Exhibit 10.12
Franklin Telecommunications Corp.
Indemnification Agreement
THIS INDEMNIFICATION AGREEMENT is entered into as of ___________ ____, 1997
between Franklin Telecommunications Corp. a California corporation ("the
Company"), and ______________________________ ("Indemnitee").
RECITALS
A. The Company believes that it is essential to its best interests to
attract and retain highly capable persons to serve as directors and officers of
the Company.
B. Indemnitee is or has been selected to be a director and/or officer of
the Company.
C. The Company and Indemnitee recognize the increased risk of litigation
and other claims being asserted against directors, officers, and other agents of
corporations.
D. In recognition of Indemnitee's need for substantial protection against
personal liability, in order to enhance Indemnitee's continued service to the
Company, and in order to induce Indemnitee to continue to provide services to
the Company as a director and/or officer, the Company wishes to provide in this
Agreement for the indemnification of and the advancing of expenses to Indemnitee
to the fullest extent permitted by law and as set forth in this Agreement and,
to the extent applicable insurance is maintained, for the coverage of Indemnitee
under the Company's policies of directors' and officers' liability insurance.
NOW THEREFORE, IN CONSIDERATION of the foregoing and of Indemnitee's
continuing to provide services to the Company directly or, at its request, with
another enterprise, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings when
used in this Agreement:
1.1 The term "Board" shall mean the board of directors of the Company.
1.2 The term "Change in Control" shall mean a state of affairs that
shall be deemed to have occurred if :
(i) any person is or becomes the "beneficial owner" (as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of securities representing 20 percent
or more of the total voting power of the Company's then-outstanding voting
securities;
(ii) during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the board, together with any new director
whose election by the board 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 in office who either were directors at the beginning of the two-
year period, or whose election or nomination was previously so approved, cease
for any reason to constitute a majority of the board;
(iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or a
consolidation that would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80 percent 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
(iv) 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 (whether in one transaction or a series of transactions), of all or
substantially all of the Company's assets.
1.3 The term "Expenses" shall mean:
(i) any expense, liability, or loss, including attorney fees, judgments,
fines, ERISA excise taxes and penalties, and amounts paid or to be paid in
settlement;
(ii) any interest, assessments, or other charges imposed on any of the
items in part (i) of this subsection 1.3; and
(iii) any federal, state, local, or foreign taxes imposed as a result of
the actual or deemed receipt of any payments under this Agreement paid or
incurred in connection with investigating, defending, being a witness in,
participating in (including on appeal), or preparing for any of the foregoing in
any proceeding relating
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to any Indemnifiable Event.
1.4 The term "Indemnifiable Event" shall mean any event or occurrence that
takes place either before or after the execution of this Agreement and that is
related to:
(i) the fact that Indemnitee is or was a director or an officer of the
Company, or while a director or officer is or was serving at the request of the
Company as a director, officer, employee, trustee, agent, or fiduciary of
another foreign or domestic corporation, partnership, joint venture, employee
benefit plan, trust, or other enterprise, or was a director, officer, employee,
or agent of a foreign or domestic corporation that was a predecessor corporation
of the Company or another enterprise at the request of such predecessor
corporation; or
(ii) anything done or not done by Indemnitee in any such capacity,
whether or not the basis of the proceeding is an alleged action in an official
capacity as a director, officer, employee, or agent, or in any other capacity
while serving as a director, officer, employee, or agent of the Company, as
described in this subsection 1.4.
1.5 The term "Independent Counsel" shall mean the person or firm appointed
in connection with Section 3 of this Agreement
1.6 The term "Person" shall mean any person (as that term is used in
sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
acting in such capacity, 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 at the date of this Agreement.
1.7 The term "Participant" shall mean a person who is a party to, or a
witness or a participant (including on appeal) in, a Proceeding.
