EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
This Agreement, dated as of __________, 1998, is made by and between
Payless Cashways, Inc., a Delaware corporation (the "Company"), and
________________ who is serving as a director and/or officer of the Company
("Indemnitee").
RECITALS
WHEREAS, Indemnitee is currently serving in the capacity or capacities
described above;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as directors, officers,
employees and agents of the Company and to indemnify these individuals so as to
provide them with the maximum protection permitted by law;
WHEREAS, the Company and Indemnitee recognize the substantial increase in
corporate litigation in general, subjecting directors, officers, employees, and
agents to expensive litigation risk at the same time that the availability and
coverage of liability insurance has been severely limited;
WHEREAS, Indemnitee is currently entitled to indemnification under Delaware
General Corporation Law and the Certificate of Incorporation and the Amended and
Restated Bylaws of the Company; and
WHEREAS, Indemnitee regards the protection extended by Delaware law, the
Certificate of Incorporation, and the Amended and Restated Bylaws as beneficial,
but Indemnitee may not be willing to serve or continue to serve as director or
officer of the Company without additional inducements, and the Company desires
Indemnitee to serve in such capacity and in other capacities.
AGREEMENT
1. Definitions.
1.1. "Agent" means any person who is or was a director, officer,
employee, agent or fiduciary of the Company or a subsidiary of the Company, or
is or was serving at the request of, for the convenience of, or to represent the
interests of the Company or a subsidiary of the Company as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise or entity, including service with respect to an
employee benefit plan.
1.2. "Disinterested Director" means a director of the Company who is
not and was not a party to the proceeding for which indemnification is being
sought by the claimant.
2
1.3. "Expenses" includes all direct and indirect costs of any type or
nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements, other out-of-pocket costs and reasonable compensation for
time spent by Indemnitee for which he/she is not otherwise compensated by the
Company or any third party) actually and reasonably incurred by Indemnitee in
connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
Section 145 of the General Corporation Law of Delaware or otherwise.
1.4. "Independent Legal Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the applicable standards
of professional conduct then prevailing, would not have a conflict of interest
in representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
1.5. "Proceeding" means any threatened, pending, or completed action,
suit or other proceeding, whether civil, criminal, administrative, investigative
or any other type whatsoever.
1.6. "Subsidiary" means any corporation, partnership, joint venture or
other enterprise, a majority of whose equity interests are owned by the Company,
directly or through one or more other subsidiaries.
2. Agreement to Serve. Indemnitee agrees to serve or to continue to serve
as an Agent of the Company in the capacity Indemnitee currently serves as an
agent of the Company, so long as he/she is duly appointed or elected and
qualified in accordance with the applicable provisions of the Certificate of
Incorporation and the Amended and Restated Bylaws of the Company or any
Subsidiary of the Company or until such time he/she tenders his/her resignation
in writing.
3. D&O Insurance.
3.1. Maintenance of D&O Insurance. So long as Indemnitee shall
continue to serve in any capacity described in Section 2 and thereafter so long
as there is any reasonable possibility that Indemnitee shall be subject to any
proceeding by reason of the fact that Indemnitee served in any of such
capacities, the Company will use reasonable efforts to purchase and maintain in
effect for the benefit of Indemnitee one or more valid, binding and enforceable
policies of directors' and officers' liability insurance ("D&O Insurance")
providing, in all respects, coverage and amounts as reasonably determined by the
Board of Directors.
3.2. Unavailability or Impracticality of D&O Insurance.
Notwithstanding subsection 3.1, the Company shall not be required to maintain
D&O Insurance if (a) such insurance is not reasonably available or (b) in the
reasonable business judgment of the Board of Directors of the Company as it may
exist from time to
3
time, either (i) the premium cost for such insurance is substantially
disproportionate to the amount of insurance or (ii) the coverage is so limited
by exclusions that there is insufficient benefit provided by such insurance.
