1
EXHIBIT 10.14
WESTERN SIERRA NATIONAL BANK
INDEMNIFICATION AGREEMENT
This Agreement is made as of the 11TH day of May, 1994 by and between Western
Sierra National Bank, a national association ("Bank"), and XXXXXXXXX XXXXX
("the Indemnitee"), a director (or officer) of Bank.
RECITALS
A. Bank and the Indemnitee recognize that statutes, regulations, court
opinions and Bank's Articles of Association and Bylaws are uncertain in
providing Bank's directors and officers with adequate protection from
liabilities to which they may become personally exposed as a result of
performing their duties in good faith for Bank;
B. Bank and the Indemnitee are aware of the large number of lawsuits
filed against corporate directors and officers;
C. Bank and the Indemnitee recognize that the cost of defending against
such lawsuits, may be beyond the financial resources of most directors and
officers of Bank;
D. Bank and the Indemnitee recognize that the potential risks and
liabilities of being a director or officer pose a significant deterrent and
increased reluctance on the part of experienced and capable individuals to
serve as a director or officer of Bank;
E. Bank has investigated the availability and sufficiency of liability
insurance to its directors and officers with adequate protection against
potential liabilities and has concluded that such insurance provides both
inadequate and unacceptable protection to its directors and officers, and thus,
it would be in the best interests of Bank and its shareholders to contract with
the Indemnitee, to indemnify him to the fullest extent permitted by law against
personal liability for actions taken in the good faith performance of his
duties to Bank;
F. The Office of the Comptroller of the Currency (the "OCC")
interpretive ruling 12 CRF 7.5217 states that, with regard to indemnification
of directors, officers and employees, a national bank may amend its Articles of
Association to substantially reflect the general standards of law of the state
in which it is headquartered.
2
G. Section 317 of the General Corporation Law of the state of California
("Section 317") sets forth certain provisions relating to the mandatory and
permissive indemnification of directors and officers (among others) of a
California corporation by such corporation.
H. In order to induce and encourage experienced and capable persons such as
the Indemnitee to continue to serve as a director or officer of Bank, the Board
of Directors of Bank has determined, after due consideration and investigation
of the terms and provisions of this Agreement and the various other options
available to Bank and the Indemnitee in lieu hereof, that the following
Agreement is not only reasonable and prudent but necessary to promote and ensure
the best interests of Bank and its shareholders;
I. Bank desires to have the Indemnitee continue to serve as a director or
officer of Bank free from undue concern for unpredictable, inappropriate or
unreasonable legal risks and personal liabilities by reason of his acting in
good faith in the performance to his duty to Bank; and the Indemnitee desires to
continue to serve as director or officer of Bank; provided, and on the express
condition, that the Indemnitee is furnished with the indemnity set forth
hereinafter.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below and based on the premises set forth above, Bank and the Indemnitee
do hereby agree as follows:
1. Agreement to Serve. The Indemnitee will serve or continue to serve as a
director or officer of Bank to the best of his abilities at the will of Bank for
so long as the Indemnitee is duly elected or appointed or until such time as the
Indemnitee tenders his resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the right of Bank or
otherwise and whether of a civil, criminal, administrative or investigative
nature, including, but not limited to, actions, suits or proceedings brought
under and/or predicated upon the Securities Act of 1933, as amended, and/or the
Securities Exchange Act of 1934, as amended, and/or their respective state
counterparts and/or any rule or regulation promulgated thereunder, in which the
Indemnitee may be or may have been involved as a party or otherwise, by reason
of the fact that the Indemnitee is or was a director or officer
3
of Bank, by reason of any action taken by him or of any inaction on his part
while acting as such director or officer or by reason of the fact that he is or
was serving at the request of Bank as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
whether or not he is serving in such capacity at the time any liability or
expense is incurred for which indemnification or reimbursement can be provided
under this Agreement.
Notwithstanding anything to the contrary above, the term Proceeding
does not include any administrative proceeding or action instituted by an
appropriate bank regulatory agency which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action by
the Indemnitee in the form of payments to Bank.
(b) The term "Expenses" includes, without limitation thereto,
expenses of investigations, of judicial or administrative proceedings or
appeals, attorneys' fees and disbursements and any expenses of establishing a
right to indemnification under Paragraph 7 of this Agreement, but shall not
include the amount of judgments, fines or penalties actually levied against the
Indemnitee.
Notwithstanding anything to the contrary above, the term Expenses
does not include expenses incurred by the Indemnitee or payments to Bank
required of the Indemnitee as a result of an administrative action or
proceeding by an appropriate bank regulatory agency.
