EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made as of
______________________ by and between LIPID SCIENCES, INC., an Arizona
corporation (the "Company"), and _____________ ("Indemnitee").
RECITALS:
A. The Company and Indemnitee recognize the increasing difficulty in
obtaining and/or maintaining 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 may be severely limited;
C. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous or conflicting,
and therefore fail to provide such directors and officers with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take;
D. Sections 10-851, 10-852 and 10-856 of the Arizona Revised Statutes,
under which the Company is organized, requires and/or empowers the Company to
indemnify its directors and officers and to indemnify directors and officers who
serve, at the request of the Company, as the directors, officers, employees or
agents of other corporations or enterprises; and
E. The Board of Directors of the Company has determined that, in order
to retain and attract talented and experienced individuals to serve as directors
and officers of the Company, it is reasonable and prudent for the Company to
contractually indemnify its directors and certain of its officers against the
risk of judgments, settlements and other expenses which may occur as a result of
their service to the Company, and to assume for itself liability for expenses
and damages in connection with claims against such directors and officers in
connection with their service to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties hereto, intending to be legally bound, 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 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 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, suit or proceeding if Indemnitee acted in good faith and in a manner
which Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal action, suit 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, suit 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 suit by or in
the right 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 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 amounts paid in settlement and attorneys' fees, 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.
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. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined by a
court of competent jurisdiction 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 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 could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address of the Company's principal executive
offices (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three (3) 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 without undue hardship to provide.
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(c) Procedure. Any indemnification provided for in Section 1
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 13 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, and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Section 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 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 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 claim pursuant to Section 2(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 unreasonably 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 such defense or
(C) the Company shall not, in fact, have employed
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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 an Arizona corporation to indemnify a member of
its board of directors, an officer or other corporate agent, 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 an Arizona corporation to
indemnify a member of its Board of Directors, an officer or other corporate
agent, such changes, to the extent required by such law, statute or rule to be
applied to this Agreement, shall have the effect on this Agreement and the
parties' rights and obligations hereunder as is required by such law, statute or
rule.
(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 Arizona
Revised Statutes, 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 while serving in an indemnified capacity even though he may
have ceased to serve in such capacity at the time of any action 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, judgment, 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.
5. PUBLIC POLICY LIMITATIONS; CONTRIBUTION. Indemnitee understands and
acknowledges that the Company may be required in the future to undertake with
the Securities and Exchange Commission to submit the question of indemnification
with respect to certain federal securities law claims to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee. In the event that the indemnification provided to
Indemnitee by this Agreement is unavailable to Indemnitee for reasons of public
policy, then the Company shall contribute to the amount paid or payable by
Indemnitee, with respect to which Indemnitee otherwise would have been entitled
to indemnification under this Agreement, in such proportion as is appropriate to
reflect the relative economic interests of the Company on the one hand, and
Indemnitee on the other hand, in the
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matters giving rise to such indemnification claim, as well as the relative fault
of the Company and Indemnitee with respect to such matters and any other
relevant equitable considerations.
6. DIRECTORS' AND OFFICERS' 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 directors' and officers' 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 directors, if Indemnitee is a director, 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 7. 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 Arizona Revised Statutes, or, if the Indemnitee is or at the
determinative time was a director of the Company, in connection with any
proceeding in which the Indemnitee was adjudged liable to the Company or was
adjudged liable on the basis that financial benefit was improperly received by
the Indemnitee; or
(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, 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
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(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 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
directors' and officers' liability insurance maintained by the Company; or
(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; or
(f) Unauthorized Settlements. To indemnify Indemnitee for any
amount paid in settlement of an action, suit or proceeding without the prior
written consent of the Company.
9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification expressly permitted by the Arizona Revised
Statutes, such provisions shall not be effective unless and until the Company's
Articles of Incorporation authorize such additional rights of indemnification.
In all other respects, the balance of this Agreement shall be effective as of
the date set forth on the first page and may apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was an officer,
director, employee or other agent of the Company, 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, at the time such act or
omission occurred.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall also 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, 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
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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.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. 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.
13. 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, a 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.
14. NOTICES. All notices, demands, consents, requests, approvals and
other communications between the parties pursuant to this Agreement must be in
writing and will be deemed given when delivered in person, one (1) business day
after being dispatched by a nationally recognized overnight courier service,
three (3) business days after being deposited in the U.S. Mail, registered or
certified mail, return receipt requested, or one (1) business day after being
sent by facsimile (with receipt acknowledged), to the Company at the address of
its principal offices and to Indemnitee at his address as shown on the Company's
records. Indemnitee may change his address for notice purposes by delivering
notice to the Company in accordance with this Section 14.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Arizona
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 Arizona.
16. GOVERNING LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Arizona,
without giving effect to conflicts of laws principles.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LIPID SCIENCES, INC.
By:
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Name:
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Title:
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ACCEPTED AND AGREED TO:
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INDEMNITEE:
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(address)
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