INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (this “Agreement”) is made as of the 7th
day of
March, 2007 by and between MOD-PAC CORP., a New York corporation (the
“Corporation”) and XXXXX X. XXXXXXX (“Indemnitee”), a director, officer or key
employee of the Corporation.
WITNESSETH:
WHEREAS,
it is essential to the Corporation to retain and attract directors, officers
and
key employees who are the most capable persons available;
WHEREAS,
the Indemnitee is serving or has agreed to serve as a director, officer or
key
employee of the Corporation and in such capacity will render valuable services
to the Corporation;
WHEREAS,
the substantial increase in corporate litigation subjects directors, officers
and key employees to expensive litigation risks at the same time that the
availability of directors’ and officers’ liability insurance and fiduciary
insurance has been severely limited;
WHEREAS,
it is now, and has always been, the express policy of the Corporation to
indemnify its directors, officers and key employees so as to provide them with
the maximum possible protection permitted by law; and
WHEREAS,
Indemnitee may not be willing to serve or to continue to serve as a director,
officer or key employee without adequate protection, and the Corporation desires
Indemnitee to continue to serve in such capacity.
NOW,
THEREFORE, in consideration of the Indemnitee’s continued service as a director,
officer or key employee of the Corporation, the Corporation and Indemnitee
do
hereby agree as follows:
1. Agreement
to Serve.
Indemnitee
agrees to continue to serve as a director, officer or key employee of the
Corporation for so long as he or she is duly elected or appointed or until
such
time as he or she tenders his or her resignation in writing. This provision
is
not a guarantee of employment.
2. Definitions.
As
used
in this Agreement:
(a) The
term
“Proceeding” shall include any threatened, pending, or completed action, suit,
or proceeding, whether brought by or in the right of the Corporation or one
of
its subsidiaries or otherwise, and whether of a civil, criminal, administrative,
or investigative nature, in which Indemnitee is or was a party or is threatened
to be made a party by reason of the fact that Indemnitee is or was a director,
officer or employee of the Corporation (or any subsidiary of the Corporation),
or is or was serving at the request of the Corporation as a director, officer,
employee, member, manager, trustee, agent, or fiduciary of another corporation,
limited liability company, partnership, joint venture, trust, or other
enterprise.
(b) The
term
“Expenses” shall include, without limitation, expenses of investigation,
judicial or administrative proceedings or appeals, amounts paid in settlement
by
or on behalf of Indemnitee, attorneys’ fees and disbursements, experts’ fees and
disbursements and any expenses of establishing a right to indemnification under
Paragraph 7 of this Agreement.
(c) References
to “other enterprises” shall include employee benefit plans; references to
“fines” shall include any excise taxes assessed on Indemnitee with respect to
any employee benefit plan; references to “serving at the request of the
Corporation” shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee, agent, or fiduciary with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in
good
faith and in a manner he or she reasonably believed to be in the interest of
the
participants and beneficiaries of an employee benefit plan shall be deemed
to
have acted in a manner “not opposed to the best interest of the Corporation” as
referred to in this Agreement.
3. Indemnity
in Third-Party Proceedings.
The
Corporation shall indemnify Indemnitee in accordance with the provisions of
this
Paragraph 3, against all Expenses, judgments, fines, and penalties actually
and
reasonably incurred by Indemnitee in connection with the defense or settlement
of any Proceeding (other than a Proceeding by or in the right of the Corporation
to procure a judgment in its favor) if Indemnitee acted in good faith and in
a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, in the case of a criminal proceeding, had
no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any such Proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that Indemnitee did not act in good faith in a manner
which
he or she reasonably believed to be in or not opposed to the best interests
of
the Corporation, and, with respect to any criminal proceeding, that Indemnitee
did not have reasonable cause to believe that his or her conduct was
unlawful.
4. Indemnity
in Proceedings By or In the Right of the Corporation.
The
Corporation shall indemnify Indemnitee, in accordance with the provisions of
this Paragraph 4, against all Expenses actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of any Proceeding by
or
in the right of the Corporation to procure a judgment in its favor, including
the amount of the judgment or settlement, if Indemnitee acted in good faith
and
in a manner which he or she reasonably believed to be in or not opposed to
the
best interests of the Corporation; provided, however, that no indemnification
for Expenses shall be made under this Paragraph 4 in respect of any claim,
issue, or matter as to which Indemnitee shall have been adjudged to be liable
to
the Corporation unless and only to the extent that the court in which such
Proceeding was brought, or, if no action was brought, any court of competent
jurisdiction, determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for the Expenses and the amount of the
judgment or settlement which the court shall deem proper.
