INDEMNIFICATION AGREEMENT
This Agreement is made effective as of July 13, 1998, by and between
Jenkon International, Inc., a Delaware corporation (the "Company"), and the
undersigned, a director and/or officer of the Company ("Indemnitee"), with
respect to the following facts.
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers 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 and officers.
B. The following facts contribute to unfairness to directors and
officers: (i) laws regarding the duties of directors and officers are often
ambiguous; (ii) costs of litigation may be so enormous (whether or not the
case is meritorious) that the defense and/or settlement of such litigation is
often beyond the personal resources of officers and directors; and (iii)
delay in litigation may extend the period of exposure to an officer or
director until after retirement or death, thus forcing spouses, heirs,
executors or administrators to expend funds.
C. The Company has been advised that there can be no assurance that
directors' and officers' liability insurance will be available to the Company
and Indemnitee in the future, and that the cost of such insurance, if
available, may not be acceptable to the Company.
D. Indemnitee questions the adequacy and reliability of the protection
presently afforded by the Delaware General Corporation Law and the corporate
laws of the State of Washington (together with the Delaware General
Corporation Law, the "Corporation Laws") and the Company's Certificate of
Incorporation and Bylaws, in part because certain of the indemnification
provisions of the Corporation Laws are for the most part merely permissive
and because the impact of provisions of the Company's Certificate of
Incorporation and Bylaws is presently uncertain.
E. Indemnitee currently serves or has agreed to serve as a director
and/or officer of the Company and/or any of its subsidiaries. Indemnitee is
concerned about continuing to serve the Company as a director and/or officer
without assurance that indemnities available to him are, and will be,
adequate to protect him against the risks associated with his service to the
Company.
F. The Company, in order to induce Indemnitee to continue to serve the
Company as a director and/or officer without assurance that indemnities
available to him are, and will be, adequate to protect him against the risks
associated with his service to the Company, has agreed to provide Indemnitee
with the benefits contemplated by this Agreement, which benefits are intended
to provide Indemnitee with the maximum possible protection permitted by law.
G. As a result of the provision of such benefits and in reliance
thereon Indemnitee is continuing to serve as a director or officer.
NOW, THEREFORE, in consideration of the foregoing and the promises,
conditions, representations and warranties set forth herein, the Company and
Indemnitee hereby agree as follows:
1. DEFINITIONS. The following terms, as used herein, shall have the
following respective meanings:
1.1 "COVERED ACT" means (i) any actual or alleged action taken or
attempted by Indemnitee (including, without limitation, any breach of duty,
neglect, error, misstatement, or misleading statement) (a) in his capacity
as, or otherwise by reason of, or arising out of his being, a director,
officer, employee or other agent of the Company or any of its subsidiaries,
or (b) by reason of the fact he 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; or (ii) any inaction
or omission on Indemnitee's part while acting in any of the foregoing
capacities. For purposes solely of this Agreement, it shall be conclusively
deemed between the parties that the Indemnitee is serving at the request of
the Company whenever such director serves as an officer, director, employee
or other agent of any business entity controlling, controlled by or under
common control with the Company.
1.2 "D & O INSURANCE" means directors' and officers' liability
insurance with coverage sufficient to ensure performance of the
indemnification obligation of the Company hereunder issued by one or more
reputable insurers.
1.3 "EXCLUDED CLAIM" means any payment for Losses or Expenses in
connection with any claim: (i) for the return by Indemnitee of any
remuneration which is illegal; or (ii) for an accounting of profits in fact
made from the purchase or sale by Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or similar provisions of any state law, if the Company is in
fact entitled to recover such profits; or (iii) resulting from Indemnitee's
knowingly fraudulent, deliberately dishonest or intentional misconduct; or
(iv) the payment of which by the Company under this Agreement is not
permitted by applicable law; or (v) 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 or advancement of
Expenses and Losses or a proceeding initiated with the approval of a majority
of the members of the Board of Directors.
Any facts pertaining to any other director, officer, employee
or agent of the Company shall not be imputed to Indemnitee for the purpose of
determining an Excluded Claim.
