EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("AGREEMENT") is made as of the
date set forth on the signature page to this Agreement, by and between Pacific
Ethanol, Inc., a Delaware corporation ("COMPANY"), and the individual named on
the signature page to this Agreement ("INDEMNITEE"), an officer and/or a
director of the Company.
R E C I T A L S
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A. The Indemnitee is currently serving as an officer and/or
director of the Company and in such capacity renders valuable services to the
Company.
B. The Company has investigated whether additional protective
measures are warranted to adequately protect its directors and officers against
various legal risks and potential liabilities to which such individuals are
subject due to their position with the Company and has concluded that additional
protective measures are warranted.
C. In order to induce and encourage highly experienced and
capable persons such as the Indemnitee to continue to serve as an officer and/or
director, the Board of Directors of the Company has determined, after due
consideration, that this Agreement is not only reasonable and prudent, but
necessary to promote and ensure the best interests of the Company and its
stockholders.
D. The Company's execution of this Agreement has been approved
by the Board of Directors of the Company.
E. Indemnitee has indicated to the Company that but for the
Company's agreement to enter into this Agreement, Indemnitee would decline to
continue to serve as an officer and/or a director of the Company.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the recital set forth
above and the continued services of the Indemnitee, and as an inducement to the
Indemnitee to continue to serve as an officer and/or a director of the Company,
the Company and the Indemnitee do hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "PROCEEDING" shall mean any threatened, pending or
completed action, suit or proceeding, whether brought in the name of the Company
or otherwise and whether of a civil, criminal, administrative or investigative
nature, by reason of the fact that the Indemnitee is or was an officer and/or a
director 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 is
serving in such capacity at the time any liability or Expense is incurred for
which indemnification or advancement of Expenses (as defined in subparagraph (b)
below) is to be provided under this Agreement.
(b) "EXPENSES" means, all costs, charges and expenses incurred
in connection with a Proceeding, including, without limitation, attorneys' fees,
disbursements and retainers, accounting and witness fees, travel and deposition
costs, expenses of investigations, judicial or administrative proceedings or
appeals, 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; PROVIDED, HOWEVER, that the term
Expenses includes only those costs, charges and expenses incurred with the
Company's prior consent, which consent shall not be unreasonably withheld; and
PROVIDED, FURTHER, that the term "EXPENSES" does not include (i) the amount of
damages, judgments, amounts paid in settlement, fines or penalties relating to
any Proceeding or (ii) excise taxes under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), relating to any Proceeding, either
of which are actually levied against the Indemnitee or paid by or on behalf of
the Indemnitee.
2. AGREEMENT TO SERVE. The Indemnitee agrees to continue to serve as an
officer and/or a director of the Company at the will of the Company for so long
as Indemnitee is duly elected or appointed or until such time as Indemnitee
tenders a resignation in writing or is terminated as an officer and/or removed
as a director by the Company. Nothing in this Agreement shall be construed to
create any right in Indemnitee to continued employment with the Company or any
subsidiary or affiliate of the Company. Nothing in this Agreement shall affect
or alter any of the terms of any otherwise valid employment agreement or other
agreement between Indemnitee and the Company relating to Indemnitee's conditions
and/or terms of employment or service.
3. INDEMNIFICATION IN THIRD PARTY ACTIONS. The Company shall indemnify
the Indemnitee in accordance with the provisions of this Section 3 if the
Indemnitee is a party to or threatened to be made a party to or is otherwise
involved in any Proceeding (other than a Proceeding by or in the right of the
Company to procure a judgment in its favor), by reason of the fact that the
Indemnitee is or was an officer and/or a director 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, damages, judgments, amounts paid in
settlement, fines, penalties and ERISA excise taxes actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of such
Proceeding, to the fullest extent permitted by the Delaware General Corporation
Law ("DGCL"), whether or not the Indemnitee was the successful party in any such
Proceeding; PROVIDED, HOWEVER, that any settlement shall be approved in writing
by the Company.
4. INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
The Company shall indemnify the Indemnitee in accordance with the provisions of
this Section 4 if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding by or in the right of the Company
to procure a judgment in its favor by reason of the fact that the Indemnitee is
or was an officer and/or a director 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 such Proceeding, to the fullest
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extent permitted by the DGCL, whether or not the Indemnitee is the successful
party in any such Proceeding. The Company shall further indemnify the Indemnitee
for any damages, judgments, amounts paid in settlement, fines, penalties and
ERISA excise taxes actually and reasonably incurred by the Indemnitee in any
such Proceeding described in the immediately preceding sentence, provided that
either (i) the Proceeding is settled with the approval of a court of competent
jurisdiction, or (ii) indemnification of such amounts is otherwise ordered by a
court of competent jurisdiction in connection with such Proceeding.
