INDEMNIFICATION AGREEMENT
Exhibit 10.5
This Agreement is made as of , 2006, between LoopNet, Inc., a Delaware corporation
(the “Company”), and (the “Indemnitee”).
RECITALS
Both the Company and Indemnitee recognize that highly competent persons have become more
reluctant to serve publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification against inordinate
risks of claims and actions against them arising out of their service to and activities on behalf
of the corporation.
In recognition of Indemnitee’s need for substantial protection against personal liability in
order to enhance Indemnitee’s continued service to the Company in an effective manner and
Indemnitee’s reliance on the provisions of the Company’s Certificate of Incorporation (“Certificate
of Incorporation”) and the Company’s Bylaws (the “Bylaws”) requiring indemnification of the
Indemnitee to the fullest extent permitted by law, and in part to provide Indemnitee with specific
contractual assurance that the protection promised by such Certificate of Incorporation and Bylaws
will be available to Indemnitee (regardless of, among other things, any amendment to or revocation
of such Certificate of Incorporation or Bylaws or any change in the composition of the Company’s
Board of Directors or acquisition transaction relating to the Company), the Company wishes to
provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to
the fullest extent (whether partial or complete) permitted by law and as set forth in this
Agreement.
The Certificate of Incorporation, the Bylaws and the General Corporation Law of the State of
Delaware (“DGCL”) expressly provide that the indemnification provisions set forth therein are not
exclusive and thereby contemplate that contracts may be entered into between the Company and
members of the board of directors, officers and other persons with respect to indemnification.
It is reasonable, prudent and necessary for the Company contractually to obligate itself to
indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free from undue concern
that they will not be so indemnified.
This Agreement is a supplement to and in furtherance of the Certificate of Incorporation and
Bylaws and any resolutions adopted pursuant thereto and shall not be deemed a substitute therefor,
nor to diminish or abrogate any rights of Indemnitee thereunder.
AGREEMENT
In consideration of the premises and of Indemnitee agreeing to serve or continuing to serve
the Company directly or, at its request, with another enterprise, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Basic Indemnification Agreement.
(a) In the event Indemnitee was, 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, a Claim (as defined in
Section 9(b)) by reason of (or arising in part out of) an Indemnifiable Event (as defined in
Section 9(d)), the Company shall indemnify Indemnitee to the fullest extent permitted by law as
soon as practicable but in any event no later than 30 days after written demand is presented to the
Company, against any and all Expenses (as defined in Section 9(c)), judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other charges paid or payable
in connection therewith) of such Claim actually and reasonably incurred by or on behalf of
Indemnitee in connection with such Claim and any federal, state, local or foreign taxes imposed on
Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. If
requested by Indemnitee in writing, the Company shall advance (within ten business days of such
written request) any and all Expenses to Indemnitee (an “Expense Advance”). Notwithstanding
anything in this Agreement to the contrary, prior to a Change of Control (as defined in Section
9(a)) and except as set forth in Sections 1(b), 3 and 7, Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with any Claim (i) initiated by Indemnitee
against the Company or any director or officer of the Company unless the Company has joined in or
consented to the initiation of such Claim; (ii) made on account of Indemnitee’s conduct which
constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an
act or omission not in good faith or which involves intentional misconduct or a knowing violation
of the law; or (iii) arising from the purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(b) Notwithstanding the foregoing, (i) the indemnification obligations of the Company under
Section 1(a) shall not be applicable if the Reviewing Party (as defined in Section 9(f)) has
determined (in a written opinion, in any case in which the special independent counsel referred to
in Section 2 is involved) that Indemnitee would not be permitted to be indemnified under applicable
law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 1(a)
shall be subject to the condition that the Company receives an undertaking that, if, when and to
the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced legal proceedings in the Court of Chancery of the State of
Delaware (the “Delaware Court”) to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any Expense Advance 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 Expense Advances shall be unsecured
and no interest shall be charged thereon. If there has not been a Change in Control, the Reviewing
Party shall be selected by the Board of Directors, and if there has been such a Change in Control,
the
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Reviewing Party shall be the special independent counsel referred to in Section 2. If there
has been no determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in part under
applicable law, Indemnitee shall have the right to commence litigation in the Delaware Court
seeking an initial determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof and the Company hereby consents to service of process and to
appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee. The Company shall indemnify Indemnitee for
Expenses incurred by Indemnitee in connection with the successful establishment or enforcement, in
whole or in part, by Indemnitee of Indemnitee’s right to indemnification or advances.
2. Change in Control. The Company agrees that if there is a Change in Control of the
Company (other than a Change in Control which has been approved by two-thirds or more of the
Company’s Board of Directors who were directors immediately prior to such Change in Control) then
with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity
payments and Expense Advances under this Agreement or any other agreement, the Bylaws or
Certificate of Incorporation now or hereafter in effect relating to Claims for Indemnifiable
Events, the Company shall seek legal advice only from special independent counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably withheld or
delayed) and who has not otherwise performed services for the Company within the last five years
(other than in connection with such matters) or for Indemnitee. In the event that Indemnitee and
the Company are unable to agree on the selection of the special independent counsel, such special
independent counsel shall be selected by lot from among at least five law firms with offices in the
State of Delaware having more than fifty attorneys, having a rating of “av” or better in the then
current Martindale Xxxxxxx Law Directory and having attorneys which specialize in corporate law.
Such selection shall be made in the presence of Indemnitee (and his legal counsel or either of
them, as Indemnitee may elect). Such counsel, among other things, shall, within 90 days of its
retention, render its written opinion to the Company and Indemnitee as to whether and to what
extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to
pay the reasonable fees of the special independent counsel referred to above and to fully indemnify
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.
3. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee
against any and all expenses (including attorneys’ fees) and, if requested by Indemnitee in
writing, shall (within ten business days of such written request) advance such expenses to
Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or
action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company
under this Agreement or any other agreement, the Bylaws or Certificate of Incorporation now or
hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any
directors’ and officers’ liability insurance policies maintained by the Company, regardless of
whether the Company believes that Indemnitee is entitled to such indemnification, advance expense
payment or insurance recovery, as the case may be. The Indemnitee shall qualify for advances
solely upon the execution and delivery to the Company of
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an undertaking providing that the Indemnitee undertakes to repay the advance to the extent
that it is ultimately determined that the Indemnitee is not entitled to be indemnified by the
Company.
4. Partial Indemnity. If Indemnitee is entitled under any provisions of this
Agreement to indemnification by the Company of some but not all of the Expenses, liabilities,
judgments, fines, penalties and amounts paid in settlement of a Claim, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has
been successful on the merits or otherwise in defense of any or all Claims relating in whole or in
part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection
therewith. In connection with any determination by the Reviewing Party or otherwise as to whether
Indemnitee is entitled to be indemnified hereunder the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
5. No Presumption. For purposes of this Agreement, the termination of any action,
suit or proceeding 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.
6. Notification and Defense of Claim. Within 30 days after receipt by Indemnitee of
notice of the commencement of a Claim which may involve an Indemnifiable Event, Indemnitee will, if
a claim in respect thereof is to be made against the Company under this Agreement, submit to the
Company a written notice identifying the proceeding, but the omission so to notify the Company will
not relieve it from any liability which it may have to Indemnitee under this Agreement unless the
Company is materially prejudiced by such lack of notice. With respect to any such Claim as to
which Indemnitee notifies the Company of the commencement thereof:
(a) the Company will be entitled to participate therein at its own expense;
(b) except as otherwise provided below, to the extent that it may wish, the Company jointly
with any other indemnifying party similarly notified will be entitled to assume the defense
thereof, with counsel selected by the Board of Directors and satisfactory to Indemnitee. After
notice from the Company to Indemnitee of its election to assume the defense thereof, the Company
will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the right to employ its own
counsel in such action, suit or proceeding, but the fees and expenses of such counsel incurred
after notice from the Company of its assumption of the defense thereof shall be at the expense of
Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company,
(ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of the defense of such action, or (iii) the Company
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 the Company. The Company shall
not be entitled to assume the defense of any claim brought by
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or on behalf of the Company or as to which Indemnitee shall have made the conclusion provided
for in clause (ii) above; and
(c) the Company shall not be liable to indemnify Indemnitee under this Agreement for any
amounts paid in settlement of any action or claim effected without its written consent. The
Company shall not settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee’s written consent. Neither the Company nor Indemnitee
will unreasonably withhold or delay their consent to any proposed settlement.
