INDEMNIFICATION AGREEMENT
Exhibit 10.2
This INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into this
day of , 200 (the “Effective Date”) by and between Duoyuan Global Water Inc., a
British Virgin Islands corporation (the “Company”), and (the “Indemnitee”).
WHEREAS, the Company believes it is essential to retain and attract qualified directors and
officers;
WHEREAS, the Indemnitee is a director and/or officer of the Company;
WHEREAS, both the Company and the Indemnitee recognize the increased risk of litigation and
other claims that may be asserted against directors and officers of public companies, as well as
the possibility that in certain situations a threat of litigation may be employed to deter them
from exercising their judgment in the best interests of the Company, and the consequent need to
allocate the risk of personal liability through indemnification and insurance;
WHEREAS, the Company’s Memorandum and Articles of Association, as amended from time to time
(the “Memorandum and Articles of Association”), permit the Company to indemnify its
directors and officers when (i) the Indemnitee acted honestly and in good faith with a view to the
best interests of the Company and (ii) in the case of criminal proceedings, the Indemnitee had no
reasonable cause to believe that his or her conduct was unlawful; and
WHEREAS, in recognition of the Indemnitee’s need for (i) substantial protection against
personal liability and (ii) an inducement to continue to provide effective services to the Company
as a director and/or officer thereof, the Company wishes to provide for the indemnification of the
Indemnitee and to advance expenses to the Indemnitee to the fullest extent permitted by law and as
set forth in this Agreement, and, to the extent insurance is maintained by the Company, to provide
for the continued coverage of the Indemnitee under the Company’s directors’ and officers’ liability
insurance policies.
NOW, THEREFORE, in consideration of the premises contained herein and of the 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) A “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, as amended, and the rules and regulations thereunder (the “Exchange Act”),
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 shareholders
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of the Company in substantially the same proportions as their
ownership of stock of the Company; or (c) any current beneficial shareholder 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 50% of the total combined voting power of the Company’s outstanding
securities; hereafter becomes the “beneficial owner,” as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of securities of the Company representing 20% or more of the total combined
voting power represented by the Company’s then outstanding Voting Securities;
(ii) during any period of two consecutive years, individuals who at the beginning of such
period constitute the Board and any new director whose election by the Board or nomination for
election by the Company’s shareholders was approved by a vote of at least two-thirds of the
directors then 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 shareholders 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 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 shareholders 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.
(b) “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.
(c) “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 the 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, or by reason
of anything done or not done by the Indemnitee in any such capacity.
(d) “Proceeding” shall mean any threatened, pending or completed action, suit,
investigation or proceeding, and any appeal thereof, whether civil, criminal, administrative or
investigative and/or any inquiry or investigation, whether conducted by
the Company or any other party, that the Indemnitee in good faith believes might lead to the
institution of any such action.
(e) “Reviewing Party” shall mean any appropriate person or body consisting of a member
or members of the Company’s Board or any other person or body appointed by the
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Board (including the
special independent counsel referred to in Section 6) who is not a party to the particular
Proceeding with respect to which the Indemnitee is seeking indemnification.
(f) “Voting Securities” shall mean any securities of the Company which vote generally
in the election of directors.
2. Indemnification. Subject to Section 4 below, in the event the 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 the 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 the Indemnitee to the fullest extent
permitted by the laws of the British Virgin Islands and the Memorandum and Articles of Association
against any and all Expenses, liability, and loss (including judgments, fines, penalties and
amounts paid or to be paid in settlement, and any interest, assessments, or other charges imposed
thereon, and any taxes imposed on any director or officer as a result of the actual or deemed
receipt of any payments under this Agreement) (collectively, “Liabilities”) actually
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 30
days after it receives written demand from the Indemnitee. Notwithstanding anything in this
Agreement to the contrary and except as provided in Section 5 below, the Indemnitee shall not be
entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated
by the 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. Subject to Section 4 below, the Company shall advance Expenses to
the Indemnitee within 30 business days of such request (an “Expense Advance”); provided,
however, that if required by applicable laws 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 the Indemnitee is not entitled to be indemnified by the Company; and
provided further, that the Company shall make such advances only to the extent permitted by law.