5. CONCLUSIVE PRESUMPTION REGARDING STANDARD OF CONDUCT. The Indemnitee
shall be conclusively presumed to have met the relevant standards of conduct
required by the DGCL for indemnification pursuant to this Agreement, unless a
determination is made that the Indemnitee has not met such standards (i) by the
Board of Directors of the Company by a majority vote of a quorum thereof
consisting of directors who were not parties to such Proceeding, (ii) by the
stockholders of the Company by majority vote, or (iii) in a written opinion of
the Company's independent legal counsel. Further, the termination of any
Proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, rebut such presumption that
the Indemnitee met the relevant standards of conduct required for
indemnification pursuant to this Agreement.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any
other provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding or in defense
of any claim, issue or matter therein, the Indemnitee shall be indemnified
against all Expenses incurred in connection therewith to the fullest extent
permitted by the DGCL. For purposes of this paragraph, the Indemnitee will be
deemed to have been successful on the merits if the Proceeding is terminated by
settlement or is dismissed with prejudice.
7. ADVANCES OF EXPENSES. The Expenses incurred by the Indemnitee in
connection with 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 the DGCL; provided that the
Indemnitee shall undertake in writing to repay such amount to the extent that it
is ultimately determined that the Indemnitee is not entitled to indemnification
by the Company.
8. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, damages, judgments, amounts paid in settlement, fines,
penalties or ERISA excise taxes actually and reasonably incurred by Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
the Indemnitee for the portion of such Expenses, damages, judgments, amounts
paid in settlement, fines, penalties or ERISA excise taxes to which the
Indemnitee is entitled.
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9. INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO
INDEMNIFICATION.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding with respect to which the Indemnitee intends to
claim indemnification or advancement of Expenses pursuant to this Agreement, the
Indemnitee will notify the Company of the commencement thereof. The omission to
so notify the Company will not relieve the Company from any liability which it
may have to the Indemnitee under this Agreement or otherwise.
(b) If a claim for indemnification or advancement of Expenses
under this Agreement is not paid by or on behalf of the Company within thirty
(30) days of receipt of written notice thereof, Indemnitee may at any time
thereafter bring suit in any court of competent jurisdiction against the Company
to enforce the right to indemnification or advancement of Expenses provided by
this Agreement. It shall be a defense to any such action (other than an action
brought to enforce a claim for Expenses incurred in defending any Proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Company) that the Indemnitee has failed to
meet the standard of conduct that makes it permissible under the DGCL for the
Company to indemnify the Indemnitee for the amount claimed. The burden of
proving by clear and convincing evidence that indemnification or advancement of
Expenses is not appropriate shall be on the Company. The failure of the
directors or stockholders of the Company or independent legal counsel to have
made a determination prior to the commencement of such Proceeding that
indemnification or advancement of Expenses are proper in the circumstances
because the Indemnitee has met the applicable standard of conduct shall not be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with any
action concerning Indemnitee's right to indemnification or advancement of
Expenses in whole or in part pursuant to this Agreement shall also be
indemnified in accordance with the terms of this Agreement by the Company
regardless of the outcome of such action, unless a court of competent
jurisdiction determines that each of the material claims made by the Indemnitee
in such action was not made in good faith or was frivolous.
(d) With respect to any Proceeding for which indemnification
is requested, the Company will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may wish,
the Company may assume the defense thereof, with counsel satisfactory to the
Indemnitee. After notice from the Company to the Indemnitee of its election to
assume the defense of a Proceeding, the Company will not be liable to the
Indemnitee under this Agreement for any Expenses subsequently incurred by the
Indemnitee in connection with the defense thereof, other than reasonable costs
of investigation or as otherwise provided below. The Company shall not settle
any Proceeding in any manner that would impose any penalty or limitation on the
Indemnitee without the Indemnitee's prior written consent. The Indemnitee shall
have the right to employ counsel in any such Proceeding, but the Expenses of
such counsel incurred after notice from the Company of its assumption of the
defense thereof and the Indemnitee's approval of the Company's counsel 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
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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 Expenses of the Indemnitee's counsel
shall be at the expense of the Company. Notwithstanding the foregoing, 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 concluded that
there may be a conflict of interest between the Company and the Indemnitee.
10. RETROACTIVE EFFECT. Notwithstanding anything to the contrary
contained in this Agreement, the Company's obligation to indemnify the
Indemnitee and advance Expenses to the Indemnitee shall be deemed to be in
effect since the date that the Indemnitee first commenced serving in any of the
capacities covered by this Agreement.
11. 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 actions initiated or brought voluntarily by the Indemnitee and not by
way of defense, except with respect to actions brought to establish or enforce a
right to indemnification or advancement of Expenses under this Agreement or any
other statute or law or otherwise as required under the DGCL, but such
indemnification or advancement of Expenses may be provided by the Company in
specific cases if approved by the Board of Directors by a majority vote of a
quorum thereof consisting of directors who are not parties to such action;
(b) to indemnify the Indemnitee for any Expenses, damages,
judgments, amounts paid in settlement, 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
paid under such insurance;
(c) to indemnify the Indemnitee for any Expenses, damages,
judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes
for which the Indemnitee has been or is indemnified by the Company or any other
party otherwise than pursuant to this Agreement; or
(d) to indemnify the Indemnitee for any Expenses, damages,
judgments, 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 and the rules and regulations promulgated thereunder or similar
provisions of any federal, state or local statutory law;
12. MAINTENANCE OF DIRECTORS' AND OFFICERS' INSURANCE.
(a) Upon the Indemnitee's request, the Company hereby agrees
to maintain in full force and effect, at its sole cost and expense, directors'
and officers' liability insurance ("D&O INSURANCE") by an insurer, in an amount
and with a deductible reasonably acceptable to the Indemnitee, covering the
period during which the Indemnitee is serving in any one or more of the
capacities covered by this Agreement and for so long thereafter as the
Indemnitee shall be subject to any possible claim or threatened, pending or
completed Proceeding by reason of the fact that the Indemnitee is serving in any
of the capacities covered by this Agreement.
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(b) In all policies of D&O Insurance to be maintained pursuant
to Paragraph 12(a) above, the Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee with the greatest rights and benefits available
under such policy.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to maintain D&O Insurance if the Company determines, in good faith,
that (i) such insurance cannot be obtained on terms which are commercially
reasonable, (ii) the premium costs for such insurance is significantly
disproportionate to the amount of coverage provided, (iii) the coverage provided
by such insurance is limited by exclusions so as to provide an insufficient
benefit, or (iv) the Company, after using best efforts, is otherwise unable to
obtain such insurance.
13. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and
advancement of Expenses provided by this Agreement shall not be deemed to limit
or preclude any other rights to which the Indemnitee may be entitled under the
Company's certificate of incorporation or bylaws, any agreement, any vote of
stockholders or disinterested directors of the Company, the DGCL, or otherwise.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of (i) the Indemnitee and Indemnitee's heirs,
devisees, legatees, personal representatives, executors, administrators and
assigns and (ii) the Company and its successors and assigns, including any
transferee of all or substantially all of the Company's assets and any successor
or assign of the Company by merger or by operation of law.
15. SEVERABILITY. Each provision of this Agreement is a separate and
distinct agreement and independent of the other, so that if any provision hereof
shall be held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. 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 and
advancement of Expenses permitted under the DGCL. If this Agreement or any
portion thereof is invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify Indemnitee as to
Expenses, damages, judgments, amounts paid in settlement, fines, penalties and
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 applicable provision of the DGCL or any other applicable
law.
16. HEADINGS. The headings used herein are for convenience only and
shall not be used in construing or interpreting any provision of the Agreement.
17. GOVERNING LAW. The DGCL shall govern all issues concerning the
relative rights of the Company and the Indemnitee under this Agreement. All
other questions and obligations under this Agreement shall be construed and
enforced in accordance with the internal laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
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(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California. In any action, dispute, litigation or other proceeding concerning
this Agreement (including arbitration), exclusive jurisdiction shall be with the
courts of California, with the County of Orange being the sole venue for the
bringing of the action or proceeding.
18. AMENDMENTS AND WAIVERS. No amendment, waiver, modification,
termination or cancellation of this Agreement shall be effective unless in
writing and signed by the party against whom enforcement is sought. The
indemnification rights afforded to the Indemnitee hereby 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 any D&O
Insurance policies, whether the alleged actions or conduct giving rise to
indemnification hereunder arose before or after any such amendment. No waiver of
any provision of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof, whether or not similar, nor shall any waiver
constitute a continuing waiver.
19. 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.
20. NOTICES. All notices and communications shall be in writing and
shall be deemed duly given on the date of delivery or on the date of receipt of
refusal indicated on the return receipt if sent by first class mail, postage
prepaid, registered or certified, return receipt requested, to the following
addresses, unless notice of a change of address is duly given by one party to
the other, in which case notices shall be sent to such changed address:
If to the Company:
Pacific Ethanol, Inc.
5711 N. West Avenue
Fresno, CA 93711
Attn: Neil Koehler, Chief Executive Officer
with a copy, which shall not constitute notice to the Company,
to:
Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626
Attn: Larry A. Cerutti, Esq.
If to the Indemnitee, to the address set forth on the
signature page to this Agreement.
21. SUBROGATION. In the event of any payment under this Agreement to or
on behalf of the Indemnitee, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee against any
person, firm, corporation or other entity (other than the Company) and the
Indemnitee shall execute all papers requested by the Company and shall do any
and all things that may be necessary or desirable to secure such rights for the
Company, including the execution of such documents necessary or desirable to
enable the Company to effectively bring suit to enforce such rights.
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22. SUBJECT MATTER AND PARTIES. The intended purpose of this Agreement
is to provide for indemnification and advancement of Expenses, and this
Agreement is not intended to affect any other aspect of any relationship between
the Indemnitee and the Company and is not intended to and shall not create any
rights in any person as a third party beneficiary hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of __________________, 2005.
"Indemnitee" Signature:_____________________________
Print Name:____________________________
Address For Notices:___________________
_______________________________________
_______________________________________
"Company" PACIFIC ETHANOL, INC.,
a Delaware corporation
By:____________________________________
Name: _________________________________
Its: __________________________________
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