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EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into as of this 27th day of November, 1996, by and between Atrium Corporation,
a Delaware corporation (including any successors thereto, the "Company"), and
Xxxxxxx X. Xxxxxxxx ("Indemnitee").
RECITALS:
A. Competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors, officers or in other capacities
unless they are provided with adequate protection through insurance or
indemnification (or both) against claims and actions against them arising out
of their service to and activities on behalf of those corporations.
B. The current uncertainties relating to the availability of
adequate insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons.
C. The Board of Directors of the Company (the "Board") has
determined that the continuation of present trends in litigation will make it
more difficult to attract and retain competent and experienced persons, that
this situation is detrimental to the best interests of the Company's
stockholders, and that the Company should act to assure its directors and
officers that there will be increased certainty of adequate protection in the
future.
D. It is reasonable, prudent and necessary for the Company to
obligate itself contractually to indemnify its directors and officers to the
fullest extent permitted by applicable law in order to induce them to serve or
continue to serve the Company.
E. Indemnitee is willing to serve and continue to serve the
Company on the condition that he be indemnified to the fullest extent permitted
by law.
F. Concurrently with the execution of this Agreement, Indemnitee
is agreeing to serve or to continue to serve as a director or officer of the
Company.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises,
Indemnitee's agreement to serve or continue to serve as a director or officer
of the Company, and the covenants contained in this Agreement, the Company and
Indemnitee hereby covenant and agree as follows:
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1. Certain Definitions:
For purposes of this Agreement:
(a) Affiliate: shall mean any Person that directly, or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with the Person specified.
(b) Change of Control: shall mean the occurrence of any
of the following events:
(i) The acquisition after the date of this
Agreement by any individual, entity, or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (x) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this paragraph (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
or any Subsidiary thereof, (B) any acquisition by the Company or any Subsidiary
thereof, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary of the Company, (D)
any acquisition by one or more members of the HMC Group, or (E) any acquisition
by any entity or its security holders pursuant to a transaction which complies
with clauses (A), (B), and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the date of this
Agreement, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of this Agreement (A) who
is a member of the HMC Group, or (B) whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board, shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or an acquisition of assets of another entity (a
"Business Combination"), other than a Business Combination with one or more
members of the HMC Group, in each case, unless, immediately following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common stock or
other equity interests and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors (or
similar governing body), as the case may be, of the
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entity resulting from such Business Combination (including, without limitation,
an entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more Subsidiaries) in proportions not materially different from their
ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any entity resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such entity resulting from such Business Combination or any Subsidiary of
either of them) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the entity
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such entity except to the extent that
such ownership existed prior to the Business Combination, and (C) at least a
majority of the members of the board of directors (or similar governing body)
of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Claim: shall mean any threatened, pending, or
completed action, suit or proceeding (including, without limitation, securities
laws actions, suits and proceedings and also any cross claim or counterclaim in
any action, suit or proceeding), whether civil, criminal, arbitral,
administrative or investigative in nature, or any inquiry or investigation
(including discovery), whether conducted by the Company or any other Person,
that Indemnitee in good faith believes might lead to the institution of any
action, suit or proceeding.
(d) Expenses: shall mean all costs, expenses (including
attorneys' and expert witnesses' fees), and obligations paid or incurred in
connection with investigating, defending (including affirmative defenses and
counterclaims), being a witness in, or participating in (including on appeal),
or preparing to defend, be a witness in, or participate in, any Claim relating
to any Indemnifiable Event.
(e) Indemnifiable Event: shall mean any actual or
alleged act, omission, statement, misstatement, event or occurrence related to
the fact that Indemnitee is or was a director, officer, agent or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust, or other enterprise, or by reason of any
actual or alleged thing done or not done by Indemnitee in any such capacity.
For purposes of this Agreement, the Company agrees that Indemnitee's service on
behalf of or with respect to any Subsidiary or employee benefits plan of the
Company or any Subsidiary of the Company shall be deemed to be at the request
of the Company.
(f) Indemnifiable Liabilities: shall mean all Expenses
and all other liabilities, damages (including, without limitation, punitive,
exemplary, and the multiplied portion of any damages), judgments, payments,
fines, penalties, amounts paid in settlement, and awards paid or incurred that
arise out of, or in any way relate to, any Indemnifiable Event.