1.4 "EXPENSES" means any reasonable expenses incurred by
Indemnitee as a result of a claim or claims whether brought by or in the
right of the Company (e.g.,
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derivatively by stockholders of the Company for the benefit of the Company)
or otherwise and whether of a civil, criminal, administrative or
investigative nature made against him for, or otherwise in respect of,
Covered Acts including, without limitation, counsel fees, costs of bonds, and
other costs of proceedings or appeals.
1.5 "LOSS" means any amount which Indemnitee pays or is obligated
to pay as a result of a claim or claims whether brought by or in the right of
the Company (e.g., derivatively by stockholders of the Company for the
benefit of the Company) or otherwise and whether of a civil, criminal,
administrative or investigative nature made against him or for or otherwise
in respect of Covered Acts including, without limitation, damages, judgments,
sums paid in settlement of such claim or claims, sums paid in respect of any
deductible under any policy of D & O Insurance, and fines and penalties other
than fines and penalties for which indemnification is not permitted by
applicable law.
2. MAINTENANCE OF D & O INSURANCE.
2.1 The Company hereby covenants and agrees that, as long as
Indemnitee shall continue to serve as a director or officer of the Company
and thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether
civil, criminal or investigative, by reason of his services to the Company,
the Company, subject to Section 2.3 hereof, shall obtain and maintain in full
force and effect D & O Insurance.
2.2 All policies of D & O Insurance shall be written in such a
manner as to provide Indemnitee the same rights and benefits, subject to the
same limitations, as are accorded to the Company's directors or officers most
favorably insured by such policy.
2.3 The Company shall have no obligation to maintain D & O
Insurance if the Board of Directors of the Company determines in good faith
that such insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage provided, or the
coverage provided for such insurance is limited by exclusions so as to
provide an insufficient benefit.
3. INDEMNIFICATION.
3.1 The Company, at the request of Indemnitee, shall indemnify
Indemnitee and hold him harmless from any and all Losses and Expenses
subject, in each case, to the further provisions of this Agreement.
3.2 The protection afforded to Indemnitee hereunder is intended to
supplement the other protections to which Indemnitee may be entitled now or
hereafter under statutory law, the Company's Certificate of Incorporation or
Bylaws, the D & O Insurance, vote of stockholders or of directors or
otherwise, and all of such protections and the provisions hereof are intended
to be cumulative.
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3.3 Indemnitee may seek such indemnification under statutory law,
the Company's Certificate of Incorporation or Bylaws, the D & O Insurance,
the provisions of Section 3.1 of this Agreement, or otherwise concurrently or
in such sequence as Indemnitee may choose, in his sole discretion.
3.4 The Company shall have no obligation to indemnify Indemnitee
for and hold him harmless from any Loss or Expense which constitutes an
Excluded Claim.
4. INDEMNIFICATION PROCEDURES.
4.1 Promptly after receipt by Indemnitee of notice of the
commencement of or the threat of commencement of any action, suit or
proceeding, Indemnitee shall notify the Company of the commencement or threat
thereof; but the omission so to notify or delay in notifying the Company will
not relieve it from any liability which it may have to Indemnitee except to
the extent that the Company is actually prejudiced by any such omission or
delay.
4.2 The Company shall give prompt notice of the commencement of
such action, suit or pending to the insurers on the D & O Insurance, if any,
in accordance with the procedures set forth in the respective policies in
favor of Indemnitee. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
amounts as a result of such action, suit or proceeding in accordance with the
terms of such policies.
4.3 If such action, suit or proceeding is other than by or in the
right of the Company, Indemnitee shall, assuming that the D & O Insurance, if
any, then provides for Indemnitee's defense, accept the defense provided
under the D & O Insurance. If it does not so provide for his defense, or if
Indemnitee determines that the insurers under the D & O Insurance are unable
or unwilling to defend, contest and protect Indemnitee adequately against any
such action, suit or proceeding, or if no D & O Insurance is maintained
pursuant to Section 2.3 hereof, Indemnitee may at his option, either control
the defense thereof himself or require the Company to defend him; provided,
however, that Indemnitee may not control the defense himself or require the
Company to defend him if such decision would jeopardize the coverage provided
by the D & O Insurance, if any, to the Company and/or the other directors and
officers covered thereby. If (a) Indemnitee requires the Company to defend
him, (b) the Company does not maintain any D & O Insurance pursuant to
Section 2.3 hereof or (c) Indemnitee proceeds under the D & O Insurance but
Indemnitee determines that the insurers under the D & O Insurance are unable
or unwilling to defend, contest and protect Indemnitee adequately against any
such action, suit or proceeding, then the Company shall promptly undertake to
defend any such action, suit or proceeding, at the Company's sole cost and
expense, utilizing counsel of the Indemnitee's choice who has been approved
by the Company. If appropriate the Company shall have the right to
participate in the defense of such action, suit or proceeding.
