INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "AGREEMENT") dated as of April ,
1998 is by and between Mannatech, Incorporated, a Texas corporation (the
"COMPANY"), and ____________________ ("DIRECTOR").
RECITALS
A. Director is a member of the Board of Directors of the Company (the
"BOARD OF DIRECTORS") and in such capacity is performing a valuable service
to the Company.
B. The Texas Business Corporation Act, as amended to date (the
"CORPORATION ACT") specifically provides that indemnification and advancement
of expenses under any agreement is valid to the extent it is consistent with
the Corporation Act, as limited by the Articles of Incorporation of the
Company (the "ARTICLES"), and thereby contemplates that agreements may be
entered into between the Company and members of the Board of Directors with
respect to the indemnification of such directors.
C. The general availability of directors' and officers' liability
insurance ("INSURANCE") covering certain liabilities which may be incurred by
the Company's directors and officers in the performance of their services to
the Company and the applicability, amendment and enforcement of statutory and
bylaw provisions have raised questions concerning the adequacy and
reliability of the protection afforded to directors.
D. In order to induce Director to serve as a member of the Board of
Directors for the current term and for any subsequent term to which he is
elected by the shareholders of the Company, the Company has deemed it to be
in its best interest to enter into this Agreement with Director.
NOW, THEREFORE, in consideration of Director's agreement to serve as a
member of the Board of Directors after the date hereof, the parties hereto
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) CHANGE IN CONTROL. 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) (the
"EXCHANGE ACT"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the outstanding
securities of the Company, or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors and any new director whose election by the Board of
Directors or nomination for election by the Company's shareholders 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
shareholders of the Company approve (x) a merger or consolidation of the
Company with any other entity (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 combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation), (y) a plan of complete
liquidation of the Company or (z) an agreement or agreements for the
sale or disposition, in a single transaction or series of related
transactions, by the Company of all or substantially all of the property
and assets of the Company. Notwithstanding the foregoing, events
otherwise constituting a Change in Control in accordance with the
foregoing shall not constitute a Change in Control if such events are
solicited by the Company and are approved, recommended or supported by
the Board of Directors in actions taken prior to, and with respect to,
such events.
(b) REVIEWING PARTY. A "Reviewing Party" means (i) the Board of
Directors or a committee of directors of the Company, who are not
officers, appointed by the Board of Directors, provided that a majority
of such directors are not parties to the claim or (ii) special,
independent counsel selected and appointed by the Board of Directors or
by a committee of directors of the Company who are not officers.
2. INDEMNIFICATION OF DIRECTOR.
The Company hereby agrees that it shall hold harmless and indemnify
Director to the fullest extent authorized and permitted by the provisions of
the Articles and the Company's Bylaws (the "BYLAWS") and the provisions of
the Corporation Act, or by any amendment thereof, but in the case of any such
amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than the Articles, Bylaws or
Corporation Act permitted the Company to provide prior to such amendment, or
other statutory provisions authorizing or permitting such indemnification
which is adopted after the date hereof.
3. INSURANCE
3.1 INSURANCE POLICIES. So long as Director may be subject to any
possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that Director is or was a director, to the extent that the
Company maintains one or more insurance policy or policies providing
directors' and officers' liability insurance, Director shall be covered by
such policy or policies in accordance with its or their terms, to the maximum
extent of the coverage applicable to any director or officer then serving the
Company.
3.2 MAINTENANCE OF INSURANCE. The Company shall not be required to
maintain the Insurance or any policy or policies of comparable insurance, as
the case may be, if such insurance is not reasonably available or if, in the
reasonable business judgement of the Board of Directors which shall be
conclusively established by such determination by the Board of Directors, or
any appropriate committee thereof, either (i) the premium cost for such
insurance is substantially disproportionate to the amount of coverage
thereunder or (ii) the coverage provided by such insurance is so limited by
exclusions that there is insufficient benefit from such insurance.
3.3 SELF-INSURANCE. To the extent Director is not indemnified under
other Sections of this Agreement and is not fully, by reason of deductible or
otherwise, covered by directors' and officers' liability insurance, the
Company shall maintain self-insurance for, and thereby
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indemnify and hold harmless, Director from and against any and all expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by Director in connection with any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, in which Director was or is
made a party or was or is involved by reason of the fact that Director is or
was a director of the Company. Notwithstanding the foregoing, payments of
self-insurance under this Section to Director by the Company shall not exceed
the amount of $5,000,000 for any event and further shall be limited in
accordance with Section 5 hereof; PROVIDED, HOWEVER, that nothing in this
Section 3.3 shall limit the Company's obligation to indemnify Director as set
forth in this Agreement. An "event" as used in the preceding sentence in
reference to a limitation on self-insurance shall include the same acts or
omissions by Director and interrelated, repeated or continuous acts or
omissions.
4. ADDITIONAL INDEMNIFICATION.
Subject only to the exclusions set forth in Section 5 hereof, the Company
hereby agrees that it shall hold harmless and indemnify Director:
(a) against any and all judgments, penalties (including excise and
similar taxes), fines, settlements, and reasonable expenses (including
court costs and attorneys' fees) actually incurred by Director in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, including an action by or on behalf of shareholders of
the Company or by or in the right of the Company, to which Director is,
was or at any time becomes a party, or is threatened to be made a party,
by reason of the fact that Director is, was or at any time becomes a
director or officer of the Company, or, while a director or officer of
the Company, is or was serving or at any time serves at the request of
the Company as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another domestic or
foreign corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director
by the Company under the Corporation Act.
5. LIMITATIONS ON ADDITIONAL INDEMNIFICATION.
No indemnification pursuant to this Agreement shall be paid by the Company:
(a) in respect to any transaction if it shall be determined by the
Reviewing Party, or by final judgment or other final adjudication, that
Director derived an improper personal benefit;
(b) on account of Director's conduct which is determined by the
Reviewing Party, or by final judgment or other final adjudication, to have
involved acts or omissions not in good faith, intentional misconduct or a
knowing violation of law;
(c) if the Reviewing Party or a court having jurisdiction in the
matter shall determine that such indemnification is in violation of the
Articles, the Bylaws or the law.
6. ADVANCEMENT OF EXPENSES.
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In the event of any threatened or pending action, suit or proceeding in
which Director is a party or is involved and which may give rise to a right
of indemnification under this Agreement, following written request to the
Company by Director, the Company shall promptly pay to Director amounts to
cover expenses incurred by Director in such proceeding in advance of its
final disposition upon the receipt by the Company of (i) a written
affirmation by Director of his good faith belief that he has met the standard
of conduct necessary for indemnification under the Corporation Act, (ii) a
written undertaking executed by or on behalf of Director to repay the amount
paid or reimbursed if it is ultimately determined that he has not met that
standard or if it is ultimately determined that indemnification of Director
against expenses incurred by him in connection with that proceeding is
prohibited by the Corporation Act and (iii) satisfactory evidence as to the
amount of such expenses.
7. REPAYMENT OF EXPENSES.
Director agrees that Director shall reimburse the Company for all
reasonable expenses paid by the Company in defending any civil, criminal,
administrative, arbitrative or investigative action, suit or proceeding
against Director or any amount paid in settlement or any other amounts paid
hereunder in the event and only to the extent that it shall be determined by
final judgment or other final adjudication that Director is not entitled to
be indemnified by the Company for such expenses under the provisions of the
Corporation Act or any applicable law.
8. DETERMINATION OF INDEMNIFICATION; BURDEN OF PROOF.
With respect to all matters concerning the rights of Director to
indemnification and payment of expenses under this Agreement or under the
provisions of the Articles and Bylaws now or hereafter in effect, the Company
shall appoint a Reviewing Party and any determination by the Reviewing Party
shall be conclusive and binding on the Company and Director. If under
applicable law, the entitlement of Director to be indemnified under this
Agreement depends on whether a standard of conduct has been met, the burden
of proof of establishing that Director did not act in accordance with such
standard of conduct shall rest with the Company. Director shall be presumed
to have acted in accordance with such standard and entitled to
indemnification or advancement of expenses hereunder, as the case may be,
unless, based upon a preponderance of the evidence, it shall be determined by
the Reviewing Party that Director did not meet such standard. For purposes
of this Agreement, unless otherwise expressly stated herein, the termination
of any 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 Director 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. EFFECT OF CHANGE IN CONTROL.
If there has not been a Change in Control after the date of this
Agreement, the determination of (i) the rights of Director to indemnification
and payment of expenses under this Agreement or under the provisions of the
Articles and the Bylaws, (ii) standard of conduct and (iii) evaluation of the
reasonableness of amounts claimed by Director shall be made by the Reviewing
Party or such other body or persons as may be permitted by the Corporation
Act. If there has been a Change in Control after the date of this Agreement,
such determination and evaluation shall be made by a special, independent
counsel who is selected by Director and approved by the Company, which
approval shall not be unreasonably withheld, and who has not otherwise
performed services for Director or the Company.
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10. CONTINUATION OF INDEMNIFICATION.
All agreements and obligations of the Company contained herein shall
continue during the period that Director is a director or officer of the
Company, or, while a director or officer of the Company, is or was serving at
the request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, and shall
continue thereafter so long as Director shall be subject to any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative, any appeal in
such an action, suit, or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding, by reason of the fact that
Director was a director of the Company or serving in any other capacity
referred to herein.
11. NOTIFICATION AND DEFENSE OF CLAIM.
Promptly after receipt by Director of notice of the commencement of any
action, suit or proceeding, Director shall, if a claim in respect hereof is
to be made against the Company under this Agreement, notify the Company of
the commencement thereof; provided, however, that delay in so notifying the
Company shall not constitute a waiver or release by Director of rights
hereunder and that omission by Director to so notify the Company shall not
relieve the Company from any liability which it may have to Director
otherwise than under this Agreement, except to the extent that the Company's
ability to defend is adversely affected by such delay. With respect to any
such action, suit or proceeding as to which Director notifies the Company of
the commencement thereof:
(a) The Company shall be entitled to participate therein at its own
expense.
(b) Except as otherwise provided below, to the extent that it may
wish, the Company, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof and to employ
counsel reasonably satisfactory to Director. After notice from the
Company to Director of its election to so assume the defense thereof,
the Company shall not be liable to Director under this Agreement for any
legal or other expenses subsequently incurred by Director in connection
with the defense thereof other than reasonable costs of investigation or
as otherwise provided below. Director shall have the right to employ
counsel of his own choosing in such action, suit or proceeding but the
fees and expenses of such counsel incurred after notice from the Company
of assumption by the Company of the defense thereof shall be at the
expense of Director unless (i) the employment of counsel by Director has
been specifically authorized by the Company, such authorization to be
conclusively established by action by disinterested members of the Board
of Directors though less than a quorum; (ii) representation by the same
counsel of both Director and the Company would, in the reasonable
judgment of Director and the Company, be inappropriate due to an actual
or potential conflict of',interest between the Company and Director in
the conduct of the defense of such action, such conflict of interest to
be conclusively established by an opinion of counsel to the Company to
such effect; (iii) the counsel employed by the Company and reasonably
satisfactory to Director has advised Director in writing that such
counsel s representation of Director would likely involve such counsel
in representing differing interests which could adversely affect the
judgment or loyalty of such counsel to Director, whether it be a
conflicting, inconsistent, diverse or other interest; or (iv) the
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Company shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of counsel shall
be paid by the Company. The Company shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of the
Company or as to which a conflict of interest has been established as
provided in (ii) hereof. Notwithstanding the foregoing, if an insurance
company has supplied directors' and officers' liability insurance
covering an action, suit or proceeding, then such insurance company
shall employ counsel to conduct the defense of such action, suit or
proceeding unless Director and the Company reasonably concur in writing
that such counsel is unacceptable. After notice from the insurer, the
Company shall not be liable to Director under this Agreement for any
legal or other costs and expenses subsequently incurred by Director.
(c) The Company shall not be liable to indemnify Director under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any liability or
penalty on Director without Director's written consent. Neither the
Company nor Director shall unreasonably withhold consent to any proposed
settlement.
12. ENFORCEMENT.
(a) The Company expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on the Company hereby in
order to induce Director to serve as a director of the Company and
acknowledges that Director is relying upon this Agreement in continuing in
such capacity.
(b) If a claim for indemnification or advancement of expenses is not
paid in full by the Company within ninety (90) days after a written claim by
Director has been received by the Company, Director may at any time assert
the claim and bring suit against the Company to recover the unpaid amount of
the claim. In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in
such action, the Company shall reimburse Director for all of Director's
reasonable attorneys' fees and expenses m bringing and pursuing such action.
13. PROCEEDINGS BY DIRECTOR.
The Company shall not be liable to make any payment under this Agreement
m connection with any action, suit or proceeding, or any part thereof,
initiated or otherwise brought by Director unless such action, suit or
proceeding, or part thereof, (i) was authorized by the Company by a majority
of the disinterested members of the Board of Directors whether or not
constituting a quorum or (ii) was brought by Director pursuant to Section
12(b) hereof.
14. EFFECTIVENESS.
This Agreement is effective for, and shall apply to, (i) any claim which
is asserted or threatened before, on or after the date of this Agreement and
(ii) any action, suit or proceeding which is threatened before, on or after
the date of this. So long as the foregoing is satisfied, this Agreement shall
be effective for, and be applicable to, acts or omissions occurring prior to,
on or after the date hereof.
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15. NON-EXCLUSIVITY.
The rights of Director under this Agreement shall not be deemed
exclusive, or in limitation of, any rights to which Director may be entitled
under any applicable common or statutory law, or pursuant to the Articles,
the Bylaws, vote of shareholders or otherwise.
16. OTHER PAYMENTS.
The Company shall not be liable to make any payment under this Agreement
m connection with any action, suit or proceeding against Director to the
extent Director has otherwise received payment of the amounts otherwise
payable by the Company hereunder.
17. SUBROGATION.
In the event the Company makes any payment under this Agreement, the
Company shall be subrogated, to the extent of such payment, to all rights of
recovery of Director with respect thereto, and Director shall execute all
agreements, instruments, certificates or other documents and do or cause to
be done all things necessary or appropriate to secure such recovery rights to
the Company including, without limitation, executing such documents as shall
enable the Company to bring an action or suit to enforce such recovery rights.
18. SURVIVAL; CONTINUATION.
The rights of Director under this Agreement shall inure to the benefit
of Director, his heirs, executors, administrators, personal representatives
and assigns, and this Agreement shall be binding upon the Company, its
successors and assigns. The rights of Director under this Agreement shall
continue so long as Director may be subject to any action, suit or proceeding
because of the fact that Director is or was a director or officer of the
Company or, while a director or officer of the Company, is or was serving at
the request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise. If the
Company, in a single transaction or series of related transactions, sells,
leases, exchanges, or otherwise disposes of all or substantially all of its
property and assets, the Company shall, as a condition precedent to any such
transaction, cause effective provision to be made so that the persons or
entities acquiring such property and assets shall become bound by and replace
the Company under this Agreement.
19. AMENDMENT AND TERMINATION.
No amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in writing signed by both parties
hereto.
20. HEADINGS.
Section headings of the sections and paragraphs of this Agreement have
been inserted for convenience of reference only and do not constitute a part
of this Agreement.
21. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by overnight
delivery service, cable, telegram, facsimile transmission or telex to the
parties at the following addresses or at such other addresses as shall be
specified
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by the parties by like notice:
(a) if to the Company:
Mannatech, Incorporated
000 X. Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
(b) if to the Director:
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Notice so given shall, in the case of notice so given by mail, be deemed to
be given and received on the fourth calendar day after posting, in the case
of notice so given by overnight delivery service, on the date of actual
delivery and, in the case of notice so given by cable, telegram, facsimile
transmission, telex or personal delivery, on the date of actual transmission
or, as the case may be, personal delivery.
22. SEVERABILITY.
If any provision of this Agreement shall be held to be illegal, invalid
or unenforceable under any applicable law, then such contravention or
invalidity shall not invalidate the entire Agreement. Such provision shall be
deemed to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties
shall be construed and enforced accordingly.
23. COMPLETE AGREEMENT.
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any
way.
24. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, with the same effect as if
all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one and
the same instrument.
25. CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
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INDEMNIFICATION AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
MANNATECH, INCORPORATED
By:
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Name:
------------------------------------
Title:
-----------------------------------
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, Director
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SCHEDULE I
(Signing Directors)
1. Xxxxxxx X. Xxxxxxxx
2. Xxxxxx X. Xxxxxx
3. Xxxxxxx X. Xxxx
4. Xxxxxx X. Xxxxxx
5. Xxxxx X. Xxxxxxxx
