FORM OF INDEMNIFICATION AGREEMENT
FORM
OF INDEMNIFICATION AGREEMENT
THIS
INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of the 1st
day of July, 0000,
xxxxxxx Xxxxx Xxxxxxxxxx Systems, Inc., a Pennsylvania corporation (the
“Company”), and ______________ (“Indemnitee”).
WHEREAS,
Indemnitee is a member of the Board of Directors of the Company (the “Board
of Directors”) and/or an officer of the Company and in such capacity, or
capacities, is performing valuable services for the Company; and
WHEREAS,
the Company’s By-laws, as amended (the “Company By-Laws” and, together
with the Company’s Articles of Incorporation, as amended, the “Governing
Instruments”) provide for the indemnification of the Company’s directors and
officers; and
WHEREAS,
Section 4 of Article VII of the Company By-Laws and Section 1746 of the
Pennsylvania Business Corporation Law (the “PBCL”) provide that they
shall not be deemed exclusive of any other rights to indemnification or
advancement of expenses to which directors or officers may be entitled under
any
by-law, agreement, vote of shareholders or disinterested directors or otherwise;
and
WHEREAS,
the number of lawsuits and shareholders’ derivative lawsuits against
corporations, their directors and officers has increased in recent years, such
lawsuits frequently are without merit and seek damages in amounts having no
reasonable relationship to the amount of compensation received by the directors
and officers from the corporation, and such lawsuits whether or not meritorious
are expensive and time-consuming to defend; and
WHEREAS,
adequate directors and officers liability insurance may not be available at
a
reasonable cost; and
WHEREAS,
the Company desires that Indemnitee continue to serve as a director and/or
an
officer of the Company free from undue concern for unpredictable or unreasonable
claims for damages by reason of Indemnitee’s status as a director and/or an
officer of the Company, by reason of Indemnitee’s decisions or actions on the
Company’ behalf or by reason of Indemnitee’s decisions or actions in another
capacity for the Company while serving as a director and/or an officer of the
Company; and
WHEREAS,
the Board of Directors has determined that the Company’s entry into this
Agreement is not only reasonable and prudent but also promotes the best
interests of the Company and its shareholders; and
WHEREAS,
Indemnitee has agreed to continue to serve as a director and/or an officer
of
the Company in reliance on the protections afforded to him under this
Agreement;
NOW,
THEREFORE, in consideration of Indemnitee’s continued service as a director
and/or an officer of the Company and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Indemnification.
Subject only to the exclusions set forth in this Agreement, the Company hereby
agrees (i) to hold harmless and indemnify Indemnitee, from time to time, against
any and all Expenses and Liabilities (as such terms are defined in Section
1(h)
below) to the fullest extent authorized or permitted by the PBCL (or any other
applicable law), the Governing Instruments in effect on the date hereof or
as
such law or the Governing Instruments may from time to time be amended (but
in
the case of any such amendment, only to the extent such amendment permits the
Company to provide broader indemnification rights than such law or Governing
Instruments permitted the Company to provide prior to such amendment) and (ii)
to take all such action as may reasonably be required or requested to carry
out
such indemnification. Notwithstanding the foregoing, the Company shall not
be
required to indemnify Indemnitee for any Expenses and/or Liabilities to the
extent that such amounts have been paid directly to or for the account of
Indemnitee pursuant to any directors and officers liability insurance policy
maintained by the Company. Without limiting the generality of the
foregoing:
(a) Third
Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee was
or is a party or is threatened to be made a party to any Proceeding (as defined
in Section 1(h) below), other than a Proceeding by or in the right of the
Company, by reason of the fact that Indemnitee is or was a director and/or
an
officer of the Company, or is or was serving at the request of the Company
as a
director, officer, employee or agent of another corporation, limited liability
company, partnership, joint venture, trust or other enterprise (including,
without limitation, service with respect to any employee benefit plan), against
any and all Expenses and Liabilities actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with such Proceeding, and any
appeal therefrom, provided that Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests
of
the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee’s conduct was unlawful. The termination
of any action, suit or 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 satisfy the foregoing standard of conduct
to
the extent applicable thereto.