-2-
5. Indemnification
of Expenses of Successful Party.
Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise, in defense of any Proceeding, or in
defense of any claim, issue, or matter therein, Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by Indemnitee in
connection therewith to the fullest extent permitted by New York
Law.
6. Advances
of Expenses.
At
the
written request of Indemnitee, the Expenses actually and reasonably incurred
by
Indemnitee in any Proceeding shall be paid by the Corporation in advance of
the
final disposition of such Proceeding and within 30 days after request therefor.
Indemnitee will repay any such Expenses that are advanced under this Paragraph
6
if it is ultimately determined, in a final, non-appealable judgment rendered
by
the court of last resort (or by a lower court if not timely appealed), that
Indemnitee is not entitled to be indemnified against such Expenses. This
undertaking by Indemnitee is an unlimited general undertaking but no security
for such undertaking will be required. If the Corporation makes an advance
of
expenses pursuant to this Paragraph 6, the Corporation shall be subrogated
to
every right of recovery Indemnitee may have against any insurance carrier from
whom the Corporation has purchased insurance for such purpose.
7. Right
of Indemnitee to Indemnification Upon Application; Procedure Upon
Application.
(a) Subject
to Paragraph 8 of this Agreement, Indemnitee will be presumed to be entitled
to
indemnification under this Agreement. The burden of proving that indemnification
or advances of Expenses are not appropriate shall be on the
Corporation.
(b) Any
indemnification under Paragraphs 3 and 4 (other than the advancement of
Expenses) shall be paid by the Corporation no later than 30 days after receipt
of the written request of Indemnitee, unless a determination is made within
the
30-day period by (i) the Board of Directors by a majority vote of directors
who
are not and were not parties to the Proceeding in respect of which
indemnification is being sought (“Disinterested Directors”), (ii) a committee of
the Board of Directors comprised of Disinterested Directors or (iii) independent
legal counsel in a written opinion (which counsel shall be appointed by a vote
of the Disinterested Directors), that Indemnitee has not met the relevant
standards for indemnification set forth in Paragraphs 3 and 4. If requested
by
the Indemnitee in writing, any such determination shall be made by independent
legal counsel not previously employed by the Corporation or any Affiliate
thereof (“Affiliate” having the meaning defined in Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended).
(c) Indemnitee
will be entitled to a hearing before the Board of Directors of Corporation
or
the Disinterested Directors and/or any other person or persons making a
determination and evaluation under Paragraph 7(b). Indemnitee will be entitled
to be represented by counsel at such
hearing. The cost of any determination and evaluation under Paragraph 7(b)
(including attorneys’ fees and other expenses incurred by Indemnitee in
preparing for and attending the hearing contemplated by Paragraph 7 and
otherwise in connection with the determination and evaluation under Paragraph
7)
will be borne by the Corporation.
-3-
(d) The
right
to indemnification or advancement of Expenses as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction.
Neither the failure of the Corporation (including its Board of Directors or
independent legal counsel) to have made a determination prior to the
commencement of such action that Indemnitee has met the applicable standard
of
conduct nor an actual determination by the Corporation (including its Board
of
Directors or independent legal counsel) that Indemnitee has not met such
standard shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct. Indemnitee’s Expenses
actually and reasonably incurred in connection with successfully establishing
his or her right to indemnification or advances, in whole or in part, shall
also
be indemnified by the Corporation.
(e) With
respect to any Proceeding for which indemnification is requested, the
Corporation will be entitled to participate therein at its own expense and,
except as otherwise provided below, the Corporation may assume the defense
thereof, with counsel satisfactory to Indemnitee. After notice from the
Corporation to Indemnitee of its election to assume the defense of a Proceeding,
the Corporation will not be liable to Indemnitee under this Agreement for any
Expenses subsequently incurred by Indemnitee in connection with the defense
thereof, other than as provided below. The Corporation shall not settle any
Proceeding in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee’s written consent. Indemnitee shall have the right
to employ counsel in any Proceeding but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
of
the Proceeding shall be at the expense of Indemnitee, unless (i) the employment
of counsel by Indemnitee has been authorized by the Corporation, (ii) Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Corporation and Indemnitee in the conduct of the defense of a Proceeding,
or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of a Proceeding, in each of which cases the fees and expenses of
Indemnitee ’s counsel shall be advanced by the Corporation. Notwithstanding the
foregoing, the Corporation shall not be entitled to assume the defense of any
Proceeding brought by or in the right of the Corporation.
