Exhibit 10.26
EXHIBIT 10.26
ENOVA SYSTEMS, INC. DIRECTOR INDEMNIFICATION AGREEMENT
THIS
INDEMNIFICATION
AGREEMENT (the
"AGREEMENT") is made
effective as of
July _____, 2005, by and between Enova
Systems, Inc., a
California
corporation
(the "Company"), and ________________, a Director of the Company (the
"INDEMNITEE").
RECITALS:
---------
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as
directors and officers of corporations unless
they are protected by comprehensive
liability insurance or indemnification, due
to increased exposure to litigation costs
and risks resulting from their service
to such corporations, and due to the fact that the
exposure frequently bears no
reasonable relationship to the compensation
of such directors or officers.
B. The statutes
and judicial decisions
regarding the duties of directors
and officers are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors and officers with
adequate, reliable
knowledge of legal risks to which they are
exposed or information
regarding the
proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or
not the case is meritorious), that the
defense and/or settlement of such
litigation is beyond the personal resources of
directors and officers.
D. The Company
believes that it is unfair for its directors and officers to
assume the risk of huge judgments and other
expenses which may occur in cases in
which the director or officer received no
personal profit and in cases where the
director or officer was not culpable.
E. The Company
recognizes
that the issues in
controversy
in litigation
against a director or officer of a corporation such as the Company are often
related to the knowledge, motives, and intent of such
director or officer, that
he or she is usually the only witness with
knowledge of the essential facts and
exculpating circumstances regarding such matters and that the long period
of
time which usually elapses before the trial or other disposition of such
litigation often extends beyond the time that the
director or officer can
reasonably recall such matters and may extend beyond the normal time for
retirement for such director or officer with the
result that he or she,
after
retirement or in the event of death,
his or her spouse,
heirs, executors or
administrators, may be faced with limited ability and undue hardship in
maintaining an adequate defense, which may
discourage such a director or officer
from serving in that position.
F. Based upon
their experience as business managers, the Board of Directors
of the Company (the "BOARD") has concluded
that, to retain and attract talented
and experienced individuals to serve as directors and officers
of the Company
and to encourage such individuals to take the business
risks necessary for
the
success of the Company, it is necessary for the Company to contractually
indemnify its directors and officers, and
to assume for itself maximum liability
for expenses and damages in connection
with claims
against such
directors and
officers in connection with their service to the Company, and has further
concluded that the failure to provide such
contractual
indemnification
could
result in great harm to the Company and the
Company's shareholders.
G. Section 317
of the California
Corporations
Code (the "CODE"), under
which the Company is organized ("SECTION 317"), empowers the Company to
indemnify persons who serve, at the request of the Company,
as the directors,
officers, employees or agents of other corporations or enterprises, and
expressly provides that the indemnification provided by Section 317 is not
exclusive.
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H. The
Company is also investigating obtaining increased coverage of
director's and officer's liability insurance ("D&O INSURANCE"). The Company
believes that the interests of the
Company's shareholders
would best be
served
by a combination of such insurance as the Company may obtain in the future
pursuant to the Company's obligations hereunder and the indemnification
by the
Company of the directors and officers of
the Company.
I. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director
of the Company free from undue concern for
claims for damages arising out of or
related to such services to the Company.
J. The
Indemnitee
is willing to serve, or to continue to serve, the
Company, provided that he or she is
furnished the indemnity provided for herein.
THE PARTIES
AGREE AS FOLLOWS:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
Section 1.1 "AGENT" of the Company shall mean any person who is or
was
a director, officer, employee or other agent
of the Company or a Subsidiary (as
defined below); or is or was serving at the
request of, for the convenience of,
or to represent the interests of the Company or a Subsidiary as a director,
officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise; or was a director,
officer, employee or agent of a foreign or
domestic corporation which was a
predecessor corporation of the Company or a Subsidiary or was a director,
officer, employee or agent of another enterprise at the request of, for the
convenience of, or to represent the
interests of such predecessor corporation.
