INDEMNIFICATION AGREEMENT
EXHIBIT 10.14
THIS AGREEMENT, made and entered into this 7th day of June, 2004
(“Agreement”), by and between First Mercury Financial Corporation, a Delaware corporation
(the “Company”), and Xxxxxx Xxxxxxxxxx (“Indemnitee”):
WHEREAS, qualified persons are reluctant to serve corporations as directors or officers or in
other capacities, unless they are provided with adequate protection against inordinate risks of
claims and actions against them arising out of their service to and activities on behalf of such
corporations;
WHEREAS, the uncertainties related to obtaining adequate insurance and indemnification have
increased the difficulty of attracting and retaining such persons;
WHEREAS, it is reasonable, prudent and necessary for the Company to obligate itself
contractually to indemnify such persons to the fullest extent permitted by law, so that such
persons will serve or continue to serve the Company free from undue concern that they will not be
adequately indemnified;
WHEREAS, the Company and Indemnitee recognize that the legal risks and potential liabilities,
and the threat thereof, associated with lawsuits filed against persons serving the Company, and the
resultant substantial time, expense and anxiety spent and endured in defending lawsuits bears no
reasonable relationship to the compensation received by such persons, and thus poses a significant
deterrent and increased reluctance on the part of experienced and capable individuals to serve the
Company;
WHEREAS, the By-laws of the Company and the laws of the State of Delaware provide for the
indemnification of directors, officers, agents and employees of the Company and specifically
provide that they are not exclusive, and thereby contemplate that contracts may be entered into
between the Company and persons providing services to it; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service
for or on behalf of the Company on the condition that he be indemnified according to the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and promises contained herein, the parties
agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to serve as a director of the
Company, and, if he subsequently consents, at its request or for its benefit, as a director,
officer, employee, agent or fiduciary of certain other corporations and entities. Nothing
contained herein shall entitle or require Indemnitee to continue in Indemnitee’s present position
or any future position with the Company.
Section 2. Term of Agreement. This Agreement shall continue until and terminate upon
the later of: (a) ten (10) years after the date that Indemnitee ceases to hold a Corporate Status
or (b) one hundred twenty (120) days after the final termination of all pending Proceedings in
respect of which Indemnitee is granted rights of indemnification or advancement
of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 8 of
this Agreement.
Section 3. Indemnification
3.1 General. As more specifically set forth in Section 3.2 and subject to the
limitations of Section 5, the Company shall hold harmless and indemnify Indemnitee against all
Liabilities and advance to Indemnitee all Expenses to the fullest extent permitted by the Delaware
General Corporation Law, or by any amendment thereof (but in the case of any such amendment, only
to the extent such amendment permits the Company to provide broader indemnification than provided
prior to such amendment), or by other statutory provisions authorizing or permitting such
indemnification applicable from time to time hereafter.
3.2 Proceedings. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3.2 if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is
threatened to be, made a party to any threatened, pending or completed Proceeding (including a
Proceeding by or in the right of the Company). Under this Section 3.2, Indemnitee shall be
indemnified against all Liabilities actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, 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 and, with respect to any criminal Proceeding, had no
reasonable cause to believe the conduct was unlawful.
3.3 Indemnification for Expenses as a Witness. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a
witness in any Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
3.4 Partial Indemnity. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any Liabilities but not,
however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein,
including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection therewith.
Section 4. Advancement of Expenses. The Company shall advance all Expenses incurred
or to be incurred by or on behalf of Indemnitee in connection with any Proceeding within thirty
(30) days after the receipt by the Company of a statement from Indemnitee requesting such advance
from time to time, whether prior to or after final disposition of such Proceeding. Each such
statement shall reasonably evidence the Expenses incurred or to be incurred by Indemnitee.
Indemnitee hereby agrees and undertakes to repay any Expenses advanced, if it shall ultimately be
determined by a final non-appealable judgment of a court of competent jurisdiction that Indemnitee
is not entitled to be indemnified against such Expenses.