7. Non-exclusivity. The rights of Indemnitee hereunder shall be in addition to any
other rights Indemnitee may have under the Certificate of Incorporation, the Bylaws, the DGCL, any
agreement, a vote of the stockholders, a resolution of directors or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee
acting on behalf of the Company and at the request of the Company prior to such amendment,
alteration or repeal. To the extent that a change in the DGCL (whether by statute or judicial
decision), the Certificate of Incorporation or the Bylaws permits greater indemnification by
agreement than would be afforded currently under the Certificate of Incorporation, the Bylaws and
this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is
intended to be exclusive of any other right or remedy, and every other right and remedy shall be
cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other
right or remedy.
8. Liability Insurance. To the extent the Company maintains an insurance policy or
policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum extent of the coverage
available for any Company director or officer. If, at the time the Company receives notice from
any source of a Claim as to which Indemnitee is a party or a participant (as a witness or
otherwise), the Company has director and officer liability insurance in effect, the Company shall
give prompt notice of such Proceeding 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. In the event of a Potential Change in Control
(as defined in Section 9), the Company shall maintain in force any and all insurance policies then
maintained by the Company providing directors’ and officers’ liability insurance, in respect of
Indemnitee, for a period of six years thereafter. The Company shall indemnify Indemnitee for
Expenses incurred by Indemnitee in connection with any successful action brought by Indemnitee for
recovery under any insurance policy referred to in this Section 8 and shall advance to Indemnitee
the Expenses of such action in the manner provided in Section 3 above.
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9. Certain Definitions.
(a) A “Change in Control” shall be deemed to have occurred if:
(1) any person, as that term is used in Section 13(d) and Section 14(d)(2) of
the Exchange Act, becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such person is a
beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any successor
rule or regulation), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power of the Company’s then outstanding
Voting Securities (unless such person becomes such a beneficial owner in connection
with the initial public offering of the Company);
(2) 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 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;
(3) the Company, or any material subsidiary of the Company, is merged,
consolidated or reorganized into or with another corporation or other legal person
(an “Acquiring Person”) or securities of the Company are exchanged for securities of
an Acquiring Person, and immediately after such merger, consolidation,
reorganization or exchange less than a majority of the combined voting power of the
then outstanding securities of the Acquiring Person immediately after such
transaction are held, directly or indirectly, in the aggregate by the holders of
Voting Securities immediately prior to such transaction;
(4) the Company, or any material subsidiary of the Company, in any transaction
or series of related transactions, sells or otherwise transfers all or substantially
all of its assets to an Acquiring Person, and less than a majority of the combined
voting power of the then outstanding securities of the Acquiring Person immediately
after such sale or transfer is held, directly or indirectly, in the aggregate by the
holders of Voting Securities immediately prior to such sale or transfer;
(5) the Company and its subsidiaries, in any transaction or series of related
transactions, sells or otherwise transfers business operations that generated two
thirds or more of the consolidated revenues (determined on the basis of the
Company’s four most recently completed fiscal quarters) of the Company and its
subsidiaries immediately prior thereto;
(6) the Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing that a change
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in control of the Company has or may have occurred or will or may occur in the
future pursuant to any then existing contract or transaction; or
(7) any other transaction or series of related transactions occur that have
substantially the effect of the transactions specified in any of the preceding
clauses in this paragraph (ii).
Notwithstanding the provisions of Section 9(a)(1) or 9(a)(4), unless otherwise determined in a
specific case by majority vote of the Board of Directors of the Company, a Change of Control shall
not be deemed to have occurred for purposes of this Agreement solely because (i) the Company, (ii)
an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting
securities or (iii) any Company sponsored employee stock ownership plan, or any other employee
benefit plan of the Company, either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of stock of the Company, or because the Company reports that a Change in
Control of the Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(b) A “Claim” is any threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any inquiry, hearing or investigation whether conducted by the
Company or any other party, whether civil, criminal, administrative, investigative or other.
