INDEMNIFICATION AGREEMENT
This Agreement, dated as of January 28, 1998, is by and between STB
Systems, Inc., a Texas corporation (the "Company"), and Xxxxxx X. Xxxx
("Indemnitee").
W I T N E S S E T H :
WHEREAS, the Company desires to have qualified directors serving on its
Board of Directors who are willing to make decisions that in their judgment are
in the Company's best interest without any undue threat of personal liability;
WHEREAS, the Company's Amended and Restated Articles of Incorporation
("Articles of Incorporation") and the Company's Amended and Restated Bylaws
("Bylaws") require indemnification of each director or officer of the Company in
his capacity as a director or officer and, if serving at the request of the
Company as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, in each of those capacities, against any and
all liability and reasonable expense that may be incurred by him in connection
with or resulting from (a) any threatened, pending, or completed action, suit,
or proceeding whether civil, criminal, administrative, arbitrative, or
investigative (collectively, a "Proceeding"), (b) an appeal in such a
Proceeding, or (c) any inquiry or investigation that could lead to such a
Proceeding, to the fullest extent permitted by the Texas Business Corporation
Act ("Act"), as the same exists or may be hereafter amended;
WHEREAS, the Company desires to grant to Indemnitee the maximum
indemnification for any Loss (hereinafter defined) permitted by the Articles of
Incorporation and Bylaws;
WHEREAS, developments with respect to the terms and availability of
directors' and officers' liability insurance and with respect to the
application, amendment, and enforcement of statutory, charter, and bylaw
indemnification provisions generally have raised questions concerning the
adequacy, and reliability of the protection afforded to persons intended to be
protected thereunder; and
WHEREAS, in order to resolve such questions and thereby induce Indemnitee
to serve or to continue serving, as a director of the Company, the Company has
agreed to enter into this Agreement with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's consent to serve or
continuing to serve in the position of director of the Company, the parties
hereto agree as follows:
1. INDEMNITY OF INDEMNITEE. The Company shall indemnify Indemnitee in
his capacity as director, director nominee, and/or officer of the Company, as
the case may be, and, if serving at the request of the Company as a director,
director nominee, officer, trustee, employee, agent, or similar functionary
of another foreign or domestic corporation, trust partnership, joint venture,
sole proprietorship, employee benefit plan, or other enterprise, in each of
those capacities, against any and all liability and reasonable expense that
may be incurred by Indemnitee in connection with or resulting from (a) any
Proceeding, (b) an appeal in such a
Proceeding, or (c) any inquiry or investigation that could lead to such a
Proceeding, all to the fullest extent permitted by Article 2.02-1 of the Act.
All indemnity obligations and/or liabilities of the Company hereunder shall
be without limit and without regard to the cause or causes thereof or the
negligence or gross negligence of any person or persons (expressly including
Indemnitee), whether such negligence or gross negligence of Indemnitee be
sole, joint or concurrent, active, or passive.
2. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, director nominee or officer of the Company, shall be retroactive to
the date Indemnitee first became a director, director nominee or officer
covering all periods of service from time to time, and shall continue
thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending, or completed Proceeding, any appeal in a Proceeding, and
any inquiry or investigation that could lead to a Proceeding, by reason of
the fact that Indemnitee was serving, or had consented to serve, in any
capacity referred to herein.
3. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
Indemnitee of notice of any claim against Indemnitee or the commencement of
any Proceeding, Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the assertion
of any such claim or the commencement thereof; but the omission so to notify
the Company will not relieve it from any liability under this Agreement
unless such delay in notification actually prejudiced the Company (and then
only to the extent the Company was actually prejudiced thereby) and in
addition, the Company shall not be relieved from any liability which it may
have to Indemnitee otherwise than under this Agreement. With respect to any
such Proceeding as to which Indemnitee notifies the Company of the
commencement thereof:
(a) The Company will be entitled to participate therein at its own
expense.
(b) Except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof with counsel
satisfactory to Indemnitee, provided that, notwithstanding the Company's
assumption of such defense, Indemnitee shall have the right to retain
separate counsel and the Company shall pay all reasonable fees and expenses
of such counsel and all other reasonable expenses of Indemnitee in
connection with such Proceeding. The Company shall not be entitled to
assume the defense of any Proceeding brought by or on behalf of the Company
or as to which Indemnitee shall have reasonably concluded that there may be
a conflict of interest between the Company and Indemnitee in the conduct of
the defense of such action.
