ELCOM INTERNATIONAL, INC. INDEMNIFICATION AGREEMENT FOR INTERNAL REVENUE CODE SECTION 409A
Exhibit 10.2
ELCOM INTERNATIONAL, INC.
INTERNAL REVENUE CODE SECTION 409A
THIS INDEMNIFICATION AGREEMENT FOR INTERNAL REVENUE CODE SECTION 409A (this “Agreement”) is
made and entered into effective as of
the ___ day of
_____________ , 2006, by and between ELCOM
INTERNATIONAL, INC., a Delaware corporation (the
“Corporation”), and ___________ (“Indemnitee”),
an officer of the Corporation.
WHEREAS: The Corporation and Indemnitee entered into that certain Agreement to Repay Accrued
Salary, effective as of
_________ (the “Repayment Agreement”), in order to establish the
terms by which the Corporation would re-pay Indemnitee all suspended and deferred base salary and
other amounts owed to Indemnitee as of the date of the Repayment Agreement.
WHEREAS: The Corporation and Indemnitee are concerned about the potential taxes, interest
and/or penalties that may be assessed against Indemnitee in connection with the Repayment
Agreement as a result of the recently enacted American Jobs Creation Act, and more specifically
Internal Revenue Code section 409A (“Section 409A”), which prescribes very strict rules for
compensation deferred under “nonqualified deferred compensation plans,” as defined therein.
WHEREAS: Because of (i) the broad definition of “nonqualified deferred compensation plan”
contained in Section 409A, (ii) the harsh penalties that may apply to participants, such as
Indemnitee, if a plan fails to comply with Section 409A, (iii) the difficulty and cost involved
with amending the Repayment Agreement to attempt to bring it into compliance with Section 409A,
(iv) the fact that Indemnitee voluntarily agreed to defer his compensation for an extended period
of time until the Corporation could more readily afford to repay such compensation and also
voluntarily agreed not to earn any rate of return on such deferred amounts; and (v) the
Corporation’s need to retain and reward Indemnitee and other highly competent executives for
positions of substantial responsibility, the Corporation’s Board of Directors (the “Board”) has
determined that it is in the best interests of the Corporation to enter into this Agreement,
whereby the Corporation shall indemnify Indemnitee for all taxes, penalties, interest and fees
assessed by and otherwise owed to the United States Internal Revenue Service (the “IRS”) or other
taxing authorities (hereafter “Taxes”) in connection with the Repayment Agreement as a result of
Section 409A and all legal fees related to same.
NOW, THEREFORE, for good and valuable consideration, the adequacy of which is hereby
acknowledged, the Corporation and Indemnitee do hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) The term “Proceeding” shall include any threatened, pending, or completed action,
suit, arbitration or proceeding, whether or not brought by or in the right of the IRS or any
other taxing authority, and whether of a civil, criminal, administrative
or investigative nature, against Indemnitee in connection with the Repayment Agreement,
involving or otherwise as a result of Section 409A.
(b) The term “Expenses” shall include, without limitation, expenses of investigations,
judicial or administrative proceedings or appeals, reasonable attorneys’ fees and
disbursements and any and all personal or other expenses (including attorney’s fees) of
enforcing any rights under this Agreement.
(c) The term “Penalties and Fees” shall include all taxes, fines, penalties, interest
and fees assessed by or otherwise owed to the IRS or other taxing authorities in connection
with the Repayment Agreement involving or otherwise as a result of Section 409A, but shall
not include income or other taxes (and related fines, penalties, interest and fees) that do
not arise out of 409A.
2. Indemnity in Third-Party Proceedings. The Corporation shall indemnify Indemnitee
and shall hold Indemnitee harmless from and against all Expenses, Penalties and Fees, incurred by
Indemnitee promptly following request therefor from Indemnitee in accordance with the provisions of
this Agreement, including if Indemnitee is a party to or threatened to be made a party to or
otherwise involved in any Proceeding, whether before or after the date of this Agreement.
3. Procedure. Any and all indemnification and advances provided for in this Agreement
shall be made no later than twenty (20) days after receipt of the written request of Indemnitee.
If a claim under this Agreement providing for indemnification, is not paid in full by the
Corporation within twenty (20) days after a written request for payment thereof has first been
received by the Corporation, Indemnitee may, but need not, at any time thereafter, bring an action
against the Corporation to recover the unpaid amount of the claim and, subject to the other
provisions of this Agreement, Indemnitee shall also be entitled to be paid for all of the Expenses
of bringing such action.
4. Non Exclusive Indemnification. The indemnification 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, as the same may be amended, any
agreement, any vote of stockholders or disinterested directors, the Delaware General Corporation
Law, or otherwise.