3. Indemnity in Third Party Proceedings. Bank shall indemnify the
Indemnitee in accordance with the provisions of this section if the Indemnitee
is a party to or threatened to be made a party to or otherwise involved in any
Proceeding (other than a Proceeding by or in the right of Bank to procure a
judgment in its favor), by reason of the fact that the Indemnitee is or was a
director or officer of Bank or is or was serving at the request of Bank as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, against all Expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred by the
Indemnitee in connection with such Proceeding, provided it is determined
pursuant to Paragraph 7 of this Agreement or by the court before which such
action was brought or by the shareholders of Bank in the manner prescribed by
Section 317, that the Indemnitee acted in good faith and in a manner which he
reasonably believed to be in the best interests of Bank and, in the case of a
criminal proceeding, in addition, had no reasonable cause to believe that his
conduct was unlawful. The termination of any such Proceeding by judgment,
order of court, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
4
did not act in good faith and in a manner which he reasonably believed to be in
the best interest of Bank, and with respect to any criminal proceeding, that
such person had reasonable cause to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of Bank. Bank shall
indemnify the Indemnitee in accordance with the provisions of this section if
the Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any Proceeding by or in the right of Bank to procure a judgment in
its favor by reason of the fact that the Indemnitee is or was a director of Bank
or is or was serving at the request of Bank as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against all Expenses actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such Proceeding,
provided it is determined pursuant to Paragraph 7 of this Agreement or by the
court before which such action was brought or by the shareholders of Bank in the
manner prescribed by Section 317, that the Indemnitee acted in good faith and in
a manner which he reasonably believed to be in the best interests of Bank and
its shareholders (for a Proceeding by or in the right of Bank) and with such
care, including reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances. Notwithstanding the foregoing,
no indemnification shall be made under this Paragraph 4:
(a) in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable to bank, unless and only to the
extent that the court in which such Proceeding is or was pending shall determine
upon application that, in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as
such court shall determine;
(b) of amounts paid in settling or otherwise disposing of such
Proceeding, other than a threatened action, suit or proceeding, without court
approval;
(c) of Expenses incurred in defending such Proceeding, other than a
threatened action, suit or proceeding, which is settled or otherwise disposed of
without court approval; or,
(d) in respect of any act, omission, or transaction set forth in
Section 204(a)(10)(A)(i)-(vii) of the California Corporations Code.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits in defense of any Proceeding or in the defense of any
claim, issue or matter therein, the Indemnitee shall be indemnified against
5
all Expenses actually and reasonably incurred in connection therewith.
6. Advances of Expenses. The Expenses incurred by the Indemnitee
pursuant to Paragraphs 3 and 4 in defending any Proceeding shall be paid by
Bank in advance of the final disposition of such Proceeding at the written
request of the Indemnitee, if the Indemnitee shall provide an undertaking in
the form attached hereto as Exhibit "A" to Bank to repay such amount unless it
is ultimately determined that the Indemnitee is entitled to the payment of
expenses. The written request to Bank shall include a description of the nature
of the Proceeding and be accompanied by copies of any documents filed with a
court relating to the Proceeding.
Notwithstanding the foregoing or any other provision of this Agreement, no
advance shall be made by Bank if a determination if reasonably and promptly
made by the Board of Directors by a majority vote of a quorum of disinterested
directors, or (if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs) by independent legal counsel,
that, based upon the facts known to the Board or counsel at the time such
determination is made, (a) the Indemnitee acted in bad faith or deliberately
breached his duty to Bank or its stockholders, and (b) as a result of such
actions by the Indemnitee, it is more likely than not that it will ultimately
be determined that the Indemnitee is not entitled to indemnification under the
terms of this Agreement.
7. Rights of the Indemnitee to Indemnification Upon Application;
Procedure Upon Application. To the extent a quorum of the Board of Directors of
Bank consisting of directors who were or are not parties to a Proceeding is
obtainable, the Board of Directors shall determine within 45 days after receipt
of the written request of the Indemnitee for indemnification whether the
Indemnitee has met the relevant standards for indemnification set forth in
Paragraphs 3 and 4 and, if it determines that such standards have been met, it
shall provide indemnification to the Indemnitee.
Notwithstanding the foregoing, the Indemnitee may request independent
counsel or may bring suit in the court in which such Proceeding is or was
pending to determine whether the Indemnitee is entitled to indemnification as
provided by this Agreement. The Indemnitee's expenses incurred in connection
with successfully establishing his right to indemnification, in whole or part,
shall also be indemnified by Bank.
8. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by Bank for some or a portion of
the Expenses, judgments, fines, settlements or other amounts actually and
reasonably incurred by
6
him in the investigation, defense, appeal or settlement of any Proceeding but
not, however, for the total amount thereof, Bank shall nevertheless indemnify
the Indemnitee for the portion of such Expenses, judgements, fines settlements
or other amounts to which the Indemnitee is entitled.
9. Directors' and Officers' Liability Insurance. The obtaining of
directors' and officers' liability insurance ("D&O Coverage") at the expense of
and by Bank shall in no way limit or diminish the obligation of Bank to
indemnify the Indemnitee as provided in this Agreement; provided, however, that
any amounts actually recovered by the Indemnitee from the insurer providing D&O
Coverage shall be applied in reduction of amounts otherwise owing by Bank
reason of it's indemnification under this Agreement and if Bank pays any
amounts to the Indemnitee pursuant to this Agreement, bank shall be subrogated
to the Indemnitee's rights and claims against the insurer providing D&O
Coverage and the Indemnitee shall execute such documents as Bank shall deem
necessary to reflect such subrogation.
