Indemnification Agreement - Xybernaut Corp.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, made and entered into this
day of , 19 ("Agreement"), by and between XYBERNAUT CORPORATION,
a Delaware corporation (the "Company") and ("Indemnitee").
WHEREAS, highly competent persons are becoming more reluctant
to serve publicly-held corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation,
and
WHEREAS, the Board of Directors of the Company has determined
that the inability to attract and retain such persons is detrimental to the
best interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and
to take on additional service for or on behalf of the Company on the condition
that Indemnitee be so indemnified;
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, including Indemnitee's
continued service to the Company, the Company and Indemnitee hereby covenant
and agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meaning given here:
1.01 "Board" shall mean the Board of Directors of the
Company.
1.02 "Corporate Status" describes the status of a person
who is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee
benefit or other enterprise which such person is or was serving at the express
written request of the Company.
1.03 "Covered Act" means any breach of duty, neglect,
error, misstatement, misleading statement, omission or other act done or
wrongfully attempted by Indemnitee or against any of the foregoing alleged by
any claimant or any claim against Indemnitee solely by reason of being a
director or officer of the Company.
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1.04 "D&O Insurance" means the directors' and officers'
liability insurance issued by the insurer(s), and having the policy number(s),
amount(s) and deductible(s) set forth on Exhibit A hereto and any replacement
or substitute policies issued by one or more reputable insurers providing in
all respects coverage at least comparable to and in the same amount as that
provided under the policy or policies identified on Exhibit A.
1.05 "Determination" means a determination, based on the
facts known at the time, made by:
(a) a majority vote of a quorum of disinterested
directors; or
(b) Independent Counsel in a written opinion
prepared at the request of a majority of a quorum of Disinterested Directors;
or
(c) a majority of the disinterested stockholders
of the Company; or
(d) a final adjudication by a court of competent
jurisdiction.
"Determined" shall have a correlative meaning.
1.06 "Disinterested Director" means a director of the
Company who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
1.07 "Effective Date" means , 19 .
1.08 "Excluded Claim" means any payment for Losses or
Expenses in connection with any claim:
(a) based upon or attributable to Indemnitee
gaining in fact any personal profit or advantage to which Indemnitee is not
entitled; or
(b) for the return by Indemnitee of any
remuneration paid to Indemnitee without the previous approval of the
stockholders of the Company which is illegal; or
(c) for an accounting of profits in fact made
from the purchase or sale by Indemnitee of securities of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or
similar provisions of any state law; or
(d) resulting from Indemnitee's knowingly
fraudulent, dishonest or willful misconduct; or
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(e) the payment of which by the Company under
this Agreement is not permitted by applicable law.
1.09 "Expenses" shall include all reasonable attorneys
fees, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or being or
preparing to be a witness in a Proceeding, but shall not include Fines.
1.10 "Fines" means any fine, penalty or, with respect to
an employee benefit plan, any excise tax or penalty assessed with respect
thereto.
1.11 "Good Faith" shall mean Indemnitee having acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
Proceeding, having had no reasonable cause to believe Indemnitee's conduct was
unlawful.
1.12 "Independent Counsel" means a law firm, or a member
of a law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past three years has been, retained to represent (i)
the Company or Indemnitee in any matter material to either such party or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing the term "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.
1.13 "Loss" means any amount which Indemnitee is legally
obligated to pay as a result of a claim or claims made against him for Covered
Acts including, without limitation, damages and judgments and sums paid in
settlement of a claim or claims, but shall not include Fines.
1.14 "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing
or any other actual threatened or completed proceeding whether civil, criminal,
administrative or investigative, other than one initiated by Indemnitee. For
purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have
been initiated by Indemnitee where Indemnitee seeks pursuant to Article IX of
this Agreement to enforce Indemnitee's rights under this Agreement relating
thereto.
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ARTICLE II - SERVICES BY INDEMNITEE
Indemnitee agrees to serve as a(n) (director) (officer)
(employee). Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law).
ARTICLE III - MAINTENANCE OF D&O INSURANCE
3.01 DESCRIPTION OF D&O INSURANCE. Exhibit A contains a
complete and accurate description of the policies of directors' and officers'
liability insurance purchased by the Company, if any.
