1
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Indemnification Agreement") is
made and entered into as of the 5th day of October, 1996, by and between SUN
HYDRAULICS INCORPORATED, a Delaware corporation (the "Company"), and __________
_____________, an individual ("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, the Company and Indemnitee recognize the risk of litigation
and other claims being asserted against directors and officers of public
companies;
WHEREAS, the Certificate of Incorporation (the "Certificate") of the
Company requires the Company to indemnify and advance expenses to its directors
and officers to the full extent permitted by law, and Indemnitee has been
serving and continues to serve as a director and/or officer of the Company in
part in reliance upon the Certificate; and,
WHEREAS, in recognition of (1) Indemnitee's need for substantial
protection against personal liability; (2) the Company's need to induce
Indemnitee's continued service to the Company in an effective manner; and (3)
Indemnitee's reliance on the Certificate, and to provide Indemnitee with
specific contractual assurance that the protection contained in the Certificate
will be available to Indemnitee (regardless of, among other things, any
amendment to or restatement of the Certificate or any changes in the
composition of the Company's Board of Directors or any business combination in
which the Company participates), the Company wishes to provide in this
Indemnification Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the full extent (whether partial or complete)
permitted by law and as set forth in this Indemnification Agreement and, if
insurance is obtained, for the coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the premises, the mutual
promises, covenants and conditions herein contained, Indemnitee continuing to
serve the Company directly, or at its request, to serve another enterprise, and
for other good and valuable considerations, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
2
1. CERTAIN DEFINITIONS. In addition to the words and terms
elsewhere defined in this Indemnification Agreement, certain capitalized words
and terms used herein shall have the meanings given to them by the definitions
and descriptions in this Section 1, unless the context or use indicates another
or different meaning or intent, and such definitions shall be equally
applicable to both the singular and plural forms of any of the capitalized
words and terms herein defined. The following words and terms are defined
terms under this Indemnification Agreement:
1.1 Change in Control. "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 Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial owner"
(as defined in Rule 13-d-3 under said Act), directly or indirectly, of
securities of the Company representing 20% or more of the total voting
power represented by the Company's then outstanding Voting Securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination
for election by the Company's stockholders 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 thereof; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any
other corporation, other than 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)
at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or 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 (in one transaction or a series
of transactions) all or substantially all the Company's assets.
-2-
3
1.2 Claim. "Claim" shall mean any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation,
whether instituted by the Company or any other party, that Indemnitee
in good faith believes might lead to the institution of any such action,
suit or proceeding, whether civil, criminal, administrative, investigative
or other.
1.3 Expenses. "Expenses" shall mean attorneys' fees and all
other costs, expenses and obligations paid or incurred in connection with
investigating, defending, 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.
1.4 Indemnifiable Event. "Indemnifiable Event" shall mean any
event or occurrence related to the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee, trustee,
agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, or by reason of anything
done or not done by Indemnitee in any such capacity.
1.5 Independent Legal Counsel. "Independent Legal Counsel"
shall mean an attorney or firm of attorneys, selected in accordance with
the provisions of Section 3, who shall not have otherwise been retained by
or performed services for the Company or Indemnitee within the last two
years (other than with respect to matters concerning the rights of
Indemnitee under this Indemnification Agreement or of other indemnities
under similar indemnification agreements).
1.6 Reviewing Party. "Reviewing Party" shall mean (i) the Board
of Directors of the Company by a quorum consisting of directors who were
not parties to a Claim in question, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by Independent Legal Counsel.
1.7 Voting Securities. "Voting Securities" shall mean any
securities of the Company which vote generally in the election of
directors.
-3-
4
2. BASIC INDEMNIFICATION ARRANGEMENT.
A. In the event Indemnitee was, is or becomes a party to
or witness or other participant in, or is threatened to be made a party to
or witness or other participant in, a Claim by reason of (or arising in
part out of) an Indemnifiable Event, the Company shall indemnify
Indemnitee to the full extent permitted by the Certificate and by the
Delaware General Corporation Law as soon as practicable but in any event
no later than thirty days after written demand is presented to the
Company, against any and all Expenses, judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses,
judgments, fines, penalties or amounts paid in settlement) of such Claim.
B. If so requested by Indemnitee, the Company shall advance
(within two business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance").
