EXHIBIT 10.23
INDEMNIFICATION AGREEMENT
AGREEMENT between Xxxxxx Industries, Ltd., a Bermuda Company (the
"Company"), and _________________________ (the "Indemnitee").
WHEREAS, Xxxxxx Industries, Inc. ("Xxxxxx Ohio") has decided to
reorganize and effectively change its legal domicile from Ohio to Bermuda (the
"Reorganization");
WHEREAS, the Reorganization was accomplished pursuant to, among other
things, the Merger Agreement, dated as of June 11, 2001 (the "Merger
Agreement"), among the Company, a newly formed Bermuda corporation that became
the publicly traded parent holding company for the reorganization ("Xxxxxx
Bermuda"), Xxxxxx Ohio and Xxxxxx Mergerco, Inc. ("Merger Sub");
WHEREAS, pursuant to the Merger Agreement (i) Merger Sub merged into
Xxxxxx Ohio (the "Merger"), with Xxxxxx Ohio being the surviving company in the
Merger and becoming a wholly-owned, indirect subsidiary of the Company, and (ii)
each outstanding share of Xxxxxx Ohio common stock, par value $5.00 per share,
automatically became a Class A common share, par value U.S. $.01 per share of
the Company;
WHEREAS, each of the directors of Xxxxxx Ohio and substantially all of
the executive officers of Xxxxxx Ohio became the directors and executive
officers of the Company;
WHEREAS, it is essential to the Company to retain the current directors
and executive officers of Xxxxxx Ohio who became the directors and executive
officers of Xxxxxx Bermuda and to retain other key executives of Xxxxxx Ohio and
its subsidiaries;
WHEREAS, the Bye-laws of the Company provide that the indemnification
provided therein shall not be exclusive;
WHEREAS, the Company wishes to provide the directors, executive
officers and other key executives of Xxxxxx Ohio with substantially the same
indemnification such person currently has from Xxxxxx Ohio;
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions:
(a) Change in Control: shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
-1-
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 15%
or more of the total voting power represented by the Company's then outstanding
Voting Securities without the prior approval of the Board of Directors, or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets. For purposes of determining whether
clause (ii) above has been complied with, the directors of Xxxxxx Ohio on the
effective date of the Merger shall be included in the determination of who the
directors of Xxxxxx Bermuda were during the relevant two year period until the
second anniversary of the effective date of the Merger.
(b) Claim: any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company or
any other party, that Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal) or
preparing to defend, be a witness in or participate in, any Claim relating to
any Indemnifiable Event (including all interest, assessments and other charges
paid or payable in connection with or in respect of any of the foregoing).
(d) Judgments: include judgments, fines, penalties and amounts
paid in settlement that are paid or payable in connection with any Claim
relating to any Indemnifiable Event (including all interest, assessments and
other charges paid or payable in connection with or in respect of any of the
foregoing).
(e) Indemnifiable Event: any event or occurrence related to the
fact that Indemnitee is or was a director, officer or representative of the
Company, or is or was serving at the request of the Company in accordance with
the Company's "Code of Ethics and Business Conduct," as a director, trustee,
officer, employee, agent or representative of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, employee benefit
plan, trust or other enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity, except for any actions
-2-
by Indemnitee determined by a court to constitute fraud or dishonesty in the
performance of his or her duties to the Company.
(f) Reviewing Party: any appropriate person or body consisting of
a member or members of the Company's Board of Directors or any other person or
body appointed by the Board (including the special, independent counsel referred
to in Section 3) who is not a party to the particular Claim for which Indemnitee
is seeking indemnification.
(g) Voting Securities: any securities of the Company that vote
generally in the election of directors, but does not include the Class B common
shares, par value U.S. $.01 per share, of the Company.
2. Scope of Indemnification
(a) Indemnification of Judgments and Expenses. In the event
Indemnitee was, is or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, a Claim
by reason of (or arising in part out of) an Indemnifiable Event, the Company
shall indemnify Indemnitee to the fullest extent permitted by law against any
and all Expenses and Judgments arising from or relating to such Claim. Except as
otherwise provided in Section 2(b), such indemnification shall be made as soon
as practicable, but in any event not later than thirty (30) days, after written
demand therefor is presented to the Company by or on behalf of the Indemnitee.
(b) Indemnification and Advance Payment of Expenses. Any and all
Expenses indemnifiable under Sections 2(a) and 2(c) shall be paid by the Company
promptly as they are incurred by Indemnitee (any such payment of expenses by the
Company is hereinafter referred to as an "Expense Advance"). Indemnitee shall be
obligated, and hereby agrees, to repay the amount of Expenses so paid only to
the extent that Indemnitee shall have been adjudged by the Supreme Court in
Bermuda or the court in which such action or suit was brought to be liable for
fraud or dishonesty in the performance of his or her duty to the Company.
Indemnitee hereby further agrees to reasonably cooperate with the Company
concerning any Claim.
(c) Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee to the fullest extent permitted by law
against any and all expenses (including attorneys' fees) that are incurred by
Indemnitee in connection with any claim asserted against or action brought by
Indemnitee for (i) indemnification of Expenses or Judgments or advance payment
of Expenses by the Company under this Agreement or under any other agreement,
the Company's Bye-laws, statute or rule of law now or hereafter in effect
relating to Claims for Indemnifiable Events and/or (ii) recovery under any
directors' and officers' liability insurance policy or policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance Expense payment or insurance recovery,
as the case may be.
-3-
(d) Partial Indemnity. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Judgments and Expenses arising from or relating to a Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled.
(e) Indemnification of Successful Defense Expenses.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to an Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
3. Reviewing Party Determinations.
(a) General Rules. The Reviewing Party, in its discretion, may
review the rights of Indemnitee to indemnity payments under this Agreement.
Notwithstanding the provisions of Section 2, the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which the
special, independent counsel referred to in Section 4 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law;
provided, however, that if Indemnitee has commenced, or thereafter commences,
legal proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee should be indemnified under applicable law, any determination
made by the Reviewing Party that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed) and any such determination by the
Reviewing Party shall be modified, to the extent necessary, to conform to such
final judicial determination.
(b) Selection of Reviewing Party. If there has not been a Change
in Control, the Reviewing Party shall be selected by the Board of Directors as
soon as practicable after notice of a claim for indemnification. If there has
been such a Change in Control, the Reviewing Party shall be the special,
independent counsel referred to in Section 4 hereof.
(c) Judicial Review. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantially would not be permitted to be indemnified in whole or in part under
applicable law, Indemnitee shall have the right to commence litigation in any
court having subject matter jurisdiction thereof seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(d) Burden of Proof. In connection with any determination by the
Reviewing Party pursuant to Section 3(a), or by a court of competent
jurisdiction pursuant to Section 3(c) or otherwise, as to whether Indemnitee is
entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish by clear and convincing evidence that Indemnitee is not so
entitled.
-4-
4. Change in Control. The Company agrees that if there is a
Change in Control of the Company then with respect to all matters thereafter
arising concerning the rights of Indemnitee to indemnity payments under this
Agreement or under any other agreement, the Company's Bye-laws, statute or rule
of law now or hereafter in effect relating to Claims for Indemnifiable Events,
the Company shall seek legal advice only from special, independent counsel
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and who has not otherwise performed services for the
Company or Indemnitee within the last five years (other than in connection with
such matters). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of the special, independent counsel
referred to above and to indemnify fully such counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
5. No Presumption. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee failed to meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by the Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law shall be a defense to Indemnitee's
claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief.
6. Non-exclusivity. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may now or hereafter have to
indemnification by the Company. More specifically, the Parties intend that
Indemnitee shall be entitled to indemnification to the maximum extent permitted
by any or all of the following:
(a) The fullest benefits provided by the Company's Bye-laws in
effect on the date hereof, a copy of the relevant portions of which are
attached hereto as Exhibit II;
(b) The fullest benefits provided by the Bye-laws or their
equivalent of the Company in effect at the time the Indemnifiable Event
occurs or at the time Expenses are incurred by Indemnitee;
(c) The fullest benefits allowable under Bermuda law in effect
at the date hereof or as the same may be amended to the extent that
such benefits are increased thereby;
-5-
(d) The fullest benefits allowable under the law of the
jurisdiction under which the Company exists at the time the
Indemnifiable Event occurs or at the time Expenses are incurred by the
Indemnitee; and
(e) Such other benefits as are or may be otherwise available
to Indemnitee pursuant to this Agreement, any other agreement or
otherwise.
