EXHIBIT 99.5
CONFIDENTIAL SETTLEMENT AGREEMENT
---------------------------------
AND MUTUAL RELEASE
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This Confidential Settlement Agreement and Mutual Release (this
"Agreement") is entered into as of February 25, 2001, by and between Xxxxxxx X.
Xxxxxx ("Dukker"), on one hand, and eMachines, Inc. (the "Company"), on the
other hand. Dukker and the Company are collectively referred to as the
"Parties."
RECITALS
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WHEREAS, the Company is in the business of selling personal computers to
develop ongoing Internet-based consumer relationships and Dukker has served as
its Chief Executive Officer ("CEO") since September 18, 1998;
WHEREAS, the Parties entered into an Amended and Restated Employment
Agreement, dated August 18, 1999, wherein certain terms and conditions of
Dukker's employment with the Company as its CEO are set forth (the "Employment
Agreement");
WHEREAS, certain disputes, including regarding the Employment Agreement,
have arisen between the Parties; and
WHEREAS, the Parties wish to resolve fully and finally these disputes;
NOW, THEREFORE, in consideration of these Recitals and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are expressly acknowledged, the Parties hereto, intending
to be legally bound, agree as follows:
AGREEMENT
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1. Dukker's Relationship with the Company. Upon notification from one of
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the members of the Compensation Committee of the Board of Directors of the
Company, Dukker shall resign all of his positions as an officer or director, or
any other Board appointment, of the Company and any of its affiliates or
subsidiaries, including but not limited to his positions as President and CEO of
the Company, by executing and submitting to the Company the letter attached
hereto as Attachment A. Dukker shall assist the Company in its efforts to
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retain a new CEO and, at reasonable times and locations and upon reasonable
notice actually received (including by facsimile), shall assist the new CEO in
transitioning to this position as needed, such assistance not to exceed 20 hours
in the first 30 days following the date this Agreement is signed by the Parties
and five (5) hours during each 30-day period thereafter through September 18,
2001.
2. Payments to Dukker. In lieu of any payments or benefits provided to
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Dukker Employment Agreement:
(a) Dukker shall receive $1,600,000.00 in cash from the Company,
payable as follows: $800,000.00 within eight (8) business days of the date this
Agreement is signed by the Parties; $400,000.00 within three months of the date
this Agreement is signed by the Parties; and $400,000 within 30 days of the
expiration of the Employment Agreement on September 18, 2001. Each of these
payments will be subject to normal payroll withholding and deductions. In
addition, one of the two $400,000.00 payments shall be subject to required
withholdings and deductions on the income to Dukker attributable to the
Company's forgiveness of Dukker's $200,000.00 promissory note as more fully set
forth in Paragraph 3 of this Agreement.
(b) If Dukker resigns his positions as President and CEO prior to
September 18, 2001, within eight (8) business days thereafter, Dukker shall
receive a lump sum payment equal to the net present value of his remaining
salary, at the same rate as in effect immediately prior to his resignation,
through September 18, 2001, less normal payroll withholding and deductions.
The parties agree that a discount rate of 5% shall be used to compute net
present value. Dukker acknowledges that the Company is not obligated to
continue to pay his health insurance premiums (or other benefits) following his
resignation, but that he will have the option to continue his health care
coverage, at his own expense, in accordance with the provisions of federal law.
(c) Dukker acknowledges that he has been reimbursed by the Company for
all of his business expenses and that the Company has no obligation to him,
beyond the payments set forth in Paragraphs 2(a) and 2(b), for any accrued
compensation or expenses. Dukker represents and agrees that after the date of
this Agreement, he will not use his corporate American Express card except for
business travel between San Francisco and Irvine, without the advance written
approval of the Company, and further agrees that the Company may deduct any
amounts charged to Dukker's corporate American Express card for non-business
expenses from any payment to Dukker pursuant to this Agreement.
(d) Attached hereto as Attachment B is a breakdown of the payments
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that will be made to Dukker within eight (8) business days of the date this
Agreement is signed by the Parties.
3. Forgiveness of Dukker's Promissory Note. On the earlier of
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(i) the due date for the first scheduled payment under this Agreement following
the date on which the Form S-3 Registration Statement referenced in Attachment C
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is declared
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effective, and (ii) the due date for the last scheduled payment under this
Agreement, the Company shall forgive the $200,000.00 promissory note, and all
interest accrued thereon, executed by the Parties in connection with Dukker's
purchase of stock pursuant to that certain Initial Capitalization Agreement
dated as of June 10, 1999.
4. Registration Rights. Attachment C is hereby incorporated by reference
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as if set forth in its entirety herein.
