INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into
as of the 21st day of September, 1997, by and between Xxxxxxxx Xxxx Company,
a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxx ("Indemnitee").
RECITALS:
A. Competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors, officers, or in other capacities
unless they are provided with adequate protection through insurance or
indemnification (or both) against claims and actions against them arising out
of their service to and activities on behalf of those corporations.
B. The current uncertainties relating to the availability of adequate
insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons.
C. The Board of Directors of the Company has determined that the
continuation of present trends in litigation will make it more difficult to
attract and retain competent and experienced persons, that this situation is
detrimental to the best interests of the Company's stockholders, and that the
Company should act to assure its directors and officers that there will be
increased certainty of adequate protection in the future.
D. It is reasonable, prudent, and necessary for the Company to obligate
itself contractually to indemnify its directors and officers to the fullest
extent permitted by applicable law in order to induce them to serve or
continue to serve the Company.
E. Indemnitee is willing to serve and continue to serve the Company on
the condition that he be indemnified to the fullest extent permitted by law.
F. Concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of the
Company.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's
agreement to serve or continue to serve as a director or officer of the
Company, and the covenants contained in this Agreement, the Company and
Indemnitee hereby covenant and agree as follows:
1. CERTAIN DEFINITIONS:
For purposes of this Agreement:
(a) ACQUIRING PERSON: shall mean any Person other than (i) the
Company, (ii) any of the Company's Subsidiaries, (iii) any employee benefit
plan of the Company or of a Subsidiary of the Company or of 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, or (iv) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or of a Subsidiary of the Company or of
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.
(b) CHANGE IN CONTROL: shall be deemed to have occurred if:
(i) any Acquiring Person is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act")), directly or indirectly, of securities of the Company
representing fifty percent or more of the combined voting power of the then
outstanding Voting Securities of the Company; or
(ii) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors of the Company; or
(iii) the Company merges or consolidates with any other
corporation or entity, or the Company or the stockholders of the Company and
holders of voting securities in such other corporation or entity participate
in a securities exchange, other than a merger or consolidation that would
result in the Voting Securities of the Company outstanding immediately before
the completion thereof continuing to represent a majority of the combined
voting power of the Voting Securities of the surviving entity (or its parent)
outstanding immediately after that merger, consolidation or securities
exchange; or
(iv) the Company liquidates, sells or disposes of all or
substantially all the Company's assets in one transaction or series of
transactions other than a liquidation, sale or disposition of all or
substantially all the Company's assets in one transaction or a series of
related transactions to an entity owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(c) CLAIM: shall mean any threatened, pending or completed action,
suit or proceeding (including, without limitation, securities laws actions,
suits and proceedings and also any crossclaim or counterclaim in any action,
suit or proceeding), whether civil, criminal, arbitral, administrative or
investigative in nature, or any inquiry or investigation (including
discovery), whether conducted by the Company or any other Person, that
Indemnitee in good faith believes might lead to the institution of any
action, suit or proceeding.
2
(d) EXPENSES: shall mean all costs, expenses (including attorneys'
and expert witnesses' fees), and obligations paid or incurred in connection
with investigating, defending (including affirmative defenses and
counterclaims), being a witness in, or participating in (including on
appeal), or preparing to defend, be a witness in, or participate in, any
Claim relating to any Indemnifiable Event.
(e) INCUMBENT BOARD: shall mean individuals who, as of August 21,
1997, constitute the Board of Directors of the Company and any other
individual who becomes a director of the Company after that date and whose
election or appointment by the Board of Directors or nomination for election
by the Company's stockholders was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board.
(f) INDEMNIFIABLE EVENT: shall mean any actual or alleged act,
omission, statement, misstatement, event or occurrence related to the fact
that Indemnitee is or was a director, officer, agent or fiduciary of the
Company, or is or was serving at the request of the Company as a director,
officer, trustee, agent or fiduciary of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise, or by reason
of any actual or alleged thing done or not done by Indemnitee in any such
capacity. For purposes of this Agreement, the Company agrees that
Indemnitee's service on behalf of or with respect to any Subsidiary or
employee benefits plan of the Company or any Subsidiary of the Company shall
be deemed to be at the request of the Company.
(g) INDEMNIFIABLE LIABILITIES: shall mean all Expenses and all
other liabilities, damages (including, without limitation, punitive,
exemplary, and the multiplied portion of any damages), judgments, payments,
fines, penalties, amounts paid in settlement and awards paid or incurred that
arise out of, or in any way relate to, any Indemnifiable Event.
