Indemnity Agreement - Luminent Mortgage Capital Inc.
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") is made as of ________,
2003, by and between Luminent Mortgage Capital, Inc., a Maryland corporation
(the "Company"), and ____________, a [director and/or officer] of the Company
(the "Indemnitee").
THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of
the following facts, intentions and understandings:
A. The Indemnitee is currently serving as a [director and/or
officer] of the Company and in such capacity renders valuable services to the
Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and Maryland statutory indemnification provisions to provide
its directors and officers with adequate protection against various legal risks
and potential liabilities to which directors and officers are subject in
connection with their position with the Company and has concluded that insurance
and statutory provisions may provide inadequate and unacceptable protection to
certain individuals requested to serve as its directors and officers.
C. In order to induce and encourage highly experienced and capable
persons such as the Indemnitee to continue to serve as a [director and/or
officer] of the Company, the Board of Directors of the Company has determined,
after due consideration and investigation of the terms and provisions of this
Agreement and the various other options available to the Company and the
Indemnitee in lieu of this Agreement, that this Agreement is not only reasonable
and prudent but necessary to promote and ensure the best interests of the
Company and its stockholders.
NOW, THEREFORE, In consideration of the continued services of the
Indemnitee and in order to induce the Indemnitee to continue to serve as a
[director and/or officer], the Company and the Indemnitee agree as follows:
1. Definitions. As used in this Agreement:
(a) A "Change in Control" shall be deemed to have occurred
if (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing fifteen percent (15%) or more of the total voting power represented
by the Company's then outstanding voting securities, or (ii) during any period
of two consecutive years, individuals who at the beginning of the two year
period constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or
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nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board of Directors, or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation or other entity, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior to
such a merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least eighty-five percent (85%) of the total voting power represented
by the voting securities of the Company or the surviving entity outstanding
immediately after the merger or consolidation, or the stockholders of the
Company approve a plan of liquidation, dissolution or winding up of the Company
or an agreement for the sale or disposition by the Company (in one transaction
or a series of transactions) of all or substantially all the Company's assets.
(b) The term "Expenses" includes, without limitation,
attorneys' fees, disbursements and retainers, accounting and witness fees,
travel and deposition costs, expenses of investigations, judicial or
administrative proceedings or appeals, amounts paid in settlement by or on
behalf of Indemnitee, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise including reasonable
compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he is not otherwise compensated by the Company or any third party. The
term "Expenses" does not include the amount of judgments, fines, penalties or
ERISA excise taxes actually levied against the Indemnitee.
(c) The term "fullest extent permitted by applicable law"
shall mean the fullest extent authorized or permitted under applicable statutory
or decisional law as amended or interpreted from time to time.
(d) A "Potential Change in Control" shall be deemed to have
occurred 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) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change in
Control; (iii) any person (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 stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company), who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding voting securities increases his
beneficial ownership of the securities by five percent (5%) or more over the
percentage so owned by that person on the date this Agreement is executed; or
(iv) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.
(e) The term "Proceeding" shall include any threatened,
pending or completed action, suit or proceeding, whether brought by or in the
name of the Company or otherwise and whether of a civil, criminal,
administrative, investigative or other nature, by reason of the fact that the
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, agent, partner, member, trustee or fiduciary of another
corporation, partnership, joint venture, limited liability
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company, employee benefit plan or other enterprise (each, an "Enterprise"),
whether or not he is serving in such capacity at the time any liability or
Expense is incurred for which indemnification or reimbursement is to be provided
under this Agreement.