5. Cancellation of Company Stock Options. The Company shall immediately
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cancel all stock options previously granted to Dukker, including 2,000,000
shares with an exercise price of $9.00 per share and 227,897 shares with an
exercise price of $1.61 per share.
6. Releases.
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(a) Release by Dukker. Dukker hereby knowingly and voluntarily, fully
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and finally releases, acquits, and forever discharges the Company and each of
its respective affiliates and subsidiaries, each of their present and former
officers, directors, members, shareholders, agents, partners, consultants,
advisors, family members and employees, and the successors or assigns of said
persons and entities ("the Company Released Parties"), from any and all claims,
charges, complaints, liens, demands, causes of action, obligations, damages and
liabilities that Dukker had, now has, or may hereafter claim to have against the
Company Released Parties, arising out of or relating in any way to Dukker's
employment with the Company, his service as a Board Member of the Company or any
of its affiliates or subsidiaries, his status as a shareholder of the Company or
any of its affiliates or subsidiaries, and any and all alleged acts or omissions
of the Company Released Parties, whether known or unknown, or any other claim
relating to any of the Company Released Parties from the beginning of time
through date of this Agreement, except: (i) as otherwise provided in Paragraph
6(e) of this Agreement, or (ii) in the event that any of the Company Released
Parties (other than the Company) files a claim or action against Dukker, then
nothing in this Paragraph 6(a) shall prevent Dukker from bringing a counterclaim
limited to the subject matter of such claim or action.
(b) Release by Company. The Company hereby knowingly and voluntarily,
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fully and finally releases, acquits, and forever discharges Dukker and each of
his heirs, executors, representatives and administrators (the "Dukker Released
Parties") from any and all claims, charges, complaints, liens, demands, causes
of action, obligations, damages and liabilities that the Company had, now has,
or may hereafter claim to have against the Dukker Released Parties, arising out
of or relating in any way to Dukker's employment with the Company, his service
as a Board Member of the Company or any of its affiliates or subsidiaries, his
status as a shareholder of the
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Company or any of its affiliates or subsidiaries, and any and all alleged acts
or omissions of the Dukker Released Parties, whether known or unknown, or any
other claim relating to any of the Dukker Released Parties from the beginning of
time through date of this Agreement.
(c) The releases set forth in this Paragraph 6 specifically
extend to, without limitation, claims or causes of action for breach of an
express or implied contract, interference with prospective economic advantage,
breach of the covenant of good faith and fair dealing, breach of fiduciary duty,
discrimination, harassment, fraud, misrepresentation, conversion, defamation,
slander, infliction of emotional distress, disability, loss of future income,
and claims under the Age Discrimination in Employment Act ("ADEA"), California
Constitution, the United States Constitution, and applicable local, state, and
federal anti-discrimination laws, statutes or regulations.
(d) Each of the Parties expressly waives all rights afforded by
Section 1542 of the Civil Code of the State of California ("Section 1542"),
which states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release, each of the Parties understands and
agrees that, except as otherwise set forth in Paragraph 6(e) of this Agreement,
this Agreement is intended to include all claims, if any, that either may have
which he or it does not now know or suspect to exist in his or its favor and
that this Agreement extinguishes those claims.
(e) Notwithstanding the above, nothing in this Paragraph 6 is
intended to deprive Dukker of any indemnification rights: (i) pursuant to
California Labor Code section 2802, or (ii) as an officer or director, pursuant
to coverage provided by the Company's bylaws or insurance policies, or any
contract for indemnity between Dukker and the Company, all as subject to
applicable law. A copy of the Indemnification Agreement between eMachines, Inc.
and Xxxxxxx Xxxxxx dated as of June 1, 1999 is attached hereto as Attachment D.
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7. Review And Revocation Period. Dukker acknowledges that the
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Company has advised him that he may consult with an attorney of his choosing
prior to
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signing this Agreement and that he has twenty-one (21) days during which to
consider the provisions of this Agreement, although he may sign and return it
sooner. Dukker further acknowledges that he has been advised by the Company that
he has the right to revoke the release provisions of this Agreement for a period
of seven (7) days after signing it and that this Agreement shall not become
effective or enforceable until such seven (7)-day revocation period has expired.
Dukker acknowledges and agrees that if he wishes to revoke the release
provisions of this Agreement, he must do so in writing, and that such revocation
must be signed by him and received by the Company no later than 5:00 p.m. on the
seventh (7th) day after Dukker has signed this Agreement. Dukker acknowledges
and agrees that, in the event that Dukker revokes the release provisions of this
Agreement, he shall have no right to receive any benefits hereunder, including
those set forth in Paragraphs 2-4 of this Agreement. Dukker further acknowledges
that he has consulted with an attorney regarding signing this Agreement.
