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Exhibit 10.5
ADVANCED DIGITAL INFORMATION CORPORATION
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") dated as of
_______ __, 1996 is made between ADVANCED DIGITAL INFORMATION CORPORATION, a
Washington corporation (the "Company"), and __________________ ("Indemnitee").
RECITALS
A. Indemnitee is an officer and/or director of the Company and in such
capacity is performing valuable services for the Company.
B. The Company and Indemnitee recognize the difficulty in obtaining
directors' and officers' liability insurance, the significant cost of such
insurance and the general reduction in the coverage of such insurance.
C. The Company and Indemnitee further recognize the substantial
increase in litigation subjecting officers and directors to expensive litigation
risks at the same time that such liability insurance has been severely limited.
D. The sole shareholder of the Company has adopted bylaws (the
"Bylaws") providing for indemnification of the officers, directors, agents and
employees of the Company to the full extent permitted by the Business
Corporation Act of Washington (the "Statute").
E. The Bylaws and the Statute specifically provide that they are not
exclusive, and thereby contemplate that contracts may be entered into between
the Company and the members of its Board of Directors and its officers with
respect to indemnification of such directors and officers.
F. In order to induce Indemnitee to continue to serve as an officer
and/or director, as the case may be, of the Company, the Company has agreed to
enter into this Agreement with Indemnitee.
AGREEMENT
In consideration of the recitals above, the mutual covenants and
agreements herein contained, and Indemnitee's continued service as an officer
and/or director, as the case may be, of the Company after the date hereof, the
parties to this Agreement agree as follows:
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1. INDEMNITY OF INDEMNITEE
1.1. SCOPE
The Company agrees to hold harmless and indemnify Indemnitee to the
full extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by this Agreement, the Company's Restated Articles of
Incorporation, the Bylaws, the Statute or otherwise. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule
regarding the right of a Washington corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent that they would
expand Indemnitee's rights hereunder, shall be within the purview of
Indemnitee's rights and the Company's obligations hereunder, and, to the extent
that they would narrow Indemnitee's rights hereunder, shall be excluded from
this Agreement; provided, however, that any change that is required by
applicable laws, statutes or rules to be applied to this Agreement shall be so
applied regardless of whether the effect of such change is to narrow
Indemnitee's rights hereunder.
1.2. 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
Restated Articles of Incorporation, the Bylaws, any agreement, any vote of
shareholders or disinterested directors, the Statute, or otherwise, whether as
to action in Indemnitee's official capacity or otherwise.
1.3. ADDITIONAL INDEMNITY
If Indemnitee was or is made a party, or is threatened to be made a
party, to or is otherwise involved (including, without limitation, as a witness)
in any Proceeding (as defined below), the Company shall hold harmless and
indemnify Indemnitee from and against any and all losses, claims, damages,
liabilities or expenses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid in settlement and other expenses
incurred in connection with such Proceeding) (collectively, "Damages").
1.4. DEFINITION OF PROCEEDING
For purposes of this Agreement, "Proceeding" shall mean any actual,
pending or threatened action, suit, claim or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, in
which Indemnitee is, was or becomes involved by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the Company or
that, being or having been such a director, officer, employee or agent,
Indemnitee is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (collectively a "Related Company"),
including service with respect to an employee benefit plan, whether the basis of
such proceeding is alleged action (or inaction) by Indemnitee in an official
capacity as a director, officer, employee, trustee or agent or in any other
capacity
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while serving as a director, officer, employee, trustee or agent; provided,
however, that, except with respect to an action to enforce the provisions of
this Agreement, "Proceeding" shall not include any action, suit, claim or
proceeding instituted by or at the direction of Indemnitee unless such action,
suit, claim or proceeding is or was authorized by the Company's Board of
Directors.
1.5. DETERMINATION OF ENTITLEMENT
In the event that a determination of Indemnitee's entitlement to
indemnification is required pursuant to Section 23B.08.550 of the Statute or any
successor thereto or pursuant to other applicable law, the appropriate
decision-maker shall make such determination; provided, however, that Indemnitee
shall initially be presumed in all cases to be entitled to indemnification, that
Indemnitee may establish a conclusive presumption of any fact necessary to such
a determination by delivering to the Company a declaration made under penalty of
perjury that such fact is true and that, unless the Company shall deliver to
Indemnitee written notice of a determination that Indemnitee is not entitled to
indemnification within twenty (20) days of the Company's receipt of Indemnitee's
initial written request for indemnification, such determination shall
conclusively be deemed to have been made in favor of the Company's provision of
indemnification and Company hereby agrees not to assert otherwise.
1.6. SURVIVAL
The indemnification provided under this Agreement shall apply to any
and all Proceedings, notwithstanding that Indemnitee has ceased to be a
director, officer, employee, trustee or agent of the Company or a Related
Company.
2. EXPENSE ADVANCES
2.1. GENERALLY
The right to indemnification of Damages conferred by Section 1 shall
include the right to have the Company pay Indemnitee's expenses in any
Proceeding as such expenses are incurred and in advance of such Proceeding's
final disposition (such right is referred to hereinafter as an "Expense
Advance").
2.2. CONDITIONS TO EXPENSE ADVANCE
The Company's obligation to provide an Expense Advance is subject to
the following conditions:
2.2.1. UNDERTAKING
If the Proceeding arose in connection with Indemnitee's service as
a director or an officer of the Company (and not in any other capacity in which
Indemnitee rendered service, including service to any Related Company), then
Indemnitee or his or her representative shall have executed and delivered to the
Company an undertaking, which need
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not be secured and shall be accepted without reference to Indemnitee's financial
ability to make repayment, by or on behalf of Indemnitee to repay all Expense
Advances if and to the extent that it shall ultimately be determined by a final,
unappealable decision rendered by a court having jurisdiction over the parties
and the question that Indemnitee is not entitled to be indemnified for such
Expense Advance under this Agreement or otherwise.
