INDEMNIFICATION AGREEMENT
Exhibit 10.7
Indemnification Agreement, dated as of , between NCI Building Systems, Inc., a
Delaware corporation (the “Company”), and (“Indemnitee”).
WHEREAS, qualified persons are reluctant to serve corporations as directors or otherwise
unless they are provided with broad indemnification and insurance against claims arising out of
their service to and activities on behalf of the corporations; and
WHEREAS, the Company has determined that attracting and retaining such persons is in the best
interests of the Company’s stockholders and that it is reasonable, prudent and necessary for the
Company to indemnify such persons to the fullest extent permitted by applicable law and to provide
reasonable assurance regarding insurance;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Defined Terms; Construction.
(a) Defined Terms. As used in this Agreement, the following terms shall have the
following meanings:
“Change in Control” means, and shall be deemed to have occurred if, on or after the
date of this Agreement, (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) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or any of its
subsidiaries acting in such capacity, or (B) 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 more than 20% of the total voting
power represented by the Company’s then outstanding Voting Securities, (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 of
the Company 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, (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other corporation other than a
merger or consolidation that 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, (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 (in one transaction or a series of related
transactions) all or substantially all of its assets, or (v) the Company shall file or have
filed against it, and such filing shall not be dismissed, any bankruptcy, insolvency or dissolution
proceedings, or a trustee, administrator or creditors committee shall be appointed to manage or
supervise the affairs of the Company.
“Corporate Status” means the status of a person who is or was a director (or a member
of any committee of a board of directors), officer, employee or agent (including without limitation
a manager of a limited liability company) of the Company or any of its subsidiaries, or of any
predecessor thereof, or is or was serving at the request of the Company as a director (or a member
of any committee of a board of directors), officer, employee or agent (including without limitation
a manager of a limited liability company) of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise, or of any predecessor thereof, including
service with respect to an employee benefit plan.
“Determination” means a determination that either (x) there is a reasonable
basis for the conclusion that indemnification of Indemnitee is proper in the circumstances because
Indemnitee met a particular standard of conduct (a “Favorable Determination”) or
(y) there is no reasonable basis for the conclusion that indemnification of Indemnitee is
proper in the circumstances because Indemnitee met a particular standard of conduct (an
“Adverse Determination”). An Adverse Determination shall include the decision that a
Determination was required in connection with indemnification and the decision as to the applicable
standard of conduct.
“DGCL” means the General Corporation Law of the State of Delaware, as amended from
time to time.
“Expenses” means all attorneys’ fees and expenses, retainers, court, arbitration and
mediation costs, transcript costs, fees of experts, bonds, witness fees, costs of collecting and
producing documents, travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, appealing or otherwise participating in a
Proceeding.
“Independent Legal Counsel” means an attorney or firm of attorneys competent to render
an opinion under the applicable law, selected in accordance with the provisions of Section 5(e),
who has not otherwise performed any services for the Company or any of its
subsidiaries or for
Indemnitee within the last three years (other than with respect to matters concerning the rights of
indemnitees under indemnity agreements).
“Proceeding” means a threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, including without limitation a claim,
demand, discovery request, formal or informal investigation, inquiry, administrative hearing,
arbitration or other form of alternative dispute resolution, including an appeal from any of the
foregoing.
“Voting Securities” means any securities of the Company that vote generally in the
election of directors.
(b) Construction. For purposes of this Agreement,
(i) References to the Company and any of its “subsidiaries” shall include any
corporation, limited liability company, partnership, joint venture, trust or other entity
or enterprise that before or after the date of this Agreement is party to a merger or
consolidation with the Company or any such subsidiary or that is a successor to the Company
as contemplated by Section 8(d) (whether or not such successor has executed and delivered
the written agreement contemplated by Section 8(d)).
(ii) References to “fines” shall include any excise taxes assessed on Indemnitee with
respect to an employee benefit plan.
(iii) References to a “witness” in connection with a Proceeding shall include any
interviewee or person called upon to produce documents in connection with such Proceeding.
2. Agreement to Serve.
Indemnitee agrees to serve as a director of the Company or one or more of its subsidiaries and
in such other capacities as Indemnitee may serve at the request of the Company from time to time,
and by its execution of this Agreement the Company confirms its request that Indemnitee serve as a
director and in such other capacities. Indemnitee shall be entitled to resign or otherwise
terminate such service with immediate effect at any time, and neither such resignation or
termination nor the length of such service shall affect Indemnitee’s rights under this Agreement.
This Agreement shall not constitute an employment agreement, supersede any employment agreement to
which Indemnitee is a party or create any right of Indemnitee to continued employment or
appointment.