(b) Proceedings
By or in the Right of the Company. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
Proceeding by or in the right of the Company by reason of the fact that
Indemnitee is or was a director and/or an officer of the Company, or is or
was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, limited liability company, partnership, joint venture,
trust or other enterprise (including, without limitation, service with respect
to any employee benefit plan), against any and all Expenses actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with
the defense or settlement of such Proceeding, and any appeal therefrom, if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to
be in or not opposed to the best interests of the Company, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company unless
and
only to the extent that the Court of Common Pleas of Allegheny County,
Pennsylvania or the court in which such Proceeding was brought shall determine
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 such Expenses which the Court of Common Pleas of Allegheny County,
Pennsylvania or such other court shall deem proper.
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(c) Successful
Defense. To the extent that Indemnitee has been successful on the merits or
otherwise in the defense of any Proceeding referred to in Section 1(a) or 1(b)
above, or in the defense of any claim, issue or matter therein, the Company
shall indemnify Indemnitee against any and all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
Dismissal of any Proceeding with prejudice, or a settlement not involving any
payment or assumption of liability, shall be deemed a successful
defense.
(d) Partial
Indemnification. If Indemnitee is entitled to indemnification under any
provision of this Agreement for a portion of the Expenses and/or Liabilities
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in the
investigation, defense, appeal or settlement of any Proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.
(e) Advancement
of Expenses. All Expenses incurred by Indemnitee or on Indemnitee’s behalf
in the investigation, defense or appeal of a Proceeding referred to in either
of
Sections 1(a) and 1(b) of this Agreement, or in enforcing Indemnitee’s rights
under any provisions of this Agreement, shall be paid by the Company in advance
of the final disposition of such Proceeding in the manner prescribed by Section
3 below.
(f) Amendments
to Indemnification Rights. The Company shall not adopt any amendment to its
Governing Instruments, the effect of which would be to deny, diminish or
encumber Indemnitee’s rights to indemnity pursuant to the Governing Instruments,
the PBCL or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the “Effective Date”)
upon which the amendment was approved by the Board of Directors. In the event
that the Company shall adopt any amendment to its Governing Instruments the
effect of which is to change Indemnitee’s rights to indemnity under such
instruments, such amendment shall apply only to acts or failures to act
occurring entirely after the Effective Date thereof. The Company shall give
written notice to Indemnitee of any proposal with respect to any such amendment
no later than the date such amendment is first presented to the Board of
Directors (or any committee thereof) for consideration, and shall provide a
copy
of any such amendment to Indemnitee promptly after its adoption.
(g) Indemnification
for Expenses as a Witness. To the extent Indemnitee is, by reason of the
fact that Indemnitee is or was a director and/or an officer of the Company
(or
is or was serving at the Company’s request in any one or more of the capacities
described in Sections 1(a) and 1(b) of this Agreement), a witness in any
Proceeding, the Company shall indemnify Indemnitee against all Expenses in
connection therewith.
(h) Certain
Definitions. As used in this Agreement:
(i) “Expenses”
shall mean any and all expenses to the fullest extent permitted by the PBCL
(or
any other applicable law), the Governing Instruments in effect on the date
hereof or as such law or Governing Instruments may from time to time be amended
(but, in the case of any such amendment, only to the extent such amendment
broadens the range or amount of expenses that may be paid or reimbursed relative
to the range or amounts permitted before such amendment), including, without
limitation, any and all retainers, court costs,
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transcript
costs, fees of experts, witness fees, private investigators, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
fax
transmission charges, secretarial services, delivery service fees, attorneys’
fees, and all other costs, 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, or otherwise
participating in, a Proceeding or in connection with seeking indemnification
under this Agreement or enforcing this Agreement in accordance with Section
3(g)
below. Expenses also shall include the foregoing expenses incurred in
connection with any appeal resulting from any action, suit or proceeding,
including, without limitation, the premium, security for, and other costs
relating to any cost bond, supersedeas bond, or other appeal bond or its
equivalent.
