1
EXHIBIT 10.5 (B)
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this ______ day of May, 1999, by and
between INNOTRAC CORPORATION, a Georgia corporation (the "CORPORATION"),
__________________ (the "INDEMNIFIED PARTY").
W I T N E S S E T H:
WHEREAS, the Indemnified Party currently serves as a director, officer,
or both of the Corporation, and in such capacity is performing a valuable
service; and
WHEREAS, pursuant to the Corporation's Articles of Incorporation and
Bylaws, each as amended to date (collectively the "CHARTER"), the Corporation
may indemnify its directors and officers to the fullest extent authorized by
applicable law; and
WHEREAS, Section 14-2-851 of the Georgia Business Corporation Code, as
amended to date (the "STATE STATUTE"), provides the statutory basis for the
indemnification of directors and officers of a Georgia corporation; and
WHEREAS, in order to induce the Indemnified Party to continue to serve,
the Corporation has determined and agreed to enter into this Agreement with the
Indemnified Party;
NOW, THEREFORE, in consideration of Indemnified Party's continued
service on behalf of the Corporation after the date hereof, the parties hereto
agree as follows:
1. INDEMNITY. The Corporation hereby agrees to hold harmless and
indemnify the Indemnified Party to the fullest extent authorized or permitted by
the provisions of the State Statute with respect to the indemnification of
directors and officers, or by any amendment thereof or other statutory provision
authorizing or permitting such indemnification that is adopted after the date
hereof.
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth
in SECTION 3 hereof, the Corporation hereby further agrees to hold harmless and
indemnify Indemnified Party against any and all expenses (including reasonable
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by Indemnified Party in connection with any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (including an action by or in the right of the
Corporation) to which Indemnified Party is, was or at any time becomes a party,
or is threatened to be made a party, by reason of the fact that Indemnified
Party is, was or at any time becomes a director, officer, employee, or agent of
the Corporation, or is or was serving or at any time serves at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise.
2
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
SECTIONS 1 or 2 hereof shall be paid by the Corporation:
(a) In respect of expenses, judgments, fines, and
settlement amounts to the extent attributable to remuneration paid or other
financial benefit provided to the Indemnified Party by the Corporation if it
shall be determined by a final judgment or other final adjudication that such
remuneration or financial benefit was paid or provided in violation of the
Indemnified Party's duties and obligations to the Corporation;
(b) On account of any suit in which judgment is rendered
against Indemnified Party for an accounting of profits, made from the purchase
or sale by the Indemnified Party of securities of the Corporation, pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of any federal or state law, or on account of any
payment by the Indemnified Party to the Corporation in respect of any claim for
such accounting;
(c) On account of the Indemnified Party's conduct if it
shall be determined by a final judgment or other final adjudication to have been
knowingly fraudulent, deliberately dishonest, or grossly negligent, or to have
constituted willful misconduct; or
(d) If a final decision by a court having jurisdiction in
the matter shall determine that such indemnification is not lawful.
4. CONTRIBUTION. (a) If the indemnification provided in
SECTIONS 1 OR 2 is unavailable and may not be paid to the Indemnified Party for
any reason (other than pursuant to SECTIONS 3(A), (B), (C) AND (D)), then in
respect of any threatened, pending, or completed action, suit, or proceeding in
which the Corporation is jointly liable with the Indemnified Party (or would be
if joined in such action, suit, or proceeding), the Corporation shall contribute
to the amount of expenses, judgments, fines, penalties, and settlements paid or
payable by the Indemnified Party in such proportion as is appropriate to reflect
(i) the relative benefits received by the Corporation on the one hand and the
Indemnified Party on the other from the transaction from which such action,
suit, or proceeding arose, and (ii) the relative fault of the Corporation on the
one hand and of the Indemnified Party on the other in connection with the events
that resulted in such expenses, judgments, fines, penalties, or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Corporation on the one hand and of the Indemnified Party on the
other shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines,
penalties, or settlement amounts. The Corporation agrees that it would not be
just and equitable if contribution pursuant to this SECTION 4 were determined by
pro rata allocation or any other method of allocation that does not take account
of the foregoing equitable considerations.
-2-
3
(b) The determination as to the amount of the
contribution, if any, shall be made by: (i) a court of competent jurisdiction
upon the application of both the Indemnified Party and the Corporation (if an
action or suit had been brought in, and final determination had been rendered
by, such court); (ii) the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit, or
proceeding; or (iii) regular outside counsel of the Corporation, if a quorum is
not obtainable for purposes of clause (ii) above, or, even if obtainable, a
quorum of disinterested directors so directs.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
the Corporation contained herein shall continue during the period the
Indemnified Party is a director, officer, employee, or agent of the Corporation
(or is serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise), and shall continue thereafter for
so long as the Indemnified Party shall be subject to any possible claim or
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that the
Indemnified Party was serving in any such capacity on behalf of the Corporation.
