EXHIBIT 10.16
FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE COMPANY AND ITS
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN OTHER OFFICERS
EMPLOYEE INDEMNIFICATION AGREEMENT
This Agreement is made as of the 27th day of April, 2004
between CITIZENS FINANCIAL CORPORATION, a Kentucky corporation (the
"Corporation"), and ____________________ (the "Employee").
WITNESSETH:
WHEREAS, the Employee has been asked to continue his/her
employment with the Corporation and may be subjected to claims, suits, or
proceedings arising as a result of such employment; and
WHEREAS, Article XII of the Articles of Incorporation of the
Corporation (the "Article") allows the Corporation, upon the approval of the
Corporation's Board of Directors, to indemnify employees, including entering
into contracts for indemnification with such employees; and
WHEREAS, the Board of Directors has approved the indemnification
of the Employee under this Agreement; and
WHEREAS, to provide greater certainty with respect to the
Employee's right to indemnification and the payment thereof, and thereby help to
induce the Employee to continue his/her employment with the Corporation, the
Corporation and the Employee desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the Employee's continued
employment with the Corporation after the date of this Agreement, the
Corporation and the Employee agree as follows:
1. INDEMNITY OF EMPLOYEE. Subject only to the exclusions set forth
in Sections~2~and~11 of this Agreement, the Corporation hereby agrees to hold
harmless and indemnify the Employee against any and all reasonable costs and
expenses (including, but not limited to, attorneys' fees) and any liabilities
(including, but not limited to, judgments, fines, penalties and reasonable
settlements) paid by or on behalf of, or imposed against, the Employee in
connection with any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative, legislative, investigative
or other (including any appeal relating thereto) whether formal or informal and
whether made or brought by or in the right of the Corporation or otherwise, in
which the Employee is, was or at any time becomes a party or witness, or is
threatened to be made a party or witness, or otherwise, by reason of the fact
that the Employee is, was or at any time becomes a director, officer, employee
or agent of the Corporation or, at the Corporation's request, a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
specifically including, without limitation, an officer of the Corporation's
insurance company subsidiaries and all related positions.
2. LIMITATIONS ON INDEMNITY. No indemnity pursuant to Section~1 of this
Agreement shall be paid by the Corporation:
A. if a court of competent jurisdiction renders a final adjudication
on the merits, in an action, suit or proceeding in which the Employee is a
party, that such indemnification is prohibited by law; or
B. if a court of competent jurisdiction renders a final adjudication
on the merits, in an action, suit or proceeding in which the Employee is a party
that [i] the Employee is liable for violating the federal securities laws and
[ii] indemnification of the Employee by the Corporation for such liability
violates public policy as expressed by the Securities and Exchange Commission;
or
C. in connection with any transaction with respect to which a court
of competent jurisdiction renders a final adjudication on the merits, in an
action, suit or proceeding in which the Employee is a party, [i] that the
Employee's personal financial interest was in conflict with the financial
interests of the Corporation or its shareholders, or [ii] that the Employee
derived an improper personal benefit; or
D. on account of acts or omissions of the Employee to the extent a
court of competent jurisdiction renders a final adjudication on the merits, in
an action, suit or proceeding in which the Employee is a party, that such acts
or omissions [i] were not in good faith, or [ii] involved intentional
misconduct, or [iii] were known to the Employee to be a violation of law; or
E. in respect of any liability to the Corporation to the extent that
a court of competent jurisdiction renders a final adjudication on the merits, in
an action, suit or proceeding in which the Employee is a party, that such
liability to the Corporation arises under any federal or state statute providing
for liability directly to the Corporation by reason of the fact that the
Employee is deemed to be or to have been an officer of the Corporation,
including, by way of example and not limitation, liability under Section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or
F. to the extent and only to the extent that, prior to a Change of
Control, as hereinafter defined, a majority of the Board of the Directors of the
Corporation or a duly designated committee thereof, in either case consisting of
directors who are not at the time parties to the claim, action, suit or
proceeding against the Employee, determines that the amount of expenses and/or
settlements for which indemnification is sought is unreasonable; or
G. in connection with any claim, action, suit or proceeding if such
claim, action, suit or proceeding was initiated by the Employee or his or her
personal or legal representative, or involved the voluntary solicitation or
intervention by the Employee or his or her personal or legal representative
(other than an action to enforce indemnification rights or an action initiated
with the approval of a majority of the Board of the Directors).
For the purposes of this Section~2, a settlement by the
Employee that substantially acknowledges the Employee's responsibility such that
the Corporation would be excused from liability under this Section~2 had there
been a final adjudication on the merits shall be deemed the equivalent of such
final adjudication.
The limitations on indemnity contained in this Section~2 shall
not be applicable if the Corporation purchases and maintains directors and
officers insurance ("D&O Insurance") and such indemnity is covered and paid for
by the Corporation's D&O Insurance. The Employee acknowledges and agrees that
the preceding sentence [i] does not obligate the Corporation to purchase and
maintain D&O Insurance in general and [ii] does not give the Employee any right
to be covered by the D&O Insurance in particular.
For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred if [i] any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or a
corporation owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the Corporation
representing 40% or more of the combined voting power of the Corporation's then
outstanding voting securities; or [ii] during any period of twenty-four (24)
consecutive months (not including any period prior to the date of this
Agreement), individuals who at the beginning of such period constituted the
Board of the Directors of the Corporation and any new director (other than a
director designated by a person who has entered into an agreement with the
Corporation to effect a transaction described in clauses [ii or [iii] of this
Paragraph) whose election by the Board of the Directors or nomination for
election by the Corporation's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Board of the Directors or [iii] the shareholders of the Corporation approve a
merger or consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Corporation outstanding or by being converted into voting securities of the
surviving entity constituting at least 70% of the combined voting power of the
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger of consolidation; or [iv] the shareholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially
all of the assets owned by the Corporation, whether directly or indirectly.
3. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained in this Agreement shall continue during the period the
Employee serves in any capacity entitling the Employee to indemnification under
this Agreement and shall continue thereafter so long as the Employee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, legislative, or
investigative, or other, arising as a result of acts or omissions occurring
during the period the Employee was employed by the Corporation.
4. NOTIFICATION OF CLAIM. It shall be a condition precedent to
indemnification under this Agreement that, within twenty (20) days after receipt
by the Employee of actual notice that the Employee is or will be a party,
witness or otherwise involved in any threatened or pending action, suit or
proceeding described in Section 1 of this Agreement, the Employee shall have
notified the Corporation in writing of the assertion or commencement thereof;
but the omission to so notify the Corporation will not relieve it from any
liability which it may have to the Employee otherwise than under this Agreement.
5. ADVANCEMENT OF COSTS AND EXPENSES. The costs and expenses (including,
but not limited to, attorneys' fees) incurred by the Employee in investigating,
being a witness in, defending or appealing any threatened or pending claim or
any threatened or pending action, suit or proceeding described in Section 1 of
this Agreement shall, at the written request of the Employee, be paid by the
Corporation in advance of final judgment or settlement with the understanding,
undertaking and agreement hereby made and entered into by the Employee and the
Corporation, that the Employee shall, if it is ultimately determined in
accordance with Section~2 or pursuant to Section~11 that the Employee is not
entitled to be indemnified, or was not entitled to be fully indemnified, repay
to the Corporation such amount, or the appropriate portion thereof, so paid or
advanced. Such advancements shall be made at least monthly.
6. ENFORCEMENT. If a claim for payment under this Agreement is not
paid in full by the Corporation within ninety (90) days after a written demand
has been delivered by the Employee to the Corporation, or within thirty days
after delivery of a written demand by the Employee to the Corporation based upon
a final and unappealable judgment of a court of competent jurisdiction, the
Employee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the Employee shall also be entitled to be paid all costs and expenses (including
but not limited to attorneys' fees) incurred by the Employee in prosecuting such
suit. In any suit brought by the Employee to enforce this Agreement, the burden
of proof shall be on the Corporation to establish that the Employee is not
entitled to the relief sought under this Agreement.
7. CONTRIBUTION. If the full indemnity provided in Section 1 of this
Agreement may not be paid to the Employee because of any exclusion in Section 2
of this Agreement, then in respect of any actual or threatened claim, action,
suit or proceeding in which the Corporation is jointly liable with the Employee
(or would be if joined in such claim) the Corporation shall contribute to the
amount of expenses and liabilities incurred by the Employee in such proportion
as is appropriate to reflect [i] the relative benefits received by the
Corporation on the one hand and the Employee on the other hand from the acts or
omissions from which such claim, action, suit or proceeding arose and [ii] the
relative fault of the Corporation, including its directors, officers, agents,
other employees and other representatives, on the one hand and of the Employee
on the other hand in connection with the acts or omissions which resulted in
such claim, action, suit or proceeding, as well as any other relevant equitable
considerations. The relative fault of the Corporation, including its directors,
officers, agents, other employees and other representatives, on the one hand and
of the Employee on the other hand shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such claim,
action, suit or proceeding. The Corporation agrees that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or any other method of allocation which does not take into account
the foregoing equitable considerations.
8. PARTIAL INDEMNITY. If the Employee is entitled under any provision
of this Agreement to indemnification by the Corporation for some or a portion of
the costs, expenses, judgments, fines, penalties and amounts paid in settlement,
but not for the total amount thereof, the Corporation shall nevertheless
indemnify the Employee for the portion thereof to which the Employee is
entitled.
9. NON-EXCLUSIVITY. The rights of the Employee under this Agreement shall
be in addition to any other rights the Employee may have under the Articles of
Incorporation or By-laws of the Corporation or any of its insurance company
subsidiaries, both as amended, agreement, vote of shareholders or disinterested
directors, as a matter of law or otherwise.
10. SUBROGATION. In the event of any payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Employee, 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 Corporation effectively to
bring suit to enforce such rights.
11. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under
this Agreement to make any payment to the extent the Employee has otherwise
actually received payment (under any insurance policy, By-law or otherwise) of
the amounts otherwise payable by the Corporation under this Agreement. The
Employee shall use best efforts to collect from all third parties any amounts
otherwise payable by the Corporation under this Agreement. If the Employee is
entitled to but has not received payment from a third party (under any insurance
policy or otherwise) of amounts otherwise payable by the Corporation under this
Agreement, the Corporation shall nevertheless pay the Employee such amounts with
the understanding, undertaking and agreement hereby made and entered into by the
Employee and the Corporation that the Employee will repay to the Corporation
such amounts to the extent they are ultimately paid to the Employee by such
third party.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Corporation, heirs, and personal and legal representatives;
provided, however, that this Agreement is personal to the Employee and may not
be transferred or encumbered by the Employee in any way.
13. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
14. GOVERNING LAW; AMENDMENT.
A. This Agreement shall be interpreted and enforced in accordance
with the laws of the Commonwealth of Kentucky.
B. No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
15. NOTICES. Any notice to the Corporation or the Employee under this
Agreement shall be in writing and shall be delivered personally or sent by
overnight courier service or certified mail:
If to the Corporation:
Citizens Financial Corporation
The Marketplace, Suite 300
00000 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Secretary
If to the Employee:
__________________
_______________________
_______________________
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
CITIZENS FINANCIAL CORPORATION
By:
Name:
Title:
Authority: Resolution of the Board of
Directors adopted April 27, 2004
EMPLOYEE
Name:
