INDEMNITY AGREEMENT AND RELEASE
THIS AGREEMENT is made and entered into this 21st day of April, 2000 by
and between AMERICAN EDUCATIONAL PRODUCTS, INC., a Colorado corporation, (the
"Corporation") and XXXXXXX X. XXXXXXXXXXX ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation; and
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") and provisions of the Articles of Incorporation, as amended, (the
"Articles") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, as authorized by the Colorado
Business Corporation Act, as amended (the "Code"); and
WHEREAS, the Articles, Bylaws and the Code, by their non-exclusive
nature, permit contracts between the Corporation and its agents, officers,
employees and other agents with respect to indemnification of such persons;
and
WHEREAS, the controlling and majority shareholder of the Corporation has
proposed that the Corporation's Board of Directors be reconstituted in order
that representatives of such shareholder comprise a majority of the members of
the Corporation's Board of Directors; and
WHEREAS, Agent has agreed to voluntarily resign as a director of the
Corporation; and
WHEREAS, the Corporation has agreed to pay to Agent a stipend as
hereinbelow set forth in consideration of the Agent's release of the
Corporation and agreement to voluntarily resign as a member of the
Corporation's Board of Directors.
NOW, THEREFORE, in consideration of mutual covenants and agreements
hereinbelow set forth, the parties hereto agree as follows:
AGREEMENT
1. RESIGNATION. Effective upon the execution of this Agreement and the
performance of the covenants herein contained, Agent shall be deemed to have
resigned as a director of the Corporation and resigned any other positions
that Agent may have had with the Corporation or its subsidiaries or affiliates
as an officer, employee or other agent.
2. CONSIDERATION. In consideration of Agent's release of the
Corporation contained in Paragraph 5 hereof and Agent's agreement to
voluntarily terminate his position as a director of the Corporation, the
Corporation agrees to pay to Agent, concurrently with the execution of this
Agreement, a one-time resignation stipend in the amount of $29,000.
3. MUTUAL GENERAL RELEASES. In consideration of the mutual covenants
and agreements herein contained, the receipt and sufficiency whereof are
hereby acknowledged, the Corporation, for itself, its officers, directors,
agents, affiliates, subsidiaries, successors and assigns (hereafter
collectively the "Corporation Releasors"), on the one hand, and Agent, for
himself, his heirs, personal representatives, successors and assigns (the
"Agent Releasors"), on the other, each hereby release, acquit and forever
discharge the other, from and against any claim, demand, action, suit, debt,
obligation or liability of whatsoever kind or description, whether civil,
criminal, arbitrational or administrative, at law or in equity, known or
unknown, direct or indirect, arising from any transaction, fact or occurrence
from the beginning of time to the date of this Agreement, to the full extent
permissible under Colorado law and consistent with the guidance of the U.S.
Securities and Exchange Commission regarding the permissible scope of the
release and indemnification under the U.S. securities laws, as applicable.
4. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Articles, Bylaws and the Code, as the same may be amended
from time to time (but, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than the Bylaws or the
Code permitted prior to adoption of such amendment) and consistent with the
guidance of the U.S. Securities and Exchange Commission regarding the
permissible scope of the release and indemnification under the U.S. securities
laws, as applicable.
5. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth herein, the Corporation hereby further agrees to hold
harmless and indemnify Agent:
(a) Against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is or was at
any time a director, officer, employee or other agent of the Corporation; and
(b) Against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of Agent's resignation as a director
of the Corporation and/or his execution, delivery and performance of this
Agreement and the covenants contained herein; and
(c) Otherwise to the fullest extent legally permissible as may be
provided to Agent by the Corporation under the non-exclusivity provisions of
the Code, Articles and Bylaws.
6. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 5 hereof shall be paid by the Corporation:
(a) On account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) On account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) For which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement; or
(d) If indemnification is not lawful under the Code or any other
applicable law (and, in this respect, both the Corporation and Agent have been
advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities laws is
against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication).
7. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation and shall
continue thereafter so long as Agent shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the
fact that Agent was serving in the capacity referred to herein.
8. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
for which indemnification is legally permissible (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay in connection with
any action, suit or proceeding referred to in Section 5 hereof even if not
entitled hereunder to indemnification for the total amount thereof, and the
Corporation shall indemnify Agent for the portion thereof, for which
indemnification is legally permissible, to which Agent is entitled.
9. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent otherwise than under
this Agreement, to the extent such delay shall not have prejudicial defense of
the action, suit or proceeding. With respect to any such action, suit or
proceeding as to which Agent notifies the Corporation of the commencement
thereof:
(a) The Corporation will be entitled to participate therein at its
own expense;
(b) Except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent
of its election to assume the defense thereof, the Corporation will not be
liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except
for reasonable costs of investigation or otherwise as provided below in any
matter for which indemnification hereunder shall be legally permissible.
Agent shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Agent unless (i) the employment of counsel by Agent has been
authorized by the Corporation, (ii) Agent shall have reasonably concluded that
there may be a conflict of interest between the Corporation and Agent in the
conduct of the defense of such action but only to the extent of such conflict
of interest, or (iii) the Corporation shall not in fact have employed counsel
to assume the defense of such action, in each of which cases the fees and
expenses of Agent's separate counsel shall be at the expense of the
Corporation; and
(c) The Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably
withheld. The Corporation shall be permitted to settle any action except that
it shall not settle any action or claim in any manner which would impose any
penalty or limitation on Agent, for which the Corporation is not fully
responsible, without Agent's written consent, which shall not be unreasonably
withheld.
10. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by or on behalf of Agent in connection with such proceeding
and this section constitutes an undertaking by Agent to repay said amounts if
it shall be determined ultimately that Agent is not entitled to be indemnified
under the provisions of this Agreement, the Bylaws, the Code or otherwise.
11. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim
is made within ninety (90) days of request therefor after all proceedings on a
matter for which the Corporation has undertaken the defense have been
terminated. Agent, in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the ratable portion of the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Paragraph 5 hereof that Agent is not
entitled to indemnification because of the limitations set forth in Paragraph
6 hereof or the requirements of applicable law. Neither the failure of the
Corporation (including its Board of Directors or its stockholders) to have
made a determination prior to the commencement of such enforcement action that
indemnification of Agent is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a complete
defense to the action or create a presumption that Agent is not entitled to
indemnification under this Agreement or otherwise.
12. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
the Corporation effectively to bring suit to enforce such rights.
13. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Articles
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
14. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall continue
as provided for in Paragraph 7 hereof.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
15. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity
or unenforceability shall not affect the validity or enforceability of the
other provisions hereof. Furthermore, if this Agreement shall be invalidated
in its entirety on any ground, then the Corporation shall nevertheless
indemnify Agent to the fullest extent provided by the Bylaws and consistent
with the Code and any other applicable law.
16. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Colorado.
17. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed
by both parties hereto.
18. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the
existence of this Agreement.
19. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
20. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with
postage prepaid:
If to Corporation, to: American Educational Products, Inc.
Attention: President and Chief Financial
Officer
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
If to Agent, to: Xxxxxxx X. Xxxxxxxxxxx
The Rockies Fund, Inc.
0000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
or to such other address as may have been furnished to Agent by the
Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
CORPORATION: AMERICAN EDUCATIONAL PRODUCTS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx
AGENT:
/s/ Xxxxxxx X. Xxxxxxxxxxx
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XXXXXXX X. XXXXXXXXXXX
