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EXHIBIT
10.4
FORM
OF DIRECTOR INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (this “Agreement”)
dated
the ____ day of October 2007, by and between United Fuel & Energy
Corporation, a Nevada corporation (the “Company”),
and
______________________, an individual (“Indemnitee”).
RECITALS
A. Competent
and experienced persons are reluctant to serve or to continue to serve as
directors and officers of corporations or in other capacities unless they are
provided with adequate protection through insurance or indemnification (or
both)
against claims against them arising out of their service and activities on
behalf of the corporation.
B. The
current uncertainties relating to the availability of adequate insurance have
increased the difficulty for corporations of attracting and retaining competent
and experienced persons to serve in such capacity.
C. The
Board
of Directors of the Company (the “Board
of Directors”)
has
determined that the continuation of present trends in litigation will make
it
more difficult to attract and retain competent and experienced persons to serve
as directors and officers of the Company, that this situation is detrimental
to
the best interests of the Company’s stockholders and that the Company should act
to assure such persons that there will be increased certainty of adequate
protection in the future.
D. As
a
supplement to and in the furtherance of the Company’s Articles of Incorporation,
as amended (the “Articles”),
and
Bylaws, as amended (the “Bylaws”),
it is
reasonable, prudent, desirable and necessary for the Company contractually
to
obligate itself to indemnify, and to pay in advance expenses on behalf of
directors to the fullest extent permitted by law so that they will serve or
continue to serve the Company free from concern that they will not be so
indemnified and that their expenses will not be so paid in advance;
E. This
Agreement is not a substitute for, nor does it diminish or abrogate any rights
of Indemnitee under, the Articles and the Bylaws or any resolutions adopted
pursuant thereto (including any contractual rights of Indemnitee that may
exist).
F. Indemnitee
is a director of the Company and his willingness to continue to serve in such
capacity is predicated, in substantial part, upon the Company’s willingness to
indemnify him to the fullest extent permitted by the laws of the State of Nevada
and upon the other undertakings set forth in this Agreement.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the premises and covenants contained herein, the Company and
Indemnitee hereby agree as follows:
ARTICLE 1
CERTAIN
DEFINITIONS
Capitalized
terms used but not otherwise defined in this Agreement have the meanings set
forth below:
“Corporate
Status”
means
the status of a person who is or was a director, officer, employee, partner,
member, manager, trustee, fiduciary or agent of the Company or of any other
Enterprise which such person is or was serving at the request of the Company.
In
addition to any service at the actual request of the Company, Indemnitee will
be
deemed, for purposes of this Agreement, to be serving or to have served at
the
request of the Company as a director, officer, employee, partner, member,
manager, trustee, fiduciary or agent of another Enterprise if Indemnitee is
or
was serving as a director, officer, employee, partner, member, manager,
fiduciary, trustee or agent of such Enterprise and (i) such Enterprise is or
at
the time of such service was a Controlled Affiliate, (ii) such Enterprise is
or
at the time of such service was an employee benefit plan (or related trust)
sponsored on maintained by the Company or a Controlled Affiliate or (iii) the
Company or a Controlled Affiliate directly or indirectly caused Indemnitee
to be
nominated, elected, appointed, designated, employed, engaged or selected to
serve in such capacity.
“Controlled
Affiliate”
means
any corporation, limited liability company, partnership, joint venture, trust
or
other Enterprise, whether or not for profit, that is directly or indirectly
controlled by the Company. For purposes of this definition, the term “control”
means the possession, directly or indirectly, of the power to direct, or cause
the direction of, the management or policies of an Enterprise, whether through
the ownership of voting securities, through other voting rights, by contract
or
otherwise; provided,
however,
that
direct or indirect beneficial ownership of capital stock or other interests
in
an Enterprise entitling the holder to cast 30% or more of the total number
of
votes generally entitled to be cast in the election of directors (or persons
performing comparable functions) of such Enterprise will be deemed to constitute
“control” for purposes of this definition.
“Disinterested
Director”
means
a
director of the Company who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
“Enterprise”
means
the Company and any other corporation, partnership, limited liability company,
joint venture, employee benefit plan, trust or other entity or other enterprise
of which Indemnitee is or was serving at the request of the Company in a
Corporate Status.
“Expenses”
means
all attorney’s fees, disbursements and retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs, printing
and
binding costs, telephone charges, postage, fax transmission charges, secretarial
services, delivery service fees and all other disbursements or expenses paid
or
incurred in connection with prosecuting, defending, preparing to prosecute
or
defend, investigating, being or preparing to be a witness in, or otherwise
participating in, a Proceeding, or in connection with seeking indemnification
under this Agreement. Expenses will also include Expenses paid or incurred
in
connection with any appeal resulting from any Proceeding, including the premium,
security for and other costs relating to any appeal bond or its equivalent.
