EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this ____ day of
___________________, 1997, by and between Middlesboro Federal Bank, Federal
Savings Bank (the "Bank"), Cumberland Mountain Bancshares, Inc. (the "Company")
and _____________________________ (the "Indemnitee").
WHEREAS, the Bank, Company, and the Indemnitee recognize the increasing
difficulty in obtaining directors' liability insurance, the increasing cost of
such insurance, and the trend toward reductions in the coverage of such
insurance;
WHEREAS, the Bank, Company, and the Indemnitee further recognize the
substantial increase in corporate litigation in general, which subjects
directors to a greater risk of expensive litigation at the same time as the
availability and coverage of liability insurance has been severely reduced;
WHEREAS, the Indemnitee does not regard the current protection available as
adequate under the present circumstances;
WHEREAS, the Bank and the Company desire to indemnify its current directors
individually so as to provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Bank, Company, and the Indemnitee hereby agree as
follows:
1. Definitions. The following terms shall have the indicated meanings:
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(a) "Change in Control" shall have the meaning provided for in the
Cumberland Mountain Bancshares, Inc. 1993 Stock Option Plan, as said plan may be
amended from time to time, provided that a change to said definition shall be
ineffective to the extent it is adverse to a Participant and not consented to by
the Participant.
(b) "Disinterested Director" shall mean a director of the Bank or the
Company qualified and in good standing who is not a party to, or an officer,
employee, significant shareholder or owner, or member of the immediate family of
any party, other than the Bank, or the Company or its subsidiaries or
affiliates, to the Proceeding for which indemnification hereunder is being
sought.
(c) "Expenses" include, without limitation, (i) any amount for which
the Indemnitee becomes liable in a judgment in a Proceeding (including, without
limitation, all judgment, fines, excise taxes assessed with respect to an
employee benefit plan, court costs), (ii) amounts paid in Settlement of a
Proceeding, (iii) reasonable attorney's fees actually paid and incurred by the
Indemnitee in connection with a Proceeding, and, (iv) if the Indemnitee
commences any action or other proceeding to enforcing the Indemnitee's rights
under this Agreement, or under the Charter or Bylaws of the Bank or the Company,
and obtains a favorable judgment therein, the Indemnitee's reasonable attorney's
fees, costs and other expenses actually paid or incurred in connection
therewith.
(d) "FDIC" shall mean the Federal Deposit Insurance Corporation.
(e) "Final Judgment" means a judgment, decree or order which is not
appealable or as to which the period for appeal has expired with no appeal
taken.
(f) "OTS" shall mean the Office of Thrift Supervision of the United
States Department of the Treasury, or any successor agency.
(g) "Proceeding" means any judicial or administrative proceeding, or
other proceeding, whether civil, criminal, administrative or otherwise,
including any appeal or other proceeding for review, as a result of or in
connection with any action or inaction on the part of the Indemnitee while the
Indemnitee is or was a director or while the Indemnitee is or was serving at the
request of the Bank or the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, to which the Indemnitee is or was a party or target or is
threatened to be made a party or target.
(h) "Settlement" shall mean any agreement or action by which a
Proceeding or other action is terminated or a complaint withdrawn before final
judgment on the merits, and shall include, without limitation, a judgment by
consent or confession or plea of guilty or nolo contendere.
2. Indemnification.
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(a) Indemnification. Subject to the limitations and exceptions set
forth herein, the Bank or the Company will indemnify the Indemnitee for Expenses
incurred in connection with any and all Proceedings, provided only that:
(1) Final judgment on the merits in such Proceeding is in the
Indemnitee's favor; or
(2) In the case of Settlement or a judgment in the Indemnitee's
favor other than on the merits, a majority of the Disinterested
Directors determines that the Indemnitee was acting (i) in good faith,
(ii) within the scope of the Indemnitee's authority or employment as
the Indemnitee could have reasonably perceived it under the
circumstances, and (iii) for a purpose the Indemnitee could have
reasonably believed under the circumstances was in the best interests
of the Bank, the Company, or its shareholders.
