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Exhibit 10.12
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, dated effective as of
__________, 1995, is made by and between KANI, INC., a California corporation
(the "Company"), and ___________________ (the "Indemnitee").
RECITALS
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 statutes and judicial decisions regarding the
duties of directors and officers are often difficult to apply, ambiguous or
conflicting, and therefore fail to provide such directors and officers with
adequate, reliable knowledge of legal risks to which they are exposed or
information regarding the proper course of action to take;
C. Plaintiffs often seek damages in such large amounts
and the 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;
D. The Company believes that it is unfair for its
directors and officers to assume the risk of huge judgments and other expenses
which may occur in cases in which the director or officer received no personal
profit and in cases where the director or officer was not culpable;
E. The Company recognizes that the issues in controversy
in litigation against a director or officer of a corporation such as the
Company are often related to the knowledge, motives and intent of such director
or officer, that such director or officer is usually the only witness with
knowledge of the essential facts and exculpating circumstances regarding such
matters and that the long period of time which usually elapses before the trial
or other disposition of such litigation often extends beyond the time that the
director or officer can reasonably recall such matters; and may extend beyond
the normal time for retirement for such director or officer with the result
that such director or officer, after retirement or in the event of such
director's death, his spouse, heirs executors or administrators, may be faced
with
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limited ability and undue hardship in maintaining an adequate defense, which
may discourage such director or officer from serving in that position;
F. Based upon their experience as business managers, the
Board of Directors of the Company (the "Board") has concluded that, to retain
and attract talented and experienced individuals to serve as officers and
directors of the Company and its subsidiaries and to encourage such individuals
to take the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
officers and directors, and to assume for itself maximum liability for expenses
and damages in connection with claims against such officers and directors in
connection with their service to the Company, and has further concluded that
the failure to provide such contractual indemnification could result in great
harm to the Company and its subsidiaries and the Company's shareholders;
G. Sections 204 and 317 of the California Corporations
Code (the "Corporations Code"), under which the Company is organized, empowers
the Company to indemnify its officers, directors, employees and agents by
agreement and to indemnify persons who serve, at the request of the Company as
the directors, officers, employees or agents of other corporations,
partnerships, joint ventures, trusts or enterprises;
H. The Articles of Incorporation of the Company provide
that the directors and officers of the Company shall be indemnified by the
Company to the fullest extent permitted by the Corporations Code;
I. The Company, after reasonable investigation prior to
the date hereof, has determined that the liability insurance coverage available
to the Company as of the date hereof is inadequate and/or unreasonably
expensive. The Company believes, therefore, that the interest of the Company's
shareholders would best be served by a combination of such insurance as the
Company may obtain, pursuant to the Company's obligations hereunder and the
indemnification by the Company of the directors and officers of the Company;
J. The Company desires and has requested the Indemnitee
to serve or continue to serve as a director and/or officer of the Company free
from undue concern for claims for damages arising out of or related to such
services to the Company; and
K. The Indemnitee is willing to serve, or to continue to
serve, the Company, provided that the Indemnitee is furnished the indemnity
provided for herein.
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AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions.
(a) Agent. For the purpose of this Agreement,
"agent" of the Company means any person who is or was a director, officer,
employee or other agent of the Company or a subsidiary of the Company; or is or
was serving at the request of, for the convenience of, or to represent the
interests of the Company or a subsidiary of the Company as a director, officer,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise.
(b) Expenses. For purposes of this Agreement,
"expenses" includes all direct and indirect costs of any type or nature
whatsoever (including, without limitation, all attorneys' fees and related
disbursements, other out-of-pocket costs and reasonable compensation for time
spent by the Indemnitee for which he is not otherwise compensated by the
Company or any third party) actually and reasonably incurred by the Indemnitee
in connection with the investigation, defense or appeal of a proceeding or in
establishing or enforcing a right to indemnification under this Agreement or
Section 317, or in settling or otherwise disposing of a pending action provided
court approval is obtained, or otherwise.
(c) Proceeding. For the purposes of this Agreement,
"proceeding" means any threatened, pending, or completed action, suit or other
proceeding, whether civil, criminal, administrative, or investigative.
