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EXHIBIT 10.2
FORM OF
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "AGREEMENT") is entered into as of
this ___ day of _______________, 1997, by and between NANOPHASE TECHNOLOGIES
CORPORATION, an Illinois corporation (the "CORPORATION"), and _____________
("INDEMNITEE").
RECITALS
A. The Corporation is aware that because of the increased exposure to
litigation costs and risks resulting from service to corporations, talented and
experienced persons are increasingly reluctant to serve or continue serving as
directors or executive officers of corporations unless they are protected by
comprehensive liability insurance and indemnification;
B. Plaintiffs often seek damages in such large amounts, and the costs of
litigation may be so great (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is usually beyond the personal
resources of directors and executive officers;
C. Based upon their experience as business managers, the Board of
Directors of the Corporation (the "BOARD") has concluded that, to retain and
attract talented and experienced individuals to serve as directors and
executive officers of the Corporation, it is appropriate for the Corporation to
contractually indemnify its directors and certain of its executive officers,
and to assume for itself liability for expenses and damages in connection with
claims against such directors and executive officers in connection with their
service to the Corporation; and
D. The Corporation believes that it is fair and proper to protect its
directors and certain executive officers of the Corporation from the risk of
judgments, settlements and other expenses which may occur as a result of their
service to the Corporation.
NOW, THEREFORE, the parties, intending to be legally bound, for good and
valuable consideration, hereby agree as follows:
1. DEFINITIONS.
(a) AGENT. "AGENT" means a director or executive officer of the
Corporation or a director or executive officer of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise serving at the request, for the convenience, or to represent
the interests of the Corporation.
(b) CORPORATION. "CORPORATION" means Nanophase Technologies
Corporation, an Illinois corporation, its successors or assigns, or any
Subsidiary of the Corporation. "SUBSIDIARY" means, and "SUBSIDIARIES"
include, (i) any company of which more than fifty percent (50%) of the
outstanding voting securities are owned
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directly or indirectly by the Corporation, or which is otherwise
controlled by the Corporation, and (ii) any partnership, joint venture,
trust, or other entity of which more than fifty percent (50%) of the
equity interest is owned directly or indirectly by the Corporation, or
which is otherwise controlled by the Corporation.
(c) LIABILITIES. "LIABILITIES" means losses, claims, damages,
liabilities, obligations, penalties, judgments, fines, settlement
payments, awards, costs, expenses and disbursements (and any and all
costs, expenses or disbursements in giving testimony or furnishing
documents in response to a subpoena or otherwise), including, without
limitation, all reasonable attorneys' fees, costs, expenses and
disbursements, as and when incurred.
(d) PROCEEDING. "PROCEEDING" means any threatened, pending, or
completed action, suit or other proceeding whether civil, criminal,
administrative, investigative or any other type whatsoever.
(e) CONTROL. "CONTROL" means, with respect to any person or entity,
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or
otherwise.
2. MAINTENANCE OF LIABILITY INSURANCE.
The Corporation hereby covenants and agrees to and with Indemnitee
that, so long as Indemnitee shall continue to serve as an Agent and
thereafter so long as Indemnitee shall be subject to any claim or
Proceeding by reason of the fact that Indemnitee was an Agent or in
connection with Indemnitee's acts as such an Agent, the Corporation shall
obtain and maintain in full force and effect directors' and officers'
liability insurance ("D&O INSURANCE") in reasonable amounts from
established and reputable insurers. In all policies of D&O Insurance,
Indemnitee shall be named as an insured.
3. INDEMNIFICATION OF AGENT.
(a) THIRD PARTY ACTIONS. If Indemnitee is a person who was or is a
party or is threatened to be made a party to any Proceeding (other than
an action by or in the right of the Corporation) by reason of the fact
that Indemnitee is or was an Agent of the Corporation, or by reason of
anything done or not done by Indemnitee in any such capacity or otherwise
at the request of the Corporation or of its officers, directors or
shareholder, the Corporation shall indemnify, defend and hold harmless
Indemnitee against any and all Liabilities actually and reasonably
incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of such Proceeding, so long as Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Corporation, and, with respect
to any criminal action or Proceeding, if Indemnitee had no reasonable
cause to believe his conduct was unlawful.
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(b) DERIVATIVE ACTIONS. If Indemnitee is a person who was, or is a
party or is threatened to be made a party, to any Proceeding by or in the
right of the Corporation to procure a judgment in its favor by reason of
the fact that Indemnitee is or was an Agent of the Corporation, or by
reason of anything done or not done by Indemnitee in any such capacity or
otherwise at the request of the Corporation or of its officers, directors
or shareholders, the Corporation shall indemnify, defend and hold
harmless Indemnitee against all Liabilities actually and reasonably
incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of such Proceeding, if Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation; provided, however, that no
indemnification under this SECTION 3(B) shall be made in respect of any
claim, issue or matter for which such person is adjudged to be liable for
gross negligence or willful misconduct in the performance of Indemnitee's
duties to the Corporation, unless, and only to the extent that, the court
in which such Proceeding was brought shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled
to indemnity for such Liabilities as the court shall deem proper.
(c) ACTIONS WHERE INDEMNITEE IS DECEASED. If Indemnitee is a person
who was or is a party or is threatened to be made a party to any
Proceeding by reason of the fact that he is or was an Agent of the
Corporation, or by reason of anything done or not done by Indemnitee in
any such capacity, and prior to, during the pendency of, or after
completion of, such Proceeding, Indemnitee shall die, then the
Corporation shall indemnify, defend and hold harmless the estate, heirs
and legatees of Indemnitee against any and all Liabilities incurred by
such estate, heirs or legatees in connection with the investigation,
defense, settlement or appeal of such Proceeding on the same basis as
provided for Indemnitee in SECTIONS 3(a) AND 3(b) above.
(d) REDUCTION OF LIABILITIES. The Liabilities covered hereby shall
be net of any payments to or on behalf of Indemnitee by D&O Insurance
carriers or others with respect to the subject Proceeding.
4. INDEMNIFICATION AS WITNESS. Notwithstanding any other provision of
this Agreement, to the extent Indemnitee is, by reason of the fact that
Indemnitee is or was an Agent of the Corporation, involved in any
investigative Proceeding, including but not limited to testifying as a
witness or furnishing documents in response to a subpoena or otherwise,
Indemnitee shall be indemnified against any and all Liabilities actually
and reasonably incurred by or for Indemnitee in connection therewith.
5. ADVANCEMENT OF LIABILITIES. Subject to the provisions of SECTION
6(c), until a determination that Indemnitee is not entitled to be
indemnified by the Corporation under the terms hereof, and unless the
provisions of SECTION 9 apply, the Corporation shall reimburse Indemnitee
for Liabilities previously paid by Indemnitee and may advance Liabilities
which the Corporation reasonably determines will be due and payable by
Indemnitee within a reasonable time after a request for advancement is
made by Indemnitee. The execution and delivery of this Agreement by the
Corporation evidences the specific approval by the Board of the
reimbursement and advancement of Liabilities
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as provided for in this SECTION 5. As a condition to such reimbursement
and/or advancement, Indemnitee shall, at the request of the Corporation,
undertake in a manner satisfactory to the Corporation to repay such
amounts reimbursed and/or advanced, without interest, if it shall
ultimately be determined pursuant to SECTION 7 OR 9 below that Indemnitee
is not entitled to be indemnified by the Corporation under the terms of
this Agreement. Subject to the foregoing, the reimbursement and/or
advances to be made hereunder shall be paid by the Corporation to
Indemnitee within twenty (20) business days following delivery of a
written request by Indemnitee to the Corporation, which request shall be
accompanied by vouchers, invoices and similar evidence documenting the
amounts incurred or to be incurred by Indemnitee.
6. INDEMNIFICATION PROCEDURES.
(a) NOTICE BY INDEMNITEE. Promptly after receipt by Indemnitee of
notice of the commencement or threat of commencement of any Proceeding,
Indemnitee shall, if Indemnitee believes that indemnification with
respect thereto may be sought from the Corporation under this Agreement,
notify the Corporation of the commencement or threat of commencement
thereof, provided that any failure to so notify the Corporation shall not
relieve the Corporation of its obligations hereunder, except to the
extent that such failure or delay increases the liability of the
Corporation hereunder.
(b) D & O INSURANCE. If, at the time of receipt of a notice
pursuant to SECTION 6(a) above, the Corporation has D&O Insurance in
effect, the Corporation shall give prompt notice of the Proceeding or
claim to its insurers in accordance with the procedures set forth in the
applicable policies. The Corporation shall thereafter take all necessary
or desirable action to cause such insurers to pay all amounts payable as
a result of such Proceeding in accordance with the terms of such
policies, and Indemnitee shall not take any action (by waiver, settlement
or otherwise) which would adversely affect the ability of the Corporation
to obtain payment from its insurers.
(c) ASSUMPTION OF DEFENSE. In the event the Corporation shall be
obligated under this Agreement to pay the Liabilities of Indemnitee, the
Corporation shall be entitled to assume the defense (with counsel
reasonably acceptable to Indemnitee, approval thereof not to be
unreasonably withheld) of the Proceeding to which the Liabilities relate.
