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INDEMNIFICATION AGREEMENT
This Agreement is between Payless Cashways, Inc. and __________. In this
Agreement, "Payless," "we" or "us" refers to Payless Cashways, Inc. and "you"
refers to _____________. The glossary attached as Exhibit "A" defines certain
other capitalized terms used in this Agreement.
1. Date.
This date of this Agreement is February __, 1999.
2. Purpose of the Agreement.
We desire to attract and retain your services as a Payless director or
officer. We recognize, however, that you might be concerned because directors
and officers are sometimes named as parties in expensive litigation. To help
alleviate that concern and to induce you to serve, we agree to indemnify you for
certain expenses potentially resulting from such litigation. We also agree to
use reasonable efforts to maintain directors' and officers' insurance for your
benefit.
3. Agreement to Serve.
You agree to serve or to continue to serve as Payless' ___________
until you are no longer duly appointed, elected or qualified or until you
resign.
4. Directors' and Officers' Insurance.
We agree to use reasonable efforts to maintain one or more enforceable
policies of directors' and officers' insurance for your benefit. The insurance
will provide coverage in amounts which our Board of Directors determines to be
reasonable. Our obligation to maintain insurance ends when you are no longer
serving Payless in your present capacity and there is no reasonable possibility
that someone will xxx you based on your prior service to Payless in that
capacity. Our obligation to maintain insurance will also cease if such insurance
is not reasonably available or if our Board of Directors determines that the
cost of providing the insurance exceeds its benefits.
5. Agreement to Indemnify.
Subject to the limitations set forth in Section 7 of this Agreement, we
agree to indemnify you for your expenses resulting from a threatened, pending or
completed Proceeding, including any Proceeding by or in the right of Payless, if
you meet the following requirements:
- You are (or at the time in question were) serving as our Agent, or
as the Agent of another entity at our request;
- You acted in good faith and in a manner you reasonably believed to
be in (or not opposed to) our best interests;
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- You had no reason to believe your conduct was unlawful (if
the Proceeding against you is criminal); and
- Delaware law does not prohibit us from indemnifying you.
6. Advancement of Expenses.
Subject to the limitations set forth in Section 7 of the Agreement and
subject to the following conditions, we will advance all costs and expenses you
reasonably incur in connection with the investigation, defense, settlement or
appeal of any Proceeding upon receipt from you of:
- Your written affirmation of your good faith belief that you have
met the standard of conduct necessary for indemnification set
forth in Section 5 of this Agreement; and
- Your undertaking (or an undertaking on your behalf) to repay all
amounts so advanced if a court having final jurisdiction
determines that you are not entitled to indemnification for such
expenses under this Agreement or otherwise.
7. Limitation of Indemnity.
Notwithstanding anything to the contrary contained in Section 5,
Section 6 or any other section of this Agreement, we will not indemnify you or
advance expenses in connection with a Proceeding which you initiated unless our
Board of Directors authorized the Proceeding (or any part thereof). We also will
not indemnify you:
- to the extent that payment is made to you or on your behalf under
a valid and collectible insurance policy;
- to the extent that you receive payment other than under this
Agreement;
- with respect to directors' acts or omissions for which our
Certificate of Incorporation may not limit liability under
Delaware law; or
- if a court having final jurisdiction determines in a final
decision that such indemnification is not lawful.
8. Notification of Right to Indemnification.
You agree to notify us promptly after your receipt of notice that a
Proceeding has been brought (or is threatened to be brought) against you. If
your failure to notify us promptly prejudices us in our defense of a Proceeding,
we will be relieved of liability under this Agreement to the extent of the
prejudice.
9. Notice to Insurer.
If we have directors' and officers' liability insurance in effect at
the time we receive notice of a Proceeding from you, we will give prompt notice
to the insurer in accordance with the
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requirements of the insurance policy. We will take all necessary or desirable
action to cause the insurer to pay all amounts owed under the terms of the
policy.
10. Determination of Right to Indemnification.
Subject to the limitations set forth in Section 7 of this Agreement, we
agree to indemnify you if you meet the requirements for indemnification set
forth in Section 5 of this Agreement. We will determine whether you meet those
requirements using one of the following three methods:
- by a majority vote of directors who are not parties to the
Proceeding (regardless of whether there are enough such directors
to constitute a quorum);
- by Independent Legal Counsel selected by directors who are not
parties to the Proceeding; or
- by vote of our stockholders, if there are no directors who are
not parties to the Proceeding.