(c) “Expenses” include attorneys’ fees and all other costs, fees, expenses and obligations of
any nature whatsoever paid or incurred in connection with investigating, defending, being a witness
in or participating in (including appeal), or preparing to defend, be a witness in or participate
in any Claim relating to any Indemnifiable Event.
(d) An “Indemnifiable Event” is any event or occurrence (whether before or after the date
hereof) related to the fact that Indemnitee is or was a director, officer, employee, consultant,
agent or fiduciary of or to the Company, or any subsidiary of the Company, or is or was serving at
the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by
reason of anything done or not done by Indemnitee in any such capacity.
(e) A “Potential Change in Control” shall be deemed to have occurred if (i) the Company enters
into an agreement, the consummation of which would result in the occurrence of a Change in Control;
(ii) any person (including the Company) publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control; (iii) any person, other
than a trustee or other fiduciary holding securities under an employee benefit plan of the Company
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, who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 9.5% or more of the
combined voting power of the Company’s then outstanding Voting Securities, increases such person’s
beneficial ownership of
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such securities by five percentage points or more over the initial percentage of such
securities; or (iv) the Board of Directors of the Company adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has occurred.
(f) A “Reviewing Party” is (i) the Company’s Board of Directors (provided that a majority of
directors are not parties to the particular Claim for which Indemnitee is seeking indemnification)
or (ii) any other person or body appointed by the Company’s Board of Directors, who is not a party
to the particular Claim for which Indemnitee is seeking indemnification, or (iii) if there has been
a Change in Control, the special independent counsel referred to in Section 2 hereof.
(g) “Voting Securities” means any securities of the Company which vote generally in the
election of directors.
10. Amendments, Termination and Waiver. No supplement, modification, amendment or
termination of this Agreement shall be binding unless executed in writing by both 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 hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
11. Contribution. If the indemnification provided in Sections 1 and 3 is unavailable,
then, in respect of any Claim in which the Company is jointly liable with Indemnitee (or would be
if joined in the Claim), the Company shall contribute to the amount of Expenses, judgments, fines,
penalties and amounts paid in settlement as appropriate to reflect: (i) the relative benefits
received by the Company, on the one hand, and Indemnitee, on the other hand, from the transaction
from which the Claim arose, and (ii) the relative fault of the Company, on the one hand, and of
Indemnitee, on the other, in connection with the events which resulted in such Expenses, judgments,
fines, penalties and amounts paid in settlement, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of Indemnitee, on the
other, shall be determined by reference to, among other things, the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent the circumstances resulting
in such Expenses and Liabilities. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 11 were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable considerations described in this Section
11.
12. 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 papers required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company effectively to bring suit
to enforce such rights.
13. No Duplication of Payments. The Company shall not be 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 insurance policy, Certificate of Incorporation or
otherwise) of the amounts otherwise indemnifiable hereunder.
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14. Binding Effect. 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 and/or assets of the Company, spouse, heirs, and personal and
legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director or officer (or in one of the capacities enumerated in Section 9(d)
hereof) of the Company or of any other enterprise at the Board of Director’s request.
15. 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.
16. Applicable Law and Consent to Jurisdiction. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in accordance with,
the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in the Delaware Court and not in
any other state or federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement, (iii) appoint,
irrevocably, to the extent such party is not a resident of the State of Delaware, as its agent in
the State of Delaware as such party’s agent for acceptance of legal process in connection with any
such action or proceeding against such party with the same legal force and validity as if served
upon such party personally within the State of Delaware, (iv) waive any objection to the laying of
venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead
or to make, any claim that any such action or proceeding brought in the Delaware Court has been
brought in an improper or inconvenient forum.
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17. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Executed this day of , 200___.
| LoopNet, Inc. | ||||
| By: | ||||
| [Name] | ||||
| [Title] | ||||
| [Indemnitee] | ||||
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