QUALITY SYSTEMS, INC. second amended and restated indemnification Agreement
Exhibit 10.3
QUALITY SYSTEMS, INC.
second amended and restated
indemnification Agreement
indemnification Agreement
This Second Amended and Restated Indemnification Agreement (this “Agreement”) is made
as of ___, 2009, by and between QUALITY SYSTEMS, INC., a California corporation (the
“Company”), and ___(“Indemnitee”).
R
E C I T A L S
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining quality
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 cost effective liability insurance has been severely
limited; 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, in consideration for Indemnitee’s services as an officer or director of the
Company (as the case may be), 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,
suit, proceeding or any alternative dispute resolution mechanism, 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, 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 reasonable
attorneys’ fees and costs), 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, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to
be in 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, suit 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 Indemnitee did
not act
in good faith and in a manner which Indemnitee reasonably believed to be in the best
interests of the Company, and, with respect to any criminal action or proceeding, 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 is or was a party or is threatened to be made a party to any threatened,
pending or completed action or suit 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, 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 reasonable attorneys’ fees and costs) and, to the fullest extent
permitted by law, amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in the best interests of the Company, except
that no indemnification shall be made in respect of any claim, issue or matter as to which
Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that
the Superior Court of the State of California or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Superior Court of the State of California or such other court shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this Section 1, or in defense of any claim, issue or matter therein,
Indemnitee shall be indemnified against expenses (including reasonable attorneys’ fees and costs)
actually and reasonably incurred by Indemnitee in connection therewith. For purposes of this
Agreement, and without limitation, the termination of any claim, issue or matter in any action,
suit or proceeding by dismissal with prejudice shall be deemed to be a successful result as to
such claim, issue or matter.
2. Agreement to Serve. In consideration of the protection afforded by this Agreement,
if Indemnitee is a director of the Company he agrees to serve at least for the 90 days after the
effective date of this Agreement 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 an officer
of the Company not serving under an employment contract, he agrees to serve in such capacity at
least for the 90 days after the effective date of this Agreement 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.
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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 referenced in Section 1(a) or (b) hereof (but not
amounts actually paid in settlement of any 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 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 thirty (30)
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 or her right to be indemnified under this Agreement, give the Company written notice as soon as
practicable of any claim for which Indemnitee will or could seek indemnification under this
Agreement. 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 thirty (30) 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 thirty (30) 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 8 and
10(g) of this Agreement, Indemnitee shall also be entitled to be paid for the expenses
(including reasonable attorneys’ fees and costs) 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. However, Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Section 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 a court of competent jurisdiction 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 it 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
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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 approved
by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee
of written notice of its election to do so. 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.
4. Additional Indemnification Rights; Nonexclusivity; Contribution.
(a) Scope. Notwithstanding any other provision of this Agreement, the Company hereby
agrees to indemnify the Indemnitee to the fullest extent permitted by the California General
Corporation Law (the “CGCL”), 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
CGCL, 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.
(c) Contribution. To the fullest extent permissible under applicable law, if the
indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason
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whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute (“Contribution”) to
the amount incurred by Indemnitee, whether for liabilities and/or for expenses, in connection with
any proceeding relating to an indemnifiable event under this Agreement, in such proportion as is
deemed fair and reasonable in light of all of the circumstances of such proceeding in order to
reflect (1) the relative benefits received by the Company and Indemnitee as a result of the
event(s) and/or transaction(s) giving rise to such proceeding; and (2) the relative fault of the
Company (and its directors, officers, employees and agents) and Indemnitee in connection with such
event(s) and/or transaction(s), provided, however, that no such Contribution shall be made
pursuant to this Section 4(c) with respect to any of the matters set
forth in Section 8.
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 and 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. 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.
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. 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.
8. 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, provide Contribution or advance
expenses to Indemnitee with respect to proceedings or claims initiated or brought
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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 CGCL, but such
indemnification, Contribution 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
(b) Lack
of Good Faith. To indemnify or provide Contribution to Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to
enforce or interpret this 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
(c) Insured
Claims. To indemnify or provide Contribution to 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; or
(d) Claims
Under Section 16(b). To indemnify or provide Contribution
to 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.
10. Miscellaneous.
(a) 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
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California residents entered into and to be performed entirely within California without regard to the
conflict of law principles thereof.
(b) 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 .
(c) Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed by both 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.
(d) Entire Agreement. This Agreement sets forth the entire understanding between the
parties hereto and supersedes and merges all previous written and oral negotiations, commitments,
understandings and agreements relating to the subject matter hereof between the parties hereto.
(e) 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
and legal representatives.
(f) 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. 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.
(g) 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 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.
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(h) Notice. All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be delivered personally by hand or by
courier, mailed by United States first-class mail, postage prepaid, sent by facsimile or sent by
electronic mail directed to the party to be notified at the address, facsimile number or electronic
mail address indicated for such person on the signature page hereof, or at such other address,
facsimile number or electronic mail address as such party may designate by ten (10) days’ advance
written notice to the other parties hereto. All such notices and other communications shall be
deemed given upon personal delivery, on the date of mailing, upon confirmation of facsimile
transfer or when directed to the electronic mail address set forth on signature page hereof.
(i) Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s estate,
spouse, heirs, executors or personal or legal representatives after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of action of the Company
shall be extinguished and deemed released unless asserted by the timely filing of a legal action
within such two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall govern.
(j) 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 the Company effectively to bring suit to enforce such rights.
(k) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall constitute an original.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
| QUALITY SYSTEMS, INC. |
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| By: | ||||
| Xxxx Xxxx, Chief Financial Officer/Secretary | ||||
| Address: 00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000 Xxxxxx, XX 00000 Facsimile #: 000-000-0000 Email: xxxxx@xxxx.xxx (Corporate Secretary) |
||||
AGREED TO AND ACCEPTED:
“Indemnitee”
[printed name of Indemnitee] |
||
Address: |
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