EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is entered into and effective as of
the ____ day of ___________, 1997 (this "Agreement"), by and between Innovative
Valve Technologies, Inc., a Delaware corporation ("Company"), and
_______________________ ("Indemnitee"):
WHEREAS, highly competent persons have become more reluctant to
serve corporations as directors or in other capacities unless they are provided
with adequate protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of corporations; and
WHEREAS: (i) the Board of Directors of the Company (the "Board") has
determined that, in order to attract and retain qualified individuals, the
Company will attempt to maintain on an ongoing basis, at its sole expense,
liability insurance to protect persons serving the Company and its subsidiaries
from certain liabilities; (ii) although the furnishing of such insurance has
been a customary and widespread practice among United States-based corporations
and other business enterprises, the Board believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions; and (iii) at the same time,
directors, officers and other persons in service to corporations or business
enterprises are being increasingly subjected to expensive and time-consuming
litigation relating to, among other matters, matters that traditionally would
have been brought only against the corporation or business enterprise itself;
and
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons; and
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;
and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
SECTION 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
[director] [and] [officer] of the Company and, as mutually agreed by Indemnitee
and the Company, as a director, officer, employee, agent or fiduciary of other
corporations, partnerships, joint ventures, trusts or other enterprises
(including, without limitation, employee benefit plans)(each, an
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"Enterprise"). Indemnitee may at any time and for any reason resign from any
such position (subject to any other contractual obligation or any obligation
imposed by operation of law), in which event the Company will have no obligation
under this Agreement to continue Indemnitee in that position. This Agreement is
not and will not be deemed an employment contract between the Company (or any of
its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that
Indemnitee's employment with the Company (or any of its subsidiaries), if any,
is at will, and the Indemnitee may be discharged at any time for any reason,
with or without cause, except as may be otherwise provided in any written
employment contract between Indemnitee and the Company (or any of its
subsidiaries), other applicable formal severance policies duly adopted by the
Board or, with respect to service as a director of the Company, by the Company's
Certificate of Incorporation, Bylaws and the General Corporation Law of the
State of Delaware. The foregoing notwithstanding, subject to Section 12, this
Agreement will continue in force after Indemnitee has ceased to serve as an
officer or director of the Company and no longer serves at the written request
of the Company as a director, officer, employee, agent or fiduciary of any other
Enterprise.
SECTION 2. INDEMNIFICATION--GENERAL. The Company will indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) (subject to the provisions of this Agreement) to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence will include, but will not be limited to, the rights set forth in the
other Sections of this Agreement.
SECTION 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF
THE COMPANY. Indemnitee will be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to or a participant in any threatened, pending or
completed Proceeding (as hereinafter defined), other than a Proceeding by or in
the right of the Company. Pursuant to this Section 3, the Company will indemnify
Indemnitee against, and will hold Indemnitee harmless from and in respect of,
all Expenses, judgments, penalties, fines (including excise taxes) and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) actually and reasonably incurred by him
or on his behalf in connection with such Proceeding or any claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company and, with respect
to any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
SECTION 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee
will be entitled to the rights of indemnification provided in this Section 4 if,
by reason of his Corporate Status, he is, or is threatened to be made, a party
to or a participant in any threatened, pending or completed Proceeding brought
by or in the right of the Company to procure a judgment in its favor. Pursuant
to this Section 4, the Company will indemnify Indemnitee against, and shall hold
Indemnitee harmless from and in respect of, all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he acted
in good faith and in a manner he
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reasonably believed to be in or not opposed to the best interests of the
Company; PROVIDED, HOWEVER, that, if applicable law so provides, no
indemnification against such Expenses will be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery of the State of Delaware, or the court in which such Proceeding shall
have been brought or is pending, shall determine that such indemnification may
be made.
SECTION 5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR
PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to (or a
participant in) and is successful, on the merits or otherwise, in defense of any
Proceeding, the Company will indemnify him against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in defense of 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, the Company will indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section 5 and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, will be deemed to be a successful result as to such claim, issue or
matter.
SECTION 6. INDEMNIFICATION FOR EXPENSES AS A WITNESS.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to
which Indemnitee is not a party, the Company will indemnify him against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith.
SECTION 7. ADVANCEMENT OF EXPENSES. The Company will advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within 10 days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements must reasonably evidence the Expenses incurred by or on
behalf of Indemnitee and include or be preceded or accompanied by an undertaking
by or on behalf of Indemnitee to repay any Expenses advanced if it ultimately
shall be determined that Indemnitee is not entitled to be indemnified by the
Company against such Expenses.
SECTION 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION. (a) To obtain indemnification under this Agreement, Indemnitee
must submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee is
entitled to that indemnification. The Secretary of the Company will, promptly
upon receipt of such a request for that indemnification, advise the Board in
writing that Indemnitee has requested that indemnification.
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(b) On written request by Indemnitee for indemnification pursuant to
Section 8(a), a determination, if required by applicable law, with respect to
Indemnitee's entitlement thereto will be made in the specific case: (i) if a
Change of Control shall have occurred within two years prior to the date of such
written request, by Independent Counsel in a written opinion to the Board, a
copy of which will be delivered to Indemnitee; or (ii) if a Change of Control
shall not have occurred within two years prior to the date of such written
request, (A) by a majority vote of the Disinterested Directors, even though less
than a quorum of the Board, or (B) if there are no such Disinterested Directors,
or if such Disinterested Directors so direct, by Independent Counsel in a
written opinion to the Board, a copy of which will be delivered to Indemnitee;
and, if it is so determined that Indemnitee is entitled to indemnification under
this Agreement, the Company will: (i) within 10 days after such determination
pay to Indemnitee all amounts theretofore incurred by or on behalf of Indemnitee
in respect of which Indemnitee is entitled to that indemnification by reason of
that determination; and (ii) thereafter on written request by Indemnitee, pay to
Indemnitee within 10 days after that request such additional amounts incurred by
or on behalf of Indemnitee in respect of which Indemnitee is entitled to that
indemnification by reason of that determination. Indemnitee will cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification under this Agreement, including
providing to such person, persons or entity on reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including attorneys'
fees and disbursements) incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination will be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b), the Independent
Counsel will be selected as provided in this Section 8(c). If a Change of
Control shall not have occurred within two years prior to the date of
Indemnitee's written request for indemnification pursuant to Section 8(a), the
Board will select the Independent Counsel, and the Company will give written
notice to Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred within two years prior to
the date of Indemnitee's written request for indemnification pursuant to Section
8(a), Indemnitee will select the Independent Counsel (unless Indemnitee requests
that such selection be made by the Board, in which event the preceding sentence
will apply), and Indemnitee will give written notice to the Company advising it
of the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection; PROVIDED,
HOWEVER, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 17, and the objection must set forth with
particularity the factual basis for such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If
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(i) the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) and (ii) within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 8(a), no Independent Counsel shall have been selected and not objected
to, either the Company or Indemnitee may petition the Court of Chancery or other
court of competent jurisdiction for resolution of any objection that shall have
been made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the petitioned court or by such other person as the petitioned court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed will act as Independent Counsel under Section 8(b). The
Company will pay any and all reasonable fees and expenses of Independent Counsel
incurred by such Independent Counsel in connection with acting pursuant to
Section 8(b), and the Company will pay all reasonable fees and expenses incident
to the procedures of this Section 8(c), regardless of the manner in which such
Independent Counsel was selected and appointed. If (i) Independent Counsel does
not make any determination respecting Indemnitee's entitlement to
indemnification hereunder within 90 days after receipt by the Company of a
written request therefor and (ii) any judicial proceeding or arbitration
pursuant to Section 10(a)(iii) is then commenced, Independent Counsel will be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
SECTION 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. (a) In
making a determination with respect to entitlement to indemnification hereunder,
the person, persons or entity making such determination must presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a), and the
Company will have the burden of proof to overcome that presumption in connection
with the making by any person, persons or entity of any determination contrary
to that presumption.
