Document:

Exhibit
10.16

 

INDEMNITY
AGREEMENT

 

This Indemnity Agreement,
effective as of May 10, 2005, is made by and between ACA Capital Holdings,
Inc., a Delaware corporation with executive offices located at 140 Broadway,
New York, NY (the “Company”), and Douglas Jacobs, a Director of the Company
residing at 67 Orchard Avenue, Providence, Rhode Island (the “Indemnitee”).

 

RECITALS

 

A.             The Company is required, by the terms of the
Stockholders Agreement, dated as of September 30, 2004, by and
among the Company, BSMB/ACA LLC, a Delaware company and the other persons from
time to time signatories thereto (the “Stockholders Agreement”), to appoint two
Independent Directors (as defined in the Stockholders Agreement) to the Board
of Directors of the Company.

 

B.            The Company is aware that competent and experienced
persons are increasingly reluctant to serve as directors of corporations unless
they are protected by comprehensive liability insurance or indemnification, due
to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors;

 

C.            The statutes and judicial decisions regarding the duties
of directors are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors with adequate, reliable knowledge of
legal risks to which they are exposed or information regarding the proper
course of action to take;

 

D.            Plaintiffs often seek damages in such large amounts and
the costs of litigation may be so substantial (whether or not the case is
meritorious) that the defense and/or settlement of such litigation is often
beyond the personal resources of the directors;

 

E.             Based upon their experience as business managers, the
Board of Directors of the Company (the “Board”) has
concluded that, to retain and attract talented and experienced individuals to
serve as Independent Directors of the Company and its subsidiaries, it is
necessary and appropriate for the Company to contractually indemnify such
directors, and to assume for itself maximum liability for expenses and damages
in connection with claims against such directors in connection with their
service to the Company and its subsidiaries;

 

F.             Section 145 of the General Corporation Law of the State
of Delaware, under which the Company is organized (“Section 145”),
empowers the Company to indemnify by agreement its officers, directors,
employees, and agents, and persons who serve, at the request of the Company, as
directors, officers, employees, or agents of other corporations or enterprises,
and expressly provides that the indemnification provided by Section 145 is not
exclusive;

 

G.            The Company, after reasonable investigation prior to the
date hereof, has determined that the liability insurance
coverage available to the Company and its subsidiaries as of the date hereof
may be inadequate and/or unreasonably expensive to obtain at the levels
necessary to retain qualified Independent Directors. The Company believes,
therefore, that the interest of the

 

 

Company’s stockholders would
best be served by a combination of such insurance as the Company may obtain, or
request a subsidiary to obtain, pursuant to the Company’s obligations hereunder,
and the indemnification by the Company of the Independent Directors of the
Company and its subsidiaries;

 

H.            The Company desires and has requested the Indemnitee to
serve or continue to serve as an Independent Director of the
Company and/or the subsidiaries of the Company free from undue concern for
claims for damages arising out of or related to such services to the Company
and/or a subsidiary of the Company; and

 

I.              The Indemnitee is willing to serve, or to continue to
serve, the Company and/or the subsidiaries of the Company, provided that he or
she is furnished the indemnity provided for herein.

 

AGREEMENT

NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

 

1. Definitions.

 

(a)           Agent. For the purposes of this Agreement, “agent”
of the Company means any person who is
or was a director, officer, employee, or other agent of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of or to represent the interest of the Company or a subsidiary of
the Company as a director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise;
or was a director, officer, employee, or agent of a foreign or domestic
corporation which was a predecessor corporation of the Company or a subsidiary
of the Company, or was a director, officer, employee, or agent of another
enterprise at the request of, for the convenience of or to represent the
interests of such predecessor corporation.

 

(b)           Expenses. For purposes of this Agreement, “expenses”
includes all direct and indirect costs of any type or nature
whatsoever (including, without limitation, all attorneys’ fees and related
disbursements, and other out-of-pocket costs such as retainers, court costs,
expert fees, travel expenses and telephone charges) actually and reasonably
incurred by the Indemnitee as a party or as a participant in connection with
either the investigation, defense, or appeal of a proceeding or establishing or
enforcing a right to indemnification under this Agreement, Section 145, or
otherwise; provided, however, that expenses shall not include any judgments, fines,
ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.

 

(c)           Proceeding. For the purposes of this Agreement, “proceeding”
means any threatened, pending, or completed action, suit, claim, inquiry or other
proceeding, formal or informal, including arbitration, mediation, other
alternative dispute resolution mechanism, or hearing, whether civil, criminal,
administrative, investigative, or any other type whatsoever.

