PEERLESS MFG. CO. INDEMNIFICATION AGREEMENT
Exhibit 10(s)
PEERLESS MFG. CO.
This Indemnification Agreement (this “Agreement”) is made and entered into as of the
day of 2006, by and between Peerless Mfg. Co., a Texas corporation (the
"Corporation”), and (“Indemnitee”).
RECITALS
A. It is critically important to the Corporation and its shareholders that the Corporation be
able to attract and retain the most capable persons reasonably available to serve as directors and
officers of the Corporation.
B. In recognition of the need for corporations to be able to induce capable and responsible
persons to accept positions in corporate management, Texas law authorizes (and in some instances
requires) corporations to indemnify their directors and officers, and further authorizes
corporations to purchase and maintain insurance for the benefit of their directors and officers.
C. Recent federal legislation and rules adopted by the Securities and Exchange Commission and
the national securities exchanges have imposed additional disclosure and corporate governance
obligations on directors and officers of public companies and have exposed such directors and
officers to new and substantially broadened civil liabilities.
D. These legislative and regulatory initiatives have also exposed directors and officers of
public companies to a significantly greater risk of criminal proceedings, with attendant defense
costs and potential criminal fines and penalties.
E. Indemnitee is a director and/or officer of the Corporation and his/her willingness to serve
in such capacity is predicated, in substantial part, upon the Corporation’s willingness to
indemnify him/her in accordance with the principles reflected above, to the full extent permitted
by the laws of the State of Texas, and upon the other undertakings set forth in this Agreement.
F. Therefore, in recognition of the need to provide Indemnitee with substantial protection
against personal liability, in order to procure Indemnitee’s continued service as a director and/or
officer of the Corporation and to enhance Indemnitee’s ability to serve the Corporation in an
effective manner, and in order to provide such protection pursuant to express contract rights
(intended to be enforceable irrespective of, among other things, any amendment to the Corporation’s
Second Amended and Restated Articles of Incorporation (the “Articles”) or Second Amended and
Restated Bylaws (the “Bylaws”) or any change in the composition of the Corporation’s Board of
Directors (the “Board”)), the Corporation wishes to provide in this Agreement for the
indemnification of and the advancement of Expenses (as defined in Article I) to Indemnitee
as set forth in this Agreement and for the continued coverage of Indemnitee under the Corporation’s
directors’ and officers’ liability insurance policies.
G. In light of the considerations referred to in the preceding recitals, it is the
Corporation’s intention and desire that the provisions of this Agreement be construed liberally,
subject to their express terms, to maximize the protections to be provided to Indemnitee hereunder.
NOW, THEREFORE, in order to induce Indemnitee to continue to serve in his/her present
capacity, the Corporation and Indemnitee hereby agree as follows:
ARTICLE I
Certain Definitions
Certain Definitions
As used herein, the following words and terms shall have the following respective meanings
(whether singular or plural):
“Claim” means an actual or threatened claim or request for relief.
“Corporate Status” means the status of a person as a current or former director or officer of
the Corporation or, at the request of the Corporation, as a current or former director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, employee benefit plan, other enterprise or other entity.
“Disinterested Director” means a director of the Corporation who is not and was not a party to
the Proceeding or Claim in respect of which indemnification is sought by Indemnitee.
“Expenses” means all attorneys’ fees, retainers, court costs, transcript costs, fees of
experts, witness fees, travel expenses, duplicating costs, printing costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses of the types customarily
incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating
or being or preparing to be a witness in a Proceeding.
“Incumbent Directors” means the individuals who, as of the date hereof, are directors of the
Corporation and any individual becoming a director subsequent to the date hereof whose election,
nomination for election by the Corporation’s shareholders, or appointment, was approved by a vote
of at least two-thirds of the then-Incumbent Directors (either by a specific vote or by approval of
the proxy statement of the Corporation in which such person is named as a nominee for director,
without objection to such nomination); provided, however, that an individual shall not be an
Incumbent Director if such individual’s election or appointment to the Board occurs as a result of
an actual or threatened election contest (as described in Rule 14a-12(c) under the Securities
Exchange Act of 1934, as amended) with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a person other than the
Board.
“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 has been, retained
to represent: (i) the Corporation or Indemnitee in any matter material to either such party (other
than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees
under similar indemnification agreements), or (ii) any other named (or, as to a threatened matter,
reasonably likely to be named) party in the Proceeding or Claim giving rise to
2
a claim for indemnification hereunder. Notwithstanding the foregoing, Independent Counsel
shall not include any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Corporation or Indemnitee
in an action to determine Indemnitee’s rights under this Agreement.
“Official Capacity” means (a) when used with respect to a director, the office of director in
the Corporation, and (b) when used with respect to a person other than a director, the elective or
appointive office in the Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation, but neither clause (a)
nor (b) includes service for any other foreign or domestic corporation or any employee
benefit plan, other enterprise or other entity.
“Proceeding” means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative, arbitrative or investigative (except one initiated by
Indemnitee pursuant to Article V of this Agreement to enforce his/her rights under this
Agreement), any appeal in such an action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding.
ARTICLE II
Indemnification
Indemnification
Section 2.1 General. The Corporation shall indemnify, and advance Expenses to,
Indemnitee to the full extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited to, the right to be
indemnified and to have Expenses advanced in all Proceedings to the full extent permitted by
Article 2.02-1 of the Texas Business Corporation Act (the “TBCA”) (or any successor provision).
The provisions set forth in this Agreement are provided in addition to and as a means of
furtherance and implementation of, and not in limitation of, the obligations expressed in this
Article II.
Section 2.2 Additional Indemnity of the Corporation. Indemnitee shall be entitled to
indemnification pursuant to this Section 2.2 if, by reason of his/her Corporate Status,
he/she is, or is threatened to be made, a party to any Proceeding (except to the extent limited by
Section 2.3). Pursuant to this Section 2.2, Indemnitee shall be indemnified
against judgments, penalties (including excise and similar taxes), fines, settlements and
reasonable Expenses actually incurred by him/her or on his/her behalf in connection with such
Proceeding or any Claim therein, if (a) he/she conducted himself/herself in good faith, (b) he/she
reasonably believed: (i) in the case of conduct in his/her Official Capacity, that his/her conduct
was in the Corporation’s best interests; and (ii) in all other cases, that his/her conduct was at
least not opposed to the Corporation’s best interests, and (c) in the case of any criminal
Proceeding, had no reasonable cause to believe his/her conduct was unlawful. Nothing in this
Section 2.2 shall limit the benefits of Section 2.1 or any other Section hereunder.
Section 2.3 Limitation on Indemnity. The indemnification otherwise available to
Indemnitee under Section 2.2 shall be limited to the extent set forth in this Section
2.3. In the event that Indemnitee is found liable to the Corporation or is found liable on the
basis that
3
personal benefit was improperly received by Indemnitee, whether or not the benefit resulted
from an action taken in Indemnitee’s Official Capacity, Indemnitee shall, with respect to the Claim
in the Proceeding in which such finding is made, be indemnified only against reasonable Expenses
actually incurred by him/her in connection with that Claim. Notwithstanding the foregoing, no
indemnification against such Expenses shall be made in respect of any Claim in such Proceeding as
to which Indemnitee shall have been adjudged to be liable for willful or intentional misconduct in
the performance of his/her duty to the Corporation; provided, however, that, if applicable law so
permits, indemnification against such Expenses shall nevertheless be made by the Corporation in
such event if and only to the extent that the court in which such Proceeding shall have been
brought or is pending, shall determine.
