SONOMAWEST HOLDINGS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of October 30, 2002
by and between SONOMAWEST HOLDINGS, INC., a California corporation (the
"Company"), and Matthew J. Ertman ("Indemnitee").
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, particularly services related to the reporting of transactions
entered into by the Company's officers, directors and shareholders involving the
Company's common stock under Sections 13 and 16 of the Securities Exchange Act
of 1934, as amended, the Company wishes to provide for the indemnification of,
and the advancement of expenses to, Indemnitee to the maximum extent permitted
by law;
WHEREAS, it is reasonable, prudent and necessary for the Company to
obligate itself contractually to indemnify such persons so that they will serve
or continue to serve the Company free from undue concern that they will not be
adequately protected;
WHEREAS, Indemnitee is willing to serve, continue to serve and take on
additional service for or on behalf of the Company on condition that he be so
indemnified;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Certain Definitions.
(a) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(b) "Covered Event" shall mean any event or occurrence related to
services provided by Indemnitee as an officer, agent or fiduciary of the
Company, related to the preparation and filing of Schedules 13D and 13G, and
Forms 3, 4 and 5 under Sections 13 and 16, respectively, of the Securities
Exchange Act of 1934, on behalf of officers, directors and shareholders of the
Company, including without limitation, the execution of such schedules and forms
pursuant to a power of attorney. The Company acknowledges that such services are
being performed for the benefit of the Company.
(c) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
2. Indemnification.
(a) Indemnification of Expenses. the Company shall indemnify
Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was
or is or becomes a party to or witness or other participant in, or is threatened
to be made a party to or witness or other participant in, any Claim, including
all interest, assessments and other charges paid or payable in connection with
or in respect of such Expenses.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall give the
Company notice in writing as soon as practicable of any Claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chairman of the Board
of the Company at the address shown on the signature page of this Agreement (or
such other address as the Company shall designate in writing to the Indemnitee).
Notice shall be deemed received three business days after the date postmarked if
sent by domestic certified or registered mail, properly addressed; otherwise
notice shall be deemed received when such notice shall actually be received by
the Company. The omission to so notify the Company will not relieve the Company
from any liability which it may have under this Agreement or otherwise. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification under this Agreement, other than
pursuant to Section 4, shall be made no later than 45 days after receipt by the
Company of the written request of Indemnitee, accompanied by substantiating
documentation, unless a determination is made within said 45-day period by (1)
the Board of Directors by a majority vote of a quorum consisting of directors
who are or were not parties to such Claim, or (2) independent legal counsel in a
written opinion (which counsel shall be appointed if such quorum is not
obtainable), that Indemnitee has not met the relevant standards for
indemnification set forth herein.
In the event the Company does not indemnify Indemnitee within such
45-day period, whether or not the Company (including its Board of Directors or
independent legal counsel) has made a determination that Indemnitee has not met
the applicable standard of conduct, Indemnitee may at anytime thereafter bring
suit against the Company to recover the unpaid amount in any court of competent
jurisdiction. The burden of proving by clear an convincing evidence that
indemnification is not appropriate shall be on the Company. Neither the failure
of the Company (including its Board of Directors or independent legal counsel)
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because Indemnitee has met the
applicable standard of conduct, nor an actual determination by the Company
(including its Board of Directors or independent legal counsel) that Indemnitee
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that Indemnitee has not met the applicable
standard of conduct. Indemnitee's expenses reasonably incurred in connection
with successfully establishing his right to indemnification hereunder, in whole
or part, shall also be indemnified by the Company.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
a Claim pursuant to Section 3(b) hereof, the Company has director and officer
liability 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. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
4. Additional Indemnification Rights; Nonexclusively.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's or any
subsidiary's Articles of Incorporation, the Company's or any subsidiary's
By-laws or by statute. In the event of any change, after the date of this
Agreement, in any applicable law, statute or rule which expands the right of a
California corporation to indemnify a member of its board of directors or an
officer, such changes shall be, ipso facto, within the purview of Indemnitee's
rights and Company's obligations, under this Agreement. In the event of any
change in any applicable law, statute or rule which narrows the right of a
California corporation to indemnify a member of its Board of Directors or an
officer, such changes, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Nonexclusively. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Articles of Incorporation, its By-laws, any agreement, any
vote of shareholders or disinterested directors, the General Corporation Law of
the State of California, applicable employment law, or otherwise, both as to
action in Indemnitee's official capacity and as to action in another capacity
while holding such office. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity even though he may have ceased to serve in such
capacity at the time of any action or other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
Expenses, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such Expenses to which
Indemnitee is entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its officers, employees, agents or fiduciaries under
this Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
7. Directors' and Officers' Liability Insurance. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
directors' and officers' liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's officers.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company.
8. Severability. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(i) Excluded Acts. To indemnify Indemnitee for any acts or omissions
or transactions from which an officer may not be relieved of
liability under the California General Corporation Law;
(ii) Claims Initiated by Indemnitee. To indemnify or advance Expenses
to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by 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 Section 317
of the California Corporations Code, but such indemnification or
advancement of Expenses may be provided by the Company in
specific cases if the Board of Directors has approved the
initiation or bringing of such suit;
(iii)Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any proceeding
instituted by Indemnitee to enforce or interpret this Agreement,
if a court of competent jurisdiction determines that each of the
material assertions made by the Indemnitee in such proceeding was
not made in good faith or was frivolous;
(iv) Insured Claims. To indemnify Indemnitee for Expenses or
liabilities of any type whatsoever which have been paid directly
to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability maintained by the Company;
(v) Indemnified Claims. To indemnify the Indemnitee for any Expenses
or liabilities of any type whatsoever for which the Indemnitee
has been or is indemnified by the Company otherwise than pursuant
to this Agreement.
10. Effectiveness of Agreement. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the California General Corporation
Law, such provisions shall not be effective unless and until the Company's
Articles of Incorporation authorize such additional rights of indemnification.
In all other respects, the balance of this Agreement shall be effective as of
the date set forth on the first page of this Agreement.
11. Construction of Certain Phrases. For purposes of this Agreement,
references to the "Company" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
officers so that if Indemnitee is or was an officer of such constituent
corporation, or is or was serving at the request of such constituent corporation
as an officer of another corporation or other enterprise, Indemnitee shall stand
in the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
13. 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 estate, heirs, legal representatives and assigns.
14. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction 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. In the event of an action
instituted by or in the name of the Company 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 attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of the Indemnitee's material defenses to
such action were made in bad faith or were frivolous.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressed, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or 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 California.
17. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of California as applied to
contracts between California residents entered into and to be performed entirely
within California.
18. 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.
19. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SONOMAWEST HOLDINGS, INC.
a California corporation
By: /s/ Roger S. Mertz
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Roger S. Mertz
Chairman of the Board
Address: 2064 Highway 116 North
Sebastopol, California 95472
AGREED TO AND ACCEPTED:
INDEMNITEE:
/s/ Matthew J.Ertman
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Matthew J. Ertman
Address
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[Signature page to Indemnification Agreement]