Indemnification Agreement - Natrol Inc. and Elliott Balbert
INDEMNIFICATION AGREEMENT
This Indemnification Agreement made and entered into this 30th day of
September, 1996 ("Agreement"), by and between Natrol, Inc., a California
corporation (together with any successor or successors thereto, the "Company")
and Elliott Balbert ("Indemnitee"):
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors to
litigation risks and expenses and the limitations on the availability of
directors and officers liability insurance have made it increasingly difficult
for the Company to attract and retain such persons;
WHEREAS, its by-laws permit the Company to indemnify its directors to the
fullest extent permitted by law and permit the Company to make other
indemnification arrangements and agreements;
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of such by-laws or any change in the ownership of the Company
or the composition of its Board of Directors), which indemnification is intended
to be greater than that which is afforded by the Company's certificate of
incorporation, by-laws and, to the extent insurance is available, the coverage
of Indemnitee under the Company's directors and officers liability insurance
policies; and
WHEREAS, Indemnitee is relying upon the rights afforded under this
Agreement in continuing in Indemnitee's position as a director of the Company:
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Definitions.
(a) "Corporate Status" describes the status of a person who is
serving or has served (i) as a director of the Company, (ii) in any
capacity with respect to any employee benefit plan of the Company,
or (iii) as a director, partner, trustee, officer, employee, or
agent of any other Entity at the request of the Company.
(b) "Entity" shall mean any corporation, partnership, joint venture,
trust, foundation, association, organization or other legal entity
and any group or division of the Company or any of its subsidiaries.
(c) "Expenses" shall mean all reasonable fees, costs and expenses
incurred in connection with any Proceeding (as defined below),
including, without limitation, attorneys' fees, disbursements and
retainers (including, without
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limitation, any such fees, disbursements and retainers incurred by
Indemnitee pursuant to Section 10 of this Agreement), fees and
disbursements of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants
and investment bankers), court costs, transcript costs, fees of
experts, travel expenses, duplicating, printing and binding costs,
telephone and fax transmission charges, postage, delivery services,
secretarial services, and other disbursements and expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities,
losses, penalties, excise taxes, fines and amounts paid in
settlement.
(f) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, or any other
proceeding, whether civil, criminal, administrative or
investigative, whether formal or informal, including a proceeding
initiated by Indemnitee pursuant to Section 10 of this Agreement to
enforce Indemnitee's rights hereunder.
2. Services of Indemnitee. In consideration of the Company's covenants and
commitments hereunder, Indemnitee agrees to serve or continue to serve as a
director of the Company. However, this Agreement shall not impose any obligation
on Indemnitee or the Company to continue Indemnitee's service to the Company
beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.
3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as
follows:
(a) Subject to the exceptions contained in Section 4(a) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding (other than an action by or in the right of the
Company) by reason of Indemnitee's Corporate Status, Indemnitee
shall be indemnified by the Company against all Expenses and
Liabilities incurred or paid by Indemnitee in connection with such
Proceeding (referred to herein as "Indemnifiable Expenses" and
"Indemnifiable Liabilities," respectively, and collectively as
"Indemnifiable Amounts").
(b) Subject to the exceptions contained in Section 4(b) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding by or in the right of the Company to procure a
judgment in its favor by reason of Indemnitee's Corporate Status,
Indemnitee shall be indemnified by the Company against all
Indemnifiable Expenses.
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4. Exceptions to Indemnification. Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than the following:
(a) If indemnification is requested under Section 3(a) and it has
been adjudicated finally by a court of competent jurisdiction that,
in connection with the subject of the Proceeding out of which the
claim for indemnification has arisen, Indemnitee failed to act in
good faith and in a manner Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company or, with respect
to any criminal action or proceeding, Indemnitee had reasonable
cause to believe that Indemnitee's conduct was unlawful, Indemnitee
shall not be entitled to payment of Indemnifiable Amounts hereunder.
(b) If indemnification is requested under Section 3(b) and
(i) it has been adjudicated finally by a court of
competent jurisdiction that, in connection with the
subject of the Proceeding out of which the claim for
indemnification has arisen, Indemnitee failed to act in
good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests
of the Company, Indemnitee shall not be entitled to
payment of Indemnifiable Expenses hereunder; or
(ii) it has been adjudicated finally by a court of
competent jurisdiction that Indemnitee is liable to the
Company with respect to any claim, issue or matter
involved in the Proceeding out of which the claim for
indemnification has arisen, including, without
limitation, a claim that Indemnitee received an improper
personal benefit, no Indemnifiable Expenses shall be
paid with respect to such claim, issue or matter unless
the Court of Chancery or another court in which such
Proceeding was brought shall determine upon application
that, despite the adjudication of liability, but in view
of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such
Indemnifiable Expenses which such court shall deem
proper.
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit
to the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and the basis for the
claim. The Company shall pay such Indemnifiable Amounts to Indemnitee within
twenty (20) calendar days of receipt of the request. At the request of the
Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is
entitled to indemnification hereunder.
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6. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If 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, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, 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.
7. Effect of Certain Resolutions. Neither the settlement or termination of
any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action or proceeding, had reasonable cause to
believe that Indemnitee's action was unlawful.
8. Agreement to Advance Interim Expenses; Conditions. The Company shall
pay to Indemnitee all Indemnifiable Expenses incurred by Indemnitee in
connection with any Proceeding, including a Proceeding by or in the right of the
Company, in advance of the final disposition of such Proceeding, if Indemnitee
furnishes the Company with a written undertaking to repay the amount of such
Indemnifiable Expenses advanced to Indemnitee if it is finally determined by a
court of competent jurisdiction that Indemnitee is not entitled under this
Agreement to indemnification with respect to such Expenses. Such undertaking
shall be an unlimited general obligation of Indemnitee, shall be accepted by the
Company without regard to the financial ability of Indemnitee to make repayment,
and in no event shall be required to be secured.