 

(d)           Subsidiary. For purposes of this Agreement,
“subsidiary” means any corporation or other form of business entity of which
more than 50% of the outstanding voting securities is

 

 

 

2

 

owned directly or indirectly
by the Company, by the Company and one or more other subsidiaries, or by one or
more other subsidiaries.

 

2.             Agreement to Serve. The Indemnitee agrees to
serve and/or continue to serve as an agent of the Company, in the
capacity the Indemnitee currently serves as an agent of the Company, so long as
he or she is duly appointed or elected and qualified in accordance with the
applicable provisions of the Bylaws of the Company or any subsidiary of the
Company or until such time as he or she tenders his resignation in writing or
he or she is removed from such position.

 

3.             Liability Insurance. To the extent the Company or
any of its subsidiaries maintains an insurance policy or policies providing
liability insurance for agents of the Company and its subsidiaries (“D&O
Insurance”), the Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available.

 

4.             Mandatory Indemnification. The Company shall
indemnify the Indemnitee:

 

(a)           Third Party Actions. If the Indemnitee is a person
who was or is a party or other participant or is threatened to be made a party
or other participant to any proceeding (other than an action by or in the right
of the Company) by reason of the fact that he or she is or was an agent of the
Company, or by reason of anything done or not done by him or her in any such
capacity, against any and all expenses and liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties, and amounts paid in settlement) actually and reasonably incurred by
him or her in connection with the investigation, defense, settlement or appeal
of such proceeding to the fullest extent authorized or permitted by law, the
Certificate of Incorporation of the Company or the Bylaws of the Company;
provided that he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful; and

 

(b)           Actions By Or In The Right Of The Company. If the Indemnitee
is a person who was or is a party or other participant or is
threatened to be made a party or other participant to any proceeding by or in
the right of the Company to procure a judgment in its favor by reason of the
fact that he or she is or was an agent of the Company, or by reason of anything
done or not done by him or her in any such capacity, against any amounts paid
in settlement of any such proceeding, to the extent permitted by law, and all
expenses actually and reasonably incurred by him or her in connection with the
investigation, defense, settlement, or appeal of such proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company; except that no indemnification
under this subsection shall be made in respect of any claim, issue, or matter
as to which such person shall have been finally adjudged to be liable to the
Company unless and only to the extent that the Court of Chancery or 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, such person is fairly and reasonably entitled to indemnity for such
amounts which the Court of Chancery or such other court shall deem proper; and

 

(c)           The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the

 

 

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Indemnitee did not act in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Company, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful;

 

(d)           Indemnification for Expenses Incurred as a Witness.
To the extent that Indemnitee is, by reason of the fact that he or she is or
was an agent of the Company, a witness in any proceeding to which Indemnitee is
not a party, the Company shall indemnify Indemnitee against all expenses
actually and reasonably incurred by Indemnitee in connection therewith; and

 

(e)           Exception for Amounts Covered by Insurance.
Notwithstanding the foregoing, the Company shall not be
obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fees, ERISA excise taxes
or penalties, and amounts paid in settlement) that have been paid directly to Indemnitee
under D&O Insurance.

 

5.             Partial Indemnification. If the Indemnitee is
entitled under any provision of this Agreement to indemnification by the
Company for some or a portion of any expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) incurred by him or her in the
investigation, defense, settlement, or appeal of a proceeding but not entitled,
however, to indemnification for all of the total amount thereof, the Company
shall nevertheless indemnify the Indemnitee for such amount except as to the
portion thereof to which the Indemnitee is not entitled.

 

6.             Mandatory Advancement of Expenses. Subject to
Section 9 below and subject to receipt by the Company of a statement that
reasonably evidences the expenses incurred, the Company shall advance all
expenses actually and reasonably incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party
or participant or is threatened to be made a party or participant by reason of the fact that the Indemnitee
is or was an agent of the Company or by reason of anything done or not done by
him or her in any such capacity. Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the Company
to the Indemnitee within twenty (20) days following delivery of a written
request therefore by the Indemnitee to the Company.

 

7.             Notice and Other Indemnification Procedures.

 

(a)           Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding or his or her
potential involvement as a participant (be it as a party or otherwise), the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company in writing
of the commencement or threat of commencement thereof.

 

(b)           If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give notice of the commencement
of such proceeding to the insurers in accordance with the procedures set forth
in the respective policies. The Company shall thereafter take all necessary 

 

 

4

 

action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such proceeding in accordance with the terms of such policies.

