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INDEMNIFICATION AGREEMENT
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THIS INDEMNIFICATION AGREEMENT ("Agreement") is made effective as of
the 17th day of January, 1997, by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and XXXXX X. XXXXX ("Indemnitee"), a director
and/or officer of the Company.
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 does not currently have any directors' and
officers' liability insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation subjecting officers and directors to expensive
litigation risks at the same time that liability insurance has been severely
limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate given the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to serve as officers and directors
without adequate protection;
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;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
I.
INDEMNIFICATION
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1.01 Third Party Proceedings. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or complete action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than action by or in the right
of the Company) by reason of the fact that Indemnitee is or was a director
and/or officer of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director and/or officer or
by reason of the fact that 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, against all expense,
liability and loss (including attorneys' fees), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval shall not be unreasonably withheld) actually and reasonably
incurred by Indemnitee in connection with such action, suit or proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably
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believed to be in the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
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 Indemnitee reasonably believed to be in the best
interests of the Company, and with respect to any criminal action or proceeding,
had reasonable cause to believe that Indemnitee's conduct was unlawful.
1.02 Proceedings by or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of fact that Indemnitee is or was a director and/or officer
of the Company or any subsidiary of the Company, by reason of any action or
inaction on the part of Indemnitee while a director and/or officer or by reason
of the fact that 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, against all expense, liability and loss
(including attorneys' fees) and amounts paid in settlement (if such settlement
is court-approved) actually and reasonably incurred by Indemnitee in connection
with the defense or settlement of such action or suit if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in the best
interests of the Company and its shareholders. No indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company in the performance of Indemnitee's duties
to the Company and its shareholders, unless and only to the extent that the
Court in which such proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine.
1.03 Mandatory Payment of Expenses. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1.01 or 1.02 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
II.
EXPENSES; INDEMNIFICATION PROCEDURE
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2.01 Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1.01 or 1.02 hereof. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advance to be made hereunder shall be paid by the Company to
Indemnitee within thirty (30) days following delivery of a written request
therefor by Indemnitee to the Company.
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2.02 Determination of Conduct. Any indemnification (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
a determination that indemnification of Indemnitee is proper under the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Section 1.01 or 1.02 of this Agreement. Such determination shall be
made by any of the following: (1) the Board of Directors (or by an executive
committee thereof) by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, (3) by the
shareholders, with the shares owned by Indemnitee not being entitled to vote
thereon, or (4) the court in which such proceeding is or was pending upon
application made by the Company or Indemnitee or the attorney or other person
rendering service in connection with the defense, whether or not such
application by Indemnitee, the attorney or the other person is opposed by the
Company.
2.03 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 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 Alpha Microsystems, 0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx Xxx, Xxxxxxxxxx 00000, or such other address as the
Company shall designate in writing to Indemnitee. Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
2.04 Notice to Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 2.03 hereof, 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 the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
2.05 Selection of Counsel. In the event the Company shall be obligated
under Section 2.01 hereof to pay the expenses of any proceeding against
Indemnitee, the Company, shall be entitled to assume the defense of such
proceeding, 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
proceeding, provided that (a) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) 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 (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
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III.
ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
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3.01 Application. The provisions of this Agreement shall be deemed
applicable to all actual or alleged actions or omissions by Indemnitee during
any and all periods of time that Indemnitee was, is, or shall be serving as a
director and/or officer of the Company.
3.02 Scope. The Company hereby agrees to indemnify Indemnitee to the
fullest extent permitted by law (except as set forth in Article VIII hereof),
notwithstanding that such indemnification is not specifically authorized by the
other provisions of this Agreement, the Company's Articles of Incorporation, the
Company's Bylaws or by statute. In the event of any changes, after the date of
this Agreement, in any applicable law, statute, or rule which expands the right
of a California corporation to indemnify a member of its board of directors or
an officer, such changes shall be, ipso facto, within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. In the
event of any change in any applicable law, statute, or rule which narrows the
right of a California corporation to indemnify a member of its board of
directors or an officer, 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.
3.03 Non-Exclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for an action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
IV.
PARTIAL INDEMNIFICATION
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4.01 If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the expenses, judgments,
fines or penalties actually or reasonably incurred by him in the investigation,
defense, appeal or settlement of any civil or criminal action, suit or
proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
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V.
MUTUAL ACKNOWLEDGMENT
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5.01 Both the Company and Indemnitee acknowledge that in certain
instances, federal law or public policy may override applicable state law and
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge that
the Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC 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.
VI.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
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6.01 The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the company to obtain and
maintain a policy or policies of insurance with reputable insurance companies
providing the directors and officers with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured 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. Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith that
such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or subsidiary of the Company.
VII.
SEVERABILITY
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7.01 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. The provisions of this Agreement shall be severable as provided in
this Article VII. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify
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Indemnitee to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated, and the balance of this
Agreement not so invalidated shall be enforceable in accordance with its terms.
VIII.
EXCEPTIONS
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8.01 Any other provision to the contrary notwithstanding, the Company
shall not be obligated pursuant to the terms of this Agreement for the
following:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, unless said
proceedings or claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee against
liability for any transactions from which Indemnitee derived an improper
personal benefit, including, but not limited to, self-dealing or usurpation of a
corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or other
final adjudication adverse to Indemnitee established that Indemnitee committed
acts of active and deliberate dishonesty, with actual dishonest purpose and
intent, which acts were material to the cause of action so adjudicated.
(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) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses or 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.
IX.
MISCELLANEOUS
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9.01 Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger so that if Indemnitee is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust
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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 or agent of the Company
which impose duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "reasonably believed to be in the best interests of the
Company and its shareholders" as referred to in this Agreement.
9.02 Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall insure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
9.03 Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressed, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked:
If to Indemnitee: Xxxxx X. Xxxxx
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If to Company: Alpha Microsystems
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
or to such other address as may be furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be.
9.04 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 and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
9.05 Choice of Law. This Agreement shall be governed by and its
provisions construed 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 California.
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9.06 Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as
of the date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
By:
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Its:
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"Indemnitee"
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Xxxxx X. Xxxxx
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