Expenses, however, will not include amounts paid in settlement by Indemnitee
or
the amount of judgments or fines against Indemnitee.
2
“Independent
Counsel”
means
an attorney or firm of attorneys that is experienced in matters of corporation
law and neither currently is, nor in the past five (5) years has been, retained
to represent: (i) the Company or Indemnitee in any matter material to either
such party (other than with respect to matters concerning the Indemnitee under
this Agreement and/or the indemnification provisions of the Articles or Bylaws,
or of other indemnitees under similar indemnification agreements), or (ii)
any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” does
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.
“Losses”
means
any loss, liability, judgments, damages, amounts paid in settlement, fines
(including excise taxes and penalties assessed with respect to employee benefit
plans), penalties (whether civil, criminal or otherwise) and all interest,
assessments and other charges paid or payable in connection with or in respect
of any of the foregoing.
“Proceeding”
means
any threatened, pending or completed action, suit, claim, demand, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative
hearing or any other actual, threatened or completed proceeding, including
any
and all appeals, whether brought by or in the right of the Company or otherwise,
whether civil, criminal, administrative or investigative, whether formal or
informal, and in each case whether or not commenced prior to the date of this
Agreement, in which Indemnitee was, is or will be involved as a party or
otherwise, by reason of or relating to Indemnitee’s Corporate Status and by
reason of or relating to either (i) any action or alleged action taken by
Indemnitee (or failure or alleged failure to act) or of any action or alleged
action (or failure or alleged failure to act) on Indemnitee’s part, while acting
in his Corporate Status or (ii) the fact that Indemnitee is or was serving
at
the request of the Company as director, officer, employee, partner, member,
manager, trustee, fiduciary or agent of another Enterprise, in each case whether
or not serving in such capacity at the time any Loss or Expense is paid or
incurred for which indemnification or advancement of Expenses can be provided
under this Agreement, except one initiated by Indemnitee to enforce his rights
under this Agreement. For purposes of this definition, the term “threatened”
will be deemed to include Indemnitee’s good faith belief that a claim or other
assertion may lead to institution of a Proceeding.
References
to “serving
at the request of the Company”
include
any service as a director, officer, employee or agent of the Company which
imposes duties on, or involves services by, such director, officer, employee
or
agent with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan will be deemed to have acted in a
manner “not
opposed to the best interests of the Company”
as
referred to under applicable law or in this Agreement.
3
ARTICLE
2
SERVICES
TO THE COMPANY
2.1 Services
to the Company.
Indemnitee agrees to serve as a director of the Company. Indemnitee may at
any
time and for any reason resign from such position (subject to any other
contractual obligation or any obligation imposed by operation of law), in which
event the Company will have no obligation under this Agreement to continue
Indemnitee in such position. This Agreement will not be construed as giving
Indemnitee any right to be retained in the employ of the Company (or any other
Enterprise).
ARTICLE
3
INDEMNIFICATION
3.1 Company
Indemnification.
Except
as otherwise provided in this Article 3,
if
Indemnitee was, is or becomes a party to, or was or is threatened to be made
a
party to, or was or is otherwise involved in, any Proceeding, the Company will
indemnify and hold harmless Indemnitee to the fullest extent permitted by the
Articles, Bylaws and applicable law, as the same exists or may hereafter be
amended, interpreted or replaced (but in the case of any such amendment,
interpretation or replacement, only to the extent that such amendment,
interpretation or replacement permits the Company to provide broader
indemnification rights than were permitted prior thereto), against any and
all
Expenses and Losses, and any federal, state, local or foreign taxes imposed
as a
result of the actual or deemed receipt of any payments under this Agreement,
that are actually and reasonably paid or incurred by Indemnitee in connection
with such Proceeding. For purposes of this Agreement, the meaning of the phrase
“to
the fullest extent permitted by law”
will
include to the fullest extent permitted by the Nevada Revised Statues, as
amended (the “NRS”),
with
respect to such matters.
3.2 Mandatory
Indemnification if Indemnitee is Wholly or Partly
Successful.
Notwithstanding any other provision of this Agreement (other than Section 6.9),
to the
extent that Indemnitee has been successful, on the merits or otherwise, in
defense of any Proceeding or any part thereof, the Company will indemnify
Indemnitee against all Expenses that are actually and reasonably paid or
incurred by Indemnitee in connection therewith. If Indemnitee is not wholly
successful in such Proceeding, but is successful, on the merits or otherwise,
as
to one or more but fewer than all claims, issues or matters in such Proceeding,
the Company will indemnify and hold harmless Indemnitee against all Expenses
paid or incurred by Indemnitee in connection with each successfully resolved
claim, issue or matter on which Indemnitee was successful. For purposes of
this
Section 3.2,
the
termination of any Proceeding, or any claim, issue or matter in such Proceeding,
by dismissal with or without prejudice will be deemed to be a successful result
as to such Proceeding, claim, issue or matter.