 

(c)           In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel approved by the Indemnitee, upon the delivery to the Indemnitee of
written notice of its election so to do. After delivery of such notice,
approval of such counsel by the Indemnitee and the retention of such counsel by
the Company, the Company will not be liable to the Indemnitee under this
Agreement for any fees of counsel subsequently incurred by the Indemnitee with
respect to the same proceeding, provided that (i) the Indemnitee shall have the
right to employ his or her counsel in any such proceeding at the Indemnitee's
expense; and (ii) if (A) the employment of counsel by the Indemnitee has been
previously authorized by the Company, (B) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of any such defense or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, the fees and
expenses of the Indemnitee's counsel shall be at the expense of the Company.

 

8.             Determination of Right to Indemnification.

 

(a)           To the extent the Indemnitee has been successful on the merits
or otherwise in defense of any proceeding referred to in Section 4(a) or 4(b)
of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him or her in connection therewith to the extent permitted
by law.

 

(b)           Upon each submission of a written notice by Indemnitee for
indemnification pursuant to Section 7(a) above, a determination with respect to
Indemnitee's entitlement thereto because he or she has met all the applicable
standards set forth in this Agreement shall be made in accordance with this
Section 8.

 

(c)           The Indemnitee shall be entitled to select the decision
maker or decision making body who will determine, on behalf of the Company, the
Indemnitee's entitlement to indemnification from among the following:

 

(1)           All of the members of the Board of
Directors who are not parties to or participants in the
proceeding for which indemnification is being sought, even though less than a
quorum, or a committee of such directors designated by majority vote of such
directors, even though less than a quorum;

 

(2)           The stockholders of the Company; or

 

(3)           Independent legal counsel selected by
the Board, which counsel shall make such determination in a written opinion.

 

(d)           As soon as practicable, and in no event later than 30 days
after written notice of the Indemnitee's choice of decision maker pursuant to
Section 8(c) above, the Company shall, at its own expense, submit to the
selected decision maker its claim that the Indemnitee is not entitled to

 

5

 

indemnification; and the
Company shall act in the utmost good faith to assure the Indemnitee a complete
opportunity to defend against such claim. 

 

(e)           Notwithstanding a determination by any decision maker
listed in Section 8(c) hereof that the Indemnitee is not entitled to indemnification
with respect to a specific proceeding, the Indemnitee shall have the right to
apply to the Court of Chancery of the State of Delaware, the court in which the
Proceeding is or was pending, or any other court of competent jurisdiction, for
the purpose of enforcing the Indemnitee's right to indemnification pursuant to
the Agreement.

 

(f)            In any suit brought by Indemnitee seeking to enforce a
right to indemnification hereunder (but not a suit brought by Indemnitee
seeking to enforce a right to an advancement of expenses hereunder), it shall
be a defense that Indemnitee has not met any applicable standard for indemnification
under applicable law. With respect to any suit brought by Indemnitee seeking to
enforce a right to indemnification or right to advancement of expenses
hereunder or any suit brought by the Company to recover an advancement of
expenses (whether pursuant to the terms of an undertaking or otherwise),
neither (i) the failure of the Company to have made a determination prior to commencement of such suit that indemnification
of such person is proper in the circumstances because such
person has met the applicable standards of conduct under applicable law, nor
(ii) an actual determination by the Company that such person has not met such
applicable standards of conduct, shall create a presumption that such person
has not met the applicable standards of conduct or, in
a case brought by such person seeking to enforce a right to indemnification, be
a defense to such suit.

 

(g)           In any suit brought by Indemnitee seeking to enforce a right
to indemnification or to an advancement of expenses hereunder, or by the Company
to recover an advancement of expenses (whether pursuant to the terms of an undertaking
or otherwise), the burden shall be on the Company to prove that the Indemnitee
is not entitled to be indemnified, or to such an advancement of expenses, under
this Agreement or otherwise.

 

(h)           The Company shall indemnify the Indemnitee against all
expenses incurred by the Indemnitee in connection with any proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by
the Indemnitee in connection with any other proceeding between the Company and
the Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement so long as a court of competent jurisdiction finds
that Indemnitee in any such proceeding was entitled to indemnification or
advancement of expenses, in whole or in part.

 

9.             Exceptions. Any other provision herein to the
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement:

 

(a)           Claims Initiated by Indemnitee. To indemnify or
advance expenses (including attorneys’ fees) to the Indemnitee with respect to
proceedings or claims initiated or brought voluntarily by the Indemnitee
against the Company or in defending any counterclaim, cross-claim, affirmative
defense or like claim of the Company), except with respect to proceedings
brought to establish or enforce a right to indemnification or advancement of
expenses under this Agreement or any other statute or law or otherwise as
required under Section 145, but such indemnification or

 

 

 

6

 

advancement of expenses may
be provided by the Company in specific cases if the Board of Directors finds it
to be appropriate; or

 

(b)           Lack of Good Faith. To indemnify the Indemnitee for
any expenses incurred by the Indemnitee with respect to any proceeding
instituted by the Indemnitee to enforce or interpret this Agreement, if a court
of competent jurisdiction determines that each of the material assertions made
by the Indemnitee in such proceeding was not made in good faith or was
frivolous; or

 

(c)           Unauthorized Settlements. To indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of a proceeding unless
the Company consents to such settlement; or

 

(d)           Claims by the Company for Willful Misconduct. To
indemnify or advance expenses to the Indemnitee under this Agreement for any
expenses incurred by the Indemnitee with respect to any proceeding or claim
brought by the Company against the Indemnitee for willful misconduct, unless a
court of competent jurisdiction determines that each of such claims was not
made in good faith or was frivolous; or

 

(e)           Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, to the extent applicable to the Company, or any similar
successor statute; or

 

(f)            Willful Misconduct. To indemnify the Indemnitee (x)
on account of the Indemnitee's conduct which is finally adjudged to have been
knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct or (y) if it is finally adjudged that Indemnitee did not act in good
faith or in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company; or

 

(g)           Unlawful Indemnification. To indemnify the Indemnitee
if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful; or 

 

10.           Right to Bring Suit. If (a) a claim under Section
4(a) or 4(b) hereof with respect to any right to indemnification is not paid in
full by the Company within sixty days after a written demand has been received
by the Company or (b) a claim under Section 6 hereof with respect to any right
to the advancement of expenses is not paid in full by the Company within twenty
days after a written demand has been received by the Company, then Indemnitee
may at any time thereafter bring suit against the Company to recover the unpaid
amount of the claim.

 

11.           Subrogation. Upon a payment to Indemnitee under
this Agreement, the Company shall be subrogated to the extent of such payment
to all of the rights of the Indemnitee to recover against any person for such
liability, and Indemnitee shall execute all documents and instruments
reasonably required and shall take such other actions as may be reasonably
necessary to secure such rights, including the execution of such documents as
may be necessary for the Company to bring suit to enforce such rights.

 

12.           Nonexclusivity. The provisions for indemnification
and advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee

 

 

7

 

 

may have under any provision
of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the
Company’s stockholders or disinterested directors, other agreements, or
otherwise, both as to actions in his or her official capacity and to actions in
another capacity while occupying his or her position as an agent of the
Company, and the Indemnitee's rights hereunder shall continue after the Indemnitee
has ceased acting as an agent of the Company and shall inure to the benefit of
the heirs, executors and administrators of the Indemnitee.

 

13.           Interpretation of Agreement. It is understood that
the parties hereto intend this Agreement to be interpreted and enforced so as
to provide indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.

 

14.           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, that are not themselves invalid,
illegal, or unenforceable) shall not in any way be affected or impaired
thereby, and (ii) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, all portions of any paragraphs 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
13 hereof.

 

15.           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 provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.

 

16.           Successors and Assigns. The terms of this Agreement
shall bind, and shall inure to the benefit of, the successors, heirs,
executors, and administrators and assigns of the parties hereto.

 

17.           Notice. All notices, requests, demands, and other
communications under this Agreement shall be in
writing and shall be deemed duly given (i) if delivered by hand and receipted
for by the party addressee, (ii) if mailed by certified or registered mail with
postage prepaid, on the third business day after the mailing date, (iii) sent
by a recognized overnight courier, on the next business day after the date on
which it was so sent, or (iv) sent by facsimile, the successful transmission
and receipt of which is confirmed in a written report. Addresses for notice to
either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.

 

18.           Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of Delaware.

 

19.           Consent to Jurisdiction. To the fullest extent
permitted by law, the Company and the Indemnitee each hereby
irrevocably consent to the jurisdiction of the Court of Chancery of the State
of Delaware for all purposes in connection with any action or proceeding that
arises out of or relates to this Agreement.

 

 

8

The parties hereto have
entered into this Indemnity Agreement effective as of the date first above
written.

 

 

	
   

  	
  ACA CAPITAL HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nora J. Dahlman

  
	
   

  	
   

  	
  Name: Nora J. Dahlman

  
	
   

  	
   

  	
  Title: General Counsel
  &  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notice
  purposes:

  ACA Capital Holdings, Inc.

  140 Broadway, 47th Floor

  New York, NY 10005

  Attention: General Counsel

  Facsimile: 212-275-2302

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Douglas Jacobs

  
	
   

  	
  Name: Douglas Jacobs

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notice purposes:

  67 Orchard Avenue

  Providence, RI 02906

  

 

 

9Exhibit
10.17

 

INDEMNITY
AGREEMENT

 

This Indemnity Agreement,
effective as of May 10, 2005, is made by and between ACA Capital Holdings,
Inc., a Delaware corporation with executive offices located at 140 Broadway,
New York, NY (the “Company”), and William Lacy, a Director of the Company
residing at 342 Calle Linda, Sedona, Arizona (the “Indemnitee”).