1.8 The term "Potential Change in Control" shall mean a state of affairs
that shall be deemed to exist if:
(i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a change in control;
(ii) any person (including the Company) announces publicly an
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intention to take or to consider taking actions that, if consummated, would
constitute a change in control;
(iii) any person who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10 percent or more of the
combined voting power of the Company's then-outstanding voting securities,
increases his or her beneficial ownership of such securities by 5 percent or
more over the percentage owned by such person on the date of this Agreement; or
(iv) the board adopts a resolution to the effect that, for purposes of
this Agreement, a potential change in control has occurred.
1.9 The term "Proceeding" shall mean any threatened, pending, or completed
action, suit, or proceeding, or any inquiry, hearing, or investigation, whether
conducted by the Company or any other party, that Indemnitee in good faith
believes might lead to the institution of any such action, suit, or proceeding,
whether civil, criminal, administrative, investigative, or other.
1.10 The term "Reviewing Party" shall mean the person or firm appointed in
accordance with Section 3 of this Agreement.
1.11 The term "Voting Securities" shall mean any securities of the Company
that have the right to vote generally in the election of directors.
2. AGREEMENT TO INDEMNIFY.
2.1 General Agreement. In the event Indemnitee was, is, or becomes a
participant in, or is threatened to be made a participant in, a proceeding by
reason of (or arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee from and against any and all expenses to the fullest extent
permitted by law, as the same exists or may hereafter be amended or interpreted
(but in the case of any such amendment or interpretation, only to the extent
that such amendment or interpretation permits the Company to provide broader
indemnification rights than were permitted prior thereto). The parties hereto
intend that this Agreement shall provide for indemnification in excess of that
expressly permitted by statute, including, without limitation, any
indemnification provided by the Company's articles of incorporation, its bylaws,
a vote of its shareholders or disinterested directors, or applicable law.
2.2 Initiation of Proceeding. Notwithstanding anything in this Agreement to
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the contrary, Indemnitee shall not be entitled to indemnification under this
Agreement in connection with any proceeding initiated by Indemnitee against the
Company or any director or officer of the Company unless:
(i) the Company has joined in or the Board has consented to the
initiation of such proceeding;
(ii) the proceeding is one to enforce indemnification rights under
Section 5; or
(iii) the proceeding is instituted after a change in control and
independent counsel has approved its initiation.
2.3 Expense Advances. If so requested by Indemnitee, the Company shall,
within 10 business days after such request, advance all Expenses to Indemnitee
(an "Expense Advance"). Notwithstanding the foregoing, 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 for all such amounts, and Indemnitee hereby agrees to reimburse
the Company promptly for the same. If Indemnitee has commenced legal proceedings
in a court of competent jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, as provided in Section 4, 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 and all rights of
appeal therefrom have been exhausted or have lapsed. Indemnitee's obligation to
reimburse the Company for expense advances shall be unsecured, and no interest
shall be charged thereon.
2.4 Mandatory Indemnification. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits in
defense of any proceeding relating in whole or in part to an indemnifiable event
or in defense of any issue or matter in such proceeding, Indemnitee shall be
indemnified against all expenses incurred in connection therewith.
2.5 Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for a portion of Expenses,
but not for the total amount of Expenses, the Company shall indemnify Indemnitee
for the portion to which Indemnitee is entitled.
2.6 Prohibited Indemnification. No indemnification under this Agreement
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shall be paid by the Company on account of any proceeding in which judgment is
rendered against Indemnitee for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company under section 16(b) of the
Exchange Act, or similar provisions of any federal, state, or local laws.
3. REVIEWING PARTY.
Before any change in control occurs, the Reviewing Party shall be any
appropriate person or body consisting of a member or members of the Board or any
other person or body appointed by the Board who is not a party to the proceeding
for which Indemnitee is seeking indemnification; after a change in control, the
reviewing party shall be the independent counsel. On all matters arising after a
change in control (other than a change in control approved by a majority of the
directors of the Board who were directors immediately before such change in
control) concerning the rights of Indemnitee to indemnity payments and expense
advances under this Agreement, any other agreement, applicable law, or the
Company's articles of incorporation or bylaws now or hereafter in effect
relating to indemnification for indemnifiable events, the Company shall seek
legal advice only from independent counsel selected by Indemnitee and approved
by the Company (which approval shall not be unreasonably withheld), and who has
not otherwise performed services for the Company or Indemnitee (other than in
connection with indemnification matters) within the last five years. The
independent counsel shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement. Such counsel, among other
things, shall render a written opinion to the Company and Indemnitee on whether
and to what extent Indemnitee should be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the independent
counsel and to indemnify fully such counsel against any and all expenses,
including attorney fees, claims, liabilities, loss, and damages arising out of
or relating to this Agreement or the engagement of independent counsel under
this Agreement.