(b) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or on a plea of
NOLO CONTENDERE or its equivalent, will not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification under this Agreement or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.
(c) Any action taken by Indemnitee in connection with any employee
benefit plan will, if taken in good faith by Indemnitee and in a manner
Indemnitee reasonably believed to be in the interest of the participants in or
beneficiaries of that plan, be deemed to have been taken in a manner "not
opposed to the best interests of the Company" for all purposes of this
Agreement.
SECTION 10. REMEDIES OF INDEMNITEE. (a) In the event that (i) a
determination is made pursuant to Section 8 that Indemnitee is not entitled to
indemnification hereunder, (ii) advancement of Expenses is not timely made
pursuant to Section 7, (iii) Independent Counsel
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is to determine Indemnitee's entitlement to indemnification hereunder, but does
not make that determination within 90 days after receipt by the Company of the
request for that indemnification, (iv) payment of indemnification is not made
pursuant to Section 5 or 6 within 10 days after receipt by the Company of a
written request therefor or (v) payment of indemnification pursuant to Section
8(b) is not made timely, Indemnitee will be entitled to an adjudication from the
Court of Chancery of his entitlement to such indemnification or advancement of
Expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Indemnitee must
commence such proceeding seeking an adjudication or an award in arbitration
within 180 days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a); PROVIDED, HOWEVER, that
the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his rights under Section 5.
(b) In the event that a determination shall have been made pursuant
to Section 8(b) that Indemnitee is not entitled to indemnification hereunder,
any judicial proceeding or arbitration commenced pursuant to this Section 10
will be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee will not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced pursuant to
this Section 10, the Company will have the burden of proving that Indemnitee is
not entitled to indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 8(b)
that Indemnitee is entitled to indemnification hereunder, the Company will be
bound by such determination in any judicial proceeding or arbitration commenced
pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a
material fact, or an omission by Indemnitee of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee will be
entitled to recover from the Company, and will be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that Indemnitee is
entitled to receive part of, but not all, the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration will be appropriately prorated.
SECTION 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE;
SUBROGATION. (a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement are not and will not be deemed exclusive
of any other rights to which Indemnitee may at any time be entitled under
applicable law, the Company's Certificate of Incorporation, the Company's
Bylaws, any agreement, a vote of stockholders or a resolution of directors, or
otherwise.
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No amendment, alteration or repeal of this Agreement or of any provision hereof
will limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his Corporate Status prior
to such amendment, alteration or repeal. To the extent that a change in Delaware
law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under this Agreement, it is the
intent and agreement of the parties hereto that Indemnitee will enjoy by this
Agreement the greater benefits so afforded by such change.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other Enterprise that any such
person serves at the written request of the Company, Indemnitee will be covered
by such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee, agent
or fiduciary under such policy or policies.
(c) The Company will 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.
(d) In the event of any payment under this Agreement, the Company
will be subrogated to the extent of such payment to all the rights of recovery
of Indemnitee, who will execute all papers required and take all action
necessary to secure such rights, including execution of such documents as are
necessary to enable the Company to bring suit to enforce such rights.
(e) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee with respect to Indemnitee's service at the written
request of the Company as a director, officer, employee, agent or fiduciary of
any other Enterprise will be reduced by any amount Indemnitee has actually
received as indemnification or advancement of Expenses from such other
Enterprise.
SECTION 12. DURATION OF AGREEMENT. This Agreement will continue
until and terminate on the later of: (a) 10 years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or as a
director, officer, employee, agent or fiduciary of any other Enterprise that
Indemnitee served on behalf of the Company at the written request of the
Company; or (b) the final termination of any Proceeding then pending in respect
of which Indemnitee is granted rights of indemnification or advancement of
expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Section 10 relating thereto. This Agreement will be binding on the Company and
its successors and assigns and will inure to the benefit of Indemnitee and his
spouse (if Indemnitee resides in Texas or another community property state),
heirs, executors and administrators.