Expenses incurred by the Indemnitee while not acting in his/her 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, 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 the Indemnitee would not be permitted to be indemnified under applicable law or
the Memorandum and Articles of Association, 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 the Indemnitee would not be permitted to be so
indemnified under applicable law or the Memorandum and Articles of Association, the Company shall
be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for
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all such amounts theretofore paid; provided, however, that if the Indemnitee has commenced legal
proceedings in a court of competent jurisdiction pursuant to Section 5 below to secure a
determination that the Indemnitee should be indemnified under applicable law, any determination
made by the Reviewing Party that the Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and the 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). The 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, 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 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 the
Indemnitee would not be permitted to be indemnified in whole or in part under applicable law, or if
the Indemnitee has not otherwise been paid in full pursuant to Sections 2 and 3 above within 30
days after a written demand has been received by the Company, the Indemnitee shall have the right
to commence litigation in any court having subject matter jurisdiction thereof and in which venue
is proper to recover the unpaid amount of the demand (an “Enforcement Proceeding”) and, if
successful in whole or in part, the 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 the 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 who
were directors immediately prior to such Change in Control, then with respect to all matters
thereafter arising concerning the rights of the Indemnitee to indemnity payments and Expense
Advances under this Agreement or any other agreement or under applicable law or the Memorandum and
Articles of Association now or hereafter in effect relating to indemnification for Indemnifiable
Events, the Company shall seek legal advice only from special independent counsel selected by the
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
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 the Indemnitee in an action to determine the Indemnitee’s rights under this
Agreement. Such counsel, among other things, shall render its written opinion to the Company and
the 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),
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claims, liabilities and damages arising out of or relating to this
Agreement or the engagement of special independent counsel pursuant to this Agreement.
7. Partial Indemnity. If the 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 the
Indemnitee for the portion thereof to which the Indemnitee is entitled. Moreover, notwithstanding
any other provision of this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any or all Proceedings relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including dismissal without
prejudice, the Indemnitee shall be indemnified against all Expenses incurred in connection
therewith. In connection with any determination by the Reviewing Party or otherwise as to whether
the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company
to establish that the Indemnitee is not so entitled.
8. Non-exclusivity. The rights of the Indemnitee hereunder shall be in addition to any other
rights the Indemnitee may have under any statute, provision of the Memorandum and Articles of
Association, vote of shareholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such office. 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 British Virgin Islands company to indemnify a member of its board of directors, such
changes shall be, ipso facto, within the purview of the Indemnitee’s rights and the Company’s
obligations, under this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a British Virgin Islands company to indemnify a member of its board
of directors, such changes, 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.
9. Liability Insurance. To the extent the Company maintains an insurance policy or policies
providing directors’ and officers’ liability insurance, the 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 director or officer of the Company. If at the time a claim for indemnification
arises hereunder in connection with a Proceeding the Company has director and officer liability
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.
10. Settlement of Claims. The Company shall not be liable to indemnify the 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.
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11. No Presumption. For purposes of this Agreement, to the fullest extent permitted by law,
the termination of any Proceeding, action, suit or claim, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard
of conduct or have any particular belief or that a court has determined that indemnification is not
permitted by applicable law.
12. Consent and Waiver by Third Parties. The Indemnitee hereby represents and warrants that
he or she has obtained all waivers and/or consents from third parties which are necessary for his
or her employment with the Company on the terms and conditions set forth herein and to execute and
perform this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Indemnitee represents that he or she is not bound by
any agreement or any other existing or previous business relationship which conflicts with, or may
conflict with, the performance of his or her obligations hereunder or prevent the full performance
of his or her duties and obligations hereunder.
13. 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.
14. 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 the 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.
15. No Duplication of Payments. The Company shall not be liable under this Agreement to make
any payment in connection with any claim made against the Indemnitee to the extent the Indemnitee
has otherwise actually received payment (under any insurance policy, vote, agreement or otherwise)
of the amounts otherwise indemnifiable hereunder.
16. 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 the Indemnitee continues to serve as
a director or officer of the Company or of any other enterprise at the Company’s request.
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17. 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.
18. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the British Virgin Islands applicable to contracts made and to be
performed in such jurisdiction without giving effect to the principles of conflicts of laws.
19. 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.
20. 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 (a) if delivered by hand, when
received (b) if transmitted by facsimile, on receipt of an error-free confirmation, or (c) if by
international courier service, on the fourth (4th) business day following the date of deposit with
such courier service, or such earlier delivery date as may be confirmed in writing to the sender by
the courier service. All such notices, demands and other communications shall be addressed as
follows:
If to the Company:
Duoyuan Global Water Inc.
Xx. 0 Xxxxxxx Xxxx
Xxxxxx Xxxxxxxxxx Xxxxxxxxxxx Xxxx
Xxxxxxx 000000
People’s Republic of China.
Facsimile: (8610) 6021-2164
Attention: Chief Executive Officer
Xx. 0 Xxxxxxx Xxxx
Xxxxxx Xxxxxxxxxx Xxxxxxxxxxx Xxxx
Xxxxxxx 000000
People’s Republic of China.
Facsimile: (8610) 6021-2164
Attention: Chief Executive Officer
If to the Indemnitee:
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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.
21. Specific Performance. The failure of the Company to perform any of its obligations
hereunder shall entitle the Indemnitee, as a matter of course, to request an injunction from any
court of competent jurisdiction to enforce such obligations. Such right to request specific
performance shall be cumulative and in addition to any other rights and remedies to which the
Indemnitee shall be entitled.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the day first set forth above.
| THE COMPANY: DUOYUAN GLOBAL WATER INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| INDEMNITEE: |
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| Signature | ||||
| Print Name: | ||||
EXECUTION PAGE
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT
