Exhibit 10.9
INDEMNIFICATION AGREEMENT
This Agreement is made this 1st day of June, 1993, by and between Microsoft
Corporation, a Delaware corporation (the "Company") and ______________
("Indemnitee"), a director and/or executive officer of the Company and Xxxxxxx
X. Xxxx, Xx. (the initial "Beneficiaries' Representative").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors or executive officers
of publicly-held corporations unless they are protected by comprehensive
policies of insurance or indemnification, due to the increasing number of
lawsuits against such corporations and their directors and officers, the
attendant expense of defending against such lawsuits, and the exposure of such
directors and officers to unreasonably high damages;
WHEREAS, present laws and interpretations are frequently too uncertain to
provide such officers and directors with adequate, reliable knowledge of the
legal risks to which they may be exposed as a result of serving the corporation;
WHEREAS, the Board of Directors has concluded that its directors and
executive officers should be provided with protection against such risks in
order to insure that the most capable persons will be attracted to such
positions; and, therefore, has determined to contractually obligate itself to
indemnify in a reasonable manner its directors and executive
officers and to assume for itself the liability for expenses and damages in
connection with claims lodged against its directors and executive officers as a
result of their service to the Company.
WHEREAS, applicable law empowers corporations to indemnify persons serving
as a director, officer, employee, or agent of the corporation or a person who
serves at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, and further empowers a corporation to purchase and maintain
insurance (on behalf of such persons) against liability which may be asserted
against Indemnitee or incurred by Indemnitee in any such capacity, or arising
out of Indemnitee's status as such, whether or not the corporation would have
the power to indemnify against such liability under the provisions of said laws;
WHEREAS, the Board of Directors has concluded that, due to the high cost
and other negative features of the coverage under presently available directors
and officers liability insurance, at this time it would not be in the best
interest of its shareholders for the Company to purchase and maintain such
insurance in the amounts customarily held by similar corporations and that its
shareholders' interest would be better served by contracting to indemnify its
executive officers and directors thereby reasonably self-insuring against such
potential liabilities;
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WHEREAS, the Company desires to have Indemnitee serve or continue to serve
as a director or executive officer of the Company free from undue concern for
damages by reason of Indemnitee being a director and/or executive officer of the
Company or by reason of his or her decision or actions on its behalf, and
Indemnitee is willing to serve, or to continue to serve, only if he or she is
furnished the indemnity provided for hereinafter in one or more of such
capacities; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm the
Company's indemnification obligations to Indemnitee and, in addition, to set
forth the agreements contained herein.
NOW, THEREFORE, in consideration of the promises, conditions,
representations, and warranties set forth herein, including the Indemnitee's
continued service to the Company, the Company and Indemnitee hereby agree as
follows:
1. Definitions. The following terms, as used herein, shall have the
following respective meanings:
"Beneficiary" or "Beneficiaries" means an officer or director of the
Company who qualifies as a Beneficiary under Section 1.1 of the Trust Agreement.
"Beneficiaries' Representative" means a non-employee director of the
Company, or other individual selected in accordance with the procedures set
forth in Section 1.4 of the Trust Agreement.
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"Claim or Claims" includes without limitation any threatened, pending, or
completed action, suit, or proceeding whether civil, derivative, criminal,
administrative, investigative, or otherwise, and includes any Claims by or in
the right of the Company.
"Covered Amount" means Loss and Expenses which, in type or amount, are not
insured under any D&O Insurance.
"Covered Act" means any act or omission (including without limitation any
breach of duty, neglect, error, misstatement, misleading statement, or
otherwise, or appearing as or preparing to be a witness) by Indemnitee, and any
Claim against Indemnitee, by reason of the fact that Indemnitee is or was a
director or officer of the Company, or of any subsidiary or division, or is or
was serving at the request of the Company as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise.
"D&O Insurance" means any directors' and officers' liability insurance
issued to the Company the proceeds of which are available for, and are tendered
to, the Indemnitee.
"Determination" means a determination, based on the facts known at the
time, made by:
(i) A majority vote of a quorum of disinterested directors; or
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(ii) Independent legal counsel in a written opinion prepared at the
request of a majority of a quorum of disinterested directors; or
(iii) A majority of the disinterested stockholders of the Company; or
(iv) A final order by a court of competent jurisdiction from which
there is no further right of appeal.
"Determined" shall have a correlative meaning.
"Excluded Claim" means any payment for Losses or Expenses in connection
with any Claim the payment of which is Ultimately Determined to be prohibited by
the Delaware General Corporation Law, public policy, or other applicable law
(including binding regulations and orders of, and undertakings or other
commitments with, any governmental entity or agency) as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment).
"Expenses" means any reasonable expenses incurred by Indemnitee as a result
of a Claim or Claims made against him for Covered Acts including, without
limitation, counsel fees and costs of investigative, judicial, or administrative
proceedings and any appeals.
