DIRECTOR INDEMNIFICATION AGREEMENT
Exhibit 10b
This Director Indemnification Agreement, dated as of ___, 200___(this “Agreement”),
is made by and between Brush Engineered Materials Inc., an Ohio corporation (the “Company”), and
(“Indemnitee”), who is a director of the Company.
RECITALS:
A. Section 1701.59 of the Ohio Revised Code (the “ORC”) provides that the business and affairs
of a corporation shall be managed by or under the direction of its directors.
B. By virtue of the managerial prerogatives vested in the directors of an Ohio corporation,
directors act as fiduciaries of the corporation and its shareholders.
C. Thus, it is critically important to the Company and its shareholders that the Company be
able to attract and retain the most capable persons reasonably available to serve as directors of
the Company.
D. In recognition of the need for corporations to be able to induce capable and responsible
persons to accept positions in corporate management, ORC §1701.13(E) authorizes (and in some
instances requires) corporations to indemnify their directors, authorizes (and sometimes requires)
corporations to advance funds to pay for expenses of its directors prior to the final disposition
of an action, suit or proceeding, and further authorizes corporations to purchase and maintain
insurance for the benefit of their directors.
E. Indemnification by a corporation serves the policies of (1) allowing directors to resist
unjustified lawsuits, secure in the knowledge that, if vindicated, the corporation will bear the
expense of litigation; (2) encouraging capable women and men to serve as corporate directors,
secure in the knowledge that the corporation will absorb the costs of defending their honesty and
integrity; and (3) allowing directors and corporations to dispose of vexacious and distracting
litigation through negotiation of settlements.
F. The number of lawsuits challenging the judgment and actions of corporate directors, the
costs of defending those lawsuits, and the threat to directors’ personal assets have all materially
increased over the past several years, chilling the willingness of capable women and men to
undertake the responsibilities imposed on corporate directors.
G. Federal legislation and rules adopted by the Securities and Exchange Commission and the
national securities exchanges have imposed additional disclosure and corporate governance
obligations on directors of public companies and have exposed such directors to additional and
substantially broadened civil liabilities.
H. These legislative and regulatory initiatives have also exposed directors of public
companies to a significantly greater risk of criminal proceedings, with attendant defense costs and
potential criminal fines and penalties.
I. Under Ohio law, a director’s right to be reimbursed for the costs of defense of criminal
actions, whether such claims are asserted under state or federal law, does not depend upon the
merits of the claims asserted against the director, which are separate and distinct from any right
to indemnification the director may be able to establish, and indemnification of the director
against criminal fines and penalties is permitted if the director satisfies the applicable standard
of conduct as a director.
J. Indemnitee is a director of the Company and Indemnitee’s willingness to continue to serve
in such capacity is predicated, in substantial part, upon the Company’s willingness to indemnify
Indemnitee in accordance with the principles reflected above, to the fullest extent permitted by
the laws of the state of Ohio, and upon the other undertakings set forth in this Agreement.
K. Section 34 of the Company’s Amended and Restated Code of Regulations (the “Regulations”)
require the Company to indemnify each director and former director of the Company to the full
extent then permitted by law. However, recent court decisions in Delaware, while not binding on
the courts of Ohio interpreting Ohio law, have raised questions as to the ability of directors
generally to rely on such provisions following their retirement or other departure from the board
in the event that there is a subsequent amendment to the [Regulations][Articles] that alters or
eliminates the indemnification provisions of those documents.
L. Section 36 of the Company’s Regulations provides that the Company, with the approval of the
Board of Directors may enter into agreements with any persons that the Company may indemnify under
the Regulations, and undertake thereby to indemnify such persons and to pay the expenses incurred
by them in defending any action, suit or proceeding against them, whether or not the Company would
have power under the law or the Articles to indemnify such person.
M. Therefore, in recognition of the need to provide Indemnitee with contractual protection
against personal liability, in order to procure Indemnitee’s continued service as a director of the
Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in
order to provide such protection pursuant to express contract rights (intended to be enforceable
irrespective of, among other things, any amendment to the Company’s Amended and Restated Articles
of Incorporation or the Regulations (collectively, the “Constituent Documents”), any change in the
composition of the Company’s Board of Directors (the “Board”) or any change-in-control or business
combination transaction relating to the Company), or any change in the director’s status through
retirement or resignation, the Company wishes to provide in this Agreement for the indemnification
of and the advancement of Expenses (as defined in Section 1(e)) to Indemnitee as set forth in this
Agreement and for the continued coverage of Indemnitee under the Company’s directors’ and officers’
liability insurance policies.
