EXHIBIT 10.1
FORM OF
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement"), entered into as of the
______ day of ___________, 199_, between Hyseq, Inc., a Nevada corporation
("Hyseq" or the "Company") and _______________ (the "Indemnitee").
WHEREAS, the Indemnitee is an officer or a member of the Board of Directors
of Hyseq and in such capacity is performing a valuable service for Hyseq;
WHEREAS, the law of Hyseq's state of incorporation permits Hyseq to enter
into contracts with its officers or members of its Board of Directors with
respect to indemnification of such persons; and
WHEREAS, to induce the Indemnitee to continue to provide services to Hyseq
as an officer or a member of the Board of Directors, and to provide the
Indemnitee with specific contractual assurance that indemnification will be
available to the Indemnitee regardless of, among other things, any amendment to
or revocation of Hyseq's Articles of Incorporation, or any acquisition
transaction relating to Hyseq, Hyseq desires to provide the Indemnitee with
protection against personal liability;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, Hyseq and the Indemnitee hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement:
(a) "Change in Control" shall mean a change in the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of Hyseq, or any successor in interest thereto, whether through the
ownership of voting securities, by contract or otherwise, including but not
limited to a change which would be required to be reported under Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 as in effect on the date hereof (the "Exchange Act") or as may otherwise be
determined pursuant to a resolution of the Hyseq Board of the Directors. A
rebuttable presumption of a Change in Control shall be created by any of the
following which first occur after the date hereof and Hyseq shall have the
burden of proof to overcome such presumption:
(i) the ability of any "Person" (as such term is defined in Sections
13(d) and 14(d) of the Exchange Act) together with an "Affiliate" or
"Associate" (as defined in Rule 12b-2 of the Exchange Act) or "Group"
(within the meaning of Section 13(d)(3) of the Exchange Act) to exercise or
direct the exercise of 20% or more of the combined voting power of all
outstanding shares of voting stock of Hyseq in the election of its
directors
-1-
("Interested Party") (provided, however, "Interested Party" shall not
include an agent, broker, nominee, custodian or trustee, solely in their
capacity as such, for one or more persons who do not individually or as a
group possess such power);
(i) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of Hyseq
cease for any reason to constitute at least a majority thereof, unless the
election of each director who was not a director at the beginning of such
period has been approved in advance by the directors representing two-
thirds of the directors then in office who were the directors at the
beginning of the period;
(ii) the approval of the shareholders of Hyseq of:
(A) a merger or consolidation of Hyseq with any Interested
Party;
(B) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition, to or with any Interested Party in any transaction
or series of transactions, of Hyseq's assets or the assets of any
subsidiary of Hyseq having a market value equal to 10% or more of the
aggregate market value of all assets of Hyseq determined on a
consolidated basis, all outstanding stock of Hyseq, or the earning
power or net income of Hyseq, determined on a consolidated basis;
(C) the issuance or transfer by Hyseq, or any subsidiary
thereof, to any Interested Party in any transaction or a series of
transactions, of capital securities with a value equal to 5% or more
of the aggregate market value of the then outstanding shares of voting
stock of Hyseq other than the issuance or transfer of such shares of
stock to all Hyseq shareholders on a pro rata basis;
(D) the adoption of any plan or proposal for the partial or
complete liquidation or dissolution of Hyseq proposed by an Interested
Party or pursuant to any agreement, arrangement or understanding,
whether or not in writing, with any Interested Party; or
(E) any reclassification of securities, including without
limitation, any stock split, stock dividend, or other distributions of
stock, or any reverse stock split, recapitalization of Hyseq, or any
merger or consolidation of Hyseq with any subsidiary thereof, or any
other transaction proposed by, or pursuant to, any agreement,
arrangement, or understanding, whether or not in writing, with any
Interested Party which has the effect, directly or indirectly, of
increasing the proportionate shares of the voting stock of Hyseq
directly or indirectly owned by any such Interested Party; or
(iv) any receipt by any Interested Party, directly or indirectly, of
any loans, advances, guarantees, pledges or other financial assistance, or
any tax credits or other tax
-2-
advantages provided by or through Hyseq other than the receipt of such
advantages which are provided to all Hyseq shareholders on a pro rata
basis.
(b) "Corporate Status" describes the status of a person who is or was a
director, officer, employee, agent or fiduciary of Hyseq or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (whether conducted for profit or not for profit) if such person is or
was so serving at the request of Hyseq.
