INDEMNIFICATION AGREEMENT
Exhibit 10.10
This Indemnification Agreement (this “Agreement”) is made as of the 30th day of January, 2006
by and between MOD-PAC CORP., a New York corporation (the “Corporation”) and Xxxxx X. Xxxx
(“Indemnitee”), a director, officer or key employee of the Corporation.
WITNESSETH:
WHEREAS, it is essential to the Corporation to retain and attract directors, officers and key
employees who are the most capable persons available;
WHEREAS, the Indemnitee is serving or has agreed to serve as a director, officer or key
employee of the Corporation and in such capacity will render valuable services to the Corporation;
WHEREAS, the substantial increase in corporate litigation subjects directors, officers and key
employees to expensive litigation risks at the same time that the availability of directors’ and
officers’ liability insurance and fiduciary insurance has been severely limited;
WHEREAS, it is now, and has always been, the express policy of the Corporation to indemnify
its directors, officers and key employees so as to provide them with the maximum possible
protection permitted by law; and
WHEREAS, Indemnitee may not be willing to serve or to continue to serve as a director, officer
or key employee without adequate protection, and the Corporation desires Indemnitee to continue to
serve in such capacity.
NOW, THEREFORE, in consideration of the Indemnitee’s continued service as a director, officer
or key employee of the Corporation, the Corporation and Indemnitee do hereby agree as follows:
1. Agreement to Serve. Indemnitee agrees to continue to serve as a director, officer
or key employee of the Corporation for so long as he or she is duly elected or appointed or until
such time as he or she tenders his or her resignation in writing. This provision is not a
guarantee of employment.
2. Definitions. As used in this Agreement:
(a) The term “Proceeding” shall include any threatened, pending, or completed action, suit, or
proceeding, whether brought by or in the right of the Corporation or one of its subsidiaries or
otherwise, and whether of a civil, criminal, administrative, or investigative nature, in which
Indemnitee is or was a party or is threatened to be made a party by reason of the fact that
Indemnitee is or was a director, officer or employee of the Corporation (or any subsidiary of the
Corporation), or is or was serving at the request of the Corporation as a
director, officer, employee, member, manager, trustee, agent, or fiduciary of another
corporation, limited liability company, partnership, joint venture, trust, or other enterprise.
(b) The term “Expenses” shall include, without limitation, expenses of investigation, judicial
or administrative proceedings or appeals, amounts paid in settlement by or on behalf of Indemnitee,
attorneys’ fees and disbursements, experts’ fees and disbursements and any expenses of establishing
a right to indemnification under Paragraph 7 of this Agreement.
(c) References to “other enterprises” shall include employee benefit plans; references to
“fines” shall include any excise taxes assessed on Indemnitee with respect to any employee benefit
plan; references to “serving at the request of the Corporation” shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on, or involves
services by, such director, officer, employee, agent, or fiduciary with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants and beneficiaries of
an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best
interest of the Corporation” as referred to in this Agreement.
3. Indemnity in Third-Party Proceedings. The Corporation shall indemnify Indemnitee in
accordance with the provisions of this Paragraph 3, against all Expenses, judgments, fines, and
penalties actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of any Proceeding (other than a Proceeding by or in the right of the Corporation to
procure a judgment in its favor) if Indemnitee acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the Corporation, and, in the
case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was
unlawful. The termination of any such Proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that
Indemnitee did not act in good faith in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding,
that Indemnitee did not have reasonable cause to believe that his or her conduct was unlawful.
4. Indemnity in Proceedings By or In the Right of the Corporation. The Corporation
shall indemnify Indemnitee, in accordance with the provisions of this Paragraph 4, against all
Expenses actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of any Proceeding by or in the right of the Corporation to procure a judgment in its
favor, including the amount of the judgment or settlement, if Indemnitee acted in good faith and in
a manner which he or she reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification for Expenses shall be made under this
Paragraph 4 in respect of any claim, issue, or matter as to which Indemnitee shall have been
adjudged to be liable to the Corporation unless and only to the extent that the court in which such
Proceeding was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for the Expenses and the amount of the judgment or settlement which the court shall
deem proper.