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Section 5. Specific Limitations on Indemnity. Indemnitee shall not be entitled to
indemnification or advancement of expenses under this Agreement (i) with respect to proceedings or
claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with
respect to proceedings specifically authorized by the Board or brought to establish or enforce a
right to indemnification and/or advancement of expenses arising under this Agreement, the charter
documents of the Company or any subsidiary, the Series A Convertible Preferred Stock Purchase
Agreement dated March 1, 2004 between the Company and FMFC Holdings, LLC or any statute or law or
otherwise, but such indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board finds it to be appropriate; or (ii) for any amounts paid in settlement
of a proceeding unless the Company consents in advance in writing to such settlement, which consent
shall not be unreasonably withheld; or (iii) on account of any suit in which judgment is rendered
against the Indemnitee for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state
or local statutory law; or (iv) if a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful (in this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission takes the position that
indemnification for liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
Section 6. Procedure for Determination of Entitlement to Indemnification.
6.1 Initial Request. To obtain indemnification under this Agreement in connection
with any Proceeding, and for the duration thereof, Indemnitee shall submit to the Company a written
request, including such documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Company shall, promptly upon receipt of any request for
indemnification, advise the Board in writing that Indemnitee has requested indemnification.
6.2 Method of Determination. Upon written request by Indemnitee for indemnification
pursuant to Section 6.1 hereof, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall be made in the specific case by one of the following
methods, which shall be selected by agreement of the Indemnitee and the Company: (1) by a majority
vote of the directors who are not parties to such action, suit or proceeding, even though less than
a quorum, or (2) by a majority vote of a committee of such directors designated by a majority of
such directors even though less than a quorum, or (3) if there are no such directors or if such
directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders
(the individual or body making such determination, the “Reviewing Party”). If the
Indemnitee and the Company fail to agree on the appropriate Reviewing Party, then Independent
Counsel shall be selected as the Reviewing Party. If it is determined that Indemnitee is entitled
to indemnification, payment to Indemnitee shall be made within ten (10) days after such
determination.
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6.3 Selection, Payment and Discharge of Independent Counsel. If required, Independent
Counsel shall be selected by Indemnitee and Indemnitee shall give written notice to the Company
advising it of the identity of Independent Counsel so selected. The Company may, within seven (7)
days after such written notice of selection shall have been given, deliver to Indemnitee a written
objection to such selection. Such objection may be asserted only on the ground that Independent
Counsel so selected does not meet the requirements of “Independent Counsel” as defined in
this Agreement, and the objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so selected may not serve as
Independent Counsel, unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request for indemnification
pursuant to Section 6.1 hereof, no Reviewing Party shall have been selected and not objected to,
either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware, or
other court of competent jurisdiction, for resolution of any objection which shall have been made
by the Company to the selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by such court or by such other person as such court shall designate,
and the person with respect to whom an objection is so resolved or the person so appointed shall
act as Independent Counsel under Section 6.2 hereof. The Company shall pay any and all reasonable
fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with
its actions pursuant to this Agreement, and the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 6.3, regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement date of any judicial proceeding or
arbitration pursuant to Section 8.1 of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
6.4 Cooperation. Both the Company and Indemnitee shall cooperate with the Reviewing
Party with respect to Indemnitee’s entitlement to indemnification, including providing to such
person, persons or entity any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to Indemnitee or the Company, as the
case may be, and reasonably necessary to such determination. Any reasonable costs or expenses
(including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination shall be borne by the Company (irrespective of
the determination as to Indemnitee’s entitlement to indemnification).
Section 7. Presumptions and Effects of Certain Proceedings.
7.1 Burden of Proof. In making a determination with respect to entitlement to
indemnification hereunder, the Reviewing Party shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6.1 of this Agreement, and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any Reviewing Party of any determination
contrary to that presumption.