ARTICLE III
Expenses
Expenses
Section 3.1 Expenses of a Party Who Is Wholly or Partly Successful. Indemnitee shall
be indemnified against all reasonable Expenses incurred by him/her in connection with any
Proceeding to which Indemnitee is a party by reason of his/her Corporate Status and in which
Indemnitee is wholly successful, on the merits or otherwise, in the defense of such Proceeding. In
the event that Indemnitee is not wholly successful, on the merits or otherwise, in a Proceeding but
is successful, on the merits or otherwise, as to any Claim in such Proceeding, the Corporation
shall indemnify Indemnitee against all reasonable Expenses incurred by him/her or on his/her behalf
relating to each such Claim. For purposes of this Section 3.1 and without limitation, the
termination of a Claim in a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such Claim.
Section 3.2 Expenses of a Witness. To the extent that Indemnitee is, by reason of
his/her Corporate Status, a witness or otherwise participates in any Proceeding at a time when
he/she is not named a defendant or respondent in the Proceeding, he/she shall be indemnified
against all Expenses incurred by him/her or on his/her behalf in connection therewith.
Section 3.3 Advancement of Expenses. The Corporation shall pay all reasonable
Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding or Claim, whether
brought by the Corporation or otherwise, in advance of any determination respecting entitlement to
indemnification pursuant to Article IV hereof within ten business days after the receipt by
the Corporation of a written request from Indemnitee setting forth a written affirmation of his/her
good faith belief that he/she has met the standard of conduct necessary for indemnification under
applicable law, confirming his/her obligation under the last sentence of this Section 3.3
and requesting such payment or payments from time to time, whether prior to or after final
disposition of such Proceeding or Claim. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee. Indemnitee hereby undertakes and agrees that he/she will
repay the Corporation for any Expenses so advanced to the extent that it shall ultimately be
determined by a court in a final adjudication from which there is no further right of appeal, that
Indemnitee is not entitled to be indemnified against such Expenses.
4
ARTICLE IV
Procedure for Determination of Right to Indemnification
Procedure for Determination of Right to Indemnification
Section 4.1 Request for Indemnification. To obtain indemnification under this
Agreement, Indemnitee shall submit to the Corporation 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
indemnification for a Proceeding or Claim. The Secretary or an Assistant Secretary of the
Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification. If, at the time of the receipt of such
request, the Corporation has directors’ and officers’ liability insurance in effect under which
coverage for such Proceeding or Claim is potentially available, the Corporation shall give prompt
written notice of such Proceeding or Claim to the applicable insurers in accordance with the
procedures set forth in the applicable policies. The Corporation shall provide to Indemnitee a
copy of such notice delivered to the applicable insurers, and copies of all subsequent
correspondence between the Corporation and such insurers regarding the Proceeding or Claim, in each
case substantially concurrently with the delivery or receipt thereof by the Corporation. The
failure by Indemnitee to timely notify the Corporation of any Proceeding or Claim shall not relieve
the Corporation from any liability hereunder unless, and only to the extent that, the Corporation
did not otherwise learn of such Proceeding or Claim and such failure results in forfeiture by the
Corporation of substantial defenses, rights or insurance coverage.
Section 4.2 Determination of Right to Indemnification.
(a) To the extent that Indemnitee shall have been wholly successful, on the merits or
otherwise, in defense of any Proceeding or Claim or in defense of any issue or matter therein,
including without limitation dismissal without prejudice, Indemnitee shall be indemnified against
judgments, penalties (including excise and similar taxes), fines, settlements and reasonable
Expenses actually incurred by him/her or on his/her behalf in connection with any such Proceeding
or Claim or any issue or matter therein in accordance with Article II and no Standard of
Conduct Determination (as defined in Section 4.2(b)) shall be required.
