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EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
This Agreement, dated as of February __, 1998, is made by and
between 1-800 CONTACTS, INC., a Delaware corporation (the "Company"), and who
is currently serving as an officer and/or director of the Company (the
"Indemnitee").
WHEREAS, the Indemnitee is currently serving in the capacity
or capacities described above;
WHEREAS, the Company is currently in the process of making an
initial public offering of its common stock (the "Offering"), the completion of
which will likely increase the risk of litigation and other claims being
asserted against the directors and officers of the Company;
WHEREAS, the Company wishes the Indemnitee to continue to
serve in such capacity or capacities and the Indemnitee is willing, under
certain circumstances, to continue in such capacity or capacities;
WHEREAS, damages sought and sometimes paid in many claims made
against corporate directors and officers and the expenses required to defend
such claims, whether or not the allegations are meritorious, may not bear a
reasonable relationship to the amount of compensation received by and may be
beyond the financial resources of the Indemnitee;
WHEREAS, the Indemnitee is currently entitled to
indemnification under Delaware General Corporation Law and the Certificate of
Incorporation of the Company, which the Indemnitee does not regard to be
adequate protection against the risks associated with his service to or at the
request of the Company;
WHEREAS, the Indemnitee and the Company have concluded that
the exposure to risk of personal liability and payment of damages out of the
Indemnitee's personal assets may result in overly conservative direction and
supervision of the Company's affairs, which is detrimental to the best
interests of the Company and its stockholders; and
WHEREAS, the Company has concluded that additional protection
is necessary for its directors and elected officers.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
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1. Definitions.
(a) Agent. For the purposes of this Agreement, "agent"
of the Company means any person who is or was a director, officer, employee,
agent or fiduciary of the Company or a subsidiary of the Company, or is or was
serving at the request of, for the convenience of, or to represent the
interests of the Company or a subsidiary of the Company 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.
(b) Disinterested Director. For purposes of this
Agreement, "Disinterested Director" of the Company means a director of the
Company who is not and was not a party to the proceeding for which
indemnification is being sought by the claimant.
(c) Expenses. For purposes of this Agreement, "expenses"
includes all direct and indirect costs of any type or nature whatsoever
(including, without limitation, all attorneys' fees and related disbursements,
other out-of-pocket costs and reasonable compensation for time spent by the
Indemnitee for which he is not otherwise compensated by the Company or any
third party) actually and reasonably incurred by the Indemnitee in connection
with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
Section 145 of the General Corporation Law of Delaware or otherwise; provided,
however, that expenses shall not include any judgments, fines, excise taxes or
penalties under the Employee Retirement Income Security Act of 1974 ("ERISA"),
or amounts paid in settlement of a proceeding.
(d) Independent Legal Counsel. For purposes of this
Agreement, "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 shall include any person who, under the applicable
standards of professional conduct then prevailing, would not 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.
(e) Proceeding. For the purposes of this Agreement,
"proceeding" means any threatened, pending, or completed action, suit or other
proceeding, whether civil, criminal, administrative, investigative or any other
type whatsoever.
(f) Subsidiary. For purposes of this Agreement,
"subsidiary" means any corporation, partnership, joint venture or other
enterprise, a majority of whose equity interests are owned by the Company,
directly or through one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve
as an agent of the Company, at its will (or under separate agreement, if such
agreement exists), in the capacity Indemnitee currently serves as an agent of
the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the By-Laws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided,
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however, that nothing contained in this Agreement is intended to create any
right to continued employment of the Indemnitee.
3. Mandatory Indemnification. Subject to the
limitations set forth in Section 7, if the Indemnitee is a person who was
or is a party or is threatened to be made a party to or is involved, including
involvement as a witness, in any proceeding, including any action by or in the
right of the Company, by reason of the fact that he is or was or has agreed to
become an agent, or by reason of any action alleged to have been taken or
omitted by him in any such capacity, the Company shall indemnify the Indemnitee
against all expense, liability and loss (including but not limited to
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement), actually and reasonably incurred by him in connection with
the investigation, defense, settlement or appeal of such proceeding; provided,
however, that except as provided in Section 7(c) of this Agreement with respect
to proceedings seeking to enforce rights to indemnification, the Company shall
indemnify the Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee) only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company.
4. Mandatory Advancement of Expenses. The Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding referred to in
Section 3 to which the Indemnitee is a party or is threatened to be made a
party or with respect to which the Indemnitee is otherwise involved (including
involvement as a witness) as an agent of the Company. The Indemnitee hereby
undertakes to repay such amounts advanced if, but only if and to the extent
that, it shall ultimately be determined pursuant to the provisions hereof that
the Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within twenty (20) days following delivery of a written request
therefor by the Indemnitee to the Company; provided, however, that, if and to
the extent that the Delaware General Corporation Law requires, an advancement
of expenses incurred by the Indemnitee in his capacity as a director or officer
shall be made only upon delivery of an undertaking by or on behalf of the
Indemnitee to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that the Indemnitee is not entitled to be indemnified for such expenses
under this Agreement or otherwise.
5. Maintenance of D&O Insurance.
(a) So long as the Indemnitee shall continue to serve in
any capacity described in Section 2 and thereafter so long as there is any
reasonable possibility that the Indemnitee shall be subject to any proceeding
by reason of the fact that the indemnitee served in any of such capacities, the
Company will use reasonable efforts to purchase and maintain in effect for the
benefit of the Indemnitee one or more valid, binding and enforceable policies
of directors' and officers' liability insurance ("D&O Insurance") providing, in
all respects, coverage and amounts as reasonably determined by the Board of
Directors.
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(b) Notwithstanding Section 5(a), the Company shall not
be required to maintain D&O Insurance if such is not reasonably available or
if, in the reasonable business judgment of the Board of Directors of the
Company as it may exist from time to time, either (i) the premium cost for such
insurance is substantially disproportionate to the amount of insurance or (ii)
the coverage is so limited by exclusions that there is insufficient benefit
provided by such insurance.
6. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of
the commencement of or the threat of commencement of any proceeding, the
Indemnitee shall, if the Indemnitee believes that the indemnification with
respect thereto properly may be sought from the Company under this Agreement,
notify the Company of the commencement or threat of commencement thereof. The
failure to notify or promptly notify the Company shall not relieve the Company
from any liability which it may have to the Indemnitee otherwise than under
this Agreement, and shall relieve the Company from liability hereunder only to
the extent the Company has been prejudiced.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 6(a), the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement
of such proceeding to the insurers in accordance with the procedures set forth
in the D&O Insurance policy. The Company shall thereafter take all necessary
or desirable action to cause such insurers to pay, to or on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policy.
(c) In the event the Company shall be obligated to pay
the expenses of the Indemnitee in connection with any proceeding, the Company,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by the Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to the Indemnitee under this Agreement
for any fees of counsel or other expenses subsequently incurred by the
Indemnitee with respect to the same proceeding, provided that (i) the
Indemnitee shall have the right to employ his own counsel in any such
proceeding at the Indemnitee's expense; and (ii) if (A) the employment of
counsel by the Indemnitee has been previously authorized by the Company, or (B)
the Indemnitee shall have reasonably concluded that there is a conflict of
interest between the Company and the Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding, the fees and expenses of the Indemnitee's
counsel shall be paid by the Company; and provided further that the Company
shall not be required to pay the expenses of more than one such separate
counsel for persons it is indemnifying in any one proceeding.
7. Determination of Right to Indemnification.
(a) To the extent the Indemnitee has been successful on
the merits or otherwise in defense of any proceeding referred to in Section 3
or in the defense of any claim, issue or matter
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described therein, the Company shall indemnify the Indemnitee pursuant to
Section 3 against expenses actually and reasonably incurred by him in
connection with the investigation, defense, or appeal of such proceeding. If
the Indemnitee has not been successful on the merits or otherwise in any such
defense, the Company also shall indemnify the Indemnitee pursuant to Section 3
unless, and only to the extent that, the Indemnitee has not met the applicable
standard of conduct under the Company's Certificate of Incorporation required
to entitle the Indemnitee to such indemnification.
(b) Subject to the provisions of Section 8 relating to a
Change in Control (as defined therein), the determination as to whether the
Indemnitee is entitled to indemnification shall be made as follows: (1) if
requested by the Indemnitee by Independent Legal Counsel selected by the
Indemnitee with the consent of the Company (which consent shall not be
unreasonably withheld) or (2) if no request is made by the Indemnitee for a
determination by Independent Legal Counsel, (i) by a quorum of the Board of
Directors consisting of Disinterested Directors or (ii) if such quorum is not
obtainable or, even if obtainable, a quorum of Disinterested Directors so
directs, by Independent Legal Counsel in a written opinion. If Independent
Legal Counsel shall make such determination, the Company agrees to pay the
reasonable fees of such counsel and to indemnify such counsel fully against any
and all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or counsel's engagement pursuant
hereto.
(c) Notwithstanding a determination that the Indemnitee
is not entitled to indemnification with respect to a specific proceeding, the
Indemnitee shall have the right to apply to the court of Chancery of Delaware,
the court in which that proceeding is or was pending or any other court of
competent jurisdiction, for the purpose of enforcing the Indemnitee's right to
Indemnification or the advance payment of expenses pursuant to this Agreement.
The burden of proof shall be on the Company in any such suit to demonstrate by
the weight of the evidence that the Indemnitee is not entitled to
indemnification or advance payment of expenses. The Indemnitee's expenses
incurred in successfully establishing his right to Indemnification or
advancement of expenses, in whole or in part, in any such action (or settlement
thereof) shall be paid by the Company.
(d) Notwithstanding anything in Sections 3 or 4 to the
contrary, the Company shall not be liable under this Agreement to make any
indemnity payment or advancement of expenses in connection with any proceeding
(i) to the extent that payment is actually made, or for which payment is
available, to or on behalf of the Indemnitee under an insurance policy, except
in respect of any amount in excess of the limits of liability of such policy or
any applicable deductible under such policy; (ii) to the extent that payment
has been or will be made to the Indemnitee by the Company otherwise than
pursuant to this Agreement; or (iii) to the extent that there was a final
adjunction by a court of competent jurisdiction that the Indemnitee has not met
the applicable standard of conduct required to entitle the Indemnitee to
indemnification under the Delaware General Corporation Law as it now exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment).
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8. Change In Control.
(a) The Company agrees that if there is a Change in
Control, as defined below, of the Company (other than a Change in Control which
has been approved by a majority of the members of the Board of Directors who
were directors immediately prior to such Change in Control), then with respect
to all matters thereafter arising concerning the rights of the Indemnitee to
indemnity payments and advance payments of expenses under this Agreement the
Company shall seek legal advice only from Independent Legal Counsel selected by
the Indemnitee with the consent of the Company (which shall not be unreasonably
withheld). Such counsel, among other things, shall render a written opinion to
the Company and the Indemnitee as to whether and to what extent the Indemnitee
would be permitted to be indemnified under this Agreement and applicable law.
The Company agrees to pay the reasonable fees of the Independent Legal Counsel
and to indemnify such counsel fully against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or counsel's engagement pursuant hereto.
(b) Alternatively, the Indemnitee may choose to submit
all matters arising concerning his rights to Indemnity payments and advance
payments of expenses under this Agreement to a panel of three arbitrators, one
of whom is selected by the Company, another of whom is selected by the
Indemnitee and the third of whom is selected by the first two arbitrators so
selected. Any such submission shall be governed by the Commercial Arbitration
Rules of the American Arbitration Association and shall be deemed to be a
submission within the meaning of the Federal Arbitration Act or any statutory
modification or re-enactments thereof. Arbitration proceedings shall take
place in Salt Lake City, Utah, unless otherwise agreed to by the parties.
(c) "Change in Control" for purposes of this Agreement
shall be deemed to have occurred if (a) any "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder), 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,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 20% or more
of the total voting power represented by the Company's then outstanding voting
securities, except that a person who as of the date of this Agreement owns 20%
or more of the total voting power represented by the Company's outstanding
voting securities shall not be deemed to have caused a Change in Control, or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors and any new director
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-third (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 thereof, or (c) the
stockholders of the Company approve a merger, plan of complete liquidation of
the Company, an agreement for the sale or disposition by the Company of all or
any substantial part of the Company's assets, or other business combination of
the Company with any other corporation, other than a business combination
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which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately
after such bumpiness combination.
9. Limitation of Actions and Release of Claims. No
proceeding shall be brought and no cause of action shall be asserted by the
Company or any subsidiary or by any stockholder on behalf of the Company or any
subsidiary against the Indemnitee, his spouse, heirs, estate, executors or
administrators after the expiration of one year from the act or omission of the
Indemnitee upon which such proceeding is based; provided, however, that in the
event that the Indemnitee has fraudulently concealed the facts underlying such
cause of action, no proceeding shall be brought and no cause of action shall be
asserted after the expiration of one year from the earlier of (i) the date the
Company or any subsidiary of the Company discovers such facts, or (ii) the date
the Company or any subsidiary of the Company could have discovered such facts
by the exercise of reasonable diligence. Any claim or cause of action of the
Company or any subsidiary of the Company, including claims predicated upon the
negligent act or omission of the Indemnitee, shall be extinguished and deemed
released unless asserted by filing of a legal action within such period. This
Section 9 shall not apply to any cause of action which has accrued on the date
hereof and of which the Indemnitee is aware on the date hereof but as to which
the Company has no actual knowledge apart from the Indemnitee's knowledge.
10. Non-exclusivity. The provisions for indemnification
and advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or By-Laws, the vote of the
Company's stockholders or Disinterested Directors, other agreements, or
otherwise, both as to administrators in his official capacity and to action in
another capacity while occupying his position as an agent of the Company, and
the Indemnitee's rights hereunder shall continue after the Indemnitee has
ceased acting as an agent of the Company and shall inure to the benefit of the
heirs, executors and administrators of the Indemnitee.
11. Settlement. The Company shall not be liable to
indemnify the Indemnitee under this Agreement for any amounts paid in
settlement of any proceeding without its written consent, which consent shall
not be unreasonably withheld. The Company shall not settle any proceeding
which would impose any penalty or limitation on the Indemnitee without the
Indemnitee's written consent, which consent shall not be unreasonably withheld.
In the event that consent is not given and the parties hereto are unable to
agree on a proposed settlement, Independent Legal Counsel shall be retained by
the Company, at its expense, with the consent of the Indemnitee, which consent
shall not be unreasonably withheld, for the purpose of determining whether or
not the proposed settlement is reasonable under all the circumstances and if
Independent Legal Counsel determines the proposed settlement is reasonable
under all the circumstances, the settlement may be consummated without the
consent of the other party.
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12. Subrogation Rights. In the event of any payment
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery of the Indemnitee against any person
or organization and the Indemnitee shall execute all papers required and shall
do everything that may be reasonably necessary to secure such rights.
13. Interpretation of Agreement. It is understood that
the parties hereto intend this Agreement to be interpreted and enforced to as
to provide indemnification to the Indemnitee to the full extent now or
hereafter not prohibited by law. Indemnitee's rights hereunder shall apply to
claims made against Indemnitee arising out of acts or omissions which occurred
prior to the date hereof as well as those which occur after the date hereof.
14. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of
any paragraphs of this Agreement containing any such provision hold to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (ii)
to the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable and to give effect to Section 13.
15. 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 waiver of any of the provisions of this
agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
16. Successors and Assigns. The terms of this Agreement
shall bind, and shall inure to the benefit of, the successors and assigns of
the parties hereto.
17. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
duly given (i) on the date of delivery if delivered by hand or (ii) on the
second business day after being deposited In the government mail (registered or
express), postage prepaid. Addresses for notice to either party are as shown
on the signature page of this Agreement, or as subsequently modified by written
notice. Each party agrees to receipt for any notice received promptly upon
request.
18. Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be
performed entirely within Delaware.
19. Consent to Jurisdiction. The Company and the
Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of
the State of Delaware and the Company
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irrevocably consents to the jurisdiction of any court in which an Indemnitee
brings action pursuant to Section 7(c), for all purposes in connection with any
proceeding which arises out of or relates to this Agreement. The Company
agrees not to initiate any such action or proceeding in any state other than
Delaware.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnification Agreement effective as of the date first above written.
1-800 CONTACTS, INC.
00000 Xxxxx Xxxxxxxxx Xxxx Xxxxx
Xxxxx X-000
Xxxxxx, Xxxx 00000
By:
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Its:
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INDEMNITEE:
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Title:
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Address:
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