The Corporation agrees to promptly notify Indemnitee upon its election
to assume such defense. Once the Corporation (i) provides Indemnitee
with notice of its election to assume such defense and (ii) obtains
approval from Indemnitee of the counsel retained, the Corporation will
not be liable to Indemnitee under this Agreement for any attorney's fees
or other Liabilities subsequently incurred by the Indemnitee with respect
to such Proceeding, unless (x) the Liabilities incurred by the Indemnitee
were previously authorized by the Corporation or (y) counsel for the
Indemnitee shall have provided the Corporation with an opinion of counsel
stating that there is a likelihood that a conflict of interest exists
between the Corporation and the Indemnitee in the conduct of any such
defense.
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7. DETERMINATION OF RIGHT TO INDEMNIFICATION.
(a) SUCCESSFUL PROCEEDING. To the extent Indemnitee has been
successful, on the merits or otherwise, in the defense of any Proceeding
referred to in SECTIONS 3(a) OR 3(b) above, the Corporation shall
indemnify Indemnitee against all Liabilities incurred by him 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, then
the Corporation shall indemnify Indemnitee against all Liabilities
actually or reasonably incurred by or for him in connection with each
successfully resolved claim, issue or matter. For purposes of this
SECTION 7(a), and without limitation, the termination of any Proceeding,
or any claim, issue, or matter in such a Proceeding, by dismissal, with
or without prejudice, shall be deemed to be a successful result as to
such Proceeding, claim, issue or matter, so long as there has been no
finding (either adjudicated or pursuant to SECTION 7(c) below) that
Indemnitee (i) did not act in good faith, (ii) did not act in a manner
reasonably believed to be in, or not opposed to, the best interests of
the Corporation, or (iii) with respect to any criminal proceeding, had
reasonable grounds to believe his conduct was unlawful.
(b) OTHER PROCEEDINGS. In the event that SECTION 7(a) above is
inapplicable, the Corporation shall nevertheless indemnify Indemnitee,
unless and only to the extent that the forum listed in SECTION 7(c) below
determines that Indemnitee has not met the applicable standard of conduct
set forth in SECTIONS 3(a) OR 3(b) above required to entitle Indemnitee
to such indemnification.
(c) FORUM IN EVENT OF DISPUTE. The determination that
indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct set forth in
SECTIONS 3(a) OR 3(b) shall be made (i) by the Board, by a majority vote
of the directors who are not parties to such Proceeding, even though less
than a quorum, or (ii) by a committee of disinterested directors
designated by a majority of such disinterested directors, even though
less than a quorum, or (iii) if there are no such disinterested
directors, or if such disinterested directors shall so direct, by
independent legal counsel in a written opinion, or (iv) by the
shareholders of the Corporation. The choice of which forum shall make
the determination shall be made by the Board. The forum shall act in the
utmost good faith to assure Indemnitee a complete opportunity to present
to the forum Indemnitee's case that Indemnitee has met the applicable
standard of conduct.
(d) APPEAL TO COURT. Notwithstanding a determination by any forum
listed in SECTION 7(c) above that Indemnitee is not entitled to
indemnification with respect to a specific Proceeding, Indemnitee shall
have the right to apply to the court in which that Proceeding is or was
pending or any other court of competent jurisdiction for the purpose of
enforcing Indemnitee's right to indemnification pursuant to this
Agreement.
(e) INDEMNITY FOR LIABILITIES IN ENFORCEMENT OF AGREEMENT.
Notwithstanding any other provision in this Agreement to the contrary,
the Corporation shall indemnify Indemnitee against all Liabilities
incurred by Indemnitee in connection with any other Proceeding between
the Corporation and Indemnitee involving the
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interpretation or enforcement of the rights of Indemnitee under this
Agreements unless a court of competent jurisdiction finds that the
material claims and/or defenses of Indemnitee in any such Proceeding were
frivolous or made in bad faith.
8. CONTRIBUTION. If and to the extent that a final adjudication shall
specify that the Corporation is not obligated to indemnify Indemnitee
under this Agreement for any reason (including but not limited to the
exclusion set forth in SECTION 9 hereof), then in respect of any
Proceeding in which the Corporation is jointly liable with Indemnitee (or
would be so liable if joined in such action, suit or proceeding), the
Corporation shall contribute to the amount of Liabilities reasonably
incurred and paid or payable by Indemnitee in connection with such
Proceeding in such proportion as is appropriate to reflect (i) the
relative benefits received by the Corporation, on the one hand, and
Indemnitee, on the other hand, from the transaction with respect to which
such Proceeding arose, and (ii) the relative fault of the Corporation, on
the one hand, and Indemnitee, on the other hand, in connection with the
circumstances which resulted in such Liabilities, as well as any other
relevant equitable considerations. The relative fault of the
Corporation, on the one hand, and Indemnitee, 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 Liabilities. The Corporation
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 account of the foregoing
equitable considerations.
