INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of May 30, 1997 between
JPE, Inc., a Michigan corporation ("Corporation"), and David E. Cole
("Director").
Recitals
A. Director is a member of Corporation's Board of Directors and Corporation
desires Director to continue in such capacity. Director is willing to
continue to serve on Corporation's Board of Directors if Director receives
the protections provided by this Agreement.
B. Corporation's Bylaws obligate it to indemnify its directors and officers.
C. Corporation has furnished, at its expense, directors and officers liability
insurance ("D&O Insurance") protecting its directors in connection with
their performance of services for Corporation.
D. Corporation believes that (1) litigation against corporate directors,
regardless of whether meritorious, is expensive and time-consuming for the
director to defend; (2) there is a substantial risk of a large judgment or
settlement in litigation in which a corporate director was neither culpable
nor profited personally to the detriment of the corporation; (3) it is
increasingly difficult to attract and keep qualified directors because of
such potential liabilities; (4) it is important for a director to have
assurance that indemnification will be available if the director acts in
accordance with reasonable business standards; and (5) because available
D&O Insurance and the indemnification available from Corporation are not
adequate to fully protect Corporation's directors against the problems
discussed above, it is in the best interests of Corporation and its
shareholders for Corporation to contractually obligate itself to indemnify
its directors and to set forth the details of the indemnification process.
E. Based upon the conclusions stated in Recital D above, to induce Director to
continue to serve on Corporation's Board of Directors and in consideration
of Director's continued service as a director, Corporation wishes to enter
into this Agreement with Director.
Therefore, Corporation and Director agree as follows:
1. Agreement to Serve. Director will serve as a member of the Board of
Directors of the Corporation so long as Director is duly elected and
qualified to so serve or until Director resigns or is removed from
Corporation's Board of Directors.
2. Indemnification.
(a) Corporation will indemnify Director to the fullest extent permitted
under applicable law if Director was or is a party or threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding of any kind, whether civil, criminal, administrative or
investigative and whether formal or informal (including actions by or
in the right of Corporation and any preliminary inquiry or claim by
any person or authority), by reason of the fact that Director is or
was a director, officer, partner, trustee, employee or agent of
Corporation or is or was serving at Corporation's request as a
director, officer, employee or agent of another corporation (including
a Subsidiary (as defined in paragraph 19 below)), limited liability
company, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether or not for profit, or by reason of anything
done or not done by Director in any such capacity (collectively,
"Covered Matters"). Such indemnification will cover all Expenses (as
defined in paragraph 5(a) below), liabilities, judgments (including
punitive and exemplary damages), penalties, fines (including excise
taxes relating to employee benefit plans and civil penalties) and
amounts paid in settlement which are incurred or imposed upon Director
in connection with a Covered Matter (collectively, "Indemnified
Amounts").
(b) Director will be indemnified for all Indemnified Amounts and
Corporation will defend Director against claims (including threatened
claims and investigations) in any way related to Director's service as
a director including claims brought by or on behalf of Corporation or
any Subsidiary, except if it is finally determined by the court of
last resort (or by a lower court if not timely appealed) that (1) the
payment is prohibited by applicable law or (2) Director engaged in
intentional misconduct for the primary purpose of significant personal
financial benefit through actions adverse to Corporation's and its
shareholders' best interests. As used in this Agreement, (1)
"intentional misconduct" will not include violations of disclosure or
reporting requirements of federal securities laws or a breach of
fiduciary duties (including duties of loyalty or care) if Director
relied on advice of counsel to Corporation, or otherwise reasonably
believed that there was no violation of such requirements or breach of
fiduciary duty; and (2) "significant personal financial benefit" will
not include compensation or employee benefits for past or prospective
services to Corporation or Corporation's successor in connection with
an agreement not to compete or similar agreement, or any benefit
received by directors or officers or shareholders of Corporation
generally.
(c) If Director is entitled under this Agreement to indemnification for
less than all of the amounts incurred by Director in connection with a
Covered Matter, Corporation will indemnify Director for the
indemnifiable amount.
3. Claims for Indemnification. Director will give Corporation written notice
of any claim for indemnification under this Agreement. Payment requests
will include a schedule setting forth in reasonable detail the amount
requested and will be accompanied (or, if necessary, followed) by copies of
the relevant invoices or other documentation. Upon Corporation's request,
Director will provide Corporation with a copy of the document or pleading,
if any, notifying Director of the Covered Matter. To the extent
practicable, Corporation will pay Indemnified Amounts directly without
requiring Director to make any prior payment.
