Exhibit 10.4
INDEMNIFICATION AGREEMENT
THIS
INDEMNIFICATION AGREEMENT (this "Agreement") is entered into as
of
the ___ day of August, 2005, by and between
CELERITY SYSTEMS, INC., a Delaware
corporation whose principal place of
business is located at 146 Maryville Pike,
Suite #201, Knoxville, TN 37920 (the
"Company"), and C. THOMAS MCMILLEN, whose
address is 1103 South Carolina Avenue,
S.E., Washington, D.C. 20003
("McMillen").
R E C I T A L S
WHEREAS,
it is essential that the Company be able to attract and retain
as
directors and officers the most capable
persons available;
WHEREAS,
the Company's Bylaws and Certificate of Incorporation
specifically permit the Company, subject to
certain exceptions and
qualifications, to indemnify directors,
officers, and fiduciaries of the Company
from and against incurring any liability or
damages arising out of their service
to the Company;
WHEREAS,
the laws of the State of Delaware, and the Company's Bylaws and
Certificate of Incorporation, permit the
Company, subject to certain exceptions
and qualifications, to enter into
indemnification arrangements whereby the
Company will obligate itself to indemnify
directors, officers and fiduciaries of
the Company from and against incurring any
liability or damages arising out of
their service to the Company;
WHEREAS,
the Company desires to employ McMillen as its President, Chief
Executive Officer, and Chairman of the
Board, and McMillen desires to be so
employed, on the terms and subject to the
conditions set forth in that certain
Executive Employment Agreement, of even
date herewith, by and between the
Company and McMillen (the "Employment
Agreement");
WHEREAS,
in connection with McMillen serving as a director and officer
of
the Company, the Company desires to provide
McMillen with specific contractual
assurances of his rights to indemnification
from and against incurring any
liability or damages arising out of his
service to the Company; and
WHEREAS,
McMillen is relying upon the rights afforded under this
Agreement
in accepting the position of President,
Chief Executive Officer, and Chairman of
the Board of the Company pursuant to the
Employment Agreement.
NOW,
THEREFORE, for and in consideration of the foregoing premises,
and
the mutual promises and covenants contained
herein, the Company and McMillen do
hereby covenant and agree as follows:
<PAGE>
1.
Definitions.
(a) "Company" shall include, in addition to Celerity Systems,
Inc.,
any successor thereto, subsidiary thereof,
or constituent corporation (including
any constituent of a constituent) absorbed
in a consolidation or merger which,
if its separate existence had continued,
would have had power and authority to
indemnify its directors, officers,
fiduciaries, employees and agents, so that if
McMillen is or was a director, officer,
fiduciary, employee or agent of such
constituent corporation, or is or was
serving at the request of such constituent
corporation as a director, officer,
fiduciary, employee or agent of another
corporation, partnership, joint venture,
employee benefit plan, trust or other
enterprise, McMillen shall stand in the
same position under the provisions of
this Agreement with respect to the
resulting or surviving corporation as
McMillen would have with respect to such
constituent corporation if its separate
existence had continued.
(b) "Corporate Status" describes the status of a person who is
serving or has served: (i) as a director,
officer or fiduciary of the Company,
or (ii) as a director, partner, member,
trustee, officer, employee, agent, or
fiduciary of any other Entity (as defined
below) at the request of the Company.
For purposes of subsection (ii) of this
Section 1(b), if McMillen is serving or
has served as a director, partner, member,
trustee, officer, employee, agent, or
fiduciary of a Subsidiary (as defined
below), McMillen shall be deemed to be
serving at the request of the Company.
(c) "Entity" shall mean any corporation, partnership, limited
partnership, limited liability company,
joint venture, trust, foundation,
association, organization or other legal
entity and any group, branch, or
division of the Company or any of its
Subsidiaries.