Section 1.2 "EXPENSES"
shall mean all direct and indirect costs of any
type or nature whatsoever (including, without limitation, all attorneys' fees
and related disbursements, other out of
pocket costs and reasonable compensation
for time spent by the Indemnitee for which he or she is not otherwise
compensated by the Company or any third
party) actually and reasonably incurred
by the Indemnitee in connection with either
the investigation, defense or appeal
of a proceeding or establishing or enforcing a right
to indemnification
under
this Agreement, Section 317 or otherwise;
provided, however, that expenses shall
not include any judgments, fines, ERISA excise taxes or penalties or
amounts
paid in settlement of a proceeding.
Section 1.3
"PROCEEDING"
shall mean any threatened, pending, or
completed action, suit or other proceeding, whether civil, criminal,
administrative, investigative or any other
type whatsoever.
Section 1.4 "SUBSIDIARY" shall mean any corporation of
which more than
50% of the outstanding voting securities is owned
directly or indirectly by the
Company, by the Company and one or more
other subsidiaries,
or by one or more
other subsidiaries.
2. AGREEMENT TO
SERVE. The Indemnitee
agrees to serve and/or
continue to
serve as a director of the Company,
at its will,
so long as the
Indemnitee is
duly appointed or elected and qualified in accordance with the applicable
provisions of the by laws of the Company or until such time as the
Indemnitee
tenders his/her resignation in writing.
3. FUTURE
LIABILITY INSURANCE. The Company hereby covenants and agrees
that
the Company shall use its reasonable best efforts consistent with prudent
business practice to maintain in full force and effect D&O Insurance in
reasonable amounts from established and reputable insurers. The parties
acknowledge that such insurance in the future may not be available at an
acceptable price or at all.
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4. MANDATORY
INDEMNIFICATION.
Section 4.1 Third Party Actions. If the Indemnitee is a person who
was
or is a party or is threatened to be made a
party to any Proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
Indemnitee is or was an Agent of the Company,
or by reason of
anything done or
not done by the Indemnitee in any such
capacity, the Company shall indemnify the
Indemnitee against any and all Expenses and
liabilities of any
type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties, and amounts paid in settlement)
actually and
reasonably incurred by
the Indemnitee in connection
with the investigation, defense, settlement or
appeal of such proceeding if the Indemnitee
acted in good faith
and in a manner
the Indemnitee reasonably believed to be in
or not opposed to the best interests
of the Company, and, with respect to any
criminal proceeding,
had no reasonable
cause to believe his conduct was
unlawful.
Section 4.2 Derivative
Actions. If the
Indemnitee is a person who was
or is a party or is threatened to be made a
party to 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 Agent of
the Company, or by
reason of anything
done or not done by the Indemnitee in any such capacity, the Company shall
indemnify the Indemnitee against any amounts paid in
settlement
of any such
proceeding and all Expenses actually and reasonably
incurred by the
Indemnitee
in connection with the investigation, defense, settlement, or appeal of such
proceeding if the Indemnitee acted in good faith and in a
manner the Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company; except that no indemnification
under this subsection
shall be made in
respect of any claim, issue or matter as to which such
person shall have been
finally adjudged to be liable to the Company by a court of competent
jurisdiction due to willful misconduct of a culpable nature in
the performance
of a duty to the Company unless and only to the extent that
the court in which
such proceeding was brought shall determine
upon application that,
despite the
adjudication of liability but in view of
all the circumstances of the case, such
person is fairly and reasonably entitled to
indemnity for such amounts which the
court shall deem proper.
Section 4.3 Actions where Indemnitee is Deceased. If the Indemnitee is
a person who was or is a party or is threatened to be made a party to any
Proceeding by reason of the fact that the
Indemnitee is or was
an Agent of the
Company, or by reason of anything done or
not done by the Indemnitee in any such
capacity, the Company shall indemnify the Indemnitee against any and all
Expenses and liabilities of any type
whatsoever (including,
but not limited to,
judgments, fines, ERISA excise taxes and penalties, and amoun