8. No Further Claims.
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(a) No Further Claims by Dukker. Dukker agrees forever to refrain
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from filing, making or otherwise initiating any action, charge, claim, demand,
grievance, arbitration or other legal action (whether at law, in equity, or any
other basis) against the Company Released Parties or any of them over matters
released or waived in Paragraph 6 above and further agrees forever to refrain
from participating in any action, complaint, charge, claim, demand, grievance,
arbitration or other legal action initiated or pursued by any individual, group
of individuals, partnership or corporation or other entity against the Company
Released Parties or any of them relating in any way to matters released or
waived in Paragraph 6 above, except to the extent such waiver is prohibited by
law, order or regulation. If Dukker is identified in any class action related in
any way to matters released or waived in Paragraph 6 above, he shall permanently
opt out of the class at the first available opportunity.
(b) No Further Claims by Company. The Company agrees forever to
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refrain from filing, making or otherwise initiating any action, charge, claim,
demand, grievance, arbitration or other legal action (whether at law, in equity,
or any other basis) against the Dukker Released Parties or any of them over
matters released or waived in Paragraph 6 above and further agrees forever to
refrain from participating in any action, complaint, charge, claim, demand,
grievance, arbitration or other legal action initiated or pursued by any
individual, group of individuals, partnership or corporation or other entity
against the Dukker Released Parties or any of them relating in any way to
matters released or waived in Paragraph 6 above, except to the extent such
waiver is prohibited by law, order or regulation.
9. No Admission of Liability. Nothing in this Agreement shall be
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construed as an admission of liability by the Parties. The Parties acknowledge
and
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agree that this Agreement shall not be interpreted to render any of the Parties
a prevailing party for any purpose, including, without limitation, an award of
attorneys' fees or costs under any applicable statute, contract, or otherwise.
10. Cooperation with the Company. During the remainder of his
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employment with the Company, and continuing thereafter, Dukker agrees that he
shall cooperate with the Company, its affiliates and subsidiaries, and each of
their respective attorneys or other legal representatives (collectively, the
"Company attorneys") in connection with any claim, litigation, or judicial or
arbitral proceeding which is now pending or may hereinafter be brought against
the Company and/or its affiliates or subsidiaries by any third party, including
Dukker's appearance as a witness at depositions or trials, without necessity of
a subpoena, in order to state truthfully his knowledge of matters at issue. The
Company shall promptly reimburse Dukker for his actual and reasonable travel or
other expenses that he may incur in cooperating with the Company as called for
in this Paragraph 10. At reasonable times and locations and upon reasonable
notice actually received (including by facsimile), Dukker shall provide such
other cooperation as the Company may reasonably request to assist the Company in
the administration of its business, it being expressly agreed that: (i) requests
for such cooperation which do not require more than four (4) hours of Dukker's
time in any 30-day period for one (1) year following the date of this Agreement
are reasonable, and (ii) reasonable notice for purposes of both this Paragraph
and Paragraph 1 of this Agreement shall be three (3) business days for
telephonic meetings and ten (10) business days for in-person meetings, except
where such notice is not practicable due to unforeseen circumstances or
circumstances beyond the Company's control, in which case the Parties agree to
use their best efforts to agree upon a reasonable time and location for Dukker's
assistance. Dukker hereby acknowledges that all actions he and, to the best of
his knowledge, the Board of Directors of the Company have taken through the date
of this Agreement relating to the Company and its business and its stockholders
have been in the best interests of the Company and its stockholders. Dukker
further agrees that he will immediately forward to the Company any business
information related to the Company that is inadvertently directed to him
following his resignation from the Company as its President and CEO. The Company
agrees that it will immediately forward to Dukker any mail addressed to him at
the Company's offices which does not relate to the Company's business or
affairs.
11. No Disparagement. Dukker agrees not to make any public or private
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statements on or after the date of this Agreement that are disparaging of any of
the Company Released Parties, or any of their past, present or future policies,
procedures, practices, decision-making, conduct, investment programs or
prospects, professionalism or compliance with standards. The Company agrees not
to make any public or private statements on or after the date of this Agreement
that are disparaging of the Dukker Released Parties or any of Dukker's past,
present or future policies,
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procedures, practices, decision-making, conduct, investment programs or
prospects, professionalism or compliance with standards.
12. Return of Property. Upon his resignation as President and CEO of
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the Company, as set forth in Paragraph 1 above, Dukker shall promptly return any
property of the Company in his possession or control, including but not limited
to the Company's PC, computer equipment, blackberry, cellular phones, other
electronic equipment, documentation, corporate credit cards, office keys and
electronic key cards, company car and keys, golf clubs and equipment, furniture,
and the like.
