INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into effective as of this ______ day of _______________, ____, by and between
DigitalConvergence.:Com Inc., a Delaware corporation (including any successors
thereto, the "Company"), and ________________________ ("Indemnitee").
RECITALS:
A. Competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors, officers, or in other capacities
unless they are provided with adequate protection through insurance or
indemnification (or both) against claims and actions against them arising out of
their service to and activities on behalf of those corporations.
B. The current uncertainties relating to the availability of adequate
insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons.
C. The Board of Directors of the Company (the "Board") has determined
that the continuation of present trends in litigation will make it more
difficult to attract and retain competent and experienced persons, that this
situation is detrimental to the best interests of the Company's stockholders,
and that the Company should act to assure its directors and officers that there
will be increased certainty of adequate protection in the future.
D. It is reasonable, prudent, and necessary for the Company to obligate
itself contractually to indemnify its directors and officers to the fullest
extent permitted by applicable law in order to induce them to serve or continue
to serve the Company.
E. Indemnitee is willing to serve and continue to serve the Company on
the condition that he be indemnified to the fullest extent permitted by law.
F. Concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of the
Company.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises,
Indemnitee's agreement to serve or continue to serve as a director or officer of
the Company, and the covenants contained in this Agreement, the Company and
Indemnitee hereby covenant and agree as follows:
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1. CERTAIN DEFINITIONS. For purposes of this Agreement:
a. AFFILIATE: shall mean any Person that directly, or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with the Person specified.
b. CHANGE OF CONTROL: shall mean the occurrence of any of the following
events:
i. The acquisition after the date of this Agreement by
any individual, entity, or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (x) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that for purposes of this paragraph (i), the following
acquisitions shall not constitute a Change of Control: any
acquisition directly from the Company or any Subsidiary thereof;
any acquisition by the Company or any Subsidiary thereof; any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary of the
Company; or any acquisition by any entity or its security
holders pursuant to a transaction which complies with clauses
(A), (B), and (C) of paragraph (iii) below;
ii. Individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the date of this Agreement whose election or appointment by the
Board or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board, shall in either case be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board;
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iii. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company or an acquisition of assets of another corporation (a
"Business Combination"), unless in each case, following such Business
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (B) no
Person (excluding any employee benefit plan (or related trust) of the
Company or the corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership of the Company
existed prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
iv. Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
c. CLAIM: shall mean any threatened, pending, or completed action, suit, or
proceeding (including, without limitation, securities laws actions, suits,
and proceedings and also any cross claim or counterclaim in any action,
suit, or proceeding), whether civil, criminal, arbitral, administrative, or
investigative in nature, or any inquiry or investigation (including
discovery), whether conducted by the Company or any other Person, that
Indemnitee in good faith believes might lead to the institution of any
action, suit, or proceeding.
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d. EXPENSES: shall mean all costs, expenses (including attorneys' and expert
witnesses' fees), and obligations paid or incurred in connection with
investigating, defending (including affirmative defenses and
counterclaims), being a witness in, or participating in (including on
appeal), or preparing to defend, be a witness in, or participate in, any
Claim relating to any Indemnifiable Event.
e. INDEMNIFIABLE EVENT: shall mean any actual or alleged act, omission,
statement, misstatement, event, or occurrence related to the fact that
Indemnitee is or was a director, officer, agent, or fiduciary of the
Company, or is or was serving at the request of the Company as a director,
officer, trustee, agent, or fiduciary of another corporation, partnership,
joint venture, employee benefit plan, trust, or other enterprise, or by
reason of any actual or alleged thing done or not done by Indemnitee in any
such capacity. For purposes of this Agreement, the Company agrees that
Indemnitee's service on behalf of or with respect to any Subsidiary or
employee benefits plan of the Company or any Subsidiary of the Company
shall be deemed to be at the request of the Company.
f. INDEMNIFIABLE LIABILITIES: shall mean all Expenses and all other
liabilities, damages (including, without limitation, punitive, exemplary,
and the multiplied portion of any damages), judgments, payments, fines,
penalties, amounts paid in settlement, and awards paid or incurred that
arise out of, or in any way relate to, any Indemnifiable Event.
g. POTENTIAL CHANGE OF CONTROL: shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control, (ii) any Person
(including the Company) publicly announces an intention to take or to
consider taking actions that, if consummated, would constitute a Change
of Control, or (iii) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change of Control has
occurred.
h. REVIEWING PARTY: shall mean a member or members of the Board who
are not parties to the particular Claim for which Indemnitee is seeking
indemnification or if a Change of Control has occurred or if there is a
Potential Change of Control and Indemnitee so requests, or if the
members of the Board so elect, or if all of the members of the Board
are parties to such Claim, Special Counsel.
i. SPECIAL COUNSEL: shall mean special, independent legal counsel
selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld), and who has not otherwise
performed material services for the Company or for Indemnitee within
the last three years (other than as Special Counsel under this
Agreement or similar agreements).
