EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made and entered into as of the 3rd day
of October 1997 by and between Xxxxx Xxxxx Xxxxxx ("Indemnitee") and Assisted
Living Concepts, Inc. a Nevada corporation (the "Company").
RECITALS
A. The Company has recognized the difficulty that publicly held
corporations are having in attracting and retaining qualified directors,
officers and key employees as a result of the increasing risk of claims and
actions against them arising out of their association with the Company.
B. Indemnitee is an officer, director and/or key employee of the Company.
C. Indemnitee is willing to serve, to continue to serve and to take on
additional service for or on behalf of the Company.
D. In view of the mutual desire of the parties that Indemnitee render
valuable services to the Company, the parties have agreed to enter into this
Indemnification Agreement.
THEREFORE IT IS AGREED:
1. Definitions. The following definitions shall apply to this Agreement:
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1.1 "Act" shall be the Nevada Corporation Act, NRS (S)(S) 78.010-
.795, and all amendments thereto hereinafter enacted.
1.2 "Expenses" shall include, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals and attorneys'
fees and disbursements and any expenses of establishing a right to
indemnification under this Agreement.
1.3 "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable Expenses incurred with respect to a Proceeding.
1.4 "Party" includes an individual who was, is or is threatened to be
made a named defendant or respondent in a proceeding.
1.5 "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
2. Indemnification. The Company shall indemnify Indemnitee against
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Liability and Expenses actually and necessarily incurred by him or her in any
Proceeding in which he or she is made a Party by reason of being or having been
a director, officer or key employee of the Company, except in relation to
matters as to which indemnification is prohibited by the Act; but such
indemnification shall not be deemed exclusive of any other rights to which
Indemnitee may be entitled under any bylaw or agreement of the Company, general
or specific action of the Company's board of directors, vote of the Company's
shareholders or otherwise.
3. Procedure for Indemnification. After the final disposition of any
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Proceeding in which Indemnitee may be entitled to indemnification pursuant to
this Agreement, Indemnitee may send to the Company a written request for
indemnification. The Company shall, in accordance with the provisions of the
Act regarding determination and authorization of indemnification, make a finding
whether the indemnification requested is permitted by the laws of the state of
Nevada no later than 60 days following receipt by the Company of such request.
The Company shall cause the indemnification requested to be authorized and paid
unless the Company finds that the indemnification requested is not so permitted.
Indemnitee shall be given an opportunity to be heard and to present evidence in
connection with the consideration of the party or parties determining
Indemnitee's right to indemnification under the Act. If the Company does not
authorize indemnification hereunder, Indemnitee shall have the right to seek
court-ordered indemnification in accordance with the provisions of the Act. In
any such action, neither the making of, nor the failure to make, any finding by
the Company that indemnification of the Indemnitee is proper or not proper in
the circumstances shall be a defense to such action or create a presumption that
the Indemnitee has not met the standard of conduct required by the Act. In
making its determination and in any court proceeding, the Company shall have the
burden of proving that Indemnitee has not met the standard of conduct required
by the Act to entitle Indemnitee to indemnification.
4. Procedure for Advancement of Expenses. The Company shall pay for or
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reimburse the reasonable Expenses incurred by Indemnitee as a result of being
Party to a Proceeding in advance of final disposition of the Proceeding promptly
upon receipt of a written request for payment of such Expenses that is in
accordance with the requirements of the Act for such written statements. Such
written statement shall also include or be accompanied by documentation of the
Expenses incurred certified true and correct by Indemnitee. When available,
such documentation of expenses shall include copies of bills or statements
evidencing the Expenses incurred. If the requirements of this Section 4 are
met, the Company shall pay the amount requested promptly notwithstanding the
absence of a final disposition of the Proceeding.
5. Partial Indemnity. If Indemnitee is entitled under any provision of
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this Agreement to indemnification by the Company for some or a portion of the
Expenses or Liability incurred by Indemnitee in the preparation, investigation,
defense, appeal or settlement of any Proceeding but not, however, for the total
amount thereof, the Company shall indemnify Indemnitee for the portion of such
Expenses or Liability to which Indemnitee is entitled in accordance with this
Agreement.
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6. Insurance. The Company may, but shall not be required to, purchase
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and keep in force during the term of this Agreement a policy or policies of
liability insurance on behalf of Indemnitee against Liability and Expenses
incurred in any Proceeding. Nothing herein shall be construed to prohibit
Indemnitee from maintaining his or her own policy of liability insurance.
