INDEMNIFICATION AGREEMENT
This Agreement is made this _____ day of ______, _______ between
ASHLAND INC., a Kentucky corporation ("Company"), and the undersigned
individual ("Director").
WITNESSETH:
WHEREAS, Director is a member of the Board of Directors of Company and
in such capacity is performing a valuable service for Company; and
WHEREAS, Article X of the Second Restated Articles of Incorporation of
Company (the "Article") authorizes Company to indemnify directors of
Company to the maximum extent permitted by law; and
WHEREAS, the Article authorizes Company to enter into contracts with
members of its Board of Directors with respect to indemnification of such
directors; and
WHEREAS, recent developments with respect to the applications and
enforcement of indemnification provisions and the availability of insurance
to protect directors against liabilities generally have raised questions
concerning the adequacy and reliability of the protection afforded to
directors thereby; and
WHEREAS, to provide greater certainty with respect to Director's right
to indemnification and the payment thereof, and thereby induce Director to
serve as a member of the Board of Directors of Company, Company has
determined and agreed to enter into this Agreement with Director.
Now, THEREFORE, in consideration of Director's agreement to serve as a
Director after the date of this Agreement, Company and Director agree as
follows:
1. INDEMNITY OF DIRECTOR. Subject only to the exclusions set forth in
Sections 2 and 12 of this Agreement, Company hereby agrees to hold harmless
and indemnify Director against any and all reasonable costs and expenses
(including, but not limited to, attorneys' fees) and any liabilities
(including, but not limited to, judgments, fines, penalties and reasonable
settlements) paid by or on behalf of, or imposed against, Director in
connection with any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative, legislative,
investigative or other (including any appeal relating thereto) and whether
made or brought by or in the right of Company or otherwise, in which
Director is, was or at any time becomes a party or witness, or is
threatened to be made a party or witness, or otherwise, by reason of the
fact that Director is, was or at any time becomes a director, officer,
employee or agent of Company or a director, officer, partner, trustee,
employee or agent of an Affiliate of Company, as hereafter defined, or any
employee benefit plan maintained by Company or any Affiliates of Company.
As used in this Agreement, an Affiliate of Company means any corporation,
partnership or other entity which, directly or indirectly, controls, is
controlled by or is under common control with Company.
2. LIMITATIONS ON INDEMNITY. No indemnity pursuant to Section 1 of
this Agreement shall be paid by Company:
A. if a court of competent jurisdiction renders a final adjudication
on the merits, in an action, suit or proceeding in which Director is a
party, that such indemnification is prohibited by law; or
B. in connection with any transaction with respect to which a court of
competent jurisdiction renders a final adjudication on the merits, in an
action, suit or proceeding in which Director is a party, [i] that
Director's personal financial interest was in conflict with the financial
interests of Company or its shareholders, or [ii] that Director derived an
improper personal benefit; or
C. on account of acts or omissions of Director to the extent a court
of competent jurisdiction renders a final adjudication on the merits, in an
action, suit or proceeding in which Director is a party, that such acts or
omissions [i] were not in good faith, or [ii] involved intentional
misconduct, or [iii] were known to Director to be a violation of law; or
D. in respect of any liability to Company to the extent that a court
of competent jurisdiction renders a final adjudication on the merits, in an
action, suit or proceeding in which Director is a party, that such
liability to Company arises under any federal or state statute providing
for liability directly to Company by reason of the fact that Director is or
was a director of Company, including, by way of example and not limitation,
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); or
E. to the extent and only to the extent that, prior to a Change of
Control, as hereinafter defined, a majority of the Board of Directors of
Company or a duly designated committee thereof, in either case consisting
of directors who are not at the time parties to the claim, action, suit or
proceeding against Director, determines that the amount of expenses and/or
settlements for which indemnification is sought is unreasonable; or
F. in connection with any claim, suit, action or proceeding [i] if
such claim, action, suit or proceeding was initiated by Director or his or
her personal or legal representative, or involved the voluntary
solicitation or intervention by Director or his or her personal or legal
representative (other than an action to enforce indemnification rights or
an action initiated with the approval of a majority of the Board of
Directors), or [ii] to the extent that such claim, action, suit or
proceeding arose as a result of acts or omissions of Director occurring
prior to the date of this Agreement.