3.02 NAMED INSURED. In any policies of D&O Insurance
which are maintained by the Company Indemnitee shall be named as an insured in
such a manner as to provide Indemnitee the same rights and benefits, subject to
the same limitations, as are accorded to the Company's directors and officers
most favorably insured by such policy.
3.03 NO OBLIGATION. Nothing herein shall impose upon the
Company the obligation to maintain D&O Insurance if the Company determines in
good faith that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage provided, or
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit.
ARTICLE IV - INDEMNIFICATION
4.01 INDEMNIFICATION IN GENERAL. The Company shall
indemnify and hold Indemnitee harmless for any Losses, Expenses, judgments,
penalties, Fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in Good
Faith.
4.02 EXCLUDED COVERAGE. The Company shall have no
obligation to indemnify and hold Indemnitee harmless from any Losses or Expense
which has been Determined to constitute an Excluded Claim. Notwithstanding the
provisions of Section 4.01, no such indemnification shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification shall nevertheless be made by the Company in such event if and
only to the extent that the Court of Chancery of the State of Delaware, or the
court in which such Proceeding shall have been brought or pending, shall
Determine.
4.03 INDEMNIFICATION OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement,
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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 to the maximum extent permitted by law, against
all Losses, Expenses, judgments, penalties, Fines and amounts paid in
settlement, actually and 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 to the maximum extent permitted by law, against all
Losses, Expenses, judgments, penalties, Fines and amounts paid in settlement,
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection with each successfully resolved claim, issue or matter. For
purposes this Section 4.03 and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter, so long as there has been no finding (either adjudicated or pursuant to
Article VI) Indemnitee did not act in Good Faith.
4.04 INDEMNIFICATION FOR EXPENSES OF A WITNESS.
Notwithstanding any other provision of this Agreement to the extent that
Indemnitee is, by reason of Indemnitee's Corporate Status, a witness in a
Proceeding, Indemnitee shall be indemnified against all Losses and Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith.
ARTICLE V - ADVANCEMENT OF EXPENSES
Notwithstanding any provision to the contrary in Article VI,
the Company shall advance all reasonable Expenses which, by reason of
Indemnitee's Corporate Status, are incurred by or on behalf of Indemnitee in
connection with any Proceeding, within twenty days after the receipt by the
Company of a statement or statements from Indemnitee requesting such advance or
advances, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified against such
Expenses. Any advance and undertakings to repay pursuant to this Article V
shall be unsecured and interest free.
ARTICLE VI - PROCEDURES FOR DETERMINATION OF ENTITLEMENT
6.01 INITIAL NOTICE. Promptly after receipt by Indemnitee of
notice of the commencement of or the threat of commencement of any Proceeding,
Indemnitee shall, if indemnification with respect thereto may be sought from
the Company under this Agreement, notify the Company of the commencement
thereof. Indemnitee shall include
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therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall promptly advise the Board in writing that Indemnitee has
requested indemnification.
6.02 D&O INSURANCE. If, at the time of the receipt of
such notice, the Company has D&O 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 in favor of
Indemnitee. The Company shall thereafter take all necessary or desirable
action to cause such insurers to pay, on behalf of Indemnitee, all Losses and
Expenses payable as a result of such Proceeding in accordance with the terms of
such policies.
6.03 EMPLOYMENT OF COUNSEL. To the extent the Company
does not, at the time of the commencement of or the threat of commencement of a
Proceeding, have applicable D&O Insurance, or if a Determination is made that
any Expenses arising out of such Proceeding will not be payable under the D&O
Insurance then in effect, the Company shall be obligated to pay the Expenses of
any such Proceeding in advance of the final disposition thereof as provided in
Article V and the Company, if appropriate, shall be entitled to assume the
defense of such Proceeding, with counsel satisfactory to Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, the Company will not be liable to Indemnitee under
this Agreement for any legal or other Expenses subsequently incurred by
Indemnitee in connection with such defense other than reasonable Expenses of
investigation provided that Indemnitee shall have the right to employ its
counsel in any such Proceeding but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at Indemnitee's expense and provided further that 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, the fees and expenses of counsel shall
be at the expense of the Company.
