INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made as of this ___ day of September,
1997, by and between OAKLEY, INC., a Washington corporation (the "Company"),
and Xxxxxxx X. Xxxxxxx ("Indemnified Party").
WHEREAS, as of the date hereof, the Company has provisions for
indemnification of its directors and officers in Article V of its Amended and
Restated Articles of Incorporation (the "Articles of Incorporation") and
Article VII of its Bylaws (the "Bylaws") which provide for indemnification of
the Company's directors and officers to the fullest extent permitted by law;
WHEREAS, the indemnification provisions in the Bylaws provide that the
right of indemnification is a contract right of the covered parties;
WHEREAS, the Bylaws provide that the Company may maintain, at its
expense, insurance to protect itself and any of its directors and officers
against liability asserted against such persons incurred in such capacity
whether or not the Company has the power to indemnify such persons against
the same liability under Section 23B.08.510 or .520 of the Act (as defined
below) or a successor statute;
WHEREAS, the Company and the Indemnified Party recognize that the
officers and directors of publicly owned companies are frequently joined as
parties to Proceedings (as defined below) against their respective companies
as a result of their serving in such capacity; and
WHEREAS, in order to induce Indemnified Party to serve or continue to
serve the Company, the Company wishes to confirm the contract indemnification
rights provided in the Bylaws and agrees to provide Indemnified Party with
the benefits contemplated by this Agreement and to supplement the provisions
of this Agreement with directors' and officers' liability insurance
maintained by the Company.
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and Indemnified Party hereby agree as follows:
1. DEFINITIONS. The following terms, as used herein, shall have the
following respective meanings; other capitalized terms used and not
specifically defined in this Section 1 shall have the meanings provided
elsewhere in the Agreement and in the Bylaws:
(a) "Act" means the Washington Business Corporation Act RCW Title
23B, as amended from time to time.
(b) "Adjudication" shall refer to a final, non-appealable decision
by a court of competent jurisdiction. "Adjudged" shall have a correlative
meaning.
(c) "Covered Amount" means any Loss, Fine and Expense, to the
extent such Loss, Fine or Expense, in type or amount, is not insured under
the D&O Insurance maintained by the Company from time to time.
(d) "Covered Act" means any act or omission of the Indemnified
Party in his or her capacity as a director, officer, employee, agent,
fiduciary or consultant of the Company alleged by any claimant or any claim
against Indemnified Party by reason of him or her serving in such a capacity,
or by reason of Indemnified Party serving, at the request of the Company, in
such capacity with another corporation, partnership, employee benefit plan,
trust or other enterprise, in all cases, whether such alleged act or omission
occurred before or after the date of this Agreement.
(e) "D&O Insurance" means the liability insurance which the
Company may purchase on behalf of Indemnified Party against liability
asserted against or incurred by Indemnified Party in connection with claims
arising from Covered Acts, whether or not the Company would have the power to
indemnify the individual against the same liability under Section 23B.08.510
or 23B.08.520 of the Act. .
(f) "Determination" means a determination, based on the facts
known at the time, made:
(i) by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the Proceeding;
(ii) if a quorum cannot be obtained under clause (i), by
majority vote of a duly designated committee of the Board of Directors, in
the manner provided by Section 23B.08.550(2)(b) of the Act;
(iii) by special legal counsel, selected in the manner
provided by Section 23B.08.550(2)(c) of the Act, in a written opinion; or
(iv) by a majority of the shareholders of the Company,
excluding shares owned or voted under the control of directors who are at the
time parties to the Proceeding.
"Determined shall have a correlative meaning.
(g) "Excluded Claim" means any payment for Losses or Expenses in
connection with any claim relating to or arising out of:
(i) acts or omissions of the Indemnified Party Adjudged to
be intentional misconduct or a knowing violation of law;
(ii) conduct of the Indemnified Party Adjudged to be in
violation of Section 23B.08.310 of the Act; or
(iii) any transaction with respect to which it was Adjudged
that such Indemnified Party personally received a benefit in money, property,
or services to which the Indemnified Party was not legally entitled.
(h) "Expenses" means any reasonable expenses incurred by
Indemnified Party as a result of a claim or claims made against Indemnified
Party from Covered Acts, including, without limitation, reasonable counsel
fees and costs of investigative, judicial or administrative proceedings or
appeals.
(i) "Fines" means any fine or penalty including, with respect to
an employee benefit plan, any excise tax assessed with respect thereto.
(j) "Losses" means amounts, as determined by an Adjudication,
which the Indemnified Party is legally obligated to pay as a result of a
claim or claims arising from Covered Acts, including, without limitation,
Fines, damages and judgments and sums paid in settlement of such claim or
claims.