N. In light of the considerations referred to in the preceding recitals, it is the Company’s
intention and desire that the provisions of this Agreement be construed liberally, subject to their
express terms, to maximize the protections to be provided to Indemnitee hereunder.
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AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms
have the following meanings when used in this Agreement with initial capital letters:
(a) “Change in Control” means the occurrence after the date of this Agreement of
any of the following events:
(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company; provided, however, that:
(A) for purposes of this Section 1(a)(i), the following acquisitions will not constitute a
Change in Control: (1) any acquisition of Voting Stock of the Company directly from the Company
that is approved by a majority of the Incumbent Directors, (2) any acquisition of Voting Stock of
the Company by the Company or any Subsidiary, (3) any acquisition of Voting Stock of the Company by
any employee benefit plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, and (4) any acquisition of Voting Stock of the Company by any Person pursuant to a
Business Combination that complies with clauses (A), (B) and (C) of Section 1(a)(iii) below;
(B) if any Person acquires beneficial ownership of 20% or more of combined voting power of the
then-outstanding Voting Stock of the Company as a result of a transaction described in clause
(A)(1) of Section 1(a)(i) and such Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company representing 1% or more of the then-outstanding Voting Stock
of the Company, other than in an acquisition directly from the Company that is approved by a
majority of the Incumbent Directors or other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of Voting Stock are treated
equally, such subsequent acquisition will be deemed to constitute a Change in Control;
(C) a Change in Control will not be deemed to have occurred if a Person acquires beneficial
ownership of 20% or more of the Voting Stock of the Company as a result of a reduction in the
number of shares of Voting Stock of the Company outstanding unless and until such Person thereafter
becomes the beneficial owner of any additional shares of Voting Stock of the Company representing
1% or more of the then-outstanding Voting Stock of the Company, other than in an acquisition
directly from the Company that is approved by a majority of the Incumbent Directors or other than
as a result of a stock dividend, stock split or similar transaction effected by the Company in
which all holders of Voting Stock are treated equally; and
(D) if at least a majority of the Incumbent Directors determine in good faith that a Person
has acquired beneficial ownership of 20% or more of the Voting Stock of the Company inadvertently,
and such Person divests as promptly as practicable a sufficient number of shares so that such
Person beneficially owns less than 20% of the Voting
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Stock of the Company, then no Change in Control will have occurred as a result of such
Person’s acquisition; or
(ii) a majority of the Directors are not Incumbent Directors; or
(iii) the consummation of a reorganization, merger or consolidation, or sale or other
disposition of all or substantially all of the assets of the Company or the acquisition of assets
of another corporation, or other transaction (each, a “Business Combination”), unless, in each
case, immediately following such Business Combination (A) all or substantially all of the
individuals and entities who were the beneficial owners of Voting Stock of the Company immediately
prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the
combined voting power of the then outstanding shares of Voting Stock of the entity resulting from
such Business Combination (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting
from such Business Combination, or any employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or such entity resulting from such Business Combination
or a holding company as described in ORC §1701.802(A)) beneficially owns, directly or indirectly,
20% or more of the combined voting power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination, and (C) at least a majority of the members of the
Board of Directors of the entity resulting from such Business Combination were Incumbent Directors
at the time of the execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(iv) approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C)
of Section 1(a)(iii).
For purposes of this Section 1(a) and as used elsewhere in this Agreement, the following terms
have the following meanings:
(A) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(B) “Incumbent Directors” means the individuals who, as of the date hereof, are Directors of
the Company and any individual becoming a Director subsequent to the date hereof whose election,
nomination for election by the Company’s shareholders, or appointment, was approved by a vote of at
least two-thirds of the then Incumbent Directors (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for director, without
objection to such nomination); provided, however, that an individual will not be an Incumbent
Director if such individual’s election or appointment to the Board occurs as a result of an actual
or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to
the election or removal of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
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(C) “Subsidiary” means an entity in which the Company or any holding company as described in
ORC §1701.802(A) directly or indirectly beneficially owns 50% or more of the outstanding Voting
Stock.
(D) “Voting Stock” means securities entitled to vote generally in the election of directors
(or similar governing bodies).
(b) “Claim” means (i) any threatened, asserted, pending or completed claim, demand, action,
suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or other,
and whether made pursuant to federal, state or other law; and (ii) any threatened, pending or
completed inquiry or investigation, whether made, instituted or conducted by the Company or any
other person, including without limitation any federal, state or other governmental entity, that
Indemnitee determines might lead to the institution of any such claim, demand, action, suit or
proceeding.
(c) “Controlled Affiliate” means any corporation, limited liability company, partnership,
joint venture, trust or other entity or enterprise, whether or not for profit, that is directly or
indirectly controlled by the Company. For purposes of this definition, “control” means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of an entity or enterprise, whether through the ownership of voting securities, through
other voting rights, by contract or otherwise; provided that direct or indirect beneficial
ownership of capital stock or other interests in an entity or enterprise entitling the holder to
cast 20% or more of the total number of votes generally entitled to be cast in the election of
directors (or persons performing comparable functions) of such entity or enterprise will be deemed
to constitute control for purposes of this definition.
(d) “Disinterested Director” means a director of the Company who is not and was not a party to
the Claim in respect of which indemnification is sought by Indemnitee.
(e) “Expenses” means attorneys’ and experts’ fees and expenses and all other costs and
expenses paid or payable in connection with investigating, defending, being a witness in or
otherwise participating in (including on appeal), or preparing to investigate, defend, be a witness
in or otherwise participate in (including on appeal), any Claim, and any amounts paid in settlement
prior to a final, nonappealable judgment or conviction.
(f) “Indemnifiable Claim” means any Claim based upon, arising out of or resulting from (i) any
actual, alleged or suspected act or failure to act by Indemnitee in his or her capacity as a
director, officer, employee or agent of the Company or as a director, officer, employee, member,
manager, trustee or agent of any other corporation, limited liability company, partnership, joint
venture, trust or other entity or enterprise, whether or not for profit, as to which Indemnitee is
or was serving at the request of the Company as a director, officer, employee, member, manager,
trustee or agent, (ii) any actual, alleged or suspected act or failure to act by Indemnitee in
respect of any business, transaction, communication, filing, disclosure or other activity of the
Company or any other entity or enterprise referred to in clause (i) of this sentence, or
(iii) Indemnitee’s status as a current or former director, officer, employee or agent of the
Company or as a current or former director, officer, employee, member, manager, trustee or agent of
the Company or any other entity or enterprise referred to in clause (i) of this sentence or any
actual, alleged or suspected act or failure to act by Indemnitee in connection with any obligation
or restriction imposed upon Indemnitee by reason of such status. In addition to any
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service at the actual request of the Company, for purposes of this Agreement, Indemnitee will
be deemed to be serving or to have served at the request of the Company as a director, officer,
employee, member, manager, trustee or agent of another entity or enterprise if Indemnitee is or was
serving as a director, officer, employee, member, manager, trustee or agent of such entity or
enterprise and (i) such entity or enterprise is or at the time of such service was a Controlled
Affiliate, (ii) such entity or enterprise is or at the time of such service was an employee benefit
plan (or related trust) sponsored or maintained by the Company or a Controlled Affiliate, or
(iii) the Company or a Controlled Affiliate directly or indirectly caused or authorized Indemnitee
to be nominated, elected, appointed, designated, employed, engaged or selected to serve in such
capacity.
(g) “Indemnifiable Losses” means any and all Losses relating to, arising out of or resulting
from any Indemnifiable Claim.
(h) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither presently is, nor in the past five years has been, retained
to represent: (i) the Company (or any Subsidiary) or Indemnitee in any matter material to either
such party (other than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any other named (or, as to
a threatened matter, reasonably likely to be named) party to the Indemnifiable Claim giving rise to
a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” will not include 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.
(i) “Losses” means any and all Expenses, damages, losses, liabilities, judgments, fines,
penalties (whether civil, criminal or other) and amounts paid in settlement following a final,
nonappealable judgment or conviction, including without limitation all interest, assessments and
other charges paid or payable in connection with or in respect of any of the foregoing.
2. Indemnification Obligation. Subject to Section 7, the Company shall indemnify, defend and
hold harmless Indemnitee, to the fullest extent permitted or required by the laws of the State of
Ohio in effect on the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; provided, however, that, except as provided in Sections 4 and 20, Indemnitee
will 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.