3. Indemnification.
(a) General Indemnification. The Company shall indemnify Indemnitee, to the fullest
extent permitted by applicable law in effect on the date hereof or as amended to increase the scope
of permitted indemnification, against Expenses, losses, liabilities, judgments, fines, penalties
and amounts paid in settlement (including all interest, assessments and other charges in connection
therewith) incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding in
any way connected with, resulting from or relating to Indemnitee’s Corporate Status.
(b) Additional Indemnification Regarding Expenses. Without limiting the foregoing, in
the event any Proceeding is initiated by Indemnitee or the Company or any of its subsidiaries to
enforce or interpret this Agreement or any rights of Indemnitee to indemnification or advancement
of Expenses (or related obligations of Indemnitee) under the Company’s or any such subsidiary’s
certificate of incorporation or bylaws, any other agreement to which Indemnitee and the Company or
any of its subsidiaries are party, any vote of stockholders or directors of the Company or any of
its subsidiaries, the DGCL, any other applicable law or any liability insurance policy, the Company
shall indemnify Indemnitee against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in
connection with such Proceeding, whether or not Indemnitee is successful in such Proceeding, except
to the extent that the court presiding over such Proceeding determines that material assertions
made by Indemnitee in such Proceeding were in bad faith or were frivolous.
(c) Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for a portion of any Expenses, losses, liabilities,
judgments, fines, penalties and amounts paid in settlement incurred by Indemnitee, but not for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for such portion.
(d) Nonexclusivity. The indemnification provided by this Agreement shall not be
deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s certificate
of incorporation or bylaws, any agreement, any vote of stockholders or directors, the DGCL, any
other applicable law or any liability insurance policy , provided that to the extent that
Indemnitee is entitled to be indemnified by the Company under this Agreement and by any shareholder
of the Company or any affiliate of any such shareholder under any other agreement or instrument,
the obligations of the Company hereunder shall be primary, and the obligations of such shareholder
or affiliate secondary, and the Company shall not be entitled to contribution or indemnification
from or subrogation against such shareholder or affiliate.
(e) Exceptions. Any other provision herein to the contrary notwithstanding, the
Company shall not be obligated under the Agreement to indemnify Indemnitee:
(i) For Expenses incurred in connection with Proceedings initiated or brought
voluntarily by the Indemnitee and not by way of defense, counterclaim or crossclaim, except
(x) as contemplated by Section 3(b), (y) in specific cases if the board of
directors of the Company has approved the initiation or bringing of such Proceeding, and
(z) as may be required by law.
(ii) For an accounting of profits arising from the purchase and sale by the Indemnitee
of securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
(f) 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 the Indemnitee, who
shall execute such documents and do such acts as the Company may reasonably request to secure such
rights and to enable the Company effectively to bring suit to enforce such rights, provided
that the Company shall not be subrogated to any claim of Indemnitee for indemnification from any
shareholder of the Company or any affiliate of any such shareholder.
4. Advancement of Expenses.
The Company shall pay all Expenses incurred by Indemnitee in connection with any Proceeding in
any way connected with, resulting from or relating to Indemnitee’s Corporate Status, other than a
Proceeding initiated by Indemnitee for which the Company would not be obligated to indemnify
Indemnitee pursuant to Section 3(e)(i), in advance of the final disposition of such Proceeding and
without regard to whether Indemnitee will ultimately be entitled to be indemnified for such
Expenses and without regard to whether an Adverse Determination has been made, except as
contemplated by the last sentence of Section 5(f). Indemnitee shall repay such amounts advanced
only if and to the extent that it shall ultimately be determined in a decision by a court of
competent jurisdiction from which no appeal can be taken that Indemnitee is not entitled to be
indemnified by the Company for such Expenses. Such repayment obligation shall be unsecured and
shall not bear interest. The Company shall not impose on Indemnitee additional conditions to
advancement or require from Indemnitee additional undertakings regarding repayment.
5. Indemnification Procedure.
(a) Notice of Proceeding; Cooperation. Indemnitee shall give the Company notice in
writing as soon as practicable of any Proceeding for which indemnification will or could be sought
under this Agreement, provided that any failure
or delay in giving such notice shall not relieve the Company of its obligations under this
Agreement unless and to the extent that (i) none of the Company and its subsidiaries are
party to or aware of such Proceeding and (ii) the Company is materially prejudiced by such
failure.
(b) Settlement. The Company will not, without the prior written consent of
Indemnitee, which may be provided or withheld in Indemnitee’s sole discretion, effect any
settlement of any Proceeding against Indemnitee or which could have been brought against Indemnitee
unless such settlement solely involves the payment of money by persons other than Indemnitee and
includes an unconditional release of Indemnitee from all liability on any matters that are the
subject of such Proceeding and an acknowledgment that Indemnitee denies all wrongdoing in
connection with such matters. The Company shall not be obligated to indemnify Indemnitee against
amounts paid in settlement of a Proceeding against Indemnitee if such settlement is effected by
Indemnitee without the Company’s prior written consent, which shall not be unreasonably withheld.