(k) "Proceeding" means any threatened, pending or completed
action, suit, proceeding or investigation, whether civil, criminal or
administrative whether formal or informal.
2. MAINTENANCE OF D&O INSURANCE.
(a) The Company hereby covenants and agrees that, so long as
Indemnified Party shall continue to serve as a director or executive officer
of the Company and thereafter, for so long as Indemnified Party shall be
subject to any possible Proceeding arising from any Covered Act, the Company,
subject to Section 2(c), shall maintain in full force and effect D&O
Insurance.
(b) In all policies of D&O Insurance, Indemnified Party shall be
named as an insured in such a manner as to provide Indemnified Party the same
rights and benefits, and the same limitations, as are accorded to the
Company's directors or executive officers most favorably insured by such
policy.
(c) The Company shall have no obligation to maintain D&O Insurance
if the Company, by majority vote of the Board of Directors, 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,
or the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit; PROVIDED, HOWEVER, that such decision shall
not adversely affect coverage of D&O Insurance for periods prior to such
decision without the unanimous vote of all directors.
3. INDEMNIFICATION. The Company shall indemnify Indemnified Party up
to the Covered Amount and shall advance or reimburse the Expenses incurred by
Indemnified Party in a Proceeding or in connection with any Covered Acts,
subject, in each case, to the further provisions of this Agreement. This
Agreement is made pursuant to and to effectuate the indemnification
provisions set forth in Article V of the Articles of Incorporation and
Article VII of the Bylaws. Notwithstanding any other provision of this
Agreement, the Company shall indemnify Indemnified Party to the extent
Indemnified Party is successful, on the merits or otherwise, in the defense
of any Proceeding to which Indemnified Party was a party because of being a
director, officer, employee, agent, fiduciary or consultant of the Company,
against reasonable Expenses incurred by Indemnified Party in connection with
the Proceeding.
4. EXCLUDED COVERAGE. The Company shall have no obligation to
indemnify Indemnified Party for any Losses or Expenses which arise from an
Excluded Claim.
5. INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by Indemnified Party of notice of the
commencement of or the threat of commencement of any Proceeding, Indemnified
Party shall, if indemnification or advancement or reimbursement of Expenses
with respect thereto may be sought from the Company under this Agreement,
notify the Company of the commencement or the threat of commencement thereof.
(b) If, at the time of the receipt of such notice, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement or the threat of commencement of such Proceeding to the
appropriate insurers in accordance with the procedures set forth in the
respective policies in favor of Indemnified Party. The Company shall
thereafter take all necessary or desirable action to cause such insurers to
pay, on behalf of the Indemnified Party, all amounts (including, without
limitation, Losses and Expenses) payable as a result of such Proceeding in
accordance with the terms of such policies.
(c) To the extent the Company does not, at the time of the
commencement of or the threat of commencement of such Proceeding, have
applicable D&O Insurance, or if a Determination is made that any Loss, Fine
or Expense of the Indemnified Party arising out of such Proceeding will not
be payable under the D&O Insurance then in effect, the Company shall be
obligated to pay the Covered Amount with respect to any Proceeding and
provide counsel satisfactory to Indemnified Party, upon the delivery to
Indemnified Party of written notice of the Company's election to do so.
After delivery of such notice, the Company will not be liable to Indemnified
Party under this Agreement for any legal or other Expenses subsequently
incurred by the Indemnified Party in connection with such defense other than
the reasonable Expenses of investigation of Indemnified Party; PROVIDED, that
Indemnified Party shall have the right to employ his or her own counsel in
connection with the defense of any such Proceeding, the fees and expenses of
such counsel incurred after delivery of notice from the Company of its
assumption of such defense to be at the Indemnified Party's sole expense.
Notwithstanding the foregoing, if (i) the employment of counsel by
Indemnified Party has been
previously authorized by the Company, (ii) Indemnified Party shall have been
advised by counsel that there may be a conflict of interest between the
Company and Indemnified Party in the conduct of any such defense or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of
such Proceeding, in each such case, the fees and expenses of such counsel
retained by Indemnified Party shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification,
advancement and reimbursement obligations under this Agreement shall be made
within sixty (60) days of Indemnified Party's written request therefor unless
a Determination is made that the claims giving rise to Indemnified Party's
request are Excluded Claims or otherwise not payable under this Agreement;
PROVIDED, that all payments on account of the Company's obligations under
Paragraph 5(c) of this Agreement prior to the Adjudication of any Proceeding
shall be made within 20 days of Indemnified Party's written request therefor
and such obligation shall not be subject to any such Determination but shall
be subject to Paragraph 5(e) of this Agreement.
