INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into effective as of __________, 1998, by and between Precept Business
Services, Inc., a Texas corporation (the "Company"), and _________________
________________, a [director][officer] of the Company (the "Indemnitee").
W I T N E S S T H:
WHEREAS, the Indemnitee is presently serving as a [director][officer]
of the Company, and the Company desires the Indemnitee to continue in such
capacity; and
WHEREAS, the Indemnitee is willing, subject to certain conditions,
including without limitation, the execution and performance of this Agreement
by the Company, to continue in that capacity;
NOW, THEREFORE, in order to induce the Indemnitee to continue to serve
in his present capacity, the Company and Indemnitee hereby agree as follows:
1. CONTINUED SERVICE: The Indemnitee will continue to serve as a
[director][officer] of the Company so long as he is duly elected and
qualified in accordance with the bylaws of the Company (the "Bylaws") or
until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY. (a) The Company shall indemnify the Indemnitee
when he was or is a party or is threatened to be made a party to any pending,
threatened or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal (other than an action by or in the
name of the Company), by reason of the fact that he is or was or had agreed
to become a [director][officer] of the Company, or is or was serving or had
agreed to serve at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against any and all costs, charges and expenses,
including without limitation, attorneys' and others' fees and expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Indemnitee in connection therewith and any appeal therefrom
if the Indemnitee acted in good faith and in a manner he 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 his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendre or its equivalent shall not, of itself, create a presumption that
the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
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(b) The Company shall indemnify the Indemnitee when he was or is a
party or is threatened to made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he is or was or
had agreed to become a [director][officer] of the Company, or is or was
serving or had agreed to serve at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against costs, charges and expenses
(including attorneys and others' fees and expenses) actually and reasonably
incurred by him in connection with the defense or settlement thereof or any
appeal therefrom if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which the Indemnitee shall have been adjudged to be liable to
the Company unless and only to the extent that the Court of Chancery or the
court in which such action, suit or proceeding was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, the Indemnitee is fairly and reasonably
entitled for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that the Indemnitee has been successful on the merits
or otherwise, including without limitation the dismissal of an action with
prejudice, in defense of any action, suit or proceeding referred to in
Sections 2(a) or 2(b) hereof or in defense of any claim, issue or matter
therein, he shall be indemnified against costs, charges and expenses
(including attorneys' and others' fees and expenses) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Sections 2(a) and 2(b) (unless ordered by
a court) shall be made by the Company only as authorized in the specific case
upon a determination in accordance with Section 4 hereof or any applicable
provision of the articles of incorporation of the Company (the
"Certificate"), Bylaws, other agreement, resolution or otherwise. Such
determination shall be made (i) by the Board of Directors of the Company (the
"Board"), by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum of
disinterested directors is not available or so directs, by independent legal
counsel (designated in the manner provided below in this Section 2(d) in a
written opinion, or (iii) by the stockholders of the Company (the
"Stockholders"). Independent legal counsel shall be designated by vote of a
majority of the disinterested directors, provided, however, that if the Board
is unable or fails to so designate, such designation shall be made by the
Indemnitee subject to the approval of the Company (which approval shall not
be unreasonably withheld). Independent legal counsel shall not be any person
or firm who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Company or the Indemnitee in an action to determine the Indemnitee's rights
under this Agreement. The Company agrees to pay the reasonable fees and
expenses of such independent legal counsel and to indemnify fully such
counsel against costs, charges and expenses (including attorneys' and others'
fees and other expenses) actually and reasonably incurred by such counsel in
connection with this Agreement or the opinion of such counsel pursuant hereto.
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(e) All expenses (including attorneys' and others' fees and expenses)
incurred by the Indemnitee in his capacity as a director or officer of the
Company in defending a civil or criminal action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit
or proceeding in the manner prescribed by Section 4(b) hereof.