2.2.2. COOPERATION
Indemnitee shall give the Company such information and cooperation
as it may reasonably request and as shall be within Indemnitee's power.
2.2.3. AFFIRMATION
Indemnitee shall furnish, upon request by the Company and if
required under applicable law, a written affirmation of Indemnitee's good faith
belief that any applicable standards of conduct have been met by Indemnitee.
3. PROCEDURES FOR ENFORCEMENT
3.1. ENFORCEMENT
In the event that a claim for indemnity, an Expense Advance or
otherwise is made hereunder and is not paid in full within sixty days (twenty
days for an Expense Advance) after written notice of such claim is delivered to
the Company, Indemnitee may, but need not, at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim (an "Enforcement
Action").
3.2. PRESUMPTIONS IN ENFORCEMENT ACTION
In any Enforcement Action the following presumptions (and limitation on
presumptions) shall apply:
(a) The Company shall conclusively be presumed to have entered into
this Agreement and assumed the obligations imposed on it hereunder in order to
induce Indemnitee to continue as an officer and/or director, as the case may be,
of the Company;
(b) Neither (i) the failure of the Company (including the Company's
Board of Directors, independent or special legal counsel or the Company's
shareholders) to have made a determination prior to the commencement of the
Enforcement Action that indemnification of Indemnitee is proper in the
circumstances nor (ii) an actual determination by the Company, its Board of
Directors, independent or special legal counsel or shareholders that Indemnitee
is not entitled to indemnification shall be a defense to the Enforcement Action
or create a presumption that Indemnitee is not entitled to indemnification
hereunder; and
(c) If Indemnitee is or was serving as a director, officer, employee,
trustee or agent of a corporation of which a majority of the shares entitled to
vote in the election of its
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directors is held by the Company or in an executive or management capacity in a
partnership, joint venture, trust or other enterprise of which the Company or a
wholly owned subsidiary of the Company is a general partner or has a majority
ownership, then such corporation, partnership, joint venture, trust or
enterprise shall conclusively be deemed a Related Company and Indemnitee shall
conclusively be deemed to be serving such Related Company at the request of the
Company.
3.3. ATTORNEYS' FEES AND EXPENSES FOR ENFORCEMENT ACTION
In the event Indemnitee is required to bring an Enforcement Action, the
Company shall indemnify and hold harmless Indemnitee against all of Indemnitee's
fees and expenses in bringing and pursuing the Enforcement Action (including
attorneys' fees at any stage, including on appeal); provided, however, that the
Company shall not be required to provide such indemnity for such attorneys' fees
or expenses if a court of competent jurisdiction determines that each of the
material assertions made by Indemnitee in such Enforcement Action was not made
in good faith or was frivolous.
4. LIMITATIONS ON INDEMNITY; MUTUAL ACKNOWLEDGEMENT
4.1. LIMITATION ON INDEMNITY
No indemnity pursuant to this Agreement shall be provided by the
Company:
(a) On account of any suit in which a final, unappealable judgment is
rendered against Indemnitee for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company in violation of the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto;
(b) For Damages that have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company;
(c) On account of Indemnitee's conduct which is finally adjudged to
have been intentional misconduct, a knowing violation of law or the RCW
23B.08.310 or any successor provision of the Statute, or a transaction from
which Indemnittee derived benefit in money, property or services to which
Indemnittee is not legally entitled; or
(d) If a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful.
4.2. MUTUAL ACKNOWLEDGEMENT
The Company and Indemnitee acknowledge that, in certain instances,
federal law or public policy may override applicable state law and prohibit the
Company from indemnifying Indemnitee under this Agreement or otherwise. For
example, the Company and 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
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securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Furthermore, Indemnitee understands and acknowledges that the
Company 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 the Company's right under public policy to
indemnify Indemnitee.
5. NOTIFICATION AND DEFENSE OF CLAIM
5.1. NOTIFICATION
Promptly after receipt by Indemnitee of notice of the commencement of
any Proceeding, Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the commencement
thereof; but the omission so to notify the Company will not relieve the Company
from any liability which it may have to Indemnitee under this Agreement unless
and only to the extent that such omission can be shown to have prejudiced the
Company's ability to defend the Proceeding.
5.2. DEFENSE OF CLAIM
With respect to any such Proceeding as to which Indemnitee notifies the
Company of the commencement thereof:
(a) The Company may participate therein at its own expense;
(b) The Company, jointly with any other indemnifying party similarly
notified, may assume the defense thereof, with counsel satisfactory to
Indemnitee. After notice from the Company to Indemnitee of its election so to
assume the defense thereof, the Company shall not be liable to Indemnitee under
this Agreement for any legal or other expenses (other than reasonable costs of
investigation) subsequently incurred by Indemnitee in connection with the
defense thereof unless (i) the employment of counsel by Indemnitee has been
authorized by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such action, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (ii) above;
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any Proceeding effected without
its written consent;
(d) The Company shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; and
(e) Neither the Company nor Indemnitee will unreasonably withhold its,
his or her consent to any proposed settlement.
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6. 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 6. 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.
7. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Washington.
(b) This Agreement shall be binding upon Indemnitee and upon the
Company, its successors and assigns, and shall inure to the benefit of
Indemnitee, Indemnitee's heirs, personal representatives and assigns and to the
benefit of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
COMPANY:
ADVANCED DIGITAL INFORMATION
CORPORATION
By
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Its
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INDEMNITEE:
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