EXHIBIT 10.38
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of
this ______ day of ___________, 19___, by and between Micron
Electronics, Inc., a Minnesota corporation (the "Company"), and
_________________, ("Indemnitee").
WHEREAS, the Company desires to attract and retain the
services of highly qualified individuals, such as Indemnitee, to
serve the Company and its related entities;
WHEREAS, in order to induce Indemnitee to continue to
provide services to the Company, the Company wishes to provide
for the indemnification of, and advancement of expenses to,
Indemnitee to the maximum extent permitted by law;
WHEREAS, Indemnitee does not regard the current protection
available as adequate under the present circumstances, and the
Indemnitee and other directors, officers, employees, agents and
fiduciaries of the Company may not be willing to continue to
serve in such capacities without additional protection;
WHEREAS, the Company and Indemnitee recognize the continued
difficulty in obtaining liability insurance for the Company's
directors, officers, employees, agents and fiduciaries, the
significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation in general,
subjecting directors, officers, employees, agents and fiduciaries
to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been
severely limited; and
WHEREAS, in view of the considerations set forth above, the
Company desires that Indemnitee shall be indemnified by the
Company as forth herein;
NOW THEREFORE, in consideration of Indemnitee's service to
the Company, the Company and Indemnitee hereby agree as follows:
1
1. Indemnification
(a) Indemnification. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (whether in a third party proceeding or in an
action by or in the right of the Company) by reason of the fact
that Indemnitee is or was a director, officer, employee or agent
of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an
officer, director, employee or agent or by reason of the fact
that Indemnitee is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
judgements, penalties, fines (including, without limitation,
excise taxes assessed against Indemnitee with respect to an
employee benefit plan), settlements and reasonable expenses,
including attorneys' fees and disbursements, actually and
reasonably incurred by Indemnitee in connection with such action,
suit or proceeding, if Indemnitee
(1) Has not been indemnified by another organization or
employee benefit plan for the same judgements, penalties, fines
(including, without limitation, excise taxes assessed against the
person with respect to an employee benefit plan), settlements,
and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the
proceeding with respect to the same acts or omissions;
(2) acted in good faith;
(3) received no improper personal benefit and Section
302A.255 of the Minnesota Business Corporation Act (the "MBCA"),
if applicable, has been satisified;
(4) in the case of a criminal procceding, has no reasonable
cause to believe the conduct was unlawful; and
(5) in the case of acts or omissions occurring in Indemnitee's
official capacity (as defind in Section 302A.521(1)(c)(1) or (2) of
the MBCA) as an officer, director or employee of the Company, reasonably
believed that the conduct was in the best interests of the Company, or
in the case of acts or omissions occurring in the official capacity (as
defined in Section 302A.521(1)(c)(3) of the MBCA) as an officer, director
or employee of the Company, reasonably believed that the conduct was not
opposed to the best interests of the Company. If Indemnitee's acts or
omissions complained of in the proceeding relate to conduct as a
director, officer, trustee, employee, or agent of an
2
employee benefit plan, the conduct is not considered
to be opposed to the best interests of the Company if Indemnitee
reasonably believed that the conduct was in the best interests of
the participants or beneficiaries of the employee benefit plan.
The termination of a proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent does not, of itself, establish that Indemnitee did not
meet the criteria set forth in this Section 1(b).
(b) Mandatory Payment of Expenses. To the extent that
Indemnitee has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
Subsection (a) of this Section 1 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by Indemnitee in connection therewith.
2. Expenses; Indemnification Procedure
(a) Advancement of Expenses. The Company shall advance all
expenses (including attorney's fees) incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal
of any civil or criminal, administrative or investigative action,
suit or proceeding referenced in Section 1(a) hereof. 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.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as
a condition precedent to his right to be indemnified under this
Agreement, 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. 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 and advances provided
for by this Agreement shall be made no later than thirty (30)
days after receipt of the written request of Indemnitee. If a
claim under this Agreement, under any statute, or under any
provision of the Company's Articles of Incorporation or Bylaws
providing for indemnification is not paid in full by the Company
within thirty (30) days after a written request for payment
thereof has first been received by the Company, Indemnitee may,
but need not, at any time thereafter bring an action against the
Company to recover the unpaid amount of the claim. It shall be a
defense to any such action (other than an action brought to enforce
a claim for expenses incurred in connection with any action, suit or
3
proceeding in advance of its final disposition) that Indemnitee has
not met the standards of conduct which make it permissible under
applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on
the Company and Indemnitee shall be entitled to receive interim
payments of expenses hereunder unless and until such defense may be
finally adjudicated by court order or judgment from which no further
right of appeal exists.
(d) Selection of Counsel. In the event the Company shall
be obligated to pay the expenses of any proceeding against
Indemnitee, the Company shall be entitled to assume the defense
of such proceeding, with counsel selected by the Company, upon
the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, the Company will not be
liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have the right to
employ his counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee
has been authorized by the Company, (B) The Company shall have
reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of any such
defense or (C) the Company shall not, in fact, have employed
counsel to assume the defense of such proceeding, then the fees
and expenses of Indemnitee's counsel shall be at the expense of
the Company.
3. Additional Indemnification Rights; Nonexclusivity
(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify 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 Articles of
Incorporation, the Company's Bylaws 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
Minnesota 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
Minnesota 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.
4
(b) Nonexclusivity. The indemnification and advancement of
expenses provided by or granted pursuant to this Agreement shall
not be deemed exclusive of any rights to which an Indemnitee may
be entitled under the Company's Articles of Incorporation, its
Bylaws, any agreement, any vote of stockholders or disinterested
directors, the MBCA, 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, suit or other covered proceeding.
4. 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, judgments, fines
or penalties actually or reasonably incurred by him in the
investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or
penalties to which Indemnitee is entitled.
5. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or public
policy may override applicable state law and prohibit the Company
from indemnifying its directors and officers under this Agreement
or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the
"SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits
indemnification for certain ERISA violations.
6. 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.
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.
5
7. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to
the terms of this Agreement:
(a) 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.
(b) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) which have been paid directly to
Indemnitee by an insurance carrier under a policy of officers'
and directors' liability insurance maintained by the Company.
(c) Claims Under Section 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase
and sale by Indemnitee of securities in violation of Section
16(b) of the Securities Exchange Act of 1934, as amended, or any
similar successor statute.
8. Construction of Certain Phrases
(a) 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 directors, officers, and
employees or agents, so that if Indemnitee is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust 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.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on Indemnitee
with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director,
officer, employee or agent of the Company which imposes duties on,
or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of any employee benefit plan,
Indemnitee shall be deemed to have acted in a manner "not
6
opposed to the best interests of the Company" as referred to in this
Agreement.
9. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original.
10. 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.
11. 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 Indemnitee's material defenses to
such action were made in bad faith or were frivolous.
12. 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 addressee, 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.
13. Choice of Law. This Agreement shall be governed by and
its provisions construed in accordance with the laws of the State
of Minnesota, without reference to the provisions thereof
regarding conflicts of laws.
7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Micron Electronics, Inc.
By:
____________________________
Its:
____________________________
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
AGREED TO AND ACCEPTED:
INDEMNITEE:
___________________________
Address:
___________________________
___________________________
8