7. Exclusions. The Company shall not be liable to make any payment
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hereunder:
7.1 If it shall be finally adjudicated that such payment is
prohibited by law;
7.2 On account of any Proceeding brought under Section 16(b) of the
Securities Exchange Act of 1934, as such law is amended from time to time, or
under any similar law that replaces Section 16(b), in which judgment is rendered
against Indemnitee for an accounting for profits made from the purchase or sale
by Indemnitee of the securities of the Company;
7.3 For Liability or Expenses in any Proceeding brought by Indemnitee
against the Company unless (i) the Proceeding is brought as a Proceeding for
indemnity under this Agreement, (ii) Indemnitee is successful in whole or in
part in a Proceeding or (iii) the indemnification is included in a settlement of
the Proceeding or is awarded by a court;
7.4 To the extent payment is actually made to Indemnitee under a
valid, enforceable and collectible insurance policy, whether provided by the
Company or by Indemnitee (the "Insurance Policy"), by or out of a fund created
by the Company and under the control of a trustee or otherwise (the "Fund") or
from other sources provided by the Company ("Other Sources"); or
7.5 For amounts paid in settlement of a claim effected without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
If Indemnitee shall become obligated or required to pay any amount that the
Company would be obligated to pay hereunder except for the exclusion in Section
7.4, the Company shall advance such amount to Indemnitee if payment is not
reasonably expected to be made under the Insurance Policy, by the Fund or from
Other Sources prior to the time that Indemnitee must make such payment,
provided, however, that Indemnitee shall immediately pay over to the Company,
from the funds Indemnitee later receives under the Insurance Policy, from the
Fund or from Other Sources, an amount equal to the amount advanced.
8. Defense of Claim. If any Proceeding asserted or commenced against
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Indemnitee is also asserted or commenced against the Company, the Company shall
be entitled to participate in the Proceeding at its own expense and, except as
otherwise provided herein below, to the extent that it may wish the Company
shall be entitled to assume the defense thereof. After notice from the Company
to Indemnitee of its election to assume the defense of any such Proceeding,
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Proceeding, but the Expenses of such counsel incurred after notice from the
Company to Indemnitee of its assumption of the defense thereof shall be the
Expenses of Indemnitee, and the
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Company may not be obligated to Indemnitee under this Agreement for any Expenses
subsequently incurred by Indemnitee in connection therewith other than the
reasonable costs of investigation, travel and lodging Expenses arising out of
Indemnitee's participation in the defense of such Proceeding unless (i)
otherwise authorized by the Company, (ii) Indemnitee's counsel shall have
reasonably concluded, and so notified the Company in writing, that there may be
a conflict of interest between the Company and Indemnitee in the conduct of the
defense of such Proceeding or (iii) the Company shall not in fact have employed
counsel to assume the defense of such Proceeding. If the Company may be
obligated for some or all of the Expenses of Indemnitee under this Section 8,
the determination of Indemnitee's entitlement to indemnification shall be made
in accordance with Section 3.
9. Change in Control.
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9.1 The Company agrees that, if there is a Change in Control (as
hereinafter defined) of the Company, then with respect to all matters thereafter
arising concerning the rights of Indemnitee to indemnification and Expense
advances under this Agreement, the Company shall seek legal advice only from
special, independent counsel selected by the Company with the consent of
Indemnitee, which consent shall not be unreasonably withheld, with respect to
matters arising out of this Agreement, including but not limited to the right of
Indemnitee to indemnification hereunder. Such counsel shall, among other
things, render its written opinion to the Company and Indemnitee as to whether
and to what extent Indemnitee would be permitted to be indemnified under the Act
and as to the amount of reasonable indemnification. Such written opinion shall
be binding upon the Company and Indemnitee. The Company shall agree to pay the
reasonable fees of such special counsel and to indemnify fully such counsel
against any and all expenses, including attorney fees, claims, liabilities and
damages arising out of or relating to this Agreement or its engagement pursuant
hereto.
9.2 For the purpose of this Section 9, a "Change in Control" shall be
deemed to have occurred if:
9.2.1 Any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportion as their ownership of the
Company, becomes the "Beneficial Owner," as defined in Rule 13d-3 under the 1934
Act, directly or indirectly, of securities of the Company representing twenty-
five percent (25%) or more of the combined voting power of the Company's then
outstanding voting securities ("Voting Stock");
9.2.2 During any period of twenty-four (24) consecutive months,
not including any period prior to the execution of this Agreement, individuals
who at the beginning of such period constitute the board of directors of the
Company and any new director, other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in Section 9.2.1 or 9.2.3, whose election was approved by a vote of at
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least two-thirds (2/3rds) of the shares entitled to vote, cease for any reason
to constitute a majority of the board; or
9.2.3 The stockholders of the Company (i) approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the Voting Stock outstanding immediately
prior thereto continuing to represent, either by remaining outstanding or by
being converted into Voting Stock of the surviving entity, at least seventy
percent (70%) of the combined voting power of the Voting Stock of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, (ii) approve a plan of complete liquidation of the Company or