(b) Upon written request by Indemnitee for indemnification pursuant to Section 4.1
hereof, a determination of whether Indemnitee has satisfied any applicable standard of conduct
under Texas law that is a legally required condition precedent to indemnification of Indemnitee
hereunder with respect to Indemnitee’s entitlement thereto (a “Standard of Conduct Determination”)
shall be made in the specific case in accordance with Article 2.02-1 of the TBCA (or any successor
provision). Indemnitee will cooperate with the person or persons making such Standard of Conduct
Determination, including providing to such person or persons, upon reasonable advance request, any
documentation or information that is not privileged or otherwise protected from disclosure and that
is reasonably available to Indemnitee and reasonably necessary to such determination. The
Corporation shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee,
shall reimburse Indemnitee for, or advance to Indemnitee, within five business days of such
request, any and all costs and expenses (including attorneys’ and experts’ fees and expenses)
incurred by Indemnitee in so cooperating with the person or persons making such Standard of Conduct
Determination.
5
(c) The Corporation shall use its reasonable best efforts to cause any Standard of Conduct
Determination required under Section 4.2(b) to be made as promptly as practicable. If (i)
the person or persons empowered or selected under this Section 4.2 to make the Standard of
Conduct Determination shall not have made a determination within 30 days after the later of (A)
receipt by the Corporation of written notice from Indemnitee advising the Corporation of the final
disposition of the applicable Proceeding or Claim (the date of such receipt being the “Notification
Date”) and (B) the selection of special legal counsel, if such determination is to be made by
special legal counsel, that is permitted under the provisions of Section 4.2(e) to make
such determination, and (ii) Indemnitee shall have fulfilled his/her obligations set forth in the
second sentence of Section 4.2(b), then Indemnitee shall be deemed to have satisfied the
applicable standard of conduct; provided that such 30-day period may be extended for a reasonable
time, not to exceed an additional 30 days, if the person or persons making such determination in
good faith requires such additional time for obtaining or evaluating documentation and/or
information relating thereto; and provided, further, that the 30-day limitation set forth in this
Section 4.2(c) shall not apply and such period shall be extended as necessary if within 30
days after receipt by the Corporation of the request for indemnification under Section 4.1
the Board has resolved to submit such determination to the shareholders for their consideration at
an annual meeting thereof to be held within 90 calendar days after such receipt and such
determination is made thereat, or a special meeting of shareholders is called within 30 calendar
days after such receipt for the purpose of making such determination, such meeting is held for such
purpose within 60 calendar days after having been so called and such determination is made thereat.
(d) If (i) Indemnitee shall be entitled to indemnification hereunder pursuant to Section
4.2(a), (ii) no determination of whether Indemnitee has satisfied any applicable standard of
conduct under Texas law is a legally required condition precedent to indemnification of Indemnitee
hereunder, or (iii) Indemnitee has been determined or deemed pursuant to Section 4.2(b) or
(c) to have satisfied any applicable standard of conduct under Texas law that is a legally
required condition precedent to indemnification of Indemnitee hereunder, then the Corporation shall
pay to Indemnitee, within five business days after the later of (x) the Notification Date in
respect of the applicable Proceeding or Claim and (y) the earliest date on which the applicable
criterion specified in clause (i), (ii) or (iii) above shall have been
satisfied, all reasonable Expenses incurred by him/her in connection with the applicable Proceeding
or Claim.
(e) If a Standard of Conduct Determination is to be made by special legal counsel pursuant to
Article 2.02-1 of the TBCA (or any successor provision), such special legal counsel must be
Independent Counsel (as defined in Article I hereof) and the Corporation shall give written
notice to Indemnitee advising him/her of the identity of the special legal counsel so selected.
Indemnitee may, within five business days after receiving written notice of selection from the
Corporation, deliver to the Corporation a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the special legal counsel so selected
does not satisfy the criteria set forth in the definition of “Independent Counsel” in Article
1, and the objection shall set forth with particularity the factual basis of such assertion.