(c) "Disinterested Director" means a director of Hyseq who is not and was
not a party to the Proceeding (as hereinafter defined) in respect of which
indemnification is sought by the Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' and paralegals'
fees, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to be a
witness in a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, or
in the past five (5) years has been, retained to represent (i) Hyseq or the
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
(g) "Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing, or any other
proceeding, including appeals therefrom, whether civil, criminal,
administrative, or investigative, except one initiated by the Indemnitee
pursuant to paragraph 8 of this Agreement to enforce his rights under this
Agreement.
2. INDEMNIFICATION - GENERAL
The Indemnitee shall be entitled to the rights of indemnification provided
in this paragraph 2 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending, or completed
Proceeding, including a Proceeding by or in the right of Hyseq. Unless
prohibited by paragraph 13 hereof, the Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines, and settlement amounts actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein.
-3-
3. EXPENSES OF A SUCCESSFUL PARTY
Without limiting the effect of any other provision of this Agreement, to
the extent that the Indemnitee is, by reason of his Corporate Status, a party to
and is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If the Indemnitee is not wholly successful
in such Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues, or matters in such Proceeding, Hyseq
shall indemnify the Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this paragraph and without limitation,
the termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
4. WITNESS EXPENSES
Notwithstanding any other provision of this Agreement, to the extent that
the Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which he is not a party, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith.
5. ADVANCES
Hyseq shall advance all reasonable Expenses incurred by or on behalf of the
Indemnitee in connection with any Proceeding within twenty (20) days after the
receipt by Hyseq of a statement from the Indemnitee requesting such advance from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement shall reasonably evidence the Expenses incurred by the Indemnitee
and shall include or be preceded or accompanied by an undertaking by or on
behalf of the Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that the Indemnitee is not entitled to be indemnified against such
Expenses.
6. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION
(a) To obtain indemnification under this Agreement, the Indemnitee shall
submit to Hyseq a written request, including therewith such documentation and
information reasonably necessary to determine whether and to what extent the
Indemnitee is entitled to indemnification.
(b) Upon such written request pursuant to subparagraph 6(a), a
determination with respect to the Indemnitee's entitlement thereto shall be made
in the specific case (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board of the Directors, a copy
of which shall be delivered to the Indemnitee (unless the Indemnitee shall
request that such determination be made by the Board of Directors or the
Shareholders, in which case by the person or persons or in the manner provided
in clauses (ii) or (iii) of this paragraph
-4-
6(b)); (ii) if a Change in Control shall not have occurred, (A) by the Board of
Directors by a majority vote of a quorum consisting of Disinterested Directors,
or (B) if a quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, if such quorum of
Disinterested Directors so directs, by Independent Counsel in a written opinion
to the Board of Directors, a copy of which shall be delivered to the Director,
or (C) by the shareholders of Hyseq; or (iii) as provided in paragraph 7(b) of
this Agreement. If it is so determined that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within ten (10) days
after such determination.
(c) The Indemnitee shall cooperate with the person or entity making such
determination with respect to the Indemnitee's entitlement to indemnification,
including providing upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to the Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by the Indemnitee in so cooperating shall be borne by
Hyseq (irrespective of the determination as to the Indemnitee's entitlement to
indemnification) and Hyseq hereby indemnifies and agree to hold the Indemnitee's
harmless therefrom.
(d) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to paragraph 6(b) hereof, the
Independent Counsel shall be selected as provided in this paragraph 6(d). If a
Change in Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and Hyseq shall give written notice to the
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change in Control shall have occurred, the Independent Counsel shall be
selected by the Director (unless the Indemnitee shall request that such
selection be made by the Board of Directors, in which event the preceding
sentence shall apply), and the Indemnitee shall give written notice to Hyseq
advising it of the identity of the Independent Counsel so selected. In either
event, the Indemnitee, or Hyseq, as the case may be, may, within seven (7) days
after such written notice of selection shall have been given, deliver to Hyseq
or to the Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the grounds that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in paragraph 1 of this Agreement. If such written objection is made, the
Independent Counsel so selected may not serve as Independent Counsel until a
court has determined that such objection is without merit. If, within twenty
(20) days after submission by the Indemnitee of a written request for
indemnification pursuant to paragraph 6(a) hereof, no Independent Counsel shall
have been selected or, if selected, shall have been objected to, either Hyseq or
the Indemnitee may petition a court for resolution of any objection which shall
have been made by Hyseq or the Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under paragraph 6(b)
hereof. Hyseq shall pay all reasonable fees and expenses of Independent Counsel
incurred in connection with acting pursuant to paragraph 6(b) hereof, and all
reasonable fees and expenses incident to the selection of such Independent
Counsel pursuant to this paragraph 6(d). In the event that a determination of
-5-
entitlement to indemnification is to be made by Independent Counsel and such
determination shall not have been made and delivered in a written opinion within
ninety (90) days after the receipt by Hyseq of the Indemnitee's request in
accordance with paragraph 6(a), upon the due commencement of any judicial
proceeding in accordance with paragraph 8(a) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity.