9. Procedure for Payment of Interim Expenses. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than twenty (20) calendar days after the Company's receipt of such request
and the undertaking required by Section 8.
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10. Remedies of Indemnitee.
(a) Right to Petition Court. In the event that Indemnitee makes a
request for payment of Indemnifiable Amounts under Sections 3 and 5
above or a request for an advancement of Indemnifiable Expenses
under Sections 8 and 9 above and the Company fails to make such
payment or advancement in a timely manner pursuant to the terms of
this Agreement, Indemnitee may petition the appropriate judicial
authority to enforce the Company's obligations under this Agreement.
(b) Burden of Proof. In any judicial proceeding brought under
Section 10(a) above, the Company shall have the burden of proving
that Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. The Company agrees to reimburse Indemnitee in full for
any Expenses incurred by Indemnitee in connection with
investigating, preparing for, litigating, defending or settling any
action brought by Indemnitee under Section 10(a) above, or in
connection with any claim or counterclaim brought by the Company in
connection therewith.
(d) Validity of Agreement. The Company shall be precluded from
asserting in any Proceeding, including, without limitation, an
action under Section 10(a) above, that the provisions of this
Agreement are not valid, binding and enforceable or that there is
insufficient consideration for this Agreement and shall stipulate in
court that the Company is bound by all the provisions of this
Agreement.
(e) Failure to Act Not a Defense. The failure of the Company
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination
concerning the permissibility of the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses under this
Agreement shall not be a defense in any action brought under Section
10(a) above, and shall not create a presumption that such payment or
advancement is not permissible.
11. Representations and Warranties of the Company. The Company hereby
represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to
enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings contemplated
by this Agreement have been duly authorized by the Company.
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(b) Enforceability. This Agreement, when executed and delivered by
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally.
12. Insurance. The Company will use its commercially reasonable efforts to
obtain and maintain a policy or policies of insurance with reputable insurance
companies providing the Indemnitee with coverage for losses from wrongful acts,
and to ensure the Company's performance of its indemnification obligations under
this Agreement. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee at least the same rights and benefits as are accorded to the most
favorably insured of the Company's officers and directors. Notwithstanding the
foregoing, if the Company, after employing commercially reasonable efforts as
provided in this section, 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, or if the coverage provided
by such insurance is limited by exclusions so as to provide an insufficient
benefit the Company shall use its commercially reasonable efforts to obtain and
maintain a policy or policies of insurance with coverage having features as
similar as practicable to those described above.
13. Contract Rights Not Exclusive. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's by-laws or certificate
of incorporation, or any other agreement, vote of stockholders or directors, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in any other capacity as a result of Indemnitee's serving as a director of the
Company.
14. Successors. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or a substantial
portion of the business, stock and/or assets of the Company and any direct or
indirect successor by merger or consolidation or otherwise by operation of law)
and (b) binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.
15. Subrogation. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of Indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the
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execution of such documents as are necessary to enable the Company to bring suit
to enforce such rights.
16. Change in Law. To the extent that a change in applicable law (whether
by statute or judicial decision) shall permit broader indemnification than is
provided under the terms of the by-laws of the Company and this Agreement,
Indemnitee shall be entitled to such broader indemnification and this Agreement
shall be deemed to be amended to such extent.
17. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.
18. Indemnitee as Plaintiff. Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless the
Company has consented to the initiation of such Proceeding. This Section shall
not apply to counterclaims or affirmative defenses asserted by Indemnitee in an
action brought against Indemnitee.
19. Joint and Several Liability. The obligations of the Company hereunder
shall be joint and several.
20. Modifications and Waiver. Except as provided in Section 16 above with
respect to changes in applicable law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
21. General Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
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(i) If to Indemnitee, to:
Elliott Balbert
(ii) If to the Company, to:
Natrol, Inc.
20731 Marilla Street
Chatsworth, CA 91311-4408
or to such other address as may have been furnished in the same manner by any
party to the others.
23. Governing Law. This Agreement shall be governed by and construed and
enforced under the laws of the jurisdiction in which the Company or its
successor or successors are incorporated from time to time (the "Jurisdiction")
without giving effect to the provisions thereof relating to conflicts of law.
Upon the re-incorporation of the Company in Delaware, this Agreement shall be
amended to allow Indemnitee to petition the Court of Chancery upon any failure
by the Company to perform under this Agreement.
24. Consent to Jurisdiction. The Company hereby irrevocably and
unconditionally consents to the jurisdiction of the courts of the Jurisdiction
and the United States District Court in the Jurisdiction. The Company hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Proceeding arising out of or relating to this Agreement in the courts of the
Jurisdiction or the United States District Court in the Jurisdiction, and hereby
irrevocably and unconditionally waives and agrees not to plead or claim that any
such Proceeding brought in any such court has been brought in an inconvenient
forum.
25. Agreement Governs. This Agreement is to be deemed consistent wherever
possible with relevant provisions of the Company's by-laws and certificate of
incorporation; however, in the event of a conflict between this Agreement and
such provisions, the provisions of this Agreement shall control.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NATROL, INC.
By: /s/ Dennis R. Jolicoeur
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Name: Dennis R. Jolicoeur
Title: Executive Vice President and Chief
Financial Officer
INDEMNITEE
/s/ Elliott Balbert
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Name: Elliott Balbert
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