4.4 If such action, suit or proceeding is by or in the right of
the Company, Indemnitee may, at his option, either control the defense
thereof himself or accept the defense
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provided under the D & O Insurance, if any; PROVIDED, HOWEVER, that
Indemnitee may not control the defense himself if such decision would
jeopardize the coverage provided by the D & O Insurance, if any, to the
Company and/or the other directors and officers covered thereby.
4.5 If the Company shall fail to defend, contest or otherwise
protect Indemnitee in a timely manner against any such action, suit or
proceeding which is not by or in the right of the Company, Indemnitee shall
have the right to do so, including without limitation, the right to make any
compromise or settlement thereof, and to recover from the Company all
attorney's fees, reimbursements and all amounts paid as a result thereof.
4.6 Expenses and Losses incurred or to be incurred by Indemnitee
from time to time as a result of any actions, suit or proceeding covered by
the indemnity provisions of this Agreement (including, without limitation, an
action, suit or proceeding by or in the right of the Company) which have not
been paid by the insurers under the D & O Insurance, if any, shall be paid by
the Company within 30 days of the written request of the Indemnitee, whether
or not the Company believes that such Expenses and Losses may constitute an
Excluded Claim. At the election of Indemnitee, Indemnitee may from time to
time request the Company to advance to him funds to pay any expenses which
would be subject to reimbursement hereunder. The Company shall provide such
advances within five business days after written request thereof. Indemnitee
agrees that he will reimburse the Company for all Losses and Expenses paid or
advanced by the Company in connection with any such action, suit or
proceeding against Indemnitee in the event, and only to the extent, that a
determination shall have been made by an arbitrator that Indemnitee is not
entitled to be indemnified by the Company for such Losses and Expenses
because the claim is an Excluded Claim.
5. SETTLEMENT. Except as otherwise provided in Section 4.5, hereof,
Indemnitee shall not settle any suit, action or proceeding without the
Company's prior written consent. The Company shall not settle any suit,
action or proceeding in any manner which would impose any obligation on
Indemnitee which is not covered by indemnification hereunder without
Indemnitee's written consent. Neither the Company nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.
6. MISCELLANEOUS.
6.1 NOTICES. Any communication contemplated under this Agreement
shall be in writing and shall be effective upon personal delivery or five
days after deposit in the United States mail, postage prepaid, certified or
registered, return receipt requested, addressed as follows or to such other
address as may be specified in the same manner:
If to Company: Jenkon International, Inc.
0000 X.X. 00xx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
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With copy to: Xxxxxx Xxxxxxxxx, Esq.
Jeffer, Mangels, Xxxxxx & Marmaro
2121 Avenue of the Stars, 00xx Xxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to Indemnitee: To the address set forth on the signature page
hereof.
6.2 ENFORCEMENT.
(a) The burden of proving that indemnification is not
appropriate shall be on the Company and any actual determination by the
Company (including any determination made by its Board of Directors or
stockholders, or by independent legal counsel) that Indemnitee is not
entitled to indemnification hereunder shall not be a defense to such action
or create a presumption that Indemnitee has not met the applicable standard
for indemnification. If Indemnitee commences an action to enforce this
Agreement, the Company shall nevertheless be obligated, subject to
Indemnitee's obligation to reimburse the Company contained in Section 4.6
hereof, to pay Expenses and Losses from time to time as incurred by
Indemnitee.