C. Notwithstanding the foregoing, (i) the obligations of the
Company under this Section 2 shall be subject to the condition that the
Reviewing Party shall not have determined (in a written opinion in any
case in which Independent Legal Counsel is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an Expense Advance pursuant to this
Section 2 shall be subject to the condition that, if, when and to the
extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse
the Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced or thereafter commences legal proceedings
in a court of competent jurisdiction to secure a determination that
Indemnitee should be indemnified under applicable law, any determination
made by the Reviewing Party that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee
shall not be required to reimburse the Company for any Expense Advance
until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).
D. If there has not been a Change in Control, the Reviewing Party
shall be selected by the Board of
-4-
5
Directors and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), the Reviewing Party shall be the Independent Legal Counsel
referred to in Section 3 hereof. If there has been no determination by
the Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part
under applicable law, Indemnitee shall have the right to commence
litigation in any court in the State of Florida having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, including the legal or factual
bases therefor, and the Company hereby consents to service of process and
to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
3. CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then with respect to all
matters thereafter arising concerning the rights of Indemnitee to indemnity
payments and Expense Advances under the Certificate, this Indemnification
Agreement or any other agreement or Company Bylaw now or hereafter in effect
relating to Claims for Indemnifiable Events, the Company shall seek legal
advice only from Independent Legal Counsel selected by Indemnitee and approved
by the Company (which approval shall not be unreasonably withheld). Such
counsel, among other things, shall render its written opinion to the Company
and Indemnitee as to whether and to what extent the Indemnitee would be
permitted to be indemnified under applicable law. The Company agrees to pay
the reasonable fees of the Independent Legal Counsel referred to above and to
fully indemnify such counsel against any and all expenses (including attorneys'
fees), claims, liabilities and damages arising out of or relating to this
Indemnification Agreement or its engagement pursuant hereto.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall
indemnify Indemnitee against any and all expenses (including attorneys' fees)
and, if requested by Indemnitee, shall (within two business days of such
request) advance such expenses to Indemnitee which are incurred by Indemnitee
in connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Indemnification Agreement
or any other agreement, the Certificate or Company Bylaws now or hereafter in
effect relating to Claims for Indemnifiable
-5-
6
Events, and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be.
5. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any
provision of this Indemnification Agreement to indemnification by the Company
for some or a portion of the Expenses, judgments, fines, penalties and amounts
paid in settlement of a Claim but not, however, for the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any other provision of
this Indemnification Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all Claims relating
in whole or in part to an Indemnifiable Event or in defense of any issue or
matter therein, including dismissal without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.
6. PRESUMPTION IN FAVOR OF INDEMNITEE; BURDEN OF PROOF. In
connection with any determination by the Reviewing Party or otherwise as to
whether Indemnitee is entitled to be indemnified hereunder, there shall exist a
rebuttable presumption that Indemnitee has met the applicable standard(s) of
conduct and is, therefore, entitled to indemnification pursuant to this
Indemnification Agreement, and the burden of proof shall be on the Company to
establish that Indemnitee has not met such applicable standard(s) of conduct
and is not so entitled to indemnification.
7. NO OTHER PRESUMPTIONS. For purposes of this Indemnification
Agreement, the termination of any claim, action, suit or proceeding, by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that (i) Indemnitee did not meet any particular standard
of conduct; or (ii) Indemnitee did not have any particular belief; or, (iii)
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
-6-
7
8. NONEXCLUSIVITY, ETC. The rights of Indemnitee hereunder
shall be in addition to any other rights Indemnitee may have under the
Certificate, any Company Bylaw, the Delaware General Corporation Law, or
otherwise. To the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Certificate and this
Indemnification Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Indemnification Agreement the greater benefits
so afforded by such change.
9. LIABILITY INSURANCE. If the Company obtains directors' and
officers' liability insurance, then, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company against
Indemnitee or Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
11. AMENDMENTS, ETC. No supplement, modification or amendment of
this Indemnification Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of this
Indemnification Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
12. SUBROGATION. In the event of payment under this
Indemnification Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee, 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 the
Company effectively to bring suit to enforce such rights. To the extent
Indemnitee has been indemnified by the Company hereunder and later receives
payments from any insurance carrier covering the same Expenses, judgments,
fines, penalties or amounts paid in settlements so indemnified by the Company
hereunder, Indemnitee shall immediately reimburse the Company hereunder for all
such amounts received from the insurer.