13. Confidentiality. Until such time as any of the terms of this
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Agreement have been made public by the Company, Dukker hereby agrees that
neither he nor any of his representatives shall reveal to anyone, except his
immediate family, the existence of this Agreement and any of its negotiations,
terms, or conditions, unless (i) such disclosure is authorized in a writing and
signed by all Parties, (ii) disclosure is required by law, court order, or to
the extent necessary to legally enforce this Agreement (but only if Dukker
notifies the Company of a disclosure obligation or request within three (3)
business days after he learns of it and does not oppose the Company's taking all
steps it deems to be appropriate to prevent or limit the required disclosure),
or (iii) the specific disclosure of the amounts and types of payments received
by Dukker to his accountants is required for income tax purposes only or to his
financial advisors is necessary and appropriate for purposes of rendering
investment or financial advice. Once any of the terms of this Agreement have
been made public by the Company, Dukker shall have no further confidentiality
obligation under this Paragraph 13 with respect to the contents of the
Agreement. Disclosure of any information regarding this Agreement and any of its
negotiations, terms, or conditions known by Dukker's representatives, immediate
family, accountants or financial advisors ("Dukker's Confidants") is only
permissible to the extent that each of Dukker's Confidants agrees to honor this
confidentiality agreement. Violation of this confidentiality requirement by any
of Dukker's Confidants will be treated as a violation of this Agreement by
Dukker.
14. Assignment of Rights. Dukker represents and warrants that there
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has been no assignment or other transfer of any interest in any claim he may
have against the Company Released Parties and Dukker agrees to indemnify and
hold harmless the Company Released Parties from any liability, claim, demand,
damages, costs, expenses, and attorneys' fees incurred by the Company or its
affiliates or subsidiaries as a result of any such assignment or transfer.
15. Arbitration. If any dispute or claim arising out of or relating
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to this Agreement cannot be settled through direct discussions, the Parties
agree to endeavor first to settle the dispute in an amicable manner by mediation
administered by
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the American Arbitration Association ("AAA") in Orange County, California before
a retired judge of the Superior Court or the Court of Appeals of California or
of the United States District Court of any district in California or the United
States Court of Appeals of the Ninth Circuit. Such mediation shall be conducted
as promptly as practicable and in accordance with the rules of AAA. Thereafter,
any unresolved dispute or claim arising from or relating to this Agreement shall
be settled by binding arbitration in Orange County, California, administered by
AAA in accordance with its National Rules for the Resolution of Employment
Disputes. The arbitrator will be Judge Xxxxxx Xxxx, Ret., or, if Judge Xxxx is
not available, a retired judge of the United States District Court for the
Central District of California or of the Superior Court of the State of
California in and for the County of Orange. The arbitration proceeding will be
conducted pursuant to California Code of Civil Procedure Section 1283.05. Each
Party hereto shall bear (i) one-half of the arbitrator's fee and any
administrative fees associated with the arbitration and (ii) all of its own
attorneys' fees and costs. The remedy provided by this binding arbitration
provision is exclusive. Should either Party pursue any other legal or
administrative action with respect to any matter included within this binding
arbitration provision, the responding party shall be entitled to recover its
costs, expenses and attorneys' fees incurred as a result of each action. The
prevailing party in such arbitration may file an action in court to confirm and
to enforce the arbitration award. The provisions of this Paragraph 9 shall
survive any termination or revocation of this Agreement.
16. Successors and Assigns. The Company may assign this Agreement to
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any of its successor entities and this Agreement shall be binding upon the
successors and assigns of the Company as well as the heirs, executors,
administrators, and other legal representatives of Dukker.
17. Governing Law. This Agreement shall be governed by and construed
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and enforced pursuant to the laws of the State of California without regard to
its conflict of laws rules.
18. Counterparts. This Agreement may be executed in one or more
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counterparts, and may include multiple signature pages, all of which shall be
deemed to be one instrument. Fully executed copies of this Agreement may be
used in lieu of the original.