For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred if [i] any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of Company or a
corporation owned, directly or indirectly, by the shareholders of Company
in substantially the same proportions as their ownership of stock of
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of Company
representing 20% or more of the combined voting power of Company's then
outstanding voting securities; or [ii] during any period of twenty-four
(24) consecutive months (not including any period prior to the date of this
Agreement), individuals who at the beginning of such period constituted the
Board of Directors of Company and any new director (other than a director
designated by a person who has entered into an agreement with Company to
effect a transaction described in clauses [ii or [iii] of this Paragraph)
whose election by the Board of Directors or nomination for election by
Company's shareholders was approved by a vote of at least two-thirds (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, cease for any reason to constitute a majority of
the Board of Directors or [iii] the shareholders of Company approve a
merger or consolidation of Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
Company outstanding or by being converted into voting securities of the
surviving entity) at least 70% of the combined voting power of the voting
securities of Company or such surviving entity outstanding immediately
after such merger of consolidation; or [iv] the shareholders of Company
approve a plan of complete liquidation of Company or an agreement for the
sale or disposition by Company of all or substantially all of the assets
owned by Company, whether directly or indirectly.
3. CONTINUATION OF INDEMNITY. All agreements and obligations of
Company contained in this Agreement shall continue during the period
Director serves in any capacity entitling Director to indemnification under
this Agreement and shall continue thereafter so long as Director shall be
subject to any possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, legislative or
investigative, or other, arising as a result of acts or omissions occurring
during the period Director served as a director of Company.
4. NOTIFICATION OF CLAIM. It shall be a condition precedent to
indemnification under this Agreement that, within twenty days after receipt
by Director of actual notice that Director is or will be a party, witness
or otherwise involved in any threatened or pending action, suit or
proceeding described in Section 1 of this Agreement, Director shall have
notified Company in writing of the assertion or commencement thereof; but
the omission to so notify Company will not relieve it from any liability
which it may have to Director otherwise than under this Agreement.
5. ADVANCEMENT OF COSTS AND EXPENSES. The costs and expenses incurred
by Director in investigating, defending or appealing any threatened or
pending claim or any threatened or pending action, suit or proceeding
described in Section 1 of this Agreement shall, at the written request of
Director, be paid by Company in advance of final judgment or settlement
with the understanding, undertaking and agreement hereby made and entered
into by Director and Company, that Director shall, if it is ultimately
determined in accordance with Section 2 or pursuant to Section 12 that
Director is not entitled to be indemnified, or was not entitled to be fully
indemnified, repay to Company such amount, or the appropriate portion
thereof, so paid or advanced. Such advancements shall be made at least
quarterly.
6. ENFORCEMENT. If a claim for payment under this Agreement is not
paid in full by Company within ninety days after a written demand has been
delivered by Director to Company, or within thirty days after delivery of a
written demand by Director to Company based upon a final and unappealable
judgment of a court of competent jurisdiction, Director may at any time
thereafter bring suit against Company to recover the unpaid amount of the
claim and, if successful in whole or in part, Director shall also be
entitled to be paid all costs and expenses (including but not limited to
attorneys' fees) incurred by Director in prosecuting such suit. In any suit
brought by Director to enforce this Agreement, the burden of proof shall be
on Company to establish that Director is not entitled to the relief sought
under this Agreement.
7. ESTABLISHMENT OF SECURITY. In the event of a Potential Change in
Control, as hereafter defined, Company shall, upon written request of
Director, obtain an irrevocable letter of credit issued by a commercial
bank, satisfactory to Director, which letter of credit shall be in the
amount of $10,000,000, shall have a term of ten years, shall name Director,
and Director's spouse, heirs and personal and legal representatives as
beneficiary and shall permit Director, and Director's heirs and personal
and legal representatives to draw thereunder from time to time such amounts
as are due and owing to Director under this Agreement, whether in the form
of an advancement or indemnification or otherwise, upon delivery of
Director's certificate to the effect that Director is entitled to be paid
such amounts pursuant to the terms of this Agreement. The issuer of the
letter of credit shall be chosen by Director and all expenses, fees and
other disbursements incurred in connection with the issuance and
enforcement of such letter of credit shall be paid by Company. Obtaining a
letter of credit shall not relieve Company of any of its obligations under
this Agreement.