(c) Request for Payment; Timing of Payment. To obtain indemnification payments or
advances under this Agreement, Indemnitee shall submit to a Company a written request therefor,
together with such invoices or other supporting information as may be reasonably requested by the
Company and reasonably available to Indemnitee. The Company shall make indemnification payments to
Indemnitee no later than 30 days, and advances to Indemnitee no later than 10 days, after receipt
of the written request of Indemnitee.
(d) Determination. The Company intends that Indemnitee shall be indemnified to the
fullest extent permitted by law as provided in Section 3 and that no Determination shall be
required in connection with such indemnification. In no event shall a Determination be required in
connection with advancement of Expenses pursuant to Section 4 or in connection with indemnification
for Expenses incurred as a witness or incurred in connection with any Proceeding or portion thereof
with respect to which Indemnitee has been successful on the merits or otherwise. Any decision that
a Determination is required by law in connection with any other indemnification of Indemnitee, and
any such Determination, shall be made within 30 days after receipt of Indemnitee’s written request
for indemnification, as follows:
(i) If no Change in Control has occurred, (w) by a majority vote of the
directors of the Company who are not parties to such Proceeding, even though less than a
quorum, with the advice of Independent Legal Counsel, or (x) by a committee of such
directors designated by majority vote of such directors, even though less than a quorum,
with the advice of Independent Legal Counsel, or (y) if there are no such
directors, or if such directors so direct, by Independent
Legal Counsel in a written opinion to the Company and Indemnitee, or (z) by
the stockholders of the Company.
(ii) If a Change in Control has occurred, by Independent Legal Counsel in a written
opinion to the Company and Indemnitee.
The Company shall pay all Expenses incurred by Indemnitee in connection with a Determination.
(e) Independent Legal Counsel. If there has not been a Change in Control, Independent
Legal Counsel shall be selected by the board of directors of the Company and approved by Indemnitee
(which approval shall not be unreasonably withheld or delayed). If there has been a Change in
Control, Independent Legal Counsel shall be selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld or delayed). The Company shall pay the fees and
expenses of Independent Legal Counsel and indemnify Independent Legal Counsel against any and all
expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to
its engagement.
(f) Consequences of Determination; Remedies of Indemnitee. The Company shall be bound
by and shall have no right to challenge a Favorable Determination. If an Adverse Determination is
made, or if for any other reason the Company does not make timely indemnification payments or
advances of Expenses, Indemnitee shall have the right to commence a Proceeding before a court of
competent jurisdiction to challenge such Adverse Determination and/or to require the Company to
make such payments or advances. Indemnitee shall be entitled to be indemnified for all Expenses
incurred in connection with such a Proceeding in accordance with Section 3(b) and to have such
Expenses advanced by the Company in accordance with Section 4. If Indemnitee fails to timely
challenge an Adverse Determination, or if Indemnitee challenges an Adverse Determination and such
Adverse Determination has been upheld by a final judgment of a court of competent jurisdiction from
which no appeal can be taken, then, to the extent and only to the extent required by such Adverse
Determination or final judgment, the Company shall not be obligated to indemnify or advance
Expenses to Indemnitee under this Agreement.
(g) Presumptions; Burden and Standard of Proof. In connection with any Determination,
or any review of any Determination, by any person, including a court:
(i) It shall be a presumption that a Determination is not required.
(ii) It shall be a presumption that Indemnitee has met the applicable standard of
conduct and that indemnification of Indemnitee is proper in the circumstances.
(iii) The burden of proof shall be on the Company to overcome the presumptions set
forth in the preceding clauses (i) and (ii), and each such presumption shall only be
overcome if the Company establishes that there is no reasonable basis to support it.
(iv) The termination of any Proceeding by judgment, order, finding, 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 indemnification is not proper or
that Indemnitee did not meet the applicable standard of conduct or that a court has
determined that indemnification is not permitted by this Agreement or otherwise.
(v) Neither the failure of any person or persons to have made a Determination nor an
Adverse Determination by any person or persons shall be a defense to Indemnitee’s claim or
create a presumption that Indemnitee did not meet the applicable standard of conduct, and
any Proceeding commenced by Indemnitee pursuant to Section 5(f) shall be de novo with
respect to all determinations of fact and law.
6. Directors and Officers Liability Insurance.
(a) Maintenance of Insurance. So long as the Company or any of its subsidiaries
maintains liability insurance for any directors, officers, employees or agents of any such person,
the Company shall ensure that Indemnitee is covered by such insurance in such a manner as to
provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of
the Company’s and its subsidiaries’ then current directors and officers. If at any date
(i) such insurance ceases to cover acts and omissions occurring during all or any part of
the period of Indemnitee’s Corporate Status or (ii) neither the Company nor any of its
subsidiaries maintains any such insurance, the Company shall ensure that Indemnitee is covered,
with respect to acts and omissions prior to such date, for at least six years (or such shorter
period as is available on commercially reasonable terms) from such date, by other directors and
officers liability insurance, in amounts and on terms (including the portion of the period of
Indemnitee’s Corporate Status covered) no less favorable to Indemnitee than the amounts and terms
of the liability insurance maintained by the Company on the date hereof.
(b) Notice to Insurers. Upon receipt of notice of a Proceeding pursuant to Section
5(a), the Company shall give or cause to be given prompt notice of such Proceeding to all insurers
providing liability insurance in accordance with the
procedures set forth in all applicable or potentially applicable policies. The Company shall
thereafter take all necessary action to cause such insurers to pay all amounts payable in
accordance with the terms of such policies.
7. Exculpation, etc.
(a) Limitation of Liability. Indemnitee shall not be personally liable to the Company
or any of its subsidiaries or to the stockholders of the Company or any such subsidiary for
monetary damages for breach of fiduciary duty as a director of the Company or any such subsidiary;
provided, however, that the foregoing shall not eliminate or limit the liability of
the Indemnitee (i) for any breach of the Indemnitee’s duty of loyalty to the Company or
such subsidiary or the stockholders thereof; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law; (iii) under
Section 174 of the DGCL or any similar provision of other applicable corporations law; or
(iv) for any transaction from which the Indemnitee derived an improper personal benefit.
If the DGCL or such other applicable law shall be amended to permit further elimination or
limitation of the personal liability of directors, then the liability of the Indemnitee shall,
automatically, without any further action, be eliminated or limited to the fullest extent permitted
by the DGCL or such other applicable law as so amended.
(b) Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or in the right of the Company or any of its subsidiaries against Indemnitee
or Indemnitee’s estate, spouses, heirs, executors, personal or legal representatives,
administrators or assigns 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 shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two-year period,
provided that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.
8. Miscellaneous.
(a) Severability. If any provision or provisions of this Agreement shall be held to
be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality
and enforceability of the remaining provisions of this Agreement (including without limitation,
each portion of any section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by
law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to
conform to applicable law and to give the maximum effect to the intent of the parties hereto; and
(iii) to the fullest extent possible, the provisions of this Agreement (including, without
limitation, each
portion of any section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested thereby.
(b) Notices. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, or by facsimile, upon confirmation of receipt, (ii) on the first
business day following the date of dispatch if delivered by a recognized next-day courier service
or (iii) on the third business day following the date of mailing if delivered by domestic
registered or certified mail, properly addressed, or on the fifth business day following the date
of mailing if sent by airmail from a country outside of North America, to Indemnitee as shown on
the signature page of this Agreement, to the Company at the address shown on the signature page of
this Agreement, or in either case as subsequently modified by written notice.
(c) Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed by both 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 hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
(d) Successors and Assigns. This Agreement shall be binding upon the Company and its
respective successors and assigns, including without limitation any acquiror of all or
substantially all of the Company’s assets or business, any person (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) that acquires beneficial
ownership of securities of the Company representing all or substantially all of the total voting
power represented by the Company’s then outstanding Voting Securities and any survivor of any
merger or consolidation to which the Company is party, and shall inure to the benefit of the
Indemnitee and the Indemnitee’s estate, spouses, heirs, executors, personal or legal
representatives, administrators and assigns. The Company shall require and cause any such
successor, by written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement as if it were named as the Company herein, and the
Company shall not permit any such purchase of assets or business, acquisition of securities or
merger or consolidation to occur until such written agreement has been executed and delivered. No
such assumption and agreement shall relieve the Company of any of its obligations hereunder, and
this Agreement shall not otherwise be assignable by the Company.
(e) Choice of Law; Consent to Jurisdiction. This Agreement shall be governed by and
its provisions construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely within Delaware,
without regard to the conflict of law principles
thereof. The Company and Indemnitee each hereby irrevocably consents to the jurisdiction of
the courts of the State of Delaware for all purposes in connection with any Proceeding which arises
out of or relates to this Agreement and agree that any action instituted under this Agreement shall
be brought only in the state courts of the State of Delaware.
(f) Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous written and oral
negotiations, commitments, understandings and agreements relating to the subject matter hereof
between the parties hereto, provided that the provisions hereof shall not supersede the
provisions of the Company’s certificate of incorporation or bylaws, any agreement, any vote of
stockholders or directors, the DGCL or other applicable law, to the extent any such provisions
shall be more favorable to Indemnitee than the provisions hereof.
(g) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall constitute an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
| NCI BUILDING SYSTEMS, INC. |
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| AGREED TO AND ACCEPTED: INDEMNITEE: |
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