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j. SUBSIDIARY: shall mean, with respect to any Person, any
corporation or other entity of which a majority of the voting
power of the voting equity securities or equity interest is
owned, directly or indirectly, by that Person.
INDEMNIFICATION AND EXPENSE ADVANCEMENT.
k. The Company shall indemnify Indemnitee and hold Indemnitee
harmless to the fullest extent permitted by law, as soon as
practicable but in any event no later than 30 days after written
demand is presented to the Company, from and against any and all
Indemnifiable Liabilities. Notwithstanding the foregoing, the
obligations of the Company under Section 2(a) shall be subject
to the condition that the Reviewing Party shall not have
determined (in a written opinion, in any case in which Special
Counsel is involved) that Indemnitee is not permitted to be
indemnified under applicable law. Nothing contained in this
Agreement shall require any determination under this Section
2(a) to be made by the Reviewing Party prior to the disposition
or conclusion of the Claim against the Indemnitee.
l. If so requested by Indemnitee, the Company shall advance to
Indemnitee all reasonable Expenses incurred by Indemnitee to the
fullest extent permitted by law (or, if applicable, reimburse
Indemnitee for any and all reasonable Expenses incurred by
Indemnitee and previously paid by Indemnitee) within ten
business days after such request (an "Expense Advance") and
delivery by Indemnitee of an undertaking to repay Expense
Advances if and to the extent such undertaking is required by
applicable law prior to the Company's payment of Expense
Advances. The Company shall be obligated from time to time at
the request of Indemnitee to make or pay an Expense Advance in
advance of the final disposition or conclusion of any Claim. In
connection with any request for an Expense Advance, if requested
by the Company, Indemnitee or Indemnitee's counsel shall submit
an affidavit stating that the Expenses to which the Expense
Advances relate are reasonable. Any dispute as to the
reasonableness of any Expense shall not delay an Expense Advance
by the Company. If, when, and to the extent that the Reviewing
Party determines that Indemnitee would not be permitted to be
indemnified with respect to a Claim under applicable law or the
amount of the Expense Advance was not reasonable, the Company
shall be entitled to be reimbursed by Indemnitee and Indemnitee
hereby agrees to reimburse the Company without interest (which
agreement shall be an unsecured obligation of Indemnitee) for
(x) all related Expense Advances theretofore made or paid by the
Company in the event that it is determined that indemnification
would not be permitted or (y) the excessive portion of any
Expense Advances in the event that it is determined that such
Expenses Advances were unreasonable, in either case, if and to
the extent such reimbursement is required by applicable law;
provided, however, that if Indemnitee has commenced legal
proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee could be indemnified under
applicable law, or that the Expense Advances were reasonable,
any determination made by the Reviewing Party that Indemnitee
would not be
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permitted to be indemnified under applicable law or that the
Expense Advances were unreasonable shall not be binding, and the
Company shall be obligated to continue to make Expense Advances,
until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed), which determination shall be conclusive
and binding. If there has been a Potential Change of Control or
a Change of Control, the Reviewing Party shall be advised by or
shall be Special Counsel, if Indemnitee so requests. If there
has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively is not
permitted to be indemnified in whole or part under applicable
law or that any Expense Advances were unreasonable, Indemnitee
shall have the right to commence litigation in any court in the
states of Texas or Delaware having subject matter jurisdiction
thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination
by the Reviewing Party or any aspect thereof, and the Company
hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise
shall be conclusive and binding on the Company and Indemnitee.
m. Nothing in this Agreement, however, shall require the
Company to indemnify Indemnitee with respect to any Claim
initiated by Indemnitee, other than a Claim solely seeking
enforcement of the Company's indemnification obligations to
Indemnitee or a Claim authorized by the Board.
CHANGE OF CONTROL. The Company agrees that, if there is a Potential Change in
Control or a Change of Control and if Indemnitee requests in writing that
Special Counsel be the Reviewing Party, then Special Counsel shall be the
Reviewing Party. In such a case, the Company agrees not to request or seek
reimbursement from Indemnitee of any indemnification payment or Expense Advances
unless Special Counsel has rendered its written opinion to the Company and
Indemnitee (i) that the Company was not or is not permitted under applicable law
to pay Indemnitee and to allow Indemnitee to retain such indemnification payment
or Expense Advances or (ii) that such Expense Advances were unreasonable.
However, if Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee could be indemnified
under applicable law or that the Expense Advances were reasonable, any
determination made by Special Counsel that Indemnitee would not be permitted to
be indemnified under applicable law or that the Expense Advances were
unreasonable shall not be binding, and Indemnitee shall not be required to
reimburse the Company for any Expense Advance, and the Company shall be
obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefore have been exhausted or lapsed), which determination shall be
conclusive and binding. The Company agrees to pay the reasonable fees of Special
Counsel and to indemnify Special Counsel against any and all expenses (including
attorneys' fees), claims, liabilities, and damages arising out of or relating to
this Agreement or Special Counsel's engagement pursuant hereto.
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ESTABLISHMENT OF TRUST. In the event of a Potential Change of Control or a
Change of Control, the Company shall, upon written request by Indemnitee, create
a trust for the benefit of Indemnitee (the "Trust") and from time to time upon
written request of Indemnitee shall fund the Trust in an amount equal to all
Indemnifiable Liabilities reasonably anticipated at the time to be incurred in
connection with any Claim. The amount to be deposited in the Trust pursuant to
the foregoing funding obligation shall be determined by the Reviewing Party. The
terms of the Trust shall provide that, upon a Change of Control, the Trust shall
not be revoked or the principal thereof invaded, without the written consent of
Indemnitee, the trustee of the Trust shall advance, within ten business days of
a request by Indemnitee, any and all reasonable Expenses to Indemnitee (and
Indemnitee hereby agrees to reimburse the Trust under the circumstances in which
Indemnitee would be required to reimburse the Company for Expense Advances under
this Agreement), any required determination concerning the reasonableness of the
Expenses to be made by the Reviewing Party, the Trust shall continue to be
funded by the Company in accordance with the funding obligation set forth above,
the trustee of the Trust shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement, and
all unexpended funds in the Trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as
the case may be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The trustee of the Trust shall be chosen by Indemnitee, and
shall be an institution that is not affiliated with Indemnitee. Nothing in this
Section 4 shall relieve the Company of any of its obligations under this
Agreement.
INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify Indemnitee
against any and all costs and expenses (including attorneys' and expert
witnesses' fees) and, if requested by Indemnitee, shall (within two business
days of that request) advance those costs and expenses to Indemnitee, that are
incurred by Indemnitee if Indemnitee, whether by formal proceedings or through
demand and negotiation without formal proceedings: (a) seeks to enforce
Indemnitee's rights under this Agreement; (b) seeks to enforce Indemnitee's
rights to expense advancement or indemnification under any other agreement or
provision of the Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), or Bylaws (the "Bylaws") now or hereafter in
effect relating to Claims for Indemnifiable Events; or (c) seeks recovery under
any directors' and officers' liability insurance policies maintained by the
Company, in each case regardless of whether Indemnitee ultimately prevails;
provided that a court of competent jurisdiction has not found Indemnitee's claim
for indemnification or expense advancements under the foregoing clause (a), (b)
or (c) to be frivolous, presented for an improper purpose, without evidentiary
support, or otherwise sanctionable under Federal Rule of Civil Procedure No. 11
or an analogous rule or law, and provided further, that if a court makes such a
finding, Indemnitee shall reimburse the Company for all amounts previously
advanced to Indemnitee pursuant to this Section 5. Subject to the provisos
contained in the preceding sentence, to the fullest extent permitted by law, the
Company waives any and all rights that it may have to recover its costs and
expenses from Indemnitee.
PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some, but not all, of
Indemnitee's Indemnifiable Liabilities, the Company shall indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled.
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CONTRIBUTION.
n. CONTRIBUTION PAYMENT. To the extent the indemnification
provided for under any provision of this Agreement is determined
(in the manner hereinabove provided) not to be permitted under
applicable law, the Company, in lieu of indemnifying Indemnitee,
shall, to the extent permitted by law, contribute to the amount
of any and all Indemnifiable Liabilities incurred or paid by
Indemnitee for which such indemnification is not permitted. The
amount the Company contributes shall be in such proportion as is
appropriate to reflect the relative fault of Indemnitee, on the
one hand, and of the Company and any and all other parties
(including officers and directors of the Company other than
Indemnitee) who may be at fault (collectively, including the
Company, the "Third Parties"), on the other hand.
o. RELATIVE FAULT. The relative fault of the Third Parties and the
Indemnitee shall be determined by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency or
to the extent such court or other governmental agency does not
apportion relative fault, by the Reviewing Party (which shall include
Special Counsel) after giving effect to, among other things, the
relative intent, knowledge, access to information, and opportunity to
prevent or correct the relevant events, of each party, and other
relevant equitable considerations. The Company and Indemnitee agree
that it would not be just and equitable if contribution were
determined by pro rata allocation or by any other method of allocation
that does take account of the equitable considerations referred to in
this Section 7(b).
BURDEN OF PROOF. In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified under any
provision of this Agreement or to receive contribution pursuant to Section 7 of
this Agreement, to the extent permitted by law the burden of proof shall be on
the Company to establish that Indemnitee is not so entitled.
NO PRESUMPTION. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval), or
conviction, or upon a plea of NOLO CONTENDERE, or its equivalent, or an entry of
an order of probation prior to judgment shall not create a presumption (other
than any presumption arising as a matter of law that the parties may not
contractually agree to disregard) that 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.
NON-EXCLUSIVITY. The rights of Indemnitee hereunder shall be in addition to any
other rights Indemnitee may have under the Bylaws or Certificate of
Incorporation or the Delaware General Corporation Law or otherwise. To the
extent that a change in the Delaware General Corporation Law (whether by statute
or judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Bylaws or Certificate of Incorporation and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so
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afforded by that change. Indemnitee's rights under this Agreement shall not be
diminished by any amendment to the Certificate of Incorporation or Bylaws, or
of any other agreement or instrument to which Indemnitee is not a party, and
shall not diminish any other rights that Indemnitee now or in the future has
against the Company.
LIABILITY INSURANCE. Except as otherwise agreed to by the Company and Indemnitee
in a written agreement, to the extent the Company maintains an insurance policy
or policies providing directors' and officers' liability insurance, Indemnitee
shall be covered by that policy or those policies, in accordance with its or
their terms, to the maximum extent of the coverage available for any Company
director or officer.
PERIOD OF LIMITATIONS. No action, lawsuit, or proceeding may be brought against
Indemnitee or Indemnitee's spouse, heirs, executors, or personal or legal
representatives, nor may any cause of action be asserted in any such action,
lawsuit, or proceeding, by or on behalf of the Company, after the expiration of
two years after the statute of limitations commences with respect to
Indemnitee's act or omission that gave rise to the action, lawsuit, proceeding,
or cause of action; provided, however, that, if any shorter period of
limitations is otherwise applicable to any such action, lawsuit, proceeding, or
cause of action, the shorter period shall govern.
AMENDMENTS. 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 provision of this Agreement shall be effective unless in a writing signed by
the party granting the waiver. 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 that waiver constitute a continuing
waiver.
OTHER SOURCES. Indemnitee shall not be required to exercise any rights that
Indemnitee may have against any other Person (for example, under an insurance
policy) before Indemnitee enforces his rights under this Agreement. However, to
the extent the Company actually indemnifies Indemnitee or advances him Expenses,
the Company shall be subrogated to the rights of Indemnitee and shall be
entitled to enforce any such rights which Indemnitee may have against third
parties. Indemnitee shall assist the Company in enforcing those rights if it
pays his costs and expenses of doing so. If Indemnitee is actually indemnified
or advanced Expenses by any third party, then, for so long as Indemnitee is not
required to disgorge the amounts so received, to that extent the Company shall
be relieved of its obligation to indemnify Indemnitee or advance Indemnitee
Expenses.
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 merger or consolidation),
spouses, heirs, and personal and legal representatives. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or another enterprise at the Company's
request.
SEVERABILITY. If any provision of this Agreement is held to be illegal, invalid,
or unenforceable under present or future laws effective during the term hereof,
that provision shall be fully severable; this Agreement shall be construed and
enforced as if that illegal, invalid, or unenforceable provision had
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never comprised a part hereof; and the remaining provisions shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of that illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to the illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
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 that state without giving effect to the principles of
conflicts of laws.
HEADINGS. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
NOTICES. Whenever this Agreement requires or permits notice to be given by one
party to the other, such notice must be in writing to be effective and shall be
deemed delivered and received by the party to whom it is sent upon actual
receipt (by any means) of such notice. Receipt of a notice by the Secretary of
the Company shall be deemed receipt of such notice by the Company.
COMPLETE AGREEMENT. This Agreement constitutes the complete understanding and
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof, other than any indemnification rights that
Indemnitee may enjoy under the Certificate of Incorporation, the Bylaws, or the
Delaware General Corporation Law.
COUNTERPARTS. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but in making proof hereof it shall not be
necessary to produce or account for more than one such counterpart.
[Remainder of page intentionally left blank]
EXECUTED as of the date first written above.
DIGITALCONVERGENCE.:COM INC.
By: _____________________________________
Name: _____________________________________
Title:_____________________________________
INDEMNITEE:
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__________________________________
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