9. EXCEPTIONS.
(a) CLAIMS INITIATED BY INDEMNITEE. Notwithstanding any other
provision herein to the contrary, the Corporation shall not be obligated
pursuant to the terms of this Agreement to indemnify or advance
Liabilities to Indemnitee with respect to Proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, except
with respect to Proceedings brought to establish or enforce a right to
indemnification under this Agreement, but such indemnification or
advancement of expenses may be provided by the Corporation in specific
cases if the Board finds it to be appropriate.
(b) UNAUTHORIZED SETTLEMENTS. Notwithstanding any other provision
herein to the contrary, the Corporation shall not be obligated pursuant
to the terms of this Agreement to indemnify Indemnitee under this
Agreement for any amount paid in settlement of a Proceeding without the
prior written consent of the Corporation to such settlement.
(c) NO DUPLICATIVE PAYMENT. 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.
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10. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Corporation agrees
that the Certificate of Incorporation and By-laws of the Corporation in
effect on the date hereof shall not be amended to reduce, limit, hinder
or delay (a) the rights of Indemnitee granted hereby, or (b) the ability
of the Corporation to indemnify Indemnitee as required hereby. The
Corporation further agrees that it shall exercise the powers granted to
it under its Certificate of Incorporation, its By-laws and by applicable
law to indemnify any Indemnitee to the fullest extent possible as
required hereby.
11. NON-EXCLUSIVITY. The provisions for indemnification and advancement
of Liabilities set forth in this Agreement shall not be deemed exclusive
of any other rights which the Indemnitee may have under any provision of
law, the Corporation's Certificate of Incorporation or By-laws, the vote
of the Corporation's shareholder or disinterested directors, other
agreements or otherwise.
12. INTERPRETATION OF AGREEMENT. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification to Indemnitee to the fullest extent now or
hereafter permitted by law.
13. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason
whatsoever, (i) the validity, legality and enforceability of the
remaining provisions of the Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such
provision held to be invalid, illegal or unenforceable) shall not in any
way be effected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without
limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal, or unenforceable, that
are not themselves invalid, illegal, or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable and to give effect to SECTION 12
hereof.
14. MODIFICATION AND WAIVER. No supplement, modification or amendment to
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.
15. SUBROGATION. In the event that the Corporation makes 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 and do all things that may be necessary to secure such
rights, including but not limited to the execution of such documents as
shall be necessary to enable the Company effectively to bring suit to
enforce such rights.
16. SURVIVAL, SUCCESSORS, AND ASSIGNS. Indemnitee's rights under this
Agreement shall continue after Indemnitee has ceased acting as an Agent
of the Corporation. The terms of this Agreement shall be binding on and
inure to the benefit of the Corporation
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and its successors and assigns and shall be binding on and inure to the
benefit of Indemnitee and Indemnitee's heirs, executors and
administrators.
17. NOTICES. All notices, demands, consents, requests, approvals and
other communications between the parties pursuant to this Agreement must
be in writing and will be deemed given when delivered in person, one (1)
business day after being dispatched by a nationally recognized overnight
courier service, three (3) business days after being deposited in the
U.S. Mail, registered or certified mail, return receipt requested, or one
(1) business after being sent by facsimile (with receipt acknowledged),
to the Corporation at the address of its principal office in Burr Ridge,
Illinois and to Indemnitee at Indemnitee's address as shown on the
Corporation's records. Indemnitee may change Indemnitee's address for
notice purposes by delivering notice to the Corporation in accordance
with this SECTION 17. All notices sent to the Corporation shall also be
delivered to Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600,
Chicago, Illinois 60661-3693, Attention: Matthew S. Brown, Esq.,
Facsimile No. (312-902-1061).
18. GOVERNING LAW. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Illinois, without regard
to its principles of conflicts of laws.
19. COUNTERPARTS. This agreement may be executed in counterparts, each
of which when so executed and delivered shall be deemed an original, and
such counterparts together shall constitute one instrument.
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The parties hereto have entered into this Indemnification Agreement
effective as of the date first above written.
NANOPHASE TECHNOLOGIES CORPORATION
By:___________________________________
Name:______________________________
Its:_______________________________
INDEMNITEE:
______________________________________
(Sign Name)
______________________________________
(Print Name)
______________________________________
______________________________________
(Print Address)
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LIST OF DIRECTORS
TO RECEIVE INDEMNIFICATION AGREEMENTS
- Leonard A. Batterson
- Robert W. Cross
- Steven Lazarus
- Richard W. Siegel
- Robert W. Shaw, Jr.
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