XXXXXX.XXX, INC.
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") dated as of _______ __,
1999 is made between XXXXXX.XXX, INC., a Washington corporation (the "Company"),
and ___________ ("Indemnitee").
RECITALS
A. Indemnitee is a director or officer 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 and the significant cost of such
insurance.
C. The Company and Indemnitee further recognize the substantial increase
in litigation, subjecting directors and officers to expensive litigation risks
at the same time that such liability insurance has been severely limited.
D. 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 Washington Business Corporation Act (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 its directors and officers with respect to indemnification of
such directors and officers.
F. To induce Indemnitee to serve or continue to serve as a director or
officer of the Company, the Company desires to confirm the contract
indemnification rights provided in the Bylaws and agrees to provide the
Indemnitee with the benefits contemplated by this Agreement.
AGREEMENT
In consideration of the recitals above, the mutual covenants and
agreements herein contained, and Indemnitee's continued service as a director or
officer, as the case may be, of the Company after the date hereof, the parties
to this Agreement agree as follows:
1. Indemnification of Indemnitee
1.1. Scope
The Company agrees to hold harmless and indemnify Indemnitee to the full
extent provided under the provisions of the Company's Restated Articles of
Incorporation and the
Bylaws, and to the full extent permitted by law, notwithstanding that the basis
for such indemnification is not specifically enumerated in this Agreement, the
Company's Restated Articles of Incorporation, the Bylaws, any 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 change, to
the extent that it would expand Indemnitee's rights hereunder, shall be included
within Indemnitee's rights and the Company's obligations hereunder, and, to the
extent that it would narrow Indemnitee's rights or the Company's obligations
hereunder, shall not affect or limit the scope of this Agreement; provided,
however, that in no event shall any part of this Agreement be construed so as to
require indemnification when such indemnification is not permitted by then
applicable law.
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. Included Coverage
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 (compensatory,
exemplary, punitive or otherwise), liabilities or expenses, including, without
limitation, attorneys' fees, costs, judgments, fines, ERISA excise taxes or
penalties, witness fees, amounts paid in settlement and other expenses incurred
in connection with the investigation, defense, settlement or approval of such
Proceeding (collectively, "Damages").
1.4. Definition of Proceeding
For purposes of this Agreement, "Proceeding" shall mean any completed,
actual, pending or threatened action, suit, claim, hearing or proceeding,
whether civil, criminal, arbitrative, administrative, investigative or pursuant
to any alternative dispute resolution mechanism (including an action by or in
the right of the Company) 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 while serving as a
director, officer, employee, trustee or agent; provided, however, that, except
with respect to
an Enforcement Action (defined in Section 3.1 below, an action challenging the
Company's determination that Indemnitee is not entitled to indemnification
pursuant to Section 1.5, and any other 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 a
successor statute 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) calendar days after 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 that the Company hereby agrees not to assert
otherwise.
1.6. Contribution
If the indemnification provided under Section 1.1 is unavailable by reason
of a court decision, based on grounds other than any of those set forth in
paragraphs (b) through (d) of Section 4.1, then, in respect of any Proceeding in
which the Company is jointly liable with Indemnitee (or would be if joined in
such Proceeding), the Company shall contribute to the amount of Damages
(including attorneys' fees) actually and reasonably incurred and paid or payable
by Indemnitee in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and Indemnitee on the other
from the transaction from which such Proceeding arose and (ii) the relative
fault of the Company on the one hand and of Indemnitee on the other in
connection with the events that resulted in such Damages as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of Indemnitee on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such Damages.
The Company agrees that it would not be just and equitable if contribution
pursuant to this Section 1.6 were determined by pro rata allocation or any other
method of allocation that does not take account of the foregoing equitable
considerations.
1.7. Survival
The indemnification and contribution provided under this Agreement shall
apply to any and all Proceedings, notwithstanding that Indemnitee has ceased to
serve the Company or a Related Company and shall continue so long as Indemnitee
shall be subject to any possible
Proceeding, whether civil, criminal or investigative, by reason of the fact that
Indemnitee was a director or officer of the Company or serving in any other
capacity referred to in Section 1.4 of this Agreement.
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, 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 Indemnitee's representative shall have executed and delivered to
the Company an undertaking, which need 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 it shall ultimately be
determined by a final, unappealable decision rendered by a court having
jurisdiction over the parties that Indemnitee is not entitled to be indemnified
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 legal power to
so provide.
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 any claim for indemnification, whether an Expense
Advance or otherwise, is made hereunder and is not paid in full within thirty
(30) calendar days 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 expressly affirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereunder to induce
Indemnitee to continue as a director or officer, 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 or officer of a
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the Company or as a partner, trustee or otherwise 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 other enterprise shall conclusively be
deemed a Related Company and Indemnitee shall conclusively be deemed to be
serving such Related Company at the Company's request.