4. INDEMNIFICATION PROCESS AND APPEAL.
4.1 Indemnification Payment. Indemnitee shall receive indemnification of
Expenses from the Company in accordance with this Agreement as soon as
practicable after Indemnitee has made written demand on the Company for
indemnification, unless the Reviewing Party has given a written opinion to the
Company that Indemnitee is not entitled to indemnification under this Agreement
or applicable law.
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4.2 Suit To Enforce Rights. Regardless of any action by the reviewing
party, if Indemnitee has not received full indemnification within 30 days after
making a demand in accordance with Section 4.1, Indemnitee shall have the right
to enforce its indemnification rights under this Agreement by commencing
litigation in any court in the State of California seeking an initial
determination by the court or challenging any determination by the reviewing
party or any aspect thereof. The Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the reviewing party
not challenged by Indemnitee shall be binding on the Company and Indemnitee. The
remedy provided for in this Section 4 shall be in addition to any other remedies
available to Indemnitee in law or equity.
4.3 Defense to Indemnification, Burden of Proof, and Presumptions. It
shall be a defense to any action brought by Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
expenses incurred in defending a proceeding in advance of its final disposition
when the required undertaking has been tendered to the Company) that it is not
permissible, under this Agreement or applicable law, for the Company to
indemnify Indemnitee for the amount claimed. In connection with any such action
or any determination by the Reviewing Party or otherwise on whether Indemnitee
is entitled to be indemnified under this Agreement, the burden of proving such a
defense or determination shall be on the Company. Neither the failure of the
Reviewing Party or the Company (including its board, independent legal counsel,
or its shareholders) to have made a determination before the commencement of
such action by Indemnitee that indemnification is proper under the circumstances
because Indemnitee has met the standard of conduct set forth in applicable law,
nor an actual determination by the reviewing party or the Company (including its
board, independent legal counsel, or its shareholders) that Indemnitee had not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that Indemnitee has not met the applicable standard of
conduct. For purposes of this Agreement, the termination of any claim, action,
suit, or proceeding, by judgment, order, settlement (whether with or without
court approval), conviction, or on a plea of nolo contendere, or its equivalent,
shall not create a 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.
5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING RIGHTS
The Company shall indemnify Indemnitee against any and all expenses. If
requested by Indemnitee, the Company shall, within 10 business days after such
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request, advance to Indemnitee such expenses as are incurred by Indemnitee in
connection with any claim asserted against or action brought by Indemnitee for:
(a) indemnification of expenses or advances of expenses by the Company
under this Agreement, or any other agreement, or under applicable law, or the
Company's articles of incorporation or bylaws now or hereafter in effect
relating to indemnification for indemnifiable events, and/or
(b) recovery under directors' and officers' liability insurance policies
maintained by the Company, for amounts paid in settlement if the independent
counsel has approved the settlement.
The Company shall not settle any proceeding in any manner that would impose
any penalty or limitation on Indemnitee without Indemnitee's written consent.
Neither the Company nor Indemnitee will unreasonably withhold its consent to any
proposed settlement. The Company shall not be liable to indemnify the Indemnitee
under this Agreement with regard to any judicial award if the Company was not
given a reasonable and timely opportunity, at its expense, to participate in the
defense of such action; however, the Company's liability under this Agreement
shall not be excused if participation in the proceeding by the Company was
barred by this Agreement.
6. ESTABLISHMENT OF TRUST.
In the event of a change in control or a potential change in control, the
Company shall, on written request by Indemnitee, create a trust for the benefit
of Indemnitee ("the Trust") and from time to time on written request of
Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all
expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for, participating in, and/or
defending any proceeding relating to an indemnifiable event. The amount or
amounts to be deposited in the Trust under the foregoing funding obligation
shall be determined by the reviewing party. The terms of the Trust shall provide
that on a change in control:
(a) The Trust shall not be revoked or the principal invaded without the
written consent of Indemnitee.
(b) The Trustee shall be chosen by Indemnitee subject to approval by the
Company. The Trustee shall advance, within 10 business days of a request by
Indemnitee, all expenses to Indemnitee (provided that Indemnitee hereby agrees
to
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reimburse the Trust under the same circumstances for which Indemnitee would
be required to reimburse the Company under Section 2.3 of this Agreement).
(c) The Trust shall continue to be funded by the Company in accordance with
the funding obligation set forth in this Section 6.
(d) The Trustee shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification under this Agreement or
otherwise.
(e) All unexpended funds in the Trust shall revert to the Company on a
final determination by the reviewing party or a court of competent jurisdiction
that Indemnitee has been fully indemnified under the terms of this Agreement.
Nothing in this Section 6 shall relieve the Company of any of its
obligations under this Agreement. All income earned on the assets held in the
Trust shall be reported as income by the Company for federal, state, local, and
foreign tax purposes. The Company shall pay all costs of establishing and
maintaining the Trust and shall indemnify the Trustee against any and all
expenses, including attorneys' fees, claims, liabilities, losses, and damages
arising out of or relating to this Agreement or the establishment and
maintenance of the Trust.
7. NONEXCLUSIVITY.
The rights of Indemnitee under this Agreement shall be in addition to any
other rights Indemnitee may have under the Company's articles of incorporation,
bylaws, applicable law, or otherwise. To the extent that a change in applicable
law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company's articles of
incorporation, bylaws, applicable law, or this Agreement, it is the intent of
the parties that Indemnitee enjoy by this Agreement the greater benefits
afforded by such change.
8. LIABILITY INSURANCE.
To the extent the Company maintains an insurance policy or policies
providing directors' and officers' liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company director or
officer.
9. PERIOD OF LIMITATIONS.
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No legal action shall be brought, and no cause of action shall be asserted,
by or on behalf of the Company or any affiliate of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors, or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, or such longer period as may be required by state law
under the circumstances. Any claim or cause of action of the Company or its
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such period; provided, however, that if
any shorter period of limitations is otherwise applicable to any such cause of
action, the shorter period shall govern.
10. AMENDMENT OF THIS AGREEMENT.
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 operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
11. SUBROGATION.
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all 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.
12. 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 received payment (under any insurance policy, bylaw, or otherwise) of
the amounts otherwise indemnifiable under this Agreement.
13. BINDING EFFECT.
This Agreement shall be binding on and inure to the benefit of and be
enforceable by the parties hereto and their respective successors (including any
direct or indirect successor by purchase, merger, consolidation, or otherwise to
all or
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substantially all of the business and/or assets of the Company), assigns,
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. The
indemnification provided under this Agreement shall continue for Indemnitee for
any action taken or not taken while serving in an indemnified capacity
pertaining to an indemnifiable event even though Indemnitee may have ceased to
serve in such capacity at the time of any proceeding.
14. SEVERABILITY.
If any portion of this Agreement shall be held by a court of competent
jurisdiction to be invalid, void, or otherwise unenforceable, 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 limitation, 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, void, or unenforceable.
15. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California applicable to contracts made
and to be performed in such State without giving effect to the principles of
conflicts of laws.
16. NOTICES.
All notices, demands, and other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand, against receipt, or mailed, postage prepaid, certified or
registered mail, return receipt requested, and addressed to the Company at:
000 Xxxxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
and to Indemnitee at:
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________________________________
________________________________
Notice of change of address shall be effective only when given in
accordance with this section. All notices complying with this section shall be
deemed to have been received on the date of delivery or on the third business
day after mailing.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.
Franklin Telecommunications Corp.
By:_____________________________
By:_____________________________
________________________________
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