Exhibit 10.1
INDEMNIFICATION
AGREEMENT
THIS INDEMNIFICATION AGREEMENT is
made and entered into this 15 th day of November, 2005 (this
“Agreement”), by and between NovaStar Financial, Inc.,
a Maryland corporation (the “Company”), and
(“Indemnitee”).
RECITALS
A. The Company and Indemnitee
recognize the increasing difficulty in obtaining directors’
and officers’ liability insurance, the significant increases
in the cost of such insurance and the general reductions in the
coverage of such insurance.
B. The Company and Indemnitee
further recognize the substantial increase in corporate litigation
in general, subjecting officers and directors to expensive
litigation risk at the same time that the availability and coverage
of liability insurance has been severely limited.
C. Indemnitee does not regard the
current protection available as adequate under the present
circumstances, and Indemnitee and other officers and directors of
the Company may not be willing to continue to serve as officers and
directors without the protection provided by this
Agreement.
D. The Company desires to attract
and retain the services of highly qualified individuals, such as
Indemnitee, to serve as officers and directors of the Company and
to indemnify its officers and directors so as to provide them with
the maximum protection permitted by law.
AGREEMENT
The Company and Indemnitee hereby
agree as follows:
1. Definitions . For
purposes of this Agreement:
(a) “Change in Control”
shall be deemed to have occurred if the conditions set forth in any
one of the following paragraphs shall have been
satisfied:
(i) any “person” as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the “Exchange Act”) (other than the
Company; any trustee or other fiduciary holding securities under an
executive benefit plan of the Company; or any company owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the stock
of the Company), is or becomes the “beneficial owner”
(as defined by Rule 13d-3 under the Exchange Act), directly or
indirectly, of the securities of the Company (not including any
securities acquired directly from the Company or from a transferor
in a transaction expressly approved or consented to by the Board of
Directors) representing more than 25% of the combined voting power
of the Company’s then outstanding securities; or
(ii) during any period of two
consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of such period
constitute the Board of Directors and any new director (other than
a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i),
(ii) or (iv) of this section), (A) whose election by
the Board of Directors or nomination for election by the
Company’s stockholders was approved by a vote of at least
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved or
(B) whose election is to replace a person who ceases to be a
director due to death, disability or age, cease for any reason to
constitute a majority thereof; or
(iii) the stockholders of the
Company approve a merger or consolidation of the Company with
another corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an executive benefit plan of the Company, at least 75% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no person acquires more than 50% of the
combined voting power of the Company’s then outstanding
securities; or
(iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all the Company’s assets.
(b) “Corporate Status”
means with respect to the Indemnitee the status of such person as a
director, trustee, officer, manager, employee or agent of the
Company or of any other corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan or other
enterprise for which such person is or was serving at the request
of the Company.
(c) “Disinterested
Director” means a director of the Company who is not and was
not a party to the Proceeding for which indemnification is sought
by Indemnitee
(d) “Effective Date”
means the date of this Agreement.
(e) “Expenses” includes
all reasonable attorneys’ fees, retainers, court costs,
transcript costs, fees of experts, witness fees, 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, and actually incurred,
in connection with prosecuting, defending, preparing to prosecute
or defend, investigating, or being or preparing to be a witness in
a Proceeding.
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(f) “Independent
Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and has not, nor in the
past five years has been, retained to represent the Company or
Indemnitee in any matter material to either such party, or any
other party to or witness in the Proceeding giving rise to a claim
for indemnification under this Agreement. “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. If a Change of Control has not occurred,
Independent Counsel shall be selected by the Board of Directors,
with the approval of Indemnitee, which approval will not be
unreasonably withheld. If a Change of Control has occurred,
Independent Counsel shall be selected by Indemnitee, with the
approval of the Board of Directors, which approval will not be
unreasonably withheld.
(g) “ Liabilities
” means liabilities of any type whatsoever incurred by reason
of (i) Indemnitee’s Corporate Status, or (ii) any
action taken (or failure to act) by him or on his behalf in his
Corporate Status, including, but not limited to, any judgments,
fines (including any excise taxes assessed on Indemnitee with
respect to an employee benefit plan), ERISA excise taxes and
penalties, and penalties and amounts paid in settlement of any
Proceeding (including all interest, assessments and other charges
paid or payable in connection with or in respect of such judgments,
fines, penalties or amounts paid in settlement).
(h) “Proceeding”
includes any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative (including on appeal),
including any such proceeding (i) pending or completed on or
before the Effective Date, or (ii) with respect to any act or
omission of the Company or any members of the Company’s board
of directors committed prior to the Effective Date, unless
otherwise specifically agreed in writing by the Company and
Indemnitee.
2. Services by
Indemnitee . Indemnitee will serve as a director and/or
officer of the Company. However, this Agreement does not impose any
obligation on Indemnitee or the Company to continue
Indemnitee’s service to the Company beyond any period
otherwise required by law or by other agreements or commitments of
the parties, if any.
3. Indemnification -
General . The Company will indemnify, and advance Expenses
to, Indemnitee as provided in this Agreement and otherwise to the
maximum extent permitted by Maryland law in effect on the Effective
Date and as amended from time to time. However, no change in
Maryland law will have the effect of reducing the benefits
available to Indemnitee based on Maryland law as in effect on the
Effective Date. The rights of Indemnitee provided in this
Section 3 include, without limitation, the rights set forth in
the other sections of this Agreement, including any additional
indemnification permitted by Section 2-418(g) of the Maryland
General Corporation Law (the “MGCL”).