SECTION 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
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and enforceability of the remaining provisions of this Agreement (including,
without limitation, each portion of any Section containing any such provision
held to be invalid, illegal or unenforceable which is not itself invalid,
illegal or unenforceable) will not in any way be affected or impaired thereby;
(b) such provision or provisions will be deemed reformed to the extent necessary
to conform to applicable law and to give the maximum effect to the intent of the
parties hereto; and (c) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section containing
any such provision held to be invalid, illegal or unenforceable which is not
itself invalid, illegal or unenforceable) will be construed so as to give effect
to the intent manifested thereby.
SECTION 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision hereof, Indemnitee will not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding brought by Indemnitee or any claim therein prior to a
Change of Control, unless the bringing of such Proceeding or making of such
claim shall have been approved by the Board of Directors.
SECTION 15. IDENTICAL COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which will for all purposes be deemed to be
an original but all of which together will constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
SECTION 16. HEADINGS. The headings of the Sections hereof are
inserted for convenience only and do not and will not be deemed to constitute
part of this Agreement or to affect the construction thereof.
SECTION 17. DEFINITIONS. For purposes of this Agreement:
(a) "ACQUIRING PERSON" means any Person who or which, together with
all Affiliates and Associates of such Person, is or are the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that a Person will not be or become an Acquiring Person
if that Person, together with its Affiliates and Associates, shall become
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding solely as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as that Person or any Affiliate or
Associate of that Person purchases or otherwise becomes the Beneficial
Owner of additional shares of Common Stock constituting 1% or more of the
then outstanding shares of Common Stock or any other Person (or Persons)
who is (or collectively are) the Beneficial Owner of shares of Common
Stock constituting 1% or more of the then outstanding shares of Common
Stock becomes an Affiliate or Associate of such Person, unless, in either
such case, such Person, together with all Affiliates and Associates of
such Person, is not then the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding. Notwithstanding anything in this
definition of "Acquiring
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Person" to the contrary, no Exempt Person shall be deemed to be or become
an "Acquiring Person" or an Affiliate or Associate of any other person for
purposes of this definition.
(b) "AFFILIATE" has the meaning ascribed to that term in Exchange
Act Rule 12b-2.
(c) "ASSOCIATE" means, with reference to any Person, (i) any
corporation, firm, partnership, limited liability company, association,
unincorporated organization or other entity (other than the Company or a
subsidiary of the Company) of which that Person is an officer or general
partner (or officer or general partner of a general partner) or is,
directly or indirectly, the Beneficial Owner of 10% or more of any class
of its equity securities or interests, (ii) any trust or other estate in
which that Person has a substantial beneficial interest or for or of which
that Person serves as trustee or in a similar fiduciary capacity and (iii)
any relative or spouse of that Person, or any relative of that spouse, who
has the same home as that Person.
(d) A specified Person is deemed the "BENEFICIAL OWNER" of, and is
deemed to "beneficially own," any securities:
(i) of which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" (as
determined pursuant to Exchange Act Rule 13d-3) or otherwise has the
right to vote or dispose of, including pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED,
HOWEVER, that a Person will not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote
that security if that agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given in response to
a public (that is, not including a solicitation exempted by Exchange
Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
Exchange Act; and (B) is not then reportable by such Person on
Exchange Act Schedule 13D (or any comparable or successor report);
(ii) which that Person or any of that Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether that right or obligation is exercisable or
effective immediately or only after the passage of time or the
occurrence of an event) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or on the exercise of
conversion rights, exchange rights, other rights, warrants or
options, or otherwise; PROVIDED, HOWEVER, that a Person will not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by
that Person or any of that Person's Affiliates or Associates until
those tendered securities are accepted for purchase or exchange; or
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(iii) which are beneficially owned, directly or indirectly, by
(A) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or
consent as described in the proviso to subparagraph (i) of this
definition) or disposing of any voting securities of the Company or
(B) any group (as that term is used in Exchange Act Rule 13d-5(b))
of which that specified Person is a member;
PROVIDED, HOWEVER, that nothing in this definition shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired through such
Person's participation in good faith in a firm commitment underwriting
(including without limitation securities acquired pursuant to stabilizing
transactions to facilitate a public offering in accordance with Exchange
Act Regulation M or to cover overallotments created in connection with a
public offering) until the expiration of 40 days after the date of that
acquisition. For purposes of this Agreement, "voting" a security shall
include voting, granting a proxy, acting by consent, making a request or
demand relating to corporate action (including, without limitation,
calling a stockholder meeting) or otherwise giving an authorization
(within the meaning of Section 14(a) of the Exchange Act) in respect of
such security.
