EXHIBIT 10.14
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into
this 12th day of February, 1999 (the "Effective Date") by and between uBid,
Inc., a Delaware corporation (the "Company"), and (the
"Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors
and officers the most capable persons available;
WHEREAS, Indemnitee is a director and officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment;
WHEREAS, the Company's Bylaws (the "Bylaws") require the Company to
indemnify and advance expenses to its directors and officers to the extent
permitted by the DGCL and the Indemnitee has been serving and continues to
serve as a director and officer of the Company in part in reliance on the
Bylaws; and
WHEREAS, in recognition of Indemnitee's need for (i) substantial protection
against personal liability based on Indemnitee's reliance on the Bylaws, (ii)
specific contractual assurance that the protection promised by the Bylaws will
be available to Indemnitee, regardless of, among other things, any amendment
to or revocation of the Bylaws or any change in the composition of the
Company's Board of Directors or acquisition transaction relating to the
Company, and (iii) an inducement to continue to provide effective services to
the Company as a director and officer thereof, the Company wishes to provide
for the indemnification of Indemnitee and to advance expenses to Indemnitee to
the fullest extent permitted by law and as set forth in this Agreement, and,
to the extent insurance is maintained, to provide for the continued coverage
of Indemnitee under the Company's directors' and officers' liability insurance
policies.
NOW, THEREFORE, in consideration of the premises contained herein and of
Indemnitee continuing to serve the Company directly or, at its request, with
another enterprise, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Certain Definitions:
(a) "Affiliate" shall mean any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person specified.
(b) "Change in Control" shall be deemed to have occurred if
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended, other
than (a) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (b) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or (c) any current
beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange
Act, including the heirs, assigns and successors thereof, of beneficial
ownership, within the meaning of Rule 13d-3 of the Exchange Act, of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities, hereafter becomes the
"beneficial owner," as defined in Rule 13d-3 under of the Exchange Act,
directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the total combined voting power represented by the
Company's then outstanding Voting Securities, or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of
1
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least eighty percent (80%) of the total voting power
represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company, in one
transaction or a series of transactions, of all or substantially all of the
Company's assets.
Notwithstanding the foregoing, a Change of Control shall not be deemed to
have occurred as a result of (i) any of the transactions contemplated by the
Separation and Distribution Agreement between the Company and Creative
Computers, Inc. (Delaware) ("Creative"), dated as of December 7, 1998,
including without limitation the transfer of the Company's Voting Securities
from Creative Computers, Inc. (California) to Creative and the subsequent
distribution of those Voting Securities to Creative stockholders or (ii) the
sale by Creative or Creative Computers, Inc. (California) in one or more
offerings of the Company's Voting Securities to the public.
(c) "DGCL" shall mean the General Corporation Law of the State of Delaware,
as the same exists or may hereafter be amended or interpreted; provided,
however, that in the case of any such amendment or interpretation, only to the
extent that such amendment or interpretation permits the Company to provide
broader indemnification rights than were permitted prior thereto.
(d) "Expense" shall mean attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with investigating, defending,
being a witness in or participating in (including on appeal), or preparing for
any of the foregoing, any Proceeding relating to any Indemnifiable Event.
(e) "Indemnifiable Event" shall mean any event or occurrence that takes
place either prior to or after the execution of this Agreement, related to the
fact that Indemnitee is or was a [director or] officer of the Company, or is
or was serving at the request of the Company as a director, officer, employee,
or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans.
(f) "Proceeding" shall mean any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative.
(g) "Reviewing Party" shall mean any appropriate person or body consisting
of a member or members of the Company's Board of Directors or any other person
or body appointed by the Board (including the special, independent counsel
referred to in Section 6) who is not a party to the particular Proceeding with
respect to which Indemnitee is seeking Indemnification.
(h) "Voting Securities" shall mean any securities of the Company which vote
generally in the election of directors.
2. Indemnification. In the event Indemnitee was or is a party to or is
involved (as a party, witness, or otherwise) in any Proceeding by reason of
(or arising in part out of) an Indemnifiable Event, whether the basis of the
Proceeding is Indemnitee's alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, the Company shall indemnify Indemnitee to the fullest extent
permitted by the DGCL against any and all Expenses, liability, and loss
(including judgments, fines, ERISA excise taxes or penalties, and amounts paid
or to be paid in settlement, and any interest, assessments, or other charges
imposed thereon, and any federal, state, local, or foreign taxes imposed on
any director or officer as a
2
result of the actual or deemed receipt of any payments under this Agreement)
(collectively, the "Liabilities") reasonably incurred or suffered by such
person in connection with such Proceeding. The Company shall provide
indemnification pursuant to this Section 2 as soon as practicable, but in no
event later than thirty (30) days after it receives written demand from
Indemnitee. Notwithstanding anything in this Agreement to the contrary and
except as provided in Section 5 below, Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with any Proceeding
initiated by Indemnitee against the Company or any director or officer of the
Company unless the Company has joined in or consented to the initiation of
such Proceeding.