The indemnification provided for in this Agreement shall continue as to Indemnitee even though
he or she may have ceased to be a director and/or officer and shall inure to the benefit of the
heirs, executors and personal representatives of Indemnitee.
5. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Corporation for some or a portion of Expenses, Penalties and
Fees incurred by Indemnitee or amounts paid by Indemnitee in the investigation, defense, appeal or
settlement of any Proceeding, but not for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such, Expenses, Penalties and Fees, judgments
or amounts paid in settlement to which Indemnitee is entitled.
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6. No Rights of Continued Employment. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment by the Corporation.
7. Reimbursement to Corporation by Indemnitee; Limitation on Amounts Paid by
Corporation. To the extent Indemnitee has been indemnified by the Corporation hereunder and
later receives payments from any insurance carrier covering the same Expenses, Penalties and/or
Fees, judgments or amounts paid in settlement so indemnified by the Corporation hereunder,
Indemnitee shall, within ten (10) days of the actual receipt of such payments, reimburse the
Corporation hereunder for all such amounts received from the insurer.
Notwithstanding anything contained herein to the contrary, Indemnitee shall not be entitled to
recover amounts under this Agreement which, in the aggregate, exceed the Expenses, Penalties and
Fees, judgments and/or amounts paid in settlement actually incurred by Indemnitee (“Excess
Amounts”). To the extent the Corporation has paid Excess Amounts to Indemnitee, Indemnitee shall
be obligated to reimburse the Corporation for such Excess Amounts.
Notwithstanding anything contained herein to the contrary, the Corporation shall not be
obligated under the terms of this Agreement, to indemnify Indemnitee:
(a) for any Expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee in such proceeding was not made in good
faith or was frivolous; or
(e) for any judgment, fine or penalty which the Corporation is prohibited by applicable law
from paying as indemnity or for any other reason.
8. Jurisdiction and Venue. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be brought against any of the parties
exclusively in the courts of the State of Massachusetts, County of Norfolk, or, if it has or can
acquire jurisdiction, in the United States District Court of Massachusetts, and each of the parties
consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding, and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any party anywhere in
the world. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO A TRIAL BY JURY IN ANY SUIT,
ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
9. Amendment and Modification. This Agreement may only be amended, modified or
supplemented by the written agreement of the Corporation and Indemnitee.
10. Assignment. This Agreement shall not be assigned by the Corporation or Indemnitee
without the prior written consent of the other party thereto. Subject to the foregoing, this
Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, including, without
limitation, any successor to the Corporation by way of merger, consolidation and/or, if agreed by
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Indemnitee, following the sale or disposition of all or substantially all of the capital stock of
the Corporation.
11. Saving Clause. If this Agreement or any portion thereof shall be invalidated on
any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify
Indemnitee as to Expenses, Penalties and Fees, judgments and amounts paid in settlement to the full
extent permitted by any applicable portion of this Agreement that shall not have been invalidated
or by any other applicable law.
12. Counterparts. This Agreement may be executed in two or more fully or partially
executed counterparts each of which shall be deemed an original binding the signer thereof against
the other signing parties, but all counterparts together shall constitute one and the same
instrument. Executed signature pages may be removed from counterpart agreements and attached to
one or more fully executed copies of this Agreement. The parties may execute and deliver this
Agreement by facsimile signature, which shall have the same binding effect as an original ink
signature.
13. Notice and Information. Indemnitee shall give to the Corporation notice in
writing as soon as reasonably practicable of any claim made against him or her for which indemnity
will or could be sought under this Agreement. Notice to the Corporation shall be directed to the
Corporation at 00 Xxxxxx Xxx, Xxxxxxx, Xxxxxxxxxxxxx, 00000 Attention: Chief Financial Officer (or
such other address as the Corporation shall designate in writing to Indemnitee). Notice to the
Indemnitee shall be directed
to _______________ (or such other address as Indemnitee shall
designate in writing to the Corporation). Failure to give such notification shall not effect the
indemnification provided hereunder except and only to the extent the Corporation shall have been
actually prejudiced as a result of such failure. Notice shall be deemed received three (3) 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 within
Indemnitee’s power.
14. Applicable Law. All matters with respect to this Agreement, including, without
limitation, matters of validity, construction, effect and performance shall be governed by the
internal laws of the State of Delaware applicable to contracts made and to be performed therein
between the residents thereof (regardless of the laws that might otherwise be applicable under
principles of conflicts of law).
[Signature Page to Follow.]
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly executed and
signed as of the day and year first above written.
| THE CORPORATION: | ||||||
| ELCOM INTERNATIONAL, INC. | ||||||
| By: | ||||||
| Its: | ||||||
| INDEMNITEE: | ||||||
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