3. Advancement of Expenses. Indemnitee will have the right to advancement by the Company
prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating to,
arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee. Indemnitee’s
right to such advancement is not subject to the satisfaction of any standard of conduct. Without
limiting the generality or effect of the foregoing, within five
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business days after any request by Indemnitee, the Company shall, in accordance with such
request (but without duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to
Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such
Expenses; provided that Indemnitee shall repay, without interest any amounts actually advanced to
Indemnitee that, at the final disposition of the Indemnifiable Claim to which the advance related,
were in excess of amounts paid or payable by Indemnitee in respect of Expenses relating to, arising
out of or resulting from such Indemnifiable Claim. For purposes of obtaining payments of Expenses
in advance of final disposition, the Indemnitee shall submit to the Company a sworn request for
advancement of Expenses substantially in the form of Exhibit A attached hereto and made a part
hereof (subject to Indemnitee filling in the blanks therein and selecting from among the bracketed
alternatives therein, the “Undertaking”), averring that the Indemnitee has reasonably incurred or
will reasonably incur actual Expenses in defending an Indemnifiable Claim. The Undertaking need
not be secured and the Company must accept the Undertaking without reference to Indemnitee’s
ability to repay the Expenses. Unless at the time of the Indemnitee’s act or omission at issue,
the Constituent Documents prohibit such advances by specific reference to ORC Section
l701.13(E)(5)(a) or unless the only liability asserted against the Indemnitee in the subject
action, suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee will be eligible to
execute Part A of the Undertaking by which the Indemnitee undertakes to: (i) repay such amount if
it is proved by clear and convincing evidence in a court of competent jurisdiction that the
Indemnitee’s action or failure to act involved an act or omission undertaken with deliberate intent
to cause injury to the Company or undertaken with reckless disregard for the best interests of the
Company; and (ii) reasonably cooperate with the Company concerning the action, suit, proceeding or
claim. In all cases, the Indemnitee will be eligible to execute Part B of the Undertaking by which
the Indemnitee undertakes to repay such amount if it ultimately is determined that the Indemnitee
is not entitled to be indemnified by the Company under this Agreement or otherwise. In the event
that the Indemnitee is eligible to and does execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto will be required to be repaid by the
Indemnitee only if the Indemnitee is required to do so under the terms of both Part A and Part B of
the Undertaking. In no event will Indemnitee’s right to the payment, advancement or reimbursement
of Expenses pursuant to this Section 3 be conditioned upon any undertaking that is less favorable
to Indemnitee than, or that is in addition to, the undertakings set forth in Exhibit A.
4. Indemnification for Additional Expenses. Without limiting the generality or effect of the
foregoing, the Company shall indemnify and hold harmless Indemnitee against and, if requested by
Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within five business days of
such request, any and all Expenses paid or incurred by Indemnitee or which Indemnitee determines
are reasonably likely to be paid or incurred by Indemnitee in connection with any Claim made,
instituted or conducted by Indemnitee for (a) indemnification or payment, advancement or
reimbursement of Expenses by the Company under any provision of this Agreement, or under any other
agreement or provision of the Constituent Documents now or hereafter in effect relating to
Indemnifiable Claims, and/or (b) recovery under any directors’ and officers’ liability insurance
policies maintained by the Company, regardless in each case of whether Indemnitee ultimately is
determined to be entitled to such indemnification, reimbursement, advance or insurance recovery, as
the case may be; provided, however, that Indemnitee shall return, without interest, any such
advance of Expenses (or portion thereof) which remains unspent at the final disposition of the
Claim to which the advance related.
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5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of any Indemnifiable Loss, but not for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.
6. Procedure for Notification. To obtain indemnification under this Agreement in respect of
an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a written
request, including a brief description (based upon information then available to Indemnitee) of
such Indemnifiable Claim or Indemnifiable Loss. If, at the time of the receipt of such request,
the Company has directors’ and officers’ liability insurance in effect under which coverage for
such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company shall give
prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the applicable insurers
in accordance with the procedures set forth in the applicable policies. The Company shall provide
to Indemnitee a copy of such notice delivered to the applicable insurers, and copies of all
subsequent correspondence between the Company and such insurers regarding the Indemnifiable Claim
or Indemnifiable Loss, in each case substantially concurrently with the delivery or receipt thereof
by the Company. The failure by Indemnitee to timely notify the Company of any Indemnifiable Claim
or Indemnifiable Loss will not relieve the Company from any liability hereunder unless, and only to
the extent that, the Company did not otherwise learn of such Indemnifiable Claim or Indemnifiable
Loss and such failure results in forfeiture by the Company of substantial defenses, rights or
insurance coverage.
7. Determination of Right to Indemnification.
(a) To the extent that Indemnitee shall have been successful on the merits or otherwise in
defense of any Indemnifiable Claim or any portion thereof or in defense of any issue or matter
therein, including without limitation through a dismissal without prejudice, Indemnitee shall be
indemnified against all Indemnifiable Losses relating to, arising out of or resulting from such
Indemnifiable Claim in accordance with Section 2 and no Standard of Conduct Determination (as
defined in Section 7(b)) will be required. In the event that a matter as to which there has been a
dismissal without prejudice is later revived in the same or similar form, that matter will be
treated as a new Claim for all purposes of this Agreement.