(f) The Company shall not adopt any amendment to the Certificate or
Bylaws the effect of which would be to deny, diminish or encumber the
Indemnitee's rights to indemnity pursuant to the Certificate. Bylaws, the
Texas Business Corporation Act, as amended (the "TBCA") 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 or the Stockholders, as the case may be. In the event
that the Company shall adopt any amendment to the Certificate or Bylaws the
effect of which is to so deny, diminish or encumber the Indemnitee's rights
to indemnity, such amendment shall apply only to acts or failures to act
occurring entirely after the Effective Date thereof unless the Indemnitee
shall have voted in favor of such adoption as a director or holder of record
of the Company's voting stock, as the case may be.
3. ADDITIONAL INDEMNIFICATION. (a) Pursuant to Article 2.02-1 of the
TBCA, without limiting any right which the Indemnitee may have pursuant to
Section 2 hereof, the Certificate, the Bylaws, the TBCA, any policy of
insurance or otherwise, but subject to the limitations on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder determined as contemplated by Section 3(a)
hereof, the Company shall indemnify the Indemnitee against any amount which
he is or becomes legally obligated to pay relating to or arising out of any
claim made against him because of any act, failure to act or neglect or
breach of duty, including any actual or alleged error, misstatement or
misleading statement, which he commits, suffers, permits or acquiesces in
while acting in his capacity as a [director] [officer] of the Company, or, at
the request of the Company, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The payments which the Company's is obligated to make pursuant to this
Section 3 shall include without limitation damages, judgments, settlements
and charges, costs, expenses, expenses of investigation and expenses of
defense of legal actions, suits, proceedings or claims and appeals therefrom,
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company shall not be obligated under this Section 3(a) to make any
payment in connection with any claim against the Indemnitee to the extent (i)
of any fine or similar governmental imposition which the Company is
prohibited by applicable law from paying which results in a final,
nonappealable order or (ii) based upon or attributable to the Indemnitee
gaining in fact a personal profit to which he was not legally entitled,
including without limitation profits made from the purchase and sale by the
Indemnitee of equity securities of the Company which are recoverable by the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from transactions in
publicly traded securities of the Company which were effected by the
Indemnitee in violation of Section 10(b) of the Exchange Act, including Rule
10b-5 promulgated thereunder. The determination of whether the
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Indemnitee shall be entitled to indemnification under this Section 3(a) may
be, but shall not be required to be, made in accordance with Section 4(a)
hereof. If that determination is so made, it shall be binding upon the
Company and the Indemnitee for all purposes.
(b) Expenses (including without limitation attorneys' and others' fees
and expenses) incurred by Indemnitee in defending any actual or threatened
civil or criminal action, suit, proceeding or claim shall be paid by the
Company in advance of the final disposition thereof as authorized in
accordance with Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. (a) Except as otherwise permitted or required by the TBCA, for
purposes of pursuing his rights to indemnification under Sections 2(a), 2(b)
or 3(a) hereof, as the case may be, the Indemnitee may, but shall not be
required to, (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of EXHIBIT 1 attached hereto and
made a part hereof (the "Indemnification Statement") averring that he is
entitled to indemnification hereunder, and (ii) present to the Company
reasonable evidence of all expenses for which payment is requested.
Submission of an Indemnification Statement to the Board shall create a
presumption that the Indemnitee is entitled to indemnification under Sections
2(a), 2(b) or 3(a) hereof, as the case may be, and the Board shall be deemed
to have determined the Indemnitee is entitled to such indemnification unless
within 30 calendar days after submission of the Indemnification Statement the
Board shall determine by vote of a majority of the directors at a meeting at
which a quorum is present, based upon clear and convincing evidence
(sufficient to rebut the foregoing presumption) and the Indemnitee shall have
received notice within such period in writing of such determination that the
Indemnitee is not so entitled to indemnification, which notice shall disclose
with particularity the evidence in support of the Board's determination. The
foregoing notice shall be sworn to by all persons who participated in the
determination and voted to deny indemnification. The provisions of this
Section 4(a) are intended to be procedural only and shall not affect the
right of the Indemnitee to indemnification under this Agreement and any
determination by the Board that the Indemnitee is not entitled to
indemnification and any failure to make the payments requested in the
Indemnification Statement shall be subject to judicial review as provided in
Section 7 hereof.
(b) For purposes of determining whether to authorize advancement of
expenses pursuant to Section 2(e) hereof, the Indemnitee shall submit to the
Board a sworn statement of request for advancement of expenses substantially
in the form of EXHIBIT 2 attached hereto and made a part hereof (the
"Undertaking"), averring that the (i) has reasonably incurred or will
reasonably incur actual expenses in defending an actual civil or criminal
action, suit, proceeding or claim, and (ii) undertakes to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the Company under this Agreement or otherwise. For purposes of
requesting advancement of expenses pursuant to Section 3(b) hereof, the
Indemnitee may, but shall not be required to submit an Undertaking or Expense
Request, as the case may be, the Board shall within 10 calendar days
authorize immediate payment of the expenses stated in the
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Undertaking or Expense Request, as the case may be, whereupon such payments
shall immediately be made by the Company. No security shall be required in
connection with any Undertaking or Expense Request and any Undertaking or
Expense Request shall be accepted without reference to the Indemnitee's
ability to make repayment.
5. SUBROGATION; DUPLICATION OF PAYMENT. (a) In the event of payment
under this Agreement, the Company shall be subrogated to the extent such
payment to all of the rights of recovery of the Indemnitee, who shall execute
all papers required and shall do everything that may be necessary to secure
such rights, including the execution of such documents necessary to enable
the Company effectively to bring suit to enforce such rights.
(b) The Company shall be liable under this Agreement to make any
payment in connection with any claim made against the Indemnitee to the
extent the Indemnitee has actually received payment (under any insurance
policy, the Certificate, the Bylaws or otherwise) of the amounts otherwise
payable hereunder.
6. STOCKHOLDER RATIFICATION. The Company may, at its option, propose at
any future meeting of the Stockholders that this Agreement be ratified by the
Stockholders; provided, however, that the Indemnitee's rights hereunder shall
be fully enforceable in accordance with the terms hereof whether or not such
ratification is sought or obtained; and provided further, however, that if
such ratification is sought and not obtained, the Company, in the direction
of and upon action by the Board, may rescind this Agreement.
7. ENFORCEMENT. (a) If a claim for indemnification is made to the
Company pursuant to Section 4 hereof is not paid in full by the Company
within 30 calendar days after a written claim has been received by the
Company, the Indemnitee may at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim.
(b) In any action brought under Section 7(a) hereof, it shall be a
defense to a claim for indemnification pursuant to Sections 2(a) or 2(b)
hereof (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
Undertaking, if any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it permissible
under the TBCA for the Company to indemnify the Indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Company.
Neither the failure of the Company (including the Board, independent legal
counsel or the Stockholders) to have made a determination prior to
commencement of such action that indemnification of the Indemnitee is proper
in the circumstances because he has met the applicable standard of conduct
set forth in the TBCA, nor an actual determination by the Company (including
the Board, independent legal counsel or the Stockholders) that the Indemnitee
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Indemnitee has not met the applicable
standard of conduct.
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(c) It is the intent of the Company that the Indemnitee not be required
to incur the expenses associated with the enforcement of his rights under
this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under the Agreement or in the event that the Company or any other person
takes any action to declare the Agreement void or unenforceable, or
institutes any action, suit or proceeding designed (or having the effect of
being, designed) to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of his choice,
at the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director,
officer, Stockholder or other person affiliated with the Company, in any
jurisdiction. Regardless of the outcome thereof, the Company shall pay and be
solely responsible for any and all costs, charges and expenses, including
without limitation attorneys' and others' fees and expenses, reasonably
incurred by the Indemnitee as a result of (i) the Company's failure to
perform this Agreement or any provision thereof, or (ii) the Company or any
person contesting the validity or enforceability of this Agreement or any
provision thereof as aforesaid.
