INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into effective as of this ___ day of __________, 2001, by and between United
Surgical Partners International, Inc., a Delaware corporation (including any
successors thereto, the "Company"), and ________________________ ("Indemnitee").
RECITALS:
A. Competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors, officers, or in other capacities
unless they are provided with adequate protection through insurance or
indemnification (or both) against claims and actions against them arising out of
their service to and activities on behalf of those corporations.
B. The current uncertainties relating to the availability of adequate
insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons.
C. The Board of Directors of the Company (the "Board") has determined
that the continuation of present trends in litigation will make it more
difficult to attract and retain competent and experienced persons, that this
situation is detrimental to the best interests of the Company's stockholders,
and that the Company should act to assure its directors and officers that there
will be increased certainty of adequate protection in the future.
D. It is reasonable, prudent, and necessary for the Company to obligate
itself contractually to indemnify its directors and officers to the fullest
extent permitted by applicable law in order to induce them to serve or continue
to serve the Company.
E. Indemnitee is willing to serve and continue to serve the Company on
the condition that he be indemnified to the fullest extent permitted by law.
F. Concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of the
Company.
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AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises,
Indemnitee's agreement to serve or continue to serve as a director or officer of
the Company, and the covenants contained in this Agreement, the Company and
Indemnitee hereby covenant and agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement:
a. AFFILIATE: shall mean any Person that directly, or indirectly,
through one or more intermediaries, controls, is controlled
by, or is under common control with the Person specified.
b. CHANGE OF CONTROL: shall mean the occurrence of any of the
following events:
i. The acquisition after the date of this Agreement by
any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (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 either (x) the then
outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (y) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally
in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that
for purposes of this paragraph (i), the following
acquisitions shall not constitute a Change of
Control: any acquisition directly from the Company or
any Subsidiary thereof; any acquisition by the
Company or any Subsidiary thereof; any acquisition by
any employee benefit plan (or related trust)
sponsored or maintained by the Company or any
Subsidiary of the Company; or any acquisition by any
entity or its security holders pursuant to a
transaction which complies with clauses (A), (B), and
(C) of paragraph (iii) below;
ii. Individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the date of this
Agreement whose election or appointment by the Board
or nomination for election by the Company's
stockholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board, shall in either case be considered
as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office
occurs as a result of an actual or threatened
election contest 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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iii. Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or an
acquisition of assets of another corporation (a
"Business Combination"), unless in each case,
following such Business Combination, (A) the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination represent or are converted into
or exchanged for securities which represent or are
convertible into more than 50% of, respectively, the
then outstanding shares of common stock and the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation 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 (excluding any employee benefit plan (or
related trust) of the Company or the corporation
resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
of the Company existed prior to the Business
Combination and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members
of the Incumbent Board 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 stockholders of the Company of a
complete liquidation or dissolution of the Company.
c. CLAIM: shall mean any threatened, pending, or completed
action, suit, or proceeding (including, without limitation,
securities laws actions, suits, and proceedings and also any
cross claim or counterclaim in any action, suit, or
proceeding), whether civil, criminal, arbitral,
administrative, or investigative in nature, or any inquiry or
investigation (including discovery), whether conducted by the
Company or any other Person, that Indemnitee in good faith
believes might lead to the institution of any action, suit, or
proceeding.
d. EXPENSES: shall mean all costs, expenses (including attorneys'
and expert witnesses' fees), and obligations paid or incurred
in connection with investigating, defending (including
affirmative defenses and counterclaims), 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.
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e. INDEMNIFIABLE EVENT: shall mean any actual or alleged act,
omission, statement, misstatement, event, or occurrence
related to the fact that Indemnitee is or was a director,
officer, agent, or fiduciary of the Company, or is or was
serving at the request of the Company as a director, officer,
trustee, agent, or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust, or
other enterprise, or by reason of any actual or alleged thing
done or not done by Indemnitee in any such capacity. For
purposes of this Agreement, the Company agrees that
Indemnitee's service on behalf of or with respect to any
Subsidiary or employee benefits plan of the Company or any
other entity in which the Company has an equity interest shall
be deemed to be at the request of the Company.
f. INDEMNIFIABLE LIABILITIES: shall mean all Expenses and all
other liabilities, damages (including, without limitation,
punitive, exemplary, and the multiplied portion of any
damages), judgments, payments, fines, penalties, amounts paid
in settlement, and awards paid or incurred that arise out of,
or in any way relate to, any Indemnifiable Event.
g. POTENTIAL CHANGE OF CONTROL: shall be deemed to have occurred
if (i) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change of
Control, (ii) any Person (including the Company) publicly
announces an intention to take or to consider taking actions
that, if consummated, would constitute a Change of Control, or
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change of Control has
occurred.
h. REVIEWING PARTY: shall mean a member or members of the Board
who are not parties to the particular Claim for which
Indemnitee is seeking indemnification or if a Change of
Control has occurred or if there is a Potential Change of
Control and Indemnitee so requests, or if the members of the
Board so elect, or if all of the members of the Board are
parties to such Claim, Special Counsel.
i. SPECIAL COUNSEL: shall mean special, independent legal counsel
selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld), and who has not
otherwise performed material services for the Company or for
Indemnitee within the last three years (other than as Special
Counsel under this Agreement or similar agreements).
j. SUBSIDIARY: shall mean, with respect to any Person, any
corporation or other entity of which a majority of the voting
power of the voting equity securities or equity interest is
owned, directly or indirectly, by that Person.
2. INDEMNIFICATION AND EXPENSE ADVANCEMENT.
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a. The Company shall indemnify Indemnitee and hold Indemnitee
harmless to the fullest extent permitted by law, as soon as
practicable but in any event no later than
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30 days after written demand is presented to the Company, from
and against any and all Indemnifiable Liabilities.
Notwithstanding the foregoing, the obligations of the Company
under this 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 Special Counsel is involved)
that Indemnitee is not permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall
require any determination under this Section 2(a) to be made
by the Reviewing Party prior to the disposition or conclusion
of the Claim against the Indemnitee.
b. If so requested by Indemnitee, the Company shall advance to
Indemnitee all reasonable Expenses incurred by Indemnitee to
the fullest extent permitted by law (or, if applicable,
reimburse Indemnitee for any and all reasonable Expenses
incurred by Indemnitee and previously paid by Indemnitee)
within ten business days after such request (an "Expense
Advance") and delivery by Indemnitee of an undertaking to
repay Expense Advances if and to the extent such undertaking
is required by applicable law prior to the Company's payment
of Expense Advances. The Company shall be obligated from time
to time at the request of Indemnitee to make or pay an Expense
Advance in advance of the final disposition or conclusion of
any Claim. In connection with any request for an Expense
Advance, if requested by the Company, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that
the Expenses to which the Expense Advances relate are
reasonable. Any dispute as to the reasonableness of any
Expense shall not delay an Expense Advance by the Company. If,
when, and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be indemnified with
respect to a Claim under applicable law or the amount of the
Expense Advance was not reasonable, the Company shall be
entitled to be reimbursed by Indemnitee and Indemnitee hereby
agrees to reimburse the Company without interest (which
agreement shall be an unsecured obligation of Indemnitee) for
(x) all related Expense Advances theretofore made or paid by
the Company in the event that it is determined that
indemnification would not be permitted or (y) the excessive
portion of any Expense Advances in the event that it is
determined that such Expenses Advances were unreasonable, in
either case, if and to the extent such reimbursement is
required by applicable law; provided, however, that if
Indemnitee has commenced legal proceedings in a court of
competent jurisdiction to secure a determination that
Indemnitee could be indemnified under applicable law, or that
the Expense Advances were reasonable, any determination made
by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law or that the Expense
Advances were unreasonable shall not be binding, and the
Company shall be obligated to continue to make Expense
Advances, until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom
have been exhausted or lapsed), which determination shall be
conclusive and binding. If there has been a Potential Change
of Control or a Change of Control, the Reviewing Party shall
be advised by or shall be Special Counsel, if Indemnitee so
requests. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that
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Indemnitee substantively is not permitted to be indemnified in
whole or part under applicable law or that any Expense
Advances were unreasonable, Indemnitee shall have the right to
commence litigation in any court in the states of Texas or
Delaware having subject matter jurisdiction thereof and in
which venue is proper 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.
c. With respect to any Claim relating to any Indemnifiable Event,
the Company shall be entitled to participate in or, at its
option, assume the defense, appeal or settlement of such
Claim.
d. Nothing in this Agreement, however, shall require the Company
to indemnify Indemnitee with respect to any Claim initiated by
Indemnitee, other than a Claim solely seeking enforcement of
the Company's indemnification obligations to Indemnitee or a
Claim authorized by the Board.