(b) To the extent that the provisions of Section 7(a) are inapplicable to an Indemnifiable
Claim that will have been finally disposed of, any determination of whether Indemnitee has
satisfied any applicable standard of conduct under Ohio law that is a legally required condition
precedent to indemnification of Indemnitee hereunder against Indemnifiable Losses relating to,
arising out of or resulting from such Indemnifiable Claim (a “Standard of Conduct Determination”)
will be made as follows: (i) if a Change in Control shall not have occurred, or if a Change in
Control shall have occurred but Indemnitee shall have requested that the Standard of Conduct
Determination be made pursuant to this clause (i), (A) by a majority vote of a quorum consisting of
the Disinterested Directors, (B) if such Disinterested Directors so direct, by a majority vote of a
committee of Disinterested Directors designated by a majority vote of all Disinterested Directors,
or (C) if such quorum of Disinterested Directors is not available or if a majority of such a quorum
so direct, by Independent Counsel in a written opinion addressed to the Board, a copy of which
shall be delivered to Indemnitee; and (ii) if a Change in Control shall have occurred and
Indemnitee shall not have requested that the Standard of Conduct Determination be made pursuant to
clause (i), by Independent Counsel in a written opinion
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addressed to the Board, a copy of which shall be delivered to Indemnitee. Indemnitee will
cooperate with the person or persons making such Standard of Conduct Determination, including
providing to such person or persons, upon reasonable advance request, any documentation or
information which is not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. The Company shall
indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse
Indemnitee for, or advance to Indemnitee, within five business days of such request, any and all
costs and expenses (including attorneys’ and experts’ fees and expenses) incurred by Indemnitee in
so cooperating with the person or persons making such Standard of Conduct Determination.
(c) The Company shall use its reasonable best efforts to cause any Standard of Conduct
Determination required under Section 7(b) to be made as promptly as practicable. If (i) the person
or persons empowered or selected under Section 7 to make the Standard of Conduct Determination
shall not have made a determination within 30 days after the later of (A) receipt by the Company of
written notice from Indemnitee advising the Company of the final disposition of the applicable
Indemnifiable Claim (the date of such receipt being the “Notification Date”) and (B) the selection
of an Independent Counsel, if such determination is to be made by Independent Counsel, that is
permitted under the provisions of Section 7(e) to make such determination and (ii) Indemnitee shall
have fulfilled his/her obligations set forth in the second sentence of Section 7(b), then
Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such
30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the
person or persons making such determination in good faith requires such additional time for the
obtaining or evaluation or documentation and/or information relating thereto.
(d) If (i) Indemnitee shall be entitled to indemnification hereunder against any Indemnifiable
Losses pursuant to Section 7(a), (ii) no determination of whether Indemnitee has satisfied any
applicable standard of conduct under Ohio law is a legally required condition precedent to
indemnification of Indemnitee hereunder against any Indemnifiable Losses, or (iii) Indemnitee has
been determined or deemed pursuant to Section 7(b) or (c) to have satisfied any applicable standard
of conduct under Ohio law which is a legally required condition precedent to indemnification of
Indemnitee hereunder against any Indemnifiable Losses, then the Company shall pay to Indemnitee,
within five business days after the later of (x) the Notification Date in respect of the
Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are related, out of which
such Indemnifiable Losses arose or from which such Indemnifiable Losses resulted and (y) the
earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) above shall
have been satisfied, an amount equal to the amount of such Indemnifiable Losses.
(e) If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to
Section 7(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the
Company shall give written notice to Indemnitee advising him or her of the identity of the
Independent Counsel so selected. If a Standard of Conduct Determination is to be made by
Independent Counsel pursuant to Section 7(b)(ii), the Independent Counsel shall be selected by
Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of
the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable,
may, within five business days after receiving written notice of selection from the
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other, deliver to the other a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel so selected does not
satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(h), and the
objection shall set forth with particularity the factual basis of such assertion. Absent a proper
and timely objection, the person or firm so selected will act as Independent Counsel. If such
written objection is properly and timely made and substantiated, (i) the Independent Counsel so
selected may not serve as Independent Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit and (ii) the non-objecting party may, at
its option, select an alternative Independent Counsel and give written notice to the other party
advising such other party of the identity of the alternative Independent Counsel so selected, in
which case the provisions of the two immediately preceding sentences and clause (i) of this
sentence shall apply to such subsequent selection and notice. If applicable, the provisions of
clause (ii) of the immediately preceding sentence shall apply to successive alternative selections.
