INDEMNIFICATION AGREEMENT
This INDEMNIFICATION
AGREEMENT (the “Agreement”) is made and entered into
this 15th day of June, 2009 by and between CFS BANCORP, INC. (the
“Company”), an Indiana corporation, and LAWRENCE T.
TOOMBS (the “Indemnitee”), currently a resident of the
State of Indiana,
W
I T N E S S E T H :
WHEREAS, a shareholder derivative demand has
been made on the Company by PL Capital, LLC and/or Mr. John Palmer
as set forth in a letter to the Board of Directors dated
March 25, 2009 (the “Shareholder Demand”); and
WHEREAS, the Board of Directors has determined
it is in the best interests of the Company to create a committee
consisting of three disinterested persons for the purpose of
performing the duties and responsibilities under Indiana Code
23-1-32 (the “Special Committee”); and
WHEREAS, the Board of Directors desires to
appoint the Indemnitee to serve on the Special Committee; and
WHEREAS, in
recognition of the heightened scrutiny and responsibility
associated with serving on the Special Committee, and as an
inducement to the Indemnitee to so serve, the Board of Directors
has determined that the Indemnitee should be provided with adequate
assurances of indemnity as provided in this Agreement; and
WHEREAS, the Indemnitee desires to serve on
the Special Committee at the request of the Board of Directors of
the Company subject to the Company’s execution of this
Agreement; and
WHEREAS, this Agreement is permitted under
Indiana law, which is the corporate law governing the Company, as
well as the Company’s Articles of Incorporation and has been
approved by the Company’s Board of Directors.
NOW, THEREFORE,
in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and the Indemnitee,
intending to be legally bound hereby, hereto agree as follows:
(a)
“Claim” or “Claims” includes, but is
not limited to, any threatened, pending, asserted or completed (i)
demand, claim, action, suit, proceeding (whether civil, derivative,
criminal, administrative, investigative or otherwise),
counterclaim, crossclaim, arbitration or mediation, (ii) demand,
claim, action, suit, proceeding, counterclaim or crossclaim by or
in the name or right of the Company, (iii) inquiry, hearing,
investigation or other process (whether conducted by the Company, a
government agency, body, department or authority or any other
party), and (iv) appeal of any of the
foregoing, in each case in which the Indemnitee is a party or a
participant, is in any way involved or named or incurs any Losses
or Expenses and in connection with, relating to or arising from an
Indemnifiable Act.
(b)
“D&O Insurance” means the Company’s (i)
directors’ and officers’, EPLI, ERISA and fiduciary
claims made insurance policy in effect on the date of this
Agreement, which presently has an aggregate liability limit of Ten
Million Dollars ($10,000,000), (ii) “tail” coverage or
an extended reporting period under such policy for the Indemnitee
and (iii) any other applicable insurance policy providing coverage
to the Indemnitee. The D&O Insurance presently has a
deductible or retainage amount equal to Two Hundred Thousand
Dollars ($200,000).
(c)
“Expense” or “Expenses” includes,
but is not limited to, any and all expenses and costs incurred or
paid by the Indemnitee in connection with or relating to a Claim
for an Indemnifiable Act including, but not limited to, (i)
reasonable fees, retainers, costs, expenses and disbursements of
attorneys for the Indemnitee, (ii) reasonable costs, expenses and
other amounts (including reasonable travel and copying costs) paid
or incurred by the Indemnitee in connection with or relating to the
Indemnitee investigating, defending, being a witness or deponent
in, preparing for, participating in or otherwise dealing with any
Claim, and (iii) deductibles and retainage amounts under the
D&O Insurance. “Expense” and
“Expenses” shall also include the value of any time of
the Indemnitee reasonable spent investigating, defending, being a
witness or deponent in, preparing for, participating in or
otherwise dealing with any Claim with the value of such time
determined in good faith by the Company and consistent with the
manner in which fees were paid with respect to the service to the
Special Committee.
(d)
“Indemnifible Act” means any event, occurrence,
action, decision, inaction or omission in the Indemnitee’s
service or position on the Special Committee.