The parties acknowledge that Director will have no adequate remedy at
law if Company breaches its obligations under this Section 7, and agree
that, in addition to any other remedies which may be available, Director
shall be entitled to the equitable remedy of specific performance in the
event of a breach or threatened breach by Company of its obligations
hereunder.
For purposes of this Agreement, a "Potential Change in Control" shall
be deemed to have occurred if [i] Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control; [i] any person (including Company) publicly announces an intention
to take or to consider taking actions which, if consummated, would
constitute a Change in Control; [iii] any person, other than a trustee or
other fiduciary holding securities under an employee benefit plan of
Company or a corporation owned, directly or indirectly, by the stockholders
of Company in substantially the same proportions as their ownership of
stock of Company, who is on the date hereof, or hereafter becomes, the
beneficial owner, directly or indirectly, of securities of Company
representing 9.5% or more of the combined voting power of Company's then
outstanding voting securities, hereafter or thereafter increases Director's
beneficial ownership of such securities by one-half percent (.5%) or more
over the percentage so owned by such person on the date hereof or on the
date of becoming such a beneficial owner; or [iv] the Board of Directors of
Company adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.
8. CONTRIBUTION. If the full indemnity provided in Section 1 of this
Agreement may not be paid to Director because of any exclusion in Section 2
of this Agreement, then in respect of any actual or threatened claim,
action, suit or proceeding in which Company is jointly liable with Director
(or would be if joined in such claim) Company shall contribute to the
amount of expenses and liabilities incurred by Director in such proportion
as is appropriate to reflect [i] the relative benefits received by Company
on the one hand and Director on the other hand from the acts or omissions
from which such claim, action, suit or proceeding arose and [ii] the
relative fault of Company, including its other directors, officers, agents,
employees and other representatives, on the one hand and of Director on the
other hand in connection with the acts or omissions which resulted in such
claim, action, suit or proceeding, as well as any other relevant equitable
considerations. The relative fault of Company, including its other
directors, officers, agents, employees and other representatives, on the
one hand and of Director on the other hand shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances
resulting in such claim, action, suit or proceeding. Company agrees that it
would not be just and equitable if contribution pursuant to this Section 8
were determined by pro rata allocation or any other method of allocation
which does not take into account the foregoing equitable considerations.
9. PARTIAL INDEMNITY. If Director is entitled under any provision of
this Agreement to indemnification by Company for some or a portion of the
costs, expenses, judgments, fines, penalties and amounts paid in
settlement, but not for the total amount thereof, Company shall
nevertheless indemnify Director for the portion thereof to which Director
is entitled.
10. NON-EXCLUSIVITY. The rights of Director under this Agreement shall
be in addition to any other rights Director may have under the Second
Restated Articles of Incorporation or By-laws of Company, both as amended,
agreement, vote of shareholders or disinterested directors, as a matter of
law or otherwise.
11. SUBROGATION. In the event of any payment under this Agreement,
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable Company effectively to
bring suit to enforce such rights.
12. NO DUPLICATION OF PAYMENTS. Company shall not be liable under this
Agreement to make any payment to the extent Director has otherwise actually
received payment (under any insurance policy, By-law or otherwise) of the
amounts otherwise payable by Company under this Agreement. Director shall
use best efforts to collect from all third parties any amounts otherwise
payable by Company under this Agreement. If Director is entitled to but has
not received payment from a third party (under any insurance policy or
otherwise) of amounts otherwise payable by the Company under this
Agreement, Company shall nevertheless pay Director such amounts with the
understanding, undertaking and agreement hereby made and entered into by
Director and Company that Director will repay to Company such amounts to
the extent they are ultimately paid to Director by such third party.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and assigns, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company, heirs, and
personal and legal representatives; provided, however, that this Agreement
is personal to Director and may not be transferred or encumbered by
Director in any way.
14. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law.
15. GOVERNING LAW; AMENDMENT.
A. This Agreement shall be interpreted and enforced in accordance with
the laws of the Commonwealth of Kentucky.
B. No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
16. NOTICES. Any notice to Company or Director under this Agreement
shall be in writing and shall be delivered personally or sent by overnight
courier service or certified mail:
If to Company: Ashland Inc.
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Attn: Secretary
If to Director:
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
ASHLAND INC.
By:
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Title: Chairman of the Board and
Chief Executive Officer
Director:
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[Director Name]