If no Independent Counsel that is permitted under the foregoing provisions of this Section 7(e) to
make the Standard of Conduct Determination shall have been selected within 30 days after the
Company gives its initial notice pursuant to the first sentence of this Section 7(e) or Indemnitee
gives its initial notice pursuant to the second sentence of this Section 7(e), as the case may be,
either the Company or Indemnitee may petition the Federal or state courts of Ohio for resolution of
any objection which shall have been made by the Company or Indemnitee to the other’s selection of
Independent Counsel and/or for the appointment as Independent Counsel of a person or firm selected
by the court or by such other person as the court shall designate, and the person or firm with
respect to whom all objections are so resolved or the person or firm so appointed will act as
Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses
of the Independent Counsel incurred in connection with the Independent Counsel’s determination
pursuant to Section 7(b).
8. Presumption of Entitlement. In making any Standard of Conduct Determination, the person or
persons making such determination shall presume that Indemnitee has satisfied the applicable
standard of conduct, and the Company may overcome such presumption only by its adducing clear and
convincing evidence to the contrary. Any Standard of Conduct Determination that is adverse to
Indemnitee may be challenged by the Indemnitee in the state or Federal courts in Ohio. No
determination by the Company (including by its directors or any Independent Counsel) that
Indemnitee has not satisfied any applicable standard of conduct shall be a defense to any Claim by
Indemnitee for indemnification or reimbursement or advance payment of Expenses by the Company
hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.
9. No Other Presumption. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea
of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet
any applicable standard of conduct or that indemnification hereunder is otherwise not permitted.
10. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other
rights Indemnitee may have under the Constituent Documents, or the substantive laws of the
Company’s jurisdiction of incorporation, any other contract or otherwise (collectively, “Other
Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would
have any greater right to indemnification under any Other Indemnity Provision,
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Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any
change is made to any Other Indemnity Provision which permits any greater right to indemnification
than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have
such greater right hereunder. The Company will not adopt any amendment to any of the Constituent
Documents the effect of which would be to deny, diminish or encumber Indemnitee’s right to
indemnification under this Agreement or any Other Indemnity Provision.
11. Liability Insurance and Funding. For the duration of Indemnitee’s service as a director
of the Company, and thereafter for so long as Indemnitee shall be subject to any pending or
possible Indemnifiable Claim, the Company shall use commercially reasonable efforts (taking into
account the scope and amount of coverage available relative to the cost thereof) to cause to be
maintained in effect policies of directors’ and officers’ liability insurance providing coverage
for directors and/or officers of the Company that is at least substantially comparable in scope and
amount to that provided by the Company’s current policies of directors’ and officers’ liability
insurance. The Company shall provide Indemnitee with a copy of all directors’ and officers’
liability insurance applications, binders, policies, declarations, endorsements and other related
materials, and shall provide Indemnitee with a reasonable opportunity to review and comment on the
same. Without limiting the generality or effect of the two immediately preceding sentences, the
Company shall not discontinue or significantly reduce the scope or amount of coverage from one
policy period to the next (i) without the prior approval thereof by a majority vote of the
Incumbent Directors, even if less than a quorum, or (ii) if at the time that any such
discontinuation or significant reduction in the scope or amount of coverage is proposed there are
no Incumbent Directors, without the prior written consent of Indemnitee (which consent shall not be
unreasonably withheld or delayed). In all policies of directors’ and officers’ liability insurance
obtained by the Company, Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits, subject to the same limitations, as are accorded to the
Company’s directors and officers most favorably insured by such policy. The Company may, but shall
not be required to, create a trust fund, grant a security interest or use other means, including
without limitation a letter of credit, to ensure the payment of such amounts as may be necessary to
satisfy its obligations to indemnify and advance expenses pursuant to this Agreement.
12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors), including any entity or
enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(f).
Indemnitee shall execute all papers reasonably required to evidence such rights (all of
Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to be
reimbursed by or, at the option of Indemnitee, advanced by the Company).
13. No Duplication of Payments. The Company shall not be liable under this Agreement to make
any payment to Indemnitee in respect of any Indemnifiable Losses to the extent Indemnitee has
otherwise actually received payment (net of Expenses incurred in connection therewith) under any
insurance policy, the Constituent Documents and Other Indemnity Provisions or otherwise (including
from any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim”
in Section 1(f)) in respect of such Indemnifiable Losses otherwise indemnifiable hereunder.