Notwithstanding anything to the contrary in this Agreement, the D&O
Coverage obtained by Bank shall explicitly exclude insurance coverage for a
formal order assessing civil money penalties against the Indemnitee.
10. Settlement of Claims.
(a) If Bank has not obtained D&O Coverage, the Indemnitee shall not
settle any Proceeding for which he intends to seek indemnification hereunder
without first attempting to obtain the approval of Bank. If the Indemnitee
seeks such approval and such approval is not granted by Bank, the Indemnitee
shall be free to settle the Proceeding and pursue any procedures to establish
his right to indemnification as provided under this Agreement. If the
Indemnitee seeks such approval and such approval is not granted, but Bank
agrees to indemnify the Indemnitee against any Expenses, judgments, fines,
settlements, or other amounts actually and reasonably incurred by the
Indemnitee in connection with such Proceeding, the Indemnitee shall not settle
such Proceeding. If, however, under such circumstances the Indemnitee does
settle such Proceeding, the Indemnitee shall forfeit his rights to
indemnification under this Agreement.
(b) If Bank has obtained D&O Coverage, the Indemnitee shall not settle
any Proceeding for which he intends to seek indemnification without first
attempting to obtain any approval required with respect to such settlement by
the insurance carrier of any applicable D&O Coverage. If the Indemnitee seeks
such approval and such approval is not granted by the insurance carrier of any
applicable D&O Coverage, the Indemnitee shall not settle such Proceeding
without then attempting to obtain the
7
approval of Bank. In the event the Indemnitee seeks such approval from Bank,
Bank and the Indemnitee shall have the same rights and obligations as set forth
in Paragraph 10(a). If the Indemnitee seeks such approval from Bank and such
approval is granted, Bank shall be subrogated to the Indemnitee's rights and
claims against the insurance carrier of any applicable D&O coverage and the
Indemnitee shall execute such documents as Bank shall deem necessary to effect
such subrogation.
11. Mutual Acknowledgment. Both Bank and the Indemnitee acknowledge that
in certain instances, Federal law, the OCC or applicable public policy may
prohibit Bank from indemnifying its directors and officers under this Agreement
or otherwise. For example, Bank and the 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. The Indemnitee understands and acknowledges that
Bank has undertaken or may be required in the future to undertake with the SEC
to submit the question of indemnification to a court in certain circumstances
for a determination of Bank's right under public policy to indemnify the
Indemnitee.
Further, the Indemnitee understands that in accordance with its
supervisory responsibilities, the OCC may, in its discretion, review the
possible threat to Bank's safety and soundness posed by this Agreement. Based on
this review, the OCC may direct a modification of this Agreement through
appropriate administrative action.
12. Successors and Assigns. This Agreement shall be binding upon Bank
and its successors and assigns and shall inure to the benefit of the Indemnitee
and the Indemnitee's spouse, heirs, executors and administrators.
13. Savings Clause. If this Agreement or any portion thereof be
invalidated on any ground by any court or competent jurisdiction, then Bank
shall nevertheless indemnify the Indemnitee as to Expenses, judgments, fines,
settlements or other amounts with respect to any Proceeding to the fullest
extent permitted by any applicable portion of this Agreement that shall not
have been invalidated or by any other applicable law.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California and national banking law.
15. Notices. The Indemnitee shall, as a condition precedent to his right
to be indemnified under this Agreement, give to Bank notice in writing as soon
as practicable of any claim made against him for which indemnification will or
could be sought
8
under this Agreement. Notice to Bank shall be directed to Western Sierra
National Bank, 0000 Xxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000, Attention:
Xxxxx Xxxxxxxx, President (or such other address as Bank shall designate in
writing to the Indemnitee).
16. Modification and Amendment. No amendment, modification, termination
or cancellation of this Agreement shall be effected unless in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year set forth above.
WESTERN SIERRA NATIONAL BANK
By: /s/ XXXXXXXXX XXXXX By: /s/ XXXX X. XXXX
---------------------- -------------------------
Indemnitee President/CEO
9
WESTERN SIERRA NATIONAL BANK
UNDERTAKING
TO: President
Western Sierra National Bank
0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
I, XXXXXXXXX XXXXX, a director (officer) of Western Sierra National Bank, a
national association, pursuant to national banking laws, Section 317(f) of the
California Corporations Code and the terms of my Indemnification Agreement with
Western Sierra National Bank agree to repay Western Sierra National Bank for all
expenses advanced on my behalf in defense of any proceeding or in defense of any
claim, issue or matter therein, prior to the disposition of such proceeding,
unless it shall be determined ultimately that I am entitled to indemnification
under national banking laws, Section 317 of the California Corporations Code or
Western Sierra National Bank's Articles of Association, Bylaws, or my
Indemnification Agreement.
Date: MAY 11, 1994
INDEMNITEE
/s/ XXXXXXXXX X. XXXXX
----------------------
