Exhibit 10.16
-------------
FORM OF DIRECTOR AND
OFFICER INDEMNITY AGREEMENT
This Indemnification Agreement (the "Agreement"), dated as of __________,
between ViryaNet Ltd., an Israeli company (the "Company"), and [insert name of
Officer Holder], the [insert position of the Officer Holder] of the Company (the
"Indemnitee").
WHEREAS, Indemnitee is a director or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and
officers of public companies;
WHEREAS, the Articles of Association of the Company authorize the Company
to indemnify and advance expenses to its directors and officers to
the fullest extent permitted by law and to undertake to take such
actions
WHEREAS, the shareholders of the Company, the Board of Directors of the
Company and the Audit Committee thereof, have approved the terms of
this Agreement and have authorized the Company to enter into an
agreement containing such term with the Indemnitee, as required
under applicable provisions of Israeli law; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to assure Indemnitee's continued
service to the Company in an effective manner and Indemnitee's
reliance on the aforesaid Articles of Association and, in part, to
provide Indemnitee with specific contractual assurance that the
protection promised by the Articles of Association will be available
to Indemnitee (regardless of, among other things, any amendment to
or revocation or any change in the composition of the Company's
Board of Directors or acquisition of the Company), the Company
wishes to provide in this Agreement for the indemnification of and
the advancing of expenses to Indemnitee to the full extent (whether
partial or complete) permitted by law and as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of Indemnitee
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. CERTAIN DEFINITIONS
1.1. Change in Control: shall be deemed to have occurred if: (i) any
-----------------
"person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee
or other fiduciary holding securities under an employee benefit plan
of
the Company or a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same proportions as
their ownership of shares of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly
or indirectly, of securities of the Company representing 20% or more
of the total voting power represented by the Company's then
outstanding voting securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by
the Company's shareholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period of whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (iii) the shareholders of
the Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity)
at least 80% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the shareholders of
the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
1.2. Expenses: include attorneys' fees and all other costs, expenses and
--------
obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in any
claim relating to any Indemnifiable Event.
1.3. Indemnifiable Event: is, subject to Section 2.1, any event or
-------------------
occurrence related to the fact that Indemnitee is or was an Office
Holder (as defined in Section 2.1) or an employee, agent or fiduciary
of the Company, or is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other entity.
2. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
2.1. The Company hereby undertakes to indemnify Indemnitee to the fullest
extent permitted by applicable law, for any liability and expense that
may be imposed on Indemnitee due to an act performed or failure to act
by him in his capacity as an Office Holder, as such term is defined in
the Companies Law - 5759-1999, of the Company or any subsidiary of the
Company or any entity in which Indemnitee serves as an Office Holder
at the request of the Company either prior to or after the date hereof
(the following shall be hereinafter referred to as "Indemnifiable
Events"):
2.1.1. A financial liability imposed on Indemnitee in favor of another
person by a court judgment, including a compromise judgment
given as a result of a settlement or an arbitrator's award
which has been confirmed by a court; and
2.1.2. reasonable litigation Expenses, including attorneys' fees,
expended by an Indemnitee or which were imposed on an
Indemnitee by a court in proceedings instituted against him by
the Company or in its name or by any other person or in a
criminal charge from which he was acquitted or in a criminal
proceeding in which he was convicted for a criminal offense
that does not require proof of criminal intent.
2.2. The indemnification undertaking made by the Company shall be only with
respect such events described in Exhibit A hereto. The maximum amount
---------
payable by the Company under this Agreement for each event described
in Exhibit A shall be as set forth in Exhibit A.
--------- ---------
2.3. If so requested by Indemnitee, the Company shall advance an amount (or
amounts) estimated by it to cover Indemnitee's reasonable litigation
Expenses, including attorneys' fees, with respect to which Indemnitee
is entitled to be indemnified under Paragraph 2.1 above.
2.4. The Company's obligation to indemnify Indemnitee and advance expenses
in accordance with this Agreement shall be for such period as
Indemnitee shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding or any inquiry or
investigation, whether civil, criminal or investigative, arising out
of the Indemnitee's service in the foregoing positions, whether or not
Indemnitee is still serving in such positions.
2.5. The Company undertakes that as long as it may be obligated to provide
indemnification and advance Expenses under this Agreement, the Company
will purchase and maintain in effect directors and officers liability
insurance to cover the liability of Indemnitee to the fullest extent
permitted by law.
3. GENERAL LIMITATIONS ON INDEMNIFICATION
3.1. If, when and to the extent that the Indemnitee would not be permitted
to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid (unless
Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, in which event Indemnitee shall not
be required to so reimburse the Company until a final judicial
determination is made with respect thereto as to which all rights of
appeal therefrom have been exhausted or lapsed) and shall not be
obligated to indemnify or advance any additional amounts to Indemnitee
(unless there has been a determination by a court or
competent jurisdiction that the Indemnitee would be permitted to be so
indemnified under this Agreement).
3.2. Change in Control of Company. The Company undertakes that in the
----------------------------
event of a Change in Control of the Company, the Company's obligations
under this Agreement shall continue to be in effect following such
Change in Control, and the Company shall take all necessary action to
ensure that the party acquiring control of the Company shall
independently undertake to continue in effect such Agreement, to
maintain the provisions of the Articles of Association allowing
indemnification and to indemnify Indemnitee in the event that the
Company shall not have sufficient funds or otherwise shall not be able
to fulfill its obligations hereunder.
4. NO MODIFICATION.
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of 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. Any waiver shall be in
writing.
5. 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 papers required and shall do
everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
6. REIMBURSEMENT.
The Company shall not be liable under this Agreement to make any payment in
connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy or
otherwise) of the amounts otherwise indemnifiable hereunder. Any amounts
paid to Indemnitee under such insurance policy or otherwise after the
Company has indemnified the Indemnitee for such liability or Expense shall
be repaid to the Company promptly upon receipt by Indemnitee.
7. EFFECTIVENESS.
This Agreement shall be of full force and effect immediately upon its
execution.
8. NOTIFICATION AND DEFENSE OF CLAIM.
Promptly after receipt by Indemnitee of notice of the commencement of any
action, suit or 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 hereof; but the omission so to notify the Company will
not
relieve it from any liability which it may have the Indemnitee otherwise
than under this Agreement. With respect to any such action, suit or
proceeding as to which Indemnitee notifies the Company of the commencement
thereof and without limitation of Section 2.1:
8.1. The Company will be entitled to participate therein at its own
expense; and
8.2. Except as otherwise provided below, to the extent that it may wish,
the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from the Company
to Indemnitee of its election to assume the defense thereof, the
Company will not be liable to Indemnitee under this Agreement for any
legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have
the right to employ its counsel in such action, suit or proceeding,
but the fees and expenses of such counsel incurred after notice from
the Company of its assumption of the defense thereof shall be at the
expense of Indemnitee 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 the 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 the Indemnitee shall have made the conclusion provided
for in (ii) above.
8.3. The Company shall not be liable to indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent.
Neither the Company nor the Indemnitee will unreasonably withhold
their consent to any proposed settlement.
9. NON-EXCLUSIVITY.
The rights of the Indemnitee hereunder shall not be deemed exclusive of any
other rights he may have under the Company's Articles of Association or
applicable law or otherwise, and to the extent that during the
Indemnification Period the rights of the then existing directors and
officers are more favorable to such directors or officers than the rights
currently provided thereunder or under this Agreement to Indemnitee,
Indemnitee shall be entitled to the full benefits of such more favorable
rights.
10. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs and personal and legal
representatives. This Agreement shall continue in effect during the
Indemnification Period, regardless of whether Indemnitee continues to serve
as an officer or director of the Company or of any other enterprise at the
Company's request.
11. SEVERABILITY.
The provisions of this Agreement shall be severable in the event that any
provision hereof (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions
shall remain enforceable to the fullest extent permitted by law.
12. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Israel.
13. ENTIRE AGREEMENT AND TERMINATION.
This Agreement represents the entire agreement between the parties; and
there are no other agreements, contracts or understandings between the
parties with respect to the subject matter of this Agreement. No
termination or cancellation of this Agreement shall be effective unless in
writing and signed by both parties hereto.
ViryaNet Ltd.
________________________ By:_______________________
Name of Office Holder
EXHIBIT A
1. Negotiations, execution, delivery and performance $
of agreements on behalf of the Company
2. Anti-competitive acts and acts of commercial wrongdoing $
3. Acts in regard of invasion of privacy including with $
respect to databases and acts in regard of slander
4. Acts in regard of violation of copyrights, patents, $
designs and any other intellectual property rights
5. Acts in regard of "Y2K" malfunctions $
6. Approval of corporate actions including the approval of the $
acts of the Company's management, their guidance and their
supervision
7. Claims of failure to exercise business judgement and a $
reasonable level of proficiency, expertise and care in
regard of the Company's business
8. Violations of securities laws of any jurisdiction, including $
without limitation, fraudulent disclosure claims, failure to
comply with SEC disclosure rules and other claims relating to
relationships with investors and the investment community
9. Violations of laws requiring the Company to obtain regulatory $
and governmental licenses, permits and authorizations in any
jurisdiction
10. Claims in connection with publishing or providing any $
information, including any filings with governmental
authorities, on behalf of the Company in the circumstances
required under applicable laws
11. Violations of any law or regulation governing domestic and $
international telecommunication in any jurisdiction
12. Claims in connection with employment relationships with $
Company's or its subsidiaries' employees.