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14. Defense of Claims. The Company shall be entitled to participate in the defense of any
Indemnifiable Claim or to assume the defense thereof, with counsel reasonably satisfactory to the
Indemnitee; provided that if Indemnitee believes, after consultation with counsel selected by
Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee would present
such counsel with an actual or potential conflict, (b) the named parties in any such Indemnifiable
Claim (including any impleaded parties) include both the Company and Indemnitee and Indemnitee
shall conclude that there may be one or more legal defenses available to Indemnitee that are
different from or in addition to those available to the Company, or (c) any such representation by
such counsel would be precluded under the applicable standards of professional conduct then
prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law
firm plus, if applicable, local counsel in respect of any particular Indemnifiable Claim) at the
Company’s expense. The Company shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any threatened or pending Indemnifiable Claim effected without the
Company’s prior written consent. The Company shall not, without the prior written consent of the
Indemnitee, effect any settlement of any threatened or pending Indemnifiable Claim to which the
Indemnitee is, or could have been, a party unless such settlement solely involves the payment of
money and includes a complete and unconditional release of the Indemnitee from all liability on any
claims that are the subject matter of such Indemnifiable Claim. Neither the Company nor Indemnitee
shall unreasonably withhold its consent to any proposed settlement; provided that Indemnitee may
withhold consent to any settlement that does not provide a complete and unconditional release of
Indemnitee.
15. Successors and Binding Agreement. (a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization or otherwise, and including
any holding company as described in ORC 1701.802(A)) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to Indemnitee and his or her
counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken place. This
Agreement shall be binding upon and inure to the benefit of the Company and any successor to the
Company, including without limitation any person acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise, and including any holding company as described in ORC
1701.802(A) (and such successor will thereafter be deemed the “Company” for purposes of this
Agreement), but shall not otherwise be assignable or delegatable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by the Indemnitee’s
personal or legal representatives, executors, administrators, heirs, distributees, legatees and
other successors.
(c) This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign or delegate this Agreement or any rights or obligations hereunder
except as expressly provided in Sections 15(a) and 15(b). Without limiting the generality or
effect of the foregoing, Indemnitee’s right to receive payments hereunder shall not be assignable,
whether by pledge, creation of a security interest or otherwise, other than by a transfer by the
Indemnitee’s will or by the laws of descent and distribution, and, in the event of any attempted
assignment or transfer contrary to this Section 15(c), the Company will have no liability to pay
any amount so attempted to be assigned or transferred.
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16. Notices. For all purposes of this Agreement, all communications, including without
limitation notices, consents, requests or approvals, required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when hand delivered or dispatched
by electronic facsimile or electronic mail transmission (with receipt thereof confirmed orally or
electronically), or five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid or one business day after having been
sent for next-day delivery by a nationally recognized overnight courier service, addressed to the
Company (to the attention of the Secretary of the Company) and to Indemnitee at the applicable
address shown on the signature page hereto, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that notices of changes of
address will be effective only upon receipt.
17. Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by and construed in accordance with the substantive laws of the State
of Ohio, without giving effect to the principles of conflict of laws of such State. The Company
and Indemnitee each hereby irrevocably consent to the jurisdiction of the state and Federal courts
in Ohio for all purposes in connection with any action or proceeding which arises out of or relates
to this Agreement and agree that any action instituted under this Agreement shall be brought only
in the state or Federal courts in Ohio.
18. Validity. If any provision of this Agreement or the application of any provision hereof
to any person or circumstance is held invalid, unenforceable or otherwise illegal, the remainder of
this Agreement and the application of such provision to any other person or circumstance shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent, and only to the extent, necessary to make it enforceable, valid or legal.
In the event that any court or other adjudicative body shall decline to reform any provision of
this Agreement held to be invalid, unenforceable or otherwise illegal as contemplated by the
immediately preceding sentence, the parties thereto shall take all such action as may be necessary
or appropriate to replace the provision so held to be invalid, unenforceable or otherwise illegal
with one or more alternative provisions that effectuate the purpose and intent of the original
provisions of this Agreement as fully as possible without being invalid, unenforceable or otherwise
illegal.
19. Miscellaneous. No provision of this Agreement may be waived, modified or discharged
unless such waiver, modification or discharge is agreed to in writing signed by Indemnitee and the
Company. No waiver by either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise, expressed or
implied with respect to the subject matter hereof have been made by either party that are not set
forth expressly in this Agreement. References to Sections are to references to Sections of this
Agreement.
20. Legal Fees and Expenses. It is the intent of the Company that Indemnitee not be required
to incur legal fees and or other Expenses associated with the interpretation, enforcement or
defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to be extended to Indemnitee
hereunder. Accordingly, without limiting the generality or effect of any other
13
provision hereof, if it should appear to Indemnitee that the Company has failed to comply with
any of its obligations under this Agreement (including its obligations under Section 3) or in the
event that the Company or any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided
to Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from time to time to
retain counsel of Indemnitee’s choice, at the expense of the Company as hereafter provided, to
advise and represent Indemnitee in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company or any director, officer, shareholder or other person affiliated
with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably consents to Indemnitee’s
entering into an attorney-client relationship with such counsel, and in that connection the Company
and Indemnitee agree that a confidential relationship shall exist between Indemnitee and such
counsel. Without respect to whether Indemnitee prevails, in whole or in part, in connection with
any of the foregoing, the Company will pay and be solely financially responsible for any and all
attorneys’ and related fees and expenses incurred by Indemnitee in connection with any of the
foregoing.
21. Certain Interpretive Matters. Unless the context of this Agreement otherwise requires,
(a) “it” or “its” or words of any gender include each other gender, (b) words using the singular or
plural number also include the plural or singular number, respectively, (c) the terms “hereof,”
“herein,” “hereby” and derivative or similar words refer to this entire Agreement, (d) the terms
“Article,” “Section,” “Annex” or “Exhibit” refer to the specified Article, Section, Annex or
Exhibit of or to this Agreement, (e) the terms “include,” “includes” and “including” will be deemed
to be followed by the words “without limitation” (whether or not so expressed), and (f) the word
“or” is disjunctive but not exclusive. Whenever this Agreement refers to a number of days, such
number will refer to calendar days unless business days are specified and whenever action must be
taken (including the giving of notice or the delivery of documents) under this Agreement during a
certain period of time or by a particular date that ends or occurs on a non-business day, then such
period or date will be extended until the immediately following business day. As used herein,
“business day” means any day other than Saturday, Sunday or a United States federal holiday.
22. Counterparts. This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original but all of which together shall constitute one and the same
agreement.
[Signatures Appear On Following Page]
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IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized
representative to execute this Agreement as of the date first above written.
| BRUSH ENGINEERED MATERIALS INC. 0000 Xxxxxxxx Xxxx. Xxxxxxxx Xxx., XX 00000 |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| [INDEMNITEE] [Address] |
||||
| [Indemnitee] | ||||
15
EXHIBIT A
UNDERTAKING
UNDERTAKING
STATE OF
|
) | |||||
| ) | SS | |||||
COUNTY OF
|
) |
I, , being first duly sworn, do depose and say as follows:
1. This Undertaking is submitted pursuant to the Director Indemnification Agreement, dated
, 2 , between Brush Engineered Materials Inc., an Ohio corporation (the “Company”)
and the undersigned.
2. I am requesting payment of Expenses that I have reasonably incurred or will reasonably
incur in defending an Indemnifiable Claim referred to in the aforesaid Director Indemnification
Agreement.
3. The Expenses for which payment is requested are, in general, all expenses related to
| . | ||
4. Part Ai
I hereby undertake to (a) repay all amounts paid pursuant hereto if it is proved by clear and
convincing evidence in a court of competent jurisdiction that my action or failure to act which is
the subject of the matter described herein involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with reckless disregard for the best interests
of the Company and (b) reasonably cooperate with the Company concerning the action, suit,
proceeding or claim.
| [INDEMNITEE NAME] |
5. Part B
I hereby undertake to repay all amounts paid pursuant hereto if it ultimately is determined
that I am not entitled to be indemnified by the Company under the aforesaid Director
Indemnification Agreement or otherwise.
| [Signature of Indemnitee] |
Subscribed and sworn to before me, a Notary Public in and for said County and State, this
day of , 2 .
[Seal]
My commission expires the day of , 2 .
| i | The Indemnitee shall not be eligible to execute Part A of this Undertaking if, at the time of the Indemnitee’s act or omission at issue, the Articles or the Regulations of the Company prohibit such advances by specific reference to the Ohio Revised Code (the “ORC”) Section 1701.13(E)(5)(a), or if the only liability asserted against the Indemnitee is in an action, suit, or proceeding on the Company’s behalf pursuant to ORC Section 1701.95. In the event that the Indemnitee is eligible to and does execute both Part A and Part B hereof, the costs, charges, and expenses which are paid by the Company pursuant hereto shall be required to be repaid by the Indemnitee only if the Indemnitee is required to do so under the terms of both Part A and Part B. |
17