19. Notices. Any notice which is required or permitted to be given
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under this Agreement by one Party to another Party shall be in writing and may
be delivered (1) personally (in which case the notice will be deemed given on
the day actually delivered (or if such day is not a business day, the next
business day)), (2) by United States registered or certified mail, postage
prepaid (in which case the notice will be deemed given on the second business
day following the date of mailing), (3) by
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Federal Express or other reputable courier service regularly providing evidence
of delivery, with charges paid by the party sending the notice (in which case
the notice will be deemed given on the day following mailing by such means (or
if such day is not a business day, the next business day)); or (4) by telecopy
(in which case the notice will be deemed given on the day actually delivered (or
if such day is not a business day, the next business day)), provided that such
telecopy shall be immediately followed by delivery of such notice pursuant to
clause (1), (2) or (3) above. Any such notice shall be addressed as follows
(subject to the right of a Party to designate a different address for itself by
notice similarly given):
To Dukker: Xxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax (by prior arrangement only): (000) 000-0000
and
Levi, Ram, Xxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
To the Company: eMachines, Inc.
00000 Xxxxxx Xxxx, Xxxx. #000
Xxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
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20. Entire Agreement. This Agreement constitutes the entire agreement
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between the Parties relating to the matters set forth herein and supersedes any
and all other prior or contemporaneous agreements, understandings, negotiations,
or discussions, either oral or in writing, express or implied, between the
Parties regarding such matters. The Parties each acknowledge that no
representations, inducements, promises, agreements or warranties, oral or
otherwise, have been made by them, or anyone acting on their behalf, which are
not embodied in this Agreement and that they have not executed this Agreement in
reliance on any such representation, inducement, promise, agreement or warranty.
The terms of this Agreement are intended by the Parties to be the final
expression of the matters herein and the Parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms.
This Agreement may not be modified or amended except by a written instrument
signed by Dukker and a duly authorized representative of the Company.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year set forth below.
AGREED:
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
AGREED:
eMACHINES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx
Chief Financial Officer
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Attachment A
________ __, 2001
Board of Directors
eMachines, Inc.
00000 Xxxxxx Xxxx, Xxxx. #000
Xxxxxx, Xxxxxxxxxx 00000
Dear Board Members,
Effective immediately, I hereby resign from all Board appointments and positions
as an officer or director of eMachines, Inc., and its affiliates and
subsidiaries, including but not limited to my positions as President and CEO of
eMachines, Inc., in order to pursue other business activities.
Very truly yours,
Xxxxxxx X. Xxxxxx
Attachment B
Bonus $ 800,000.00
Forgiven Loan
Salary Through 9/21 discounted at 5% 239,216.41
PTO (326.56 hours) 62,800.00
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1,102,016.41
FICA (6.2% up to $80k) $ 692.48
Medicare (1.45%) 15,979.24
SDI/SUI (.9% $46k max) -
Federal Withholding (28%) 308,564.59
State Withholding (6%) 66,120.98
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Total Withholding 391,357.30
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710,659.11
Loan Received
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Net Amount Due $ 710,659.11
=============
Attachment C
4. Registration Rights
4.1 Certain Definitions. As used in this Paragraph 4, the following terms
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shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the Company's common stock, par value $0.0000125 per
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share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
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any similar federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Form S-3" means such form under the Securities Act as is in effect on the
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date of this Agreement or any registration form under the Securities Act
subsequently adopted by the Commission that permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
"Registrable Securities" means (i) the 8,000,000 shares of Common Stock
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owned of record by Dukker on the date of this Agreement and (ii) any shares of
Common Stock issued or issuable in respect of the securities described in clause
(i) above upon any stock split, stock dividend, recapitalization, merger or
other reorganization; provided, however, that Registrable Securities shall not
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include any (a) securities that have previously been registered, (b) securities
that have been sold in a public distribution or a public securities transaction,
or (c) securities that have been otherwise sold or transferred by Dukker after
the date of this Agreement.
"Register," "registered" and "registration" refer to a registration
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effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
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"Registration Expenses" means all expenses, except Selling Expenses,
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incurred by the Company in complying with this Paragraph 4, including without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration.
"Rule 144" means Rule 144 promulgated under the Securities Act as the same
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shall be in effect at the time or such successor rule adopted by Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
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similar federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts, selling commissions,
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brokerage fees and stock transfer taxes applicable to the securities registered
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by Dukker and all fees and disbursements of counsel to Dukker.
4.2 Registration on Form S-3.
(a) Registration. The Company shall use all reasonable efforts (i) to
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cause one registration statement on Form S-3 (as such registration statement may
be amended or supplemented, the "Registration Statement") for an offering to be
----------------------
made on a delayed or continuous basis pursuant to Rule 415 promulgated under the
Securities Act covering all Registrable Securities to be filed promptly after
the date that the Company becomes eligible to use Form S-3 for such registration
and in any event within seven (7) business days of such date and (ii) to have
the Registration Statement declared effective by the Commission as soon as
practicable thereafter and in any event within 90 days after the filing thereof.