 

RECITALS

 

A.            The Company is required, by the terms of the Stockholders
Agreement, dated as of September 30, 2004, by and among the Company, BSMB/ACA
LLC, a Delaware company and the other persons from time to time signatories
thereto (the “Stockholders Agreement”), to appoint two Independent Directors
(as defined in the Stockholders Agreement) to the Board of Directors of the Company.

 

B.            The Company is aware that competent and experienced
persons are increasingly reluctant to serve as directors of corporations unless
they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of
such directors;

 

C.            The statutes and judicial decisions regarding the duties
of directors are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors with adequate, reliable knowledge of
legal risks to which they are exposed or information regarding the proper course of action to take;

 

D.            Plaintiffs often seek damages in such large amounts and
the costs of litigation may be so substantial (whether or not the case is
meritorious) that the defense and/or settlement of such litigation is often
beyond the personal resources of the directors;

 

E.             Based upon their experience as business managers, the
Board of Directors of the Company (the “Board”) has concluded that, to retain
and attract talented and experienced individuals to serve as Independent
Directors of the Company and its subsidiaries, it is necessary and appropriate
for the Company to contractually indemnify such directors, and to assume for
itself maximum liability for expenses and damages in connection with claims
against such directors in connection with their service to the Company and its
subsidiaries;

 

F.             Section 145 of the General Corporation Law of the State
of Delaware, under which the Company is organized (“Section 145”), empowers the Company to
indemnify by agreement its officers, directors, employees, and agents,
and persons who serve, at the request of the Company, as directors, officers, employees, or
agents of other corporations or enterprises, and expressly provides that
the indemnification provided by Section 145 is not exclusive;

 

G.            The Company, after reasonable investigation prior to the
date hereof, has determined that the liability insurance coverage available to
the Company and its subsidiaries as of the date hereof may be inadequate and/or
unreasonably expensive to obtain at the levels necessary to retain qualified
Independent Directors. The Company believes, therefore, that the interest of
the

 

 

Company’s stockholders would
best be served by a combination of such insurance as the Company may obtain, or
request a subsidiary to obtain, pursuant to the Company’s obligations hereunder,
and the indemnification by the Company of the Independent Directors of the
Company and its subsidiaries;

 

H.            The Company desires and has requested the Indemnitee to
serve or continue to serve as an Independent Director of the Company and/or the
subsidiaries of the Company free from undue concern for
claims for damages arising out of or related to such services to the Company
and/or a subsidiary of the Company; and

 

I.              The Indemnitee is willing to serve, or to continue to
serve, the Company and/or the subsidiaries of the Company, provided that he or
she is furnished the indemnity provided for herein.

 

 

AGREEMENT

 

NOW, THEREFORE, the parties
hereto, intending to be legally bound, hereby agree as follows:

 

1.             Definitions.

 

(a)           Agent. For the purposes of this Agreement, “agent”
of the Company means any person who is or was a director, officer, employee, or
other agent of the Company or a subsidiary of the Company; or is or was serving
at the request of, for the convenience of or to represent the interest of the
Company or a subsidiary of the Company as a director, officer, employee, or
agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise; or was a director, officer, employee, or agent of a
foreign or domestic corporation which was a predecessor corporation of the
Company or a subsidiary of the Company, or was a director, officer, employee,
or agent of another enterprise at the request of, for the convenience of or to
represent the interests of such predecessor corporation.

 

(b)           Expenses. For purposes of this Agreement, “expenses”
includes all direct and indirect costs of any type or nature whatsoever
(including, without limitation, all attorneys’ fees and related disbursements,
and other out-of-pocket costs such as retainers, court costs, expert fees,
travel expenses and telephone charges) actually and reasonably incurred by the Indemnitee
as a party or as a participant in connection with either the investigation,
defense, or appeal of a proceeding or establishing or enforcing a right to
indemnification under this Agreement, Section 145, or otherwise; provided,
however, that expenses shall not include any judgments, fines, ERISA excise
taxes or penalties or amounts paid in settlement of a proceeding.

 

(c)           Proceeding. For the purposes of this Agreement, “proceeding”
means any threatened, pending, or completed action, suit, claim, inquiry or
other proceeding, formal or informal, including arbitration, mediation, other
alternative dispute resolution mechanism, or hearing, whether civil, criminal,
administrative, investigative, or any other type whatsoever.

