INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (“Agreement”) is effective as of this 19th day of
November 2007, by and between Innovative Card Technologies, Inc., a Delaware
corporation (the “Company”), and ________________ (“Indemnitee”).
WHEREAS,
the Company and Indemnitee recognize the continued difficulty in obtaining
liability insurance for its directors, officers, employees, agents and
fiduciaries, 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 directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely
limited;
WHEREAS,
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and the Indemnitee and other directors, officers,
employees, agents and fiduciaries of the Company may not be willing to continue
to serve in such capacities without additional protection; and
WHEREAS,
the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company and, in part, in order
to
induce Indemnitee to continue to provide services to the Company, wishes to
provide for the indemnification and advancing of expenses to Indemnitee to
the
maximum extent permitted by law.
NOW,
THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification
of Expenses.
The
Company shall indemnify Indemnitee
to the fullest extent permitted by law if Indemnitee was or is or becomes a
party to or witness or other participant in, or is threatened to be made a
party
to or witness or other participant in, any pending or filed action, suit,
proceeding or alternative dispute resolution mechanism, or any hearing, inquiry
or investigation presided over by a federal or state government agency or body
that Indemnitee in good faith believes might lead to the institution of any
such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other (hereinafter a “Claim”)
by reason of (or arising in part out of) any event or occurrence related to
the
fact that Indemnitee is or was a director, officer, employee, consultant, agent
or fiduciary of the Company; or any subsidiary of the Company, or is or was
serving at the request of the Company as a director, officer, employee, agent
or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity (hereinafter an “Indemnifiable Event”) against
any and all expenses (including attorneys’ fees and all other costs, expenses
and obligations 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 such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld)
of
such Claim and any federal, state, local or foreign taxes imposed on the
Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement (collectively, hereinafter “Expenses”), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses. Such payment of Expenses shall be made by the Company as
soon
as practicable but in any event no later than five (5) business days after
written demand by Indemnitee therefor is presented to the Company. However,
Indemnitee acknowledges and agrees that no indemnification of expenses shall
be
required with respect to: (a) any settlement by Indemnitee effected without
the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; (b) Indemnitee’s breach of any of the representations, warranties,
covenants or agreements made by Indemnitee in any agreement with the Company;
and (c) any conduct by Indemnitee which constitutes fraud, gross negligence,
willful misconduct or malfeasance.
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(b) Reviewing
Party.
Notwithstanding the foregoing, (i) the obligations
of the Company under Section 1(a) shall be subject to the condition that the
Reviewing Party (as described in Section 10(e) hereof) shall not have determined
(in a written opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(c) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of
the
Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an “Expense Advance”) shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that 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; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court
of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee’s obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon.
If
there has not been a Change in Control (as defined in Section 10(c) hereof),
the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company’s Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be
the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has
been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any
such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and
Indemnitee.
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(c) Change
in Control.
The
Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company’s Board of Directors who were directors immediately
prior to such Change in Control) then with respect to all matters thereafter
arising concerning the rights of Indemnitee to payments of Expenses and Expense
Advances under this Agreement or any other agreement or under the Company’s
Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by the Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would have permitted to be indemnified under applicable law and
the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys’ fees),
claims, liabilities and damages arising out of or relating to this Agreement
or
its engagement pursuant hereto.
(d) Mandatory
Payment of Expenses.
Notwithstanding any other provision
of this Agreement other than Section 9 hereof, to the extent that Indemnitee
has
prevailed on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit,
proceeding, inquiry or investigation referred to in Section (1) (a) hereof
or in
the defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against all Expenses incurred by the Indemnitee in connection
therewith.
2. Expenses;
Indemnification Procedure.
(a) Advancement
of Expenses.
The
Company shall advance all Expenses
incurred by the Indemnitee. The advances to be made hereunder shall be paid
by
the Company to Indemnitee as soon as practicable but in any event no later
than
five days after written demand by Indemnitee therefor to the
Company.
(b) Notice/Cooperation
by Indemnitee.
Indemnitee shall, as a condition
precedent to Indemnitee’s 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 Chairman of the Board
of Directors of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing
to
the Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee’s
power.
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(c) No
Presumptions; Burden of Proof.
For
purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo
contendere,
or its
equivalent, shall not create of presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court
has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a determination as
to
whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to Indemnitee’s claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief. In connection with any determination by the Reviewing Party
or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice
to Insurers.
If, at
the time of the receipt by the Company of a
notice
of a Claim pursuant to Section 2(b) hereof, the Company has liability insurance
in effect which may cover such Claim, the Company shall give prompt notice
of
the commencement of such Claim 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 action, suit, proceeding,
inquiry or investigation in accordance with the terms of such
policies.
(e) Selection
of Counsel.
In the
event the Company shall be obligated hereunder
to pay the Expenses of any Claim, the Company, if appropriate, shall be entitled
to assume the defense of such Claim with counsel approved by Indemnitee, 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 Claim; provided that, (i) Indemnitee shall
have the right to employ Indemnitee’s counsel in any such Claim 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
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee’s counsel shall be at the expense of the Company.
3. Additional
Indemnification Rights; Nonexclusivity.
(a) Scope.
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 Certificate 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 Delaware corporation to indemnify
a
member of its Board of Directors or an officer, employee, agent or fiduciary,
it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its Board of Directors or an
officer, employee, agent or fiduciary, such change, 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 except as set forth in Section 8(a) hereof.