(ii) “Liabilities”
shall mean any and all obligations, indebtedness and liabilities of any kind
(including, without limitation, any and all claims, judgments, settlements,
fines, ERISA excise taxes, damages, losses, deficiencies, costs, penalties,
interest, expenses, charges, and fees), to the fullest extent permitted by
the
PBCL (or any other applicable law), the Governing Instruments in effect on
the
date hereof or as such law or Governing Instruments may from time to time be
amended (but, in the case of any such amendment, only to the extent such
amendment broadens the range or amount of liabilities that may be paid,
reimbursed or indemnified to an Indemnitee relative to the range or amounts
permitted before such amendment).
(iii) “Proceeding”
shall mean any and all threatened, pending or completed actions, suits or
proceedings, whether civil, criminal, administrative or investigative and
whether formal or informal.
2. Limitations
on Indemnification. No indemnity pursuant to Section 1 above shall be paid
by the Company:
(a) on
account of any suit in which judgment in a final, non-appealable decision is
rendered against Indemnitee for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company within the meaning of Section
16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or similar provisions of federal or state law;
(b) for
Expenses incurred by or on behalf of Indemnitee, as a plaintiff, in a suit
against the Company or against one or more other directors and/or officers
of
the Company (other than a suit brought by Indemnitee to enforce Indemnitee’s
rights to indemnification pursuant to this Agreement or as otherwise provided
in
Section 6 below), unless such suit is authorized by the Board of Directors
or
such indemnification is required by law;
(c) if
a
final, non-appealable decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(d) for
amounts paid by Indemnitee in settlement of any Proceeding without the Company’s
written consent, which consent shall not be unreasonably withheld, delayed
or
conditioned.
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3. Indemnification
Procedures.
(a) Notice
to the Company. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof
is to be made against the Company under this Agreement, notify the Company
of
the commencement thereof. Such notice shall set forth in reasonable detail
the
events giving rise to such claim and the amount requested, if known. Failure
of
Indemnitee to provide such notice shall not relieve the Company of its
obligations under this Agreement except to the extent such failure has a
material and adverse effect on the ability of the Company to meet such
obligations.
(b) Notice
to Insurers. If, at the time of receipt of such notice, the Company has
directors and officers liability insurance in effect, the Company shall give
prompt notice of the commencement of such Proceeding to the insurer or insurers
in accordance with the procedures set forth in the respective policy or policies
in favor of Indemnitee. The Company shall thereafter take all necessary or
desirable action to cause such insurer or insurers to pay, on behalf of
Indemnitee, all Expenses and Liabilities payable as a result of such Proceeding
in accordance with the terms of such policy or policies.
(c) Advancement
of Expenses. Subject to Sections 3(d) and 3(e) below, the Expenses
reasonably incurred by Indemnitee or on Indemnitee’s behalf in investigating,
defending or appealing any Proceeding covered by Section 1 above, or in
enforcing Indemnitee’s rights under any provisions of this Agreement, shall be
paid by the Company within 20 days of Indemnitee’s written request therefor even
if there has been no final disposition of such Proceeding. Indemnitee’s written
request shall state the amount requested and shall be accompanied by copies
of
the invoices or other relevant documentation.
(d) Undertaking
to Repay Advances. Indemnitee undertakes and agrees, if and to the extent
required by applicable law, that Indemnitee shall reimburse the Company for
all
advances of Expenses paid by the Company to or for the account of Indemnitee
under this Agreement with respect to any Proceeding in the event and only to
the
extent that it shall ultimately be determined that Indemnitee was not entitled
to be indemnified under this Agreement with respect to such
Proceeding.
(e) Assumption
of Defense by the Company. Except as otherwise provided below, the Company,
jointly with any other indemnifying party similarly notified, will be entitled
to assume the defense of any Proceeding of which it has been notified by
Indemnitee pursuant to Section 3(a) above, with counsel reasonably satisfactory
to Indemnitee; provided, however that, without the prior written
consent of Indemnitee, the Company shall not settle, compromise or consent
to
the entry of any judgment in any such Proceeding if and to the extent the
claimant seeks any non-monetary relief from Indemnitee. After notice
from the Company to Indemnitee of its election to assume the defense thereof,
the Company will not be liable to Indemnitee under this Agreement for any legal
or other Expenses subsequently incurred by Indemnitee; provided,
however, that Indemnitee shall have the right to employ Indemnitee’s own
counsel in such Proceeding at the expense of the Company if, at any time after
such notice from the Company, (i) the employment of counsel by Indemnitee has
been authorized by the Company, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee
in
the conduct of such defense, or (iii) the Company shall not in fact have
employed counsel to assume the defense of such Proceeding, in each of which
cases the Expenses of Indemnitee’s counsel shall be subject to reimbursement
in
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accordance
with the terms of this Agreement. The Company shall not be entitled
to assume Indemnitee’s defense of any Proceeding brought by the Company or as to
which Indemnitee shall have made the conclusion provided for in clause (ii)
of
the preceding sentence.
(f) Determination
of Right to Entitlement.
(i) In
the
event that Indemnitee incurs liability for any Liabilities (or, to the extent
not previously advanced pursuant to Section 3(c) above, Expenses), and
indemnification is sought under this Agreement, the Company shall pay (or
provide for payment if so required by the terms of any judgment or settlement)
the amount of such liability within 20 days of Indemnitee’s written request
therefor unless a determination is made within such 20 day period that the
claims giving rise to such request are excluded or indemnification is otherwise
not due under this Agreement. Such determination, and any determination required
by applicable law as to whether Indemnitee has met the standard of conduct
required to qualify and entitle Indemnitee, partially or fully, to
indemnification under Section 1 of this Agreement, shall be made, at the
Company’s discretion, (x) by the Board of Directors by a majority vote of the
directors who were not parties to such Proceeding even though less than a
quorum, or (y) if such a majority is not obtainable, or even if obtainable
a
majority of the disinterested directors so directs, by written opinion of
“independent legal counsel” (as defined below) selected by the Company and
reasonably satisfactory to Indemnitee, or (z) by the Company’s shareholders;
provided, however, that if a “change of control” (as defined
below) has occurred such determination shall be made by written opinion of
independent legal counsel selected by Indemnitee or, if requested by Indemnitee,
by the Company.
(A) The
term “change of control” shall mean: (x) the consummation of any transaction
after which any “person” or “group” (as such terms are used in Sections 3(a)(9),
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange
Act”)) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities, or possesses the power
to
vote or control the vote of securities, of the Company representing 20% or
more
of the combined voting power of the Common Stock or, if greater, all outstanding
securities, of the Company; or (y) the consummation of any merger or
consolidation of the Company with any other corporation or entity, other than
a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least a majority of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after
such merger or consolidation, or the shareholders of the Company approve a
plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s
assets.
(B) The
term “independent legal counsel” shall mean for this purpose an attorney or firm
of attorneys experienced in matters of
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corporation
law that is not now nor has within the previous three years been retained to
represent Indemnitee, the Company or any other party to the Proceeding giving
rise to the claim for indemnification hereunder; provided that “independent
legal counsel” shall not include any person who under applicable standards of
professional conduct would have a conflict of interest in representing
Indemnitee or the Company in an action to determine Indemnitee’s rights under
this Agreement.
(ii) Notwithstanding
the foregoing, Indemnitee may within 60 days after a determination adverse
to
Indemnitee has been made as provided above, or if no determination has been
made
within 20 days of Indemnitee’s written request for payment, petition the Court
of Common Pleas of Allegheny County, Pennsylvania or any other court of
competent jurisdiction, or may seek an award in arbitration to be conducted
by a
single arbitrator pursuant to the rules of the American Arbitration Association,
which award shall be deemed final, unappealable and binding, to determine
whether Indemnitee is entitled to indemnification under this Agreement, and
such
court or arbitrator, as the case may be, shall thereupon have the exclusive
authority to make such determination unless and until such court or arbitrator
dismisses or otherwise terminates such action without having made a
determination. The court or arbitrator, as the case may be, shall make an
independent determination of entitlement irrespective of any prior determination
made by the Board of Directors, independent legal counsel or shareholders.
In
any such action before the court or arbitrator, Indemnitee shall be presumed
to
be entitled to indemnification and the Company shall have the burden of proving
that indemnification is not required under this Agreement. All fees and expenses
of any arbitrator pursuant to this provision shall be paid by the
Company.
