INDEMNIFICATION
AGREEMENT
This
INDEMNIFICATION AGREEMENT (the “ Agreement ”) is
made and entered into effective as of this ___ day of
, 2006, by and between PMC Commercial Trust, a Texas real estate
investment trust (including any successors thereto, the “
Company ”), and
(“ Indemnitee ”).
WHEREAS, competent
and experienced persons are reluctant to serve or to continue to
serve entities as trust managers, directors, officers, or in other
capacities unless they are provided with adequate protection
through insurance or indemnification, or both, against claims and
actions against them arising out of their service to and activities
on behalf of those entities.
WHEREAS, the
current uncertainties relating to the availability of adequate
insurance for trust managers, directors and officers have increased
the difficulty for entities to attract and retain competent and
experienced persons.
WHEREAS, the Board
of Trust Managers of the Company (the “ Board ”)
has determined that the continuation of present trends in
litigation will make it more difficult to attract and retain
competent and experienced persons, that this situation is
detrimental to the best interests of the Company’s
shareholders, and that the Company should act to assure its trust
managers and officers that there will be increased certainty of
adequate protection in the future.
WHEREAS, it is
reasonable, prudent, and necessary for the Company to obligate
itself contractually to indemnify its trust managers and officers
to the fullest extent permitted by applicable law in order to
induce them to serve or continue to serve the Company.
WHEREAS,
Indemnitee is willing to serve and continue to serve the Company on
the condition that he be indemnified to the fullest extent
permitted by law.
WHEREAS,
concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a trust manager or
officer, or both, of the Company.
NOW, THEREFORE, in
consideration of the foregoing premises, Indemnitee’s
agreement to serve or continue to serve as a trust manager or
officer, or both, of the Company, the covenants contained in this
Agreement, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Company and Indemnitee
hereby agree as follows:
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1.
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Certain Definitions
. For purposes of this
Agreement:
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(a)
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Affiliate : shall mean any Person that
directly, or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the
Person specified.
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(b)
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Change of Control
: shall mean the
occurrence of any of the following events:
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(i)
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The
acquisition after the date of this Agreement by any individual,
entity, or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the “
Exchange Act ”)) (a “ Person ”) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either
(x) the then outstanding shares of beneficial interest of the
Company (the “ Outstanding Company Shares ”) or
(y) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of trust managers (the “ Outstanding Company
Voting Securities ”); provided, however, that for
purposes of this paragraph (i), the following acquisitions shall
not constitute a Change of Control: (A) any acquisition
directly from the Company or any Subsidiary of the Company;
(B) any acquisition by the Company or any Subsidiary of the
Company; (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
Subsidiary of the Company; or (D) any acquisition by any entity or
its security holders pursuant to a transaction which complies with
clauses (A), (B), and (C) of paragraph
(iii) below;
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(ii)
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Individuals who, as of the date of
this Agreement, constitute the Board (the “ Incumbent
Board ”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a trust manager subsequent to the date of this Agreement
whose election or appointment by the Board or nomination for
election by the Company’s shareholders, was approved by a
vote of at least a majority of the trust managers then comprising
the Incumbent Board, shall in either case be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of trust
managers or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board;
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(iii)
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Consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or an acquisition of
assets of another entity (a “ Business Combination
”), unless in each case, following such Business Combination,
(A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Shares and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of trust managers or directors, as the case may be,
of the entity resulting from such Business Combination (including,
without limitation, an entity which as a result of such
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transaction owns the Company or all
or substantially all of the Company’s assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Shares and Outstanding
Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the
Company or the entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the ownership interests of the entity resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such entity except to the extent
that such ownership of the Company existed prior to the Business
Combination and (C) at least a majority of the members of the board
of trust managers or directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
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(iv)
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Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
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(c)
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Claim : shall mean any threatened,
pending, or completed action, suit, or proceeding (including,
without limitation, securities laws actions, suits, and proceedings
and also any cross claim or counterclaim in any action, suit, or
proceeding), whether civil, criminal, arbitral, administrative, or
investigative in nature, or any inquiry or investigation (including
discovery), whether conducted by the Company or any other Person,
that Indemnitee in good faith believes might lead to the
institution of any action, suit, or proceeding.
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(d)
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Expenses : shall mean all costs, expenses
(including attorneys’ and expert witnesses’ fees, costs
and expenses), and obligations paid or incurred in connection with
investigating, defending (including affirmative defenses and
counterclaims), being a witness in, or participating in (including
on appeal), or preparing to defend, be a witness in, or participate
in, any Claim relating to any Indemnifiable Event.
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(e)
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Indemnifiable Event
: shall mean any actual
or alleged act, omission, statement, misstatement, event, or
occurrence related to the fact that Indemnitee is or was a trust
manager, officer, agent, or fiduciary of the Company, or is or was
serving at the request of the Company as a trust manager, director,
officer, trustee, agent, or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust, or other
enterprise, or by reason of any actual or alleged thing done or not
done by Indemnitee in any such capacity. For purposes of this
Agreement, the Company agrees that Indemnitee’s service on
behalf of or with respect to any Subsidiary, Affiliate or employee
benefits plan of the Company or any Subsidiary or Affiliate of the
Company shall be deemed to be at the request of the
Company.
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(f)
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Indemnifiable Liabilities
: shall mean all
Expenses and all other liabilities, damages (including, without
limitation, punitive, exemplary, and the multiplied portion of any
damages), judgments, payments, fines, penalties, amounts paid in
settlement, and awards paid or incurred that arise out of, or in
any way relate to, any Indemnifiable Event.
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(g)
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Potential Change of
Control :
shall be deemed to have occurred if (i) the Company enters
into an agreement, the consummation of which would result in the
occurrence of a Change of Control; (ii) any Person (including
the Company) publicly announces an intention to take or to consider
taking actions that, if consummated, would constitute a Change of
Control; or (iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change of Control
has occurred.
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(h)
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Reviewing Party
: shall mean a member or
members of the Board who are not parties to the particular Claim
for which Indemnitee is seeking indemnification or if a Change of
Control has occurred or if there is a Potential Change of Control
and Indemnitee so requests, or if the members of the Board so
elect, or if all of the members of the Board are parties to such
Claim, Special Counsel.
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(i)
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Special Counsel
: shall mean special,
independent legal counsel selected by Indemnitee (if permitted by
applicable law) and approved by the Company (which approval shall
not be unreasonably withheld), and who has not otherwise performed
material legal services for the Company or for Indemnitee within
the last three years (other than as Special Counsel under this
Agreement or similar agreements); it being agreed that if
applicable law does not permit selection by the Indemnitee and/or
approval by the Company, then the selection and approval of such
counsel shall be made in accordance with applicable law.
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(j)
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Subsidiary : shall mean, with respect to any
Person, any corporation or other entity of which a majority of the
voting power of the voting equity securities or equity interest is
owned, directly or indirectly, by that Person.
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2.
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Indemnification and Expense
Advancement .
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(a)
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The
Company shall indemnify Indemnitee and hold Indemnitee harmless to
the fullest extent permitted by law, as soon as practicable but in
any event no later than 30 days after written demand is
presented to the Company, from and against any and all
Indemnifiable Liabilities. Notwithstanding the foregoing, the
obligations of the Company under this Section 2(a) shall be subject
to the condition that the Reviewing Party shall not have determined
(in a written opinion, in any case in which Special Counsel is
involved) that Indemnitee is not permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall require
any determination under this Section 2(a) to be made by the
Reviewing Party prior to the disposition or conclusion of the Claim
against the Indemnitee.
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(b)
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If
so requested by Indemnitee, the Company shall advance to Indemnitee
all reasonable Expenses incurred by Indemnitee to the fullest
extent permitted by law (or, if applicable, reimburse Indemnitee
for any and all reasonable Expenses incurred by Indemnitee and
previously paid by Indemnitee) within ten business days after such
request (an “ Expense Advance ”). In making any
request for an Expense Advance, Indemnitee shall submit (but only
if required by applicable law) to the Company a written affirmation
of Indemnitee’s good faith belief that Indemnitee has met the
standards of conduct necessary for indemnification under the terms
of this Agreement and a written undertaking by or on behalf of
Indemnitee to repay
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