Exhibit 10.5
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of the 16th day of
August, 1999 ("Agreement"), by and between Individual Investor Group, Inc., a
Delaware corporation ("Corporation"), and David H Allen ("Indemnitee"):
WHEREAS, highly competent persons recently have become more
reluctant to serve publicly-held corporations as directors, officers, or in
other capacities, unless they are provided with better protection from the risk
of claims and actions against them arising out of their service to and
activities on behalf of such corporation; and
WHEREAS, the current impracticability of obtaining adequate
insurance and the uncertainties related to indemnification have increased the
difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation ("Board")
has determined that the inability to attract and retain such persons is
detrimental to the best interests of the Corporation's stockholders and that
such persons should be assured that they will have better protection in the
future; and
WHEREAS, it is reasonable, prudent and necessary for the
Corporation to obligate itself contractually to indemnify such persons to the
fullest extent permitted by applicable law so that such persons will serve or
continue to serve the Corporation free from undue concern that they will not be
adequately indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance
of Article VIII of the By-laws of the Corporation, and Article VIII of the
Amended and Restated Certificate of Incorporation of the Corporation and any
resolutions adopted pursuant thereto and shall neither be deemed to be a
substitute therefor nor to diminish or abrogate any rights of Indemnitee
thereunder; and
WHEREAS, Indemnitee is willing to serve and to take on
additional service for or on behalf of the Corporation on the condition that he
be indemnified according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the Corporation and Indemnitee do hereby covenant
and agree as follows:
1 Definitions.
For purposes of this Agreement:
1.1 "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934, as amended ("Act"), whether or not the
Corporation is then subject to such reporting requirement provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the date hereof (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
then outstanding securities of the Corporation without the prior approval of at
least two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the Board
thereafter; or (iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
1.2 "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Corporation.
1.3 "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
1.4 "Expenses" means 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 in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
1.6 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 11 of this Agreement to enforce
his rights under this Agreement.
2 Services by Indemnitee.
Indemnitee agrees to serve as Vice President and Chief Financial
Officer of the Corporation. Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any
obligation imposed by operation of law).
3 Indemnification - General.
The Corporation shall indemnify, and advance Expenses to, Indemnitee
as provided in this Agreement to the fullest extent permitted by applicable law
in effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
4 Proceedings Other Than Proceedings by or in the Right of the
Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status, he is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding, other
than a Proceeding by or in the right of the Corporation. Pursuant to this
Section, Indemnitee shall be indemnified against Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with any such Proceeding or any claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.
5 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status, he is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against Expenses
actually and reasonably incurred by him or on his behalf in connection with any
such Proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation.
Notwithstanding the foregoing, no indemnification against such Expenses shall be
made in respect of any claim, issue or matter in any such proceeding as to which
Indemnitee shall have been adjudged to be liable to the Corporation if
applicable law prohibits such indemnification unless the Court of Chancery of
the State of Delaware, or the court in which such Proceeding shall have been
brought or is pending, shall determine that indemnification against Expenses may
nevertheless be made by the Corporation.
6 Indemnification for Expenses of Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against 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 Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
7 Indemnification for Expenses as a Witness.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
8 Advancement of Expenses.
The Corporation shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after the
receipt by the Corporation of a 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 shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses.