Absent a proper and timely objection, the person or firm so selected shall act as special legal
counsel. If such written objection is properly and timely made and substantiated, (i) the special
legal counsel so selected may not serve as special legal counsel unless and until such objection is
6
withdrawn or a court has determined that such objection is without merit, and (ii) the
Corporation may, at its option, select an alternative special legal counsel and give written notice
to Indemnitee advising him/her of the identity of the alternative special legal counsel so
selected, in which case the provisions of the two immediately preceding sentences and clause
(i) of this sentence shall apply to such subsequent selection and notice. If applicable, the
provisions of clause (ii) of the immediately preceding sentence shall apply to successive
alternative selections. If no special legal counsel that is permitted under the foregoing
provisions of this Section 4.2(e) to make the Standard of Conduct Determination shall have
been selected within 30 days after the Corporation gives its initial notice pursuant to the first
sentence of this Section 4.2(e), Indemnitee may petition the courts of the State of Texas
for resolution of any objection which shall have been made by Indemnitee to the Corporation’s
selection of special legal counsel and/or for the appointment as special legal counsel of a person
or firm selected by the Court or by such other person as the Court shall designate, and the person
or firm with respect to whom all objections are so resolved or the person or firm so appointed will
act as special legal counsel. In all events, the Corporation shall pay all of the reasonable fees
and expenses of the special legal counsel incurred in connection with the special legal counsel’s
determination pursuant to Section 4.2(b).
Section 4.3 No Other Presumption. The termination of any Proceeding or of any Claim
by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Agreement) by itself adversely affect the
right of Indemnitee to indemnification or create a presumption that Indemnitee did meet the
requirements for indemnification under Section 2.2. Indemnitee shall be deemed to have
been found liable in respect of any Claim only after he/she shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom.
ARTICLE V
Certain Remedies of Indemnitee
Certain Remedies of Indemnitee
Section 5.1 Indemnitee Entitled to Adjudication in an Appropriate Court. In the event
(a) a determination is made pursuant to Article IV that Indemnitee is not entitled to
indemnification under this Agreement, or (b) there has been any failure by the Corporation to make
timely payment or advancement of any amounts due hereunder, Indemnitee shall be entitled to
commence an action seeking an adjudication in an appropriate court of the State of Texas, or in any
other court of competent jurisdiction, of his/her entitlement to such indemnification or
advancement of Expenses. Indemnitee shall commence such action seeking an adjudication within 180
days following the date on which Indemnitee first has the right to commence such action pursuant to
this Section 5.1, or such right shall expire. The Corporation agrees not to oppose
Indemnitee’s right to seek any such adjudication.
Section 5.2 Adverse Determination Not to Affect any Judicial Proceeding. In the event
that a determination shall have been made pursuant to Article IV that Indemnitee is not
entitled to indemnification, any judicial proceeding commenced pursuant to this Article V
shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be
prejudiced by reason of such initial adverse determination. In any judicial proceeding commenced
pursuant to this Article V, the Corporation shall have the burden of proving, by clear
7
and convincing evidence, that Indemnitee is not entitled to indemnification or advancement of
Expenses, as the case may be.
Section 5.3 Corporation Bound by Determination Favorable to Indemnitee in any Judicial
Proceeding. If a determination shall have been made or deemed to have been made pursuant to
Article IV that Indemnitee is entitled to indemnification, the Corporation shall be bound
by such determination in any judicial proceeding commenced pursuant to this Article V,
absent a knowing misstatement by Indemnitee of a material fact, or a knowing omission of a material
fact necessary to make a statement by Indemnitee not materially misleading, in connection with the
request for indemnification.
Section 5.4 Corporation Bound by this Agreement. The Corporation shall be precluded
from asserting in any judicial proceeding commenced pursuant to this Article V that the
procedures and presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Corporation is bound by all the provisions of this Agreement.
Section 5.5 Indemnitee Entitled to Expenses of Judicial Proceeding. In the event that
Indemnitee seeks a judicial adjudication of his/her rights under, or to recover damages for breach
of, this Agreement, Indemnitee shall be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any and all reasonable expenses (of the types described in
the definition of Expenses in Article I) incurred by him/her in such judicial adjudication
but only if he/she prevails therein. If it shall be determined in said judicial adjudication that
Indemnitee is entitled to receive part but not all of the indemnification or advancement of
expenses or other benefit sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication shall be reasonably prorated in good faith by counsel for Indemnitee.
