Exhibit 10.5
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "AGREEMENT") is made and entered
into this 15th day of February, 2000, between xxxxxx.xxx, a California
corporation (the "COMPANY"), and Xxxxxx Xxxxxxxxxxx ("INDEMNITEE").
A. Indemnitee, as a member of the Company's Board of Directors and/or
an officer of the Company, performs valuable services for the Company;
B. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for corporate directors, officers, employees,
controlling persons, agents and fiduciaries, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance.
C. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, controlling persons, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of liability insurance
has been severely limited.
D. The shareholders of the Company have adopted Bylaws (the "BYLAWS")
providing for the indemnification of the officers, directors, agents and
employees of the Company to the maximum extent authorized by the California
Corporations Code, as amended ("CODE").
E. Indemnitee does not regard the current protection available for the
Company's directors, officers, employees, controlling persons, agents and
fiduciaries as adequate under the present circumstances, and Indemnitee and
other directors, officers, employees, controlling persons, agents and
fiduciaries of the Company may not be willing to serve or continue to serve in
such capacities without additional protection.
F. The Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Company and its directors, officers, employees,
controlling persons, agents and fiduciaries with respect to indemnification of
such directors.
G. The Company (i) desires to attract and retain the involvement of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to be involved with the Company, and (ii)
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
H. In view of the considerations set forth above, the Company desires
that Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, in consideration of Indemnitee's service to the
Company, the parties hereto agree as follows:
1. INDEMNITY OF INDEMNITEE. The Company hereby agrees to indemnify
Indemnitee to the fullest extent permitted by law, even if 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, employee, controlling person,
agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits afforded by such change. 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, employee, agent or fiduciary, such change, 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 except as set forth in Section 3 hereof.
2. ADDITIONAL INDEMNITY. Subject only to the limitations set forth in
Section 3 hereof, the Company hereby further agrees to hold harmless and
indemnify Indemnitee:
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending or
completed action, claim, suit, arbitration, alternative dispute resolution
mechanism, investigation, or any other proceeding, whether civil, criminal,
administrative or investigative (including any appeal therefrom and including an
action by or in the right of the Company) to which Indemnitee is, was, or at any
time becomes a party, or is threatened to be made a party, by reason of the fact
that Indemnitee is, was, or at any time becomes a director, officer, employee or
agent of the Company, or is or was serving or at any time serves at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(collectively, a "PROCEEDING"); and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the Articles of Incorporation of the Company and
the Code.
3. LIMITATIONS ON ADDITIONAL INDEMNITY.
(a) No indemnity pursuant to Section 2 hereof shall be paid by
the Company for any of the following:
(i) except to the extent the aggregate of losses to
be indemnified thereunder exceeds the sum of such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof or pursuant to any
Directors' and Officers' Insurance purchased and maintained by the Company;
(ii) in respect to remuneration paid to Indemnitee if
it shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of any Proceeding in which judgment
is rendered against Indemnitee for an accounting of profits made from the
purchase or sale by Indemnitee of
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securities of the Company pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(iv) on account of any Proceeding to the extent that
Indemnitee is a plaintiff, a counter-complainant or a cross-complainant therein
(other than a Proceeding referred to in Section 8 hereof) unless such Proceeding
was authorized in the specific case by action of the Board of Directors;
(v) on account of Indemnitee's conduct which is the
subject of any Proceeding described in Section 7(c)(ii) hereof; or
(vi) if a final decision by a Court having
jurisdiction in the matter shall determine that such indemnification is not
lawful (and, in this respect, both the Company and Indemnitee have been advised
that the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be
submitted to appropriate courts for adjudication).
(b) In addition to those limitations set forth above in
paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in an
action by or in the right of the Company shall be paid by the Company for any of
the following:
(i) in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged 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 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 expenses and
then only to the extent that the court shall determine;
(ii) of amounts paid in settling or otherwise
disposing of a pending action without Court approval; or
(iii) of expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
(iv) on account of Indemnitee's acts or omissions
that involve intentional misconduct or a knowing and culpable violation of law;
(v) on account of acts or omissions that Indemnitee
believes to be contrary to the best interests of the Company or its shareholders
or that involve the absence of good faith on the part of Indemnitee;
(vi) with respect to any transaction from which
Indemnitee derived an improper personal benefit;
(vii) on account of acts or omissions that show a
reckless disregard for Indemnitee's duty to the Company or its shareholders in
circumstances in which Indemnitee was
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aware, or should have been aware, in the ordinary course of performing such
Indemnitee's duties, of a risk of serious injury to the Company or its
shareholders;
(viii) on account of acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
Indemnitee's duty to the Company or its shareholders;
(ix) to the extent prohibited by Section 310 of the
California Corporations Code, "Contracts In Which Director Has Material
Financial Interest; Validity," or;
(x) to the extent prohibited by Section 316 of the
California Corporations Code, "Corporate Actions Subjecting Directors To Joint
And Several Liability; Actions; Damages."