(f) The
Corporation shall pay to Indemnitee, at the time payments are made to Indemnitee
for Expenses, judgments, fines or penalties pursuant to this Agreement, an
additional payment (the “Gross Up Amount”) such that after payment of all taxes,
if any, on payments so made, including the amount of the Gross Up Amount,
Indemnitee retains an amount equal to the amount to be received.
8. Limitation
on Indemnification.
No
payment pursuant to this Agreement shall be made by the
Corporation:
(a) to
indemnify or advance funds to Indemnitee for Expenses with respect to
Proceedings initiated or brought or joined in voluntarily by Indemnitee and
not
by way of defense, except with respect to Proceedings brought to establish
or
enforce a right to indemnification or advancement of Expenses under this
Agreement or as otherwise required by New York law, but such indemnification
or
advancement of Expenses may be provided by the Corporation in specific cases
if
the Board of Directors finds it to be appropriate;
-4-
(b) to
indemnify Indemnitee for any Expenses, judgments, fines or penalties sustained
in any Proceeding for which payment is actually made to Indemnitee under a
valid
and collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance;
(c) to
indemnify Indemnitee for any Expenses, judgments, fines or penalties sustained
in any Proceeding for an accounting of profits made from the purchase or sale
by
Indemnitee of securities of the Corporation pursuant to the provisions of §
16(b) of the Securities Exchange Act of 1934, the rules and regulations
promulgated thereunder and amendments thereto or similar provisions of any
federal, state, or local statutory law; or
(d) if
a
court of competent jurisdiction finally determines that such payment hereunder
is unlawful.
9. Indemnification
Hereunder Not Exclusive.
The
indemnification and advancement of Expenses provided by this Agreement shall
not
be deemed exclusive of any other rights to which indemnitee may be entitled
under the Certificate of Incorporation or the By-Laws of the Corporation, any
agreement, any vote of stockholders or disinterested Directors, the Business
Corporation Law of the State of New York, or otherwise, both as to action in
his
official capacity and as to action in another capacity while holding such
office. To the extent the provisions of this Agreement conflict with the
provisions regarding indemnification and advancement of Expenses in the By-Laws
of the Corporation, this Agreement will
control. The indemnification provided by this Agreement shall continue as to
Indemnitee even though he or she may have ceased to be a director, officer
or
key employee and shall inure to the benefit of the heirs and personal
representatives of Indemnitee.
10. Partial
Indemnification.
If
Indemnitee is entitled under any provision of this Agreement to indemnification
by the Corporation for a portion of the Expenses, judgments, fines or penalties
actually and reasonably incurred by him or her in any Proceeding but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, judgments, fines or
penalties to which Indemnitee is entitled.
11. Indemnification
of Indemnitee’s Estate.
Notwithstanding any other provision of this Agreement, and regardless whether
indemnification of the Indemnitee would be permitted and/or required under
this
Agreement, if the Indemnitee is deceased, the Corporation shall indemnify and
hold harmless the Indemnitee’s estate, spouse, heirs, administrators, personal
representatives and executors (collectively the “Indemnitee’s Estate”) against,
and the Corporation shall assume, any and all claims, damages, Expenses,
penalties, judgments and fines actually incurred by the Indemnitee or the
Indemnitee’s Estate in connection with the investigation, defense, settlement or
appeal of any Proceeding. Indemnification of the Indemnitee’s Estate pursuant to
this Section 11 shall be mandatory and not require any determination or finding
that the Indemnitee’s conduct satisfied a particular standard of
conduct.
-5-
12. Spousal
Indemnification.
The
indemnifications, benefits and obligations of this Agreement shall extend to
the
spouse of an Indemnitee in the event that the spouse is made a party to a
Proceeding or collection, execution or enforcement efforts arising from a
Proceeding.
13. Limitation
of Actions and Release of Claims.