Section 5.6 No Diminishment of Rights. The Corporation shall not adopt any amendment
to the Articles or Bylaws the effect of which would be to deny, diminish or encumber Indemnitee’s
rights to indemnity pursuant to the Articles, Bylaws, the TBCA or any other applicable law as
applied to any act or failure to act occurring in whole or in part prior to the date (the
"Effective Date”) upon which the amendment was approved by the Board or the shareholders of the
Corporation, as the case may be. In the event that the Corporation shall adopt any amendment to
the Articles or Bylaws the effect of which is to so deny, diminish or encumber Indemnitee’s rights
to indemnity, such amendment shall apply only to acts or failures to act occurring entirely after
the Effective Date thereof.
ARTICLE VI
Miscellaneous
Miscellaneous
Section 6.1 Non-Exclusivity. The rights of Indemnitee to receive indemnification and
advancement of Expenses under this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may at any time be entitled under applicable law, the Articles or Bylaws, any
other agreement, vote of shareholders or a resolution of directors of the Corporation, or
otherwise. No amendment or alteration of the Articles or Bylaws or any provision thereof shall
adversely affect Indemnitee’s rights hereunder and such rights shall be in addition to any rights
Indemnitee may have under the Articles, Bylaws, the TBCA or otherwise.
8
To the extent that there is a change in the TBCA (whether by statute or judicial decision)
which allows greater indemnification by agreement than would be afforded currently under the
Articles or Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by virtue of this Agreement the greater benefit so afforded by such change.
Section 6.2 Insurance and Subrogation.
(a) For the duration of Indemnitee’s service as a director and/or officer of the Corporation,
and thereafter for so long as Indemnitee shall be subject to any pending or possible Proceeding or
Claim, the Corporation shall use commercially reasonable efforts (taking into account the scope and
amount of coverage available relative to the cost thereof) to cause to be maintained in effect
policies of directors’ and officers’ liability insurance providing coverage for directors and/or
officers of the Corporation. The Corporation shall provide Indemnitee with a copy of all
directors’ and officers’ liability insurance applications, binders, policies, declarations,
endorsements and other related materials. Without limiting the generality or effect of the two
immediately preceding sentences, the Corporation shall not discontinue or significantly reduce the
scope or amount of coverage from one policy period to the next (i) without the prior approval
thereof by a majority vote of the Incumbent Directors, even if less than a quorum, or (ii) if at
the time that any such discontinuation or significant reduction in the scope or amount of coverage
is proposed there are no Incumbent Directors, without the prior written consent of Indemnitee
(which consent shall not be unreasonably withheld or delayed). In all policies of directors’ and
officers’ liability insurance obtained by the Corporation, Indemnitee shall be named as an insured
in such a manner as to provide Indemnitee the same rights and benefits, subject to the same
limitations, as are accorded to the Corporation’s directors and officers most favorably insured by
such policy. The Corporation may, but shall not be required to, create a trust fund, grant a
security interest or use other means, including without limitation a letter of credit, to ensure
the payment of such amounts as may be necessary to satisfy its obligations to indemnify and advance
Expenses pursuant to this Agreement.
(b) In the event of any payment by the Corporation under this Agreement, the Corporation shall
be subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors). Indemnitee shall execute
all papers reasonably required to evidence such rights (all of Indemnitee’s reasonable Expenses
related thereto to be reimbursed by or, at the option of Indemnitee, advanced by the Corporation.
(c) The Corporation shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or otherwise.