2. Agreement to Serve. The Indemnitee agrees to serve
and/or continue to serve as an agent of the Company, at its will (or under
separate agreement, if such agreement exists), in the capacity Indemnitee
currently serves as an agent of the Company, so long as he is duly appointed or
elected and qualified in accordance with the applicable provisions of the
Bylaws of the Company or until such time as the Indemnitee tenders the
Indemnitee's resignation in writing; provided, however, that nothing in this
Agreement is intended to create any right to continued employment by
Indemnitee.
3. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, so
long as the Indemnitee shall continue to serve as an agent of the Company and
thereafter so long as the Indemnitee shall be subject to any possible
proceeding by reason of the fact that the Indemnitee was an agent of the
Company, the
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Company, subject to Section 3(c), shall promptly obtain and maintain in full
force and effect directors' and officers' liability insurance ("D&O Insurance")
in reasonable amounts from established and reputable insurers.
(b) In all policies of D&O Insurance, the Indemnitee
shall be named as an insured in such a manner as to provide the Indemnitee the
same rights and benefits as are accorded to the most favorably insured of the
Company's directors, if the Indemnitee is a director; or of the Company's
officers, if the Indemnitee is not a director of the Company but is an officer;
or of the Company's key employees, if the Indemnitee is not an officer or
director but is a key employee.
(c) Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain D&O Insurance if 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, the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or the Indemnitee is covered by similar
insurance maintained by a subsidiary of the Company.
4. Mandatory Indemnification. Subject to 4(d) and (e) below,
the Company shall indemnify the Indemnitee:
(a) Third Party Actions. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding (other than action by or in the right of the Company) by reason of
the fact that he is or was an agent of the Company, or by reason of anything
done or not done by him in any such capacity, against any and all expenses and
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement) actually
and reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of such proceeding; and
(b) Derivative Actions. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he is or was an agent of the Company, or by reason
of anything done or not done by him in any such capacity, against any and all
expenses actually and reasonably incurred by him in connection with the
investigation, defense, settlement, or appeal of such proceeding; and
(c) Actions Where Indemnitee is Deceased. If the
Indemnitee is a person who was or is a party or is threatened to be made a
party to any proceeding by reason of the fact that he is or was an agent of the
Company, or by reason of
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anything done or not done by him in any such capacity, against any and all
expenses and liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by or for him in connection with
the investigation, defense, settlement or appeal of such proceeding and, prior
to, during the pendency or after completion of such proceeding Indemnitee is
deceased.
(d) Limitations Imposed by Sections 204 and 317.
Notwithstanding the foregoing, the Company shall not be obligated to indemnify
the Indemnitee as to circumstances in which indemnity is expressly prohibited
by Section 317 of the Corporations Code, or if the Indemnitee is a director,
for any acts or omissions from which a director may not be relieved of
liability as set forth in Section 204 of the Corporations Code.
(e) Expenses Paid by Insurance. Notwithstanding the
foregoing, the Company shall not be obligated to indemnify the 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) which have been paid directly to Indemnitee by D&O Insurance.
5. Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of any expense or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties, and amounts paid in settlement) incurred by him in the
investigation, defense, settlement or appeal of a proceeding but not entitled,
however, to indemnification for all of the total amount thereof, the Company
shall nevertheless indemnify the Indemnitee for such total amount except as to
the portion thereof to which the Indemnitee is not entitled.
6. Mandatory Advancement of Expenses. Subject to Section
10(a) below, the Company shall advance all expenses incurred by the Indemnitee
in connection with the investigation, defense, settlement or appeal of any
proceeding to which the Indemnitee is a party or is threatened to be made a
party by reason of the fact that the Indemnitee is or was an agent of the
Company. Indemnitee hereby undertakes to repay such amounts advanced only if,
and to the extent that, it shall be determined ultimately that the Indemnitee
is not entitled to be indemnified by the Company as authorized hereby. The
advances to be made hereunder shall be paid by the Company to the Indemnitee
within twenty (20) days following delivery of a written request therefor by the
Indemnitee to the Company.
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7. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of
notice of the commencement of or the threat of commencement of any proceeding,
the Indemnitee shall, if the Indemnitee believes that indemnification with
respect thereto may be sought from the Company under this Agreement, notify the
Company of the commencement or threat of commencement thereof; provided,
however, that failure of Indemnitee to provide such notice will not relieve the
Company of its liability hereunder if the Company receives notice of such
proceeding from any other source.