3. CHANGE OF CONTROL. The Company agrees that, if there is a Potential
Change in Control or a Change of Control and if Indemnitee requests in writing
that Special Counsel be the Reviewing Party, then Special Counsel shall be the
Reviewing Party. In such a case, the Company agrees not to request or seek
reimbursement from Indemnitee of any indemnification payment or Expense Advances
unless Special Counsel has rendered its written opinion to the Company and
Indemnitee (i) that the Company was not or is not permitted under applicable law
to pay Indemnitee and to allow Indemnitee to retain such indemnification payment
or Expense Advances or (ii) that such Expense Advances were unreasonable.
However, if Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee could be indemnified
under applicable law or that the Expense Advances were reasonable, any
determination made by Special Counsel that Indemnitee would not be permitted to
be indemnified under applicable law or that the Expense Advances were
unreasonable shall not be binding, and Indemnitee shall not be required to
reimburse the Company for any Expense Advance, and the Company shall be
obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefore have been exhausted or lapsed), which determination shall be
conclusive and binding. The Company agrees to pay the reasonable fees of Special
Counsel and to indemnify Special Counsel against any and all expenses (including
attorneys' fees), claims, liabilities, and damages arising out of or relating to
this Agreement or Special Counsel's engagement pursuant hereto.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all costs and expenses (including attorneys' and
expert witnesses' fees) and, if requested by Indemnitee, shall (within two
business days of that request) advance those costs and expenses to Indemnitee,
that are incurred by Indemnitee if Indemnitee, whether by formal proceedings or
through demand and negotiation without formal proceedings: (a) seeks to enforce
Indemnitee's rights under
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this Agreement; (b) seeks to enforce Indemnitee's rights to expense advancement
or indemnification under any other agreement or provision of the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
or Bylaws (the "Bylaws") now or hereafter in effect relating to Claims for
Indemnifiable Events; or (c) seeks recovery under any directors' and officers'
liability insurance policies maintained by the Company, in each case regardless
of whether Indemnitee ultimately prevails; provided that a court of competent
jurisdiction has not found Indemnitee's claim for indemnification or expense
advancements under the foregoing clause (a), (b) or (c) to be frivolous,
presented for an improper purpose, without evidentiary support, or otherwise
sanctionable under Federal Rule of Civil Procedure No. 11 or an analogous rule
or law, and provided further, that if a court makes such a finding, Indemnitee
shall reimburse the Company for all amounts previously advanced to Indemnitee
pursuant to this Section 4. Subject to the provisos contained in the preceding
sentence, to the fullest extent permitted by law, the Company waives any and all
rights that it may have to recover its costs and expenses from Indemnitee.
5. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some, but not all, of
Indemnitee's Indemnifiable Liabilities, the Company shall indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled.
6. CONTRIBUTION.
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a. CONTRIBUTION PAYMENT. To the extent the indemnification
provided for under any provision of this Agreement is
determined (in the manner hereinabove provided) not to be
permitted under applicable law, the Company, in lieu of
indemnifying Indemnitee, shall, to the extent permitted by
law, contribute to the amount of any and all Indemnifiable
Liabilities incurred or paid by Indemnitee for which such
indemnification is not permitted. The amount the Company
contributes shall be in such proportion as is appropriate to
reflect the relative fault of Indemnitee, on the one hand, and
of the Company and any and all other parties (including
officers and directors of the Company other than Indemnitee)
who may be at fault (collectively, including the Company, the
"Third Parties"), on the other hand.
b. RELATIVE FAULT. The relative fault of the Third Parties and
the Indemnitee shall be determined by reference to the
relative fault of Indemnitee as determined by the court or
other governmental agency or to the extent such court or other
governmental agency does not apportion relative fault, by the
Reviewing Party (which shall include Special Counsel) after
giving effect to, among other things, the relative intent,
knowledge, access to information, and opportunity to prevent
or correct the relevant events, of each party, and other
relevant equitable considerations. The Company and Indemnitee
agree that it would not be just and equitable if contribution
were determined by pro rata allocation or by any other method
of allocation that does take account of the equitable
considerations referred to in this Section 6(b).