4. Limitation of Indemnity. Notwithstanding anything in Section 7 or
Section 8 to the contrary, the Company shall not be liable under this Agreement
to make any indemnity payment or advancement of expenses in connection with any
Proceeding (a) to the extent that payment is actually made to or on behalf of
Indemnitee under a valid and collectible insurance policy, except in respect of
any amount in excess of the limits of liability of such policy or any applicable
deductible under such policy; (b) to the extent that payment has been or will be
made to Indemnitee other than pursuant to this Agreement; (c) with respect to
acts or omissions listed in Section 102(b)(7) of the Delaware General
Corporation Law, as amended from time to time; and (d) if a final decision by a
Court having jurisdiction in the matter shall determine that such
indemnification is not lawful.
5. Notice and Defense of Claim.
5.1. Notification of Proceeding. Promptly after receipt by Indemnitee
of notice of the commencement or the threat of commencement of any Proceeding,
Indemnitee shall notify the Company of the commencement or threat of
commencement thereof. The failure to notify or promptly notify the Company shall
not relieve the Company from any liability that it may have to Indemnitee
otherwise than under this Agreement and shall relieve the Company from liability
hereunder only to the extent the Company has been prejudiced in its defense of
such Proceeding as a result of Indemnitee's failure to notify the Company.
5.2. Notice to Insurer. If, at the time of the receipt of a notice of
the commencement of a Proceeding pursuant to subsection 5.1, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the D&O Insurance policy. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, to or on behalf of Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms
of such policy.
5.3. Assumption of Defense. In the event the Company shall be
obligated to pay any expenses or costs of any Proceedings against Indemnitee,
the Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election to assume the defense. After delivery of such
notice, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
Proceeding, provided, however, that (a) Indemnitee shall have the right to
employ separate counsel in any such Proceeding at Indemnitee's expense, or (b)
if (i) the employment of counsel by Indemnitee has been previously authorized by
the Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the
4
conduct of such defense, or (iii) the Company shall not, in fact, have employed
counsel to assume the defense of such Proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company. The Company shall
not be entitled to assume the defense of any Proceeding brought by or in the
right of the Company or as to which Indemnitee shall have made the conclusion
provided for in (b)(ii) above.
5.4. Cooperation and Settlement of Claim. In defense of any claim or
threat thereof, Indemnitee shall give the Company such information and
cooperation as the Company may reasonably request. The Company shall not be
liable to indemnify Indemnitee under this Agreement for any amounts paid in
settlement of any action or claim effected without the prior written consent of
the Company. The Company shall not settle any action or claim in any manner
which will impose any penalty or limitation on Indemnitee without Indemnitee's
prior written consent. Both the Company and Indemnitee agree that they will not
unreasonably withhold their consent to any proposed settlement. In the event
that consent is not given and the parties hereto are unable to agree on a
proposed settlement, Independent Legal Counsel shall be retained by the Company,
at its expense (with the consent of Indemnitee, which consent shall not be
unreasonably withheld), for the purpose of determining whether or not the
proposed settlement is reasonable under all the circumstances; and if
Independent Legal Counsel determines the proposed settlement is reasonable under
all the circumstances, the settlement may be consummated without the consent of
the other party.
6. Determination of Right to Indemnification.
6.1. Procedure. The Secretary of the Company shall, promptly upon
receipt of a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification. Indemnitee shall be
entitled to indemnification if: (i) Indemnitee is in fact an Agent of the
Company or is or was serving at the request of the Company as an Agent of
another entity, (ii) Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, (iii) with respect to any criminal action or proceeding, Indemnitee had
no reason to believe his/her conduct was unlawful, and (iv) the indemnification
would not otherwise be prohibited under Delaware law. The determination with
respect to Indemnitee's entitlement to indemnification shall be made in the
specific case as follows: (a) by a majority vote of Disinterested Directors,
even though less than a quorum, (b) by Independent Legal Counsel selected by
such Disinterested Directors, or (c) if Disinterested Directors cannot be
obtained, by vote of the stockholders of the Company.
6.2. Notice of Determination. Following the determination with respect
to Indemnitee's entitlement to indemnification under subsection 6.1, the
Secretary or any other officer of the Company shall provide written notice to
Indemnitee of such determination.
6.3. Payment of Indemnification. After a determination that Indemnitee
is entitled to indemnification, whether under subsection 6.1 or pursuant to an
5
adjudication or arbitration under Section 9, the Company shall pay all costs and
expenses reasonably incurred by Indemnitee in investigating, defending, and
appealing any Proceeding against Indemnitee. Such payment shall be made within a
reasonable time after the Company's receipt of evidence that an indemnifiable
expense has been incurred.
6.4. Payment of Independent Legal Counsel. If the determination of
entitlement to indemnification is to be made by Independent Legal Counsel under
subsection 6.1 of this Agreement, the Company shall pay any and all reasonable
fees and expenses incurred by such independent counsel in connection with acting
pursuant to this Agreement.
6.5. Payment of Expenses Incurred by Indemnitee in Making
Determination. All reasonable costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in cooperating with the persons
responsible for making the determination called for under subsection 6.1 shall
be borne by the Company, irrespective of the determination as to Indemnitee's
entitlement to indemnification.
6.6. Presumption of Entitlement to Indemnification. In making any
determination under subsection 6.1 or subsection 9.1, it shall be presumed that
Indemnitee is entitled to indemnification under this Agreement, and the Company
shall have the burden of proof to overcome this presumption. As is provided
under Section 145 of the General Corporation Law of Delaware, the termination of
any Proceeding covered by this Agreement, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption for the purpose of subsection 6.1 or any other
provision of this Agreement that Indemnitee did not act in good faith and in a
manner that Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
had reasonable cause to believe that the conduct was unlawful.
7. Mandatory Indemnification. Subject to the limitations set forth in
Section 4 and the determination to be made under Section 6, if Indemnitee is a
person who was or is a party or is threatened to be made a party to or is
involved (including involvement as a witness) in a Proceeding, including any
action by or in the right of the Company, by reason of the fact that he/she is
or was or has agreed to become an Agent, or by reason of any action alleged to
have been taken or omitted by him/her in any capacity, the Company shall
indemnify Indemnitee against all expense, liability and loss (including, but not
limited to, judgements, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement), actually and reasonably incurred by him/her in
connection with the investigation, defense, settlement or appeal of such
Proceeding; provided, however, that except as provided in subsection 9.1 of this
Agreement with respect to remedies of Indemnitee, the Company shall indemnify
Indemnitee in connection with a Proceeding (or part thereof) initiated by
Indemnitee only if such Proceeding (or any part thereof) was authorized by the
Board of Directors of the Company.
6
8. Mandatory Advancement of Expenses. The Company shall pay in advance of
final determination all costs and expenses reasonably incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of any
Proceeding to which Indemnitee is a party or is threatened to be made a party or
with respect to which Indemnitee is otherwise involved (including involvement as
a witness) as an Agent. An advancement of expenses incurred by Indemnitee in
his/her capacity as an Agent shall be made only upon receipt by the Company of
(a) a written affirmation by Indemnitee of Indemnitee's good faith belief that
Indemnitee has met the standard of conduct necessary for indemnification as
outlined in Section 6 and Section 7, and (b) an undertaking by or on behalf of
Indemnitee to repay all amounts so advanced if it shall ultimately be determined
by final judicial decision from which there is no further right to appeal that
Indemnitee is not entitled to be indemnified for such expenses under this
Agreement or otherwise. The advances to be made hereunder shall be paid within a
reasonable time after the Company's receipt of a written request for
reimbursement for incurred costs and expenses.
9. Remedies of Indemnitee.
9.1. In the event (a) the Company determines pursuant to subsection
6.1 that Indemnitee is not entitled to indemnification under this Agreement or
(b) the Company fails to make the determination called for in subsection 6.1
within 60 days of the Company's receipt of the request for indemnification,
Indemnitee may seek an adjudication in an appropriate court of the State of
Delaware, or in any other court of competent jurisdiction, for the purpose of
enforcing Indemnitee's right to indemnification or the advance payment of
expenses pursuant to this Agreement. Alternatively, Indemnitee may, at
Indemnitee's option, seek an award in arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association.
Indemnitee must exercise the rights under this subsection within 180 days of the
earlier of (x) the date of notice of a determination that Indemnitee is not
entitled to indemnification or (y) the date 60 days after the Company receives
the request for indemnification.
9.2. In the event that a determination shall have been made pursuant
to Section 6 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 9 shall be conducted in all respects as a de novo trial or
arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of
that adverse determination.
9.3. If a determination shall have been made pursuant to Section 6 of
this Agreement that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 9, absent (a) a misstatement by Indemnitee of
a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification or (b) a prohibition of such indemnification under
applicable law.
7
9.4. The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 9 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
9.5. The obligations of the Company to make the payments required to
be made hereunder and to perform and observe the other agreements on its part
contained herein, shall not be subject to diminution by set off, counterclaim,
abatement or otherwise; provided, however, that Indemnitee shall not be released
from any liability or obligation that Indemnitee may owe the Company, whether
hereunder or otherwise.
9.6. Indemnitee's expenses incurred in successfully establishing
his/her right to indemnification or advancement of expenses under this Section
9, in whole or in part, in any such action (or settlement thereof) shall be paid
by the Company.
10. Notice. All notices, requests, demands, and other communications
relating to this Agreement shall be in writing and shall be deemed to be duly
given if (a) delivered by hand and receipted for by the party to whom the notice
or communication shall have been directed or (b) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
if to Indemnitee, to:
----------------------------
----------------------------
----------------------------
or to such other address as may have been furnished to the Company by
Indemnitee and
if to the Company, to:
Payless Cashways, Inc.
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: Secretary/Assistant Secretary
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
8
or to such other address as may have been furnished to Indemnitee by the
Company.
11. Severability. If this Agreement, or any portion hereof, shall be
held to be invalid or unenforceable for any reason, the Company shall
nevertheless indemnify Indemnitee as to all expenses, judgments, fines and
penalties with respect to any action, suit or proceeding, whether threatened or
commenced, to the full extent permitted by any portion of this Agreement that
shall not have been held to be invalid or unenforceable under the General
Corporation Law of Delaware and the Certificate of Incorporation and the Amended
and Restated Bylaws of the Company. Such invalidity or unenforceability shall
not otherwise affect the validity or enforceability of the other provisions
hereof.
12. Modification and Waiver. No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by both parties.
No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions (whether or not similar); nor shall
such waiver constitute a continuing waiver.
13. Continuation of Indemnity. All agreements and obligations of the
Company contained in this Agreement shall continue during the period Indemnitee
has consented to be or is a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
and shall continue thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed Proceeding by reason of the
fact that Indemnitee has consented to be or is or was a director or officer of
the Company or is or was serving in any other capacity referred to in this
Agreement.
14. Binding Effect. This Agreement shall be binding upon the Company
and its successors and assigns and shall inure to the benefit of Indemnitee and
his/her heirs, assigns and personal representatives.
15. Non-exclusivity. The indemnification, contribution and advance
payment of expenses provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, other
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in Indemnitee's official capacity and as to action in any other
capacity after consenting to serve as a director or while occupying any of the
positions or having any of the relationships referred to in this Agreement.
16. Subrogation Rights. In the event of any payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee against any person or organization and
Indemnitee
9
shall execute all papers required and shall do everything that may be
reasonablely necessary to secure such rights.
17. Document to Supersede. This Agreement shall supersede any other prior
written Indemnification Agreement between the Company and Indemnitee.
18. Governing Law. The parties agree that this Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of
Delaware applicable to contracts made and to be performed in that state.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
20. Headings. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction of it.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INDEMNITEE PAYLESS CASHWAYS, INC.
------------------------------ -----------------------------
Name:________________ By:______________________
Title:___________________