(b) If, at the time of the receipt of a notice of
the commencement of a proceeding pursuant to Section 7(a) hereof, the Company
has D&O 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 the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) In the event the Company shall be obligated to
pay the expenses of any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel approved by the Indemnitee, upon the delivery to the Indemnitee of
written notice of its election so to do. After delivery of such notice,
approval of such counsel by the Indemnitee and the retention of such counsel by
the Company, the Company will not be liable to the Indemnitee under this
Agreement for any fees of counsel subsequently incurred by the Indemnitee with
respect to the same proceeding except for reasonable costs of investigation,
provided that (i) the Indemnitee shall have the right to employ his counsel in
any such proceeding at the Indemnitee's expense; and (ii) if (A) the employment
of counsel by the Indemnitee has been previously authorized by the Company, (B)
the Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the 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, the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
8. Enforcement. Any right to indemnification or advances
granted by this Agreement to Indemnitee shall be enforceable by or on behalf of
Indemnitee in any court of competent jurisdiction if (a) the claim for
indemnification or advances is denied, in whole or in part, or (b) no
disposition of such claim is made within ninety (90) days of request therefor.
Indemnitee, in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the
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expense of prosecuting his claim. It shall be a defense to any action for
which a claim for indemnification is made under this Agreement (other than an
action brought to enforce a claim for expenses pursuant to Section 6 hereof,
provided that the required undertaking has been tendered to the Corporation)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 4(d) and 10 hereof. Neither the failure of the
Corporation (including its Board of Directors or its shareholders) to have made
a determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
9. Shareholder Ratification. Unless the form of this
Agreement has been approved by the shareholders of the Company, this Agreement
shall be expressly subject to ratification by such shareholders. If the form
of this Agreement is not so ratified and/or approved by such shareholders
before the effective date of this Agreement, or within one year after the
effective date hereof, this Agreement shall be void.
10. Exceptions. Any other provision herein to the
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to the Indemnitee with respect to proceedings or claims
initiated or brought voluntarily by the Indemnitee 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, 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; or
(b) Lack of Good Faith. To indemnify the Indemnitee
for any expenses incurred by the Indemnitee with respect to any proceeding
instituted by the Indemnitee to enforce or interpret this Agreement, if a court
of competent jurisdiction determines that each of the material assertions made
by the Indemnitee in such proceeding was not made in good faith or was
frivolous; or
(c) Unauthorized Settlements. To indemnify the
Indemnitee under this Agreement for any amounts paid in settlement of a
proceeding unless the Company consents to such settlement, which consent shall
not be unreasonably withheld.
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11. Non-exclusivity. The provisions for indemnification
and advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Articles of Incorporation or Bylaws, the vote of the
Company's shareholders or disinterested directors, other agreements, or
otherwise, both as to action in his official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
12. Interpretation of Agreement. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification to the Indemnitee to the fullest extent permitted by
law.
13. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of the Agreement (including without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifest by the provision held invalid, illegal or
unenforceable and to give effect to Section 12 hereof.
14. Modification and Waiver. 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.
15. Successors and Assigns. The terms of this Agreement
shall bind, and shall inure to the benefit of, the successors and assigns of
the parties hereto.
16. Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including
telegraphic or facsimile communications) and shall be mailed (return receipt
requested), telegraphed, sent by facsimile or delivered to each party at the
address set forth as follows, or at such other address as either party may
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designate by notice to the other, and any such notice, request, demand or other
communication shall be effective upon receipt. All payments required in this
Agreement shall be paid to and delivered to the party as provided herein for
notice.
Company: Kani, Inc.
000 Xxxxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
Chief Executive Officer
Indemnitee: _______________________________
_______________________________
_______________________________
17. Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of California
as applied to contracts between California residents entered into and to be
performed entirely within California.
18. Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of California for all purposes in connection with any action or proceeding
which arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be brought only in the state court of the
State of California.
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The parties hereto have entered into this Indemnification
Agreement effective as of the date first above written.
"Company"
KANI, INC.
By:______________________________
Name:
Title:
"Indemnitee"
_________________________________
_________________________________
(Print Name)
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