(e) "CHANGE OF CONTROL" means the occurrence of any of the following
events that occurs after the IPO Closing Date: (i) any Person becomes an
Acquiring Person; (ii) at any time the then Continuing Directors cease to
constitute a majority of the members of the Board; (iii) a merger of the
Company with or into, or a sale by the Company of its properties and
assets substantially as an entirety to, another Person occurs and,
immediately after that occurrence, any Person, other than an Exempt
Person, together with all Affiliates and Associates of such Person (other
than Exempt Persons), shall be the Beneficial Owner of 15% or more of the
total voting power of the then outstanding Voting Shares of the Person
surviving that transaction (in the case or a merger or consolidation) or
the Person acquiring those properties and assets substantially as an
entirety unless such Person, together with all Affiliates and Associates
of such Person, was the Beneficial Owner of 15% or more of the shares of
Common Stock outstanding prior to that transaction; or (iv) Xxxxxx,
together with all its Affiliates, shall become the Beneficial Owner of 65%
or more of the shares of Common Stock then outstanding.
(f) "COMMON STOCK" means the common stock, par value $.001 per
share, of the Company.
(g) "CONTINUING DIRECTOR" means at any time any individual who then
(i) is a member of the Board and was a member of the Board as of the IPO
Closing Date or whose nomination for his first election, or that first
election, to the Board following that date was recommended or approved by
a majority of the then Continuing Directors (acting separately
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or as a part of any action taken by the Board or any committee thereof)
and (ii) is not an Acquiring Person, an Affiliate or Associate of an
Acquiring Person or a nominee or representative of an Acquiring Person or
of any such Affiliate or Associate.
(h) "CORPORATE STATUS" describes the status of a natural person who
is or was a director, officer, employee or agent of the Company or of any
other Enterprise, provided such person is or was serving in such capacity
at the written request of the Company. For purposes of this Agreement,
"serving at the written request of the Company" includes any service by
Indemnitee which imposes duties on, or involves services by, Indemnitee
with respect to any employee benefit plan or its participants or
beneficiaries.
(i) "COURT OF CHANCERY" means the Court of Chancery of the State of
Delaware.
(j) "DISINTERESTED DIRECTOR" means a director of the Company who is
not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee hereunder.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "EXEMPT PERSON" means: (i)(A) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of
the Company and (B) any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee benefits for employees
of the Company or any subsidiary of the Company; (ii) Indemnitee, any
Affiliate or Associate of Indemnitee or any group (as that term is used in
Exchange Act Rule 13d-5(b)) of which Indemnitee or any Affiliate or
Associate of Indemnitee is a member; or (iii) so long as Xxxxxx remains
the Beneficial Owner of 15% or more of the outstanding shares of Common
Stock, Xxxxxx.
(m) "EXPENSES" include all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness
in, or otherwise participating in, a Proceeding and all interest or
finance charges attributable to any thereof. Should any payments by the
Company under this Agreement be determined to be subject to any federal,
state or local income or excise tax, "Expenses" also shall include such
amounts as are necessary to place Indemnitee in the same after-tax
position (after giving effect to all applicable taxes) he would have been
in had no such tax been determined to apply to such payments.
(n) "INDEPENDENT COUNSEL" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years
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has been, retained to represent: (i) the Company, its affiliates or
Indemnitee in any matter material to any such party; or (ii) any other
party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
does not include at any time 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.