(d) "Expenses" shall mean any and all losses, claims, fees,
damages,
costs, expenses, judgments, fines and
liabilities (joint or several) incurred in
connection with any Proceeding (as defined
below), including without limitation,
attorneys' fees, disbursements, retainers
and bonds (including without
limitation, any fees, disbursements,
retainers and bonds incurred by McMillen
pursuant to Section 11 hereof), fees and
disbursements of expert witnesses,
private investigators and professional
advisors (including, without limitation,
accountants), court costs, transcript
costs, fees of experts, travel expenses,
duplicating, printing and binding costs,
telephone and fax transmission charges,
postage, delivery services, secretarial
services, and other disbursements and
expenses, and including any federal, state,
local or foreign taxes imposed on
McMillen as a result of the actual or
deemed receipt of any payments under this
Agreement, including all interest,
assessments and other charges paid or payable
in connection with or in respect of such
payments.
(e) "Proceeding" shall mean any threatened, pending or
completed
claim, action, suit, arbitration, alternate
dispute resolution process,
investigation, administrative, legislative,
or regulatory hearing, appeal, or
any other proceeding, whether civil,
criminal, administrative or investigative,
whether formal or informal, and including
without limitation, any claim, action
or investigations made under the Securities
Act of 1933, as amended, the
Securities Exchange Act of 1934, as
amended, their respective state
counterparts, and/or any rule or regulation
promulgated thereunder or any other
United States federal or state, or other
statutory law or regulation, domestic
or foreign, at common law or otherwise,
which relate directly or indirectly to
(i) the registration, purchase, sale or
ownership of any securities of the
Company or its Subsidiaries, or (ii) any
fiduciary obligation owed with respect
to the Company, its Subsidiaries and its
shareholders; provided, however, that
the term "Proceeding" shall not include any
action instituted by McMillen other
than an action to establish or enforce
indemnification rights under this
Agreement unless such action is authorized
by the Company.
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<PAGE>
(f) "Subsidiary" shall mean any Entity of which the Company
owns
(either directly or through or together
with another Subsidiary of the Company)
either (i) a general partner, managing
member or other similar interest or (ii)
(A) ten percent (10%) or more of the voting
power of the voting capital equity
interests of such Entity, or (B) ten
percent (10%) or more of the outstanding
voting capital stock or other voting equity
interests of such Entity.
(g) "Unindemnifiable Conduct" shall mean a final determination by
a
court of competent jurisdiction or other
judicial or administrative body before
which a Proceeding was brought that, with
respect to such Proceeding, McMillen:
(i) engaged in intentional misconduct, knowing violations of
applicable law, or gross negligence;
(ii) personally received a benefit in money, property, or
services to which he was not legally
entitled, or improperly took advantage of a
corporate opportunity;
(iii) failed to act in good faith and in a manner McMillen
reasonably believed to be in or not opposed
to the best interests of the
Company;
(iv)
with respect to any criminal action or proceeding,
McMillen had reasonable cause to believe
that McMillen's conduct was unlawful;
or
(v) is liable to the Company for an accounting of profits made
from the purchase or sale by McMillen of
securities of the Company pursuant to
the provisions of Section 16(b) of the
Securities Exchange Act of 1934, as
amended, the rules and regulations
promulgated thereunder and amendments thereto
or similar provisions of any federal, state
or local statutory law.
Notwithstanding the foregoing, the
termination of any Proceeding by judgment,
order of court, settlement, conviction, or
upon plea of nolo contendere, or its
equivalent, shall not, of itself, create a
presumption that McMillen was engaged
in Unindemnifiable Conduct.
2.
Services of McMillen. In consideration of the Company's covenants
and
commitments hereunder, and for other good
and valuable consideration, McMillen
agrees to serve as President, Chief
Executive officer and Chairman of the Board
of the Company pursuant to the Employment
Agreement; provided, that this
Agreement shall not impose any obligation
on McMillen or the Company to continue
McMillen's service to the Company at any
particular rate or for any particular
period of time, unless otherwise required
by law or by other agreements or
commitments of the parties, if any,
including but not limited to the Employment
Agreement.