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7.2 Failure to Determine Entitlement. If the Reviewing Party shall not have made a
determination within sixty (60) days after receipt by the Company of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the
Reviewing Party in good faith require(s) such additional time for the obtaining or evaluating of
documentation or information relating thereto.
7.3 Effect of Other Proceedings. The termination of any Proceeding or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company and, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that the conduct was unlawful.
Section 8. Remedies of Indemnitee.
8.1 Adjudication. In the event that (a) a determination is made pursuant to Section 6
of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (b)
advancement of Expenses is not timely made pursuant to Section 4 of this Agreement, (c) payment of
indemnification is not made pursuant to Section 3 of this Agreement within ten (10) days after
receipt by the Company of a written request therefor, or (d) payment of indemnification is not made
within ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to Sections 6 or 7 of
this Agreement, Indemnitee shall be entitled to an adjudication, in any court of competent
jurisdiction selected by Indemnitee within or without the State of Delaware, of Indemnitee’s
entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association. Indemnitee shall commence any action under this
Section 8.1 within one (1) year following the date on which Indemnitee first has the right to
commence such action hereunder.
8.2 De Novo Review. In the event that a determination shall have been made pursuant
to Section 6 of this Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to Section 8.1 shall be conducted in all respects as a
de novo trial or arbitration on the merits and Indemnitee shall not be prejudiced by reason of that
adverse determination. In any such judicial proceeding or arbitration, the Company shall have the
burden of proving that Indemnitee is not entitled to indemnification or the advancement of
Expenses.
8.3 Company Bound. If a determination shall have been made or deemed to have been
made pursuant to Section 6 or 7 of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or arbitration absent
(a) a misstatement of a material fact by Indemnitee, or an omission of a
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material fact necessary to make Indemnitee’s statement not materially misleading, in
connection with the request for indemnification or the furnishing of information or (b) a
prohibition of such indemnification under applicable law. The Company shall be precluded from
asserting in any such judicial proceeding or arbitration that the procedures and presumptions of
this Agreement are not valid, binding and enforceable and shall stipulate in any such court or
before any such arbitrator that the Company is bound by all provisions of this Agreement.
8.4 Expenses of Adjudication. In the event that Indemnitee seeks an adjudication or
an award to enforce his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the type described in the definition of Expenses) actually and
reasonably incurred by Indemnitee in such adjudication or arbitration, but only if Indemnitee
prevails therein. If it shall be determined in such adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of Expenses sought,
Indemnitee shall be entitled to recover expenses from the Company on a pro rata basis.
Section 9. Non-Exclusivity; Subrogation.
9.1 Non-Exclusivity. The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the certificate of incorporation or
by-laws of any corporation, any other agreement, a vote of stockholders, a resolution of directors
or otherwise.
9.2 No Duplicative Payment. The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy, contract, agreement or
otherwise.
Section 10. Insurance. The Company hereby covenants and agrees that during the term
hereof, the Company shall obtain and maintain in full force and effect directors’ and officers’
liability insurance in reasonable amounts but in no event less than $1,000,000 from established and
reputable insurers. Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably insured of the
Company’s directors.
Section 11. Company May Assume Defense. In the event the Company shall be obligated
to pay the Expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to
Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After
delivery of such notice, the Company shall not be liable to Indemnitee under this Agreement for any
fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided,
however, that (a) Indemnitee shall have the right to employ counsel in any such Proceeding at
Indemnitee’s expense and (b) if (i) the employment of counsel by Indemnitee has been previously
authorized by the Company, (ii) Indemnitee shall have reasonably concluded
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that there may be a conflict of interest between the Company and Indemnitee in the conduct of
any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the
defense of such Proceeding, the fees and expenses of Indemnitee’s counsel shall be at the expense
of the Company.
Section 12. Definitions. For purposes of this Agreement:
(a) “Corporate Status” means the position of a person as a
director, officer, employee, agent or fiduciary of the Company or of any
other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise held at the request of the Company and shall include
any position which imposes duties on, or involves services by, such person
with respect to an employee benefit plan, its participants or
beneficiaries.