"Fines" shall include any fine, penalty or, with respect to an employee
benefit plan, any excise tax or penalty assessed with respect thereto.
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"Loss" means any amount which Indemnitee is legally obligated to pay as a
result of any Claim or Claims made against him or her for Covered Acts
including, without limitation, Fines, damages, judgments, and sums paid in
settlement of any Claim or Claims.
"Trust Agreement" shall mean the Trust established between the Company and
First Interstate Bank of Washington, N.A. ("Trustee") attached as Exhibit A.
"Ultimate Determination" means the method of Determination set forth in
clause (i), (ii), or (iii) of the above definition of Determination as selected
by the Company, except that a final order from which there is no further right
of appeal in any action in which Indemnitee seeks indemnification shall
constitute the Ultimate Determination of the Indemnitee's right to
indemnification from the Company "Ultimately Determined" shall have a
correlative meaning.
2. Indemnification. The Company agrees to indemnify and defend Indemnitee
and hold him or her harmless from and against any and all Losses and Expenses
subject, in each case, to the further provisions of this Agreement.
3. Excluded Coverage. The Company shall have no obligation to indemnify
Indemnitee for and hold him or her harmless from any Loss or Expense which has
been Ultimately Determined to constitute an Excluded Claim or to the extent that
Indemnitee has received the proceeds of D&O Insurance or to the extent that
Indemnitee has otherwise been indemnified.
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4. Indemnification Procedures.
4.1 Notice. Promptly after receipt by Indemnitee of notice of the
commencement of or the threat of commencement of any Claim, Indemnitee shall, if
Indemnitee intends to seek indemnification with respect thereto from the Company
under this Agreement, promptly notify the Company and the Beneficiaries,
Representative of the commencement thereof and shall keep the Company generally
informed of, and consult with the Company with respect to, the status of any
such Claim.
4.2 D&O Insurance Applicable. If, at the time of the receipt of such
notice, the Company has D&O Insurance in effect, the Company shall give prompt
notice of the commencement of such Claim to the insurers 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 Losses and Expenses payable as a
result of such Claim in accordance with the terms of such policies.
4.3 Advances of Expenses. The Company agrees to pay the Expenses of any
such Claim in advance of the final disposition thereof to the extent payment for
such Expenses is not promptly received from D&O Insurance or any other source of
indemnity. The Company, if appropriate, shall be entitled to assume the defense
of any Claim, with counsel satisfactory to Indemnitee, upon the delivery to
Indemnitee of written notice of its election to assume the defense. After
delivery of such notice and so long
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as the Company continues such defense, the Company will not be liable to
Indemnitee under this Aqreement for any legal or other Expenses subsequently
incurred by the Indemnitee in connection with such defense other than Expenses
of investigation and any out-of-pocket personal expenses incurred in preparing
for and participating in the Claim. Indemnitee shall have the right to employ
his or her counsel in any such Claim but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at the Indemnitee's expense provided that if (i) the employment
of counsel by Indemnitee has been previously 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 any such defense
or (iii) the Company shall not, in fact, have employed counsel which has assumed
and continues the defense of such action, the fees and expenses of counsel shall
be at the expense of the Company.
4.4 Payment of Expenses. All payments on account of the Company's
indemnification obligations under this Agreement shall be made within sixty
(60) days of Indemnitee's written request therefor unless an Ultimate
Determination is made that the claims giving rise to Indemnitee's request are
Excluded Claims or otherwise not payable under this Agreement, provided that
all payments on account of the Company's obligations under Section 4.3 of this
Agreement prior to the final disposition of any Claim shall be made within 20
days of Indemnitee's written
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request therefor and such obligation shall not be subject to any such Ultimate
Determination but shall be subject to this Agreement.
4.5 Indemnitee's Obligation to Reimburse. Indemnitee agrees that he will
reimburse the Company for all Losses and Expenses paid by the Company, or any
Trustee of a Trust created by the Company, in connection with any Claim against
Indemnitee in the event and only to the extent that an Ultimate Determination
shall have been made that the Indemnitee is not entitled to be indemnified by
the Company for such Expenses because the claim is an Excluded Claim or because
Indemnitee is otherwise not entitled to payment under this Agreement.
5. Settlement. The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent except to the extent it is
Ultimately Determined that such settlement is reasonable and in good faith. The
Company shall not settle any Claim in any manner which would impose any Fine or
any obligation on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee shall unreasonably withhold their consent to any proposed
settlement.
6. Partial Indemnification. If Indemnitee is entitled under any provisions
of this Agreement to indemnification by the Company for some or a portion of
Expenses and Losses but not, however, for the total amount thereof, the Company
shall
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nevertheless indemnify Indemnitee for the portion of such Expenses and Losses to
which Indemnitee is entitled.