(iii) approve an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
10. Potential Change in Control.
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10.1 In the event of a Potential Change in Control (as hereinafter
defined), the Company shall, upon written request by Indemnitee, create a trust
(the "Trust") for the benefit of Indemnitee and from time to time upon written
request of Indemnitee shall fund the Trust in an amount sufficient to satisfy
any and all Expenses reasonably anticipated at the time of each such request to
be incurred in connection with investigating, preparing for and defending any
Proceeding for which Indemnitee may be entitled to indemnification under this
Agreement, and any and all Liability for which Indemnitee is entitled to
indemnification hereunder from time to time actually paid, reasonably
anticipated or proposed to be paid. The amount or amounts to be deposited in
the Trust pursuant to the foregoing funding obligations shall be determined in
accordance with the provisions of the Act with regard to determination and
authorization of indemnification.
10.2 The terms of the Trust shall provide that upon a Change in
Control:
10.2.1 The Trust shall not be revoked or the principal thereof
invaded without the prior written consent of Indemnitee;
10.2.2 The trustee of the Trust (the "Trustee") shall advance,
within two (2) business days of a written request by Indemnitee in accordance
with the requirements of Section 4, any and all Expenses to Indemnitee, and
Indemnitee hereby agrees to reimburse the Trust under the circumstances under
which Indemnitee would be required to reimburse the Company pursuant to the Act
and Section 4;
10.2.3 The Trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above;
10.2.4 The Trustee shall promptly pay to Indemnitee all amounts
for which Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise; and
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10.2.5 All unexpended funds in the Trust shall revert to the
Company upon a final determination by the special counsel established in
accordance with Section 9 or a court of competent jurisdiction, as the case may
be, that Indemnitee has been fully indemnified under the terms of this
Agreement.
10.3 The Trustee shall be selected by Indemnitee with the consent of
the Company, which consent shall not be unreasonably withheld, and all
reasonable expenses, fees and other disbursements of the Trustee in connection
with the establishment and administration of the Trust shall be paid by the
Company.
10.4 Nothing in this Section 10 shall relieve the Company of any of
its obligations under this Agreement.
10.5 A "Potential Change in 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 in 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 in Control; (iii) any person,
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, who is or becomes the beneficial owner,
directly or indirectly, of stock of the Company representing nine and one-half
percent (9.5%) or more of the combined voting power of the Company's then
outstanding Voting Stock, increases his or her beneficial ownership of such
stock by five (5) percentage points or more over the percentage so owned by such
person; or (iv) the board of directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has occurred.
11. Nonexclusivity and Continuation of Rights. The indemnification
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provided by this Agreement shall not be deemed exclusive of any other rights
consistent with the laws of the state of Nevada to which Indemnitee may be
entitled under the Company's articles of incorporation, bylaws or any other
agreement, vote of shareholders or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding office or
while employed by or acting as agent for the Company, and shall continue
notwithstanding that Indemnitee may have ceased to be connected with the
Company.
12. Heirs, Successors and Assigns. This Agreement shall be binding upon
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and inure to the benefit of the heirs, successors and assigns of the Company and
Indemnitee.
13. Severability. Wherever possible, each provision in this Agreement
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shall be interpreted in such manner as to be effective and valid under the laws
of the state of Nevada, but if any provision of this Agreement shall be
invalidated by any court of competent jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
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14. Subrogation. In the event of payment under this Agreement, the Company
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shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
15. Modification and Amendment. No amendment, modification, termination
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or claimed waiver of any of the provisions hereof shall be valid unless in
writing and signed by both of the parties hereto.
16. Notices. All notices, requests, demands and other communications
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hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or mailed by certified or registered mail
with postage prepaid, on the third business day after the date on which it is so
mailed:
If to Indemnitee: If to the Company:
Xxxxx Xxxxx Xxxxxx Assisted Living Concepts, Inc.
_______________________ Attn: Corporate Secretary
_______________________ 0000 XX Xxxxxxxxxx, Xxxxx 000
_______________________ Xxxxxxxx, XX 00000
or to such other address as may have been furnished to the other party.
17. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the state of Nevada.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first hereinabove written.
INDEMNITEE Assisted Living Concepts, Inc.
a Nevada corporation
/s/ Xxxxx Xxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx
_________________________ By ________________________
Xxxxx Xxxxx Xxxxxx Chief Financial Officer
Xxxxxxx Xxxxxx
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