The Company shall use all reasonable efforts to keep the Registration Statement
effective until the earlier of the one-year anniversary of the effective date of
this Agreement or the date upon which Dukker no longer holds any Registrable
Securities. After such date, the Company shall have no obligation to keep the
Registration Statement effective.
(b) Limitations on Registration and Sale of Registrable Securities.
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Notwithstanding anything in this Agreement to the contrary, the Company's
obligations and Dukker's rights under this Paragraph 4 are subject to the
limitations and qualifications set forth below.
(i) Dukker will notify the Company within five (5) business days
prior to the date on which he intends to sell Registrable Securities pursuant to
the Registration Statement.
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(ii) Dukker's sales of Registrable Securities pursuant to the
Registration Statement shall not exceed, during any 3-month period, the number
of Registrable Securities that Dukker would then be permitted to sell under Rule
144(e) assuming that the holding period requirements of Rule 144(d) are met.
(iii) Dukker's use of the Registration Statement to sell
Registrable Securities shall be suspended upon the occurrence of any event
described in the first sentence of Paragraph 4.2(c)(iv) and shall remain
suspended until the Company files such amendment or supplement as is
contemplated by the second sentence of Paragraph 4.2(c)(iv).
(iv) The Company's obligations under this Section 4 are
conditioned upon its being eligible to register its securities on Form S-3 at
the time any such registration is otherwise required hereunder, and the
Company's obligations under this Paragraph 4 shall terminate if the Common Stock
is no longer registered pursuant to Section 12(b) or Section 12(g) of the
Exchange Act.
(v) No distribution of Registrable Securities may be made
pursuant to an underwritten offering without the Company's prior written
consent, which shall not be withheld unreasonably or in bad faith.
(vi) At any time that the Company is obligated under this
Agreement to permit Dukker to sell Registrable Securities pursuant to a
registration statement on Form S-3, the Company may include such Registrable
Securities in a registration effected for the benefit of the Company and/or
other selling stockholders, in which case the registration statement relating to
such registration shall constitute a "Registration Statement." In the event
that such registration is in connection with an underwritten offering and if
Dukker intends to participate in such registration, Dukker shall enter into an
underwriting agreement in customary form with the managing underwriter selected
by the Company, and Dukker shall have the right to sell such number of
Registrable Securities as is equal to 20% of the aggregate number of shares of
Common Stock proposed to be sold by the Company and the other selling
stockholders.
(c) Registration Procedures. In connection with any registration
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required under this Agreement, the Company shall take the actions set forth
below.
(i) The Company shall furnish to Dukker such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as Dukker may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by Dukker.
15
(ii) The Company shall notify Dukker of any stop order issued
or threatened by the Commission with respect to the Registration Statement and
will take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(iii) The Company shall use all reasonable efforts to register
or qualify the Registrable Securities under the securities or "blue sky" laws of
each State of the United States of America as Dukker reasonably requests;
provided that the Company shall not be required to (A) qualify generally to do
--------
business in any jurisdiction where it would not otherwise be required to qualify
but for this Paragraph 4.2(c)(iii), (B) subject itself to taxation in any such
jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(iv) The Company shall notify Dukker of the happening of any
event which comes to the Company's attention if, as a result of such event, the
prospectus included in the Registration Statement contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Following such event, the Company shall prepare and furnish to
Dukker and use all reasonable efforts to file with the Commission a supplement
or amendment to such prospectus so that such prospectus will no longer contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that in the event that
-------- -------
the Company determines that disclosure of an event described in the first
sentence of this Paragraph 4.2(c)(iv) would be detrimental to the Company's
business or the interests of its stockholders, the Company may defer filing such
amendment or supplement until it determines that disclosure would not be
detrimental. Upon receipt of a notice from the Company pursuant to this
Paragraph 4.2(c)(iv), Dukker shall keep the fact and content of such notice, and
the event or circumstances giving rise to such notice, confidential.
16
4.3 Other Registration Rights. Dukker acknowledges that certain other
-------------------------
stockholders of the Company may now or hereafter have registration rights, and
that such other stockholders may be entitled to sell their securities at the
same time, or pursuant to the same registration and underwriting, as Dukker
hereunder.
4.4 Expenses of Registration. The Company shall bear all Registration
------------------------
Expenses incurred in connection with the Company's obligations hereunder.
Dukker shall bear all Selling Expenses relating to the Registrable Securities
and all other registration expenses.
4.5 Information by Holder. Dukker shall, as a condition to including
---------------------
Registrable Securities in the Registration Statement, furnish to the Company and
to the underwriter, if any, such information regarding himself, the Registrable
Securities and the intended method of disposition of the Registrable Securities
proposed by Dukker as the Company or such underwriter reasonably may request in
writing in connection with the Registration Statement. At any time during the
effectiveness of the Registration Statement, if Dukker becomes aware of any
change materially affecting the accuracy of the information relating to himself
contained in the Registration Statement or related prospectus, Dukker shall
promptly notify the Company of such change.
