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DIRECTOR INDEMNIFICATION
AGREEMENT
DIRECTOR INDEMNIFICATION AGREEMENT (this " Agreement ") dated as of December 4, 2006, by
and between Direct General Corporation (the " Company "), a
Tennessee corporation, and ____________________ ("
Indemnitee "):
WHEREAS , the Indemnitee is
provided indemnification pursuant to the Tennessee Business
Corporation Act and the Charter and Bylaws of the
Company;
WHEREAS , the Board of Directors
of the Company (the " Board ") has authorized entering into
a Director Indemnification Agreement with each of the members of
the Board; and
WHEREAS , it is reasonable and
prudent for the Company contractually to obligate itself to
indemnify each member of the Board;
NOW, THEREFORE , in
consideration of the premises, the mutual agreements herein set
forth below and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Services
by Indemnitee; Notice of Proceeding.
(a) Services . Indemnitee may at any time and for any
reason resign from the Board or any permanent or temporary
committee thereof.
(b) Notice
of Proceeding . Indemnitee shall promptly notify
the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other
document relating to any Proceeding or matter that may be subject
to indemnification or advancement of Expenses (as defined below)
covered by this Agreement.
2. Indemnification .
(a) General . The Company shall indemnify and advance
Expenses to Indemnitee in connection with any action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or completed
proceeding whether civil, criminal, administrative or
investigative, direct or derivative, other than one initiated
directly by Indemnitee, and which arises out of or is related to
service by Indemnitee as a member of the Board or any permanent or
temporary committee thereof and to which Indemnitee is or is
threatened to be made a party (a " Proceeding "). "
Expenses " shall mean all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness
fees, reasonable and necessary travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, being or preparing
to be a witness in a Proceeding, for which reasonable and
appropriate documentation is presented to the Company in accordance
with the Company's standard policies and procedures for submission
and reimbursement of business expenses.
(b) Proceedings . Subject to the terms and conditions
of this Agreement, the Company shall indemnify Indemnitee against
Expenses, judgments, penalties, fines and amounts paid in
settlements actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with such Proceeding or any
claim, issue or matter therein. The Company may through counsel of
its choosing participate with Indemnitee in the defense in a claim
in any Proceeding. If the Company elects to participate with
Indemnitee in the defense a claim, the Company shall be responsible
for the costs of its legal counsel. Indemnitee shall not agree to
or enter into any settlement or consent decree with respect to any
claim without providing the Company with prior written
notice.
(c) Indemnification for Expenses As a Witness . To the
extent that Indemnitee is a witness in any Proceeding, Indemnitee
shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection
therewith.
3. Advancement of Expenses . The Company shall
advance all reasonable Expenses which were incurred by or on behalf
of Indemnitee in connection with any Proceeding within 30 days
after the receipt by the Company of a statement from Indemnitee
requesting such advance, provided the statement is accompanied by
appropriate documentation of such Expenses in accordance with the
Company's usual policies for reimbursement of business expenses. An
advance may be requested at any time prior to, during or after
final disposition of such Proceeding.
4. Entitlement to Indemnification .
(a) Request . To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written request
for indemnification, including such information as is reasonably
available to Indemnitee to demonstrate that Indemnitee is entitled
to indemnification, and including invoices or other appropriate
support for the amount claimed in accordance with the Company's
standard policies for of reimbursement of business
expenses.
(b) Payment . Unless the procedures set forth in
Section 6 of this Agreement are invoked by the Company or
unless Indemnitee shall permit the Company to defer payment,
payment to Indemnitee shall be made within 30 days after receipt of
such written request and invoices or other support as provided in
Section 4(a), above.
5. Presumptions and Effect of Certain Proceedings .
(a) Burden
of Proof . In making a determination with respect to
entitlement to Indemnification hereunder, the person or persons or
entity making such determination shall presume that Indemnitee is
entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with
Section 4(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the
making by any person, persons or entity of any determination
contrary to that presumption.
(b) Effect
of Other Proceedings . The termination of any
Proceeding or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except
as otherwise expressly provided in this Agreement, the Tennessee
Business Corporation Act, as such may be amended from time to time,
or by the Charter or Bylaws of the Company in effect on the date of
this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not
act in good faith or violated the duty of loyalty.
2
(c) Reliance as Safe Harbor . For purposes of any
determination of good faith by the Company under the Tennessee
Business Corporation Act, Indemnitee shall be deemed to have acted
in good faith if Indemnitee's action is based on the records or
books of account of the Company, including financial statements, or
on information supplied to Indemnitee by the officers of the
Company in the course of their duties, or on the advice of legal
counsel for the Company, the Board or any permanent or temporary
committee thereof or on information or records given or reports
made to the Company, the Board or any permanent or temporary
committee thereof by an independent certified public accountant,
investment banker or other expert selected with reasonable care by
the Company, the Board or any permanent or temporary committee
thereof. The provisions of this Section 5(c) shall not be
deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth under applicable
law.
(d) Actions of Others . The
knowledge and/or actions, or failure to act, of any director,
officer, agent or employee of the Company shall not be imputed to
Indemnitee for purposes of determining the right to indemnification
under this Agreement.
6. Remedies
of Indemnitee .
(a) Method
of Determination . If the Company determines not to
honor a written request for indemnification, it shall notify
Indemnitee within 30 days of receipt of such request (a "Denial
Notice"). Within 30 days of delivery of a Denial Notice to
Indemnitee, Indemnitee may appeal the denial of indemnity by
delivery of written notice (a "Denial Appeal") to the Company
invoking its right to have an Independent Counsel consider its
right to the indemnification requested. "Independent Counsel" shall
mean a law firm, or a member of a law firm, that is experienced in
matters of Tennessee corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party
or (ii) any other party to the Proceeding giving rise to a claim
for indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who, under
the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement. The Independent Counsel shall represent the
Board of Direct
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