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EXHIBIT 10.1
FORM OF INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement") is made as of October ___,
1996 by and between Procom Technology, Inc., a California corporation (the
"Company"), and _____________________ (the "Indemnitee"), a director and officer
of the Company.
BACKGROUND
A. The Indemnitee has agreed to serve as a director and officer of the
Company and in such capacities will render valuable services to the Company.
B. The Company has investigated the availability and sufficiency of
liability insurance and California 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 due to their positions 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 serve as directors and officers of the
Company, the Board of Directors 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 also
necessary to promote and ensure the best interests of the Company and its
shareholders.
AGREEMENT
In consideration of the services of the Indemnitee and in order to
induce the Indemnitee to serve as a director and officer of the Company, the
Company and the Indemnitee agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement:
(a) A "Change in Control" shall be deemed to have occurred if (i)
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
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for election by the Company's shareholders 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 nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Board of Directors, or (ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, 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 50% 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 shareholders
of the Company approve a plan of complete liquidation 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 "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 or administrative or
investigative nature, by reason of the fact that the Indemnitee is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another enterprise, whether
or not he or she 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.
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SECTION 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 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 or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another enterprise against all Expenses,
judgments, fines, penalties and ERISA excise taxes actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of the
Proceeding, to the fullest extent permitted by applicable law; provided that any
settlement shall be approved in writing by the Company.
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 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 or officer of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another enterprise, against all Expenses actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of 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, 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 any other rights to which the Indemnitee may be entitled under the
Articles of Incorporation, the Bylaws, any agreement, any vote of shareholders
or disinterested directors, applicable law or otherwise, both as to
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action in his official capacity and as to action in another capacity on behalf
of the Company while holding office.
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.
SECTION 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 shareholders of the Company by majority
vote, or (ii) in a written opinion by independent legal counsel, selection of
whom has been approved by the Indemnitee in writing.
3.2 DETERMINATION OF RIGHT TO INDEMNIFICATION
If a claim under this Agreement is not paid by the Company within 30
days of receipt of written request from the Indemnitee, 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
shareholders 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
shareholders 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 also shall 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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SECTION 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; 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.
SECTION 5. CHANGE IN CONTROL
The Company agrees that if there is a Change in Control of the Company
(other than 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 Company's Articles of Incorporation, or
the Company's 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 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.
SECTION 6. INDEMNIFICATION PROCEDURE
6.1 NOTICE
Promptly after receipt by the Indemnitee of notice of the commencement
of any Proceeding, 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. 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 which indemnification is requested,
the Company will be entitled to participate in the Proceeding at its own expense
and, except as
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otherwise provided below, to the extent that it may wish, the Company may assume
the defense of the Proceeding, with counsel reasonably 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 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 reasonable 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.
SECTION 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 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, judgements, 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;
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(c) to indemnify the Indemnitee for any Expenses, judgements, 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;
(d) to indemnify the Indemnitee for any Expenses, judgements, fines,
penalties or ERISA excise taxes resulting from Indemnitee's conduct which is
finally adjudged to have been willful misconduct, knowingly fraudulent or
deliberately dishonest; or
(e) if a court of competent jurisdiction shall finally determine that
any indemnification hereunder is unlawful.
SECTION 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 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 rights and benefits as
are accorded to the most favorably insured of the Company's directors and
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 its sole
discretion that insurance is not reasonably available, the premium costs are, in
its opinion, 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.
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SECTION 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 SEVERABILITY
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 fullest 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 California, without regard to the
conflicts of laws principles thereof.
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 Company's Certificate of Incorporation,
Bylaws or agreements including D&O Insurance policies.
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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 Procom Technology, Inc. at 2181 Dupont Drive, Irvine, California 92715,
Attention: President and to Indemnitee at the address set forth below or to
another address as either shall designate in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INDEMNITEE
____________________________________
Name: ___________________________
Address: ___________________________
___________________________
___________________________
___________________________
PROCOM TECHNOLOGY, INC.,
a California corporation
By: ________________________________
Name: ___________________________
Title: ___________________________
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