6.04 PAYMENT. All payments on account of the Company's
indemnification obligations under this Agreement shall be made within sixty
(60) days of Indemnitee's written request therefor unless a Determination is
made that the claims giving rise to Indemnitee's request are Excluded Claims or
otherwise not payable under this Agreement.
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6.05 REIMBURSEMENT BY INDEMNITEE. Indemnitee agrees that
he will reimburse the Company for all Losses and Expenses paid by the Company
in connection with any Proceeding against Indemnitee in the event and only to
the extent that a Determination shall have been made by a court in a final
adjudication from which there is no further right of appeal that Indemnitee is
not entitled to be indemnified by the Company for such Expenses because the
claim is an Excluded Claim or because Indemnitee is otherwise not entitled to
payment under this Agreement.
6.06 COOPERATION. Indemnitee shall cooperate with the
person, persons or entity making the Determination with respect to Indemnitee's
entitlement to indemnification under this Agreement, including providing to
such person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise protected
from disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such Determination. Any costs or Expenses (including attorneys'
fees and disbursements) incurred by Indemnitee in so cooperating with the
person, persons or entity making such Determination shall be borne by the
Company (irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
ARTICLE VII - SETTLEMENT
The Company shall have no obligation to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any Proceeding
effected without the Company's prior written consent. The Company shall not
settle any claim in any manner which would impose any Fine or other obligation
on Indemnitee without Indemnitee's written consent. Neither the Company nor
Indemnitee shall unreasonably withhold their consent to any proposed
settlement.
ARTICLE VIII - RIGHTS NOT EXCLUSIVE
The rights provided hereunder shall not be deemed exclusive of
any other rights to which Indemnitee may be entitled under any bylaw,
agreement, vote of stockholders or of Disinterested Directors or otherwise,
both as to action in his or her official capacity and as to action in any other
capacity by holding such office, and shall continue after Indemnitee ceases to
serve the Corporation as a director or officer.
ARTICLE IX - ENFORCEMENT
9.01 BURDEN OF PROOF. Indemnitee's right to
indemnification shall be enforceable by Indemnitee only in the state courts of
the State of Delaware and shall be enforceable notwithstanding any adverse
Determination. In any such action, if a prior adverse Determination has been
made, the burden of proving that
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indemnification is required under this Agreement shall be on Indemnitee. The
Company shall have the burden of proving that indemnification is not required
under this Agreement if no prior adverse Determination shall have been made.
9.02 COSTS AND EXPENSES. In the event that any action is
instituted by Indemnitee under this Agreement, or to enforce or interpret any
of the terms of this Agreement, Indemnitee shall be entitled to be paid all
court costs and expenses, including reasonable counsel fees, incurred by
Indemnitee with respect to such action, unless the court determines that each
of the material assertions made by Indemnitee as a basis for such action were
not made in Good Faith or were frivolous.
ARTICLE X - GENERAL PROVISIONS
10.01 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of Indemnitee and Indemnitee's heirs, executors and administrators.
10.02 SEVERABILITY. If any provision or provisions of this
Agreement is determined by a court to be invalid, illegal or unenforceable for
any reason whatsoever, such provision shall be limited or modified in its
application to the minimum extent necessary to avoid a violation of law, and,
as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with its terms.
10.03 IDENTICAL COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
10.04 HEADINGS. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
10.05 MODIFICATION AND WAIVER. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
10.06 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given it (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have
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been directed, or (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed.
If to Indemnitee to:
As shown with Indemnitee's Signature below
If to the Company to:
Xybernaut Corporation
12701 Fair Lakes Circle, Suite 550
Fairfax, Virginia 22033
Attention: Edward G. Newman, President
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
10.07 GOVERNING LAW. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the laws
of the State of Delaware without application of the conflict of laws principles
thereof.
10.08 CONSENT TO JURISDICTION. The Company and Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of Delaware for all purposes in connection with any 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
Delaware.
10.09 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and understanding between the parties hereto in reference to
all the matters herein agreed upon. This Agreement replaces in full all prior
indemnification agreements or understandings of the parties hereto, and any and
all such prior agreements or understandings are hereby rescinded by mutual
agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
XYBERNAUT CORPORATION
By:
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Name:
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Title:
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INDEMNITEE
Address:
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