7. PRESUMPTIONS
(a) In making a determination with respect to entitlement or
indemnification hereunder, the person or entity making such determination shall
presume that the Indemnitee is entitled to indemnification under this Agreement
and Hyseq shall have the burden of proof to overcome such presumption.
(b) If the person or entity making the determination whether the
Indemnitee is entitled to indemnification shall not have made a determination
within sixty (60) days after receipt by Hyseq of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and the Indemnitee shall be entitled to such indemnification,
absent (i) a misstatement by the Indemnitee of a material fact, or an omission
of a material fact necessary to make the Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law. Such sixty (60)-day
period may be extended for a reasonable time, not to exceed an additional thirty
(30) days, if the person or entity making said determination in good faith
requires additional time for the obtaining or evaluating of documentation and/or
information relating thereto. The foregoing provisions of this paragraph 7(b)
shall not apply (i) if the determination of entitlement to indemnification is to
be made by the shareholders and if within fifteen (15) days after receipt by
Hyseq of the request for such determination the Board of Directors resolves to
submit such determination to the shareholders for consideration at an annual or
special meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is made at such meeting, or (ii) if the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to paragraph 6(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of the Indemnitee to
indemnification.
8. REMEDIES
(a) In the event that (i) a determination is made that the Indemnitee is
not entitled to indemnification under this Agreement, or (ii) advancement of
Expenses is not timely made pursuant to this Agreement, or (iii) payment of
indemnification due the Indemnitee under this Agreement is not timely made, the
Indemnitee shall be entitled to an adjudication in an
-6-
appropriate court of competent jurisdiction of his entitlement to such
indemnification or advancement of Expenses.
(b) In the event that a determination shall have been made pursuant to
this Agreement that the Indemnitee is not entitled to indemnification, any
judicial proceeding commenced pursuant to this paragraph 8 shall be conducted in
all respects as a de novo trial, on the merits and the Indemnitee shall not be
prejudiced by reason of that adverse determination. In any judicial proceeding
or arbitration commenced pursuant to this paragraph 8, Hyseq shall have the
burden of proving that the Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to this Agreement that the Indemnitee is entitled to indemnification,
Hyseq shall be bound by such determination in any judicial proceeding commenced
pursuant to this paragraph 8, absent (i) a misstatement by the Indemnitee of a
material fact, or an omission of a material fact necessary to make the
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(i) Hyseq shall be precluded from asserting in any judicial
proceeding commenced pursuant to this paragraph 8 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court that Hyseq is bound by all the provisions
of this Agreement.
(ii) In the event that the Indemnitee, pursuant to this paragraph 8,
seeks a judicial adjudication of his rights under, or to recover damages
for breach of, this Agreement, if successful in whole or in part, the
Indemnitee shall be entitled to recover from Hyseq, and shall be
indemnified by Hyseq against, any and all Expenses actually and reasonably
incurred by him in such judicial adjudication.
9. ESTABLISHMENT OF TRUST
In the event of a Change in Control, Hyseq shall, upon written request by
the Indemnitee, create a trust for the benefit of the Indemnitee ("Trust") and
from time-to-time upon written request by the Indemnitee, shall fund such Trust
in an amount sufficient to satisfy any and all Expenses, judgments, penalties,
fines and settlement amounts actually and reasonably incurred by him or on his
behalf or claimed, reasonably anticipated or proposed to be paid in accordance
with the terms of this Agreement. The amount to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by Independent
Counsel. The terms of the Trust shall provide that upon a Change in Control (i)
the Trust shall not be revoked or the principal thereof invaded, without the
prior written consent of the Indemnitee, (ii) the Trustee shall advance, within
two business days of a request by the Indemnitee and in accordance with
paragraph 5 of this Agreement, any and all Expenses to the Indemnitee, (iii) the
Trust shall continue to be funded by Hyseq in accordance with the funding
obligation set forth above, (iv) the Trustee shall promptly pay to the
Indemnitee all amounts for which the Indemnitee shall be
-7-
entitled to indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in such Trust shall revert to Hyseq upon a final determination
by Independent Counsel that the Indemnitee has been fully indemnified under the
terms of this Agreement. The Trustee shall be chosen by the Indemnitee and
agreed to by Hyseq. Nothing in this Section 9 shall relieve Hyseq of any of its
obligations under this Agreement.