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(b) Nonexclusivity.
The
indemnification provided by this Agreement shall
be
in addition to any rights to which Indemnitee may be entitled under the
Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware, or otherwise. 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 Indemnitee may have ceased
to serve in such capacity.
4. No
Duplication of Payments.
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, Certificate of Incorporation, Bylaw or otherwise) of the amounts
otherwise indemnifiable hereunder.
5. Partial
Indemnification.
If
Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses
incurred in connection with any Claim, but not, however, for all of the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such Expenses 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, officers, employees, agents or
fiduciaries 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. Liability
Insurance.
To the
extent the Company maintains liability insurance
applicable to directors, officers, employees, agents or fiduciaries, Indemnitee
shall be covered by such policies 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; or of the
Company’s key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
8. Exceptions.
Any
other provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this
Agreement:
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(a) Excluded
Action or Omissions.
To
indemnify Indemnitee for acts, omissions
or transactions from which Indemnitee may not be relieved of liability under
applicable law. Moreover, Indemnitee acknowledges and agrees that no
indemnification of expenses shall be required with respect to: (a) any
settlement by Indemnitee effected without the Company’s prior written consent,
which shall not be unreasonably withheld or delayed; (b) Indemnitee’s breach of
any of the representations, warranties, covenants or agreements made by
Indemnitee in any agreement with the Company; and (c) any conduct by Indemnitee
which constitutes fraud, gross negligence, willful misconduct or
malfeasance.
(b) Claims
Initiated by Indemnitee.
To
indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company’s
Certificate of Incorporation or Bylaws now or hereafter in effect relating
to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise as required under Section 145 of the Delaware General Corporation
Law,
regardless of whether Indemnitee ultimately is determined to be entitled to
such
indemnification, advance expense payment or insurance recovery, as the case
may
be.
(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) 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.
9. 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.
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10. 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, employees, agents or fiduciaries, so that
if
Indemnitee is or was a director, officer, employee, agent or fiduciary of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, 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, agent or fiduciary of the Company which
imposes duties on, or involves services by, such director, officer, employee,
agent or fiduciary with respect to an employee benefit plan, its participants
or
its beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner “not opposed to the best interests of the Company” as referred
to in this Agreement.
(c) For
purposes of this Agreement a “Change in Control” shall be deemed
to
have occurred if (i) any “person” (as such term is used in Sections 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 stockholders of
the
Company in substantially the same proportions as their ownership of stock of
the
Company, (A) who is or becomes the beneficial owner, directly or indirectly,
of
securities of the Company representing 10% or more of the combined voting power
of the Company’s then outstanding Voting Securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so owned by
such
person, or (B) becomes the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
more than 20% of the total voting power represented by the Company’s then
outstanding Voting Securities, (ii) during any period of two consecutive years,
the 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 stockholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders 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 stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of
transactions) all of substantially all of the Company’s assets.
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(d) For
purposes of this Agreement, “Independent Legal Counsel” shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years (other than
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnity
agreements.)
(e) For
purposes of this Agreement, a “Reviewing Party” shall mean any
appropriate person or body consisting of a member or members of the Company’s
Board of Directors or any other person or body appointed by the Board of
Directors who is not a party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(f) For
purposes of this Agreement, “Voting Securities” shall mean any
securities of the Company that vote generally in the election of
directors.
11. Counterparts.
This
Agreement may be executed in one or more counterparts,
each of which shall constitute an original.
12. Binding
Effect; Successors and Assigns.
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. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of
the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner
and
to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as a director or officer of the Company
or of any other enterprise at the Company’s request.
13. Attorneys’
Fees.
In any
claim or action between the Parties involving this Agreement,
the prevailing party shall be entitled to recover from the other party, in
addition to damages, injunctive or other relief, if any, all costs and expenses
(whether or not allowable as “cost” items by law) reasonably incurred at, before
and after trial or on appeal, or in any bankruptcy proceeding, including without
limitation, attorneys’ fees, witness fees (expert or otherwise), deposition
costs, copying charges and other expenses.
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14. Notice.
All
notices, requests, demands and other communication under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered
by
hand and signed for by the party addressed, on the date of such delivery, or
(ii) if mailed by domestic certified or registered mail with postage prepaid,
on
the third business day after the date postmarked. Addresses for notice to either
party are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
15. 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.
16. Severability.
The
provisions of this Agreement shall be severable in the event
that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are 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. Furthermore, to
the
fullest extent possible, the provisions of this Agreement (including, without
limitations, each portion of this Agreement containing any provision held to
be
invalid, void or otherwise unenforceable that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. Choice
of Law.
This
Agreement shall be governed by and its provisions construed
and enforced in accordance with the laws of the State of California, as applied
to contracts between California residents, entered into and to be performed
entirely within the State of California, without regard to the conflict of
laws
principles thereof.
18. 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.
19. Integration
and Entire Agreement.
This
Agreement sets forth the entire understanding
between the parties hereto and supercedes and merges all previous written and
oral negotiations, commitments, understandings and agreements relating to the
subject matter hereof between the parties hereto.
20. No
Construction as Employment Agreement.
Nothing
contained in this Agreement
shall be construed as giving Indemnitee any right to be retained in the employ
of the Company or any of its subsidiaries.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
INNOVATIVE
CARD TECHNOLOGIES, INC.
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Xxxxxx
Xxxxx, Chairman
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AGREED
TO AND ACCEPTED
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INDEMNITEE:
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