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5. Indemnification of Expenses of Successful Party. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise, in defense of any Proceeding, or in defense of any claim, issue, or matter therein,
Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee
in connection therewith to the fullest extent permitted by New York Law.
6. Advances of Expenses. At the written request of Indemnitee, the Expenses actually
and reasonably incurred by Indemnitee in any Proceeding shall be paid by the Corporation in advance
of the final disposition of such Proceeding and within 30 days after request therefor. Indemnitee
will repay any such Expenses that are advanced under this Paragraph 6 if it is ultimately
determined, in a final, non-appealable judgment rendered by the court of last resort (or by a lower
court if not timely appealed), that Indemnitee is not entitled to be indemnified against such
Expenses. This undertaking by Indemnitee is an unlimited general undertaking but no security for
such undertaking will be required. If the Corporation makes an advance of expenses pursuant to this
Paragraph 6, the Corporation shall be subrogated to every right of recovery Indemnitee may have
against any insurance carrier from whom the Corporation has purchased insurance for such purpose.
7. Right of Indemnitee to Indemnification Upon Application; Procedure Upon
Application.
(a) Subject to Paragraph 8 of this Agreement, Indemnitee will be presumed to be entitled to
indemnification under this Agreement. The burden of proving that indemnification or advances of
Expenses are not appropriate shall be on the Corporation.
(b) Any indemnification under Paragraphs 3 and 4 (other than the advancement of Expenses)
shall be paid by the Corporation no later than 30 days after receipt of the written request of
Indemnitee, unless a determination is made within the 30-day period by (i) the Board of Directors
by a majority vote of directors who are not and were not parties to the Proceeding in respect of
which indemnification is being sought (“Disinterested Directors”), (ii) a committee of the Board of
Directors comprised of Disinterested Directors or (iii) independent legal counsel in a written
opinion (which counsel shall be appointed by a vote of the Disinterested Directors), that
Indemnitee has not met the relevant standards for indemnification set forth in Paragraphs 3 and 4.
If requested by the Indemnitee in writing, any such determination shall be made by independent
legal counsel not previously employed by the Corporation or any Affiliate thereof (“Affiliate”
having the meaning defined in Rule 144 promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended).
(c) Indemnitee will be entitled to a hearing before the Board of Directors of Corporation or
the Disinterested Directors and/or any other person or persons making a determination and
evaluation under Paragraph 7(b). Indemnitee will be entitled to be represented
by counsel at such hearing. The cost of any determination and evaluation under Paragraph 7(b)
(including attorneys’ fees and other expenses incurred by Indemnitee in preparing for and attending
the hearing contemplated by Paragraph 7 and otherwise in connection with the determination and
evaluation under Paragraph 7) will be borne by the Corporation.
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(d) The right to indemnification or advancement of Expenses as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of
the Corporation (including its Board of Directors or independent legal counsel) to have made a
determination prior to the commencement of such action that Indemnitee has met the applicable
standard of conduct nor an actual determination by the Corporation (including its Board of
Directors or independent legal counsel) that Indemnitee has not met such standard shall be a
defense to the action or create a presumption that Indemnitee has not met the applicable standard
of conduct. Indemnitee’s Expenses actually and reasonably incurred in connection with successfully
establishing his or her right to indemnification or advances, in whole or in part, shall also be
indemnified by the Corporation.
(e) With respect to any Proceeding for which indemnification is requested, the Corporation
will be entitled to participate therein at its own expense and, except as otherwise provided below,
the Corporation may assume the defense thereof, with counsel satisfactory to Indemnitee. After
notice from the Corporation to Indemnitee of its election to assume the defense of a Proceeding,
the Corporation will not be liable to Indemnitee under this Agreement for any Expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than as provided below. The
Corporation shall not settle any Proceeding in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee’s written consent. Indemnitee shall have the right to
employ counsel in any Proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense of the Proceeding shall be at the expense of
Indemnitee, unless (i) the employment of counsel by Indemnitee has been authorized by the
Corporation, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Indemnitee in the conduct of the defense of a Proceeding, or
(iii) the Corporation shall not in fact have employed counsel to assume the defense of a
Proceeding, in each of which cases the fees and expenses of Indemnitee ‘s counsel shall be advanced
by the Corporation. Notwithstanding the foregoing, the Corporation shall not be entitled to assume
the defense of any Proceeding brought by or in the right of the Corporation.