-7-
8
Notwithstanding anything contained herein to the contrary, Indemnitee
shall not be entitled to recover amounts under this Indemnification Agreement
which, when added to the amount of indemnification payments made to, or on
behalf of, Indemnitee, under the Certificate or Company Bylaws, in the
aggregate exceed the Expenses, judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by Indemnitee ("Excess Amounts").
To the extent the Company has paid Excess Amounts to Indemnitee, Indemnitee
shall be obligated to immediately reimburse the Company for such Excess
Amounts.
13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Indemnification Agreement to make any payment in connection with any
Claim made against Indemnitee to the extent Indemnitee has otherwise actually
received payment (under any insurance policy, the Certificate or Company Bylaws
or otherwise) of the amounts otherwise indemnifiable hereunder.
14. RIGHT OF INDIVIDUAL ATTORNEY. The Company shall not restrict
the right of Indemnitee to be represented by and indemnified against the fees
and expenses of the attorney of Indemnitee's choice hereunder.
15. ALLOWANCE FOR COMPLIANCE WITH SEC REQUIREMENTS. Indemnitee
acknowledges that the Securities and Exchange Commission ("SEC") has expressed
the opinion that indemnification of directors and officers from liabilities
under the Securities Act of 1933, as amended (the "Securities Act") is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. Indemnitee hereby agrees that it will not be a breach of this
Indemnification Agreement for the Company to undertake with the SEC in
connection with the registration for sale of any stock or other securities of
the Company from time to time that, in the event a claim for indemnification
against liabilities under the Securities Act (other than the payment by the
Company of expenses incurred or paid by a director or officer of the Company in
the successful defense of any action, suit or proceeding) is asserted in
connection with such securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of competent jurisdiction the question of whether
or not such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Indemnitee further agrees that such submission to a court of competent
jurisdiction shall not be a breach of this Indemnification Agreement.
16. ASSIGNMENT; CONTINUING AND BINDING EFFECT. This
Indemnification Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or of
any other enterprise at the Company's request.
-8-
9
This Indemnification Agreement shall not be assigned by the Company or
Indemnitee without the prior written consent of the other party hereto, except
that the Company may freely assign its rights and obligations under this
Indemnification Agreement to any subsidiary for whom Indemnitee is serving as a
director and/or officer thereof; provided, however, that no permitted
assignment shall release the assignor from its obligations hereunder. Subject
to the foregoing, this Indemnification Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors; 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 the Company; spouses; heirs; executors and personal
and legal representatives.
16. SEVERABILITY. The provisions of this Indemnification
Agreement shall be severable in the event that any of the provisions hereof
(including any provision within a single section, paragraph or sentence) is
held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable in any respect, and the validity and enforceability of any such
provision in every other respect and of the remaining provisions hereof shall
not be in any way impaired and shall remain enforceable to the full extent
permitted by law.
17. GOVERNING LAW. This Indemnification Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in such
state without giving effect to the principles of conflicts of laws.
18. COUNTERPARTS. This Indemnification Agreement may be executed
in two or more fully or partially executed counterparts each of which shall be
deemed an original binding and the signer thereof against the other signing
parties, but all counterparts together shall constitute one and the same
instrument. Executed signature pages may be removed from counterpart
agreements and attached to one or more fully executed copies of this Agreement.
19. NOTICE. Indemnitee shall, as a condition precedent to his
right to be indemnified under this Indemnification Agreement, give to the
Company notice in writing as soon as practicable of any claim made against
him for which indemnity will or could be sought under this Indemnification
Agreement. Notice to the Company shall be directed to the Company at its
headquarters located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: President (or such other address as the Company shall designate in
writing to Indemnitee). Notice shall be deemed received three days after the
date of postmark if sent by prepaid mail, properly addressed. In addition,
Indemnitee shall give the
-9-
10
Company such information and cooperation as it may reasonably require within
Indemnitee's power.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
Attest: SUN HYDRAULICS INCORPORATED
By:
------------------------------ ---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
[seal]
"INDEMNITEE"
------------------------------------
-10-