4. Determination of Right to Indemnification.
(a) Director will be presumed to be entitled to indemnification under this
Agreement and will receive such indemnification, subject to paragraph
4(b) below, irrespective of whether the Covered Matter involves
allegations of intentional misconduct, alleged violations of Section
16(b) of the Securities Exchange Act of 1934, alleged violations of
Section 10(b) of the Securities Exchange Act of 1934 (including Rule
10b-5 thereunder), breach of Director's fiduciary duties (including
duties of loyalty or care) or any other claim.
(b) If, in the opinion of counsel to Corporation, applicable law permits
indemnification in a Covered Matter only as authorized in the specific
case upon a determination that indemnification is proper in the
circumstances because Director has met a standard of conduct
established by applicable law, and upon an evaluation of Indemnified
Amounts to be paid in connection with such Covered Matter, the
following will apply:
(1) Corporation will give Director notice that a determination and
evaluation will be made under this paragraph 4(b); such notice
will be given immediately after receipt of counsel's opinion that
such a determination and evaluation is necessary and will include
a copy of such opinion.
(2) Such determination and evaluation will be made in good faith, as
follows:
(A) by a majority vote of a quorum of the Corporation's Board of
directors who are not parties or threatened to be made
parties to the Covered Matter in question ("Disinterested
Directors") or, if such a quorum is not obtainable, by a
majority vote of a committee of Disinterested Directors who
are selected by the Board; or
(B) by an attorney or firm of attorneys, having no previous
relationship with Corporation or Director, which is selected
by Corporation and Director; or
(C) by all independent directors of Corporation (a defined in
the Michigan Business Corporation Act) who are not parties
or threatened to be made parties to the Covered Matter.
(3) Director will be entitled to a hearing before the entire Board of
Directors of Corporation and any other person or persons making
the determination and evaluation under clause (2) above. Director
will be entitled to be represented by counsel at such hearing.
(4) The cost of a determination and evaluation under this paragraph
4(b) (including attorneys' fees and other expenses incurred by
Director in preparing for and attending the hearing contemplated
by clause (3) above and otherwise in connection with the
determination and evaluation under this paragraph 4(b)) will be
borne by Corporation.
(5) The determination will be made as promptly as possible after
final adjudication of the Covered Matter.
(6) Director will be presumed to have met the required standard of
conduct under this Section 4(b) unless it is clearly demonstrated
to the determining body that Director has not met the required
standard of conduct.
5. Advance of Expenses.
(a) Before final adjudication of a Covered Matter, upon Director's request
pursuant to paragraph 3 above, Corporation will promptly either
advance Expenses directly or reimburse Director for all Expenses. As
used in this Agreement, "Expenses" means all costs and expenses
(including attorneys' fees, expert fees, other professional fees and
court costs) incurred by Director in connection with a Covered Matter
other than judgments, penalties, fines and settlement amounts.
(b) If, in the opinion of counsel to Corporation, applicable law permits
advancement of Expenses only as authorized in the specific case upon a
determination that Director has met a standard of conduct established
by applicable law, the determination will be made at Corporation's
cost, in good faith and as promptly as possible after Director's
request, in accordance with clauses (1) through (4) and (6) of
paragraph 4(b) above. Because of the difficulties inherent in making
any such determination before final disposition of the Covered Matter,
to the extent permitted by law such advance will be made if (1) the
facts then known to those persons making the determination, without
conducting a formal independent investigation, would not preclude
advancement of Expenses under applicable law and (2) Director submits
to Corporation a written affirmation of Director's belief that
Director has met the standard of conduct necessary for advancement of
Expenses under the circumstances.
(c) Director will repay any Expenses that are advanced under this
paragraph 5 if it is ultimately determined, in a final, non-appealable
judgment rendered by the court of last resort (or by a lower court if
not timely appealed), that Director is not entitled to be indemnified
against such Expenses. This undertaking by Director is an unlimited
general undertaking but no security for such undertaking will be
required.
6. Defense of Claim.
(a) Except as provided in paragraph 6(c) below, Corporation, jointly with
any other indemnifying party, will be entitled to assume the defense
of any Covered Matter as to which Director requests indemnification.
(b) Counsel selected by Corporation to defend any Covered Matter will be
subject to Director's advance written approval, which will not be
unreasonably withheld.
(c) Director may employ Director's own counsel in a Covered Matter and be
fully reimbursed therefor if (1) Corporation approves, in writing, the
employment of such counsel or (2) either (A) Director has reasonably
concluded that there may be a conflict of interest between Corporation
and Director or between Director and other parties represented by
counsel employed by Corporation to represent Director in such action
or (B) Corporation has not employed counsel reasonably satisfactory to
Director to assume the defense of such Covered Matter promptly after
Director's request.
(d) Neither Corporation nor Director will settle any Covered Matter
without the other's written consent, which will not be unreasonably
withheld.
(e) If Director is required to testify (in court proceedings, depositions,
informal interviews or otherwise), consult with counsel, furnish
documents or take any other reasonable action in connection with a
Covered Matter, Corporation will pay Director a fee for Director's
efforts at a rate equal to the amount payable to Director for
attending Board and Board committee meetings, plus reimbursement for
all reasonable expenses incurred by Director in connection therewith.
7. Disputes; Enforcement.
(a) If there is a dispute relating to the validity or enforceability of
this Agreement or a denial of indemnification, advance of Expenses or
payment of any other amounts due under this Agreement or Corporation's
Articles of Incorporation or Bylaws, Corporation will provide such
indemnification, advance of Expenses or other payment until a final,
non-appealable judgment that Director is not entitled to such
indemnification, advance of Expenses or other payment has been
rendered by the court of last resort (or by a lower court if not
timely appealed). Director will repay such amounts if such final,
non-appealable judgment so requires.
(b) Corporation will reimburse all of Director's reasonable expenses
(including attorneys' fees) in pursuing an action to enforce
Director's rights under this Agreement unless a final, non-appealable
judgment against Director has been rendered in such action by the
court of last resort (or by a lower court if not timely appealed). At
Director's request, such expenses will be advanced by Corporation to
Director as incurred before final resolution of such action by the
court of last resort; such expenses will be repaid by Director if a
final, non-appealable judgment in Corporation's favor is rendered in
such action by the court of last resort (or by a lower court if not
timely appealed).
8. D&O Insurance.
(a) Corporation represents that it currently has in full force and effect
the D&O insurance listed on the schedule which is attached to this
Agreement.
(b) Except as provided in paragraph 8(c) below, Corporation will purchase
and maintain D&O Insurance with a policy limit of at least $2,500,000
without deductible or co-insurance in excess of the amounts set forth
on the schedule which is attached to this Agreement, insuring Director
against any liability arising out of Director's status as a director
of Corporation, regardless of whether Corporation has the power to
indemnify Director against such liability under applicable law.
(c) Corporation will not be required to purchase and maintain D&O
Insurance if the Board of Directors of Corporation determines, after
diligent inquiry, that (1) such insurance is not available; or (2) the
premiums for available insurance are disproportionate to the amount of
coverage and to the premiums paid by other corporations similarly
situated. The Board of Directors of Corporation will, at least twice
annually, in good faith review its decision not to maintain D&O
Insurance and will purchase such insurance at any time that the
conditions of this paragraph 8(c) cease to apply.
(d) The parties will cooperate to obtain advances of Expenses,
indemnification payments and consents from D&O Insurance carriers in
any Covered Matter to the full extent of applicable D&O Insurance. The
existence of D&O Insurance coverage will not diminish or limit
Corporation's obligation to make indemnification payments to Director.
Amounts paid directly to Director with respect to a Covered Matter by
Corporation's D&O Insurance carriers will be credited to the amounts
payable by Corporation to Director under this Agreement.
9. Limitations of Actions; Release of Claims; Limitation of Liability.
(a) No action will be brought by or on behalf of Corporation against
Director or Director's heirs or personal representatives relating to
Director's service as a director, after the expiration of one year
from the date Director ceases (for any reason) to serve as a Director
of Corporation, and any claim or cause of action of Corporation will
be extinguished and deemed released unless asserted by the filing of a
legal action before the expiration of such period.