8. MERGER OR CONSOLIDATION. In the event that the Company shall be a
constituent corporation in a consolidation, merger or other reorganization,
the Company, if it shall not be the surviving, resulting or other corporation
therein, shall require as a condition thereto the surviving, resulting or
acquiring corporation to agree to indemnify the Indemnitee to the full extent
provided in Section 3 hereof. Whether or not the Company is the resulting,
surviving or acquiring corporation in any such transaction, the Indemnitee
shall also stand in the same position under this Agreement with respect to
the resulting, surviving or acquiring corporation as he would have with
respect to the Company if its separate existence had continued.
9. NONEXCLUSIVITY AND SEVERABILITY. (a) The right to indemnification
provided by this Agreement shall not be exclusive of any other rights to
which the Indemnitee may be entitled under the Certificate, Bylaws, the TBCA,
any other statute, insurance policy, agreement, vote of Stockholders or of
directors or otherwise, both as to actions in his official capacity and as to
actions in another capacity while holding such office, and shall continue
after the Indemnitee has ceased to be a director, officer, employee or agent
and shall inure to the benefit of his heirs, executors and administrators.
(a) If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or other illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
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10. TERMINATION. This Agreement shall be terminable at any time by the
Company upon notice delivered to the Indemnitee; provided, however, that
any termination of this Agreement shall not affect the rights or obligations
of the parties hereto arising prior to such termination.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to the
principles of conflict of laws thereof.
12. MODIFICATION SURVIVAL. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof. This Agreement may be
modified only by an instrument in writing signed by both parties hereto. The
provisions of the Agreement shall survive the death, disability or incapacity
of the Indemnitee, the resignation of the Indemnitee as a [director] [officer]
of the Company or the termination of the Indemnitee's service as a
[directors] [officer] of the Company and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators.
13. CERTAIN TERMS. For purposes of this Agreement, references to "other
enterprises" shall include employer benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to any
employer benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent
of the Company which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries, references to the masculine shall include the feminine;
references to the singular shall include the plural and vice versa; and if
the Indemnitee acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan he shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to herein.
IN WITNESS WHEREOF, the Company and the Indemnity have executed this
Agreement as of the date set forth in the introductory paragraph hereof.
PRECEPT BUSINESS SERVICES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
----------------------------------
[Indemnitee]
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EXHIBIT 1
INDEMNIFICATION STATEMENT
STATE OF _______________)
)SS
COUNTY OF ______________)
I, ________________________ being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of ________________, between Precept
Business Services, Inc., a Texas corporation (the "Company") and the
undersigned.
2. I am requesting indemnification against charges, costs, expenses
(including attorneys' and others' fees and expenses), judgments, fines and
amounts paid in settlement, all of which (collectively, "Liabilities") have
been or will be incurred by me in connection with an actual or threatened
action, suit, proceeding or claim to which I am a party or am threatened to
be made a party.
3. With respect to all matters related to any such action, suit,
proceeding or claim, I am entitled to be indemnified as herein contemplated
pursuant to the aforesaid Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnifications against Liabilities which have or may arise out
of __________________________________________________.
----------------------------------------
Name
Subscribed and sworn to before me, a Notary Public in and for said County
and State, this _______ day of ___________, 19___.
----------------------------------------
----------------------------------------
Name
[Notarial Seal]
My commission expires the ___ day of _______________, 19____.
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EXHIBIT 2
UNDERTAKING
STATE OF ____________)
)SS
COUNTY OF____________)
I, _________________________ being first duly sworn, do depose and say
as follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of ________________________, between Precept Business
Services, Inc., (the "Company"), a Texas corporation and the undersigned.
2. I am requesting advancement of certain costs, charges and expenses
which I have incurred or will incur in defending an actual or pending civil
or criminal action, suit, proceeding or claim.
3. I hereby undertake to repay this advancement of expenses if it shall
ultimately be determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
4. The costs, charges and expenses for which advancement is requested
are, in general, all expenses related to ______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________
Name
Subscribed and sworn to before, me, a Notary Public in and for said
County and State, this ______day of ________, 19___.
________________________________________
________________________________________
Name
[Notarial Seal]
My commission expires the __ day of ____________, 19___.
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