9 Procedure for Determination of Entitlement to Indemnification.
9.1 To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly upon receipt
of any such request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
9.2 Upon written request by Indemnitee for indemnification pursuant to
Section 9.1 hereof, a determination, if required by applicable law, with respect
to Indemnitee's entitlement thereto shall be made in such case: (i) if a Change
in Control shall have occurred, by Independent Counsel (unless Indemnitee shall
request that such determination be made by the Board or the stockholders, in
which case in the manner provided for in clauses (ii) or (iii) of this Section
9.2) in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee); (ii) if a Change of Control shall not have occurred, (A) by the
Board by a majority vote of a quorum consisting of Disinterested Directors, or
(B) if a quorum of the Board consisting of Disinterested Directors is not
obtainable, or even if such quorum is obtainable, if such quorum of
Disinterested Directors so directs, either (x) by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee,
or (y) by the stockholders of the Corporation, as determined by such quorum of
Disinterested Directors, or a quorum of the Board, as the case may be; or (iii)
as provided in Section 10.2 of this Agreement. If it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
9.3 If required, Independent Counsel shall be selected as follows: (i)
if a Change of Control shall not have occurred, Independent Counsel shall be
selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected or
(ii) if a Change of Control shall have occurred, Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event (i) shall apply), and Indemnitee shall give
written notice to the Corporation advising it of the identity of Independent
Counsel so selected. In either event, Indemnitee or the Corporation, as the case
may be, may, within seven days after such written notice of selection shall have
been given, deliver to the Corporation or to Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so selected
may not serve as Independent Counsel unless and until a court has determined
that such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9.1
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or other court of competent jurisdiction, for resolution of
any objection which shall have been made by the Corporation or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by such court or by such other person
as such court shall designate, and the person with respect to whom an objection
is so resolved or the person so appointed shall act as Independent Counsel under
Section 9.2 hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its actions pursuant to this Agreement, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of this
Section 9.3, regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement date of any judicial proceeding
or arbitration pursuant to Section 11.1(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
10 Presumptions and Effects of Certain Proceedings.
10.1 If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9.1 of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
10.2 If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after receipt
by the Corporation of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification under
applicable law provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional 30 days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto and provided, further, that
the foregoing provisions of this Section 10.2 shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9.2 of this Agreement and if (A) within 15 days
after receipt by the Corporation of the request for such determination the Board
has resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9.2 of this Agreement.
10.3 The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation or, with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his conduct was
unlawful.
11 Remedies of Indemnitee.
11.1 In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of indemnification is to be
made by Independent Counsel pursuant to Section 9.2 of this Agreement and such
determination shall not have been made and delivered in a written opinion within
90 days after receipt by the Corporation of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 7 of this
Agreement within ten days after receipt by the Corporation of a written request
therefor, or (v) payment of indemnification is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 9 or 10 of
this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement of
Expenses. Alternatively, the Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 11.1. The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
11.2 In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination.
11.3 If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law.
11.4 The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Agreement.
11.5 In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive some but less than all of the indemnification or advancement
of expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
12 Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
12.1 The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the certificate of incorporation or by-laws of the Corporation, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof shall
be effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
12.2 To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, 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 such director, officer,
employee, agent or fiduciary under such policy or policies.
12.3 In the event of any payment under this Agreement, the Corporation
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 take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
12.4 The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
13 Duration of Agreement.
This Agreement shall continue until and terminate upon the later of:
(a) ten years after the date that Indemnitee shall have ceased to serve as an
officer of the Corporation, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and or any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
14 Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
15 Exception to Right of Indemnification or Advancement of Expenses.
Except as provided in Section 11.5, Indemnitee shall not be entitled
to indemnification or advancement of Expenses under this Agreement with respect
to any Proceeding, or any claim therein, brought or made by him against the
Corporation.
16 Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement.
17 Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
18 Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this 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.
19 Notice by Indemnitee.
Indemnitee agrees promptly to notify the Corporation in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating any Proceeding or matter which may be
subject to indemnification or advancement of Expenses covered hereunder.
20 Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered
by hand and receipted for by the party to whom such notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
If to Indemnitee, to:
David H. Allen
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If to the Corporation, to:
Individual Investor Group, Inc.
125 Broad Street, 14th Floor
New York, New York 10004
or to such other address or such other person as Indemnitee or the Corporation
shall designate in writing in accordance with this Section, except that notices
regarding changes in notices shall be effective only upon receipt.
21 Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
22 Miscellaneous.
Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:
Jonathan L. Steinberg
Chief Executive Officer
INDEMNITEE
David H. Allen