(c) 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 its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the Company
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
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4. ADVANCES OF EXPENSES. Reasonable expenses (other than judgments,
penalties, fines and settlements) incurred by Indemnitee that are subject to
indemnification under this Agreement (and not paid, reimbursed or advanced by
others) shall be paid or reimbursed by the Company in advance of the final
disposition of the Proceeding within 30 days after the Company receives a
written request by Indemnitee accompanied by substantiating documentation of
such expenses, a written affirmation by Indemnitee of his good faith belief
that he has met the standard of conduct necessary for indemnification under
this Agreement, and a written undertaking by or on behalf of Indemnitee to
repay the amount paid or reimbursed if it is ultimately determined that he
has not met those standards or that such reasonable expenses do not
constitute a Loss. The written undertaking described above shall be an
unlimited general obligation of Indemnitee and shall not be secured. Such
undertaking shall be without reference to the financial ability of Indemnitee
to make repayment.
5. RIGHT OF INDEMNITEE TO INDEMNIFICATION UPON APPLICATION: PROCEDURE
UPON APPLICATION. Upon the written request of Indemnitee to be indemnified
pursuant to this Agreement (other than pursuant to Section 4 hereof), the
Company shall cause the Reviewing Party (hereinafter defined) to determine,
within 45 days, whether or not the Indemnitee has met the relevant standards
for indemnification required by this Agreement. The termination of a
Proceeding by judgment, order, settlement, or conviction, or on a plea of
nolo contendere or its equivalent, shall not of itself create a presumption
that Indemnitee did not meet the requirements for indemnification required by
this Agreement. If a determination of indemnification is to be made by
Independent Legal Counsel (hereinafter defined), such Independent Legal
Counsel shall render its written opinion to the Company and Indemnitee as to
what extent Indemnitee will be permitted to be indemnified. The Company
shall pay the reasonable fees of Independent Legal Counsel and indemnify and
hold harmless such Indemnitee against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating
to the engagement of Independent Legal Counsel pursuant hereto and the
written opinion of such Independent Legal Counsel.
6. DEFINITIONS. The terms defined in this Section 6 shall, for
purposes of this Agreement have the indicated meanings:
(a) "Loss" shall mean any and all judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expense
(including attorneys' fees) actually incurred by Indemnitee, after
realization of or giving effect to all insurance, bonding, indemnification
and other payments or recoveries actually received by or for the benefit of
Indemnitee, directly or indirectly.
(b) "Reviewing Party" means, if a Change in Control (hereinafter
defined) has not occurred (or if a Change in Control has occurred and such
Change in Control has been approved by a majority of the Board of Directors
of the Company who were directors of the Company immediately prior to such
Change in Control), (i) a majority of a quorum of directors of the Company
who at the time of voting upon a determination of indemnification are
neither officers or employees of the Company or members of the immediate
family of an officer or employee of the Company ("Interested Parties") nor
parties to that particular Proceeding to which Indemnitee is seeking
indemnification; or (ii) Independent Legal Counsel selected by a majority
of a quorum of directors who at the
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time of selecting such Independent Legal Counsel are neither Interested
Parties nor parties to that particular Proceeding to which Indemnitee
is seeking indemnification, or if such a quorum cannot be obtained, by
a majority vote of a committee of the Board of Directors of the Company
designated to select such Independent Legal Counsel by a majority vote
of all directors of the Company, consisting solely of two or more
directors who at the time of such selection are neither Interested
Parties nor parties in that particular Proceeding to which Indemnitee
is seeking indemnification, or if such a quorum cannot be obtained and
such a committee cannot be established, by a majority vote of all
directors of the Company. "Reviewing Party" means if a Change in
Control has occurred, Independent Legal Counsel selected in the manner
set forth in (ii) above.
