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EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Indemnification Agreement") is made
and entered into as of the 17th day of December, 1996, by and between SUN
HYDRAULICS CORPORATION, a Florida corporation (the "Company"), and
_____________________, an individual ("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors
and officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, the Company and Indemnitee recognize the risk of litigation and
other claims being asserted against directors and officers of public companies;
WHEREAS, the Articles of Incorporation (the "Articles") of the Company
requires the Company to indemnify and advance expenses to its directors and
officers to the full extent permitted by law, and Indemnitee has been serving
and continues to serve as a director and/or officer of the Company in part in
reliance upon the Articles; and,
WHEREAS, in recognition of (1) Indemnitee's need for substantial
protection against personal liability; (2) the Company's need to induce
Indemnitee's continued service to the Company in an effective manner; and (3)
Indemnitee's reliance on the Articles, and to provide Indemnitee with specific
contractual assurance that the protection contained in the Articles will be
available to Indemnitee (regardless of, among other things, any amendment to or
restatement of the Articles or any changes in the composition of the Company's
Board of Directors or any business combination in which the Company
participates), the Company wishes to provide in this Indemnification Agreement
for the indemnification of and the advancing of expenses to Indemnitee to
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the full extent (whether partial or complete) permitted by law and as set forth
in this Indemnification Agreement and, if insurance is obtained, for the
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies.
NOW, THEREFORE, in consideration of the premises, the mutual promises,
covenants and conditions herein contained, Indemnitee continuing to serve the
Company directly, or at its request, to serve another enterprise, and for other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. CERTAIN DEFINITIONS. In addition to the words and terms elsewhere
defined in this Indemnification Agreement, certain capitalized words and terms
used herein shall have the meanings given to them by the definitions and
descriptions in this Section 1, unless the context or use indicates another or
different meaning or intent, and such definitions shall be equally applicable
to both the singular and plural forms of any of the capitalized words and terms
herein defined. The following words and terms are defined terms under this
Indemnification Agreement:
1.1 Change in Control. "Change in Control" shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or 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, is
or becomes the "beneficial owner" (as defined in Rule 13-d-3 under
said Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by
the Company's then outstanding Voting Securities; (ii) during any
period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company and any
new director whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of
at least two-
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thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in
one transaction or a series of transactions) all or substantially all the
Company's assets.
1.2 Claim. "Claim" shall mean any threatened, pending or
completed action, suit or proceeding, or any inquiry or
investigation, whether instituted by the Company or any other party,
that Indemnitee in good faith believes might lead to the institution
of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
1.3 Expenses. "Expenses" shall mean attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, 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.
1.4 Indemnifiable Event. "Indemnifiable Event" shall mean any
event or occurrence related to the fact that Indemnitee is or was a
director, officer, employee
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trustee, or agent of the Company, or is or was serving at the request of
the Company as a director, officer, employee, trustee, agent or
fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, or by reason of anything done or
not done by Indemnitee in any such capacity.
1.5 Independent Legal Counsel. "Independent Legal Counsel"
shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 3, who shall not have otherwise been
retained by or performed services for the Company or Indemnitee
within the last two years (other than with respect to matters
concerning the rights of Indemnitee under this Indemnification
Agreement or of other indemnities under similar indemnification
agreements).
1.6 Reviewing Party. "Reviewing Party" shall mean (i) the
Board of Directors of the Company by a quorum consisting of
directors who were not parties to a Claim in question, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by Independent Legal Counsel.
1.7 Voting Securities. "Voting Securities" shall mean any
securities of the Company which vote generally in the election of
directors.
2. BASIC INDEMNIFICATION ARRANGEMENT.
A. In the event Indemnitee was, is or becomes a party to or
witness or other participant in, or is threatened to be made a party
to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee to the full extent permitted by the Articles
and by the Florida Business Corporation Act as soon as practicable
but in any event no later than thirty days after written demand is
presented to the Company, against any and all Expenses, judgments,
fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses,
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judgments, fines, penalties or amounts paid in settlement) of such Claim.