(e)
“Loss” or “Losses” includes, but is
not limited to, any and all monetary obligations, liabilities and
amounts that the Indemnitee is legally required to pay in
connection with or relating to a Claim for an Indemnifiable Act
including, but not limited to, (i) judgments, damages, awards,
orders, decrees and sums paid in settlement, (ii) fines, penalties,
excise taxes, assessments, interest and other charges, and (iii)
taxes imposed on the Indemnitee as a result of or relating to any
amounts paid to or on behalf of the Indemnitee under this
Agreement.
(f) “
Standard of Conduct” means that the Indemnitee acted,
or that the Indemnitee’s conduct with respect to an
Indemnifiable Act was, based upon the facts then known to him, in
good faith in what he reasonably believed to be in, or not opposed
to, the best interests of the Company, and, in addition, in any
criminal Claim the Indemnitee had reasonable cause to believe that
his conduct was lawful or no reasonable cause to believe that his
conduct was unlawful. The termination or resolution of
any Claim, by judgment, order, settlement (whether with or without
court approval or with or without prejudice), consent decree or
conviction or upon a plea of guilty or nolo contendere shall not of
itself create a presumption that the Indemnitee did not meet the
Standard of Conduct.
(a)
Except as provided in Section 2(b) hereof, the Company shall
indemnify, defend and hold harmless the Indemnitee for and against,
and shall pay, each and every Loss and Expense of the Indemnitee in
connection with or relating to a Claim with respect to which an
Indemnifiable Act is involved and the Indemnitee has met or
complied with the Standard of Conduct. There shall be a
presumption that the Indemnitee is entitled to indemnification,
payment and defense under this Agreement.
(b)
Nothwithstanding anything to the contrary contained in this
Agreement, the Company shall have no obligation to indemnify,
defend or hold harmless the Indemnitee, or to pay, under this
Agreement to the extent that (i) the Indemnitee has not met or
complied with the Standard of Conduct, (ii) the proceeds from any
policy of D&O Insurance have been paid to or on behalf of the
Indemnitee in full and complete satisfaction of a Loss or Expense
covered by this Agreement, (iii) a Loss or Expense has already been
paid, in full, to or on behalf of the Indemnitee by the Company or
by another source of indemnity, (iv) payment by the Company of any
Loss or Expense is prohibited by any law, rule or regulation now or
hereafter in effect or by any court or government agency or
authority, or (v) the Loss or Expense is not covered by or
otherwise not properly payable under this Agreement.
3.
Indemnification Procedures .
(a) Promptly
after the Company or the Indemnitee receives notice or otherwise
becomes aware of the existence, commencement or threat of any
Claim, the Company or the Indemnitee, as the case may be, shall
give written notice (the “Indemnification Notice”) to
the other, provide pertinent information with respect to such Claim
and keep the other generally informed of, and consult with the
other with respect to, the status of such Claim.
(b) The
Company shall give prompt notice of, and take such other necessary
or appropriate actions with respect to, the Claim as is required by
the policies of D&O Insurance. The Company shall
thereafter use its reasonable efforts to cause the insurers that
have issued the D&O Insurance to pay promptly to
or on behalf of the Indemnitee all Losses and Expenses relating to
such Claim in accordance with and to the extent covered by the
policies of D&O Insurance.
(c) In
all cases, the Company shall pay all Expenses of the Indemnitee in
advance of the final disposition, termination or resolution of the
applicable Claim unless payment of such Expenses has already been
made to or on behalf of the Indemnitee or is prohibited by any law,
rule or regulation or by any court or government agency or
authority. In all cases, the Company shall pay all
Losses of the Indemnitee in advance of the final disposition,
termination or resolution of the applicable Claim unless payment
for such Losses has already been made to or on behalf of the
Indemnitee or is prohibited by any law, rule or regulation or by
any court or government agency or authority. All
payments of Losses or Expenses on account of the Company’s
obligations under this Agreement shall be made within thirty (30)
days of each written request therefor by the
Indemnitee. Each such written request shall be
accompanied by a written affirmation by the Indemnitee that the
Loss or Expense is covered by this Agreement,
that the Indemnitee has met or complied with
the Standard of Conduct and that the Indemnitee shall reimburse the
Company as provided in Section 3(d) hereof.