3.
Indemnification. The Company agrees to hold harmless and
indemnify
McMillen as follows:
(a) Indemnity in Third Party Proceedings. Subject to the
limitations
set forth in this Agreement, unless
McMillen engaged in Unindemnifiable Conduct
or indemnification is not permitted under
applicable law, the Company shall
indemnify and hold harmless McMillen if he
is or was a party to or threatened to
be made a party to or otherwise involved in
any Proceeding (other than a
Proceeding by or in the name of the Company
to procure a judgment in its favor)
from against all Expenses actually and
reasonably incurred by McMillen in
connection with the defense or settlement
of such Proceeding.
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<PAGE>
(b) McMillen in Proceedings By or In the Name of The Company.
Subject to the limitations set forth in
this Agreement, unless McMillen engaged
in Unindemnifiable Conduct or
indemnification is not permitted under applicable
law, the Company shall indemnify and hold
harmless McMillen if he is or was a
party to or threatened to be made a party
to or otherwise involved in any
Proceeding by or in the name or right of
the Company to procure a judgment in
its favor against all Expenses actually and
reasonably incurred by McMillen in
connection with the defense or settlement
of such Proceeding.
4.
Contribution.
(a) If the indemnification provided for in Section 3 hereof for
any
reason is held by a court of competent
jurisdiction to be unavailable to
McMillen in respect of any Proceeding then
the Company, in lieu of indemnifying
McMillen, shall contribute to the amount
paid or payable by McMillen as a result
of such Proceeding (i) in such proportion
as is appropriate to reflect the
relative benefits received by the Company
(including its Subsidiaries) and
McMillen from the transaction or occurrence
that the action or inaction leading
to the Proceeding related to, or (ii) if
the allocation provided by clause (i)
above is not permitted by applicable law,
then in such proportion as is
appropriate to reflect not only the
relative benefits referred to in clause (i)
above but also the relative fault of the
Company (including its Subsidiaries)
and McMillen in connection with such
Proceeding, as well as any other relevant
equitable considerations.
(b) In connection with the registration of securities of the
Company
or any of its Subsidiaries, the relative
benefits received by the Company
(including its Subsidiaries) and McMillen
shall be deemed to be in the same
respective proportions that the net
proceeds from the offering (before deducting
expenses) received by the Company
(including its Subsidiaries) and McMillen, in
each case as set forth in the table
contained in the applicable prospectus, bear
to the aggregate public offering price of
the securities so offered.
(c) In connection with the registration of securities of the
Company
or any of its Subsidiaries, the relative
fault of the Company (including its
Subsidiaries) and McMillen shall be
determined by reference to, among other
things, whether the untrue or alleged
untrue statement of a material fact or the
omission or alleged omission to state a
material fact relates to information
supplied by the Company (including its
Subsidiaries) or McMillen and the
parties' relative intent, knowledge, access
to information, and opportunity to
correct or prevent such statement or
omission.
(d) The Company and McMillen agree that it would not be just
and
equitable if contribution pursuant to this
Section 4 were determined by pro rata
or per capita allocation or by any other
method of allocation which does not
take account of the equitable
considerations referred to in Section 4(c) hereof.
(e) No person found guilty of fraudulent misrepresentation
within
the meaning of Section 11(f) of the
Securities Act of 1933, as amended, shall be
entitled to contribution from any person
who was not found guilty of such
fraudulent misrepresentation.
5.
Notification and Defense of Claim. McMillen shall promptly notify
the
Company in writing as soon as practicable
of any Proceeding for which
indemnification will or could be sought by
McMillen and provide the Company with
a copy of any summons, citation, subpoena,
complaint, indictment, information or
other document relating to such Proceeding
with which McMillen is served;
provided that the failure of McMillen to
give notice as provided herein shall
not relieve the Com