6. ADVANCEMENT OF EXPENSES. Expenses (including attorneys' fees),
judgments, fines, penalties, and amounts paid in settlement actually and
reasonably incurred by the Indemnified Party with respect to any action, suit,
or proceeding referred to in SECTIONS 1 or 2 shall be advanced by the
Corporation prior to the time of the disposition of such action, suit, or
proceeding promptly upon the receipt of a (a) written affirmation from the
Indemnified Party of his good faith belief that he is entitled to be indemnified
by the Corporation for such expenses, judgments, fines, penalties, or amounts
paid in settlement under the provisions of the State Statute, the Charter, this
Agreement, or otherwise, and (b) written undertaking to return promptly any
amounts advanced hereunder if it shall ultimately be determined that the
Indemnified Party is not entitled to indemnification from the Corporation for
such amounts under the provisions of the State Statute, the Charter, this
Agreement, or otherwise.
7. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
the Indemnified Party of notice of the commencement of any action, suit, or
proceeding, the Indemnified Party will, if a claim in respect thereof is to be
made against the Corporation under this Agreement, notify the Corporation of the
commencement thereof, but the failure to notify the Corporation will not relieve
it from any liability that it may have to the Indemnified Party otherwise than
under this Agreement. With respect to any such action, suit, or proceeding as to
which the Indemnified Party so notifies the Corporation:
(a) The Corporation will be entitled to participate at
its own expense;
(b) Except as otherwise provided below, the Corporation
may assume the defense thereof, with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Corporation to the Indemnified Party of
its election to assume such defense, the Corporation will not be liable to the
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof, other than
-3-
4
reasonable costs of investigation or as otherwise provided below. The
Indemnified Party shall have the right to employ its own counsel in such action,
suit, or proceeding, but the fees and expenses of such counsel incurred after
notice from the Corporation of its assumption of the defense thereof shall be at
the expense of the Indemnified Party, unless (i) the employment of counsel by
the Indemnified Party has been authorized by the Corporation, (ii) counsel to
the Indemnified Party shall have reasonably concluded that there may be a
conflict of interest between the Corporation and the Indemnified Party in the
conduct of the defense of such action and has advised the Indemnified Party in
writing that such a conflict of interest exists, or (iii) the Corporation shall
not in fact have employed counsel to assume the defense of such action, in each
of which cases the fees and expenses of counsel for the Indemnified Party shall
be at the expense of the Corporation. The Corporation shall not be entitled to
assume the defense of any action, suit, or proceeding brought by or on behalf of
the Corporation or as to which the Indemnified Party shall have made the
conclusion provided for in clause (ii) above; and
(c) The Corporation shall have no obligation to indemnify
the Indemnified Party under this Agreement for any amounts paid in settlement of
any action or claim effected without the Corporation's prior written consent.
The Corporation shall not settle any action or claim in any manner that would
impose any penalty or limitation on the Indemnified Party without the
Indemnified Party's prior written consent. Neither the Corporation nor the
Indemnified Party will unreasonably withhold their consent to any proposed
settlement.
8. REPAYMENT OF EXPENSES. The Indemnified Party agrees to
reimburse the Corporation for all reasonable expenses, judgments, fines,
penalties, and settlement amounts paid by the Corporation in defending any
civil, criminal, administrative, or investigative action, suit, or proceeding
against the Indemnified Party or advanced by the Corporation to the Indemnified
Party in such event, but only to the extent that it shall be ultimately
determined that the Indemnified Party is not entitled to be indemnified by the
Corporation for such expenses, judgments, fines, penalties, or amounts paid in
settlement under the provisions of the State Statute, the Charter, this
Agreement, or otherwise.
9. ENFORCEMENT. (a) The Corporation expressly confirms and
agrees that it has entered into this Agreement and assumed the obligations
imposed on it hereby in order to induce the Indemnified Party to continue to
serve on behalf of the Corporation, and acknowledges that the Indemnified Party
is relying upon this Agreement in continuing to serve in such capacity.
(b) If the Indemnified Party is required to bring any
action to enforce rights or to collect moneys due under this Agreement and is
successful in such action, then the Corporation shall reimburse the Indemnified
Party for all of the Indemnified Party's reasonable fees and expenses in
bringing and pursuing such action.
10. SEVERABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable in whole or in
part for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof.
-4-
5
11. GENERAL AND MISCELLANEOUS. (a) This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Georgia, without regard to its conflicts of laws rules.
(b) This Agreement shall be binding upon the Indemnified
Party, his heirs, personal representative, and assigns and upon the Corporation
and its successors and assigns, and shall inure to the benefit of and be
enforceable by the Indemnified Party, his heirs, personal representatives, and
assigns, and by the Corporation and its successors and assigns.
(c) No amendment, modification, termination, or
cancellation of this Agreement shall be effective unless in a writing signed by
both parties hereto.
12. NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Agreement to make any payment to the extent the Indemnified
Party has otherwise actually received payment (under any insurance policy,
Charter provision, or otherwise) of the amounts otherwise indemnifiable
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
CORPORATION:
INNOTRAC CORPORATION
By:
--------------------------------------
Scott D. Dorfman,
President and Chief Executive Officer
INDEMNIFIED PARTY:
-----------------------------------------
-----------------------------------------
-5-