EXHIBIT 10(B)
FORM OF INDEMNITY AGREEMENT
This Indemnity Agreement is made and entered into as of the day of
, 199 by and between PRICE/COSTCO, INC, a Delaware corporation (the
"Company"), and
("Indemnitee").
WHEREAS, Indemnitee is currently serving as a director, officer, employee
and/or agent of the Company and/or, at the Company's request, as a director,
officer, employee and/or agent of another corporation, partnership, joint
venture, trust or other enterprise, and the Company wishes Indemnitee to
continue in such capacity(ies);
WHEREAS, the Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and the Bylaws (the "Bylaws") of the Company each
provide that the Company shall indemnify, in the manner and to the fullest
extent permitted by the Delaware General Corporation Law (the "DGCL"), certain
persons, including directors, officers, employees or agents of the Company,
against specified expenses and losses arising out of certain threatened, pending
or completed actions, suits or proceedings;
WHEREAS, Indemnitee has indicated that he or she may not be willing to
continue to serve as a director, officer, employee and/or agent of the Company
and/or, at the Company's request, as a director, officer, employee and/or agent
of another corporation, partnership, joint venture, trust or other enterprise in
the absence of indemnification in addition to that provided in the Restated
Certificate of Incorporation and the Bylaws of the Company;
WHEREAS, DGCL Section 145(f) expressly recognizes that the indemnification
provisions of the DGCL are not exclusive of any other rights to which a person
seeking indemnification may be entitled under the Restated Certificate of
Incorporation or Bylaws of the Company, or an agreement providing for
indemnification, or a resolution of stockholders or directors, or otherwise;
WHEREAS, the Company, in order to induce Indemnitee to continue to serve in
such capacity, has agreed to provide Indemnitee with the benefits contemplated
by this Indemnity Agreement, and, as a result of the provision of such benefits,
Indemnitee has agreed to continue to serve in such capacity; and
WHEREAS, the Restated Certificate of Incorporation and Bylaws each expressly
recognizes that the indemnification provisions of the Restated Certificate of
Incorporation and Bylaws shall not be deemed exclusive of, and shall not affect,
any other rights to which a person seeking indemnification may be entitled under
any agreement, and this Indemnity Agreement is being entered into pursuant to
the Restated Certificate of Incorporation and Bylaws as permitted by the DGCL,
and as authorized by the stockholders of the Company.
NOW, THEREFORE, in consideration of the promises, conditions and
representations set forth herein, including Indemnitee's continued service as a
director, officer, employee and/or agent of the Company and/or, at the Company's
request, as a director, officer, employee and/or agent of another corporation,
partnership, joint venture, trust or other enterprise, the Company and
Indemnitee hereby agree as follows:
Section 1. DEFINITIONS. The following terms, as used herein, shall have
the following meanings:
(a) "Covered Claim" shall mean any claim against Indemnitee based upon
or arising out of any past, present or future act, omission, neglect or
breach of duty, including, without limitation, any actual or alleged error,
omission, misstatement or misleading statement, that Indemnitee may commit
or suffer while serving in his or her capacity as a director, officer,
employee and/or agent of the Company and/or, at the Company's request, as a
director, officer, employee and/or agent of another corporation,
partnership, joint venture, trust or other enterprise, provided that such
claim:
(i) is not solely based upon and does not arise solely out of
Indemnitee gaining in fact any personal profit or advantage to which
Indemnitee is not legally entitled;
(ii) is not for an accounting of profits made from the purchase or
sale by Indemnitee of securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provisions of any state law; and
(iii) is not based solely upon and does not arise solely out of
Indemnitee's knowingly fraudulent, deliberately dishonest or willful
misconduct.
(b) "Determination" shall mean a determination, based upon the facts
known at the time, made by:
(i) the Board of Directors of the Company, by the vote of a majority
of the directors who are not parties to the action, suit or proceeding in
question, at a meeting at which there is a quorum consisting solely of
such disinterested directors;
(ii) if such a quorum is not obtainable, or, even if obtainable, if
directed by a majority of such disinterested directors at a meeting of
the Board of Directors of the Company at which there is a quorum
consisting solely of such disinterested directors, by independent legal
counsel in a written opinion;
(iii) the stockholders of the Company; or
(iv) a court of competent jurisdiction in a final, nonappealable
adjudication.
(c) "Payment" shall mean any and all amounts that Indemnitee is or
becomes legally obligated to pay in connection with a Covered Claim,
including, without limitation, damages, judgments, amounts paid in
settlement, reasonable costs of investigation, reasonable fees of attorneys,
costs of investigative, judicial or administrative proceedings or appeals,
and costs of attachment or similar bonds.
Section 2. INDEMNIFICATION. The Company shall indemnify and hold harmless
Indemnitee against and from any and all Payments to the extent that:
(a) the Company shall not have advanced expenses to Indemnitee pursuant
to the provisions of Article TENTH of the Company's Certificate of
Incorporation or otherwise and no determination shall have been made
pursuant to such Article or the DGCL that the Indemnitee is not entitled to
indemnification;
(b) Indemnitee shall not already have received payment on account of
such Payments pursuant to one or more valid and collectible insurance
policies; and
(c) such indemnification by the Company is not unlawful.
Notwithstanding anything contained in this Agreement to the contrary, except for
proceedings to enforce rights to indemnification or advancement of expenses
pursuant to Section 4 hereof, the Company shall have no obligation to indemnify
Indemnitee in connection with a proceeding (or part thereof) initiated by
Indemnitee unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Company. Further, the Company shall have not
obligation to indemnify Indemnitee under this Indemnity Agreement for any
amounts paid in a settlement of any action, suit or proceeding effected without
the Company's prior written consent, which consent shall not be unreasonably
withheld. The Company shall not settle any claim in any manner that would impose
any obligation on Indemnitee without Indemnitee's prior written consent.
Indemnitee shall not unreasonably withhold his consent to any proposed
settlement.
Section 3. INDEMNIFICATION PROCEDURE; ADVANCEMENTS OF COSTS AND EXPENSES.
(a) Promptly after receipt by Indemnitee of notice of the commencement or
threat of commencement of any action, suit or proceeding, Indemnitee shall, if
indemnification with respect thereto may be sought from the Company under this
Indemnity Agreement, notify the Company thereof in writing.
(b) If, at the time of receipt of such notice the Company has directors' and
officers' liability insurance in effect, the Company shall give prompt notice of
the commencement of such action, suit or proceeding to the
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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
Payments payable as a result of such action, suit or proceeding in accordance
with the terms of such policies.
(c) All costs and expenses, including reasonable fees of attorneys, incurred
by Indemnitee in defending or investigating such action, suit or proceeding
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding; provided, however, that no such costs or expenses shall be
paid by the Company if, with respect to such action, suit or proceeding, a
Determination is made that:
(i) Indemnitee did not act in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company;
(ii) in the case of any criminal action or proceedings, Indemnitee had
reasonable cause to believe his or her conduct was unlawful; or
(iii) Indemnitee intentionally breached his or her duty to the Company
or its stockholders.
Indemnity hereby undertakes to and agrees that he or she will repay the Company
for any costs or expenses advanced by or on behalf of the Company pursuant to
this Section 3(c) if it shall ultimately be determined by a court of competent
jurisdiction in a final, nonappealable adjudication that Indemnitee is not
entitled to indemnification under this Indemnity Agreement.
(d) If the Company shall advance the costs and expenses of any such action,
suit or proceeding pursuant to Section 3(c) of this Indemnity Agreement, it
shall be entitled to assume the defense of such action, suit or proceeding, if
appropriate, with counsel reasonably satisfactory to Indemnitee, upon delivery
to Indemnitee of written notice of its election so to do. After delivery of such
notice, the Company shall not be liable to Indemnitee under this Indemnity
Agreement for any costs or expenses subsequently incurred by Indemnitee in
connection with such defense other than reasonable costs and expenses of
investigation; provided, however, that:
(i) Indemnitee shall have the right to employ separate counsel in any
such action, suit or proceeding provided that the fees and expenses of such
counsel incurred after delivery of notice by the Company of its assumption
of such defense shall be at Indemnitee's own expense; and
(ii) the fees and expenses of counsel employed by Indemnitee shall be at
the expense of the Company if (aa) the employment of counsel by Indemnitee
has previously been authorized by the Company, (bb) 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 (provided that the
Company shall not be required to pay for more than one counsel to represent
two or more Indemnitees where such Indemnitees have reasonably concluded
that there is no conflict of interest among them in the conduct of such
defense), or (cc) the Company shall not, in fact, have employed counsel to
assume the defense of such action, suit or proceeding.
(e) All payments on account on the Company's advancement obligations under
Section 3(c) of this Indemnity Agreement shall be made within twenty (20) days
of Indemnitee's written request therefor. All other payments on account of the
Company's obligations under this Indemnity 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 not payable under
this Indemnity Agreement. Each request for payment hereunder shall be
accompanied by evidence reasonable satisfactory to the Company of Indemnitee's
incurrence of the costs and expenses for which such payment is sought.
Section 4. ENFORCEMENT OF INDEMNIFICATION; BURDEN OF PROOF. If a claim for
indemnification or advancement of costs and expenses under this Indemnity
Agreement is not paid in full by or on behalf of the Company within the time
period specified in Section 3(e) of this Indemnity Agreement, Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid amount
of such claim. In any such action, the Company shall have the burden of proving
that indemnification is not required under this Indemnity Agreement.
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Section 5. EMPLOYEE BENEFIT PLANS. The term "other enterprises," as used in
this Indemnity Agreement, shall include employee benefit plans. All references
in this Indemnity Agreement to "serving...at the Company's request" shall
include any service by Indemnitee as a director, officer, employee and/or agent
of the Company which imposes duties on, or involves services by, Indemnitee with
respect to an employee benefit plan, its participates or beneficiaries. If
Indemnitee acts in good faith and in a manner he or she reasonably believes to
be in the interests of the participants and beneficiaries of an employee benefit
plan, then, for purposes of Section 3(c)(i) hereof, Indemnitee shall be deemed
to have acted in a manner he or she "reasonably believed to be in or not opposed
to the best interests of the Company".
Section 6. RIGHTS NOT EXCLUSIVE. The rights to indemnification and
advancement of costs and expenses provided hereunder shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under any
charter document, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 7. SUBROGATION. In the event of payment under this Indemnity
Agreement by or on behalf of the Company, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers that may be required and shall do all things that may be
necessary to secure such rights, including, without limitation, the execution of
such documents as may be necessary to enable the Company effectively to bring
suit to enforce such rights.
Section 8. CHOICE OF LAW. This Indemnity Agreement shall be governed by and
constructed and enforced in accordance with the laws of the State of Delaware.
Section 9. JURISDICTION. The Company and Indemnitee hereby irrevocably
consent to the jurisdiction of the courts of the State of Delaware for all
purposes in connection with any action, suit or proceeding which arises out of
or relates to this Indemnity Agreement, and agree that any action instituted
under this Indemnity Agreement shall be brought only in the state courts of the
State of Delaware.
Section 10. ATTORNEYS' FEES. If any action, suit or proceeding is commenced
in connection with or related to this Indemnity Agreement, the prevailing party
shall be entitled to have its costs and expenses, including, without limitation,
reasonable fees of attorneys and reasonable expenses of investigation, paid by
the losing party.
Section 11. SEVERABILITY. In the event that any provision of this Indemnity
Agreement is determined by a court to require the Company to do or to fail to do
an act that is in violation of any applicable law, 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 Indemnity Agreement shall be enforceable in accordance with
their terms.
Section 12. SUCCESSORS AND ASSIGNS. This indemnity Agreement shall be
binding upon all successors and assigns of the Company, including any transferee
of all or substantially all of its assets and any successor by merger or
otherwise by operation of law, and shall be binding upon and inure to the
benefit of the heirs, executors and administrators of Indemnitee.
Section 13. DESCRIPTIVE HEADINGS. The descriptive headings in this Indemnity
Agreement are included for the convenience of the parties only and shall not
affect the construction of this Indemnity Agreement.
Section 14. COUNTERPARTS. This Indemnity Agreement may be executed in two
counterparts, both of which taken together shall constitute one document.
Section 15. AMENDMENT. No amendment, modification, termination or
cancellation of this Indemnity Agreement shall be effective unless made in
writing and signed by each of the parties hereto.
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IN WITNESS WHEREOF, the Company and Indemnitee have executed this Indemnity
Agreement as of the day and year first above written.
PRICE/COSTCO, INC.
By ___________________________________
INDEMNITEE
______________________________________
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