1
EXHIBIT 10.2
[name]
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made and entered into
this ______________, 1997, by and between XXXXXX XXXXX & ASSOCIATES, INC., a
California corporation (the "Company"), and ________________ ("Indemnitee").
RECITALS
A. The Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting officers and directors to
expensive litigation risks at the same time as the availability and coverage of
liability insurance has been severely limited and is not currently available to
the Company in such scope and coverage as it desires.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
AGREEMENT
NOW, THEREFORE, The Company and Indemnitee hereby agree as follows:
1. Agreement to Indemnify.
The Company hereby agrees to indemnify Indemnitee and hold him harmless
to the full extent authorized or permitted by the provisions of the General
Corporation Law of California, or by any amendment thereof or other statutory
provision requiring, authorizing or permitting such indemnification which may be
adopted after the date hereof; provided, however, that any such amendment or
other statutory provision which further limits the availability of or further
restricts the Company's ability to provide such indemnification shall operate
prospectively only, to the extent permitted by law.
2
2. Agreement to Serve.
In consideration of the protection afforded by this Agreement, if
Indemnitee is presently a director of the Company he agrees to serve at least
for the balance of the current term as a director and not to resign voluntarily
during such period without the written consent of a majority of the Board of
Directors. If Indemnitee is presently an officer of the Company not serving
under an employment contract, he agrees to serve in such capacity at least for
the balance of the current fiscal year of the Company and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. Following the applicable period set forth above, Indemnitee
agrees to continue to serve in such capacity at the will of the Company (or
under separate agreement, if such agreement exists) so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the bylaws of the Company or any subsidiary of the Company or until such time
as he tenders his resignation in writing. Nothing contained in this Agreement is
intended to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding subject to the
indemnification provided in Section 1 hereof, to the final disposition of such
action, suit or proceeding. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to the
Indemnitee as soon as possible following delivery of a written request therefor
by Indemnitee to the Company, but in no event more than twenty (20) days after
such request.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall 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 Company's executive offices (Attn: Chief
Executive Officer) (or such other address as the Company shall designate in
writing to Indemnitee). Notice shall be deemed received on the third business
day after the date postmarked if sent by domestic certified or registered mail,
properly addressed; otherwise notice shall be deemed received when such notice
shall actually be received by the Company. The Indemnitee's omission to so
notify the Company under this Section 3(b) shall not relieve the Company from
any liability which it may have to Indemnitee under this Agreement (provided
that the Company shall retain the right to reimbursement from the Indemnitee for
any damages it may have suffered as a result of the failure so to notify). 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) Procedure. Any indemnification and advances provided for in Section
1 and this Section 3 shall be made no later than twenty (20) days after receipt
of the written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Articles of Incorporation or
Bylaws providing for indemnification, is not paid in full
-2-
3
by the Company within twenty (20) days after a written request for payment
thereof has first been received by the Company, Indemnitee may, but need not, at
any time thereafter bring an action against the Company to recover the unpaid
amount of the claim and, subject to Section 11(c) of this Agreement, Indemnitee
shall also be entitled to be paid for the expenses (including attorneys' fees)
of bringing such action. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in connection with any
action, suit or proceeding in advance of its final disposition) that Indemnitee
has not met the standards of conduct which make it permissible under applicable
law for the Company to indemnify Indemnitee for the amount claimed, but the
burden of proving such defense shall be on the Company and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Subsection 3(a)
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) 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 the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of a
claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement 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 proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel reasonably acceptable to the Indemnitee, upon
the delivery to Indemnitee of written notice of its election so to do. 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 of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of 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, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
-3-
4
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement, 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 Articles 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 California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a California corporation to indemnify a member of its board of
directors or an officer, such changes, 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.
(b) Nonexclusivity. The indemnification provided by this Agreement shall
not be deemed exclusive of any rights to which Indemnitee may be entitled under
the Company's Articles of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested Directors, the General Corporation Law of the
State of California, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office (an
"Indemnified Capacity"). The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
Indemnified Capacity even though he may have ceased to serve in an Indemnified
Capacity at the time of any action, suit or other covered proceeding.
5. Partial Indemnification.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the expenses, judgments,
fines or penalties actually or reasonably incurred by him in the investigation,
defense, appeal or settlement of any civil or criminal action, suit or
proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
6. Enforcement.
(a) Public Policy. Both the Company and Indemnitee acknowledge that in
certain instances, Federal law or public policy may override applicable state
law and prohibit the Company from indemnifying its directors and officers under
this Agreement or otherwise. For example, the Company and Indemnitee acknowledge
that the Securities and Exchange Commission (the "SEC") has taken the position
that indemnification is not permissible for liabilities arising under certain
federal securities laws, and federal legislation prohibits indemnification for
certain ERISA violations. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
SEC to
-4-
5
submit the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
(b) Inducement. The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligation imposed on the Company
hereby in order to induce Indemnitee to continue to serve as a director or
officer of the Company and/or one or more of its subsidiaries, and acknowledges
that Indemnitee is relying upon this Agreement in continuing in such capacity.
7. Officer and Director Liability Insurance.
The Company shall, from time to time, make the good faith determination
whether or not it is practicable for the Company to obtain and maintain a policy
or policies of insurance with reputable insurance companies providing the
officers and directors of the Company with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. 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 directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent or subsidiary of the Company.
8. Severability.
Nothing in this Agreement is intended to require or shall be construed
as requiring the Company to do or fail to do any act in violation of applicable
law, and to the extent this Agreement requires any act or omission to act which
would be in violation of applicable law, such requirement shall be ipso facto
eliminated herefrom. The Company's inability, pursuant to court order, to
perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
-5-
6
9. Exceptions.
Any other provision herein to the contrary notwithstanding, the Company
shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
applicable law, but such indemnification or advancement of expenses may be
provided by the Company in specific cases if the Board of Directors finds it to
be appropriate; or
(b) Insured Claims. To indemnify Indemnitee for expenses or liabilities
of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties, and amounts paid in settlement) which have been
actually paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company, without
further liability to the Indemnitee for reimbursement of any such amounts.
(c) Claims Under Section 16(b). To indemnify Indemnitee for expenses or
the payment of profits 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, or any similar successor statute.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, 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.
(b) For purposes of this Agreement, 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 or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to any employee benefit plan, its participants, or 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.
-6-
7
11. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
(b) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
(c) Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
(d) 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 receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by 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.
(e) Consent to Jurisdiction. The Company and the Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
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 brought only in the state courts of the State of California.
(f) Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
-7-
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XXXXXX XXXXX & ASSOCIATES, INC.
By:
--------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
AGREED TO AND ACCEPTED:
INDEMNITEE:
_________________________
(Address)
_________________________
_________________________
_________________________
-8-
