1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the ______ day of December, 1999, between
TRUETIME, INC., a Delaware corporation ("Corporation") and
__________________________ ("Indemnified Party").
WITNESSETH:
WHEREAS, Indemnified Party is, or is about to become, a member of the
Board of Directors or an officer of the Corporation and in such capacity is
performing a valuable service for Corporation;
WHEREAS, Indemnified Party may from time to time serve as a director,
officer, employee, trustee or agent of other corporations, partnerships, joint
ventures, trusts or other enterprises, entities or plans at the request of
Corporation in order to pursue Corporation's interests;
WHEREAS, the Certificate of Incorporation (the "Certificate") and the
Bylaws (the "Bylaws") of Corporation provide for the mandatory indemnification
of the officers, directors, agents and employees of Corporation to the maximum
extent authorized by Section 145 of the Delaware General Corporation Statute, as
amended hereafter (the "State Statute");
WHEREAS, such Certificate, such Bylaws and the State Statute
specifically provide that they are not exclusive and thereby contemplate that
contracts or other arrangements not inconsistent with the State Statute may be
entered into between Corporation and the members of its Board of Directors and
its officers with respect to indemnification of such directors and officers;
WHEREAS, in accordance with the authorization provided by the State
Statute, Corporation is purchasing and will maintain a policy of Directors' and
Officers' Liability Insurance ("D&O Insurance"), covering certain liabilities
which may be incurred by its directors and officers in the performance of their
services for Corporation, possibly including certain liabilities for which
indemnification by the Corporation is not authorized or permitted under the
State Statute;
WHEREAS, uncertainties with respect to the terms and availability of
D&O Insurance and with respect to the application, amendment and enforcement of
statutory and by-law indemnification provisions make it desirable to supplement
and enhance the adequacy and reliability of the protection afforded to directors
and officers thereby;
WHEREAS, Corporation is in the process of accomplishing an initial
public offering ("IPO") of its common stock and desires to recruit new directors
and to continue the service of its existing directors to Corporation as a public
company;
WHEREAS, in order to supplement and enhance the protection afforded
Indemnified Party and to induce Indemnified Party to serve as a member of the
Board of Directors or as an officer of
2
Corporation at and after the IPO (and to be named as a director or person
consenting to be a director in the IPO documents), Corporation has determined
and agreed to enter into this contract with Indemnified Party, which contract
has been approved and adopted by Corporation's Board and such Board action has
been ratified by Corporation's sole stockholder; and
WHEREAS, this contract has been so approved and ratified but shall not
become effective until the day one day prior to the consummation of the IPO;
NOW, THEREFORE, in consideration of Indemnified Party's continued
service as a director or an officer of Corporation after the date hereof the
parties hereto agree as follows:
1. DEFINITIONS.
"Litigation Costs" means costs, charges, expenses and obligations,
including, without limitation, all bonds, expenses of investigation,
fees and expenses of experts, accountants or other professionals,
travel and lodging expenses, and attorneys' fees and expenses,
reasonably incurred or contracted for in the investigation, defense or
prosecution of or other involvement in any Proceeding and any appeal
therefrom, and all costs of appeal, attachment, supersede as and other
bonds that may be relevant to any Proceeding.
"Losses" means the total of all amounts which Indemnified Party
becomes, or may become, legally obligated to pay in connection with any
Proceeding, including (without limitation) judgments, penalties, fines,
court or investigative costs, amounts paid in settlement, amounts lost
or ordered forfeited pursuant to injunctive sanctions, and all
Litigation Costs.
"Proceeding" means any threatened, pending or completed action, suit,
proceeding, subpoena compliance, inquiry or investigation, whether
civil, criminal, administrative or investigative (whether external and
involving outside parties or internal to the Corporation, including,
but not limited to, an action by or in the right of the Corporation and
any internal investigation conducted by the Board of Directors or any
committee or other designee thereof or any other person), and whether
formal or informal.
2. INDEMNITY OF INDEMNIFIED PARTY. Corporation hereby agrees to indemnify
Indemnified Party to the fullest extent authorized or permitted by the
provisions of the State Statute, including, but not limited to, (i) the
maximum extent permitted by the provisions of such Statute which
provide that such Statute is not the exclusive basis for
indemnification of directors and officers and (ii) the maximum extent
authorized or permitted by any amendment thereof or other statutory
provision authorizing or permitting such indemnification which is
adopted after the date hereof.
3. ADDITIONAL INDEMNITY. In addition to and not in substitution for or
diminution of the obligations of indemnification set forth in Section 2
hereof, Corporation hereby further agrees to indemnify Indemnified
Party, to the fullest extent permitted by law, against any and all
Litigation Costs and Losses of Indemnified Party in connection with any
Proceeding to which Indemnified Party is, was or at any time becomes a
party, or is threatened to be made
2
3
a party or otherwise becomes involved (other than as plaintiff except
where being a plaintiff or intervenor is necessary to avoid res
judicata or collateral estoppel or other estoppel or other result as to
matters which may adversely impact Indemnified Party) by reason of the
fact that Indemnified Party is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise or any benefit plan related to the
business and affairs of Corporation, and specifically including any
Proceeding brought pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 (the "1934 Act") or any other provision
under the 1934 Act and the Securities Act of 1933 and the rules and
regulations thereunder.
4. LIMITATIONS ON INDEMNITY. No amounts of Indemnity pursuant to Section 2
or 3 hereof shall be paid by Corporation:
(a) Except to the extent the aggregate of Litigation Costs and
Losses in any Proceeding or group of related Proceedings to be
indemnified thereunder exceeds the amount of Litigation Costs
and Losses for which the Indemnified Party actually receives
indemnification payments or on whose behalf indemnification
payments are made pursuant to any D&O Insurance policy or from
any other source;
(b) On account of any payments required to be paid by an
Indemnified Party as a result of any Proceeding in which a
final, non-appealable judgment is rendered against Indemnified
Party for an accounting or disgorgement of profits made from
the purchase or sale by Indemnified Party of securities of
Corporation pursuant to the provisions of Section 16(b) of the
1934 Act;
(c) On account of any claim made against Indemnified Party brought
about or contributed to by the dishonesty of Indemnified Party
seeking payment hereunder; however, notwithstanding the
foregoing, Indemnified Party shall be protected under this
Agreement as to any claims upon which suit may be brought
against him by reason of any alleged dishonesty on his part
unless a final adjudication adverse to Indemnified Party shall
establish that he committed (i) acts of active and deliberate
dishonesty (ii) with actual dishonest purpose and intent,
which acts were material to the cause of action so
adjudicated;
(d) If a final non-appealable decision by a court having
jurisdiction over the parties and the subject matter shall
determine that such indemnification is not lawful.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of
Corporation contained herein and in the Certificate and the Bylaws
shall continue during the period Indemnified Party is a director,
officer, employee, trustee or agent of Corporation (or is or was
serving at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise or any benefit plan related to the business and
affairs of Corporation or of any of its affiliates, subsidiaries,
associates or other entities
3
4
in which it is interested) and shall continue thereafter so long as
Indemnified Party shall be subject to any possible Litigation Costs or
Losses in any Proceeding by reason of the fact that Indemnified Party
was a director, officer, employee, trustee or agent of Corporation (or
is or was serving at the request of Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise or any such benefit plan).
6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
Indemnified Party of notice of the commencement of any Proceeding,
Indemnified Party will, if a claim in respect thereof is to be made
against Corporation under this Agreement, give reasonable notice to
Corporation of the commencement thereof; but the omission so to notify
Corporation will not relieve Corporation from any liability which it
may have to Indemnified Party unless Corporation can demonstrate by
clear and convincing evidence that it was materially prejudiced by the
failure to receive such notice. With respect to any such Proceeding as
to which Indemnified Party becomes involved:
(a) Corporation will be entitled to participate therein at its own
expense; and
(b) Except as otherwise provided below, to the extent that it may
wish, Corporation may, jointly with any other indemnifying
party, assume the defense thereof, with outside counsel which
must be reasonably satisfactory to Indemnified Party. After
notice from Corporation to Indemnified Party of its election
so to assume the defense thereof (and consent of Indemnified
Party as to Corporation's choice of outside counsel, which
consent will not be unreasonably withheld), Corporation will
be liable to Indemnified Party under this Agreement for all
Litigation Costs (subject to Section 4 above and other than as
provided below with respect to attorneys' fees) incurred in
connection therewith. Indemnified Party shall have the right
to employ personal counsel in such Proceeding, but the fees
and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof (and
consent of Indemnified Party as to Corporation's choice of
outside counsel) shall be at the expense of Indemnified Party,
unless (i) the employment of counsel for Indemnified Party has
been authorized by Corporation, (ii) Indemnified Party shall
have concluded in good faith that there may be a conflict of
interest between Corporation and Indemnified Party in the
conduct of the defense (or part of the defense) of such
action, or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be at the expense
of Corporation. Corporation shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of
Corporation or as to which Indemnified Party shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Indemnified Party
under this Agreement for any Losses paid in settlement of any
Proceeding or claim effected without its written consent.
Corporation shall not settle any Proceeding or claim in any
manner which would impose any penalty, sanction or limitation
on Indemnified Party, or
4
5
otherwise effectively indicate the existence of any wrongful
act by Indemnified Party, without Indemnified Party's written
consent. Neither Corporation nor Indemnified Party will
unreasonably withhold its consent to any proposed settlement.
Without intending to limit the circumstances in which it would
be unreasonable for Corporation to withhold its consent to a
settlement, the parties hereto agree it would be unreasonable
for Corporation to withhold its consent to a settlement in an
amount that did not exceed, in the business judgment of the
Board of Directors of Corporation, the estimated amount of
Litigation Costs of Indemnified Party to litigate the
Proceeding to conclusion, provided that there is no other
materially adverse consequence to Corporation from such
settlement.
7. NO PRESUMPTIONS. The termination of any Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption (i) that
Indemnified Party did not act in good faith, (ii) with respect to any
criminal action or proceeding, that Indemnified Party had reasonable
cause to believe that his conduct constituted a criminal violation or
(iii) that Indemnified Party was knowingly fraudulent, deliberately
dishonest or committed an act, or made an omission, involving willful
misconduct.
8. MANDATORY ADVANCEMENT OF EXPENSES. At the request of Indemnified Party,
Litigation Costs incurred or contracted for by him in any Proceeding
shall be paid by Corporation on a continuing and current basis, in
advance of the final disposition of such matter, with the undertaking
which Indemnified Party makes hereby that if it shall be ultimately
determined that Indemnified Party was not entitled to be indemnified
therefor, or was not entitled to be fully indemnified therefor,
Indemnified Party shall repay to Corporation the amount, or appropriate
portion thereof, so advanced. Such advancement and current payment of
Litigation Costs by Corporation shall be made promptly (but in any
event within 10 days) after receipt by Corporation of Indemnified
Party's request therefor.
9. REPAYMENT OF EXPENSES. Indemnified Party agrees that Indemnified Party
will reimburse Corporation for all Litigation Costs paid by Corporation
in connection with any Proceeding in which Indemnified Party is
involved in the event and only to the extent that it shall be
ultimately determined by final non-appealable judgment of a court of
competent jurisdiction that Indemnified Party is not entitled to be
indemnified by Corporation for such Litigation Costs under the
provisions of the State Statute, the Certificate, the Bylaws and this
Agreement.
10. PROCEDURE.
(a) Indemnification hereunder shall be made promptly, and in any
event within thirty days of Indemnified Party's written
request therefor, unless (i) an affirmative determination is
made reasonably and within such thirty-day period by
Corporation in the manner provided in subsection (b) below,
that Indemnified Party is not entitled to indemnity hereunder
for any reason other than as contemplated by clause (ii) of
this Section 10(a), or (ii) an affirmative determination is
required by the State Statute
5
6
or other applicable law that the Indemnified Party met an
applicable standard of conduct, in which case the Corporation
will cause such determination to be made within sixty days
from the date of the written request for indemnity.
(b) The determination to be made by Corporation under subsection
(a) above shall be based on the facts known at the time and
shall be made (i) by the Board, by a majority vote of a quorum
consisting of directors who are not parties to the Proceeding
("disinterested directors"), or (ii) if such a quorum is not
obtainable, by independent legal counsel in a written opinion,
or (iii) even if such a quorum is obtainable, by independent
legal counsel in a written opinion if the Board, by a majority
vote of a quorum consisting of disinterested directors, so
directs, or (iv) by the stockholders of Corporation. Any such
determination may be contested by Indemnified Party as
hereinafter contemplated.
(c) A failure to make any required determination within the period
of time specified shall be deemed to be a determination
favorable to the Indemnified Party.
11. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on
Corporation hereby and has obtained the approval of its Board
of Directors and the ratification of such approval by its sole
stockholder in order to induce Indemnified Party to serve as a
director or an officer of Corporation and acknowledges that
Indemnified Party is relying upon this Agreement in agreeing
to serve in such capacity.
(b) In the event Indemnified Party is required to bring any action
to enforce rights or to collect moneys due under this
Agreement, Corporation shall reimburse Indemnified Party, on a
continuing and current basis, for all of Indemnified Party's
reasonable fees and expenses in bringing and pursuing such
action and Indemnified Party shall have no obligation to
reimburse Corporation therefor unless Indemnified Party is not
successful in such action after rendition of a final,
non-appealable judgment by a court of competent jurisdiction.
(c) The right to indemnification hereunder shall be enforceable by
Indemnified Party in any court of competent jurisdiction if
Indemnified Party's claim therefor is denied, in whole or in
part, in the manner provided herein, or if no disposition of
such claim is made within sixty days from the receipt by
Corporation of Indemnified Party's request for indemnification
hereunder.
12. INSURANCE. Corporation shall maintain in full force and effect, at its
own expense, director and officer liability insurance ("Insurance")
coverage for each director and officer in amounts and scope at least as
favorable as that maintained by Corporation on the effective date of
its registration statement in connection with its initial public
offering or, to the extent more favorable, any Insurance policy entered
into or renewed by Corporation following such date.
6
7
Notwithstanding the foregoing, if Corporation, after using its best
efforts, cannot obtain and purchase such coverage for an amount no more
than what it paid for the most recent expiring Insurance policy plus a
reasonable additional amount reflecting increased premium costs for
Companies situated at the time as Corporation, Corporation shall only
be required to purchase such Insurance coverage for any act or omission
occurring at or prior to the time of such date, sometimes referred to
in the insurance industry as "tail" coverage.
13. SEVERABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others so that if any
provision hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof. To the
extent necessary to effectuate this Agreement, should any provision
hereof be held invalid or unenforceable, this Agreement shall be
reformed in such manner as to provide the maximum indemnity
contemplated hereby to Indemnified Party, it being the intention of the
parties hereto that this Agreement be otherwise given its maximum
effect consistent with the laws of the State of Delaware.
14. OBLIGATION TO AMEND. Corporation agrees to take all actions necessary
to amend this Agreement in the future to increase or otherwise maximize
the indemnity protections intended to be afforded hereby to the extent
then permitted by law. Corporation will take no action, however, to
amend the provisions of its Certificate or Bylaws pertaining to
indemnity with any retroactive effect without the consent of the
Indemnified Party.
15. NOTICE. Any notice, request or other communication hereunder to
Corporation or Indemnified Party shall be in writing and delivered or
sent by postage prepaid first class mail or by hand delivery or express
mail service or by facsimile copy to Corporation's facsimile phone
number as follows: (i) if to Corporation, addressed to TrueTime, Inc.,
0000 Xxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, and (ii) if to
Indemnified Party, to the address shown on the signature page hereof or
at such other address as Indemnified Party shall designate from time to
time to Corporation in writing.
16. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Delaware.
(b) This Agreement shall be binding upon Indemnified Party and
upon Corporation, its successors and assigns, and shall inure
to the benefit of Indemnified Party, his heirs, personal
representatives and assigns and to the benefit of Corporation,
its successors and assigns. Corporation will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or any substantial part of
the business and/or assets of Corporation, by agreement in
form and substance satisfactory to Indemnified Party, to
expressly assume and agree to perform this Indemnification
Agreement in the same manner and to the same extent that
Corporation would be required to perform it if no such
succession had taken place. Failure of Corporation to obtain
such agreement prior to effectiveness of any
7
8
succession shall be a breach of this Indemnification Agreement
and shall entitle Indemnified Party to appropriate equitable
relief or monetary damages from Corporation in an amount
necessary to provide Indemnified Party with the protections to
which he would be entitled hereunder. As used in this
Indemnification Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its
business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 14 or that
otherwise becomes bound by all the terms and provisions of
this Indemnification Agreement by operation of law.
(c) No amendment, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRUETIME, INC.
By
-----------------------------------
Authorized Signatory
-------------------------------------
Indemnified Party
Address:
-----------------------------
-----------------------------
-----------------------------
8