3.3 Indemnification
for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding
to
which Indemnitee is not a party, the Company will indemnify Indemnitee against
all Expenses actually and reasonably paid or incurred by Indemnitee on his
behalf in connection therewith.
4
3.4 Exclusions.
Notwithstanding any other provision of this Agreement, the Company will not
be
obligated under this Agreement to provide indemnification in connection with
the
following:
(a) Any
Proceeding (or part of any Proceeding) initiated or brought voluntarily by
Indemnitee against the Company or its directors, officers, employees or other
indemnities, unless the Board of Directors has authorized or consented to the
initiation of the Proceeding (or such part of any Proceeding); provided,
however,
that
nothing in this Section 3.4(a)
shall
limit the right of Indemnitee to be indemnified under Section 8.4.
(b) For
an
accounting of profits made from the purchase and sale (or sale and purchase)
by
Indemnitee of securities of the Company within the meaning of Section 16(b)
of the Exchange Act or any similar successor statute.
ARTICLE
4
ADVANCEMENT
OF EXPENSES
4.1 Expense
Advances.
Except
as set forth in Section 4.2,
the
Company will, if requested by Indemnitee, advance, to the fullest extent
permitted by law, to Indemnitee (hereinafter an “Expense
Advance”)
any
and all Expenses actually and reasonably paid or incurred by Indemnitee in
connection with any Proceeding (whether prior to or after its final
disposition). Indemnitee’s right to each Expense Advance will not be subject to
the satisfaction of any standard of conduct and will be made without regard
to
Indemnitee’s ultimate entitlement to indemnification under the other provisions
of this Agreement, or under provisions of the Articles or Bylaws or otherwise.
Each Expense Advance will be unsecured and interest free and will be made by
the
Company without regard to Indemnitee’s ability to repay the Expense Advance;
provided,
however,
that,
if applicable law requires, an Expense Advance will be made only upon delivery
to the Company of an undertaking (hereinafter an “Undertaking”),
by or
on behalf of Indemnitee, to repay such Expense Advance if it is ultimately
determined, by final decision by a court or arbitrator, as applicable, from
which there is no further right to appeal, that Indemnitee is not entitled
to be
indemnified for such Expenses under the Articles, Bylaws, the NRS, this
Agreement or otherwise. An Expense eligible for an Expense Advance will include
any and all reasonable Expenses incurred pursuing an action to enforce the
right
of advancement provided for in this Article 4,
including Expenses incurred preparing and forwarding statements to the Company
to support the Expense Advances claimed.
4.2 Exclusions.
Indemnitee will not be entitled to any Expense Advance in connection with any
of
the matters for which indemnity is excluded pursuant to Section 3.4.
4.3 Timing.
An
Expense Advance pursuant to Section 4.1
will be
made within five business days after the receipt by the Company of a written
statement or statements from Indemnitee requesting such Expense Advance (which
statement or statements will include, if requested by the Company, reasonable
detail underlying the Expenses for which the Expense Advance is requested),
whether such request is made prior to or after final disposition of such
Proceeding. Such request must be accompanied by or preceded by the Undertaking,
if then required by the NRS or any other applicable law.
5
ARTICLE
5
CONTRIBUTION
IN THE EVENT OF JOINT LIABILITY
5.1 Contribution
by Company.
To the
fullest extent permitted by law, if the indemnification provided for in this
Agreement is unavailable to Indemnitee for any reason whatsoever, the Company,
in lieu of indemnifying Indemnitee, will contribute to the amount of Expenses
and Losses actually and reasonably incurred or paid by Indemnitee in connection
with any Proceeding in proportion to the relative benefits received by the
Company and all officers, directors and employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in
such
Proceeding), on the one hand, and Indemnitee, on the other hand, from the
transaction from which such Proceeding arose; provided,
however,
that
the proportion determined on the basis of relative benefit may, to the extent
necessary to conform to law, be further adjusted by reference to the relative
fault of the Company and all officers, directors and employees of the Company
other than Indemnitee who are jointly liable with Indemnitee (or would be if
joined in such Proceeding), on the one hand, and Indemnitee, on the other hand,
in connection with the events that resulted in such Expenses and Losses, as
well
as any other equitable considerations which applicable law may require to be
considered. The relative fault of the Company and all officers, directors and
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such Proceeding), on the one hand, and
Indemnitee, on the other hand, will be determined by reference to, among other
things, the degree to which their actions were motivated by intent to gain
personal profit or advantage, the degree to which their liability is primary
or
secondary, and the degree to which their conduct was active or passive.
5.2 Indemnification
for Contribution Claims by Others.
To the
fullest extent permitted by law, the Company will fully indemnify and hold
Indemnitee harmless from any claims of contribution which may be brought by
other officers, directors or employees of the Company who may be jointly liable
with Indemnitee for any Loss or Expense arising from a Proceeding.
ARTICLE
6
PROCEDURES
AND PRESUMPTIONS FOR THE
DETERMINATION
OF ENTITLEMENT TO INDEMNIFICATION
6.1 Notification
of Claims; Request for Indemnification.
Indemnitee agrees to notify promptly the Company in writing of any claim made
against Indemnitee for which indemnification will or could be sought under
this
Agreement; provided,
however,
that a
delay in giving such notice will not deprive Indemnitee of any right to be
indemnified under this Agreement unless, and then only to the extent that,
the
Company did not otherwise learn of the Proceeding and such delay is materially
prejudicial to the Company’s ability to defend such Proceeding; and,
provided,
further,
that
notice will be deemed to have been given without any action on the part of
Indemnitee in the event the Company is a party to the same Proceeding. The
omission to notify the Company will not relieve the Company from any liability
for indemnification which it may have to Indemnitee otherwise than under this
Agreement. Indemnitee may deliver to the Company a written request to have
the
Company indemnify and hold harmless Indemnitee in accordance with this
Agreement. Subject to Section 6.9,
such
request may be delivered from time to time and at such time(s) as Indemnitee
deems appropriate in his sole discretion. Following such a written request
for
indemnification, Indemnitee’s entitlement to indemnification shall be determined
according to Section 6.2.
The
Secretary of the Company will, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that Indemnitee has
requested indemnification. The Company will be entitled to participate in any
Proceeding at its own expense.
6
6.2 Determination
of Right to Indemnification.
Upon
written request by Indemnitee for indemnification pursuant to Section 6.1
hereof
with respect to any Proceeding, a determination, if, but only if, required
by
applicable law, with respect to Indemnitee’s entitlement thereto will be made by
one of the following, at the election of Indemnitee: (1) so long as there are
Disinterested Directors with respect to such Proceeding, a majority vote of
the
Disinterested Directors, even though less than a quorum of the Board of
Directors, (2) so long as there are Disinterested Directors with respect to
such
Proceeding, a committee of such Disinterested Directors designated by a majority
vote of such Disinterested Directors, even though less than a quorum of the
Board of Directors or (3) Independent Counsel in a written opinion delivered
to
the Board of Directors, a copy of which will also be delivered to Indemnitee.
The election by Indemnitee to use a particular person, persons or entity to
make
such determination is to be included in the written request for indemnification
submitted by Indemnitee (and if no election is made in the request it will
be
assumed that Indemnitee has elected the Independent Counsel to make such
determination). The person, persons or entity chosen to make a determination
under this Agreement of the Indemnitee’s entitlement to indemnification will act
reasonably and in good faith in making such determination.
6.3 Selection
of Independent Counsel.
If the
determination of entitlement to indemnification pursuant to Section 6.2
will be
made by an Independent Counsel, the Independent Counsel will be selected as
provided in this Section 6.3.
The
Independent Counsel will be selected by Indemnitee (unless Indemnitee requests
that such selection be made by the Board of Directors, in which event the
immediately following sentence will apply) and Indemnitee will give written
notice to the Company advising it of the identity of the Independent Counsel
so
selected. If the Independent Counsel is selected by the Board of Directors,
the
Company will give written notice to Indemnitee advising him of the identity
of
the Independent Counsel so selected. In either event, Indemnitee or the Company,
as the case may be, may, within ten days after such written notice of selection
is given, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided,
however,
that
such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of “Independent Counsel” as defined
in this Agreement, and the objection will set forth with particularity the
factual basis of such assertion. Absent a proper and timely objection, the
person so selected will act as Independent Counsel. If a written objection
is
made and substantiated, the Independent Counsel selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court
has
determined that such objection is without merit. If, within 30 days after
submission by Indemnitee of a written request for indemnification pursuant
to
Section 6.1,
no
Independent Counsel is selected, or an Independent Counsel for which an
objection thereto has been properly made remains unresolved, either the Company
or Indemnitee may petition the appropriate court of the State of Nevada or
other
court of competent jurisdiction for resolution of any objection which has been
made by the Company or Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the court or by such other person as the court may designate, and the person
with respect to whom all objections are so resolved or the person so appointed
will act as Independent Counsel under Section 6.2.
The
Company will pay any and all fees and expenses incurred by such Independent
Counsel in connection with acting pursuant to Section 6.2
hereof,
and the Company will pay all fees and expenses incident to the procedures of
this Section 6.3,
regardless of the manner in which such Independent Counsel was selected or
appointed.
7
6.4
