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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.
“
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.
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.
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.
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.
6.2
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
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