Exhibit 10.38
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made as of the ___
day of May ___, 1998, by and between MENDOCINO BREWING COMPANY, INC., a
California corporation (the "Company") and XXXX XXXXX ("Indemnitee").
WITNESSETH:
WHEREAS, the Company has been advised that there can be no assurance
that directors' and officers' liability insurance will continue to be available
to the Company and Indemnitee, and believes that it is possible that the cost of
such insurance, if obtainable, may not be acceptable to the Company; and
WHEREAS, the Company and the Indemnitee recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks; and
WHEREAS, Indemnitee is unwilling to serve, or continue to serve, the
Company or any of its wholly owned subsidiaries as an officer and/or director
without assurances that adequate liability insurance, indemnification or a
combination thereof is, and will continue to be, provided; and
WHEREAS, the Company, in order to induce Indemnitee to serve or to
continue to serve the Company or any of its wholly owned subsidiaries, has
agreed to provide Indemnitee with the benefits contemplated by this Agreement;
and
WHEREAS, as a result of the provision of such benefits, Indemnitee has
agreed to serve or to continue to serve as an officer and/or director of the
Company or any of its wholly owned subsidiaries.
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, the Company and Indemnitee
hereby agree as follows:
I. Indemnification.
A. Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees and costs), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval
Exhibit 10.38 - 1
shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful, to the fullest extent permitted by California law and the Company's
Articles of Incorporation. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in the best interests of the Company, or, with respect to any criminal action or
proceeding, that Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful.
B. Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) judgments, fines and amount paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld), in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in the best interests of the Company
and its shareholders, to the fullest extent permitted by California law and the
Company's Articles of Incorporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which Indemnitee shall have
been finally adjudicated by court order or judgment to be liable to the Company
in the performance of Indemnitee's duty to the Company and its shareholders
unless and only to the extent that the court in which such action or proceeding
is or was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
C. Mandatory Payment of Expenses. To the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
II. No Employment Rights. Nothing contained in this Agreement is
intended to create in Indemnitee any right to continued employment.
III. Expenses; Indemnification Procedure.
A. Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any
Exhibit 10.38 - 2
civil or criminal action, suit or proceeding referred to in Section 1(a) or
Section 1(b) of this Agreement (including amounts actually paid in settlement of
any such action, suit or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby.
B. Notice; Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and all shall be within
Indemnitee's power.
C. Procedure. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Articles of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the Company
contests Indemnitee's right to indemnification, the question of Indemnitee's
right to indemnification shall be for the court to decide, and neither the
failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
shareholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct required by applicable law, nor an actual determination by the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its shareholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
D. Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt 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 or desirable action to cause such insurers to pay, on behalf
of
Exhibit 10.38 - 3
the Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.
E. Selection of Counsel. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
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, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
IV. Additional Indemnification Rights; Nonexclusivity.
A. Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Articles of Incorporation, the Company's Bylaws or by statute. In the event of
any change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a California corporation to indemnify a member
of its board of directors or an officer, such changes shall be deemed to be
within the purview of Indemnitee's rights and the Company's obligations under
this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a California corporation to indemnify a member
of its board of directors or an officer, such changes, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement
shall have no effect on this Agreement or the parties' rights and obligations
hereunder.
B. Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested members of the Company's
Board of Directors, the General Corporation Law of the State of California, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he or she may have
ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.
V. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total
Exhibit 10.38 - 4
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
VI. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or public policy may override
applicable state law and prohibit the Company from indemnifying its directors
and officers under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission (the "SEC")
has taken the position that indemnification is not permissible for liabilities
arising under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
VII. Officer and Director Liability Insurance. The Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director, or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer, or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent of subsidiary of the Company.
VIII. Severability. Nothing in this Agreement is intended to
require, or shall be construed as requiring the Company to do or fail to do, any
act in violation of applicable law. The Company's inability, pursuant to court
order, to perform its obligations under this Agreement shall not constitute a
breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 8. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Agreement that shall not have been invalidated,
and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms. IX. Exceptions. Any other provision herein to the
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement:
IX. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
xxxxx Agreenment:
A. Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee
Exhibit 10.38 - 5
and not by way of defense, except with respect to proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 317 of the
California General Corporation Law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of
Directors finds it to be appropriate;
B. Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
C. Claims under Section 16(b). To indemnify Indemnitee for
expenses or 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, or any similar successor statute.
X. Construction of Certain Phrases.
A. For purposes of this Agreement, references to the "Company"
shall include in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
B. For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "taxes" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries.
XI. Attorneys Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses including,
reasonable attorneys' fees and costs, incurred by Indemnitee with respect to
such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous. In the
event of an action instituted by or in the name of the Company under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses including
attorneys' fees and costs, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of
Exhibit 10.38 - 6
such action the court determines that each of Indemnitee's material defenses to
such action were made in bad faith or were frivolous.
XII. Miscellaneous.
A. Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
B. Entire Agreement; Enforcement of Rights. This Agreement
sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
C. Construction. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
D. Notices. All notices, requests, demands, or other
communications which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed to have been duly given upon
receipt, if delivered by hand, by telecopy or telegram, or three (3) days after
deposit in the U.S. mail, postage prepaid, addressed to Indemnitee and to the
Company as follows:
Indemnitee: Xxxx Xxxxx
00 Xxxx Xx
Xxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Company: Mendocino Brewing Company, Inc.
0000 Xxxxxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other address as any party may designate for itself by notice given
as provided in this Agreement. Copies of notice to counsel shall be given at the
same time and by the same method of delivery as notice to the parties.
Exhibit 10.38 - 7
E. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
F. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.
G. Subrogation. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Company to effectively bring suit to enforce such rights.
IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement as of the day and year first above written.
COMPANY:
MENDOCINO BREWING COMPANY, INC., a
California corporation
Dated: May 11, 1998 By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
Chief Executive Officer
INDEMNITEE:
Dated: May 11, 1998 /s/ Xxxx Xxxxx
------------------------------------
XXXX XXXXX
Exhibit 10.38 - 8