(d) Notwithstanding
anything to the contrary contained in this Agreement, the
Indemnitee shall reimburse the Company for all Losses and Expenses
paid by the Company to or on behalf of the Indemnitee in the event
and only to the extent that the Indemnitee is not entitled to
indemnification for such Losses of Expenses pursuant to Section
2(b) hereof. The Indemnitee’s obligation to
reimburse the Company shall be unsecured and no interest shall
accrue or be charged thereon unless it is determined pursuant to
one of the methods identified in Section 3(f) hereof that the
Indemnitee is required to reimburse the Company and, in such event,
interest on the amount to be reimbursed to the Company by the
Indemnitee shall accrue and be due and payable from the date of the
written opinion of the law firm or the order or judgment of the
court, as the case may be, referenced in Section 3(f) hereof until
the amount required to be reimbursed plus all interest thereon
shall have been paid in full by the Indemnitee. The rate
of interest shall be equal to the highest prime rate announced or
utilized by Citizens Financial Bank as of the date that interest
shall begin to accrue and shall remain fixed as of the same date
until the amount to be reimbursed plus all interest thereon shall
have been paid in full. If it has been determined
pursuant to Section 3(f) hereof that the Indemnitee is required to
reimburse the Company for any Losses or Expenses previously paid by
the Company under this Agreement and the Indemnitee refuses or is
unable to reimburse the Company, then in addition to the interest
referenced above, the Indemnitee shall pay the reasonable
attorneys’ fees and all other costs and expenses of the
Company relating to its collection efforts for the amount owed by
the Indemnitee.
(e) In
connection with the defense of any Claim against or involving the
Indemnitee, the Company shall have the right, at its option, to
defend, at its own expense and through legal counsel of its own
choosing, such Claim; provided, however, that the Indemnitee shall
have first consented to the legal counsel selected by the Company,
which consent shall not be unreasonably withheld. If the
Company undertakes to defend a Claim, it shall promptly give
written notice to the Indemnitee of its intention to do
so. If legal counsel reasonably satisfactory to the
Indemnitee is not selected by the Company within thirty (30) days
of any Indemnification Notice, then the Indemnitee may select
counsel to defend the Claim and, in such event, the Company shall
be responsible for and pay all Expenses relating to such counsel;
provided, however, that if the Indemnitee shall unreasonably fail
to give his consent to the legal counsel selected by the Company,
then the Company shall have the right to engage counsel of its
choice to defend such Claim without the necessity of obtaining the
Indemnitee’s consent, and all Expenses relating to such
counsel shall nevertheless be paid by the Company.
Whether or not the
Company chooses to defend a Claim, the Company and the Indemnitee
shall cooperate in the defense thereof and shall furnish such
records, information and testimony, and attend such conferences,
discovery proceedings, mediations, arbitrations, hearings, trials,
appeals and pre-trial and post-judgment proceedings as may be
reasonably requested in connection therewith.
Notwithstanding an election by the Company to assume the defense of
a Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the defense of
such Claim but, in such event, the Indemnitee
shall be responsible for and pay all Expenses relating to such
separate counsel. If, during the course of the defense
of any Claim, a conflict of interest develops with the legal
counsel defending the Claim, then the party who has selected such
counsel shall promptly notify the other party and new counsel shall
be selected using the same procedures and time periods referenced
in this subsection.
The Company shall have no obligation to
indemnify, defend or hold harmless the Indemnitee, or to pay, under
this Agreement for any amounts paid in settlement of a Claim
effected without the Company’s prior written consent, which
consent shall not be unreasonably withheld. The Company
shall not, without the Indemnitee’s prior written consent
(which consent shall not be unreasonably withheld), settle any
Claim in any manner which would impose or result in any Loss or
Expense that is not payable in full to or on behalf of the
Indemnitee by the Company, any D&O Insurance or
another source of indemnity, which would impose or result in any
fine or penalty against the Indemnitee or which does not include as
part of the settlement a full and complete release o