4. Third Party
Proceedings . Indemnitee is entitled to the rights of
indemnification provided in this Section 4 if, by reason of
his Corporate Status, he is, or is threatened to be,
made
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a party to or a witness in any Proceeding, other
than a Proceeding by or in the right of the Company. Under this
Section 4, Indemnitee will be indemnified against all
Liabilities and Expenses actually and reasonably incurred by him or
on his behalf in connection with a Proceeding by reason of his
Corporate Status unless one of the following is
established:
(a) The act or omission of
Indemnitee was material to the matter giving rise to the
Proceeding, and
(i) was committed in bad faith,
or
(ii) was the result of active and
deliberate dishonesty;
(b) Indemnitee actually received an
improper personal benefit in money, property or services;
or
(c) In the case of any criminal
Proceeding, Indemnitee had reasonable cause to believe that his
conduct was unlawful.
5. Proceedings by or in the
Right of the Company . Indemnitee is entitled to the rights
of indemnification provided in this Section 5 if, by reason of
his Corporate Status, he is, or is threatened to be, made a party
to or a witness in any Proceeding brought by or in the right of the
Company to procure a judgment in its favor. Under this
Section 5, Indemnitee will be indemnified against all
Liabilities and Expenses actually and reasonably incurred by him or
on his behalf in connection with such Proceeding, unless one of the
following is established:
(a) The act or omission of
Indemnitee was material to the matter giving rise to such a
Proceeding, and
(i) was committed in bad faith,
or
(ii) was the result of active and
deliberate dishonesty; or
(b) Indemnitee actually received an
improper personal benefit in money, property or
services.
6. Court-Ordered
Indemnification . Notwithstanding any other provision of
this Agreement, a court of appropriate jurisdiction, upon
application of Indemnitee and such notice as the court requires,
may order indemnification in certain circumstances. However,
indemnification for any Proceeding by or in the right of the
Company, or in which liability has been adjudged in the
circumstances described in Section 2-418(c) of the MGCL, will
be limited to Expenses actually and reasonably incurred by
Indemnitee or on his behalf in connection with a Proceeding. The
circumstances under which a court may order such indemnification as
it deems proper are:
(a) If it determines that Indemnitee
is entitled to reimbursement under Section 2-418(d)(1) of the
MGCL, the court will order indemnification, in which case
Indemnitee will be entitled to recover the expenses of securing
such reimbursement; or
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(b) If it determines that Indemnitee
is fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not Indemnitee
has:
(i) met the standards of conduct set
forth in Section 2-418(b) of the MGCL; or
(ii) been adjudged liable for
receipt of an improper personal benefit under Section 2-418(c)
of the MGCL.
7. Indemnification for
Expenses of a Party Who is Wholly or Partly Successful .
Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by
reason of his Corporate Status, made a party to and is successful,
on the merits or otherwise, in the defense of any Proceeding, he
will be indemnified for all Expenses actually and reasonably
incurred by him or on his behalf 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 less
than all claims, issues or matters in such Proceeding, the Company
will indemnify Indemnitee under this Section 7 for all
Expenses actually and reasonably incurred by him or on his behalf
in connection with each successfully resolved claim, issue or
matter, allocated on a reasonable and proportionate basis. For
purposes of this Section 7 and without limitation, the
termination of any claim, issue or matter in such a Proceeding by
dismissal, with or without prejudice, will be deemed to be a
successful result as to such claim, issue or matter.
8. Advance of Expenses
. The Company will advance all reasonable Expenses actually and
reasonably incurred by or on behalf of Indemnitee in connection
with any Proceeding (other than a Proceeding brought to enforce
indemnification under this Agreement, applicable law, the Charter
or Bylaws of the Company, any agreement, a resolution of the
stockholders entitled to vote generally in the election of
directors or a resolution of the Board of Directors), to which
Indemnitee is, or is threatened to be, made a party or a witness,
within 10 days after the receipt by the Company of a written
statement or statements from Indemnitee requesting such advance or
advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements must
reasonably evidence the Expenses incurred by Indemnitee. The
statement or statements must include a written affirmation by
Indemnitee of Indemnitee’s good faith belief that the
standard of conduct necessary for indemnification by the Company,
as authorized by law and by this Agreement, has been met. The
statement or statements must also include a written undertaking by
or on behalf of Indemnitee, in substantially the form attached
hereto as Exhibit A , or in such form as may be
required under applicable law as in effect at the time the
undertaking is signed. The undertaking requires Indemnitee to
reimburse the portion of any Expenses advanced to him relating to
claims, issues or matters in the Proceeding for which it is
ultimately determined pursuant to Section 9 of this Agreement
that the standard of conduct was not met and which have not been
successfully resolved as described in Section 7 of this
Agreement. Such reimbursement will be made within 30 days of such
determination; provided, however, that if Indemnitee has commenced,
or commences within such 30-day period, legal proceedings in a
court of competent jurisdiction to secure a determination that he
should be indemnified under applicable law, any determination made
by the Company that Indemnitee is not entitled to indemnification
will not be binding, and Indemnitee will not be required to
reimburse the Company for any Expenses until a final
judicial
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determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or have
lapsed). To the extent that Expenses advanced to Indemnitee do not
relate to a specific claim, issue or matter in the Proceeding, such
Expenses will be allocated on a reasonable and proportionate basis.
The undertaking required by this Section 8 will be an
unlimited general obligation by or on behalf of Indemnitee and will
be accepted without reference to Indemnitee’s fina