(b) “Expenses” means all reasonable attorneys’ fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types of customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
(c) “Independent Counsel” means a law firm, or a member of a
law firm, that is nationally recognized as experienced in matters of
corporation law and neither presently is, nor in the past five (5) years
has been, retained to represent either (i) the Company or Indemnitee in any
matter material to either such party or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder. The term
“Independent Counsel” shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee’s rights under this Agreement.
(d) “Liabilities” means any judgments, fines, penalties, or
similar payments or amounts paid or incurred by Indemnitee in connection
with any Proceeding, and amounts paid or incurred by Indemnitee or on
Indemnitee’s behalf in settlement of any Proceeding (including any excise
taxes assessed upon Indemnitee with respect to any employee benefit plan)
and all Expenses.
(e) “Proceeding” means any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative
hearing or any other proceeding, pending or threatened, whether civil,
criminal, administrative or investigative, except one initiated by
Indemnitee, unless the Board of Directors consents thereto.
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Section 13. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (a) delivered by hand
and receipted for by the party to whom such notice or other communication shall have been directed
or (b) mailed by certified or registered mail with postage prepaid, on the third business day after
the date on which it is so mailed:
| (a) | If to Indemnitee, to: | |||||
| Telephone: | ||||||
| Facsimile: | ||||||
| (b) | If to the Company, to: | |||||
| First Mercury Financial Corporation | ||||||
| 00000 Xxxxxxxxxxxx Xxxxxxx | ||||||
| Xxxxxxxxxx, Xxxxxxxx 00000 | ||||||
| Attention: Xxxxxxx Xxxxx | ||||||
| Telephone: (000) 000-0000 | ||||||
| Facsimile: (000) 000-0000 |
or to such other address as may have been furnished to the other party. Promptly after receipt by
Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding,
Indemnitee shall notify the Company of the commencement or the threat of commencement thereof.
Section 14. General Provisions.
14.1 Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and
administrators. The Company shall require and cause any successor to substantially all of the
business or assets of the Company, by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such succession had taken place.
14.2 No Adequate Remedy. The parties acknowledge that it is impossible to measure in
money the damages which will accrue to either party by reason of a failure to perform any of the
obligations under this Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, the party against whom such action or proceeding is
brought hereby waives the claim or defense that the party bringing such action has an adequate
remedy at law, and the party against whom the action is brought shall not urge in any action or
proceeding the claim or defense that the other party has an adequate remedy at law.
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14.3 Governing Law. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
14.4 Severability. If any provision or provisions of this Agreement shall be held to
be invalid or unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid or unenforceable) shall not in any way be affected or
impaired thereby; and (b) to the fullest extent possible, the remaining provisions of this
Amendment (including, without limitation, each portion of any Section of this Agreement containing
any such provision held to be invalid or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested by the provision
held invalid or unenforceable.
14.5 Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No amendment,
alteration, rescission or replacement of this Agreement or any provision hereof shall be effective
as to Indemnitee with respect to any action taken or omitted by such Indemnitee in Indemnitee’s
Corporate Status before such amendment, alteration, rescission or replacement. 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 such waiver constitute a continuing waiver.
The party shall not be deemed to have waived a right or remedy provided in or relating to this
Agreement, unless the waiver is in writing and duly executed by the party.
14.6 Entire Agreement. This Agreement as to its subject matter, exclusively and
completely states the rights and duties of the parties, sets forth their entire understanding and
merges all prior and contemporaneous representations, promises, proposals, discussions and
understandings by or between the parties.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above first above written.
| COMPANY: FIRST MERCURY FINANCIAL CORPORATION |
||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: | Xxxxxxx X. Xxxxx | |||
| Title: | President | |||
| INDEMNITEE: |
||||
| /s/ Xxxxxx Xxxxxxxxxx | ||||
| Name: | Xxxxxx Xxxxxxxxxx | |||
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