EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made as of __________,
2000, by and between QUALSTAR CORPORATION, a California corporation (the
"Company") and ______________________________ ("Indemnitee").
RECITALS
A. Indemnitee is now serving, or is considering serving, the Company, or a
subsidiary of the Company, in the capacity of an executive officer and/or a
member of the Board of Directors.
B. The parties hereto acknowledge that Indemnitee's service to the Company
in the capacity indicated above may expose Indemnitee to claims, lawsuits and
risk of liability;
C. The parties further recognize that the compensation or fees payable to
Indemnitee for the performance of such services may not be commensurate with the
potential risk involved and that the Company is now, or may in the future be,
unable adequately to provide insurance at a reasonable cost to cover such risk;
and
D. Accordingly, as an inducement to Indemnitee to serve or to continue to
serve the Company in the capacity indicated above, the Company and Indemnitee
desire to enter into this Agreement pursuant to which the Company undertakes to
indemnify Indemnitee against such risks, to the extent that it is permitted to
do so under the laws of the State of California.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. DEFINITIONS
1.1 Agent. The term "Agent" shall mean any person who is or was 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
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or of
another enterprise at the request of such predecessor corporation.
1.2 Derivative Action. The term "Derivative Action" shall mean a
Proceeding brought by or in the right of the Company to procure a judgment in
favor of the Company.
1.3 Expenses. The term "Expenses" includes without limitation
attorneys' fees and all other costs, costs of investigation and cost of legal
actions, claims or proceedings and appeals therefrom, and costs of attachment or
similar bonds.
1.4 Proceedings. The Term "Proceeding" shall mean any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, and whether arising out of a related actions of
Indemnitee prior to or after the date of this Agreement.
2. INDEMNIFICATION
2.1 Direct Actions. Subject to the provisions of Section 2.3 hereof, if
Indemnitee was or is a party or is threatened to be made a party of any
Proceeding, other than a Derivative
Action, by reason of the fact that Indemnitee is or was an Agent of the Company,
the Company shall indemnify and hold harmless Indemnitee against Expenses,
judgments, fines, settlements and other amounts and reasonably incurred in
connection with such Proceeding.
2.2 Derivative Actions. Subject to the provisions of Section 2.3
hereof, if Indemnitee was or is a party is threatened to be made a party to any
threatened, pending or completed Derivative Action by reason of the fact that
Indemnitee is or was an Agent of the Company, the Company shall indemnify and
hold harmless Indemnitee against Expenses, settlements and other amounts
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action; provided, however, no indemnification shall be made
under this Section 2.2 for any of the following:
(a) In respect to any claim, issue or matter as to which
Indemnitee shall have been adjudged to be liable to the Company in the
performance of his or her 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 such court shall determine;
(b) Amounts paid in settling or otherwise disposing of a pending
action without court approval; and
(c) Expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
2.3 Limitation on Indemnification. Notwithstanding the provisions of
Section 2.1 and 2.2 above, Indemnitee shall not be entitled to indemnification
as provided therein under any of the following circumstances:
(a) For acts or omissions that involve intentional misconduct or
a knowing and culpable violation of law;
(b) For acts or omissions that Indemnitee believes to be contrary
to the best interest of the Company or its shareholders or that involve the
absence of good faith on the part of Indemnitee;
(c) For any transaction from which Indemnitee derived an improper
personal benefit;
(d) For acts or omissions that show a reckless disregard for
Indemnitee's duty to the Company or its shareholders in circumstances in which
Indemnitee was aware, or should have been aware, in the ordinary course of
performing Indemnitee's duties, of a risk of serious injury to the Company or
its shareholders;
(e) For 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;
(f) Involving liability of a director under Section 310 or
Section 316 of the California Corporations Code;
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(g) For any act or omission occurring prior to the date that the
Company amended its Articles of Incorporation to incorporate provisions
permitted by Section 204(a)(11) of the California Corporations Code; provided,
however, nothing herein shall be construed to limit the Company's ability to
indemnify Indemnitee pursuant to the Company's Articles of Incorporation, Bylaws
or the law of the State of California as in effect prior to such amendment;
(h) Under other circumstances, if any, in which indemnity is
expressly prohibited by Section 317 of the California Corporation Code; and
(i) Under circumstances where it is determined by a final
judgment or other final adjudication that such indemnity is in violation of law.
3. ADVANCEMENT OF EXPENSES
3.1 The Company shall pay for and on behalf of Indemnitee all Expenses
which Indemnitee actually and reasonably incurs in defending any Proceeding
prior to the final disposition of such Proceeding; provided that, in connection
with each such Proceeding, Indemnitee shall provide the Company with an
undertaking, in form and substance reasonably satisfactory to the Company, to
repay any such advances if it shall be ultimately determined that Indemnitee is
not entitled to be indemnified hereunder or as otherwise authorized under
California law. The Company shall perform its obligation under this Section 3.1
until such time as it may be determined that Indemnitee is not entitled to
Indemnification by virtue of one or more of the exclusions set forth in Section
2.2 or Section 2.3 hereof.
3.2 Notwithstanding the provisions of Section 3.1 or any other
provision of this Agreement, no advance shall be made by the Company if a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum of disinterested directors, or (if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel, that, based upon the facts known to the
Board or counsel at the time such determination is made, (i) Indemnitee acted in
bad faith or deliberately breached his or her duty to the Company or its
shareholders, and (ii) as a result of such actions by Indemnitee it is more
likely than not that it will ultimately be determined that Indemnitee is not
entitled to indemnification under the terms of this Agreement.
4. AGREEMENT - NOT EXCLUSIVE
This Agreement and the indemnification provided herein is not
exclusive of and shall not diminish any other rights to which Indemnitee may be
entitled under any provision of the Articles of Incorporation or Bylaws of the
Company, any other indemnification agreement or insurance provided by persons or
entities other than the Company, or under applicable law. Notwithstanding the
foregoing, the Company shall not be liable to Indemnitee to make any payment
with respect to any claim made against Indemnitee for which payment is actually
made to Indemnitee under a valid and collectible insurance policy, except with
respect to any excess beyond the amount of the payment under such policy.
5. AGREEMENT TO BE LIBERALLY CONSTRUED
The purpose of this Agreement is to induce Indemnitee either to serve
the Company, or to continue to serve the Company, in the capacity indicated in
Recital A, above. The Company
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acknowledges that, but for this Agreement and the expectation by Indemnitee that
the Company will perform each of its obligations hereunder, Indemnitee may not
consent to serve or to continue to serve the Company in such capacity.
Therefore, it is the intention of the Company and Indemnitee that this Agreement
be liberally construed so as to achieve its purpose of protecting Indemnitee to
the maximum extent permitted under California law. In the case of any amendments
to or change in California law permitting the Company to indemnity Indemnitee in
those situations where indemnification is currently prohibited by law as
outlined in Sections 2.2 and 2.3, it is in the intention of the parties hereto
that the Company provide Indemnitee such broader or greater rights of
indemnification than permitted to the Company prior to such amendment or change
and that this Agreement be construed accordingly. The Company agrees that it
will not do or fail to do any act which would or might prevent or hinder the
performance by the Company of its obligations under this Agreement.
6. NOTICE AND OTHER INDEMNIFICATION PROCEDURES
6.1 Notice to Company. Promptly after receipt by Indemnitee of notice
of the commencement of or the threat of commencement of any Proceeding,
Indemnitee shall, if Indemnitee believes that Indemnification with respect
thereto may be sought from the Company under this Agreement, notify the Company
in writing of the commencement or threat of commencement thereof (but the
failure to so notify the Company shall not relieve the Company from any
liability which it may have under this Agreement, except to the extent that the
Company has been prejudiced in any material respect by such failure).
6.2 Choice of Counsel; Conduct of Defense. In the event the Company
shall be obligated to pay the Expenses of any Proceeding against Indemnitee, the
Company, unless otherwise provided below, shall be entitled to participate
therein, or, upon the delivery to Indemnitee of written notice of its election
to do so, to assume the defense of such Proceeding, with counsel approved by
Indemnitee (which approval shall not be unreasonably withheld). After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Proceeding, provided that; (i) Indemnitee shall have the
right to employ his or her own counsel in any Proceeding at Indemnitee's
expense; and (ii) if (a) the employment of counsel by Indemnitee has been
previously authorized by the Company, (b) Indemnitee shall have reasonably
concluded that there may be conflict of interest between the Company and the
Indemnitee in the conduct of any such defense, or (c) the Company shall not,
within reasonable period of time, in fact have employed counsel to assume the
defense of such Proceeding, Indemnitee may employ its own counsel (subject the
Company's approval thereof which shall not unreasonably withheld) and the fees
and expenses of such counsel shall be paid by the Company. Notwithstanding any
the provisions of this Agreement, the Company shall not liable for any
settlement of any claim or action effected without its written consent shall not
be unreasonably withheld.
7. SEVERABILITY
This Agreement is intended to comply in all respects with California
law. In the event any provision of this Agreement is finally determined by a
court of competent jurisdiction to require the Company to do or fail to do any
act in violation of applicable law, such provision shall be limited or modified
in its application to the extent necessary to avoid a violation of law, and as
so
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limited or modified such provision and the balance of this Agreement shall be
enforceable in accordance with their terms.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
California law.
9. SUCCESSORS AND ASSIGNS
This terms of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and the assigns of the Company
and Indemnitee's estate, heir and personal representatives.
10. MODIFICATION AND WAIVER
No supplement modifications or amendment of this Agreement shall be
binding unless executed in writing by both the parties hereto. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any provisions hereof nor shall such waiver constitute a continuing waiver.
11. ATTORNEYS' FEES
In the event that any action is instituted by Indemnitee under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorney's fees, incurred by Indemnitee with respect to such action,
unless as part of such action the court determines that each of the material
assertions made by Indemnitee as a part of such action was not made in good
faith or was frivolous. In the event any action is instituted by or in the name
of the Company under this Agreement or to enforce or interpret any term of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorney's fees, incurred by Indemnitee in defense of such
action (including with respect to Indemnitee's counterclaims and cross-claims
made in such action), unless as a part of such action the court determines that
each of Indemnitee's material defenses to such action was made in bad faith or
was frivolous.
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IN WITNESS WHEREOF, the parties have executed this Indemnification
Agreement as of the date first above written.
QUALSTAR CORPORATION
By:
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Name (Print)
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Title:
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"INDEMNITEE"
By:
_____________________________________________
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