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(b) No Presumptions Created; Defenses. The termination of any
Proceeding by Final Judgment or Settlement shall not, of itself, create a
presumption that the Indemnitee did not act (i) in good faith, (ii) in a manner
which the Indemnitee reasonably believed to be within the scope of the
Indemnitee's authority or employment, or (iii) for a purpose which the
Indemnitee could have reasonably believed to be in the best interests of the
Bank or the Company. Nothing in this Agreement is intended to require or shall
be construed as requiring the Bank or the Company to do or fail to do any act in
violation of applicable law. The Bank or the Company's inability, pursuant to
administrative order or court order, to perform its obligations under this
Agreement shall not constitute a breach of this Agreement. It shall be a
defense to any action by the Indemnitee for indemnification under this Agreement
that the Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Bank or the Company to indemnify the
Indemnitee for the amount claimed or that the Bank or the Company is prohibited
by law, regulation, or order from paying such amount, but the burden of proving
such defense shall be on the Bank or the Company except as may otherwise be
required by federal law or regulation.
(c) Bank Duty to Seek Approvals. The Bank or the Company shall act
diligently, promptly, in good faith, and at its own expense with respect to
requests for indemnification hereunder. The Bank or the Company shall
diligently, promptly, in good faith, and at its own expense pursue any
regulatory or other approvals required for indemnification of the Indemnitee
hereunder or otherwise and appeals or requests for reconsideration of any
regulatory objection to or denial of such indemnification.
(d) Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Bank or the Company for
some or a portion of any Expenses incurred by him, but not, however, for the
total amount thereof, the Bank or the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which the Indemnitee is
entitled.
3. Expenses; Indemnification Procedure.
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(a) Notice/Cooperation by the Indemnitee. The Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Bank or the Company notice in writing as soon as practicable of any claim
made against the Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Bank or the Company shall be directed to
the President of the Bank or the Company. In addition, the Indemnitee shall
give the Bank or the Company such information and cooperation as it may
reasonably require and as shall be within the Indemnitee's power.
(b) Claims. Claims for indemnification must be made in writing and be
accompanied by evidence that the Expense for which indemnification is claimed
hereunder has been paid or incurred by the Indemnitee.
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(c) Payment Procedure for Indemnification. Any indemnification
provided for hereunder shall be paid no later than 65 days after receipt of the
written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Bank's or the Company's Charter or Bylaws
providing for indemnification, is not paid in full by the Bank or the Company
within days after a written request for payment thereof has first been received
by the Bank or the Company, the Indemnitee may, but need not, at any time
thereafter bring an action against the Bank or the Company to recover the unpaid
amount of the claim and be entitled to indemnification in accordance herewith
with respect to such action.
(d) Procedure for Advances. The Bank or the Company shall advance all
Expenses incurred by the Indemnitee, other than amounts for which the Indemnitee
becomes liable under a judgment, to the Indemnitee within 65 days following the
delivery of a written request therefor by the Indemnitee to the Bank or the
Company if the Disinterested Directors on the Board of Directors, if any, or if
there are none, then the Board of Directors of the Bank or the Company has made
a good faith determination that the Indemnitee ultimately may become entitled to
indemnification hereunder or otherwise. The Indemnitee hereby undertakes to
repay such amount advanced if, and only if and to the extent that, it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Bank or the Company as authorized hereby.
4. Attorneys.
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(a) Selection of Counsel. In the event the Bank or the Company shall
be obligated under Section 2 hereof to pay the Expenses of any Proceeding
against the Indemnitee, the Bank, or 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 so to do. After delivery of
such notice, approval of such counsel by the Indemnitee and the retention of
such counsel by the Bank or the Company, the Bank or the Company shall 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 its counsel in
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any such Proceeding at the Indemnitee's expense; and (ii) if (A) the employment
of counsel by the Indemnitee has been previously authorized by the Bank or the
Company, (B) the Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Bank, the Company, and the Indemnitee in the
conduct of any such defense, or (C) the Bank or 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 Bank or
the Company.
(b) Attorney's Fees. In the event the Indemnitee commences any action
or other proceeding to enforce the Indemnitee's rights under this Agreement, or
under the Charter or Bylaws of the Bank or the Company, and obtains a favorable
judgment therein, the Bank or
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the Company shall indemnify the Indemnitee for the Indemnitee's Expenses
incurred in connection therewith. In the event of an action instituted by or in
the name of the Bank or the Company under this Agreement or to enforce or
interpret any of the terms of this Agreement, the Indemnitee shall be entitled
to be paid all Expenses incurred by the Indemnitee in defense of such action
(including with respect to the Indemnitee's counterclaims and cross-claims made
in such action), unless as a part of such action the court determines that each
of the Indemnitee's material defenses to such action were made in bad faith or
were frivolous or as such payments are prohibited hereby.
5. Directors' Liability Insurance.
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(a) Maintenance of Insurance. The Bank or the Company shall, from
time to time, make the good faith determination whether or not it is practicable
to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the directors of the Bank or the Company with
coverage for losses from wrongful acts, or to ensure the Bank or the Company's
performance of its indemnification obligations under this Agreement. Among
other considerations, the Bank or the Company will weigh the costs of obtaining
such insurance against the protection afforded by such coverage. In all
policies of directors' liability insurance, the Indemnitee shall be named as an
insured in such a manner as to provide the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Bank or the
Company's directors. Notwithstanding the foregoing, the Bank or the Company
shall have no obligation to obtain or maintain such insurance if the Bank or the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if the
Indemnitee is covered by similar insurance maintained by a subsidiary or parent
of the Bank or the Company. The Bank and the Company is prohibited by OTS
regulations from obtaining insurance which provides payment for losses of any
person incurred as a consequence of his or her willful or criminal misconduct.
(b) Notice to Insurers. If, at the time of the receipt of a notice of
a claim hereunder, the Bank and the Company has directors' liability insurance
in effect, the Bank or 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 Bank or 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 policies.
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6. Limitations and Exceptions. The limitation and exceptions set forth
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in this Section 6 are effective notwithstanding any other provision of this
Agreement to the contrary.
(a) Excluded Acts. The Indemnitee will not be indemnified hereunder
for any acts or omissions or transactions from which a director may not be
indemnified under federal law.
(b) Statutory Requirements. The Bank or the Company shall not be
required to pay hereunder any indemnification to the extent and for such time as
such indemnification is prohibited by applicable regulation or order properly
issued by the FDIC or OTS under Section 18(k) of the Federal Deposit Insurance
Act (12 U.S.C. (S)1828(k)). This Agreement is subject to and qualified by
Section 11(k) of the Federal Deposit Insurance Act (12 U.S.C. (S)1821(k)).
(c) Requirements of OTS Regulations. This Agreement is intended to be
in accordance with the Regulations of the Office of Thrift Supervision at 12
C.F.R. (S)545.121 in effect at the date hereof. The Bank shall not be required
to indemnify the Indemnitee to the extent the Bank has received a written
objection from the OTS to indemnification of the Indemnitee, which written
objection is authorized by applicable law, regulation or order relating
specifically to indemnification, until such time as such indemnification of the
Indemnitee is permitted by the OTS upon appeal or otherwise or by applicable
law, regulation, or order.
(d) Proceedings by or in the Right of the Bank or the Company. No
indemnification shall be made hereunder of Expenses for which the Indemnitee is
adjudged in a Proceeding to be liable to the Bank or the Company in the
performance of the Indemnitee's duty to the Bank or the Company and their
shareholders unless, and only to the extent that, the court in which such
Proceeding is or was pending determines that, in view of all the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to indemnity for
Expenses and then only to the extent that the court shall determine.
(e) Claims Initiated by the Indemnitee. The Bank or the Company is
not required hereunder 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 brought
to establish or enforce a right to indemnification under this Agreement or any
other statute or law, but such indemnification or advancement of Expenses may be
provided by the Bank or the Company in specific cases if the Disinterested
Directors on the Board of Directors, if any, or if there are none, then the
Board of Directors has approved the initiation or bringing of such suit.
(f) Insured Claims. The Bank or the Company is not required hereunder
to indemnify the Indemnitee for Expenses which have been paid directly to the
Indemnitee by an insurance carrier under a policy of directors' liability
insurance maintained by the Bank or the Company.
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7. Scope and Nonexclusivity.
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(a) Scope. The Bank and the Company hereby agree to indemnify the
Indemnitee to the fullest extent permitted by law.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which the Indemnitee may be
entitled under the Bank or the Company's Charter, its Bylaws, any agreement, any
vote of shareholders or Disinterested Directors, or otherwise, as to action in
the Indemnitee's official capacity and as to liability alleged to result from
holding such office. The indemnification provided under this Agreement shall
continue as to the Indemnitee for any action taken or not taken while serving in
an indemnified capacity even though he may have ceased to serve in such capacity
at the time of any action or other covered Proceeding.
8. Effect of Merger, Consolidation or Acquisition. For purposes of this
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Agreement, the term "Bank" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that if the Indemnitee is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, the Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as the Indemnitee would have with respect to
such constituent corporation if its separate existence had continued.
9. Severability. The provisions of this Agreement shall be severable as
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provided in this Section 9. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the Bank
or the Company shall nevertheless indemnify the Indemnitee to the full extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
10. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which taken together shall constitute an original.
11. Successors and Assigns. This Agreement shall be binding upon the Bank
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or the Company and their successors and assigns, and shall inure to the benefit
of the Indemnitee and the Indemnitee's estate, heirs, legal representatives and
assigns.
12. Notices. All notices, requests, demands and other communications
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under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and
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receipted for by the party addressed, on the date of such receipt, or (ii) if
mailed by domestic certified or registered mail with postage prepaid, on the
third business day after the date postmarked. Addresses for notices to either
party are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
13. Choice of Law. This Agreement shall be governed by and its provisions
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construed in accordance with the laws of the Commonwealth of Kentucky as applied
to contracts between residents thereof entered into and to be performed entirely
within the Commonwealth of Kentucky unless and to the extent federal law or the
Tennessee Business Corporation Act controls.
14. Titles and Headings. Titles and headings used herein are for
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convenience of reference only.
15. Subrogation. In the event of payment under this Agreement, the Bank
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or 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 Bank or the Company
effectively to bring suit to enforce such rights.
16. Joint and Several Liability; No Duplication of Payments. The Bank
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or the Company shall be jointly and severally liable under this Agreement, but
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, Certificate of
Incorporation or Bylaws of the Bank or the Company or otherwise) of the amounts
otherwise indemnifiable hereunder.
17. Specific Performance. The parties recognize that if any provision
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of this Agreement is violated by the Bank or the Company, Indemnitee may be
without an adequate remedy at law. Accordingly, in the event of any such
violation, the 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.
18. Change in Control. If a Change in Control occurs, the Indemnitee
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shall be entitled to continue on as a director emeritus or as an advisory
director of any successor entity for one year after the Change in Control.
Additionally, on each annual anniversary date after the Change in Control, the
Agreement shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board of Directors of the successor
entity determines in a duly adopted resolution that this Agreement shall be
extended.
19. Amendments. No supplement, modification or amendment of this
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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.
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20. No Construction as Employment Agreement. Nothing contained herein
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shall be construed as giving Indemnitee any right to be retained in the employ
of the Bank or the Company or any of its subsidiaries.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ATTEST: CUMBERLAND MOUNTAIN
BANCSHARES, INC.
BY:
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Its Prsident
ATTEST: MIDDLESBORO FEDERAL
BANK, FEDERAL SAVINGS BANK
By:
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Its President
WITNESS:
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Indemnitee
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