(h) PERSON: shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a trust or other entity. A Person, together with
that Person's Affiliates and Associates (as those terms are defined in Rule
12b-2 under the Exchange Act), and any Persons acting as a partnership,
limited partnership, joint venture, association, syndicate or other group
(whether or not formally organized), or otherwise acting jointly or in
concert or in a coordinated or consciously parallel manner (whether or not
pursuant to any express agreement), for the purpose of acquiring, holding,
voting or disposing of securities of the Company with such Person, shall be
deemed a single "Person."
(i) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred
if (i) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) any Person (including
the Company) publicly announces an intention to take or to consider taking
actions that, if consummated, would constitute a Change in Control; or (iii)
the Board of Directors of the Company adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has occurred.
3
(j) REVIEWING PARTY: shall mean any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board (including Special Counsel
referred to in Section 3) who is not a party to the particular Claim for
which Indemnitee is seeking indemnification.
(k) SPECIAL COUNSEL: shall mean special, 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 for Indemnitee within the last three years (other than as
Special Counsel under this Agreement or similar agreements).
(l) SUBSIDIARY: shall mean, with respect to any Person, any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by that Person.
(m) VOTING SECURITIES: shall mean any securities that vote
generally in the election of directors, in the admission of general partners,
or in the selection of any other similar governing body.
2. INDEMNIFICATION AND EXPENSE ADVANCEMENT.
(a) The Company shall indemnify Indemnitee and hold Indemnitee
harmless to the fullest extent permitted by law, as soon as practicable but
in any event no later than 30 days after written demand is presented to the
Company, from and against any and all Indemnifiable Liabilities.
Notwithstanding the foregoing, the obligations of the Company under this
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 Special
Counsel is involved) that Indemnitee is not permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall require any
determination under this Section 2(a) to be made by the Reviewing Party prior
to the disposition or conclusion of the Claim against the Indemnitee.
(b) If so requested in writing by Indemnitee, the Company shall
advance to Indemnitee all Expenses incurred by Indemnitee (or, if applicable,
reimburse Indemnitee for any and all Expenses incurred by Indemnitee and
previously paid by Indemnitee) (an "Expense Advance") within ten business
days after such request and delivery by Indemnitee of an undertaking to repay
Expense Advances if and to the extent such undertaking is required by
applicable law prior to the Company's payment of Expense Advances. The
Company shall be obligated from time to time at the request of Indemnitee to
make or pay an Expense Advance in advance of the final disposition or
conclusion of any Claim. In connection with any request for an Expense
Advance, if requested by the Company, Indemnitee or Indemnitee's counsel
shall submit an affidavit stating that the Expenses to which the Expense
Advances relate are reasonable. Any dispute as to the reasonableness of any
Expense shall not delay an Expense Advance by the Company. If, when, and to
the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be indemnified with respect to a Claim under applicable law, the
Company shall be entitled to be reimbursed by Indemnitee and Indemnitee
hereby agrees to reimburse the Company without interest (which agreement
shall be an
4
unsecured obligation of Indemnitee) for all related Expense Advances
theretofore made or paid by the Company; provided, however, that if
Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee could 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, and the Company shall be obligated to
continue to make Expense Advances, until a final judicial determination is
made with respect thereto (as to which all rights of appeal therefrom have
been exhausted or lapsed). If there has not been a Potential Change in
Control or a Change in Control, the Reviewing Party shall be selected by the
Board of Directors of the Company. If there has been a Potential Change in
Control or a Change in Control, the Reviewing Party shall be advised by or
shall be Special Counsel referred to in Section 3 hereof, if and as
Indemnitee so requests. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that Indemnitee substantively
would not be permitted to be indemnified in whole or part under applicable
law, Indemnitee shall have the right to commence litigation in any court in
the states of Texas or Delaware having subject matter jurisdiction thereof
and in which venue is proper seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect
thereof, 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 Potential
Change in Control or a Change in Control and if Indemnitee requests in
writing that Special Counsel advise the Reviewing Party or be the Reviewing
Party, then the Company shall not (i) deny any indemnification payments (and
Expense Advances shall continue to be paid by the Company pursuant to Section
2(b)) that Indemnitee requests or demands under this Agreement or any other
agreement or law now or hereafter in effect relating to Claims for
Indemnifiable Events, or (ii) request or seek reimbursement from Indemnitee
of any indemnification payment or Expense Advances unless, in either case,
Special Counsel has rendered its written opinion to the Company and
Indemnitee that the Company was not or is not permitted under applicable law
to pay Indemnitee and to allow Indemnitee to retain such indemnification
payment or Expense Advances. However, if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee could be indemnified under applicable law, any determination
made by Special Counsel 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, and the
Company shall be obligated to continue to make Expense Advances, until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefore have been exhausted or lapsed). The Company agrees
to pay the reasonable fees of Special Counsel and to indemnify Special
Counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or
Special Counsel's engagement pursuant hereto.
