DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
EXHIBIT 10.12
This
Indemnification Agreement (“Agreement”) is made as of this
day of ___________ 2010, by and between Telkonet, Inc.,
a Utah corporation (the “Company”), and
[ ]
(“Indemnitee”).
WHEREAS,
the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve as officers and directors of the
Company and to indemnify its officers and directors so as to provide them with
the maximum protection permitted by law;
WHEREAS,
the Company and Indemnitee recognize the increasing difficulty in obtaining
directors’ and officers’ liability insurance, 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 officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited;
WHEREAS,
it is reasonable, prudent and necessary for the Company contractually to
obligate itself to indemnify its directors and certain of its officers to the
fullest extent permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS,
the Indemnitee is willing to serve, continue to serve and to take on additional
service for or on behalf of the Company on the condition that he may be so
indemnified.
NOW,
THEREFORE, in consideration of the premises and the covenants contained herein,
the Company and the Indemnitee do hereby covenant and agree as
follows:
1. Certain
Definitions.
In
addition to terms defined elsewhere herein, the following terms shall have the
meanings ascribed to them below when used in this Agreement with initial capital
letters:
(a)
"Claim" means
any threatened, pending or completed action, suit or proceeding, or any inquiry
or investigation, whether instituted, made or conducted by the Company or any
other party, including without limitation any governmental entity, that
Indemnitee determines might lead to the institution of any such action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, investigative
or other.
(b)
"Expenses"
includes attorneys' and experts' fees, expenses and charges 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.
(c)
"Indemnifiable
Losses" means any and all Expenses, damages, losses, liabilities,
judgments, fines, penalties and amounts paid in settlement (including without
limitation all interest, assessments and other charges paid or payable in
connection with or in respect of any of the foregoing) (collectively, "Losses")
relating to, resulting from or arising out of any Claim by reason of the fact
that (i) Indemnitee is or was a director, officer, employee or agent of the
Company or (ii) 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.
2.
Indemnification.
(a) Third Party
Proceedings. Subject to Section 2(b), the Company will indemnify
and hold harmless Indemnitee, to the fullest extent permitted by the laws of the
State of Utah in effect on the date hereof or as such laws may from time to time
hereafter be amended to increase the scope of such permitted indemnification,
against all Indemnifiable Losses relating to, resulting from or arising out of
any Claim if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit 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 Indemnitee did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(b) Authorization.
Any indemnification under this Agreement (unless ordered by a court) shall be
made by the Company only as authorized in the specific case upon a determination
that indemnification of the Indemnitee is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section 2(a). Such
determination shall be made (i) by a majority vote of the directors who were not
parties to such action, suit or proceeding, even though less than a quorum, (ii)
by a committee of such directors designated by majority vote of such directors,
even though less than a quorum, (iii) if there are no such directors, or, if
such directors so direct, by independent legal counsel in a written opinion or
(iv) by the stockholders. To the extent, however, that Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys’ fees) actually
and reasonably incurred by him or her in connection therewith, without the
necessity of authorization in the specific case.
3. Expenses; Indemnification
Procedure.
(a) Advance of
Expenses. Expenses incurred by Indemnitee in defending a Claim
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of Indemnitee
to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized under this
Agreement.
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(b) Notice/Cooperation By
Indemnitee. Indemnitee shall, as a condition precedent to his or
her right to be indemnified under this Agreement, give the Company notice in
writing as soon as reasonably practicable of any Claim made or threatened to be
made against Indemnitee for which indemnification is or will be sought under
this Agreement. Notice to the Company shall be directed to the Company at
the address shown in Section 15 of this Agreement (or such address as the
Company shall designate in writing to 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. The failure by
Indemnitee to notify the Company of such Claim will not relieve the Company from
any liability hereunder unless, and only to the extent that, the Company did not
otherwise learn of the Claim and such failure results in forfeiture by the
Company of substantial defenses, rights or insurance coverage.