3. Advancement of Expenses. If so requested by Indemnitee, the Company shall
advance Expenses to Indemnitee within thirty (30) business days of such
request (an "Expense Advance"); provided, however, that if required by the
DGCL such Expenses shall be advanced only upon delivery to the Company of an
undertaking by or on behalf of the Indemnitee to repay such amount if it is
ultimately determined that Indemnitee is not entitled to be indemnified by the
Company. Expenses incurred by Indemnitee while not acting in his capacity as a
director or officer, including service with respect to employee benefit plans,
may be advanced upon such terms and conditions as the Board of Directors of
the Company, in its sole discretion, deems appropriate.
4. Review Procedure for Indemnification. Notwithstanding the foregoing, (i)
the obligations of the Company under Sections 2 and 3 above shall be subject
to the condition that the Reviewing Party shall not have determined (in a
written opinion, in any case in which the special, independent counsel
referred to in Section 6 hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 3 above shall be
subject to the condition that, if, when and to the extent that the Reviewing
Party determines that Indemnitee would not be permitted to be so indemnified
under applicable law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction pursuant to Section 5 below
to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Reviewing Party that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
have lapsed). Indemnitee's obligation to reimburse the Company for Expense
Advances pursuant to this Section 4 shall be unsecured and no interest shall
be charged thereon. If there has not been a Change in Control, the Reviewing
Party shall be selected by the Board of Directors, and if there has been such
a Change in Control, other than a Change in Control which has been approved by
a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control, the Reviewing Party shall be the special,
independent counsel referred to in Section 6 hereof.
5. Enforcement of Indemnification Rights. If the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in
whole or in part under applicable law, or if Indemnitee has not otherwise been
paid in full pursuant to Sections 2 and 3 above within thirty (30) days after
a written demand has been received by the Company, Indemnitee shall have the
right to commence litigation in any court in the State of Delaware having
subject matter jurisdiction thereof and in which venue is proper to recover
the unpaid amount of the demand ("Enforcement Proceeding") and, if successful
in whole or in part, Indemnitee shall be entitled to be paid any and all
Expenses in connection with such Enforcement Proceeding. The Company hereby
consents to service of process for such Enforcement Proceeding and to appear
in any such Enforcement Proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
6. Change in Control. The Company agrees that if there is a Change in
Control of the Company, other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control, then with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and Expense Advances under this Agreement or any other agreement or under
applicable law or the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to indemnification for Indemnifiable Events, the
Company shall seek legal advice only
3
from special, independent counsel selected by Indemnitee and approved by the
Company, which approval shall not be unreasonably withheld. Such special,
independent counsel shall not have otherwise performed services for the
Company or the Indemnitee, other than in connection with such matters, within
the last five (5) years. Such independent counsel shall not include any person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Company or
Indemnitee in an action to determine Indemnitee's rights under this Agreement.
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent the Indemnitee would
be permitted to be indemnified under applicable law. The Company agrees to pay
the reasonable fees of the special, independent counsel referred to above and
to indemnify fully such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating
to this Agreement or the engagement of special, independent counsel pursuant
hereto.
7. Partial Indemnity. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
Expenses and Liabilities, but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.
8. Non-exclusivity. The rights of the Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under any statute, provision
of the Company's Certificate of Incorporation or Bylaws, vote of stockholders
or disinterested directors or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office;
provided, however, that this Agreement shall supersede any prior
indemnification by agreement between the Company and the Indemnitee. To the
extent that a change in the DGCL permits greater indemnification by agreement
than would be afforded currently under the Company's Certificate of
Incorporation and Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change.
9. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any
Company director or officer.
10. Settlement of Claims. The Company shall not be liable to indemnify
Indemnitee under this Agreement (a) for any amounts paid in settlement of any
action or claim effected without the Company's written consent, which consent
shall not be unreasonably withheld; or (b) for any judicial award if the
Company was not given a reasonable and timely opportunity, at its expense, to
participate in the defense of such action.
11. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company or any affiliate of
the Company against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, or such longer period as may be
required by state law under the circumstances, and any claim or cause of
action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.
12. Amendment of this Agreement. 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 provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver. Except as
specifically provided herein, no failure to exercise or any delay in
exercising any right or remedy hereunder shall constitute a waiver thereof.
13. 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 papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
4
14. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw, vote, agreement or otherwise) of the
amounts otherwise indemnifiable hereunder.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to the
Indemnitee, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. This Agreement shall continue
in effect regardless of whether Indemnitee continues to serve as a director or
officer of the Company or of any other enterprise at the Company's request.
16. 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) is 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 limitation, each portion of this Agreement containing any
provision held to 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.
17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such State without giving effect to the
principles of conflicts of laws.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Notices. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed to the
Company at:
uBid, Inc.
0000 Xxxxx Xxxx
Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
and to Indemnitee at:
-------------------------------------
-------------------------------------
-------------------------------------
Notice of change of address shall be effective only when done in accordance
with this Section. All notices complying with this Section shall be deemed to
have been received on the date of delivery or on the third business day after
mailing.
5
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day first set forth above.
uBID, INC.
By:
--------------------------------
Xxxxxx X. Xxxxxx, Vice
President and
Chief Financial Officer
----------------------------------
Indemnitee
6