(e) Indemnified Party agrees that he or she will reimburse the
Company for all Losses and Expenses paid by the Company in connection with
any Proceeding against Indemnified Party in the event and only to the extent
that it is Adjudged that the Indemnified Party is not entitled to be
indemnified by the Company for such Losses or Expenses under this Agreement,
the Articles of Incorporation, the Bylaws or the Act.
6. SETTLEMENT. The Company shall have no obligation to indemnify
Indemnified Party under this Agreement for any amounts paid in settlement of
any Proceeding effected without the Company's prior written consent. The
Company shall not settle any claim in any manner which would impose any loss
or expense on Indemnified Party without Indemnified Party's prior written
consent, unless the Company provides a written undertaking to the Indemnified
Party to pay for such loss or expense on behalf of the Indemnified Party.
Neither the Company nor Indemnified Party shall unreasonably withhold their
consent to any proposed settlement.
7. RIGHTS NOT EXCLUSIVE. The rights provided hereunder shall be in
addition to any other rights to which Indemnified Party may be entitled under
the Articles of Incorporation, the Bylaws, the Act, any agreement or vote of
shareholders or directors or otherwise, both as to action in Indemnified
Party's official capacity and as to action in any other capacity, and such
rights shall continue after Indemnified Party ceases to serve the Company as
a director or officer.
8. ENFORCEMENT.
(a) Indemnified Party's rights to indemnification or reimbursement
or advancement of Expenses hereunder shall be enforceable by Indemnified
Party notwithstanding any adverse Determination, other than a Determination
which has been made by Adjudication. In any such action, if a prior adverse
Determination has been made, the burden of proving that indemnification or
reimbursement or advancement of Expenses is required under this Agreement,
the Articles of Incorporation, the Bylaws or the Act shall be on the
Indemnified Party. The Company shall have the burden of proving that
indemnification or reimbursement
or advancement of Expenses is not required under this Agreement if no prior
adverse Determination shall have been made.
(b) In the event that any action is instituted by Indemnified
Party under this Agreement, or to enforce or interpret any of the terms of
this Agreement, Indemnified Party shall be entitled to be paid all court
costs and expenses, including reasonable counsel fees, incurred by
Indemnified Party with respect to such action, unless the court determines
that each of the material assertions made by Indemnified Party as a basis for
such action were not made in good faith or were frivolous.
9. NO PRESUMPTIONS. For purposes of this Agreement, the termination
of any Proceeding by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendre, or its
equivalent, shall not create a presumption that the Indemnified Party did not
meet any particular standard of conduct or have any particular belief or that
a court has determined that indemnification or reimbursement or advancement
of Expenses by the Company is not permitted hereunder or by applicable law.
In addition, neither the absence of a Determination as to whether Indemnified
Party has met any particular standard of conduct or had any particular belief
or the existence of a Determination that Indemnified Party has not met such
standard of conduct or did not have such belief, prior to the commencement of
legal proceedings by Indemnified Party to secure an Adjudication that
Indemnified Party should be indemnified or advanced or reimbursed Expenses
hereunder or under applicable law, shall be a defense to Indemnified Party's
claim or create a presumption that Indemnified Party has not met any
particular standard of conduct or did not have any particular belief.
10. 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 Indemnified Party, 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 to
effectively bring suit to enforce such rights.
11. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Proceeding against
Indemnified Party to the extent Indemnified Party has otherwise actually
received payment (under any D&O Insurance , the Articles of Incorporation,
the Bylaws, the Act or otherwise) of the amounts which may be paid hereunder.
12. SEVERABILITY. In the event that any provision of this Agreement is
determined by a court of competent jurisdiction to require the Company to do
or to fail to do an act which is in violation of the Articles of
Incorporation, the Bylaws or the Act or other applicable law, such provision
shall be limited or modified in its application to the minimum extent
necessary to avoid such violation, and, as so limited or modified, such
provision and the remainder of this Agreement shall be enforceable in
accordance with the respective terms.
13. CHOICE OF LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be (i) binding upon
all successors and assigns of the Company (including any transferee of all or
substantially all of the Company's assets and any successor by merger or
otherwise by operation of law) and (ii) binding on and inure to the benefit
of the heirs, personal representatives and estate of Indemnified Party.
Indemnified Party may not assign this Agreement or any of Indemnified Party's
rights hereunder without the prior written consent of the Company.
15. AMENDMENT. No amendment, modification, termination or cancellation
of this Agreement shall be effective unless made in a writing signed by each
of the parties hereto.
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IN WITNESS WHEREOF, the Company and Indemnified Party have executed this
Indemnification Agreement as of the date first above written.
OAKLEY, INC.
By:
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Name:
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Title:
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Xxxxxxx X. Xxxxxxx, Indemnified Party