 

(d)           Subsidiary. For purposes of this Agreement, “subsidiary”
means any corporation or other form of business entity of which more than 50%
of the outstanding voting securities is 

 

 

2

 

owned directly or indirectly
by the Company, by the Company and one or more other subsidiaries, or by one or
more other subsidiaries.

 

2.             Agreement to Serve. The Indemnitee agrees to
serve and/or continue to serve as an agent of the Company, in the capacity the Indemnitee
currently serves as an agent of the Company, so long as he or she is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Bylaws of the Company or any subsidiary of the Company or until such
time as he or she tenders his resignation in writing or he or she is removed
from such position.

 

3.             Liability Insurance. To the extent the Company or
any of its subsidiaries maintains an insurance policy or policies providing
liability insurance for agents of the Company and its subsidiaries (“D&O
Insurance”), the Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available.

 

4.             Mandatory Indemnification. The Company shall
indemnify the Indemnitee:

 

(a)           Third Party Actions. If the Indemnitee is a person
who was or is a party or other participant or is threatened to be made a party
or other participant to any proceeding (other than an action by or in the right
of the Company) by reason of the fact that he or she is or was an agent of the
Company, or by reason of anything done or not done by him or her in any such
capacity, against any and all expenses and liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) actually and reasonably incurred by him
or her in connection with the investigation, defense, settlement or appeal of
such proceeding to the fullest extent authorized or permitted by law, the Certificate
of Incorporation of the Company or the Bylaws of the Company; provided that he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful; and

 

(b)           Actions By Or In The Right Of The Company. If the Indemnitee
is a person who was or is a party or other participant or is threatened to be
made a party or other participant to any proceeding by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he or
she is or was an agent of the Company, or by reason of anything done or not done by
him or her in any such capacity, against any amounts paid in settlement of any
such proceeding, to the extent permitted by law, and all expenses actually and
reasonably incurred by him or her in connection with the investigation,
defense, settlement, or appeal of such proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company; except that no indemnification under this
subsection shall be made in respect of any claim, issue, or matter as to which
such person shall have been finally adjudged to be liable to the Company unless
and only to the extent that the Court of Chancery or 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,
such person is fairly and reasonably entitled to indemnity for such amounts
which the Court of Chancery or such other court shall deem proper; and

 

(c)           The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendre or its equivalent,
shall not, of itself, create a presumption that the

 

3

 

Indemnitee did not act in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his or her conduct was unlawful;

 

(d)           Indemnification for Expenses Incurred as a Witness.
To the extent that Indemnitee is, by reason of the fact
that he or she is or was an agent of the Company, a witness in any proceeding
to which Indemnitee is not a party, the Company shall indemnify Indemnitee against all expenses
actually and reasonably incurred by Indemnitee in connection therewith; and

 

(e)           Exception for Amounts Covered by Insurance.
Notwithstanding the foregoing, the Company shall not be obligated to indemnify
the Indemnitee for expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fees, ERISA excise taxes or penalties, and amounts
paid in settlement) that have been paid directly to Indemnitee under D&O
Insurance.

 

5.             Partial Indemnification. If the Indemnitee is
entitled under any provision of this Agreement to indemnification by the
Company for some or a portion of any expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) incurred by him or her in the
investigation, defense, settlement, or appeal of a proceeding but not
entitled, however, to indemnification for all of the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for such amount except as
to the portion thereof to which the Indemnitee is not entitled.

 

6.             Mandatory Advancement of Expenses. Subject to
Section 9 below and subject to receipt by the Company of a
statement that reasonably evidences the expenses incurred, the Company shall
advance all expenses actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense, settlement or appeal of any
proceeding to which the Indemnitee is a party or participant or is threatened
to be made a party or participant by reason of the fact that the Indemnitee is
or was an agent of the Company or by reason of anything done or not done by him
or her in any such capacity. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined by
final judicial decision from which there is no further right to appeal that the
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within twenty (20) days following delivery of a written request
therefor by the Indemnitee to the Company.

 

7.             Notice and Other Indemnification Procedures.

 

(a)           Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding or his or her
potential involvement as a participant (be it as a party or otherwise), the
Indemnitee shall, if the Indemnitee believes that indemnification with respect
thereto may be sought from the Company under this Agreement, notify the Company
in writing of the commencement or threat of commencement thereof.

 

(b)           If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give notice of the commencement
of such proceeding to the insurers in accordance with the procedures set forth
in the respective policies. The Company shall thereafter take all necessary

 

 

4

 

action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such proceeding in accordance with the terms of such policies.

 

(c)           In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding,
with counsel approved by the Indemnitee, upon the delivery to the Indemnitee of
written notice of its election so to do. After delivery of such notice,
approval of such counsel by the Indemnitee and the retention of such counsel by
the Company, the Company will not be liable to the Indemnitee under this
Agreement for any fees of counsel subsequently incurred by the Indemnitee with
respect to the same proceeding, provided that (i) the Indemnitee shall have the
right to employ his or her counsel in any such proceeding at the Indemnitee's
expense; and (ii) if (A) the employment of counsel by the Indemnitee has been
previously authorized by the Company, (B) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of any such defense or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, the fees and
expenses of the Indemnitee's counsel shall be at the expense of the Company.

 

8.             Determination of Right to Indemnification.

 

(a)           To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4(a) or
4(b) of this Agreement or in the defense of any claim, issue or matter
described therein, the Company shall indemnify the Indemnitee against expenses
actually and reasonably incurred by him or her in connection therewith to the
extent permitted by law.

 

(b)           Upon each submission of a written notice by Indemnitee for
indemnification pursuant to Section 7(a) above, a determination with respect to
Indemnitee's entitlement thereto because he or she has met all the applicable
standards set forth in this Agreement shall be made in accordance with
this Section 8.

 

(c)           The Indemnitee shall be entitled to select the decision
maker or decision making body who will determine, on behalf of the Company, the
Indemnitee's entitlement to indemnification from among the following:

 

(1)           All of the members of the
Board of Directors who are not parties to or participants in the
proceeding for which indemnification is being sought, even though
less than a quorum, or a committee of such directors designated by majority
vote of such directors, even though less than a quorum;

 

(2)           The stockholders of the Company; or

 

(3)           Independent legal counsel selected by
the Board, which counsel shall make such determination in a written opinion.

 

(d)           As soon as practicable, and in no event later than 30 days
after written notice of the Indemnitee's choice of decision maker pursuant to
Section 8(c) above, the Company shall, at its own expense, submit to the
selected decision maker its claim that the Indemnitee is not entitled to

 

5

 

indemnification; and the
Company shall act in the utmost good faith to assure the Indemnitee a complete
opportunity to defend against such claim.

 

(e)           Notwithstanding a determination by any decision maker
listed in Section 8(c) hereof that the Indemnitee is not entitled to indemnification
with respect to a specific proceeding, the Indemnitee shall have
the right to apply to the Court of Chancery of the State of Delaware, the court
in which the Proceeding is or was pending, or any other court of competent
jurisdiction, for the purpose of enforcing the Indemnitee's right to indemnification
pursuant to the Agreement.

 

(f)            In any suit brought by Indemnitee seeking to enforce a right
to indemnification hereunder (but not a suit brought by Indemnitee seeking to
enforce a right to an advancement of expenses hereunder), it
shall be a defense that Indemnitee has not met any applicable standard for indemnification
under applicable law. With respect to any suit brought by Indemnitee seeking to
enforce a right to indemnification or right to advancement of expenses
hereunder or any suit brought by the Company to recover an advancement of
expenses (whether pursuant to the terms of an undertaking or otherwise),
neither (i) the failure of the Company to have made a determination prior
to commencement of such suit that indemnification of such person is proper in
the circumstances because such person has met the applicable standards of conduct
under applicable law, nor (ii) an actual determination by the Company that
such person has not met such applicable standards of conduct, shall create a
presumption that such person has not met the applicable standards of conduct
or, in a case brought by such person seeking to enforce a right to
indemnification, be a defense to such suit.

 

(g)           In any suit brought by Indemnitee seeking to enforce a right
to indemnification or to an advancement of expenses hereunder, or by the
Company to recover an advancement of expenses (whether pursuant to the terms of
an undertaking or otherwise), the burden shall be on the Company to prove that
the Indemnitee is not entitled to be indemnified, or to such an advancement of
expenses, under this Agreement or otherwise.

 

(h)           The Company shall indemnify the Indemnitee against all
expenses incurred by the Indemnitee in connection with any proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by
the Indemnitee in connection with any other proceeding between the Company and
the Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement so long as a court of competent jurisdiction finds
that Indemnitee in any such proceeding was entitled to indemnification or
advancement of expenses, in whole or in part.

 

9.             Exceptions. Any other provision herein to the
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement:

 

(a)           Claims Initiated by Indemnitee. To indemnify or
advance expenses (including attorneys’ fees) to the Indemnitee with respect to
proceedings or claims initiated or brought voluntarily by the Indemnitee
against the Company or in defending any counterclaim, cross-claim, affirmative
defense or like claim of the Company), except with respect to proceedings
brought to establish or enforce a right to indemnification or advancement of
expenses under this Agreement or any other statute or law or otherwise as
required under Section 145, but such indemnification or

 

 

6

 

advancement of expenses may
be provided by the Company in specific cases if the Board of Directors finds it
to be appropriate; or

 

(b)           Lack of Good Faith. To indemnify the Indemnitee for
any expenses incurred by the Indemnitee with respect to any proceeding
instituted by the Indemnitee to enforce or interpret this Agreement, if a court
of competent jurisdiction determines that each of the material assertions made
by the Indemnitee in such proceeding was not made in good faith or was
frivolous; or

 

(c)           Unauthorized Settlements. To indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of a proceeding unless
the Company consents to such settlement; or

 

(d)           Claims by the Company for Willful Misconduct. To
indemnify or advance expenses to the Indemnitee under this Agreement for any
expenses incurred by the Indemnitee with respect to any proceeding or claim
brought by the Company against the Indemnitee for willful misconduct, unless a
court of competent jurisdiction determines that each of such claims was not made
in good faith or was frivolous; or

 

(e)           Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, to the extent applicable to the Company, or any similar
successor statute; or

 

(f)            Willful Misconduct. To indemnify the Indemnitee
(x) on account of the Indemnitee's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct or (y) if it is finally adjudged that Indemnitee did not act in good
faith or in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Company; or

 

(g)           Unlawful Indemnification. To indemnify the Indemnitee
if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful; or

 

10.           Right to Bring Suit. If (a) a claim under Section
4(a) or 4(b) hereof with respect to any right to indemnification
is not paid in full by the Company within sixty days after a written demand has
been received by the Company or (b) a claim under Section 6 hereof with respect
to any right to the advancement of expenses is not paid in full by the Company
within twenty days after a written demand has been received by the Company,
then Indemnitee may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim.

 

11.           Subrogation. Upon a payment to Indemnitee under
this Agreement, the Company shall be subrogated to the extent of such payment
to all of the rights of the Indemnitee to recover against any person for such
liability, and Indemnitee shall execute all documents and instruments reasonably
required and shall take such other actions as may be reasonably necessary to
secure such rights, including the execution of such documents as may be
necessary for the Company to bring suit to enforce such rights.

 

12.           Nonexclusivity. The provisions for indemnification
and advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee

 

7

 

may have under any provision
of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the
Company’s stockholders or disinterested directors, other agreements, or
otherwise, both as to actions in his or her official capacity and to actions in
another capacity while occupying his or her position as an agent of the
Company, and the Indemnitee's rights hereunder shall continue after the Indemnitee
has ceased acting as an agent of the Company and shall inure to the benefit of
the heirs, executors and administrators of the Indemnitee.

 

13.           Interpretation of Agreement. It is understood that
the parties hereto intend this Agreement to be interpreted and enforced so as
to provide indemnification to the Indemnitee to the fullest extent now or
hereafter permitted by law.

 

14.           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,
that are not themselves invalid, illegal, or unenforceable) shall not in any
way be affected or impaired thereby, and (ii) to the fullest extent possible,
the provisions of this Agreement (including, without limitation, all
portions of any paragraphs 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 13 hereof.

 

15.           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 provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.

 

16.           Successors and Assigns. The terms of this Agreement
shall bind, and shall inure to the benefit of, the successors, heirs,
executors, and administrators and assigns of the parties hereto.

 

17.           Notice. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed
duly given (i) if delivered by hand and receipted for by the party addressee,
(ii) if mailed by certified or registered mail with postage prepaid, on the
third business day after the mailing date, (iii) sent by a recognized overnight
courier, on the next business day after the date on which it was so sent, or
(iv) sent by facsimile, the successful transmission and receipt of which is confirmed
in a written report. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written
notice.

 

18.           Governing Law. This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware.

 

19.           Consent to Jurisdiction. To the fullest extent
permitted by law, the Company and the Indemnitee each hereby irrevocably
consent to the jurisdiction of the Court of Chancery of the State of Delaware
for all purposes in connection with any action or proceeding that arises out of
or relates to this Agreement.

 

8

 

The parties hereto have
entered into this Indemnity Agreement effective as of the date first above
written.

 

	
   

  	
  ACA CAPITAL HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nora J. Dahlman

  
	
   

  	
   

  	
  Name: Nora J. Dahlman

  
	
   

  	
   

  	
  Title: General
  Counsel & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notice
  purposes:

  ACA Capital Holdings, Inc.

  140 Broadway, 47th Floor

  New York, NY 10005

  Attention: General Counsel

  Facsimile: 212-375-2302

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ William Lacy

  
	
   

  	
  Name: William Lacy

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for notice
  purposes:

  342 Calle Linda

  Sedona, AZ 86336

  

 

 

9

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