
Corporation to Indemnitee within twenty (20) business days following
delivery of a written request by Indemnitee to the Corporation, which
request shall be accompanied by vouchers, invoices and similar evidence
documenting the amounts incurred or to be incurred by Indemnitee.
6. Indemnification Procedures.
--------------------------
(a) Notice by Indemnitee. Promptly after receipt by Indemnitee of
notice of the commencement or threat of commencement of any Proceeding,
Indemnitee shall, if Indemnitee believes that indemnification with respect
thereto may be sought from the Corporation under this Agreement, notify the
Corporation of the commencement or threat of commencement thereof, provided
that any failure to so notify the Corporation shall not relieve the
Corporation of its obligations hereunder, except to the extent that such
failure or delay increases the liability of the Corporation hereunder.
(b) D & O Insurance. If, at the time of receipt of a notice pursuant
to Section 6(a) above, the Corporation has D&O Insurance in effect, the
Corporation shall give prompt notice of the Proceeding or claim to its
insurers in accordance with the procedures set forth in the applicable
policies. The Corporation shall thereafter take all necessary or desirable
action to cause such insurers to pay all amounts payable as a result of
such Proceeding in accordance with the terms of such policies, and
Indemnitee shall not take any action (by waiver, settlement or otherwise)
which would adversely affect the ability of the Corporation to obtain
payment from its insurers.
(c) Assumption of Defense. In the event the Corporation shall be
obligated under this Agreement to pay the Liabilities of Indemnitee, the
Corporation shall be entitled to assume the defense (with counsel
reasonably acceptable to Indemnitee, approval thereof not to be
unreasonably withheld) of the Proceeding to which the Liabilities relate.
The Corporation agrees to promptly notify Indemnitee upon its election to
assume such defense. Once the Corporation (i) provides Indemnitee with
notice of its election to assume such defense and (ii) obtains approval
from Indemnitee of the counsel retained, the Corporation will not be liable
to Indemnitee under this Agreement for any attorney's fees or other
Liabilities subsequently incurred by Indemnitee with respect to such
Proceeding, unless (x) the Liabilities incurred by Indemnitee were
previously authorized by the Corporation or (y) counsel for Indemnitee
shall have provided the Corporation with an opinion of counsel stating that
there is a likelihood that a conflict
-4-
of interest exists between the Corporation and Indemnitee in the conduct of
any such defense.
7. Determination of Right to Indemnification.
-----------------------------------------
(a) Successful Proceeding. To the extent Indemnitee has been
successful, on the merits or otherwise, in the defense of any Proceeding
referred to in Sections 3(a) or 3(b) above, the Corporation shall indemnify
Indemnitee against all Liabilities incurred by him in connection therewith.
If Indemnitee is not wholly successful in such Proceeding, but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, then the Corporation shall
indemnify Indemnitee against all Liabilities actually or reasonably
incurred by or for him in connection with each successfully resolved claim,
issue or matter. For purposes of this Section 7(a), and without limitation,
the termination of any Proceeding, or any claim, issue or matter in such a
Proceeding, by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such Proceeding, claim, issue or matter, so long
as there has been no finding (either adjudicated or pursuant to Section
7(c) below) that Indemnitee (i) did not act in good faith, (ii) did not act
in a manner reasonably believed to be in, or not opposed to, the best
interests of the Corporation, or (iii) with respect to any criminal
proceeding, had reasonable grounds to believe his conduct was unlawful.
(b) Other Proceedings. In the event that Section 7(a) above is
inapplicable, the Corporation shall nevertheless indemnify Indemnitee,
unless and only to the extent that the forum listed in Section 7(c) below
determines that Indemnitee has not met the applicable standard of conduct
set forth in Sections 3(a) or 3(b) above required to entitle Indemnitee to
such indemnification.
(c) Forum in Event of Dispute. The determination that indemnification
of Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct set forth in Sections 3(a) or 3(b) shall be
made (i) by the Board, by a majority vote of the directors who are not
parties to such Proceeding, even though less than a quorum or (ii) by a
committee of such disinterested directors designated by a majority of such
disinterested directors, even though less than a quorum, or (iii) if there
are no such disinterested directors, or if such disinterested directors
shall so direct, by independent legal counsel in a written opinion, or (iv)
by the stockholders of the Corporation. The choice of which forum shall
make the determination shall be made by the Board. The forum shall act in
the utmost good faith to assure Indemnitee a complete opportunity to
present to the forum Indemnitee's case that Indemnitee has met the
applicable standard of conduct.
(d) Appeal to Court. Notwithstanding a determination by any forum
listed in Section 7(c) above that Indemnitee is not entitled to
indemnification with respect to a specific Proceeding, Indemnitee shall
have the right to apply to the court in which that Proceeding is or was
pending or any other court of competent jurisdiction for the purpose of
enforcing Indemnitee's right to indemnification pursuant to this Agreement.
-5-
(e) Indemnity for Liabilities in Enforcement of Agreement.
Notwithstanding any other provision in this Agreement to the contrary, the
Corporation shall indemnify Indemnitee against all Liabilities incurred by
Indemnitee in connection with any other Proceeding between the Corporation
and Indemnitee involving the interpretation or enforcement of the rights of
Indemnitee under this Agreement, unless a court of competent jurisdiction
finds that the material claims and/or defenses of Indemnitee in any such
Proceeding were frivolous or made in bad faith.