No
proceeding shall be brought and no cause of action shall be asserted by or
on
behalf of the Corporation or any subsidiary against the Indemnitee, his or
her
spouse, heirs, estate, executors or administrators after the expiration of
one
year from the act or omission of the Indemnitee upon which such proceeding
is
based; however, in a case where the Indemnitee fraudulently conceals the facts
underlying such cause of action, no proceeding shall be brought and no cause
of
action shall be asserted after the expiration of one year from the earlier
of
(i) the date the Corporation or any subsidiary of the Corporation discovers
such
facts, or (ii) the date the Corporation or any subsidiary of the Corporation
could have discovered such facts by the exercise of reasonable diligence. Any
claim or cause of action of the Corporation or any subsidiary of the
Corporation, including claims predicated upon the act or omission of the
Indemnitee, shall be extinguished and deemed released unless asserted by filing
of a legal action within such period. This section shall not apply to any cause
of action which has accrued on the date hereof and of which the indemnitee
is
aware on the date hereof, but as to which the Corporation has no actual
knowledge apart from the Indemnitee’s knowledge.
14. Maintenance
of Liability Insurance.
(a) The
Corporation hereby covenants and agrees that, as long as Indemnitee continues
to
serve as a director, officer or key employee of the Corporation and thereafter
as long as Indemnitee may be subject to any Proceeding, the Corporation, subject
to subsection (c) below, shall maintain in full force and effect directors’ and
officers’ liability insurance (“D&O Insurance”) in reasonable amounts from
established and reputable insurers.
(b) In
all
D&O Insurance policies, Indemnitee shall be named as an insured in such a
manner as to provide the Indemnitee the same rights and benefits as are accorded
to the most favorably insured of the Corporation’s directors and
officers.
(c) Notwithstanding
the foregoing, the Corporation shall have no obligation to obtain or maintain
D&O Insurance if the Corporation determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance
are
disproportionate to the amount of coverage provided, the coverage provided
by
such insurance is so limited by exclusions that it provides an insufficient
benefit, or Indemnitee is covered by similar insurance maintained by a
subsidiary of the Corporation.
-6-
15. Savings
Clause. If
this
Agreement or any portion hereof is invalidated on any ground by any court of
competent jurisdiction, the Corporation shall nevertheless indemnify Indemnitee
to the extent permitted by any applicable portion of this Agreement that has
not
been invalidated or by any other applicable law.
16. Notice.
Indemnitee
shall, as a condition precedent to his or her right to be indemnified under
this
Agreement, give to the Corporation notice in writing as soon as practicable
of
any Proceeding for which indemnity will or could be sought under this Agreement.
Notice to the Corporation shall be directed to MOD-PAC CORP., 0000 Xxxxxxx
Xxxxxx, Xxxxxxx, Xxx Xxxx 00000-0000, Attention: Corporate Secretary (or such
other address as the Corporation shall designate in writing to Indemnitee).
Notice shall be deemed received three days after the date postmarked if sent
by
prepaid mail, properly addressed. In addition, Indemnitee shall give the
Corporation such information and cooperation as it may reasonably require and
as
shall be within Indemnitee’s power.
17. Counterparts.
This
Agreement may be executed in any number of counterparts, all of which shall
be
deemed to constitute one and the same instrument.
18. Applicable
Law.
This
Agreement shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York
19. Successors
and Assigns.
This
Agreement shall be binding upon the Corporation and its successors and
assigns.
20. Amendments.
No
amendment, waiver, modification, termination, or cancellation of this Agreement
shall be effective unless in writing signed by both parties hereto. The
indemnification rights afforded to Indemnitee hereby are contract rights and
may
not be diminished, eliminated, or otherwise affected by amendments to the
Certificate of Incorporation or Bylaws of the Corporation or by other
agreements.
21. Cessation
of Employment.
The
benefits of this Agreement shall extend to and include officers, directors
and
key employees of the Corporation who retire or cease their employment with
the
Corporation.
22. Prior
Agreements.
This
Agreement replaces and supersedes all prior agreements dealing with the same
subject matter as this Agreement.
23. Cooperation
and Interest.
The
Corporation shall cooperate in good faith with the Indemnitee and use its best
efforts to ensure that the Indemnitee is indemnified and/or reimbursed for
liabilities described in this Agreement to the fullest extent permitted by
law.
24. Effective
Date.
The
provisions of this Agreement shall cover claims, actions, suits and proceedings,
whether now pending or hereafter commenced, and shall be retroactive to cover
acts or omissions or alleged acts or omissions which heretofore have taken
place.
-7-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and signed as of the day and year first above written.
| Attest: | MOD-PAC CORP. | |
| |
|
|
| /s/ Xxxx X. Xxxxxxxx | By: | /s/ Xxxxxx X. Xxxxx |
|
Secretary |
Name: Xxxxxx X. Xxxxx |
|
| Title: President and CEO | ||
| /s/ Xxxxx X. Xxxxxxx | ||
|
Indemnitee
|
||
-8-
