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EXHIBIT 10.12
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is dated as of March 18,
1997 between 2CONNECT EXPRESS, INC., a Florida corporation (the Company"), and
Xxxxx Xxxxx (the "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 of the Company;
WHEREAS, the Company has filed a Registration Statement on Form SB-2
(Registration No. 333-15567) under the Securities Act of 1933, as amended, with
respect to an initial public offering of its securities;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service
to the Company in an effective manner and in part to provide Indemnitee with
specific contractual assurance that the indemnification protection provided by
the Articles of Incorporation and the Bylaws of the Company will be available
to Indemnitee (regardless of, among other things, any amendment to or
revocation of such Articles of Incorporation and the Bylaws or any change in
the composition of the Company's Board of Directors or acquisition transaction
relating to the Company), and in order to induce Indemnitee to continue to
provide services to the Company as a director thereof, the Company wishes to
provide in this Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the fullest extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee under the
Company's directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, another
enterprise, and intending to be legally bound hereby, the parties agree as
follows:
1. CERTAIN DEFINITIONS.
(a) 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 (the "Act")), 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 13d-3 under the Act),
directly or indirectly, of securities of
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the Company representing twenty percent (20%) or more of the total voting power
represented by the Company's then outstanding Voting Securities, or (ii) during
any period of two (2) 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-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 eighty percent (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 (in one transaction or a series of
transactions) of all or substantially all the Company's assets.
(b) Claim: any threatened, pending or completed action, suit, proceeding
or alternate dispute resolution mechanism, or any inquiry, hearing or
investigation, whether conducted by the Company or any other party, that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternate dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other costs, travel
expenses, fees of experts, transcript costs, filing fees, witness fees,
telephone charges, postage, delivery service fees, expenses and obligations of
any nature whatsoever 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.
(d) Indemnifiable Event: any event or occurrence that takes place either
prior to or after the execution of this Agreement related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary 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.
(e) Potential Change in Control: shall be deemed to have occurred if (i)
the Company enters into an agreement or arrangement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control; (iii)
any person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity 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,
who is or becomes the beneficial owner, directly or indirectly, of securities
of the Company representing ten percent (10%) or more of the combined voting
power
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of the Company's then outstanding Voting Securities, increases his beneficial
ownership of such securities by five percent (5%) or more over the percentage
so owned by such person on the date hereof; or (iv) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(f) Reviewing Party: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any other person or
body appointed by the Board who is not a party to the particular Claim for
which Indemnitee is seeking indemnification, or Independent Legal Counsel.
(g) Independent Legal Counsel: Independent Legal Counsel shall refer to
an attorney, selected in accordance with the provisions of Section 3 hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last five years (other than in connection with seeking
indemnification under this Agreement). Independent Legal Counsel shall not be
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, nor shall Independent Legal Counsel be any person who has been
sanctioned or censured for ethical violations of applicable standards of
professional conduct.
(h) Voting Securities: 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 reasons of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than
thirty (30) 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, judgments, fines, penalties or
amounts paid in settlement) of such Claim and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement (including the creation of the
trust referred to in Section 4 hereof). If so requested by Indemnitee, the
Company shall advance (within five (5) business days of such request) any and
all Expenses to Indemnitee (an "Expense Advance"). Notwithstanding anything in
this Agreement to the contrary and except as provided in Section 5, prior to a
Change in Control Indemnitee shall not be entitled to indemnification pursuant
to this Agreement in connection with any Claim initiated by Indemnitee against
the Company or any director or officer of the Company unless the Company has
joined in or consented to the initiation of such Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 3
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hereof 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 Section 2(a) 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 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). Indemnitee's obligation to reimburse the Company for
Expense Advances shall be unsecured and no interest shall be charged thereon.
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 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, or 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 Independent Legal Counsel
shall be selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld) and such Independent Legal Counsel shall
determine whether the officer or director is entitled to indemnity payments and
Expense Advances under this Agreement or any other agreement or the Articles of
Incorporation or Bylaws of the Company now or hereafter in effect relating to
Claims for Indemnifiable Events. Such Independent Legal Counsel, among other
things, shall render its written opinion of the Company and Indemnitee as to
whether and to what extent the Indemnitee will be permitted to be indemnified.
The Company agrees to pay the reasonable fees of the Independent Legal Counsel
and to indemnify fully such Independent Legal Counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or the engagement of Independent Legal
Counsel pursuant hereto.
4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control,
the Company shall, upon written request by Indemnitee, create a trust for the
benefit of Indemnitee and from time to time upon written request of Indemnitee
shall fund such trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be
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incurred in connection with investigating, preparing for and defending any
Claim relating to an Indemnifiable Event, and any and all judgments, fines,
penalties and settlement amounts of any and all Claims relating to an
Indemnifiable Event from time to time actually paid or claimed, reasonably
anticipated or proposed to be paid. The amount or amounts to be deposited in
the trust pursuant to the foregoing funding obligation shall be determined by
the Reviewing Party in any case in which the Independent Legal Counsel referred
to above is involved. The terms of the trust shall provide that upon a Change
in Control (i) the trust shall not be revoked or the principal thereof invaded,
without the written consent of Indemnitee, (ii) the trustee shall advance,
within five (5) business days of a request by Indemnitee, any and all Expenses
to indemnitee (and Indemnitee hereby agrees to reimburse the trust under the
circumstances under which Indemnitee would be required to reimburse the Company
under Section 2(b) of this Agreement), (iii) the trust shall continue to be
funded by the Company in accordance with the funding obligation set forth
above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall be chosen by
Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its
obligations under this Agreement. All income earned on the assets held in the
trust shall be reported as income by the Company for federal, state, local and
foreign tax purposes.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within five business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any claim asserted against or in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this Agreement or any other agreement or Certificate of
Incorporation or Bylaws of the Company 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.
6. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
the Expenses, judgment, fines, penalties and amounts paid in settlement of a
Claim but not, however, for all of 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 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 party 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.
7. DEFENSE TO INDEMNIFICATION, BURDEN OF PROOF AND PRESUMPTIONS. It shall
be a defense to any action brought by the Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
expenses
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incurred in defending a claim in advance of its final disposition where the
required undertaking has been tendered to the Company) that the Indemnitee has
not met the standards of conduct that make it permissible under the Florida
Business Corporation Act for the Company to indemnify the Indemnitee for the
amount claimed. In connection with any determination by the Reviewing Party or
otherwise as to whether the Indemnitee is entitled to be indemnified hereunder,
the burden of providing such a defense shall be on the Company. Neither the
failure of the Company (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action by the Indemnitee that Indemnification of the
claimant is proper under the circumstances because he or she has met the
applicable standard of conduct set forth in the Florida Business Corporation
Act, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the Indemnitee
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Indemnitee has not met the applicable
standard of conduct. For purposes of this 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 Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by applicable law.
8. NON-EXCLUSIVITY, ETC.. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Articles of
Incorporation or Bylaws of the Company or 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 of
Incorporation and Bylaws of the Company and this Agreement, it is the intent of
the parties hereto that Indemnitee shall be entitled by this Agreement to the
greater benefits so afforded by such change.
9. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained herein
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company or its subsidiaries, if any.
10. LIABILITY INSURANCE. 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.
11. 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 or any affiliate
of the Company against Indemnitee, Indemnitee's spouse, heirs, executors,
administrators 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 or its affiliate 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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12. AMENDMENTS, ETC. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
13. SUBROGATION. In the event of payment under this 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.
14. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
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 of Incorporation or Bylaws of the
Company or otherwise) of the amounts otherwise indemnifiable hereunder.
15. BINDING EFFECT, ETC. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their spouses,
heirs, personal and legal representatives and their respective successors and
assigns, including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or
assets of the Company. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise) to
all, substantially all, or a substantial part, of the business and/or assets of
the Company, by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director and officer
of the Company or of any other enterprise at the Company's request.
16. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph of sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. GOVERNING LAW. This Agreement shall be governed by and construed 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.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
2CONNECT EXPRESS
By:
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Xxxx X. Xxxxxxx,
President
INDEMNITEE:
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Xxxxx Xxxxx
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