7. BURDEN OF PROOF. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified under
any provision of this Agreement or to
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receive contribution pursuant to Section 6 of this Agreement, to the extent
permitted by law the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
8. NO 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, or an entry
of an order of probation prior to judgment shall not create a presumption (other
than any presumption arising as a matter of law that the parties may not
contractually agree to disregard) that Indemnitee did not 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.
9. NON-EXCLUSIVITY.The rights of Indemnitee hereunder shall be in addition
to any other rights Indemnitee may have under the Bylaws or Certificate of
Incorporation or the Delaware General Corporation Law or otherwise. To the
extent that a change in the Delaware General Corporation Law (whether by statute
or judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Bylaws or Certificate of Incorporation and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by that change. Indemnitee's
rights under this Agreement shall not be diminished by any amendment to the
Certificate of Incorporation or Bylaws, or of any other agreement or instrument
to which Indemnitee is not a party, and shall not diminish any other rights that
Indemnitee now or in the future has against the Company.
10. LIABILITY INSURANCE. Except as otherwise agreed to by the Company
and Indemnitee in a written agreement, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by that policy or those policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
11. PERIOD OF LIMITATIONS. No action, lawsuit, or proceeding may be
brought against Indemnitee or Indemnitee's spouse, heirs, executors, or personal
or legal representatives, nor may any cause of action be asserted in any such
action, lawsuit, or proceeding, by or on behalf of the Company, after the
expiration of two years after the statute of limitations commences with respect
to Indemnitee's act or omission that gave rise to the action, lawsuit,
proceeding, or cause of action; provided, however, that, if any shorter period
of limitations is otherwise applicable to any such action, lawsuit, proceeding,
or cause of action, the shorter period shall govern.
12. AMENDMENTS. 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 provision of this Agreement shall be effective unless in a writing
signed by the party granting the waiver. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall that waiver constitute a
continuing waiver.
13. OTHER SOURCES. Indemnitee shall not be required to exercise any rights
that Indemnitee may have against any other Person (for example, under an
insurance policy) before Indemnitee enforces
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his rights under this Agreement. However, to the extent the Company actually
indemnifies Indemnitee or advances him Expenses, the Company shall be subrogated
to the rights of Indemnitee and shall be entitled to enforce any such rights
which Indemnitee may have against third parties. Indemnitee shall assist the
Company in enforcing those rights if it pays his costs and expenses of doing so.
If Indemnitee is actually indemnified or advanced Expenses by any third party,
then, for so long as Indemnitee is not required to disgorge the amounts so
received, to that extent the Company shall be relieved of its obligation to
indemnify Indemnitee or advance Indemnitee Expenses.
14. BINDING EFFECT. 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 merger or
consolidation), spouses, heirs, and personal and legal representatives. This
Agreement shall continue in effect regardless of whether Indemnitee continues to
serve as an officer or director of the Company or another enterprise at the
Company's request.
15. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
hereof, that provision shall be fully severable; this Agreement shall be
construed and enforced as if that illegal, invalid, or unenforceable provision
had never comprised a part hereof; and the remaining provisions shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of that illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as similar in terms to the
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
17. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
18. NOTICES. Whenever this Agreement requires or permits notice to be given
by one party to the other, such notice must be in writing to be effective and
shall be deemed delivered and received by the party to whom it is sent upon
actual receipt (by any means) of such notice. Receipt of a notice by the
Secretary of the Company shall be deemed receipt of such notice by the Company.
19. COMPLETE AGREEMENT. This Agreement constitutes the complete understand-
ing and agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof, other than any indemnification rights that
Indemnitee may enjoy under the Certificate of Incorporation, the Bylaws, or the
Delaware General Corporation Law.
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20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
[21. EFFECTIVENESS; EFFECT ON PRIOR AGREEMENT. UPON CONSUMMATION OF THE SALE
OF THE COMPANY'S COMMON STOCK REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
PART OF THE COMPANY'S INITIAL PUBLIC OFFERING, THIS AGREEMENT SHALL BECOME
EFFECTIVE AND THAT CERTAIN INDEMNIFICATION AGREEMENT, DATED ___________, BY AND
BETWEEN INDEMNITEE AND THE COMPANY SHALL THEREAFTER BE VOID AND OF NO FURTHER
FORCE OR EFFECT.]
[Remainder of page intentionally left blank]
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EXECUTED as of the date first written above.
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
By:
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Name:
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Title:
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INDEMNITEE:
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LIST OF INDEMNITEES