(o) "IPO" means the first time a registration statement filed under
the Securities Act of 1933, as amended, and respecting an underwritten
primary offering by the Company of shares of Common Stock is declared
effective under that act and the shares registered by that registration
statement are issued and sold by the Company (otherwise than pursuant to
the exercise of any over-allotment option).
(p) "IPO CLOSING DATE" means the date on which the Company first
receives payment for the shares of Common Stock it sells in the IPO.
(q) "PERSON" means any natural person, sole proprietorship,
corporation, partnership of any kind having a separate legal status,
limited liability company, business trust, unincorporated organization or
association, mutual company, joint stock company, joint venture, estate,
trust, union or employee organization or governmental authority.
(r) "Xxxxxx" means Xxxxxx Services Corp., an Ontario corporation.
(s) "PROCEEDING" includes any action, suit, alternate dispute
resolution mechanism, hearing or any other proceeding, whether civil,
criminal, administrative, arbitrative, investigative or mediative, any
appeal in any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding and any inquiry or investigation that could
lead to any such action, suit, alternate dispute resolution mechanism,
hearing or other proceeding, except one (i) initiated by an Indemnitee
pursuant to Section 10 to enforce his rights hereunder or (ii) pending on
or before the date of this Agreement.
(t) "VOTING SHARES" means: (i) in the case of any corporation, stock
of that corporation of the class or classes having general voting power
under ordinary circumstances to elect a majority of that corporation's
board of directors; and (ii) in the case of any other entity, equity
interests of the class or classes having general voting power under
ordinary circumstances equivalent to the Voting Shares of a corporation.
SECTION 18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement will be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement will
be deemed or will constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
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SECTION 19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to
notify the Company in writing on being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses hereunder; however, failure to give such notice will not deprive
Indemnitee of his rights to indemnification and advancement of Expenses
hereunder unless the Company is actually and materially prejudiced thereby.
SECTION 20. NOTICES. All notices, requests, demands and other
communications hereunder must be in writing and will be deemed delivered and
received (a) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent or (b) if delivered by mail (whether actually
received or not), at the close of business on the third Houston, Texas business
day next following the day when placed in the mail, postage prepaid, certified
or registered, addressed to the appropriate party at the address of such party
set forth below (or at such other address as such party may designate by written
notice to each other party in accordance herewith):
(a) If to Indemnitee, to: _______________________
_______________________
_______________________
with a copy (which shall not constitute notice for the
purposes of this Agreement) to such legal counsel, if any, as
the Indemnitee may designate in writing; and
(b) If to the Company, to: Innovative Valve Technologies, Inc.
00000 Xxxxxxx Xxxxx, Xxxxx X-000
Xxxxxxx, Xxxxx 00000
Attention: President
SECTION 21. CONTRIBUTION. To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, will contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating to
an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all the circumstances of such Proceeding in
order to reflect: (a) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such Proceeding; and/or (b) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).
SECTION 22. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and the legal relations among the parties will be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without regard to its conflict of laws rules. Except with
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respect to any arbitration commenced by Indemnitee pursuant to Section 10(a),
the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that
any action or proceeding arising out of or in connection with this Agreement
will be brought only in the Court of Chancery and not in any other state or
federal court in the United States of America or any court in any other country,
(b) consent to submit to the exclusive jurisdiction of the Court of Chancery for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (c) waive any objection to the laying of venue of any such action or
proceeding in the Court of Chancery, and (d) waive, and agree not to plead or to
make, any claim that any such action or proceeding brought in the Court of
Chancery has been brought in an improper or otherwise inconvenient forum.
SECTION 23. MISCELLANEOUS. Use of the masculine pronoun herein
includes usage of the feminine pronoun where appropriate. When used in this
Agreement, the words "herein," "hereof" and words of similar import refer to
this Agreement as a whole and not to any provision of this Agreement, and the
word "Section" refers to a Section of this Agreement, unless otherwise
specified.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: INNOVATIVE VALVE TECHNOLOGIES, INC.
By:__________________________ By: ___________________________________
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
ATTEST: INDEMNITEE:
By: __________________________ By: ____________________________________
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