3.3. Attorneys' Fees and Expenses for Enforcement Action
In the event Indemnitee is required to bring an Enforcement Action, the
Company shall pay 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 payment 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.
4. Limitations on Indemnity; Mutual Acknowledgment
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, as amended;
(b) For Damages that have been paid directly to Indemnitee by an insurance
carrier under a policy of insurance maintained by the Company;
(c) With respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(d) On account of Indemnitee's conduct which is finally adjudged by a
court having jurisdiction in the matter 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 Indemnitee derived an improper personal
benefit; or
(e) If a final decision by a court having jurisdiction in the matter with
no further right of appeal shall determine that such indemnification is not
lawful.
4.2. Partial Indemnification
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of any Damages in
connection with a Proceeding, but not, however, for the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion of such
Damages to which Indemnitee is entitled.
4.3. Mutual Acknowledgment
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 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 shall, 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, however, 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.
If, at the time of the receipt of a notice of a claim pursuant to Section
5.1, 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 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.
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 (or any other person or
persons included in the joint defense) and Indemnitee in the conduct of the
defense of such action, (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 Company's expense, or (iv) the Company
is not financially or legally able to perform its indemnification obligations.
The Company shall not be entitled to assume the defense of any proceeding
brought by or on behalf of the Company or as to which Indemnitee shall have
reasonably made the conclusion provided for in (ii) or (iv) 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 that
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.
6. Severability
Nothing in this Agreement is intended to require or shall be construed as
requiring the Company to do or to 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 or make contribution to 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 on Indemnitee and on the Company and
its successors and assigns (including any transferee of all or substantially all
its assets and any successor by merger or otherwise by operation of law), and
shall inure to the benefit of Indemnitee and Indemnitee's heirs, personal
representatives and assigns and to the benefit of the Company and its successors
and assigns. The Company shall not effect any merger, consolidation, sale of all
or substantially all of its assets or other reorganization in which it is not
the surviving entity, unless the surviving entity agrees in writing to assure
all of the Company's obligations under this Agreement.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
8. Entire Agreement
This Agreement is the entire agreement of the parties regarding its
subject matter and supersedes all prior written or oral communications or
agreements.
9. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.
10. Amendments; Waivers
Neither this Agreement nor any provision may be amended except by written
agreement signed by the parties. No waiver of any breach or default shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default.
11. Notices
All notices, claims and other communications hereunder shall be in writing
and made by hand delivery, registered or certified mail (postage prepaid, return
receipt requested), facsimile or overnight air courier guaranteeing next-day
delivery:
(a) If to the Company, to: with a copy to:
XxxxxX.xxx. Inc. Xxxxxxx Coie LLP
000 - 000xx Xxxxxx X.X. 0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, Controller Attn: Xxxxx X. Xxxxxx
(b) If to Indemnitee, to the address specified on the last page of this
Agreement or to such other address as either party may from time to time furnish
to the other party by a notice given in accordance with the provisions of this
Section 11. All such notices, claims and communications shall be deemed to have
been duly given if (i) personally delivered, at the time delivered, (ii) mailed,
five days after dispatched, (iii) sent by facsimile transmission, upon
confirmation of receipt, and (iv) sent by any other means, upon receipt.
12. Directors' and Officers' Insurance
(a) The Company hereby covenants and agrees that, subject to the
provisions of Section 12(c) hereof, the Company shall, from a date no later than
the closing date of the Company's first registered public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, maintain directors' and officers' insurance
in full force and effect so long as Indemnitee continues to serve as a director
or officer of the Company and thereafter so long as Indemnitee shall be subject
to any possible Proceeding.
(b) In all policies of directors' and officers' insurance, Indemnitee
shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits, subject to the same limitations, as are accorded to the
Company's directors or officers most favorably insured by such policy.
(c) Notwithstanding the foregoing provisions of this Section 12, the
Company shall have no obligation to maintain directors' and officers' insurance
if the Company determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are disproportionate to the
amount of coverage provided, or the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit.
13. Specific Performance
The Company and Indemnitee agree herein that a monetary remedy for breach
of this Agreement, at some later date, will be inadequate, impracticable and
difficult of proof, and further agree that such breach would cause Indemnitee
irreparable harm. Accordingly, the
Company and Indemnitee agree that Indemnitee shall be entitled to temporary and
permanent injunctive relief to enforce this Agreement without the necessity of
proving actual damages or irreparable harm. The Company and Indemnitee further
agree that Indemnitee shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions,
without the necessity of posting bond or other undertaking in connection
therewith. Any such requirement of bond or undertaking is hereby waived by the
Company, and the Company acknowledges that in the absence of such a waiver, a
bond or undertaking may be required by the court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
COMPANY:
XXXXXX.XXX, INC.
By _______________________________
Its _____________________________
INDEMNITEE:
__________________________________
Print name: ______________________
Address: ______________________
______________________
______________________