The parties intend that a combination of two or more of the benefits
referred to in (a) through (e) shall be available to Indemnitee to the extent
that the document or law providing for such benefits does not require that the
benefits provided therein be exclusive of other benefits. The Company hereby
undertakes to use its best efforts to assist Indemnitee, in all proper and legal
ways, to obtain all such benefits to which Indemnitee is entitled.
7. Liability Insurance. The rights of the Indemnitee hereunder
shall also be in addition to any other rights Indemnitee may now or hereafter
have under policies of insurance maintained by the Company or otherwise. To the
extent the Company maintains an insurance policy or policies providing
directors' and officers' liability insurance, Indemnitee shall be covered by
such policy or policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any Company director, officer or
representative. The parties hereby acknowledge that the Company presently
maintains an aggregate of $100 million of directors' and officers' liability
insurance.
The Company shall maintain insurance coverage in the amount of the
present policy limits and with the present scope of coverage for so long as
Indemnitee's services are covered hereunder, provided and to the extent that
such insurance is available on a basis acceptable to the Company. In the event
that such insurance becomes unavailable in the amount of the present policy
limits or in the present scope of coverage at premium costs and on other terms
acceptable to the Company, then the Company may forego maintenance of all or a
portion of such insurance coverage. However, in the event of any reduction in
(or cancellation of) such insurance coverage (whether voluntary or involuntary),
the Company shall, and hereby agrees to, stand as a self-insurer with respect to
the coverage, or portion thereof, not retained, and shall indemnify the
Indemnitee against any loss arising out of the reduction in or cancellation of
such insurance coverage.
8. Escrow Fund. As collateral security for its obligations
hereunder (including specifically its indemnity obligations (other than
Judgments) and other obligations pursuant to Sections 2, 6 and 7) and under
similar agreements with other directors, officers and representatives, in the
event of a Change in Control, the Company shall dedicate and maintain, for a
period of five years following the Change of Control, an escrow account in the
aggregate of TEN MILLION DOLLARS ($10,000,000) by depositing assets or bank
letters of credit in escrow or reserving lines of credit that may be drawn down
by an escrow agent in said amount (the "Escrow Reserve"). The Company shall
promptly following establishment of the Escrow Reserve provide Indemnitee with a
true and complete copy of the agreement relating to the establishment and
operation of the Escrow Reserve, together with such additional documentation or
information with respect to the Escrow Reserve as Indemnitee may from time to
time reasonably request. The Company shall promptly following establishment of
the Escrow Reserve deliver an executed copy of this Agreement to the escrow
agent for the Escrow Reserve to evidence to that agent that Indemnitee is a
beneficiary of
-6-
that Escrow Reserve and shall deliver to Indemnitee the escrow agent's signed
receipt evidencing that delivery.
9. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors or personal or legal representatives after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of
action of the Company or its affiliate shall be extinguished and deemed released
unless asserted by the timely filing of legal action within such two-year
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action such shorter period shall
govern.
10. Amendments, Etc. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions thereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
12. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, article or otherwise) of the amounts
otherwise indemnifiable hereunder.
13. Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company, spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director, officer or representative of the
Company or of any other enterprise at the Company's request.
14. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law.
15. Termination of Xxxxxx Ohio Indemnification Agreement. As of
the effective date of this Agreement, Indemnitee and the Company agree that the
Indemnification Agreement between Indeminitee and Xxxxxx Ohio is terminated and
replaced with this Agreement.
-7-
16. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Bermuda applicable to
contracts made and to be performed in Bermuda without giving effect to the
principles of conflicts of laws. For purposes of this Agreement, the Company
submits to the non-exclusive jurisdiction of state and federal courts sitting in
the city of Houston, Texas.
Executed and effective as of this ______ day of _____________, 2003.
XXXXXX INDUSTRIES, LTD.
By: ________________________________________
Name: H. Xxxx Xxxxx, Jr.
Title: Chairman, President and Chief Executive
Officer
INDEMNITEE:
By: _______________________________________
Name: _________________________________
Title: ________________________________
-8-