(f) The Corporation shall pay to Indemnitee, at the time payments are made to Indemnitee for
Expenses, judgments, fines or penalties pursuant to this Agreement, an additional payment (the
“Gross Up Amount”) such that after payment of all taxes, if any, on payments so made, including the
amount of the Gross Up Amount, Indemnitee retains an amount equal to the amount to be received.
8. Limitation on Indemnification. No payment pursuant to this Agreement shall be made
by the Corporation:
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(a) to indemnify or advance funds to Indemnitee for Expenses with respect to Proceedings
initiated or brought or joined in voluntarily by Indemnitee and not by way of defense, except with
respect to Proceedings brought to establish or enforce a right to indemnification or advancement of
Expenses under this Agreement or as otherwise required by New York law, but such indemnification or
advancement of Expenses may be provided by the Corporation in specific cases if the Board of
Directors finds it to be appropriate;
(b) to indemnify Indemnitee for any Expenses, judgments, fines or penalties sustained in any
Proceeding for which payment is actually made to Indemnitee under a valid and collectible insurance
policy, except in respect of any excess beyond the amount of payment under such insurance;
(c) to indemnify Indemnitee for any Expenses, judgments, fines or penalties sustained in any
Proceeding for an accounting of profits made from the purchase or sale by Indemnitee of securities
of the Corporation pursuant to the provisions of § 16(b) of the Securities Exchange Act of 1934,
the rules and regulations promulgated thereunder and amendments thereto or similar provisions of
any federal, state, or local statutory law; or
(d) if a court of competent jurisdiction finally determines that such payment hereunder is
unlawful.
9. 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 the Certificate of Incorporation or the By-Laws of the
Corporation, any agreement, any vote of stockholders or disinterested Directors, the Business
Corporation Law of the State of New York, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. To the extent the provisions of
this Agreement conflict with the provisions regarding indemnification and advancement of Expenses
in the By-Laws of the Corporation, this Agreement will control. The indemnification provided by
this Agreement shall continue as to Indemnitee even though he or she may have ceased to be a
director, officer or key employee and shall inure to the benefit of the heirs and personal
representatives of Indemnitee.
10. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Corporation for a portion of the Expenses, judgments, fines or
penalties actually and reasonably incurred by him or her in any Proceeding but not, however, for
the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion
of such Expenses, judgments, fines or penalties to which Indemnitee is entitled.
11. Indemnification of Indemnitee’s Estate. Notwithstanding any other provision of
this Agreement, and regardless whether indemnification of the Indemnitee would be permitted and/or
required under this Agreement, if the Indemnitee is deceased, the Corporation shall indemnify and
hold harmless the Indemnitee’s estate, spouse, heirs, administrators, personal representatives and
executors (collectively the “Indemnitee’s Estate”) against, and the Corporation shall assume, any
and all claims, damages, Expenses, penalties, judgments and fines
actually incurred by the Indemnitee or the Indemnitee’s Estate in connection with the
investigation, defense, settlement or appeal of any Proceeding. Indemnification of the
Indemnitee’s Estate pursuant to this Section 11 shall be mandatory and not require any
determination or finding that the Indemnitee’s conduct satisfied a particular standard of conduct.
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12. Spousal Indemnification. The indemnifications, benefits and obligations of this
Agreement shall extend to the spouse of an Indemnitee in the event that the spouse is made a party
to a Proceeding or collection, execution or enforcement efforts arising from a Proceeding.
13. Limitation of Actions and Release of Claims. No proceeding shall be brought and
no cause of action shall be asserted by or on behalf of the Corporation or any subsidiary against
the Indemnitee, his or her spouse, heirs, estate, executors or administrators after the expiration
of one year from the act or omission of the Indemnitee upon which such proceeding is based;
however, in a case where the Indemnitee fraudulently conceals the facts underlying such cause of
action, no proceeding shall be brought and no cause of action shall be asserted after the
expiration of one year from the earlier of (i) the date the Corporation or any subsidiary of the
Corporation discovers such facts, or (ii) the date the Corporation or any subsidiary of the
Corporation could have discovered such facts by the exercise of reasonable diligence. Any claim or
cause of action of the Corporation or any subsidiary of the Corporation, including claims
predicated upon the act or omission of the Indemnitee, shall be extinguished and deemed released
unless asserted by filing of a legal action within such period. This section shall not apply to
any cause of action which has accrued on the date hereof and of which the indemnitee is aware on
the date hereof, but as to which the Corporation has no actual knowledge apart from the
Indemnitee’s knowledge.
14. Maintenance of Liability Insurance.
(a) The Corporation hereby covenants and agrees that, as long as Indemnitee continues to serve
as a director, officer or key employee of the Corporation and thereafter as long as Indemnitee may
be subject to any Proceeding, the Corporation, subject to subsection (c) below, shall maintain in
full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable
amounts from established and reputable insurers.
(b) In all D&O Insurance policies, Indemnitee shall be named as an insured in such a manner as
to provide the Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Corporation’s directors and officers.
(c) Notwithstanding the foregoing, the Corporation shall have no obligation to obtain or
maintain D&O Insurance if the Corporation determines in good faith that such insurance is not
reasonably available, the premium costs for such insurance are disproportionate to the amount of
coverage provided, the coverage provided by such insurance is so limited by exclusions that it
provides an insufficient benefit, or Indemnitee is covered by similar insurance maintained by a
subsidiary of the Corporation.
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15. Savings Clause. If this Agreement or any portion hereof is invalidated on any
ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify
Indemnitee to the extent permitted by any applicable portion of this Agreement that has not been
invalidated or by any other applicable law.
16. Notice. Indemnitee shall, as a condition precedent to his or her right to be
indemnified under this Agreement, give to the Corporation notice in writing as soon as practicable
of any Proceeding for which indemnity will or could be sought under this Agreement. Notice to the
Corporation shall be directed to MOD-PAC CORP., 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000-0000,
Attention: Corporate Secretary (or such other address as the Corporation shall designate in
writing to Indemnitee). Notice shall be deemed received three days after the date postmarked if
sent by prepaid mail, properly addressed. In addition, Indemnitee shall give the Corporation such
information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.
17. Counterparts. This Agreement may be executed in any number of counterparts, all of
which shall be deemed to constitute one and the same instrument.
18. Applicable Law. This Agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York
19. Successors and Assigns. This Agreement shall be binding upon the Corporation and
its successors and assigns.
20. Amendments. No amendment, waiver, modification, termination, or cancellation of
this Agreement shall be effective unless in writing signed by both parties hereto. The
indemnification rights afforded to Indemnitee hereby are contract rights and may not be diminished,
eliminated, or otherwise affected by amendments to the Certificate of Incorporation or Bylaws of
the Corporation or by other agreements.
21. Cessation of Employment. The benefits of this Agreement shall extend to and
include officers, directors and key employees of the Corporation who retire or cease their
employment with the Corporation.
22. Prior Agreements. This Agreement replaces and supersedes all prior agreements
dealing with the same subject matter as this Agreement.
23. Cooperation and Interest. The Corporation shall cooperate in good faith with the
Indemnitee and use its best efforts to ensure that the Indemnitee is indemnified and/or reimbursed
for liabilities described in this Agreement to the fullest extent permitted by law.
24. Effective Date. The provisions of this Agreement shall cover claims, actions,
suits and proceedings, whether now pending or hereafter commenced, and shall be retroactive to
cover acts or omissions or alleged acts or omissions which heretofore have taken place.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
signed as of the day and year first above written.
| Attest: | MOD-PAC CORP. | |||
/s/ Xxxx X. Xxxxxxxx
|
By: | /s/ Xxxxxx X. Xxxxx | ||
Xxxx X. Xxxxxxxx Secretary |
Xxxxxx X. Xxxxx President & CEO |
|||
| /s/ Xxxxx X. Xxxx | ||||
| Xxxxx X. Xxxx | ||||
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