(b) If any action is instituted under this Agreement, or to
enforce or interpret any of the terms of this Agreement, all court costs and
expenses, including reasonable counsel fees, incurred or to be incurred by
Indemnitee with respect to such action or arbitration shall be paid by the
Company within 30 days of written request by the Indemnitee, unless and until
an arbitrator 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.
(c) All agreements and obligations of the Company contained
herein shall continue during the period the Indemnitee is a director,
officer, employee or agent of the Company (or is serving at the request of
the Company as a director, officer, employee or agent of another corporation
or other enterprise) and shall continue thereafter so long as Indemnitee
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or investigative, by
reason of the fact that Indemnitee was a director or officer of the Company
or serving in any other capacity referred to herein.
(d) The Company's indemnity obligations hereunder shall be
applicable to any and all claims made after the date hereof regardless of
when the facts upon which such claims are based occurred, including times
prior to the date hereof.
(e) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on the
Company hereby, in order to induce Indemnitee to serve, or continue to serve,
as a director and/or officer of the Company, and acknowledges that Indemnitee
is relying upon this Agreement in agreeing to serve or in continuing to serve
in such capacity.
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6.3 PROVISIONS NOT TO INURE TO BENEFIT OF INSURERS. It is the
intention of the parties in entering into this Agreement that the insurers
under the D & O Insurance, if any, shall be obligated ultimately to pay any
claims by Indemnitee which are covered by the D & O Insurance, and nothing
herein shall be deemed to diminish or otherwise restrict the Company's or
Indemnitee's right to proceed or collect against any insurers under the D & O
Insurance or to give such insurers any rights against the Company under or
with respect to this Agreement, including, without limitation, any right to
be subrogated to Indemnitee's rights hereunder, unless otherwise expressly
agreed to by the Company in writing and the obligation of such insurers to
the Company and Indemnitee shall not be deemed reduced or impaired in any
respect by virtue of the provisions of this Agreement.
6.4 SEVERABILITY. In the event that any provision of this
Agreement is determined by a court to require the Company to do or to fail to
do any act which is in violation of applicable law, such provision shall be
limited or modified in its application to the minimum extent necessary to
avoid a violation of law and, as so limited or modified, such provision and
the balance of this Agreement shall be enforceable in accordance with their
terms. Without limiting the generality of the foregoing, if this Agreement
or any portion thereof shall be invalidated on any ground, the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated.
6.5 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 and Losses but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
of such Expenses and Losses to which Indemnitee is entitled to
indemnification.
6.6 CHOICE OF LAW. The validity, construction, performance, and
enforcement of this Agreement, and each part thereof, shall be governed by
and construed in accordance with the laws of the State of Delaware,
applicable to agreements made and to be wholly performed in such state.
6.7 SUCCESSOR AND ASSIGNS. This Agreement shall be (i) binding
upon all successors and assigns of the Company (including any transferee of
all or substantially all of its assets and any successor by merger or
otherwise by operation of law) and (ii) shall be binding on and inure to the
benefit of the heirs, personal representatives and estate of Indemnitee.
6.8 AMENDMENT. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in writing and
signed by each of the parties hereto. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof.
6.9 GENDER. Whenever the context so requires, the masculine shall
mean the feminine.
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6.10 ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement or any other agreement entered into in
connection herewith, other than matters pertaining to injunctive relief,
including without, limitation, temporary restraining orders, preliminary
injunctions and permanent injunctions, shall, upon the written demand of
either party served upon the other party, be submitted to arbitration. Such
arbitration shall be held in the City of Vancouver, Washington and conducted
in accordance with the provisions of the rules of the American Arbitration
Association, as then in effect. The arbitrator's determination of the
dispute or controversy shall be final and binding on the parties. Judgment
may be entered on the arbitrator's award in any court having jurisdiction,
and the parties hereby consent to the jurisdiction of the courts of the State
of Washington (including the federal courts located therein) for this
purpose. The parties specifically confer upon the arbitrator the right to
direct each of the parties to produce in advance of the hearing(s) whatever
documents the arbitrator deems appropriate.
IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement as of the date and year first above written.
"Company" JENKON INTERNATIONAL, INC.
By
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Name:
Title:
"Indemnitee"
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Name:
Address:
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