8. Contribution.
------------
If and to the extent that a final adjudication shall specify that the
Corporation is not obligated to indemnify Indemnitee under this Agreement
for any reason (including but not limited to the exclusion set forth in
Section 9 hereof), then in respect of any Proceeding in which the
Corporation is jointly liable with Indemnitee (or would be so liable if
joined in such action, suit or proceeding), the Corporation shall
contribute to the amount of Liabilities reasonably incurred and paid or
payable by Indemnitee in connection with such Proceeding in such proportion
as is appropriate to reflect (i) the relative benefits received by the
Corporation, on the one hand, and Indemnitee, on the other hand, from the
transaction with respect to which such Proceeding arose, and (ii) the
relative fault of the Corporation, on the one hand, and Indemnitee, on the
other hand in connection with the circumstances which resulted in such
Liabilities, as well as any other relevant equitable considerations. The
relative fault of the Corporation, on the one hand, and 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 Liabilities. The
Corporation agrees that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation or any
other method of allocation which does not take account of the foregoing
equitable considerations.
9. Exceptions.
----------
(a) Claims Initiated by Indemnitee. Notwithstanding any other
provision herein to the contrary, the Corporation shall not be obligated
pursuant to the terms of this Agreement to indemnify or advance Liabilities
to Indemnitee with respect to Proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
Proceedings brought to establish or enforce a right to indemnification
under this Agreement, but such indemnification or advancement of expenses
may be provided by the Corporation in specific cases if the Board finds it
to be appropriate.
(b) Unauthorized Settlements. Notwithstanding any other provision
herein to the contrary, the Corporation shall not be obligated pursuant to
the terms of this Agreement to indemnify Indemnitee under this Agreement
for any amount paid in settlement of a Proceeding without the prior written
consent of the Corporation to such settlement.
-6-
(c) No Duplicative Payment. The Corporation shall not be liable under
this Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
10. Certificate of Incorporation and By-laws.
----------------------------------------
The Corporation agrees that the Certificate of Incorporation and By-
laws of the Corporation in effect on the date hereof shall not be amended
to reduce, limit, hinder or delay (a) the rights of Indemnitee granted
hereby, or (b) the ability of the Corporation to indemnify Indemnitee as
required hereby. The Corporation further agrees that it shall exercise the
powers granted to it under its Certificate of Incorporation and By-laws and
by applicable law to indemnify any Indemnitee to the fullest extent
possible as required hereby.
11. Non-exclusivity.
---------------
The provisions for indemnification and advancement of Liabilities set
forth in this Agreement shall not be deemed exclusive of any other rights
which Indemnitee may have under any provision of law, the Corporation's
Certificate of Incorporation or By-laws, the vote of the Corporation's
stockholders or disinterested directors, other agreements or otherwise.
12. Interpretation of Agreement.
---------------------------
It is understood that the parties hereto intend this Agreement to be
interpreted and enforced so as to provide indemnification to Indemnitee to
the fullest extent now or hereafter permitted by law.
13. Severability.
------------
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever, (a) the
validity, legality and enforceability of the remaining provisions of the
Agreement (including, without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable) shall not in any way be effected or impaired thereby, and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any paragraph of this
Agreement containing any such provision held to be invalid, illegal, or
unenforceable that are not themselves invalid, illegal, or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable and to give effect to
Section 12 hereof.
14. Modification and Waiver.
-----------------------
No supplement, modification or amendment to 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
-7-
provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
15. Subrogation.
-----------
In the event that the Corporation makes any payment under this
Agreement, the Corporation shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall execute
all papers and do all things that may be necessary to secure such rights,
including but not limited to the execution of such documents as shall be
necessary to enable the Company effectively to bring suit to enforce such
rights.
16. Survival, Successors, and Assigns.
---------------------------------
Indemnitee's rights under this Agreement shall continue after
Indemnitee has ceased acting as an Agent of the Corporation. The terms of
this Agreement shall be binding on and inure to the benefit of the
Corporation and its successors and assigns and shall be binding on and
inure to the benefit of Indemnitee and Indemnitee's heirs, executors and
administrators.
17. Notices.
-------
All notices, demands, consents, requests, approvals and other
communications between the parties pursuant to this Agreement must be in
writing and will be deemed given when delivered in person, one (1) business
day after being dispatched by a nationally recognized overnight courier
service, three (3) business days after being deposited in the U.S. Mail,
registered or certified mail, return receipt requested, or one (1) business
after being sent by facsimile (with receipt acknowledged), to the
Corporation at the address of its principal office in Lincolnwood, Illinois
and to Indemnitee at Indemnitee's address as shown on the Corporation's
records. Indemnitee may change Indemnitee's address for notice purposes by
delivering notice to the Corporation in accordance with this Section 17.
All notices sent to the Corporation shall also be delivered to Xxxxxx
Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000-0000, Attention: Xxxxx X. Xxxxxxx, Esq., Facsimile No. (312-902-
1061).
18. Governing Law.
-------------
This Agreement shall be governed exclusively by and construed
according to the laws of the State of Illinois, without regard to its
principles of conflicts of laws.
19. Counterparts.
------------
This agreement may be executed in counterparts, each of which when so
executed and delivered shall be deemed an original, and such counterparts
together shall constitute one instrument.
-8-
The parties hereto have entered into this Indemnification Agreement
effective as of the date first above written.
DIVERSIFIED FOOD GROUP, INC.
By:
-----------------------------------
Name:
-----------------------------
Its:
-----------------------------
INDEMNITEE:
---------------------------------------
(Sign name)
---------------------------------------
(Print name)
---------------------------------------
---------------------------------------
(Print Address)
-9-
LIST OF DIRECTORS AND EXECUTIVE OFFICERS
TO RECEIVE INDEMNIFICATION AGREEMENTS
1 Xxxxxx X. Xxxx
2 Xxxxxxxx X. Xxxxx
3 _______________
4 _______________
5 _______________
-10-