B. If so requested by Indemnitee, the Company shall advance (within
two business days of such request) any and all Expenses to Indemnitee (an
"Expense Advance").
C. Notwithstanding the foregoing, (i) the obligations of the
Company under this Section 2 shall be subject to the condition that
the Reviewing Party shall not have determined (in a written opinion
in any case in which Independent Legal Counsel is involved) that
Indemnitee would not be permitted to be indemnified under applicable
law, and (ii) the obligation of the Company to make an Expense
Advance pursuant to this Section 2 shall be subject to the condition
that, if, when and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be so indemnified under
applicable law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all such
amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee
should 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 until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed).
D. If there has not been a Change in Control, the Reviewing
Party shall be selected by the Board of Directors and if there has
been such a Change in Control (other than a Change in Control which
has been approved by a majority of the Company's Board of Directors
who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel referred to
in Section 3 hereof. If there
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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 in part under applicable law, Indemnitee shall have
the right to commence litigation in any court in the State of Florida
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, including the
legal or factual bases therefor, 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 Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments and
Expense Advances under the Articles, this Indemnification Agreement or any other
agreement or Company Bylaw now or hereafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only from Independent
Legal Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld). Such counsel, among other things, shall
render its written opinion to the Company and Indemnitee as to whether and to
what extent the Indemnitee would be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Indemnification Agreement or its engagement
pursuant hereto.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two business days of such request)
advance such expenses to Indemnitee which are incurred by Indemnitee in
connection with any action brought by Indemnitee for (i) indemnification or
advance
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payment of Expenses by the Company under this Indemnification Agreement
or any other agreement, the Articles or Company Bylaws now or hereafter in
effect relating to Claims for Indemnifiable Events, and/or (ii) recovery under
any directors' and officers' liability insurance policies maintained by the
Company regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance
recovery, as the case may be.
5. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any provision
of this Indemnification Agreement to indemnification by the Company for some or
a portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any other provision of
this Indemnification Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all Claims relating
in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, including dismissal without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.
6. PRESUMPTION IN FAVOR OF INDEMNITEE; BURDEN OF PROOF. In connection
with any determination by the Reviewing Party or otherwise as to whether
Indemnitee is entitled to be indemnified hereunder, there shall exist a
rebuttable presumption that Indemnitee has met the applicable standard(s) of
conduct and is, therefore, entitled to indemnification pursuant to this
Indemnification Agreement, and the burden of proof shall be on the Company to
establish that Indemnitee has not met such applicable standard(s) of conduct
and is not so entitled to indemnification.
7. NO OTHER PRESUMPTIONS. For purposes of this Indemnification Agreement,
the termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
(i) Indemnitee did not meet any particular standard of conduct; or (ii)
Indemnitee did not have any particular belief; or, (iii) that a court has
determined that indemnification is not permitted by
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applicable law. In addition, neither the failure of the Reviewing Party to have
made a determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
8. NONEXCLUSIVITY, ETC. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Articles, any
Company Bylaw, the Florida Business Corporation Act, or otherwise. To the
extent that a change in the Florida Business Corporation Act (whether by
statute or judicial decision) permits greater indemnification by agreement than
would be afforded currently under the Articles and this Indemnification
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy
by this Indemnification Agreement the greater benefits so afforded by such
change.
9. LIABILITY INSURANCE. If the Company obtains directors' and officers'
liability insurance, then, to the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director or officer.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee or Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
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11. AMENDMENTS, ETC. No supplement, modification or amendment of this
Indemnification Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this
Indemnification Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
12. SUBROGATION. In the event of payment under this Indemnification
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights. To the extent Indemnitee has been
indemnified by the Company hereunder and later receives payments from any
insurance carrier covering the same Expenses, judgments, fines, penalties or
amounts paid in settlements so indemnified by the Company hereunder, Indemnitee
shall immediately reimburse the Company hereunder for all such amounts received
from the insurer.
Notwithstanding anything contained herein to the contrary, Indemnitee
shall not be entitled to recover amounts under this Indemnification Agreement
which, when added to the amount of indemnification payments made to, or on
behalf of, Indemnitee, under the Articles or Company Bylaws, in the aggregate
exceed the Expenses, judgments, fines, penalties and amounts paid in settlement
actually and reasonably incurred by Indemnitee ("Excess Amounts"). To the
extent the Company has paid Excess Amounts to Indemnitee, Indemnitee shall be
obligated to immediately reimburse the Company for such Excess Amounts.
13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Indemnification Agreement to make any payment in connection with any Claim
made against Indemnitee to the extent Indemnitee has otherwise actually
received payment (under any insurance policy, the Articles or Company Bylaws or
otherwise) of the amounts otherwise indemnifiable hereunder.
14. RIGHT OF INDIVIDUAL ATTORNEY. The Company shall not restrict the
right of Indemnitee to be represented by and
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indemnified against the fees and expenses of the attorney of Indemnitee's choice
hereunder.
15. ALLOWANCE FOR COMPLIANCE WITH SEC REQUIREMENTS. Indemnitee
acknowledges that the Securities and Exchange Commission ("SEC") has expressed
the opinion that indemnification of directors and officers from liabilities
under the Securities Act of 1933, as amended (the "Securities Act") is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. Indemnitee hereby agrees that it will not be a breach of this
Indemnification Agreement for the Company to undertake with the SEC in
connection with the registration for sale of any stock or other securities of
the Company from time to time that, in the event a claim for indemnification
against liabilities under the Securities Act (other than the payment by the
Company of expenses incurred or paid by a director or officer of the Company in
the successful defense of any action, suit or proceeding) is asserted in
connection with such securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of competent jurisdiction the question of whether
or not such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Indemnitee further agrees that such submission to a court of competent
jurisdiction shall not be a breach of this Indemnification Agreement.
16. ASSIGNMENT; CONTINUING AND BINDING EFFECT. This Indemnification
Agreement shall continue in effect regardless of whether Indemnitee continues
to serve as an officer or director of the Company or of any other enterprise at
the Company's request. This Indemnification Agreement shall not be assigned by
the Company or Indemnitee without the prior written consent of the other party
hereto, except that the Company may freely assign its rights and obligations
under this Indemnification Agreement to any subsidiary for whom Indemnitee is
serving as a director and/or officer thereof; provided, however, that no
permitted assignment shall release the assignor from its obligations hereunder.
Subject to the foregoing, this Indemnification 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
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otherwise to all or substantially all of the business and/or assets of the
Company; spouses; heirs; executors and personal and legal representatives.
16. SEVERABILITY. The provisions of this Indemnification Agreement shall
be severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable in any
respect, and the validity and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the full extent permitted by law.
17. GOVERNING LAW. This Indemnification Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Florida
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
18. COUNTERPARTS. This Indemnification Agreement may be executed in two
or more fully or partially executed counterparts each of which shall be deemed
an original binding and the signer thereof against the other signing parties,
but all counterparts together shall constitute one and the same instrument.
Executed signature pages may be removed from counterpart agreements and
attached to one or more fully executed copies of this Agreement.
19. NOTICE. Indemnitee shall, as a condition precedent to his right to be
indemnified under this Indemnification Agreement, give to the Company notice in
writing as soon as practicable of any claim made against him for which
indemnity will or could be sought under this Indemnification Agreement. Notice
to the Company shall be directed to the Company at its headquarters located at
0000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxxxxx, Xxxxxxx 00000, Attention: President
(or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three days after the date of
postmark if sent by prepaid mail, properly addressed. In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require within Indemnitee's power.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
Attest: SUN HYDRAULICS CORPORATION
By:
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Xxxxxxx X. Xxxxxx, Secretary Xxxxx X. Xxxxx, President
[seal]
"INDEMNITEE"
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