7. Enforcement.
7.1 Burden of Proof. Indemnitee's right to indemnification shall be
enforceable by Indemnitee in any court of competent jurisdiction and shall be
enforceable notwithstanding any adverse Determination (pursuant to clauses (i),
(ii) or (iii) but not (iv) of the definition of Determination in Section 1). In
any action in which Indemnitee seeks indemnification, the Company shall have the
burden of proving that indemnification is not required under this Agreement. The
termination of any Claim 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 he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
7.2 Enforcement Expenses. In the event that any action is instituted
in which Indemnitee or the Beneficiaries' Representative seeks indemnification
of Indemnitee under this Agreement, or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all costs and
expenses, including reasonable attorneys' fees and costs, incurred by Indemnitee
with respect to such action, unless the
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court determines that such action was not brought in good faith or was
frivolous.
8. 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 an 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.
9. Choice of Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
10. Successors 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 of the Beneficiaries' Representative and (ii) shall be
binding on and inure to the benefit of the spouses, heirs, personal
representatives, and estate of Indemnitee. The Company shall not effect any sale
of substantially all of its assets, merger consolidation, or other
reorganization unless the surviving entity agrees in writing to assume all the
obligations of the company under this Agreement and to indemnify Indemnitee and
advance Expenses in accordance with this Agreement.
11. Amendment. No amendment, modification, termination, or
cancellation of this Agreement shall be effective unless made in
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a writing signed by each 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 of this Agreement (whether or not similar) nor shall such waiver
constitute a continuing waiver.
12. Deposit in Trust. The Company has created a Trust (the "Trust") for the
benefit of the Indemnitee and others (Collectively, including Indemnitee, the
"Beneficiaries") in the form of Exhibit A (the 'Trust Agreement"). Indemnitee is
specifically acknowledqed as a third party beneficiary of the Trust Agreement,
and therefore, in addition to Indemnitee's rights under this Agreement and any
applicable insurance policy, Indemnitee shall also have the right to receive
indemnification from the Trust in accordance with the terms of this Agreement
and of the Trust Agreement. The Company agrees to fund and maintain the Trust
Fund in accordance with the procedures set forth in Article II of the Trust
Agreement and to discharge all its other ,obligations pursuant to the Trust
Agreement.
13. Procedure for Making Demand. Indemnitee shall first make demand upon
the Company in accordance with the Indemnification Procedures of Section 4 to
honor its indemnity obligation under this Agreement. If the Company shall fail
to indemnify on a timely basis, the Beneficiary shall deliver a certificate to
the Beneficiaries' Representative settinq forth the information required
pursuant to Section 2.7 of the Trust Agreement. Indemnitee shall not be required
to institute a
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lawsuit or take other actions against the Company or any insurer to recover the
unpaid amount prior to the Beneficiaries' Representative making a demand and
receiving payment from the Trustee on his or her behalf.
14. Duties and Responsibilities of Beneficiaries' Representative. The
Beneficiaries' Representative (and any successor Beneficiaries' Representative)
shall have the following affirmative duties and responsibilities:
14.1 to demand deposits from the Company so as to maintain the
Minimum Balance and make any Additional Contribution as required by Sections 2.3
and 2.4 of the Trust Agreement;
14.2 to demand payments by the Trustee to Indemnitee upon demand by
Indemnitee where, in the good faith judgment of the Beneficiaries'
Representative, the Indemnitee has satisfied the conditions for indemnification
as set forth in this Agreement and the Trust Agreement.
14.3 to generally cause the Company and Trustee to discharge their
respective responsibilities under this Agreement and the Trust Agreement,
including the bringing of legal actions and proceedings to enforce such
Agreement.
15. Other Indemnity. The provisions in this Agreement are intended to
be nonexclusive of indemnity granted pursuant to the Company's Certificate of
Incorporation, Bylaws, other agreements, vote of stockholders or disinterested
directors, or otherwise. All applicable indemnity shall be interpreted and
applied so as
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to provide Indemnitee with the broadest but nonduplicative indemnity to which he
or she is entitled.
16. Notices, Consents, and Other Communications. All notices, consents,
or other communications required or contemplated by this Agreement shall be in
writing and shall be deemed to have been given when delivered either by (a)
personal delivery, (b) overnight courier, or (c) postage prepaid return receipt
requested certified mail to the last address given to the Trustee by each
respective Beneficiary. Notice by personal delivery shall be effective upon the
date service is made and notice by certified mail or overnight courier shall be
effectiive on the date it is recorded as delivered by the U.S. Postal Service or
the overnight courier, respectively.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Attest: MICROSOFT CORPORATION
BY __________________________ By _____________________________
Secretary Chairman
________________________________
Indemnitee
Indemnitee's Address:
________________________________
________________________________
________________________________
XXXXXXX X. XXXX, XX.,
Beneficiaries' Representatives
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