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(g) Potential Change of Control: shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; (ii) any Person
(including the Company) publicly announces an intention to take or to consider
taking actions that, if consummated, would constitute a Change of Control; or
(iii) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change of Control has occurred.
(h) Reviewing Party: shall mean (i) a member or members
of the Board who are not parties to the particular Claim for which Indemnitee
is seeking indemnification or (ii) if a Change of Control has occurred and
Indemnitee so requests, or if the members of the Board so elect, or if all of
the members of the Board are parties to such Claim, Special Counsel.
(i) Special Counsel: shall mean special, independent
legal counsel selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld), and who has not otherwise
performed material services for the Company or for Indemnitee within the last
three years (other than as Special Counsel under this Agreement or similar
agreements).
(j) Subsidiary: shall mean, with respect to any Person,
any corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by that Person.
2. Indemnification and Expense Advancement.
(a) The Company shall indemnify Indemnitee and hold
Indemnitee harmless to the fullest extent permitted by law, as soon as
practicable but in any event no later than 30 days after written demand is
presented to the Company, from and against any and all Indemnifiable
Liabilities. Notwithstanding the foregoing, the obligations of the Company
under Section 2(a) shall be subject to the condition that the Reviewing Party
shall not have determined (in a written opinion, in any case in which Special
Counsel is involved) that Indemnitee is not permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall require any
determination under this Section 2(a) to be made by the Reviewing Party prior
to the disposition or conclusion of the Claim against the Indemnitee.
(b) If so requested by Indemnitee, the Company shall
advance to Indemnitee all reasonable Expenses incurred by Indemnitee to the
fullest extent permitted by law (or, if applicable, reimburse Indemnitee for
any and all reasonable Expenses incurred by Indemnitee and previously paid by
Indemnitee) within ten business days after such request (an "Expense Advance").
The Company shall be obligated from time to time at the request of Indemnitee
to make or pay an Expense Advance in advance of the final disposition or
conclusion of any Claim. In connection with any request for an Expense Advance,
if requested by the Company, Indemnitee or Indemnitee's counsel shall submit an
affidavit stating that the Expenses to which the Expense Advances relate are
reasonable. Any dispute as to the reasonableness of any Expense shall not delay
an Expense Advance by the Company. If, when, and to the extent that the
Reviewing Party determines that (i) Indemnitee would not be permitted to be
indemnified with respect to a Claim under applicable law or (ii) the amount of
the Expense Advance was not reasonable, the Company shall be entitled to be
reimbursed by Indemnitee and Indemnitee hereby agrees to reimburse the Company
without interest (which
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agreement shall be an unsecured obligation of Indemnitee) for (x) all related
Expense Advances theretofore made or paid by the Company in the event that it
is determined that indemnification would not be permitted or (y) the excessive
portion of any Expense Advances in the event that it is determined that such
Expenses Advances were unreasonable, in either case, if and to the extent such
reimbursement is required by applicable law; provided, however, that if
Indemnitee has commenced legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee could be indemnified under applicable
law, or that the Expense Advances were reasonable, any determination made by
the Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law or that the Expense Advances were unreasonable shall not
be binding, and the Company shall be obligated to continue to make Expense
Advances, until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed), which
determination shall be conclusive and binding. If there has been a Change of
Control, the Reviewing Party shall be Special Counsel, if Indemnitee so
requests. If there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively is not permitted to be
indemnified in whole or part under applicable law or that any Expense Advances
were unreasonable, Indemnitee shall have the right to commence litigation in
any court in the states of Texas, New York or Delaware having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company
and Indemnitee.
(c) Nothing in this Agreement, however, shall require the
Company to indemnify Indemnitee with respect to any Claim initiated by
Indemnitee, other than a Claim solely seeking enforcement of the Company's
indemnification obligations to Indemnitee or a Claim authorized by the Board.
3. Change of Control. The Company agrees that, if there is a
Potential Change of Control or a Change of Control and if Indemnitee requests
in writing that Special Counsel be the Reviewing Party, then Special Counsel
shall be the Reviewing Party. In such a case, the Company agrees not to
request or seek reimbursement from Indemnitee of any indemnification payment or
Expense Advances unless Special Counsel has rendered its written opinion to the
Company and Indemnitee that the Company was not or is not permitted under
applicable law to indemnify Indemnitee or that such Expense Advances were
unreasonable. However, if Indemnitee has commenced legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee could
be indemnified under applicable law or that the Expense Advances were
reasonable, any determination made by Special Counsel that Indemnitee would not
be permitted to be indemnified under applicable law or that the Expense
Advances were unreasonable shall not be binding, and the Company shall be
obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefore have been exhausted or lapsed), which determination shall be
conclusive and binding. The Company agrees to pay the reasonable fees of
Special Counsel and to indemnify Special Counsel against any and all expenses
(including attorneys' fees), claims, liabilities, and damages arising out of or
relating to this Agreement or Special Counsel's engagement pursuant hereto.