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2
hereof is unavailable by reason of a Court decision described in Section
3(a)(vi) hereof based on grounds other than any of those set forth in Sections
3(a)(ii) through (v) hereof or in Sections 3(b)(i) through (x) hereof, then in
respect of any threatened, pending or completed action, suit or proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Company shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Indemnitee in
such proportion as is appropriate to reflect (i) the relative benefits received
by the Company on the one hand and Indemnitee on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of the Company on the one hand and of Indemnitee on the other in
connection with the events which resulted in such expenses, judgments, fines or
settlement amounts, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of Indemnitee on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or agent of the Company (or is or was serving at the
request of the Company as a director, officer employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan 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 an officer or director of the Company or serving in any other
capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than 30 days after
receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee will, if a claim in respect thereof is to be made against
the Company under this Agreement, notify the Company of the commencement
thereof; but the omission so to notify the Company will not
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relieve it from any liability which it may have to Indemnitee otherwise than
under this Agreement. With respect to any such action, suit or proceeding as to
which Indemnitee notifies the Company of the commencement thereof:
(a) the Company will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, to the extent that it
may wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee. After notice from the Company to Indemnitee of its
election to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ its counsel in such action, suit or proceeding
but the fees and expenses of such counsel incurred after notice from the Company
of its assumption of the defense thereof shall be at the expense of Indemnitee
unless (i) the employment of counsel by Indemnitee has been authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of the
defense of such action or (iii) the Company shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Indemnitee's separate counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the conclusion provided for in (ii) above; and
(c) the Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will unreasonably withhold
its consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Indemnitee employs his own counsel
pursuant to Section 6(b)(i) through (iii) above, the Company shall advance to
Indemnitee, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten
business days after receiving copies of invoices presented to Indemnitee for
such expenses; and
(b) Indemnitee agrees that Indemnitee will reimburse the
Company for all reasonable expenses paid by the Company in defending any
Proceeding in the event and only to the extent it shall be ultimately determined
by a final judicial decision (from which there is no right of appeal) that
Indemnitee is not entitled, under applicable law, the Company's Bylaws, this
Agreement or otherwise, to be indemnified by the Company for such expenses.
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(c) Notwithstanding the foregoing, the Company shall not be
required to advance such expenses to Indemnitee if Indemnitee (i) commences or
is a party to any action, suit or proceeding as a plaintiff unless such advance
is specifically approved by a majority of the Board of Directors, or (ii) is a
party to an action, suit or proceeding brought by the Company and approved by a
majority of the Board of Directors which alleges willful misappropriation of
corporate assets by Indemnitee, disclosure of confidential information in
violation of Indemnitee's fiduciary or contractual obligations to the Company,
or any other willful and deliberate breach in bad faith of Indemnitee's duty to
the Company or its shareholders.
8. ENFORCEMENT. In the event Indemnitee brings any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
9. 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
effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by
this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of the Company's Articles
of Incorporation or Bylaws, agreement, vote of shareholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Indemnitee by this
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
12. NOTICE. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five calendar days after deposit with the U.S.
Postal Service or other applicable postal service, if delivered by first class
mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business
day after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if deliverable by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
Indemnitee's address as set forth beneath Indemnitee's signature to this
Agreement and if to the Company at the address of its principal corporate
offices (attention: Chief Executive Officer) or at such other address as such
party may designate by ten calendar days' advance written notice to the other
party hereto.
13. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to
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be invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California.
15. BINDING EFFECT. This Agreement shall be binding upon Indemnitee and
upon the Company, its successors and assigns, and shall inure to the benefit of
Indemnitee, his heirs, personal representatives and assigns and to the benefit
of the Company, its successors and assigns.
16. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by all parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
17. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
18. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving the Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries.
19. CORPORATE AUTHORITY. The Board of Directors and shareholders of the
Company have approved the terms of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
COMPANY:
Xxxxxx.xxx
By
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Xxxx Xxxxxxx,
President and CEO
Address: 0000 Xxxxxxx Xxxxxxx Xxxx
INDEMNITEE
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XXXXXX
Address:
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