(c) Procedure. If a
Claim under Section 2 hereof is not paid in full by the Company within ninety
(90) days after a written claim has been received by the Company, or a claim
under Section 3(a) hereof for an advancement of expenses is not paid in full by
the Company within thirty (30) days after a written claim has been received by
the Company, Indemnitee may at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Company to recover an
advancement of expenses pursuant to Section 3(a), Indemnitee shall also be
entitled to be paid the expense of prosecuting or defending such suit, including
any reasonable attorneys’ fees. In any suit by the Company to recover
an advancement of expenses pursuant to Section 3(a), the Company shall be
entitled to recover such expenses, upon a final judicial decision from which
there is no further right to appeal that Indemnitee has not met the standards of
conduct which makes it permissible under applicable law for the Company to
indemnify Indemnitee for the amounts claimed. Neither the failure of the
Company (including its board of directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the standards of conduct which makes it permissible under
applicable law for the Company to indemnify Indemnitee for the amounts claimed,
nor an actual determination by the Company (including its board of directors,
independent legal counsel, or stockholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee has
not met the applicable standard of conduct or, in the case of such a suit
brought by Indemnitee, be a defense to such suit. In any suit brought by
Indemnitee to enforce a right to indemnification or to an advancement of
expenses pursuant to Section 3(a) hereunder, or by the Company to recover an
advancement of expenses pursuant to Section 3(a), the burden of proving that
Indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Agreement or otherwise shall be on the
Company.
(d) Notice to
Insurers. If, at the time of the receipt of a notice of a Claim,
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 its 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 and to the extent of the terms of such
policies.
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(e) Selection of
Counsel. In the event the Company shall be obligated under this
Agreement to pay any Expenses in connection with a Claim, the Company shall be
entitled to assume the defense thereof, with counsel approved by Indemnitee,
which approval shall not be unreasonably withheld or delayed, upon the delivery
to Indemnitee of written notice of the Company’s 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 or her counsel in any such proceeding at
Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee at
the Company’s expense has been previously authorized by the Company, or (B) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the reasonable fees and expenses of Indemnitee’s counsel shall
be at the expense of the Company.
4. 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 from time to time by
the Utah General Corporation Law as the same presently exists or may hereafter
be amended (but, if permitted by applicable law, in the case of any amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than permitted prior to such amendment) or any other
applicable law as presently or hereafter in effect. 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, an officer
or other corporate agent, such changes, 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.
(b) Nonexclusivity.
The indemnification and advancement of Expenses provided by or granted pursuant
to this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may be entitled under the Company’s Articles of Amendment of the
Amended and Restated Articles of Incorporation (as the same may be amended from
time to time), the Company’s By-Laws (as the same may be amended from time to
time), any other agreement or contract, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such
office.
5. Partial
Indemnification. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of any
Indemnifiable Losses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
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6. 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 documents required and shall do all acts that may be necessary
to secure such rights and to enable the Company effectively to bring suit to
enforce such rights.
7. Continuation of
Indemnification. All agreements and obligations of the Company
contained herein shall continue during the period Indemnitee is a director
and/or officer of the Company or is serving at the request of the Company as a
director, officer, employee or agent or fiduciary of any other entity
(including, but not limited to, another corporation, partnership, joint venture
or trust) of the Company and shall also continue after the period of such
service with respect to any possible claims based on the fact that Indemnitee
was or had been a director and/or officer of the Company or was or had been
serving at the request of the Company as a director, officer, employee or agent
or fiduciary of any other entity (including, but not limited to, another
corporation, partnership, joint venture or trust).
8. Mutual
Acknowledgment. Both the Company and Indemnitee acknowledge that,
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company
may be required in the future to submit for determination by an appropriate
regulatory agency the question of whether the Company’s obligation to indemnify
Indemnitee is barred as a matter of public policy. 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.
9. 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 an
officer or a director may not be relieved of liability under the Utah General
Corporation Law; or
(b) Claims Initiated by
Indemnitee. To indemnify or advance expenses to Indemnitee with
respect to a proceeding (or part thereof) initiated or brought voluntarily by
Indemnitee and not by way of defense, except with respect to a proceeding (or
part thereof) brought to enforce a right to indemnification under this Agreement
and except with respect to a proceeding (or part thereof) authorized or
consented to by the board of directors of the Company; or
(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
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(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) to the extent paid, or acknowledged
to be payable, directly to or on behalf of Indemnitee by an insurance carrier
under a policy of officers’ and directors’ liability insurance; 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 that is
deemed, pursuant to a final judicial decision from which there is no further
right to appeal, in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
10. No Duplication of
Payments. The Company will not be liable under this Agreement to make any
payment in connection with any Indemnifiable Loss made against Indemnitee to the
extent Indemnitee has otherwise actually received payment (net of Expenses
incurred in connection therewith) under any insurance policy, the Corporate
Documents and Other Indemnity Provisions or otherwise of the amounts otherwise
indemnifiable hereunder.
11. Liability Insurance and
Funding. To the extent the Company maintains an insurance policy or
policies providing directors' and officers' liability insurance, Indemnitee will
be covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any director or officer of the
Company.
12. Counterparts.
This Agreement may be executed in counterparts, each of which shall constitute
an original.
13. Binding Effect; Successors
and Assigns. This Agreement shall be binding upon the Company and
its successors and assigns (including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), and shall inure to the benefit of Indemnitee
and Indemnitee’s estate, heirs, legal representative and assigns. The
Company shall require and cause any successor (whether direct or indirect, and
whether by purchase, merger, consolidation or otherwise) to all or substantially
all of its business or assets expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that it would be required to
perform if no such succession had taken place. This Agreement is personal in
nature and neither of the parties hereto will, without the consent of the other,
assign or delegate this Agreement or any rights or obligations hereunder except
as expressly provided in this Section 12. Without limiting the generality or
effect of the foregoing, Indemnitee's right to receive payments hereunder will
not be assignable, whether by pledge, creation of a security interest or
otherwise, other than by a transfer by the Indemnitee's will or by the laws of
descent and distribution, and, in the event of any attempted assignment or
transfer contrary to this Section 12, the Company will have no liability to pay
any amount so attempted to be assigned or transferred.
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14. Attorney’s
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, the 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 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.
15. Notice. All
notices, requests, demands and other communications under this Agreement shall
be in writing, shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed,
or if sent otherwise, when such notice shall actually be received, and shall be
delivered by Federal Express or a similar courier, personal delivery, certified
or registered air mail, or by facsimile transmission. Addresses for notice
to either party are as follows (or at such other addresses for a party as shall
be specified by like notice):
if to the
Company:
Telkonet, Inc.
00000
Xxxxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Attention:
General Counsel
if to
Indemnitee:
[Indemnitee]
__________________
__________________
__________________
16. Choice of Law.
This Agreement shall be governed by and its provisions construed in accordance
with the laws of the State of Wisconsin, as applied to contracts between
Delaware residents entered into and to be performed entirely within
Wisconsin.
17. 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 provision 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.
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18. Amendment and
Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
19. Integration and Entire
Agreement. This Agreement sets forth the entire understanding
between the parties hereto and supersedes and merges all previous written and
oral negotiations, commitments, understandings and agreements relating to the
subject matter hereof between the parties hereto.
20. Terminology and
Headings. Words importing a gender include any other gender. Words in the
singular number include the plural and words in the plural number include the
singular. Headings within this Contract are for convenient reference
only and have no effect in limiting or extending the language of the provisions
to which they refer.
21. 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 or affiliated entities.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
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TELKONET,
INC.
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By:
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Name:
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Title:
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[INDEMNITEE]
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Name:
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Title:
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