4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control or a Change in Control, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee (the "Trust") and
from time to time upon written request of Indemnitee shall fund the
5
Trust in an amount equal to all Indemnifiable Liabilities reasonably
anticipated at the time to be incurred in connection with any Claim. The
amount to be deposited in the Trust pursuant to the foregoing funding
obligation shall be determined by the Reviewing Party. The terms of the Trust
shall provide that, upon a Change in Control, (i) the Trust shall not be
revoked or the principal thereof invaded, without the written consent of
Indemnitee; (ii) the trustee of the Trust shall advance, within ten business
days of a request by Indemnitee, any and all Expenses to Indemnitee (and
Indemnitee hereby agrees to reimburse the Trust under the circumstances in
which Indemnitee would be required to reimburse the Company for Expense
Advances under this Agreement); (iii) the Trust shall continue to be funded
by the Company in accordance with the funding obligation set forth above;
(iv) the trustee of the Trust shall promptly pay to Indemnitee all amounts
for which Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise; and (v) all unexpended funds in that Trust shall
revert to the Company upon a final determination by the Reviewing Party or a
court of competent jurisdiction, as the case may be, that Indemnitee has
received amounts, if any, which fully satisfy the Company's obligation to
indemnify Indemnitee under the terms of this Agreement. The trustee of the
Trust shall be chosen by Indemnitee. Nothing in this Section 4 shall relieve
the Company of any of its obligations under this Agreement.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall
indemnify Indemnitee against any and all costs and expenses (including
attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall
(within two business days of that request) advance those costs and expenses
to Indemnitee, that are incurred by Indemnitee if Indemnitee, whether by
formal proceedings or through demand and negotiation without formal
proceedings: (a) seeks to enforce Indemnitee's rights under this Agreement,
(b) seeks to enforce Indemnitee's rights to expense advancement or
indemnification under any other agreement or provision of the Company's
Certificate of Incorporation (the "Certificate of Incorporation"), or Bylaws
(the "Bylaws"), now or hereafter in effect relating to Claims for
Indemnifiable Events, or (c) seeks recovery under any directors' and
officers' liability insurance policies maintained by the Company, in each
case regardless of whether Indemnitee ultimately prevails. To the fullest
extent permitted by law, the Company waives any and all rights that it may
have to recover its costs and expenses from Indemnitee.
6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some, but not all, of
Indemnitee's Indemnifiable Liabilities, the Company shall indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
7. CONTRIBUTION.
(a) CONTRIBUTION PAYMENT. To the extent the indemnification
provided for under any provision of this Agreement is determined (in the
manner hereinabove provided) not to be permitted under applicable law, the
Company, in lieu of indemnifying Indemnitee, shall, to the extent permitted
by law, contribute to the amount of any and all Indemnifiable Liabilities
incurred or paid by Indemnitee for which such indemnification is not
permitted. The amount the Company contributes shall be in such proportion as
is appropriate to reflect the relative fault of Indemnitee, on the one hand,
and of the Company and any and all other parties (including officers and
directors
6
of the Company other than Indemnitee) who may be at fault (collectively,
including the Company, the "Third Parties"), on the other hand.
(b) RELATIVE FAULT. The relative fault of the Third Parties and the
Indemnitee shall be determined (i) by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency or (ii) to
the extent such court or other governmental agency does not apportion
relative fault, by the Reviewing Party (which shall include Special Counsel)
after giving effect to, among other things, the relative intent, knowledge,
access to information and opportunity to prevent or correct the relevant
events, of each party, and other relevant equitable considerations. The
Company and Indemnitee agree that it would not be just and equitable if
contribution were determined by pro rata allocation or by any other method of
allocation which does take account of the equitable considerations referred
to in this Section 7(b).
8. BURDEN OF PROOF. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified under any provision of this Agreement or to receive contribution
pursuant to Section 7 of this Agreement, to the extent permitted by law the
burden of proof shall be on the Company to establish that Indemnitee is not
so entitled.
9. NO PRESUMPTION. For purposes of this Agreement, the termination of
any Claim by judgment, order, settlement (whether with or without court
approval), or conviction, or upon a plea of nolo contendere, or its
equivalent, or an entry of an order of probation prior to judgment shall not
create a presumption (other than any presumption arising as a matter of law
that the parties may not contractually agree to disregard) 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.
10. NON-EXCLUSIVITY. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Bylaws or
Certificate of Incorporation or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General Corporation
Law (whether by statute or judicial decision) permits greater indemnification
by agreement than would be afforded currently under the Bylaws or Certificate
of Incorporation and this Agreement, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by that change. Indemnitee's rights under this Agreement shall not
be diminished by any amendment to the Certificate of Incorporation or Bylaws,
or of any other agreement or instrument to which Indemnitee is not a party,
and shall not diminish any other rights which Indemnitee now or in the future
has against the Company.
11. LIABILITY INSURANCE. Except as otherwise agreed to by the Company
and Indemnitee in a written agreement, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by that policy or those policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
7
12. PERIOD OF LIMITATIONS. No action, lawsuit or proceeding may be
brought against Indemnitee or Indemnitee's spouse, heirs, executors or
personal or legal representatives, nor may any cause of action be asserted in
any such action, lawsuit or proceeding, by or on behalf of the Company, after
the expiration of two years after the statute of limitations commences with
respect to Indemnitee's act or omission which gave rise to the action,
lawsuit, proceeding or cause of action; provided, however, that, if any
shorter period of limitations is otherwise applicable to any such action,
lawsuit, proceeding or cause of action, the shorter period shall govern.
13. AMENDMENTS. 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 provision of this Agreement shall be effective
unless in a writing signed by the party granting the waiver. 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 that
waiver constitute a continuing waiver.
14. OTHER SOURCES. Indemnitee shall not be required to exercise any
rights that Indemnitee may have against any other Person (for example, under
an insurance policy) or before Indemnitee enforces his rights under this
Agreement. However, to the extent the Company actually indemnifies Indemnitee
or advances him Expenses, the Company shall be subrogated to the rights of
Indemnitee and shall be entitled to enforce any such rights which Indemnitee
may have against third parties. Indemnitee shall assist the Company in
enforcing those rights if it pays his costs and expenses of doing so. If
Indemnitee is actually indemnified or advanced Expenses by any third party,
then, for so long as Indemnitee is not required to disgorge the amounts so
received, to that extent the Company shall be relieved of it obligation to
indemnify Indemnitee or advance Indemnitee Expenses.
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, assigns (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), spouses, heirs and personal and legal
representatives. This Agreement shall continue in effect regardless of
whether Indemnitee continues to serve as an officer or director of the
Company or another enterprise at the Company's request.
16. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective
during the term hereof, that provision shall be fully severable; this
Agreement shall be construed and enforced as if that illegal, invalid or
unenforceable provision had never comprised a part hereof; and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of that illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to the illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
17. 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 that state without giving effect to
the principles of conflicts of laws.
8
18. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
19. NOTICES. Whenever this Agreement requires or permits notice to be
given by one party to the other, such notice must be in writing to be
effective and shall be deemed delivered and received by the party to whom it
is sent upon actual receipt (by any means) of such notice. Receipt of a
notice by the Secretary of the Company shall be deemed receipt of such notice
by the Company.
20. COMPLETE AGREEMENT. This Agreement constitutes the complete
understanding and agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
the parties with respect to the subject matter hereof.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
[THE REMAINDER OF PAGE IS INTENTIONALLY BLANK]
9
EXECUTED as of the date first written above.
XXXXXXXX XXXX COMPANY
By: /s/ XXXXXXX X. XXX
---------------------------------------
Xxxxxxx X. Xxx, Vice President
INDEMNITEE
/s/ XXXXXX X. XXXXX
------------------------------------------
Xxxxxx X. Xxxxx
10
SCHEDULE
INDEMNIFICATION AGREEMENTS
Following is a list identifying agreements with certain officers and
directors of the Company substantially identical to the Indemnification
Agreement (the "Filed Agreement") dated September 21, 1997 between the
Company and Xxxxxx X. Xxxxx filed herewith together with the material
differences between those agreements and the Filed Agreement.
INDIVIDUAL DIFFERENCES FROM THE FILED AGREEMENT
--------------------- --------------------------------------------------------
Xxxxxx X. Xxxxx The name of the Indemnitee in the recital is Xxxxxx X.
Xxxxx
X. Xxxxx Xxxxxxxxx The name of the Indemnitee in the recital is X. Xxxxx
Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx The name of the Indemnitee in the recital is Xxxxxxx X.
Xxxxxxxxx
Xxxxxxx X. Xxxxxx The name of the Indemnitee in the recital is Xxxxxxx X.
Xxxxxx
Asuka Nakahara The name of the Indemnitee in the recital is Asuka
Nakahara
Xxxxxxx Xxxxxxxxx The name of the Indemnitee in the recital is Xxxxxxx
Xxxxxxxxx
Xxxxxx X. Xxxxxxxx The name of the Indemnitee in the recital is Xxxxxx X.
Xxxxxxxx
Xxxxxx X. Xxxx The name of the Indemnitee in the recital is Xxxxxx X.
Xxxx
X. XxXxxxxx Xxxxxxxx The name of the Indemnitee in the recital is X.
XxXxxxxx Xxxxxxxx
