INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
INDEMNIFICATION
AND HOLD HARMLESS AGREEMENT
THIS
INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
(the
“Agreement”)
is
entered into as of the 25th day of April, 2008, but effective as of April 1,
2008, by and between Orion
Ethanol, Inc.,
a
Nevada corporation (the “Corporation”), and Xxxxx
Xxxxxx Xxxx,
an
individual (“Xxxx”).
WHEREAS,
the
Corporation holds a 62% membership interest in Gateway Holdco, L.L.C.
(“Gateway”), and Gateway has made a $3.5 million dollar capital call to its
members. This capital call will require the Corporation to contribute an
additional $2.17 million to Gateway to enable Gateway to continue operations.
The Corporation looked for and discussed alternatives for funding this
additional capital call and the board of directors (other than Xxxx) decided
the
best course of action was to accept a proposal by Xxxx for the purchase of
certain units in Gateway by Xxxx’x entity Mercy, LLC (“Buyer”) (for purposes
hereof, Buyer and Xxxx collectively referred to as “Xxxx”) in order to fund the
Corporation’s capital contribution (the “Transaction”) pursuant to that certain
Unit Purchase Agreement Dated April 25, 2008 by and between the Corporation,
Gateway and Buyer (the “Purchase Agreement”);
WHEREAS,
the
Corporation and Xxxx recognize the potential risk of litigation and other claims
being asserted against the Corporation and Xxxx resulting from the
Transaction;
WHEREAS,
in
recognition of Xxxx’x need for protection against personal liability to enhance
and induce Xxxx to enter into the Transaction, the Corporation wishes to provide
in this Agreement for the indemnification of Xxxx to the full extent (whether
partial or complete) permitted by law and as set forth in this Agreement;
and
WHEREAS,
the
Corporation and Xxxx believe it is in the best interests of each of them to
provide for indemnification of Xxxx as set forth in this Agreement.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements contained herein, and
other
good and valuable consideration, the Corporation and Xxxx hereby agree as
follows:
Section
1. Indemnification
Arrangement.
Capitalized terms used in subsection (a) are defined in subsections (b) and
(c)
(a) Indemnity.
If Xxxx
was, is or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in, a Claim
by
reason of, or arising in part out of, an Indemnifiable Event, then the
Corporation shall indemnify and hold Xxxx harmless to the fullest extent
permitted by law, as soon as practicable but in any event no later than thirty
days after written demand is presented to the Corporation, against any and
all
Expenses of such Claim.
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(b) Claim.
“Claim”
shall
mean any threatened or pending action, suit or proceeding, any inquiry or
investigation, or any appeal therefrom whether conducted by the Corporation
or
any other party, that Xxxx in good faith believes might lead to the institution
of any such action, suit or proceeding, whether civil, criminal, administrative,
investigative or other; provided,
however,
Claim
shall not include an action by or in the right of the Corporation if Xxxx shall
have been adjudged to be liable to the Corporation unless it is determined
in a
Claim that, despite the adjudication of liability but in view of all the
circumstances of the case, Xxxx is fairly and reasonably entitled to indemnity
for Expenses which the court shall deem proper.
(c) Indemnifiable
Event.
“Indemnifiable
Event”
shall
mean any event or occurrence arising from or related to, directly or indirectly,
the Transaction or the fact that Xxxx is or was serving the Corporation in
some
capacity, including without limitation, as Director, or as a consultant to,
or
as an officer, employee, or agent of the Corporation or of any corporation,
partnership, joint venture, trust or other enterprise related to the business
or
activities of the Corporation, or by reason of anything done or not done by
Xxxx
in any such capacity if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and
with respect to any criminal action or proceeding, Xxxx had no reasonable cause
to believe his conduct was unlawful. No event shall be an Indemnifiable Event
if
it is ultimately determined in a Claim that Xxxx acted in a manner that was
knowingly fraudulent, deliberately dishonest, or constituted willful misconduct.
For
purposes of clarification and not limitation, the following matters shall be
considered Indemnifiable Events for purposes of this Agreement: any claim that
is filed or promoted by the Corporation (or any company to which the Corporation
may be sold or into which Corporation may be merged), any past, present or
future shareholder of the Corporation, any board member, officer or creditor
of
the Corporation, any wholly or partially owned subsidiary of Seller, or any
other person, that is based in whole or in part on the Transaction including
but
not limited to claims, causes of action and/or allegations that the Purchase
Agreement was unfair to the Corporation, that Buyer and/or Xxxx usurped a
corporate opportunity belonging to Corporation, that the Purchase Agreement
is
void or voidable, that Buyer and/or Xxxx engaged in “xxxxxxx xxxxxxx” under
applicable SEC rules or regulations or that this Agreement was in violation
of
Nevada statutory or common law governing Seller. In addition to the above,
the
Corporation shall also defend at its cost Buyer and Xxxx against and indemnify
Buyer and Xxxx for any additional tax that is finally determined in a claim
to
be owed by Buyer and/or Xxxx that may result from a determination that the
Transaction was a partial liquidation of the Corporation, that the distribution
of Units (as defined in the Purchase Agreement) to Buyer constituted a dividend
by the Corporation, that the distribution of Units was a “part sale, part gift,”
or that the distribution of Units caused Buyer to recognize taxable
income.
(d) Expenses.
“Expenses”
shall
include reasonable attorneys’ fees and all other reasonable costs, expenses and
obligations actually incurred and paid in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to
any
Indemnifiable Event. Expenses shall also include judgments, fines, penalties
and
amounts paid in settlement (including all interest, assessments and other
charges actually incurred and paid or payable in connection with or in respect
of such Expenses) of any Claim relating to any Indemnifiable Event. Expenses
shall also include Additional Expenses as defined in Section 3
below.
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(e) For
purposes of Sections 1(b), 1(c) and 5 herein, the phrase “determined
in a Claim”
shall
mean a decision by a court, arbitrator(s), hearing officer or other judicial
agent having the requisite legal authority to make such a decision which
decision has become final and from which no appeal or other review proceeding
is
permissible.
Section
2. Notification
and Defense of Claim.
(a) Notification.
Promptly after receipt by Xxxx of notice of the commencement of any Claim,
Xxxx
will, if a claim for indemnification in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; provided,
however,
the
omission to notify the Corporation will not relieve it from any liability which
it may have to Xxxx under this Agreement if such omission does not materially
adversely prejudice the rights of the Corporation. In addition, Xxxx shall
give
the Corporation such information and cooperation as the Corporation may
reasonably require, subject to reasonable claims of privilege or other basis
for
nondisclosure by Xxxx.
(b) Defense.
With
respect to any Claim as to which Xxxx notifies the Corporation of the
commencement thereof, the Corporation will be entitled to participate therein
at
its own expense. Except as otherwise provided below, to the extent that it
may
wish, the Corporation will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Xxxx. After notice from the Corporation
to
Xxxx of its election to assume the defense thereof, the Corporation will not
be
liable to Xxxx under this Agreement for any legal expenses subsequently incurred
by Xxxx in connection with the defense thereof other than reasonable costs
of
investigation or as otherwise provided below. Xxxx shall have the right to
employ counsel in such Claim, but the fees and expenses of such counsel incurred
after notice from the Corporation of its assumption of the defense thereof
shall
be at the expense of Xxxx unless (i) the employment of counsel by Xxxx has
been
authorized by the Corporation, (ii) independent legal counsel approved by both
the Corporation and Xxxx shall have reasonably concluded, that there is or
is
likely to be a conflict of interest between the Corporation and Xxxx in the
conduct of the defense of such Claim or (iii) the Corporation shall not in
fact
have employed counsel to assume the defense of such Claim, in each of which
cases the fees and expenses of counsel shall be borne by the Corporation. The
Corporation shall not be entitled to assume the defense of any Claim brought
by
or on behalf of the Corporation or as to which the counsel for Xxxx shall have
reasonably made the conclusion, as provided in (ii) above.
(c) Settlements.
The
Corporation shall not be liable to indemnify Xxxx under this Agreement for
any
amounts paid in settlement of any Claim made without the prior written consent
made by or on behalf of a majority of the members of the Board of Directors
of
the Corporation. The Corporation shall not settle any Claim in any manner that
would impose any penalty or limitation on Xxxx or result in a finding of
wrongdoing against Xxxx without Xxxx’x written consent. Neither the Corporation
nor Xxxx will unreasonably withhold their consent to any proposed
settlement.
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Section
3. Indemnification
for Additional Expenses.
The
Corporation shall indemnify Xxxx against any and all expenses (including
reasonable attorneys’ fees) (collectively, “Additional Expenses”) which are or
may be incurred by Xxxx in connection with any claim asserted against or action
brought by Xxxx for (i) indemnification of Expenses by the Corporation under
this Agreement or any other agreement or under the Corporation’s Articles of
Incorporation or Bylaws now or hereafter in effect relating to Claims for an
Indemnifiable Event or (ii) recovery under any of directors’ and officers’
liability insurance policies maintained by the Corporation.
Section
4. Partial
Indemnity, Etc.
If Xxxx
is entitled under any provision of this Agreement to indemnification by the
Corporation for some or a portion of the Expenses of a Claim, but not, however,
for all of the total amount thereof, the Corporation shall nevertheless
indemnify Xxxx for the portion thereof to which Xxxx is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that Xxxx
has been successful on the merits or otherwise in defense of any or all Claims
relating in whole or in part to an Indemnifiable Event or in defense of any
issue or matter therein, including dismissal without prejudice, Xxxx shall
be
indemnified against all Expenses incurred in connection therewith.
Section
5. 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, shall not create a presumption
that
Xxxx did not meet any particular standard of conduct or have any particular
belief or that it has been determined in a Claim that indemnification is not
permitted by applicable law.
Section
6. Nonexclusivity.
The
rights of Xxxx hereunder shall be in addition to any other rights Xxxx may
have
under the Corporation’s Articles of Incorporation, Bylaws, or other agreements
or pursuant to resolutions or determinations of the Board of Directors, under
applicable law or otherwise. To the extent that a change in applicable law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Corporation’s Articles of
Incorporation or Bylaws and this Agreement, it is the intent of the parties
hereto that Xxxx shall enjoy by this Agreement the greater benefits so afforded
by such change.
Section
7. Liability
Insurance.
To the
extent the Corporation maintains an insurance policy or policies providing
liability insurance, Xxxx shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Corporation employee.
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Section
8. Subrogation.
In the
event of payment under this Agreement, the Corporation shall be subrogated
to
the extent of such payment to all of the rights of recovery of Xxxx, who shall
execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Corporation effectively to bring suit to enforce such
rights.
Section
9. No
Duplication of Payments.
The
Corporation shall not be liable under this Agreement to make any payment in
connection with any Claim made against Xxxx to the extent Xxxx has otherwise
actually received payment (under any insurance policy, the Corporation’s
Articles of Incorporation or Bylaws or otherwise) of the amounts otherwise
indemnifiable hereunder.
Section
10. Miscellaneous
Provisions.
(a) Dispute
Resolution.
All
disputes and controversies between the parties arising out of or in connection
with this Agreement shall be submitted to arbitration.
(b) Entire
Agreement.
This
Agreement supersedes all prior documents, understandings and agreements, oral
or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter hereof.
(c) Assignments.
None of
the parties’ rights or obligations under this Agreement may be assigned. Any
assignment in violation of the foregoing shall be null and void.
(d) Severability.
If any
one or more provisions of this agreement is held to be illegal, invalid or
unenforceable under present or future laws, then, if possible, such illegal,
invalid or unenforceable provision will be modified to such extent as is
necessary to comply with such present or future laws and such modification
shall
not affect any other provision hereof, provided that if such provision may
not
be so modified such illegality, invalidity or unenforceability will not affect
any other provision, but this Agreement will be reformed, construed and enforced
as if such invalid, illegal or unenforceable provision had never been contained
herein.
(e) Notices.
The
parties agree that, when sending written communications or other notices, they
will use their good faith best efforts to provide either a simultaneous fax
copy
of such material to the intended recipient thereof and/or give the intended
recipient telephonic notice that such written communication or other notice
is
being sent by mail. Communications and other notices given under this Agreement
will be deemed delivered when personally delivered, or on the third business
day
following deposit in the U.S. mail, first class, postage paid, and addressed
to
the party at the business address contained in the Employment
Agreement.
(f) Choice
of Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Kansas, without regard to principles of conflict of law.
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(g) Headings
and Captions.
All
headings and captions used in this Agreement are for convenience only, and
shall
not be construed to either limit or broaden the language of this Agreement
or
any particular section.
(h) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which may be
executed by one or more of the parties hereto, but all of which, when taken
together, shall constitute but one agreement binding upon all of the parties
hereto.
(i) Third-Party
Beneficiaries.
This
Agreement is not intended to confer upon any non-party rights or remedies
hereunder.
(j) Binding
Agreement.
This
Agreement shall be deemed effective and legally binding upon the parties when
it
has been executed and delivered by all parties hereto. This Agreement shall
inure to the benefit of the parties hereto and their respective successors
and
assignees.
(k) Interpretation.
The
parties hereto acknowledge and agree that (i) each party and its representatives
has reviewed and negotiated the terms and provisions of this Agreement and
have
contributed to its revision, (ii) the rule of construction to the effect that
any ambiguities are resolved against the drafting party shall not be employed
in
the interpretation of this Agreement and (iii) the terms and provisions of
this
Agreement shall be construed fairly as to all parties hereto and not in favor
of
or against any party regardless of which party was generally responsible for
the
preparation of this Agreement.
IN
WITNESS WHEREOF,
the
undersigned have executed this Agreement as of the date first set forth
above.
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By:
/s/ Xxx
Xxxxxx
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Xxx Xxxxxx, Co-Chief Executive Officer |
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/s/
Xxxxx Xxxxxx Xxxx
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Xxxxx
Xxxxxx Xxxx, individually and as a Member of Mercy,
LLC
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