If Independent Legal Counsel determines your entitlement to indemnification
under this Section 10, we will pay all reasonable fees and expenses incurred by
such counsel in connection with such determination.
The persons determining your entitlement to indemnification will
presume that you are entitled to indemnification. The termination of any
Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or the equivalent, will not create a presumption that you did not act
in good faith and in a manner you believed to be in (or not opposed to) our best
interests. Such a termination also will not create a presumption that you had
reasonable cause to believe that your conduct was unlawful.
Following our determination of your entitlement to indemnification, our
Secretary or another corporate officer will notify you in writing of such
determination. If we determine that you are not entitled to indemnification, you
may pursue the remedies provided by Section 14 of this Agreement.
11. Payment of Indemnification.
If we determine that you are entitled to indemnification, we will pay
all costs and expenses you reasonably incurred in connection with the Proceeding
in question. In addition, we will pay all expenses you reasonably incurred in
cooperating with the persons responsible for determining your right to
indemnification, regardless of whether we determine that you are entitled to
indemnification.
Our obligations to make payments under this Agreement are not subject
to diminution by set off, counterclaim, abatement or otherwise. However, you
will not be released from any liability or obligation that you may owe us,
whether under this Agreement or otherwise.
12. Assumption of Defense.
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If we are required to pay the costs of any Proceeding brought against
you, we shall have the right to assume the defense of such Proceeding, with
counsel approved by you, upon delivery to you of written notice of our election
to assume the defense. Notwithstanding the foregoing, however, we shall not have
the right to assume your defense in any Proceeding brought by or in the right of
Payless or as to which you have reasonably concluded that there is a conflict of
interest between you and us in the conduct of the defense.
After we have delivered notice to you that we intend to assume the
defense of a Proceeding, you will have the right to employ separate counsel at
your expense. We will not be liable to you under this Agreement for any fees of
counsel you subsequently incur with respect to the Proceeding, unless:
- We previously have authorized you to employ separate counsel at
our expense;
- You reasonably have concluded that there is a conflict of interest
between you and us in the conduct of your defense; or
- We have failed to employ counsel to assume your defense in
such Proceeding.
13. Cooperation and Settlement of Claim.
You agree to give us such information and cooperation as we may
reasonably request in defense of any claim or threat of a claim.
You agree that we are not obligated to indemnify you under this
Agreement for any amounts you pay to settle any action or claim without our
prior written consent. We agree not to settle any action or claim in any manner
that will impose any penalty or limitation on you without your prior written
consent.
Each party to this Agreement agrees not to unreasonably withhold
consent to any proposed settlement. If either party refuses to agree to a
proposed settlement acceptable to the other party, Payless will retain
Independent Legal Counsel reasonably acceptable to you for the purpose of
determining whether the proposed settlement is reasonable under the
circumstances. Payless will pay all reasonable fees and expenses incurred by
Independent Legal Counsel in connection with such determination. If Independent
Legal Counsel determines that the proposed settlement is reasonable under all
the circumstances, the party advocating the settlement may consummate the
settlement without the consent of the other party.
14. Your Remedies.
If we fail to honor our obligations under Section 6 of this Agreement,
or if we determine that you are not entitled to indemnification under this
Agreement, you may seek (a) an adjudication in an appropriate court in the State
of Delaware or in any other court of competent jurisdiction, or (b) an award in
arbitration to be conducted by a single arbitrator under the rules of the
American Arbitration Association, for the purpose of enforcing your rights under
this Agreement. However, you may not seek such an adjudication or arbitration
later than 180 days following the earlier of (x) the date of notice of a
determination that you are not entitled to indemnification, or (y) the date 60
days after we receive your request for indemnification.
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Any judicial proceeding or arbitration commenced under this Section 14
shall be conducted de novo and without presumption that you are not entitled to
indemnification.
If the court or arbitrator determines that you are entitled to
indemnification, we shall be bound by such determination, unless:
- You have misstated a material fact or omitted a material fact
necessary to make your statements in connection with the request
for indemnification not misleading; or
- Applicable law prohibits us from indemnifying you.
In addition, we will pay your reasonable expenses incurred in successfully
establishing your right to indemnification or advancement of expenses in any
action (or settlement thereof) under this Section 14.
We shall be precluded from asserting in any judicial proceeding or
arbitration commenced under this Section 14 that the procedures and presumptions
set forth in this Agreement are not enforceable. We agree to stipulate in any
such court or before any such arbitrator that we are bound by all of the
provisions of this Agreement.
15. Notice.
All notices, requests, demands and other communications relating to
this Agreement shall be in writing and shall be deemed to be duly given if (a)
delivered by hand and receipted for by the party to whom the notice or
communication was directed, or (b) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it was so
mailed:
if to you, to:
-------------------------
-------------------------
-------------------------
or to such other address as you furnish us, and
if to Payless, to:
Payless Cashways, Inc.
Two Pershing Square
0000 Xxxx
Xxxxxx Xxxx, XX 00000
Attention: Secretary/Assistant Secretary
With a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
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Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
or to such other address as we furnish you.
16. Severability.
If a court of competent jurisdiction determines that any portion of the
Agreement is unenforceable, we will nevertheless indemnify you to the full
extent permitted by the enforceable portions of the Agreement. The invalidity or
unenforceability of any provision(s) of this Agreement will not affect the
enforceability of the Agreement's other provisions.
17. Modification and Waiver.
Any supplement, modification or amendment to this Agreement will be
binding only if both parties have executed it.
If either party waives any of the provisions of this Agreement, such
waiver will be effective only as to the particular provision and matter
expressly waived.
18. Continuation of Indemnity.
Our obligations under this Agreement shall continue during the period
in which (a) you are (or have consented to be) an Agent of Payless, or (b) are
serving as an Agent of another corporation, partnership, joint venture, trust or
other enterprise at our request. Our obligations shall also continue for as long
as you are subject to any possible claim or threatened, pending or competed
Proceeding by reason of your service in such capacity.
19. Binding Effect.
This Agreement binds us and our successors and assigns. This Agreement
inures to the benefit of you and your heirs, assigns and personal
representatives.
20. Non-Exclusivity.
The indemnification to which you are entitled under this Agreement is
not exclusive of any other indemnification to which you are or may be entitled.
21. Subrogation Rights.
If we pay any amounts under this Agreement, we will be subrogated to
the extent of such payment to your rights of recovery against any person or
organization. You agree to execute all papers required and to do everything that
may be reasonably necessary to secure such rights for us.
22. Agreement to Supersede.
This Agreement supersedes any other prior written indemnification
agreement between you and us.
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23. Governing Law.
This Agreement shall be construed, enforced and governed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in that state.
24. Counterparts.
The parties may execute any number of counterparts of this Agreement,
each of which will be an original.
25. Headings.
The headings of the paragraphs in this Agreement are for convenience
only. They do not constitute part of the Agreement and do not affect the
construction of it.
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IN WITNESS WHEREOF, The parties have executed this Agreement as of the
day and year first above written.
PAYLESS CASHWAYS, INC.
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By:__________________________
Title:____________________
[INDIVIDUAL]
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Exhibit "A"
Glossary
"Agent"
"Agent" means:
- any person who is or was a director, officer, employee, agent or
fiduciary of Payless or a subsidiary of Payless; or
- any person who is or was serving as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise or entity (including service
with respect to an employee benefit plan), if such service is or
was at the request of, or for the convenience of, or to represent
the interests of, Payless or a subsidiary of Payless.
"Expenses"
"Expenses" are all direct and indirect costs of any type or nature
which you actually and reasonably incur in connection with the investigation,
defense or appeal of a Proceeding or establishing or enforcing a right to
indemnification under the Agreement, Delaware corporation law or otherwise.
"Expenses" include, without limitation, all attorneys' fees and related
disbursements, other out-of-pocket costs and reasonable compensation for time
spent by you for which you are not otherwise compensated by us or any third
party. "Expenses" also include all judgments, fines, and Employee Retirement
Income Security Act excise taxes or penalties.
"Independent Legal Counsel"
"Independent Legal Counsel" means a law firm, a member of a law firm,
or an independent practitioner that is experienced in matters of corporation law
and does not have a conflict of interest (under applicable standards of
professional conduct) in representing either Payless or you in an action to
determine your rights under this Agreement.
"Proceeding"
"Proceeding" means any threatened, pending or completed action, suit or
other proceeding, whether civil, criminal, administrative, investigative or of
another type to which you are a party or are threatened to be made a party, or
are otherwise involved, including involvement as a witness.
