Exhibit 10.40
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") between TSET, Inc., a
Nevada corporation (the "Company"), and Xxxxxxx X. Xxxxxx, (the "Indemnitee"),
is effective as of May 1, 2001.
In consideration of the Indemnitee's past and future services and to
benefit the Company, the Company and the Indemnitee agree as follows:
1. DEFINITIONS.
a) "CLAIM" means any threatened, pending or completed action, suit
or proceeding, liability, claim, damage, judgment, cost or expense (including
attorneys' fees, expenses, bonds and costs of investigation) or any inquiry or
investigation that the Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
b) "INDEPENDENT COUNSEL" means a law firm or member of a law firm
that has not within the last five (5) years represented the Company or the
Indemnitee in a matter material to either or in a matter material to any other
party to the action, suit or proceeding giving rise to the Indemnitee's claim
for indemnification under this Agreement. Independent Counsel shall not include
any member of a law firm who would have a conflict of interest under applicable
standards of professional conduct in representing the Company or the Indemnitee
in an action hereunder. Such Independent Counsel shall be chosen by the
Indemnitee and approved by the Board of Directors of the Company (the "BOARD OF
DIRECTORS") which approval shall not be unreasonably withheld.
c) "REVIEWING PARTY" means (1) the Board of Directors of the
Company by a majority vote of a quorum consisting of directors who were not
parties to the action, suit, or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by Independent Counsel in a written opinion, or (3) by the stockholders
of the Company.
2. INDEMNITY. Subject to Sections 8 and 9 hereof, the Company agrees to
indemnify and hold the Indemnitee harmless, to the fullest extent permitted by
law, including, but not limited to, the extent and in the manner herein
provided, from and against any and all Claims of any type arising from or
related to his past or future acts or omissions as a director or officer of the
Company and/or its subsidiaries (which term shall mean any entities of which the
Company owns directly, or through any such subsidiaries, at least fifty percent
(50%) of the voting stock (hereinafter referred to as "SUBSIDIARIES")). This
indemnity shall extend to all matters except to the extent applicable law
prohibits indemnification.
3. JUDGMENTS. Subject to Sections 8 and 9 hereof, the Company agrees to
promptly pay on behalf of the Indemnitee any and all judgments against the
Indemnitee for damages arising from acts or omissions as a director or officer
of the Company and/or its Subsidiaries when any such judgment becomes final and
subject to execution against the Indemnitee, to the full extent allowable under
applicable law.
4. APPEAL BONDS. Subject to Sections 8 and 9 hereof, the Company shall
pay the cost of, provide collateral for and cause to be timely and duly filed in
court, appellate bonds to prevent execution of judgment against the Indemnitee
during the pendency of appeals as the Indemnitee may reasonably initiate, to the
full extent allowable under applicable law.
5. COST OF DEFENSE. Subject to Sections 8 and 9 hereof, the Company
shall promptly pay the reasonable cost of the defense of the Indemnitee against
2
any and all Claims against him arising from the Indemnitee's past or future acts
or omissions as a director or officer of the Company and/or its Subsidiaries
when statements for legal services are delivered to the Company or the
Indemnitee (including any required retainer amounts), to the full extent
allowable under applicable law.
6. FINES, COSTS, FEES. Subject to Sections 8 and 9 hereof, the Company
shall promptly pay on the Indemnitee's behalf any fines, court costs, legal fees
or other charges assessed against him related to any Claim where allegations
against the Indemnitee arise from his acts or omissions as a director or officer
of the Company and/or its Subsidiaries, to the full extent allowable under
applicable law.
7. ADVANCE PAYMENT OF EXPENSES. Expenses incurred by the Indemnitee in
connection with defending a Claim shall be paid by the Company as they are
incurred and in advance of the final disposition of such Claim within twenty
(20) days of receipt of an undertaking by the Indemnitee, in substantially the
same form as Exhibit "A" hereto, to repay such amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the Company. If the Company fails to advance any amounts required
to be advanced under this Section 7 within twenty (20) days after receipt of an
undertaking by the Indemnitee, the Indemnity may at any time thereafter bring
suit against the Company for specific performance or to recover the unpaid
amount. If successful in whole or in part, the Indemnitee shall also be entitled
to be paid the expense of prosecuting such claim.
8. GENERAL RIGHT TO INDEMNIFICATION. Upon written demand by the
Indemnitee for indemnification under the terms of this Agreement (unless
otherwise ordered by a court or advanced pursuant to Section 7 hereof or
advanced pursuant to applicable law, as the same may be amended from time to
time (but, in the case of any such amendment with reference to events occurring
3
prior to the effect date thereof, only to the extent that such amendment permits
the Company to provide broader indemnification rights than such law permitted
the Company to provide prior to such amendment)), the Indemnitee shall be
entitled to such indemnification unless the Reviewing Party determines within
thirty (30) days of receiving Indemnitee's written demand that the Indemnitee
would not be permitted to be indemnified under applicable law. The Indemnitee
and its counsel shall be given an opportunity to be heard and to present
evidence on the Indemnitee's behalf before the Reviewing Party. If the Reviewing
Party determines that the Indemnitee is not entitled to indemnification, the
Reviewing Party shall provide the Indemnitee, concurrently with its
determination, a detailed written explanation setting forth its reasons. The
failure to provide the Indemnitee with a detailed written explanation shall
entitle the Indemnitee to a presumption that the Indemnitee has met the
applicable standard of conduct and that the unfavorable determination was
wrongful in any subsequent suit brought by either the Indemnity or the Company
to determine whether the Indemnitee is entitled to indemnification.
9. RIGHT OF INDEMNITEE TO BRING SUIT.
a) If there has been no determination by the Reviewing Party or if
the Reviewing Party determines that the Indemnitee substantively would not be
permitted to be indemnified in whole or in part under applicable law, the
Indemnitee shall have the right to bring suit seeking an initial determination
by the court or challenging any such determination by the Reviewing Party or any
aspect thereof (and the Indemnitee shall be entitled to any presumption
specified in Section 8 hereof), 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 the
Indemnitee.
4
b) In any action brought by the Indemnitee to enforce a right to
indemnification hereunder, or by the Company to recover payments by the Company
of expenses incurred by the Indemnitee in connection with a Claim in advance of
its final disposition, the burden of proving that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise shall be on the Company.
Neither the failure of the Company or the Reviewing Party to have made a
determination prior to the commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth under applicable law, nor an actual
determination by the Company or the Reviewing Party that the Indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
Indemnitee has not met the applicable standard of conduct or, in the case of
such an action brought by the Indemnitee, be a defense to the Claim.
c) The Company shall pay all expenses (including attorneys' fees)
actually and reasonably incurred by the Indemnitee in connection with such
judicial determination, whether or not the Indemnitee prevails in such
proceeding. 10. INSURANCE. If a loss, payment or expense contemplated by this
Agreement is paid by the Company and is also covered by collectible insurance,
the Indemnitee shall cooperate with the Company to effect collection of all
available insurance and through assignment, reimbursement to the Company or
otherwise exercise all reasonable efforts to cause applicable insurance benefits
to be paid to or on behalf of the Company, thus reducing the Company's payments
under this Agreement.
11. LAW, CONSTRUCTION, ARBITRATION. This Agreement is to be liberally
construed to provide the Indemnitee with the broadest indemnity permitted by
applicable law and ambiguities in the terms of this Agreement, if any, choice of
5
law, or construction of laws are to be resolved in the Indemnitee's favor. The
Indemnitee shall be entitled to the benefits of all changes in law, whether
effected by statute, regulation, rule, judicial decision or otherwise, which in
any way expand his right to be indemnified by the Company or to have the Company
advance his expenses. The law of the State of Nevada shall apply.
12. OTHER MEANS OF INDEMNITY. The Company acknowledges that the
benefits to the Indemnitee of this Agreement are not exclusive and that the
Indemnitee retains all rights of indemnity or repayment from the Company that
are available to him by applicable law, other agreements, the Articles of
Incorporation and By-Laws of the Company and/or its Subsidiaries or by vote of
the Board of Directors or stockholders of the Company.
13. 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 the 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 to bring suit to
enforce such rights.
14. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against the
Indemnitee to the extent the Indemnitee has otherwise actually received payment
(under any insurance policy or otherwise).
15. TERM. This Agreement shall remain in full force and effect until
terminated by the mutual consent of the parties in writing. Termination of the
Indemnitee's status as a director or officer of the Company and/or its
Subsidiaries does not terminate this Agreement. This Agreement inures to the
benefit of the Indemnitee, his estate, heirs, and the personal representative
(executor/administrator) of his estate.
6
16. GOOD FAITH. If any dispute arises under this Agreement or any
attack is made by anyone related to the enforcement of this Agreement, it shall
be conclusively presumed that the Indemnitee acted in good faith in executing
this Agreement and for the best interest of the Company. The Company
acknowledges that it is fully informed of all decisions and votes made by the
Indemnitee in the past and recognizes its right to keep itself informed in the
future.
17. DEFENSE. If any claim is threatened or commenced against the
Indemnitee other than by or on behalf of the Company, he shall notify the
Company in writing. His failure to do so or to do so promptly, however, shall
not diminish his rights under this Agreement except to the extent the Company
demonstrates by clear and convincing evidence that his failure caused it actual
damage. The Company may assume the defense of the claim, but only if it pays all
costs and expenses of defense, acknowledges to the Indemnitee in writing that it
is obligated to indemnify him with respect to the claim, and permits him to
select defense counsel. Any counsel the Indemnitee selects shall be reasonably
satisfactory to the Company. If the Company assumes the defense, the Indemnitee
shall cooperate with the Company in that defense if it pays his costs and
expenses of doing so. The Company shall not settle any claim in any manner which
would impose a penalty, liability or limitation on the Indemnitee unless the
Indemnitee first consents to the settlement in writing. He shall not withhold
his consent unreasonably.
18. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions (including portions of any paragraph of this
Agreement containing an invalid, illegal or unenforceable provision) shall not
be impaired. To the extent practicable, any invalid, illegal or unenforceable
provision of this Agreement shall be deemed modified as necessary to comply with
all applicable laws.
7
19. AMENDMENTS AND WAIVERS. No amendment of this Agreement shall be
binding unless the amendment is in writing and executed by both parties. Waiver,
if any, of a provision of this Agreement shall not constitute waiver of any
other provision.
20. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be duly executed and signed effective as of the date first set
forth above.
TSET, INC.
By:/S/ XXXXXXX X. XXXXXX
---------------------
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
AGREED TO AND ACCEPTED BY
INDEMNITEE:
By:/S/ XXXXXXX X. XXXXXX
---------------------
Xxxxxxx X. Xxxxxx
8