(c) "Change in Control" shall mean an event which shall be deemed to
have occurred if: (i) a merger or consolidation of the Company with or
into another corporation occurs in which the Company shall not be the
surviving corporation (for purposes of this definition, the Company shall
not be deemed the surviving corporation in any such transaction if, as the
result thereof, it becomes a wholly-owned subsidiary of another
corporation); (ii) a dissolution of the Company occurs; (iii) a transfer of
all or substantially all of the assets or shares of stock of the Company in
one transaction or a series of related transactions to one or more other
persons or entities occurs; (iv) if any "person" or "group" as those terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than Excluded Persons, becomes
the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities; or (v) during any period of two consecutive years commencing on
or after April 1, 1995, individuals who at the beginning of the period
constituted the Board cease for any reason to constitute at least a
majority, unless the election of each director who was not a director at
the beginning of the period has been approved in advance by directors
representing at least two-thirds (2/3) of the directors then in office who
were directors at the beginning of the period. The term "Excluded Persons"
means each of Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxxxx, Xx., and Xxxx X. Xxxx,
and any person, entity, or group under the control of any of them, or a
trustee or other fiduciary holding securities under an employee benefit
plan of the Company.
(d) "Independent Legal Counsel" shall mean an attorney, selected in
accordance with the provisions of Section 6(b) hereof, who shall not have
otherwise performed services for Indemnitee, the Company, any person that
controls the Company or any of the directors of the Company, within five
years preceding the time of such selection (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.
7. ENFORCEABILITY. The right to indemnification or advances as provided
by this Agreement shall be enforceable by Indemnitee in any court of competent
jurisdiction. The burden of proof that indemnification is not appropriate shall
be on the Company. Neither the
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failure of the Company (including its Board of Directors or Independent Legal
Counsel) to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because Indemnitee
has met the applicable standard of conduct, nor an actual determination by
the Company (including its Board of Directors or Independent Legal Counsel)
that Indemnitee has not met such an applicable standard of conduct, shall be
a defense to the action or create a presumption that Indemnitee has not met
the applicable standard of conduct.
8. PARTIAL INDEMNITY; EXPENSES. If the Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or
a portion of the expenses, judgments, fines, and penalties, but not for the
total amount thereof, the Company shall indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. 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 Proceedings relating in whole or
in part to an event subject to indemnification hereunder or in defense of any
issue or matter therein, including dismissal without prejudice, Indemnitee
shall be indemnified against expenses incurred for any Loss in connection
with such Proceeding, issue or matter, as the case may be.
9. REPAYMENT OF EXPENSES. Indemnitee shall reimburse the Company for
all reasonable expenses paid by the Company in defending any Proceeding
against Indemnitee in the event and only to the extent that it shall be
ultimately determined that Indemnitee is not entitled to be indemnified by
the Company for such expenses under the provisions of this Agreement.
10. CONSIDERATION. The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on the
Company hereby in order to induce Indemnitee to consent to serve, to serve,
and/or to continue serving as a director, and acknowledges that Indemnitee is
relying upon this Agreement in consenting to serve and serving in such
capacity.
11. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under any
other agreement, vote of shareholders, as a matter of law, or otherwise.
12. SUBROGATION. If a payment is made under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the right
of recovery of such Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights.
13. SEVERABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision thereof shall be held to be invalid or unenforceable for any reason
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereto.
14. NOTICE. Any notice, consent, or other communication to be given
under this Agreement by any party to any other party shall be in writing and
shall be either (a) personally delivered, (b) mailed by registered or
certified mail, postage prepaid with return receipt requested, (c) delivered
by overnight express delivery service or same-day local courier service, or
(d)
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delivered by telex or facsimile transmission to the address set forth beneath
the signature of the parties below, or at such other address as may be
designated by the parties from time to time in accordance with this Section.
Notices delivered personally, by overnight express delivery service, or by
local courier service shall be deemed given as of actual receipt. Mailed
notices shall be deemed given three business days after mailing. Notices
delivered by telex or facsimile transmission shall be deemed upon receipt by
the sender of the answerback (in the case of a telex) or transmission
confirmation (in the case of a facsimile transmission).
15. GOVERNING LAW: BINDING EFFECT; AMENDMENT AND TERMINATION:
REIMBURSEMENT.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Texas, without giving effect to Texas
principles of conflicts of laws.
(b) This Agreement shall be binding upon Indemnitee and upon the
Company, its successors, and assigns, and shall inure to the benefit of
Indemnitee, his heirs, executors, administrators, personal representation,
and assigns and to the benefit of the Company, its successors, and assigns.
(c) No amendment, modification, termination, or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(d) If Indemnitee is required to bring any action to enforce rights
or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
STB SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx, Chairman of the Board,
President and Chief Executive Officer
Address of STB Systems, Inc.
0000 Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, INDEMNITEE
Address of Indemnitee:
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Facsimile:
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