INDEMNIFICATION AGREEMENT
This Agreement is made and entered into as of May 31, 2000 between
HomeBase, Inc., a Delaware corporation (the "Company"), and ____________________
("Indemnitee").
WHEREAS, it is essential to the Company that it retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is [a director] [a director and officer]
[an officer] of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors and officers of
public companies in today's environment;
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner, and in part to provide Indemnitee with
specific contractual assurance that the indemnification protection provided by
the By-laws of the Company will be available to Indemnitee (regardless of, among
other things, any amendment to or revocation of such By-laws or any change in
the composition of the Company's Board of Directors or any acquisition
transaction relating to the Company), and in order to induce Indemnitee to
continue to provide services to the Company as [a director] [a director and
officer] [an officer] thereof, the Company wishes to provide in this Agreement
for the indemnification of and the advancing of expenses to Indemnitee to the
fullest extent (whether partial or complete) permitted by law and as set forth
in this Agreement, and, to the extent insurance is maintained, for the continued
coverage of Indemnitee under the Company's directors' and officers' liability
insurance policies (the "D&O Insurance");
WHEREAS, as a result of the Company's provision of such specific
contractual assurance, Indemnitee has agreed to continue to serve as [a
director] [a director and officer] [an officer] of the Company;
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, including Indemnitee's
continued service to the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions.
(a) Change in 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 Securities
Exchange Act of 1934, as amended), 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, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company' stockholders 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 thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
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 merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company (in one transaction or a series of transactions) of
all or substantially all of the Company's assets.
(b) Claim: any threatened, pending or completed action, suit,
proceeding or alternate dispute resolution mechanism, or any inquiry, hearing or
investigation, whether conducted by the Company or any other party, that
Indemnitee in good faith believes might lead to the institution of any such
action, suit or proceeding or alternate dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other costs,
travel expenses, fees of experts, transcript costs, filing fees, witness fees,
telephone charges, postage, delivery service fees, expenses and obligations of
any nature whatsoever paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, or related to anything done or not done by Indemnitee in any such
capacity.
(e) Potential Change in Control: shall be deemed to have
occurred if (i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(f) Reviewing Party: shall consist of either the members of
the Company's Board of Directors who are not parties to the particular Claim for
which Indemnitee is seeking indemnification, even though such members fail to
constitute a quorum, or Independent Legal Counsel. If the Reviewing Party
consists of members of the Board of Directors who are not parties to the Claim
then the Reviewing Party shall act by majority vote.
(g) Independent Legal Counsel: shall refer to an attorney,
selected in accordance with the provisions of Section 3 hereof, who shall not
have otherwise performed services for the Company or Indemnitee within the last
five years (other than in connection with seeking indemnification under this
Agreement). Independent Legal Counsel shall not be 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, nor shall
Independent Legal Counsel be any person who has been sanctioned or censured for
ethical violations of applicable standards of professional conduct.
(h) Voting Securities: any securities of the Company which
vote generally in the election of directors.
2. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim by reason of (or arising in part out
of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the
fullest extent permitted by law as soon as practicable but in any event no later
than thirty days after written demand is presented to the Company, against any
and all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Claim and any federal, state, local or
foreign taxes (net of the value to Indemnitee of any tax benefits resulting from
tax deductions or otherwise) imposed on the Indemnitee as a result of the actual
or deemed receipt of any payments under this Agreement (including the creation
of the trust referred to in Section 4 hereof). If so requested by Indemnitee,
the Company shall advance (within two business days of such request) any and all
Expenses to Indemnitee (an "Expense Advance"). Notwithstanding anything in this
Agreement or in the By-laws of the Company to the contrary and except as
provided in Section 5, prior to a Change in Control Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in connection with any
Claim initiated by Indemnitee against the Company or any director or officer of
the Company unless the Company has joined in or consented to the initiation of
such Claim.
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 2(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 2(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law shall not be binding and Indemnitee shall
not be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon. If there has not been a Change in Control, the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 3 hereof. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation in any court in the State of Delaware having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, or the legal or factual bases therefor
and the Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
3. Change in Control. The Company agrees that if there is a Change of
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control), then Independent Legal Counsel shall be
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld), and such Independent Legal Counsel shall determine
whether the officer or director is entitled to indemnity payments and Expense
Advances under this Agreement or any other agreement or under the Certificate of
Incorporation or By-laws of the Company now or hereafter in effect relating to
Claims for Indemnifiable Events. Such Independent Legal Counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent Indemnitee will be permitted to be indemnified. The
Company agrees to pay the reasonable fees of the Independent Legal Counsel and
to indemnify fully such Independent Legal Counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or the engagement of Independent Legal Counsel
pursuant hereto.
4. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
for the benefit of Indemnitee and from time to time upon written request of
Indemnitee shall fund such trust in an amount (the "Trust Fund Amount") which is
the lesser of (a) the total of all sums sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigation, preparing for and defending any Claim relating
to an Indemnifiable Event, plus any and all judgments, fines, penalties and
settlement amounts of any and all Claims relating to an Indemnifiable Event from
time to time actually paid or claimed, reasonably anticipated or proposed to be
paid, or (b) Five Million Dollars ($5,000,000). The Trust Fund Amount shall be
determined by the Company's Board of Directors, provided that no Change in
Control shall have occurred but shall be determined by the Independent Legal
Counsel after the occurrence of a Change in Control. The Company shall maintain
funds in the trust account in the Trust Fund Amount, depositing such additional
amounts as may be appropriate as a result of disbursements from the account or
increases which, from time to time, may occur in the Trust Fund Amount. The
terms of the trust shall provide that upon a Change in Control (i) the Trust
shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee, (ii) the trustee shall advance, within two business days
of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee
hereby agrees to reimburse the trust under the circumstances under which the
Indemnitee would be required to reimburse the Company under Section 2(b) of this
Agreement), (iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the trustee shall
promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement or otherwise, and (v) all unexpected
funds in such trust shall revert to the Company upon a final determination by
the Reviewing Party or a court of competent jurisdiction, as the case may be,
that Indemnitee has been fully indemnified under the terms of this Agreement.
The trustee shall be chosen by Indemnitee. Nothing in this Section 4 shall
relieve the Company of any of its obligations under this Agreement. All income
earned on the assets held in the trust shall be reported as income by the
Company for federal, state, local and foreign tax purposes.
5. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any Claim asserted against Indemnitee or which are incurred in
connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement or under the Certificate of Incorporation or By-laws of the Company
now or hereafter in effect relating to Claims for Indemnifiable Events and/or
(ii) recovery under any directors' and officers' liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim 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 or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith. In connection with any determination
by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
7. No Presumption. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo contendere
or its equivalent, shall not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by applicable law.
8. Non-Exclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the Certificate of
Incorporation or By-laws of the Company or the Delaware General Corporation Law
or otherwise. To the extent that a change in the Delaware General Corporation
Law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Certificate of
Incorporation and By-laws of the Company and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
9. No Construction as Employment Agreement. Nothing contained herein
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company or any of its subsidiaries.
10. Liability Insurance. To the extent the Company maintains D&O
Insurance, Indemnitee shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage provided for any
Company director or officer.
11. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against Indemnitee or Indemnitee's spouse, heirs,
executors, administrators or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of action, and
any claim or cause of action of the Company or its affiliates shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such
shorter period shall govern.
12. Amendments, Etc. 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 provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
13. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of 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 as may be necessary to enable the Company effectively to bring
suit to enforce such rights.
14. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Certificate of Incorporation or the By-laws of
the Company or otherwise) of the amounts otherwise indemnifiable hereunder.
15. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice of the
commencement of or the threat of commencement of any action, suit or proceeding,
Indemnitee shall notify the Company of the commencement or threat thereof; but
the omission so to notify or delay in notifying the Company will not relieve the
Company from any liability which it may have to Indemnitee except to the extent
that the Company is actually prejudiced by any such omission or delay.
(b) The Company shall give prompt notice of the commencement
of such action, suit or proceeding to the insurers on the D&O Insurance, if any,
in accordance with the procedures set forth in the respective policies in favor
of Indemnitee. The Company shall thereafter take all necessary or desirable
action to cause such insurers to pay, on behalf of Indemnitee, all amounts
payable as a result of such action, suit or proceeding in accordance with the
terms of such policies.
(c) In the event such action, suit or proceeding is other than
by or in the right of the Company, Indemnitee may, at his option, either control
the defense thereof himself, require the Company to defend him or accept the
defense provided under the D&O Insurance; provided, however, that Indemnitee may
not control the defense himself or require the Company to defend him if such
decision would jeopardize the coverage provided by the D&O Insurance to the
Company and/or the other directors and officers covered thereby. In the event
that Indemnitee requires the Company to defend him, or in the event that
Indemnitee proceeds under the D&O Insurance but Indemnitee determines that such
insurers under the D&O Insurance are unable or unwilling to adequately defend,
contest and protect Indemnitee against any such action, suit or proceeding, the
Company shall promptly undertake to defend any such action, suit or proceeding,
at the Company's sole cost and expense, utilizing counsel of Indemnitee's choice
who has been approved by the Company. If appropriate, the Company shall have the
right to participate in the defense of such action, suit or proceeding.
(d) In the event such action, suit or proceeding is by or in
the right of the Company, Indemnitee may, at his option, either control the
defense thereof himself or accept the defense provided under the D&O Insurance;
provided, however, that Indemnitee may not control the defense himself if such
decision would jeopardize the coverage provided by the D&O Insurance, if any, to
the Company and/or the other directors and officers covered thereby.
(e) In the event the Company shall fail timely to defend,
contest or otherwise protect Indemnitee against any such action, suit or
proceeding which is not by or in the right of the Company, Indemnitee shall have
the right to do so, including without limitation the right to make any
compromise or settlement thereof, and to recover from the Company all attorneys'
fees, reimbursements and all amounts paid as a result thereof.
16. Binding Effect, Etc. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, 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 Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/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. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as [a director] [a director and
officer] [an officer] of the Company or of any other enterprise at the Company's
request.
17. 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, the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
HOMEBASE, INC.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
INDEMNITEE:
Name: ___________________________________