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4. Establishment of Trust. In the event of a Potential Change of
Control or a Change of Control, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee (the "Trust") and from
time to time upon written request of Indemnitee shall fund the Trust in an
amount equal to all Indemnifiable Liabilities reasonably anticipated at the
time to be incurred in connection with any Claim. The amount to be deposited in
the Trust pursuant to the foregoing funding obligation shall be determined by
the Reviewing Party. The terms of the Trust shall provide that, upon a Change
of Control, (i) the Trust shall not be revoked or the principal thereof
invaded, without the written consent of Indemnitee; (ii) the trustee of the
Trust shall advance, within ten business days of a request by Indemnitee, any
and all reasonable Expenses to Indemnitee (and Indemnitee hereby agrees to
reimburse the Trust under the circumstances in which Indemnitee would be
required to reimburse the Company for Expense Advances under this Agreement),
any required determination concerning the reasonableness of the Expenses to be
made by the Reviewing Party, (iii) the Trust shall continue to be funded by the
Company in accordance with the funding obligation set forth above; (iv) the
trustee of the Trust shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement; and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as
the case may be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The trustee of the Trust shall be chosen by Indemnitee, and
shall be an institution that is not affiliated with Indemnitee. Nothing in
this Section 4 shall relieve the Company of any of its obligations under this
Agreement.
5. Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee against any and all costs and expenses (including
attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall
(within two business days of that request) advance those costs and expenses to
Indemnitee that are incurred by Indemnitee if Indemnitee, whether by formal
proceedings or through demand and negotiation without formal proceedings: (a)
seeks to enforce Indemnitee's rights under this Agreement, (b) seeks to enforce
Indemnitee's rights to expense advancement or indemnification under any other
agreement or provision of the Company's Certificate of Incorporation (the
"Certificate of Incorporation") or Bylaws (the "Bylaws") now or hereafter in
effect relating to Claims for Indemnifiable Events, or (c) seeks recovery under
any directors' and officers' liability insurance policies maintained by the
Company, in each case regardless of whether Indemnitee ultimately prevails;
provided that a court of competent jurisdiction has not found Indemnitee's
claim for indemnification or expense advancements under the foregoing clauses
(a), (b) or (c) to be frivolous, presented for an improper purpose, without
evidentiary support, or otherwise sanctionable under Federal Rule of Civil
Procedure No. 11 or an analogous rule or law, and provided further, that if a
court makes such a finding, Indemnitee shall reimburse the Company for all
amounts previously advanced to Indemnitee pursuant to this Section 5. Subject
to the provisos contained in the preceding sentence, to the fullest extent
permitted by law, the Company waives any and all rights that it may have to
recover its costs and expenses from Indemnitee.
6. Partial Indemnity. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some, but not
all, of Indemnitee's Indemnifiable Liabilities, the Company shall indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
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7. Contribution.
(a) Contribution Payment. To the extent the
indemnification provided for under any provision of this Agreement is
determined (in the manner hereinabove provided) not to be permitted under
applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the
extent permitted by law, contribute to the amount of any and all Indemnifiable
Liabilities incurred or paid by Indemnitee for which such indemnification is
not permitted. The amount the Company contributes shall be in such proportion
as is appropriate to reflect the relative fault of Indemnitee, on the one hand,
and of the Company and any and all other parties (including officers and
directors of the Company other than Indemnitee) who may be at fault
(collectively, including the Company, the "Third Parties"), on the other hand.
(b) Relative Fault. The relative fault of the Third
Parties and the Indemnitee shall be determined (i) by reference to the relative
fault of Indemnitee as determined by the court or other governmental agency or
(ii) to the extent such court or other governmental agency does not apportion
relative fault, by the Reviewing Party after giving effect to, among other
things, the relative intent, knowledge, access to information, and opportunity
to prevent or correct the relevant events, of each party, and other relevant
equitable considerations. The Company and Indemnitee agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation that does take account of the equitable
considerations referred to in this Section 7(b).
8. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified under any provision of this Agreement or to receive contribution
pursuant to Section 7 of this Agreement, to the extent permitted by law the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
9. No Presumption. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or
without court approval), or conviction, or upon a plea of nolo contendere, or
its equivalent, or an entry of an order of probation prior to judgment shall
not create a presumption (other than any presumption arising as a matter of law
that the parties may not contractually agree to disregard) that Indemnitee did
not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
10. Non-exclusivity. The rights of Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Bylaws or
Certificate of Incorporation or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by that change. Indemnitee's rights under this
Agreement shall not be diminished by any amendment to the Certificate of
Incorporation or Bylaws, or of any other agreement or instrument to which
Indemnitee is not a party, and shall not diminish any other rights that
Indemnitee now or in the future has against the Company.
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11. Liability Insurance. Except as otherwise agreed to by the
Company and Indemnitee in a written agreement, to the extent the Company
maintains an insurance policy or policies providing directors' and officers'
liability insurance, Indemnitee shall be covered by that policy or those
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any Company director or officer.
12. Period of Limitations. No action, lawsuit, or proceeding may
be brought against Indemnitee or Indemnitee's spouse, heirs, executors, or
personal or legal representatives, nor may any cause of action be asserted in
any such action, lawsuit or proceeding, by or on behalf of the Company, after
the expiration of two years after the statute of limitations commences with
respect to Indemnitee's act or omission that gave rise to the action, lawsuit,
proceeding or cause of action; provided, however, that, if any shorter period
of limitations is otherwise applicable to any such action, lawsuit, proceeding
or cause of action, the shorter period shall govern.
13. Amendments. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any provision of this Agreement shall be effective unless
in a writing signed by the party granting the waiver. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall that waiver
constitute a continuing waiver.
14. Other Sources. Indemnitee shall not be required to exercise
any rights that Indemnitee may have against any other Person (for example,
under an insurance policy) before Indemnitee enforces his rights under this
Agreement. However, to the extent the Company actually indemnifies Indemnitee
or advances him Expenses, the Company shall be subrogated to the rights of
Indemnitee and shall be entitled to enforce any such rights which Indemnitee
may have against third parties. Indemnitee shall assist the Company in
enforcing those rights if it pays his costs and expenses of doing so. If
Indemnitee is actually indemnified or advanced Expenses by any third party,
then, for so long as Indemnitee is not required to disgorge the amounts so
received, to that extent the Company shall be relieved of its obligation to
indemnify Indemnitee or advance Indemnitee Expenses.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
merger or consolidation), spouses, heirs and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.
16. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, that provision shall be fully severable; this Agreement
shall be construed and enforced as if that illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of that illegal, invalid, or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to the illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
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17. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in that state without giving
effect to the principles of conflicts of laws.
18. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Notices. Whenever this Agreement requires or permits notice
to be given by one party to the other, such notice must be in writing to be
effective and shall be deemed delivered and received by the party to whom it is
sent upon actual receipt (by any means) of such notice. Receipt of a notice by
the Secretary of the Company shall be deemed receipt of such notice by the
Company.
20. Complete Agreement. This Agreement constitutes the complete
understanding and agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
the parties with respect to the subject matter hereof, other than any
indemnification rights that Indemnitee may enjoy under the Certificate of
Incorporation, the Bylaws or the Delaware General Corporation Law.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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EXECUTED as of the date first written above.
ATRIUM CORPORATION
By: /s/ XXXXX X. XXXX, XX.
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Xxxxx X. Xxxx, Xx.
Executive Vice President
INDEMNITEE
/s/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx
[SIGNATURE PAGE FOR XXXXXXXX INDEMNIFICATION AGREEMENT]
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SCHEDULE
The following persons have entered into an indemnification agreement in
substantially the same form as, and with no material differences from, the
indemnification agreement of Xxxxxxx X. Xxxxxxxx filed herewith:
Xxxx Xxxxxxxxx Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx C. Xxxx Xxxxxxxxxxx
Xxxxxxx X. Xxxxxxxx Xxxx X. Xxxx
Xxxxxx X. Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx Xxxxx X. Xxxx, Xx.
Xxxxxxx X. Xxxxxxxx Xxxxxx Xxxxxxxx