Section 6.3 Defense of Claims. The Corporation shall be entitled to participate in
the defense of any Proceeding or Claim or to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee; provided that if Indemnitee believes, after consultation with counsel
selected by Indemnitee, that (a) the use of counsel chosen by the Corporation to represent
Indemnitee would present such counsel with an actual or potential conflict, (b) the named parties
in any such Proceeding or Claim (including any impleaded parties) include both the Corporation
9
and Indemnitee and Indemnitee shall conclude, based on the advice of counsel, that there may
be one or more legal defenses available to him/her that are different from or in addition to those
available to the Corporation, or (c) any such representation by such counsel would be precluded
under the applicable standards of professional conduct then prevailing, then Indemnitee shall be
entitled to retain separate counsel (but not more than one law firm plus, if applicable, local
counsel in respect of any particular Proceeding or Claim) at the Corporation’s expense. The
Corporation shall not be liable to Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding or Claim effected without the Corporation’s prior written consent.
The Corporation shall not, without the prior written consent of Indemnitee, effect any settlement
of any Proceeding or Claim to which Indemnitee is, or could have been, a party unless such
settlement solely involves the payment of money and includes a complete and unconditional release
of Indemnitee from all liability on any claims that are the subject matter of such Proceeding or
Claim. Neither the Corporation nor Indemnitee shall unreasonably withhold its consent to any
proposed settlement; provided, that Indemnitee may withhold consent to any settlement that does not
provide a complete and unconditional release of Indemnitee.
Section 6.4 Exculpation of Directors. If Indemnitee is or was a director of the
Corporation, he/she shall not in that capacity be liable to the Corporation or its shareholders for
monetary damages for an act or omission in Indemnitee’s capacity as a director, except that
Indemnitee’s liability shall not be eliminated or limited for: (a) a breach of Indemnitee’s duty
of loyalty to the Corporation or its shareholders, (b) an act or omission not in good faith that
constitutes a breach of duty of Indemnitee to the Corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law, (c) a transaction from which Indemnitee
received an improper benefit, whether or not the benefit resulted from an action taken within the
scope of Indemnitee’s office, or (d) an act or omission for which the liability of Indemnitee is
expressly provided for by statute.
Section 6.5 Duration of Agreement. This Agreement shall continue for so long as
Indemnitee serves as a director or officer of the Corporation or, at the request of the
Corporation, as a director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, employee benefit plan, other
enterprise or other entity, and thereafter shall survive until and terminate upon the later to
occur of (a) the final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Article V relating thereto, and (b) the expiration of
all statutes of limitation applicable to possible Claims arising out of Indemnitee’s Corporate
Status.
Section 6.6 Successors and Binding Agreement.
(a) The Corporation shall require any successor (whether direct or indirect, by purchase,
merger, consolidation, reorganization or otherwise) to all or substantially all of the business or
assets of the Corporation, by agreement in form and substance reasonably satisfactory to Indemnitee
and his/her counsel, expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Corporation would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the Corporation and any
successor to the Corporation, including without limitation any person acquiring directly or
indirectly all or substantially all of the business or
10
assets of the Corporation whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor will thereafter be deemed the “Corporation” for purposes of this
Agreement), but shall not otherwise be assignable or delegatable by the Corporation.
(b) This Agreement shall inure to the benefit of and be enforceable by Indemnitee’s personal
or legal representatives, executors, administrators, heirs, distributees, legatees and other
successors.
(c) This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign or delegate this Agreement or any rights or obligations hereunder
except as expressly provided in Sections 6.6(a) and 6.6(b). Without limiting the
generality or effect of the foregoing, Indemnitee’s right to receive payments hereunder shall not
be assignable, whether by pledge, creation of a security interest or otherwise, other than by a
transfer by Indemnitee’s will or by the laws of descent and distribution, and, in the event of any
attempted assignment or transfer contrary to this Section 6.6(c), the Corporation shall
have no liability to pay any amount so attempted to be assigned or transferred.