2. Indemnification.
2.1 Indemnification in Third Party Actions. The Company
shall indemnify the Indemnitee in accordance with the provisions of this
subsection 2.1 if the Indemnitee is a party to or threatened to be made a party
to or otherwise involved in any manner (including, without limitation,
involvement as witness) in any Proceeding (other than a Proceeding by or in the
name of the Corporation to procure a judgment in its favor), by reason of the
fact that the Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company as
a director, officer, employee, agent, partner, member, trustee or fiduciary of
another Enterprise, against all Expenses, judgments, fines, penalties and ERISA
excise tax actually and reasonably incurred by the Indemnitee in connection with
the Proceeding, to the fullest extent permitted by applicable law; provided that
any settlement be approved in writing by the Company, which approval shall not
be unreasonably withheld or delayed or applied in an inconsistent manner.
2.2 Indemnification in Proceedings by or In the Name of the
Company. The Company shall indemnify the Indemnitee in accordance with the
provisions of this subsection 2.2 if the Indemnitee is a party to or threatened
to be made a party to or otherwise involved in any manner (including, without
limitation, involvement as witness) in any Proceeding by or in the name of the
Company to procure a judgment in its favor by reason of the fact that Indemnitee
was or is a director, officer, employee, agent or fiduciary of the Company, or
is or was serving at the request of the Company as a director, officer,
employee, agent, partner, member, trustee or fiduciary of another Enterprise,
against all Expenses actually and reasonably incurred by Indemnitee in
connection the Proceeding, to the fullest extent permitted by applicable law.
2.3 Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for some
or a portion of, but not the total amount of, the Expenses, judgments, fines,
penalties or ERISA excise taxes actually and reasonably incurred by him in the
investigation, defense, appeal or settlement of any Proceeding or otherwise in
connection with any Proceeding, the Company shall nevertheless indemnify the
Indemnitee for the portion of the Expenses, judgments, fines, penalties or ERISA
excise taxes to which the Indemnitee is entitled.
2.4 Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall not be deemed exclusive of, and
shall be in addition to, any indemnification or other rights to which the
Indemnitee may be entitled under the charter of the Company, as the same may be
amended from time to time (the "Charter"), the bylaws of the Company, as may be
amended from time to time (the "Bylaws"), any agreement, any vote of
stockholders or disinterested directors, applicable law, or otherwise, both as
to action in his official capacity and as to action in another capacity on
behalf of the Company while holding office; provided, however, that to the
extent that the Indemnitee otherwise would have any greater right to
indemnification under any provision of the Charter or Bylaws as in effect on the
date hereof, the Indemnitee shall be deemed to have such greater right
hereunder; provided,
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further, that to the extent that any changes made to the Charter and/or Bylaws
which permits any greater right to indemnification than that provided under this
Agreement, the Indemnitee shall be entitled to have such greater right. The
Company shall not adopt any amendment to the Charter or Bylaws, the effect of
which (intended or otherwise) would be to deny, diminish or encumber the
Indemnitee's right to indemnification under the Charter, Bylaws, applicable law
or otherwise as applied to any act or failure to act occurring in whole or in
part prior to the date upon which the amendment was approved by the Board of
Directors of the Company and/or its stockholders, as the case may be.
2.5 Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement, to the extent that the
Indemnitee has been successful in defense of any Proceeding or in defense of any
claim, issue or matter in the Proceeding, on the merits or otherwise, including
the dismissal of a Proceeding without prejudice, the Indemnitee shall be
indemnified against all Expenses incurred in connection therewith to the fullest
extent permitted by applicable law.
3. Presumptions.
3.1 Presumption Regarding Standard of Conduct. The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct as defined by applicable law for indemnification pursuant to this
Agreement, unless a determination that the Indemnitee has not met the relevant
standards is made by (i) the Board of Directors of the Company by a majority
vote of a quorum consisting of directors who were not parties to the Proceeding,
(ii) the stockholders of the Company by a majority of the votes cast at a duly
called meeting at which a quorum is present, or (iii) in a written opinion by
independent legal counsel, selection of whom has been approved by the Indemnitee
in writing, which approval shall not be unreasonably withheld or delayed.
