DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
This Agreement made and entered into this ____ day of January, 2003
(the "Agreement"), by and between ITEX Corporation., a Nevada corporation (the
"Company," which term shall include, where appropriate, any Entity (as
hereinafter defined) controlled directly or indirectly by the Company) and
_________________, a Director or Officer of the Company (the "Indemnitee"):
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors and officers the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors and
officers to litigation risks and expenses, and the limitations on the
availability of directors and officers liability insurance have made it
increasingly difficult for the Company to attract and retain such persons;
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of the Certificate of Incorporation or Bylaws or any change in
the ownership of the Company or the composition of its Board of Directors);
WHEREAS, the Company intends that this Agreement provide Indemnitee
with greater protection than that which is provided by the Company's Certificate
of Incorporation and Bylaws; and
WHEREAS, Indemnitee is relying upon the rights afforded under this
Agreement in continuing to serve as a director or officer of the Company.
NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Definitions.
(a) "Corporate Status" describes the status of a person who is
serving or has served (i) as a director of the Company, (ii) as
an officer of the Company, (iii) in any capacity with respect to
any employee benefit plan of the Company or (iv) as a director,
partner, trustee, officer, employee, or agent of any other Entity
(as defined below) at the request of the Company. For purposes of
subsection (iv) of this Section 1(a), if Indemnitee is serving or
has served as a director, partner, trustee, officer, employee or
agent of a Subsidiary, Indemnitee shall be deemed to be serving
at the request of the Company.
(b) "Entity" shall mean any corporation, partnership, limited
liability company, joint venture, trust, foundation, association,
organization or other legal entity.
(c) "Expenses" shall mean all fees, costs and expenses incurred by
Indemnitee in connection with any Proceeding (as defined below),
including, without limitation, attorneys' fees, disbursements and
retainers (including, without limitation, any such fees,
disbursements and retainers incurred by Indemnitee pursuant to
Sections 10 and 11(c) of this Agreement), fees and disbursements
of expert witnesses, private investigators and professional
advisors (including, without limitation, accountants and
investment bankers), court costs, transcript costs, fees of
experts, travel expenses, duplicating, printing and binding
costs, telephone and fax transmission charges, postage, delivery
services, secretarial services, and other disbursements and
expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities, losses,
penalties, excise taxes, fines and amounts paid in settlement.
(f) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, or any
other proceeding, whether civil, criminal, administrative,
arbitrative or investigative, whether formal or informal,
including a proceeding initiated by Indemnitee pursuant to
Section 10 of this Agreement to enforce Indemnitee's rights
hereunder.
(g) "Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture, trust or other Entity of which
the Company owns (either directly or through or together with
another Subsidiary of the Company) either (i) a general partner,
managing member or other similar interest or (ii) (A) 50% or more
of the voting power of the voting capital equity interests of
such corporation, partnership, limited liability company, joint
venture or other Entity, or (B) 50% or more of the outstanding
voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint
venture or other Entity.
2. Services of Indemnitee. In consideration of the Company's covenants and
commitments hereunder, Indemnitee agrees to serve as a director or officer of
the Company; provided that nothing in this Agreement shall impose any obligation
on Indemnitee to continue Indemnitee's service as a director.
3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as
follows:
(a) Proceedings Other Than By or In the Right of the Company. Subject
to the exceptions contained in Section 4(a) below, if Indemnitee
was or is a party or is threatened to be made a party to any
Proceeding (other than an action by or in the right of the
Company) by reason of Indemnitee's Corporate Status, Indemnitee
shall be indemnified by the Company against all Expenses and
Liabilities incurred or paid by Indemnitee in connection with
such Proceeding (referred to herein as "Indemnifiable Expenses"
and "Indemnifiable Liabilities," respectively, and collectively
as "Indemnifiable Amounts").
(b) Proceedings By or In the Right of the Company. Subject to the
exceptions contained in Section 4(b) below, if Indemnitee was or
is a party or is threatened to be made a party to any Proceeding
by or in the right of the Company by reason of Indemnitee's
Corporate Status, Indemnitee shall be indemnified by the Company
against all Indemnifiable Expenses.
(c) Conclusive Presumption Regarding Standard of Care. In making any
determination required to be made under Nevada law with respect
to entitlement to indemnification hereunder, the person, persons
or entity making such determination shall presume that Indemnitee
is entitled to indemnification under this Agreement if Indemnitee
submitted a request therefore in accordance with Section 5 of
this Agreement, and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any
person, persons or entity of any determination contrary to that
presumption.
4. Exceptions to Indemnification. Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than with respect to any specific claim, issue or matter involved in the
Proceeding out of which Indemnitee's claim for indemnification has arisen, as
follows:
(a) Proceedings Other Than By or In the Right of the Company. If
indemnification is requested under Section 3(a) and it has been
finally adjudicated by a court of competent jurisdiction that, in
connection with such specific claim, issue or matter, Indemnitee
failed to act (i) in good faith and (ii) in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests
of the Company, or, with respect to any criminal action or
proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful, Indemnitee shall not be
entitled to payment of Indemnifiable Amounts hereunder.
(b) Proceedings By or In the Right of the Company. If indemnification
is requested under Section 3(b) and
(i) it has been finally adjudicated by a court of competent
jurisdiction that, in connection with such specific claim,
issue or matter, Indemnitee failed to act (A) in good faith
and (B) in a manner Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company,
Indemnitee shall not be entitled to payment of Indemnifiable
Expenses hereunder; or
(ii) it has been finally adjudicated by a court of competent
jurisdiction that Indemnitee is liable to the Company with
respect to such specific claim, Indemnitee shall not be
entitled to payment of Indemnifiable Expenses hereunder with
respect to such claim, issue or matter unless the court in
which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability, but
in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnification for such
Indemnifiable Expenses which such court shall deem proper;
or
(iii) it has been finally adjudicated by a court of competent
jurisdiction that Indemnitee is liable to the Company for an
accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act
of 1934, the rules and regulations promulgated thereunder
and amendments thereto or similar provisions of any federal,
state or local statutory law, Indemnitee shall not be
entitled to payment of Indemnifiable Expenses hereunder.
(c) Insurance Proceeds. To the extent payment is actually made to the
Indemnitee under a valid and collectible insurance policy in
respect of Indemnifiable Expenses in connection with such
specific claim, issue or matter, Indemnitee shall not be entitled
to payment of Indemnifiable Expenses hereunder except in respect
of any excess beyond the amount of payment under such insurance
and the amount of any deductible from such insurance..
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit
to the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and the basis for the
claim. The Company shall pay such Indemnifiable Amounts to Indemnitee within
thirty (30) calendar days of receipt of the request. At the request of the
Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is
entitled to indemnification hereunder.
6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without prejudice, by
reason of settlement, judgment, order or otherwise, shall be deemed to be a
successful result as to such claim, issue or matter.
7. Effect of Certain Resolutions. Neither the settlement or termination of
any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create a presumption that
Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action or proceeding, had reasonable cause to
believe that Indemnitee's action was unlawful.
8. Agreement to Advance Expenses; Undertaking. The Company shall advance
all Expenses incurred by or on behalf Indemnitee in connection with any
Proceeding, including a Proceeding by or in the right of the Company, in which
Indemnitee is involved by reason of such Indemnitee's Corporate Status within
ten (10) calendar days after the receipt by the Company of a written statement
from Indemnitee requesting such advance or advances from time to time, whether
prior to or after final disposition of such Proceeding. To the extent required
by Nevada law, Indemnitee hereby undertakes to repay any and all of the amount
of Indemnifiable Expenses paid to Indemnitee if it is finally determined by a
court of competent jurisdiction that Indemnitee is not entitled under this
Agreement to indemnification with respect to such Expenses. This undertaking is
an unlimited general obligation of Indemnitee.
9. Procedure for Advance Payment of Expenses. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than ten (10) calendar days after the Company's receipt of such request.
10. Remedies of Indemnitee.
(a) Right to Petition Court. In the event that Indemnitee makes a
request for payment of Indemnifiable Amounts under Sections 3 and
5 above or a request for an advancement of Indemnifiable Expenses
under Sections 8 and 9 above and the Company fails to make such
payment or advancement in a timely manner pursuant to the terms
of this Agreement, Indemnitee may petition a court of competent
jurisdiction to enforce the Company's obligations under this
Agreement.
(b) Burden of Proof. In any judicial proceeding brought under Section
10(a) above, the Company shall have the burden of proving that
Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. The Company agrees to reimburse Indemnitee in full for
any Expenses incurred by Indemnitee in connection with
investigating, preparing for, litigating, defending or settling
any action brought by Indemnitee under Section 10(a) above, or in
connection with any claim or counterclaim brought by the Company
in connection therewith, whether or not Indemnitee is successful
in whole or in part in connection with any such action.
(d) Failure to Act Not a Defense. The failure of the Company
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a
determination concerning the permissibility of the payment of
Indemnifiable Amounts or the advancement of Indemnifiable
Expenses under this Agreement shall not be a defense in any
action brought under Section 10(a) above, and shall not create a
presumption that such payment or advancement is not permissible.
11. Defense of the Underlying Proceeding.
(a) Notice by Indemnitee. Indemnitee agrees to notify the Company
promptly upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to
any Proceeding which may result in the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses hereunder;
provided, however, that the failure to give any such notice shall
not disqualify Indemnitee from the right, or otherwise affect in
any manner any right of Indemnitee, to receive payments of
Indemnifiable Amounts or advancements of Indemnifiable Expenses
unless the Company's ability to defend in such Proceeding is
materially and adversely prejudiced thereby.
(b) Defense by Company. Subject to the provisions of the last
sentence of this Section 11(b) and of Section 11(c) below, the
Company shall have the right to defend Indemnitee in any
Proceeding which may give rise to the payment of Indemnifiable
Amounts hereunder; provided, however that the Company shall
notify Indemnitee of any such decision to defend within ten (10)
calendar days of receipt of notice of any such Proceeding under
Section 11(a) above. The Company shall not, without the prior
written consent of Indemnitee, consent to the entry of any
judgment against Indemnitee or enter into any settlement or
compromise which (i) includes an admission of fault of Indemnitee
or (ii) does not include, as an unconditional term thereof, the
full release of Indemnitee from all liability in respect of such
Proceeding, which release shall be in form and substance
reasonably satisfactory to Indemnitee. This Section 11(b) shall
not apply to a Proceeding brought by Indemnitee under Section
10(a) above or pursuant to Section 19 below.
(c) Indemnitee's Right to Counsel. Notwithstanding the provisions of
Section 11(b) above, if in a Proceeding to which Indemnitee is a
party by reason of Indemnitee's Corporate Status, (i) Indemnitee
reasonably concludes that he or she may have separate defenses or
counterclaims to assert with respect to any issue which may not
be consistent with the position of other defendants in such
Proceeding, (ii) a conflict of interest or potential conflict of
interest exists between Indemnitee and the Company, or if the
Company fails to assume the defense of such proceeding in a
timely manner, Indemnitee shall be entitled to be represented by
separate legal counsel of Indemnitee's choice at the expense of
the Company. In addition, if the Company fails to comply with any
of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any action, suit
or proceeding to deny or to recover from Indemnitee the benefits
intended to be provided to Indemnitee hereunder, Indemnitee shall
have the right to retain counsel of Indemnitee's choice, at the
expense of the Company, to represent Indemnitee in connection
with any such matter.
12. Representations and Warranties of the Company. The Company hereby
represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to
enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings
contemplated by this Agreement have been duly authorized by the
Company.
(b) Enforceability. This Agreement, when executed and delivered by
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
the enforcement of creditors' rights generally.
13. Insurance. The Company shall at all times maintain a policy or policies
of insurance in the amount of at least $250,000 per occurrence with a reputable
insurance company providing the Indemnitee with coverage for losses from
wrongful acts, and to ensure the Company's performance of its indemnification
obligations under this Agreement. In all policies of director and officer
liability insurance, Indemnitee shall be named as an insured in such a manner as
to provide Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's officers and directors.
14. Contract Rights Not Exclusive. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's Certificate of
Incorporation or By-laws, or any other agreement, vote of stockholders or
directors (or a committee of directors), or otherwise, both as to action in
Indemnitee's official capacity and as to action in any other capacity as a
result of Indemnitee's serving as a director or officer of the Company.
15. Successors. This Agreement shall be (a) binding upon all successors and
assigns of the Company (including any transferee of all or a substantial portion
of the business, stock and/or assets of the Company and any direct or indirect
successor by merger or consolidation or otherwise by operation of law) and (b)
binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.
16. Subrogation. In the event of any payment of Indemnifiable Amounts under
this Agreement, the Company shall be subrogated to the extent of such payment to
all of the rights of contribution or recovery of Indemnitee against other
persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
17. Change in Law. To the extent that a change in Nevada law (whether by
statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the Bylaws and this
Agreement, Indemnitee shall be entitled to such broader indemnification and
advancements, and this Agreement shall be deemed to be amended to such extent.
18. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement, or any clause thereof, shall be
determined by a court of competent jurisdiction to be illegal, invalid or
unenforceable, in whole or in part, such provision or clause shall be limited or
modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.
19. Indemnitee as Plaintiff. Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless the Board
of Directors of the Company has consented to the initiation of such Proceeding.
This Section shall not apply to counterclaims or affirmative defenses asserted
by Indemnitee in an action brought against Indemnitee.
20. Modifications and Waiver. Except as provided in Section 17 above with
respect to changes in Nevada law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
21. General Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
(i) If to Indemnitee, to:
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(ii) If to the Company, to:
ITEX Corporation
0000 Xxxxxxx Xxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Secretary
or to such other address as may have been furnished in the same manner by any
party to the others.
22. Governing Law; Consent to Jurisdiction; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Nevada without regard to its rules of conflict of laws. Each of the
Company and the Indemnitee hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of Nevada and
the courts of the United States of America located in the State of Nevada (the
"Nevada Courts") for any litigation arising out of or relating to this Agreement
and the transactions contemplated hereby (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Nevada Courts and agrees not to
plead or claim in any Nevada Court that such litigation brought therein has been
brought in an inconvenient forum. Each of the parties hereto agrees, (a) to the
extent such party is not otherwise subject to service of process in the State of
Nevada, to appoint and maintain an agent in the State of Nevada as such party's
agent for acceptance of legal process, and (b) that service of process may also
be made on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of valid
service. Service made pursuant to (a) or (b) above shall have the same legal
force and effect as if served upon such party personally within the State of
Nevada. For purposes of implementing the parties' agreement to appoint and
maintain an agent for service of process in the State of Nevada, each such party
does hereby appoint The Corporation Trust Company, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxx 00000, as such agent and each such party
hereby agrees to complete all actions necessary for such appointment.
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto have executed this Agreement as of the day and year first above written.
ITEX CORPORATION
By:
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Name:
Title:
INDEMNITEE
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Print Name:
