EXHIBIT 10.12
TEKELEC
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is made on June 27, 2003
between Tekelec, a California corporation ("Tekelec"), and Xxxxxx X. Xxxxxx
("Indemnitee"), a member of the Board of Directors of Tekelec.
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors of publicly held
corporations unless they are protected by comprehensive policies of insurance or
indemnification, due, among other things, to the increased number of lawsuits
against such corporations and their directors, the attendant expense of
defending against such lawsuit, and the exposure of such directors to
unreasonably high damages;
WHEREAS, present laws and interpretations are frequently too uncertain to
provide such directors with adequate, reliable knowledge of the legal risks to
which they may be exposed as a result of serving a corporation;
WHEREAS, the Board of Directors has concluded that its directors should be
provided with the maximum available protection against inordinate risks in order
to insure that the most capable persons will be attracted to and remain in such
positions and, therefore, has determined to obligate itself contractually to
indemnify in a reasonable and adequate manner its directors and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against its directors as a result of their service to Tekelec;
WHEREAS, applicable law empowers a corporation to indemnify persons
serving as a director, officer, employee or agent of the corporation or a person
who serves at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, and further empowers a corporation to purchase and maintain
insurance (on behalf of such persons) against liability which may be asserted
against him or incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of said laws;
WHEREAS, the Board of Directors has concluded that, due to the high cost
and other negative features of the coverage under presently available directors
and officers liability insurance, it would not be in the best interests of its
shareholders for Tekelec to purchase and maintain such insurance at this time
and that its shareholders' interests would be better served by contracting to
indemnify its directors and officers;
WHEREAS, Tekelec desires to have Indemnitee serve or continue to serve as
a director of Tekelec free from undue concern for unpredictable, inappropriate
or unreasonable claims for damages by reason of his being a director of Tekelec
or by reason of his decision or actions on its behalf, and Indemnitee desires to
serve, or to continue to serve (provided that he is furnished the indemnity
provided for hereinafter), in such capacity; and
WHEREAS, the parties believe it appropriate to memorialize and reaffirm
Tekelec's indemnification obligations to Indemnitee and, in addition, to set
forth the agreements contained herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. Agreement to Serve. Indemnitee will serve and/or continue to serve, at
the will of Tekelec or under separate contract, if such exists, as a director
faithfully so long as he is duly elected and qualified in accordance with the
provisions of the Bylaws of Tekelec or until such time as he tenders his
resignation in writing.
2. Indemnification. Indemnitee shall be indemnified and held harmless by
Tekelec to the fullest extent permitted by its Articles of Incorporation, Bylaws
and applicable law, as the same exists or may hereafter be amended, against all
expenses, liability and loss (including attorneys' fees, judgments, fines and
amounts paid or to be paid in any settlement approved in advance by Tekelec,
which approval shall not unreasonably be withheld) (collectively, "Indemnifiable
Expenses"), which are not paid directly by an insurance carrier under a policy
of officers' and directors' liability insurance, or by Tekelec otherwise than
pursuant to this Agreement, and which are reasonably incurred or suffered by
Indemnitee in connection with the defense of any present or future threatened,
pending or completed investigation, claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative, (i) to which Indemnitee was or
is a party or is threatened to be made a party by reason of conduct in
Indemnitee's capacity as a director of Tekelec, or (ii) with respect to which
Indemnitee is otherwise involved by reason of the fact that Indemnitee is or was
serving as a director of Tekelec, of any subsidiary, or is or was serving at the
request of Tekelec as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (collectively,
"Indemnifiable Litigation"). Notwithstanding the foregoing, Indemnifiable
Litigation shall not be deemed to include actions or investigations brought
against Indemnitee for violation of Section 16 of the Securities Exchange Act of
1934 or for failure to qualify for an exemption under Section 4 of the
Securities Act of 1933.
3. Interim Expenses; Undertaking to Repay.
(a) Tekelec agrees to pay Indemnifiable Expenses incurred by
Indemnitee in connection with any Indemnifiable Litigation in advance of the
final disposition thereof unless a determination is reasonably and promptly made
by the Board of Directors by a majority vote of a quorum of disinterested
directors that, based upon the facts known to the Board at the time such
determination is made, Indemnitee acted in bad faith or in a manner that
Indemnitee did not believe to be in the best interests of Tekelec, or, with
respect to any action by or in the right of Tekelec to procure a judgment in its
favor, that Indemnitee acted in bad faith or in a manner Indemnitee did not
believe to be in the best interests of Tekelec and its shareholders, or, with
respect to any criminal proceeding, that Indemnitee believed or had reasonable
cause to believe his conduct was unlawful. In no event shall any advance be made
in instances where the Board of Directors reasonably determines that Indemnitee
deliberately breached his duty to Tekelec or its shareholders. In the
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event Indemnitee believes that such determination is wrongful, Indemnitee may
bring an action against Tekelec to recover advances in accordance with the
provisions of Section 4(a).
(b) In regard to any payments made by Tekelec to Indemnitee pursuant
to the terms of this Section 3, Indemnitee hereby undertakes and agrees to repay
to Tekelec any and all amounts so paid promptly and in any event within ninety
(90) days after the disposition, including any appeals, of any litigation or
threatened litigation on account of which payments were made; provided, however,
to the extent that Indemnitee is entitled to be indemnified by Tekelec under
this Agreement, the Articles of Incorporation or Bylaws of Tekelec and/or under
applicable law, Indemnitee shall not be required to repay the amount as to which
he is determined to be entitled to indemnification. This undertaking shall not
affect in any manner any other rights which Indemnitee may have against Tekelec,
any insurer, or any other person to seek indemnification for or reimbursement of
any expenses referred to herein or any judgment which may be rendered in any
litigation or proceeding.
4. Failure to Indemnify.
(a) If a claim under this Agreement, under any statute, or under any
provision of Tekelec's Articles of Incorporation or Bylaws providing for
indemnification, is not paid in full by Tekelec within forty-five (45) days
after a written request for payment thereof has first been received by Tekelec,
Indemnitee may, but need not, at any time thereafter bring an action against
Tekelec to recover the unpaid amount of the claim and, if successful in whole or
in part, Indemnitee shall also be entitled to be paid for the reasonable
expenses (including attorneys' fees) of bringing such action.
(b) It shall be a defense to any such action (other than an action
brought to enforce a claim under Section 3(a) for Indemnifiable Expenses
incurred in connection with Indemnifiable Litigation in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for Tekelec to indemnify Indemnitee for the
amount claimed. It is the parties' intention that if Tekelec contests
Indemnitee's right to indemnification or to receive payments pursuant to Section
3(a), the question of Indemnitee's right to indemnification shall be for the
court to decide, and neither the failure of Tekelec (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by Tekelec (including its Board of Directors, any committee
or subgroup of the Board of Directors, independent legal counsel or its
shareholders) that Indemnitee has or has not met the applicable standard of
conduct.
5. Successors. This Agreement establishes contract rights which shall be
binding upon, and shall inure to the benefit of, the successors, assigns, heirs
and legal representatives of the parties hereto, and which shall continue after
Indemnitee ceases to hold a position or have a relationship with Tekelec.
6. Contract Rights Not Exclusive. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may
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hereafter acquire under any statute, provision of Tekelec's Articles of
Incorporation or Bylaws, agreement, vote of shareholders or directors or
otherwise.
7. Indemnitee's Obligations. Indemnitee shall promptly advise Tekelec in
writing of the institution of any investigation, claim, action, suit or
proceeding which is or may be subject to this Agreement and shall keep Tekelec
generally informed of and consult with Tekelec with respect to the status of any
such investigation, claim, action, suit or proceeding.
8. Severability. Should any provision or section of this Agreement, or any
clause thereof, be held to be invalid, illegal or unenforceable, in whole or in
part, the remaining provisions, sections and clauses of this Agreement shall
remain fully enforceable and binding on the parties.
9. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties thereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver.
10. Choice of Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
TEKELEC
By: /s/ Xxxxxxxxx X. Xxx
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Xxxxxxxxx X. Xxx, President
and Chief Executive Officer
Attest:
/s/ Xxxxxx X. Xxxxxx
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Secretary
INDEMNITEE
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
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