10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which the Indemnitee may at any time be entitled under applicable law,
Hyseq's Charter, the Bylaws, any agreement, a vote of shareholders or a
resolution of directors, or otherwise. No amendment, alteration or repeal of
this Agreement or any provision hereof shall be effective as to the Indemnitee
with respect to any action taken or omitted by the Indemnitee as a member of the
Board of Directors prior to such amendment, alteration or repeal.
(b) To the extent that Hyseq maintains an insurance policy or policies
providing liability insurance for directors of Hyseq, the Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available.
(c) In the event of any payment under this Agreement, Hyseq shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee, who shall execute all papers required and take all actions necessary
to secure such rights, including execution of such documents as are necessary to
enable Hyseq to bring suit to enforce such rights.
(d) Hyseq shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that the
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement, or otherwise.
11. CONTINUATION OF INDEMNITY
All agreements and obligations of Hyseq contained herein shall continue
during the period the Indemnitee is an officer or a member of the Board of
Directors of Hyseq and shall continue thereafter so long as the Indemnitee shall
be subject to any threatened, pending or completed Proceeding by reason of his
Corporate Status. No legal action shall be brought and no cause of action shall
be asserted by or on behalf of Hyseq against the Indemnitee, the Indemnitee's
spouse, heirs, executors or personal or legal representatives after the
expiration of two (2) years from the date of accrual of such cause of action,
and any claim or cause of action of Hyseq shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such two
(2)-year period; provided, however, that if any shorter prior of limitations is
otherwise applicable to any such cause of action such shorter period shall
govern. This Agreement shall be binding upon Hyseq and its successors and
assigns and shall inure to the benefit of the Indemnitee and his heirs,
executors and administrators.
-8-
12. SEVERABILITY
If any provision or provisions of this Agreement shall be held to be
invalid, illegal, or unenforceable for any reason whatsoever (i) the validity,
legality, and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any paragraph of this Agreement
containing any such provision held to be invalid, illegal, or unenforceable,
that is not itself invalid, illegal, or unenforceable) shall not in any way be
affected or impaired thereby, and (ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal, or unenforceable, that is not itself invalid, illegal, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provisions held invalid, illegal, or unenforceable.
13. EXCEPTIONS TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES
Notwithstanding any other provisions of this Agreement, the Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement unless the Indemnitee acted in good faith and in a manner which the
Indemnitee believed to be or not opposed to the best interests of Hyseq.
Indemnification may not be made for any claim, issue or matter as to which the
Indemnitee has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to Hyseq or for amounts paid
in settlement to Hyseq, unless and only to the extent that the court in which
the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case,
the Indemnitee is fairly and reasonably entitled to indemnification for such
expenses as the court deems proper.
14. HEADINGS
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
15. MODIFICATION AND WAIVER
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 to, nor shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. NOTICE BY THE INDEMNITEE
The Indemnitee agrees promptly to notify Hyseq in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information, or
other document relating to
-9-
any Proceeding or matter which may be subject to indemnification or advancement
of Expenses covered hereunder.
17. NOTICES
All notices, requests, demands, and other communications hereunder shall be
in writing and shall be deemed to have been duly given if (i) delivered by hand
and receipted for by the party to whom said notice or other communication shall
have been directed, or (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:
If to the Indemnitee, to:
If to Hyseq, to:
Hyseq, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
or to such other address as may have been furnished to the Director by Hyseq or
to Hyseq by the Indemnitee, as the case may be.
18. GOVERNING LAW
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Nevada.
-10-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HYSEQ, INC.
By:
----------------------------------
Xxxxx X. Xxxxxx, President
INDEMNITEE
By:
----------------------------------
-11-