3.2 Determination of Right to Indemnification. If a claim
under this Agreement is not paid by the Company within sixty (60) days of
receipt of written notice, the right to indemnification as provided by this
Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. The burden of proving by clear and convincing evidence that
indemnification or advances are not appropriate shall be on the Company. Neither
the failure of the directors or stockholders of the Company or independent legal
counsel to have made a determination prior to the commencement of the action
that indemnification or advances are proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the directors or stockholders of the Company or independent
legal counsel that the Indemnitee has not met the applicable standard of
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct.
The Indemnitee's Expenses incurred in connection with any
Proceeding concerning his right to indemnification or advances in whole or in
part pursuant to this Agreement, the Charter or the Bylaws shall also be
indemnified by the Company regardless of the outcome of the Proceeding, unless a
court of competent jurisdiction determines that each of the material assertions
made by the Indemnitee in the Proceeding was not made in good faith or was
frivolous.
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4. Advances of Expenses. The Expenses incurred by the Indemnitee in
any Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable law (but only to the extent permissible
under Section 402 of the Sarbanes-Oxley Act of 2002, as may be amended from time
to time) and without requiring any preliminary determination of the ultimate
entitlement of the Indemnitee to indemnification, provided that if applicable
law requires an undertaking, the Indemnitee shall undertake in writing to repay
the amount advanced to the extent that it is ultimately determined that the
Indemnitee is not entitled to indemnification.
5. Change in Control. The Company agrees that if there is a
Potential Change in Control of the Company (other than in connection with a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to the Change in Control) then
with respect to all matters thereafter arising concerning the rights of
Indemnitee to indemnity payments and Expense advances under this Agreement or
any other agreement, the Charter or Bylaws in effect relating to claims 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 within the last five years (other than in connection
with such matters) ("Special Independent Counsel"). The Special Independent
Counsel, among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee would be permitted to
be indemnified under applicable law. The Company agrees to pay the reasonable
fees of the Special Independent Counsel referred to above and may fully
indemnify the Special Independent Counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement.
6. Indemnification Procedure.
6.1 Notice. Promptly after receipt by the Indemnitee of
notice of the commencement of any Proceeding or notice of the Indemnitee's
involvement in any Proceeding, if later, the Indemnitee will, if a claim is to
be made against the Company under this Agreement, notify the Company of the
commencement of the Proceeding, or the Indemnitee's involvement in such
Proceeding, as applicable. The omission to notify the Company will not relieve
it from any liability which it may have to the Indemnitee otherwise than under
this Agreement.
6.2 Company Participation. With respect to any Proceeding
for, or with respect to, which indemnification is requested, the Company will be
entitled to participate in the Proceeding at its own expense and, except as
otherwise provided below, to the extent that it may wish, the Company may assume
the defense of the Proceeding, with counsel satisfactory to the Indemnitee.
After notice from the Company to the Indemnitee of its election to assume the
defense of a Proceeding, during the Company's good faith active defense the
Company will not be liable to the Indemnitee under this Agreement for any legal
or other expenses subsequently incurred by the Indemnitee in connection with the
defense of the Proceeding, other than reasonable costs of investigation or as
otherwise provided below. The Company shall not settle
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any Proceeding in any manner which would impose any penalty or limitation on the
Indemnitee without the Indemnitee's written consent. The Indemnitee shall have
the right to employ his counsel in any Proceeding but the fees and expenses of
the counsel incurred after notice from the Company of its assumption of the
defense of the Proceeding shall be at the expense of the Indemnitee, unless (i)
the employment of counsel by the Indemnitee has been authorized by the Company,
(ii) the Indemnitee shall have reasonably concluded that there may be a conflict
of interest between the Company and the Indemnitee in the conduct of the defense
of a Proceeding, or (iii) the Company shall not in fact have employed counsel to
assume the defense of a Proceeding, in each of which cases the fees and expenses
of the Indemnitee's counsel shall be at the expense of the Company. The Company
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of the Company or as to which the Indemnitee has made the conclusion that
there may be a conflict of interest between the Company and the Indemnitee.