(g) Enforcement
Expenses. In the event that Indemnitee brings suit or takes any other action
to enforce Indemnitee’s rights or to collect monies due under this Agreement,
and if Indemnitee is successful therein (or if not successful, Indemnitee
nevertheless acted in good faith in bringing such suit or taking such other
action), the Company shall reimburse (to the extent not previously advanced)
Indemnitee for all of Indemnitee’s reasonable Expenses in any such suit or
action.
4. Continuation
of Indemnification. The Company’s obligations to indemnify Indemnitee
hereunder shall continue throughout the period Indemnitee is a director and/or
an officer of the Company (or is serving at the Company’s request in any one or
more of the capacities described in Sections 1(a) and 1(b) above) and thereafter
so long as Indemnitee shall be subject to any possible claim or Proceeding
by
reason of the fact that Indemnitee was a director and/or an officer of the
Company (or was serving in such other capacities).
5. Successors
and Assigns. This Agreement shall be binding upon the Company, its
successors and assigns (including, without limitation, any transferee of all
or
substantially all of its assets and any successor by merger or otherwise by
operation of law), and shall inure to the benefit of Indemnitee and Indemnitee’s
heirs, personal representatives, executors and administrators and shall be
binding upon Indemnitee and Indemnitee’s successors in interest under this
Agreement.
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6. Rights
Not Exclusive. The rights provided hereunder shall not be deemed exclusive
of any other rights to which Indemnitee may be entitled under any provision
of
law, the Governing Instruments, other agreement, vote of shareholders or of
disinterested directors or otherwise.
7. Subrogation.
Upon payment of any amount under this Agreement, the Company shall be subrogated
to the extent of such payment to all of Indemnitee’s rights of recovery therefor
and Indemnitee shall take all reasonable actions requested by the Company to
secure such rights, including, without limitation, execution of all documents
necessary to enable the Company to enforce such rights.
8. Severability.
In the event that any provision of this Agreement shall be held by a court
of
competent jurisdiction to be invalid, illegal or unenforceable for any reason,
such provision shall be limited or modified in its application to the minimum
extent necessary to avoid a violation of law, and, as so limited or modified,
such provision and the balance of this Agreement shall be enforceable in
accordance with their terms.
9. Integration.
This Agreement embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to the subject matter
hereof.
10. Modification.
No amendment, modification, termination or cancellation of this Agreement shall
be effective unless in writing signed by both parties hereto.
11. Notices.
All notices given under this Agreement shall be in writing and delivered either
(i) personally, (ii) by registered or certified mail (postage prepaid, return
receipt requested), (iii) by recognized overnight courier service or (iv) by
telecopy (if promptly followed by a copy delivered as provided in clauses (i),
(ii) or (iii) above), as follows:
If
to
Indemnitee: [NAME]
[ADDRESS]
If
to the
Company: North
Pittsburgh Systems, Inc.
0000
Xxxxxxxx Xxxx
Xxxxxxxx,
XX 00000-0000
Attention:
President and
Treasurer
Notices
hereunder given as provided above shall be deemed to be duly given upon delivery
if delivered personally, three business days after mailing if by registered
or
certified mail, one business day after mailing if by overnight courier service
and upon confirmation of transmission if by telecopy.
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12. Interpretation. Section
references are to this Agreement, unless otherwise specified. The
captions in this Agreement are for convenience only and shall not in any way
affect the meaning or construction of any provisions of this
Agreement.
13. Counterparts. This
Agreement may be executed in counterparts, all of which, taken together, shall
be considered one and the same agreement, it being understood that counterparts
may be delivered by facsimile.
14. Governing
Law. This Agreement shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Pennsylvania without regard to principles of
conflicts of laws.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
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NORTH
PITTSBURGH SYSTEMS, INC.
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By:
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Name:1
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Title:
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[NAME
OF DIRECTOR/OFFICER]
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__________________
1 Xxxxx
X. Xxxxx, President, except in the case of the agreement in which Xxxxx X.
Xxxxx
is the Indemnitee, Xxxxx X. Xxxxxx, Senior Vice President.
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