4.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted to Dukker under this Paragraph 4 may not be assigned
or transferred to any person without the Company's prior written consent, which
shall not be withheld unreasonably or in bad faith.
4.7 "Market Stand-Off" Agreement.
----------------------------
(a) Legends. Dukker understands and agrees that the Company shall
-------
cause the legend set forth below, or a substantially equivalent legend, to be
placed upon any certificate(s) evidencing ownership of the Registrable
Securities, together with any other legends that may be required by the Company,
any other agreement, or applicable state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
ARE BINDING ON TRANSFEREES OF THESE SHARES.
17
(b) Lock-Up Period. Dukker hereby agrees that, in connection with any
--------------
registration of the offering of any securities for the account of the Company
under the Securities Act (other than as permitted by this Agreement or relating
solely to the sale of securities to participants in a Company stock or other
benefit plan) or with the sale of convertible or other securities for the
account of the Company to qualified institutional buyers pursuant to Rule 144A
(or to institutional accredited investors as defined in Rule 501(a)(1), (2), (3)
and (7) promulgated under the Securities Act or to non-U.S. purchasers pursuant
to Regulation S promulgated under the Securities Act) (such offering or sale
being a "Company Transaction"), Dukker shall not, directly or indirectly, sell,
offer to sell, pledge, contract to sell, make any short sale of, grant any
option or contract to purchase, purchase any option or contract to sell, grant
any right or warrant to purchase, lend or otherwise transfer or encumber any
Registrable Securities or other securities of the Company during the 90-day
period (or such other shorter period as may be requested by the managing
underwriter and agreed to by the Company) following the effective date of the
registration statement or the date of the final offering memorandum relating to
the Company Transaction Dukker further agrees, if so requested by the Company or
any representative of its underwriters, to enter into a lock-up agreement with
such underwriter to the effect set forth in the preceding sentence and in a form
satisfactory to the Company and such underwriter. The Company may impose stop-
transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
4.8 Successor Obligations. If, prior to the one-year anniversary of the
---------------------
effective date of this Agreement, any consolidation or merger of the Company
with another entity, or the sale of all or substantially all of its assets to
another entity, shall be effected in such a way that holders of Common Stock
shall be entitled to receive in exchange for their shares of Common Stock
securities (the "Exchange Securities") of a class that is registered pursuant to
either Section 12(b) or Section 12(g) of the Exchange Act and which have not
been registered pursuant to the Securities Act, then the Company shall use all
reasonable efforts to ensure that the issuer of the Exchange Securities agrees
to register for resale by Dukker the Exchange Securities for which Registrable
Securities held by Dukker are exchanged; such registration to be on the same
terms and subject to the same conditions as nearly as practicable as those set
forth in this Paragraph 4 (but only with respect to the balance of the original
one-year period contemplated by this Paragraph 4).
18
ATTACHMENT D
EMACHINES, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of June 1,
--
1999 by and between emachines, Inc, a Delaware corporation (the "Company"), and
Xxxxxxx Xxxxxx, ("Indemnitee").
--------------
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee to recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of
such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, the Company and Indemnitee desire to continue to have in place the
additional protection provided by an indemnification agreement to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
-------------------
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) (the "Exchange Act"), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of
the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the total voting power represented by the Company's then
outstanding Voting Securities (as defined below), (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's stockholders
was approved by a vote of at least two thirds (2/3) of the directors then still
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, (iii) the stockholders 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 (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event (as defined
below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "Company" shall include, in addition to
emachines, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which emachines, Inc. (or
any of its wholly-owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agents or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
(e) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably
2
withheld), actually and reasonably incurred, of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless otherwise
indicated.
(k) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
---------------
(a) Indemnification of Expenses. Subject to the provisions of
---------------------------
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the
-------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which
3
Independent Legal Counsel is the Reviewing Party) that Indemnitee is not
entitled to be indemnified hereunder under applicable law, (i) the Company shall
have no further obligation under Section 2(a) to make any payments to Indemnitee
not made prior to such determination by such Reviewing Party, and (ii) the
Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all Expenses theretofore paid in indemnifying
Indemnitee; provided, however, that if Indemnitee has commenced or thereafter
-------- -------
commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee is entitled to be indemnified hereunder under
applicable law, any determination made by any Reviewing Party that Indemnitee is
not entitled to be indemnified hereunder under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
Expenses theretofore paid in indemnifying Indemnitee until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse
the Company for any Expenses shall be unsecured and no interest shall be charged
thereon.
(c) Indemnitee Rights on Unfavorable Determination: Binding Effect. If
--------------------------------------------------------------
any Reviewing Party determines that Indemnitee substantively is not entitled to
be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including these legal or factual bases therefor, and, subject to
the provisions of Section 14, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
(d) Selection of Reviewing Party: Change in Control. If there has not
-----------------------------------------------
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such Change in Control (other than a Change in
Control) which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's certificate of incorporation or bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the employment of separate counsel by one or more
Indemnitees has been previously authorized by the Company in writing, or (ii) an
Indemnitee shall have provided to the Company a written statement that such
Indemnitee has reasonably concluded that there may be a conflict of interest
between such Indemnitee and the other Indemnitees with respect to the matters
arising under this Agreement.
4
(e) Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
----------------
(a) Obligation to Make Expense Advances. The Company shall make
-----------------------------------
Expense Advances to Indemnitee upon receipt of a written undertaking by or on
behalf of the Indemnitee to repay such amounts if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified therefore by
the Company.
(b) Form of Undertaking. Any obligation to repay any Expense Advances
-------------------
hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured
and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree
--------------------------------------------
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
---------------------------------------------------
(a) Timing of Payments. All payments of Expenses (including without
------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than forty-five (45) business
days after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. 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, shall not create a presumption that Indemnitee
----------
did not meet any particular standard of conduct or have any particular belief or
that a
5
court has determined that indemnification is not permitted by this Agreement or
applicable law. In addition, neither the failure of any Reviewing Party to have
made a determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement or applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any 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 Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim 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 Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided, however,
that, (i) Indemnitee shall have the right to employ Indemnitee's separate
counsel in any such Claim at Indeminitee's expense and (ii) if (A) the
employment of separate counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee's separate counsel
shall be Expenses for which Indemnitee may receive indemnification or Expense
Advances hereunder.
5. Additional Indemnification Rights: Nonexclusivity.
-------------------------------------------------
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to
-----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's certificate of incorporation, the Company's bylaws or by statute. 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 Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware
6
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, such change, 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 except
as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense
--------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's certificate of incorporation, its
bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not liable under this
--------------------------
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's rights under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the
----------
Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
----------------------------
Expenses resulting from acts, omissions or transactions for which Indemnitee
is prohibited from receiving
7
indemnification under this Agreement or applicable law, provided, however, that
notwithstanding any limitation set forth in this Section 10(a) regarding the
Company's obligation to provide indemnification, Indemnitee shall be entitled
under Section 3 to receive Expense Advances hereunder with respect to any such
Claim unless and until a court having jurisdiction over the Claim shall have
made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has engaged in acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under this Agreement or applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense
------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's certificate of incorporation or bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, or insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Exchange Act, or any similar
successor statute; provided, however, that notwithstanding any limitation set
forth in this Section 10(d) regarding the Company's obligation to provide
indemnification, Indemnitee shall be entitled under Section 3 to receive Expense
Advances hereunder with respect to any such Claim unless and until a court
having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. 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 or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
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substance satisfactory of 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 Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
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In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to
be indemnified for all Expenses incurred by Indemnitee with respect to such
action (including without limitation attorneys' fees), regardless of whether
Idemnitee is ultimately successful in such action, unless as a part of such
action a court having jurisdiction over such action makes a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that each of the material assertions made by Indemnitee as a basis for
such action was not made in good faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action. In the event of an action instituted by or in the name of the
Company under this Agreement to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be indemnified for all Expenses
incurred by Indemnitee in defense of such action (including without limitation
costs and expenses incurred with respect to Indemnitee's counterclaims and
cross-claims made in such action), unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each of
the material defenses asserted by Indemnitee in such action was made in bad
faith or was frivolous; provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under Section 3 to receive
payment of Expense Advances hereunder with respects to such action.
14. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
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 commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. 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) are 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
9
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.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities,
-------------
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. 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 Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereto between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
----------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
EMACHINES, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Print Name: XXXXXX X. XXXXXX
---------------------------------
Title: CFO
---------------------------------
Address: 00000 Xxxxxx Xxxx, Xxxxx 000
00
Xxxxxx, XX 00000
AGREED TO AND ACCEPTED
INDEMNITEE:
/s/ XXXXXXX XXXXXX
-----------------------------------
Name:
Title: CEO
Address: 0000 Xxxxxxxx Xx.
--------------------------
Xxx Xxxxxxxxx, XX 00000
-----------------------------------
___________________________________
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