INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is made as of this th day
of , 1997, by and between Aehr Test Systems, a California corporation
(the "COMPANY"), and ("INDEMNITEE").
WHEREAS, 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;
WHEREAS, 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;
WHEREAS, 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; and
WHEREAS, 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.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a
party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Company) by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the
Company, or any subsidiary of the Company, by reason of any action or
inaction on the part of Indemnitee while an officer or director or by
reason of the fact that Indemnitee is or was serving at the request of
the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld) actually
and reasonably incurred by Indemnitee in connection with such action or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The
termination of any action or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall
not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best
interests of the Company, or (ii) with respect to any criminal action or
proceeding, Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudicated by court orders or judgment to be liable to the Company in
the performance of Indemnitee's duty to the Company and its shareholders unless
and only to the extent that the court in which such action or proceeding is or
was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine.
2. 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 or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
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
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim
made against Indemnitee for which indemnification will or will be sought
under this Agreement. Notice to the Company shall be directed to the
Chief Executive Officer of the Company at the address shown on the
signature page of this Agreement (or such other address as the Company
shall designate in writing to Indemnitee). Notice shall be deemed
received three business days 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. In addition, Indemnitee shall give the Company
such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
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(c) PROCEDURE. Any indemnification and advances provided for
in Section 1 and this Section 2 shall be made no later than forty-five
(45) 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 by the Company within forty-five
(45) 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 12 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 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
2(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
shareholders) 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 shareholders) 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 2(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 approved by Indemnitee, which approval
shall not be reasonably withheld, 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
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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. 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, an officer or other corporate agent, such
changes shall be ipso facto, within the preview 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, an officer or other corporate agent, 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 shareholders or
disinterested Directors, the 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. 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 such
capacity at the time of any action, suit or other covered proceeding.
4. 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 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.
5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public
policy may prohibit the Company from indemnifying its directors and
officers under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to
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.
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6. 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 subsidiary or parent of the Company.
7. 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. 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.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) EXCLUDED ACTS. To indemnify Indemnitee for any acts or omissions
or transactions from which a director may not be relieved of liability under the
California General Corporation Law.
(b) 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
Section 317 of the California Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this
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Agreement, if a court of competent jurisdiction determines that each of
the material assertions made by the Indemnitee in such proceeding was
not made in good faith or was frivolous; or
(d) 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 paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
and 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.
9. 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 an 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.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
11. 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.
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12. 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 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 costs and expenses, including reasonable 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.
13. 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 domestic 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.
14. CONSENT TO JURISDICTION. The Company and 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.
15. 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.
16. 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 documents required and shall do
all acts that may be necessary to secure such rights and to enable to
corporation effectively to bring suit to enforce such rights.
17. CONTINUATION OF INDEMNIFICATION. All agreements and obligations of
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the Company and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim or threatened, pending
or completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Indemnitee was
serving in the capacity referred to herein.
18. AMENDMENT AND TERMINATION. Subject to Section 17, no amendment,
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AEHR TEST SYSTEMS
By:______________________________
Title:___________________________
Address: 0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
AGREED TO AND ACCEPTED:
INDEMNITEE:
_____________________________
______________________________
(print name)
______________________________
(address)
______________________________
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