7. Limitations on Indemnification. No payments pursuant to this
Agreement shall be made by the Company:
(a) to indemnify or advance Expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to Proceedings brought to establish
or enforce a right to indemnification under this Agreement, the Charter or
Bylaws or any other statute or law or otherwise as required under applicable
law, but the indemnification or advancement of Expenses may be provided by the
Company in specific cases if the Board of Directors finds it to be appropriate;
(b) to indemnify the Indemnitee for any Expenses, judgments,
fines, penalties or ERISA excise taxes for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy, except in respect of
any excess beyond the amount of payment under the insurance;
(c) to indemnify the Indemnitee for any Expenses, judgments,
fines or penalties sustained in any Proceeding for an accounting of profits made
from the purchase or sale by Indemnitee of securities of the Company pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder and amendments thereto or similar
provisions of any federal, state or local statutory law; or
(d) if a court of competent jurisdiction shall finally
determine that any indemnification hereunder is unlawful.
8. Maintenance of Liability Insurance.
8.1 Affirmative Covenant of the Company. The Company
covenants and agrees that, as long as the Indemnitee shall continue to serve as
a [director and/or officer] of the Company and thereafter so long as the
Indemnitee shall be subject to any possible Proceeding, the Company, subject to
subsection 8.3 of this Agreement, shall promptly obtain and maintain in full
force and effect directors' and officers' liability insurance ("D&O Insurance")
in reasonable amounts from established and reputable insurers.
8.2 Indemnitee Named as Insured. In all D&O Insurance
policies, the Indemnitee shall be named as an insured in a manner that provides
the Indemnitee the same
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rights and benefits as are accorded to the most favorably insured of the
Company's [directors and/or officers].
8.3 Exemption from Maintenance of Insurance. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain D&O
Insurance if the Company determines in good faith that insurance is not
reasonably available, the premium costs for insurance are disproportionate to
the amount of coverage provided, the coverage provided by insurance is so
limited by exclusions that it provides an insufficient benefit, or the
Indemnitee is covered by similar insurance maintained by a subsidiary of the
Company.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of the Indemnitee and his heirs, personal
representatives and assigns, and the Company and its successors and assigns.
9.2 Separability. Each provision of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision of this Agreement shall be held to be invalid or unenforceable for any
reason, the invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions of this Agreement. To the extent
required, any provision of this Agreement may be modified by a court of
competent jurisdiction to preserve its validity and to provide the Indemnitee
with the broadest possible indemnification permitted under applicable law.
9.3 Savings Clause. If this Agreement or any portion of it
is invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee as to Expenses, judgments,
fines, penalties or ERISA excise taxes with respect to any Proceeding to the
full extent permitted by any applicable portion of this Agreement that shall not
have been invalidated or by any other applicable law.
9.4 Interpretation; Governing Law. This Agreement shall be
construed as a whole and in accordance with its fair meaning. Headings are for
convenience only and shall not be used in construing meaning. This Agreement
shall be governed and interpreted in accordance with the laws of the State of
Maryland.
9.5 Amendments. No amendment, waiver, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by the party against whom enforcement is sought. The
indemnification rights afforded to the Indemnitee by this Agreement are contract
rights and may not be diminished, eliminated or otherwise affected by amendments
to the Charter, Bylaws or agreements including D&O Insurance policies.
9.6 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each party and delivered to the other.
9.7 Notices. Any notice required to be given under this
Agreement shall be directed to the Company at 909 Montgomery Street, Suite 500,
San Francisco, California 94133,
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Attention: President, with a copy to Peter T. Healy, Esq. 275 Battery Street,
Suite 2600, San Francisco, California 94111, and to Indemnitee at the address
set forth below or to another address as either shall designate in writing.
[signature page attached]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"Indemnitee"
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[Name:_________________________]
Notice Address:
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"Company"
LUMINENT MORTGAGE CAPITAL, INC.,
a Maryland corporation
By:
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Albert J. Gutierrez, CFA
President
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