(b) The Directors of Corporation who are employees of Corporation (the
"Inside Directors"), with the assistance of legal counsel, have
investigated Director's activities during Director's prior service and
the Inside Directors have determined and acknowledged that Corporation
has no basis for any claim against Director for negligence or
misconduct in the performance of Director's duties on the basis of any
information presently available. Accordingly, Corporation releases
Director and Director's heirs, personal representatives and assigns
from all causes of action and claims which may be based upon
negligence or misconduct by Director in the performance of Director's
duties to Corporation by reason of facts existing on the date of this
Agreement and known or available to the Inside Directors.
(c) As soon as possible after the end of each fiscal year of Corporation,
the Inside Directors will cause Corporation to conduct an
investigation, similar to that described in paragraph 9(b) above, of
Director's activities during the immediately preceding fiscal year and
to report the results of such investigation in writing to Director and
to Corporation's Board of Directors. Unless Corporation notifies
Director within180 days after the end of the applicable fiscal year
that the results of such investigation do not so permit, Director and
Director's personal representatives, heirs and assigns will be
automatically released (in the manner described in paragraph 9(b)
above) with respect to Director's actions during the fiscal year
covered by the report.
10. Rights Not Exclusive. The indemnification provided to Director under this
Agreement will be in addition to any indemnification provided to Director
by any law, agreement, Board resolution, provision of the Articles of
Incorporation or Bylaws of Corporation or otherwise.
11. Subrogation. Upon payment of any Indemnified Amount under this Agreement,
Corporation will be subrogated to the extent of such payment to all of
Director's rights of recovery therefor and Director will take all
reasonable actions requested by Corporation (at no cost or penalty to
Director) to secure Corporation's rights under this paragraph 11 including
executing documents.
12. Continuation of Indemnity. All of Corporation's obligations under this
Agreement will continue as long as Director is subject to any actual or
possible Covered Matter, notwithstanding Director's termination of service
as a director.
13. Amendments. Neither Corporation's Articles of Incorporation nor its Bylaws
will be changed to increase liability of directors or to limit Director's
indemnification. Any repeal or modification of Corporation's Articles of
Incorporation or Bylaws or any repeal or modification of the relevant
provisions of any applicable law will not in any way diminish any of
Director's rights or Corporation's obligations under this Agreement. This
Agreement cannot be amended except with the written consent of Corporation
and Director.
14. Governing Law. This Agreement will be governed by Michigan Law.
15. Successors.
(a) This Agreement will be binding upon and inure to the benefit of the
parties and their respective heirs, legal representatives and assigns.
(b) Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Corporation to assume all of
Corporation's obligations under this Agreement. Such assumption will
not release Corporation from its obligations under this Agreement.
16. Severability. The provisions of this Agreement will be deemed severable,
and if any part of any provision is held illegal, void or invalid under
applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding.
If any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their
terms.
17. Notices. All notices given under this Agreement will be in writing and
delivered either personally, by registered or certified mail (return
receipt requested, postage prepaid), by recognized overnight courier or by
telecopy (if promptly followed by a copy delivered personally, by
registered or certified mail or overnight courier), as follows:
If to Director: David E. Cole
3946 Walden Wood
Ann Arbor, Michigan 48105
If to Corporation: JPE, Inc.
775 Technology Drive, Suite 200
Ann Arbor, Michigan 48108
Attention: Secretary
or to such other address as either party furnishes to the other in writing.
18. Counterparts: This Agreement may be signed in counterparts.
19. Subsidiaries: As used in this Agreement, the term "Subsidiary" means any
corporation in which Corporation owns a majority interest.
In witness whereof, the parties have executed this Agreement as of the date set
forth in the introductory paragraph of this Agreement.
JPE, INC.
a Michigan corporation
By: /s/ John Psarouthakis
----------------------------------
John Psarouthakis
Its: Chairman, President and
Chief Executive Officer
/s/ David E. Cole ("Director")
----------------------------------------
David E. Cole
D&O INSURANCE SCHEDULE
Policy
Deductible/ Expiration
Company Policy No. Amount Co-Insurance Date
St. Paul Mercury 900DP0647 $10,000,000 $250,000 payable by 10/26/98
Ins. Co. Corporation in each
securities claim and
$150,000 all other
claims; no retention
payable by insureds.
Insurer responsible
for 100% of loss in
excess of retention
amount.
Great American DFX0009459 $5,000,000 Policy is excess of 10/26/98
Insurance Co. amount payable by St.
Paul Mercury Ins. Co.
policy.