Section 6.7 Legal Fees and Expenses. It is the intent of the Corporation that
Indemnitee not be required to incur legal fees or other Expenses associated with the
interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or
otherwise because the cost and expense thereof would substantially detract from the benefits
intended to be extended to Indemnitee hereunder. Accordingly, without limiting the generality or
effect of any other provision hereof, if it should appear to Indemnitee that the Corporation has
failed to comply with any of its obligations under this Agreement or in the event that the
Corporation or any other person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or proceeding designed to deny,
or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee
hereunder, the Corporation irrevocably authorizes Indemnitee from time to time to retain counsel of
Indemnitee’s choice, at the expense of the Corporation as hereafter provided, to advise and
represent Indemnitee in connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal action, whether by or
against the Corporation or any director, officer, shareholder or other person affiliated with the
Corporation, in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Corporation and such counsel, the Corporation irrevocably consents to
Indemnitee’s entering into an attorney-client relationship with such counsel, and in that
connection the Corporation and Indemnitee agree that a confidential relationship shall exist
between Indemnitee and such counsel. Without respect to whether Indemnitee prevails, in whole or
in part, in connection with any of the foregoing, the Corporation will pay and be solely
financially responsible for any and all attorneys’ and related fees and expenses incurred by
Indemnitee in connection with any of the foregoing.
Section 6.8 Notice by Each Party. Indemnitee agrees to promptly notify the
Corporation in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document or communication relating to any Proceeding or Claim for
which Indemnitee may be entitled to indemnification or advancement of Expenses hereunder. The
Corporation agrees to promptly notify Indemnitee in writing, as to the pendency
11
of any Proceeding or Claim which may involve a claim against Indemnitee for which Indemnitee
may be entitled to indemnification or advancement of Expenses hereunder.
Section 6.9 Amendment. This Agreement may not be modified or amended except by a
written instrument executed by or on behalf of each of the parties hereto.
Section 6.10 Waivers. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or prospectively) by the
party entitled to enforce such term only by a writing signed by the party against which such waiver
is to be asserted. Unless otherwise expressly provided herein, no delay on the part of any party
hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder.
Section 6.11 Entire Agreement. This Agreement and the documents expressly referred to
herein constitute the entire agreement between the parties hereto with respect to matters covered
hereby, and any other prior or contemporaneous oral or written understandings or agreements with
respect to the matters covered hereby are expressly superseded by this Agreement.
Section 6.12 Severability. If any provision of this Agreement or the application of
such provision to any person or circumstance, shall be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement or affect the application of such provision to other persons or
circumstances, and the parties hereto agree that the part or parts of this Agreement so held to be
invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder of
this Agreement will have the same force and effectiveness as if such part or parts had never been
included herein; provided, however, that the parties shall negotiate in good faith with respect to
an equitable modification of the provision or application thereof declared to be invalid,
unenforceable or void. Any such finding of invalidity or unenforceability shall not prevent the
enforcement of such provision in any other jurisdiction to the maximum extent permitted by
applicable law.
Section 6.13 Notices. Unless otherwise expressly provided herein, all notices,
requests, demands, consents, waivers, instructions, approvals and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered to or
mailed, certified mail return receipt requested, first-class postage paid, addressed as follows:
(i) if to the Corporation, Peerless Mfg. Co., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn:
Secretary, and (ii) if to Indemnitee, at the address specified on the signature page of this
Agreement, or to such other address or to such other individuals as any party shall have last
designated by notice to the other parties. All notices and other communications given to any party
in accordance with the provisions of this Agreement shall be deemed to have been given when
delivered or sent to the intended recipient thereof in accordance with the provisions of this
Section 6.13.
12
Section 6.14 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Texas without regard to the principles of conflict of laws.
Section 6.15 Headings. The Article and Section headings in this Agreement are for
convenience of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
Section 6.16 Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original and both of which together shall be deemed to be one and
the same instrument.
13
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of
the date first above written.
| PEERLESS MFG. CO. | ||||||
| By: | ||||||
Title: |
||||||
| INDEMNITEE | ||||||
| [Name] | ||||||
| Indemnitee Notice Address: | ||||||