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Exhibit
10.3
INDEMNIFICATION
AGREEMENT
THIS AGREEMENT is entered
into, effective as of March 2, 2007 by and between PMC-Sierra,
a Delaware corporation (the “Company”), and Michael W.
Zellner (“Indemnitee”).
WHEREAS, it is essential to
the Company to retain and attract as directors and officers the
most capable persons available;
WHEREAS, Indemnitee is a
director and/or officer of the Company;
WHEREAS, both the Company and
Indemnitee recognize the increased risk of litigation and other
claims currently being asserted against directors and officers of
corporations;
WHEREAS, the Certificate of
Incorporation and Bylaws of the Company require the Company to
indemnify and advance expenses to its directors and officers to the
fullest extent permitted under Delaware law, and the Indemnitee has
been serving and continues to serve as a director and/or officer of
the Company in part in reliance on the Company’s Certificate
of Incorporation and Bylaws; and
WHEREAS, in recognition of
Indemnitee’s need for (i) substantial protection against
personal liability based on Indemnitee’s reliance on the
aforesaid Certificate of Incorporation and Bylaws,
(ii) specific contractual assurance that the protection
promised by the Certificate of Incorporation and Bylaws will be
available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation and
Bylaws or any change in the composition of the Company’s
Board of Directors or acquisition transaction relating to the
Company), and (iii) an inducement to provide effective
services to the Company as a director and/or officer, the Company
wishes to provide in this Agreement for the indemnification of and
the advancing of expenses to Indemnitee to the fullest extent
(whether partial or complete) permitted under Delaware law and as
set forth in this Agreement, and, to the extent insurance is
maintained, to provide for the continued coverage of Indemnitee
under the Company’s directors’ and officers’
liability insurance policies.
NOW, THEREFORE, in
consideration of the above premises and of Indemnitee continuing to
serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties
agree as follows:
1. Certain Definitions
:
(a) Board : the
Board of Directors of the Company.
(b) Affiliate
: any corporation or other person or entity that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person
specified.
(c) Change in Control
: shall be deemed to have occurred if (i) any
“person” (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) (other
than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company, and other than any person holding shares of the
Company on the date that the Company first registers under the Act
or any transferee of such individual if such transferee is a spouse
or lineal descendant of the transferee or a trust for the benefit
of the individual, his spouse or lineal descendants), is or becomes
the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the total voting power
represented by the Company’s then outstanding Voting
Securities, or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute
the Board and any new director whose election by the Board or
nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority of the Board, or (iii) the stockholders
of the Company approve a merger or consolidation of the Company
with any other entity, other than a merger or consolidation that
would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities
of the surviving entity) at least 80% of the total voting power
represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company (in one transaction or a
series of transactions) of all or substantially all of the
Company’s assets.
(d) Expenses
: any expense, liability, or loss, including attorneys’
fees, judgments, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, any federal, state, local, or
foreign taxes imposed as a result of the actual or deemed receipt
of any payments under this Agreement, and all other costs and
obligations, paid or incurred in connection with investigating,
defending, being a witness in, participating in (including on
appeal), or preparing for any of the foregoing in, any Proceeding
relating to any Indemnifiable Event.
(e) Indemnifiable
Event : any event or occurrence that takes place either
prior to or after the execution of this Agreement, related to the
fact that Indemnitee is or was a director or officer of the
Company, or while a director or officer is or was serving at the
request of the Company as a director, officer, employee, trustee,
agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, employee benefit plan, trust, or other
enterprise, or was a director, officer, employee, or agent of a
foreign or domestic corporation that was a predecessor corporation
of the Company or of another enterprise at the request of such
predecessor corporation, or related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving
as a director, officer, employee, or agent of the Company, as
described above.
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(f) Independent
Counsel : the person or body appointed in connection with
Section 3.
(g) Proceeding
: any threatened, pending, or completed action, suit, or
proceeding or any alternative dispute resolution mechanism
(including an action by or in the right of the Company), or any
inquiry, hearing, or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any such action, suit, or
proceeding, whether civil, criminal, administrative, investigative,
or other.
(h) Reviewing Party
: the person or body appointed in accordance with
Section 3.
(i) Voting Securities
: any securities of the Company that vote generally in the
election of directors.
2. Agreement to
Indemnify .
(a) General Agreement
. In the event Indemnitee was, 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, a Proceeding by reason
of (or arising in part out of) an Indemnifiable Event, the Company
shall indemnify Indemnitee from and against any and all Expenses to
the fullest extent permitted by law, as the same exists or may
hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment
or interpretation permits the Company to provide broader
indemnification rights than were permitted prior thereto). The
parties hereto intend that this Agreement shall provide for
indemnification in excess of that expressly permitted by statute,
including, without limitation, any indemnification provided by the
Company’s Certificate of Incorporation, its Bylaws, vote of
its shareholders or disinterested directors, or applicable
law.
(b) Initiation of
Proceeding . Notwithstanding anything in this Agreement to
the contrary, Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Proceeding
initiated by Indemnitee against the Company or any director or
officer of the Company unless (i) the Company has joined in or
the Board has consented to the initiation of such Proceeding;
(ii) the Proceeding is one to enforce indemnification rights
under Section 5; or (iii) the Proceeding is instituted
after a Change in Control (other than a Change in Control approved
by a majority of the directors on the Board who were directors
immediately prior to such Change in Control) and Independent
Counsel has approved its initiation.
(c) Expense Advances
. If so requested by Indemnitee, the Company shall advance
(within ten business days of such request) any and all Expenses to
Indemnitee (an “Expense Advance”). The Indemnitee shall
qualify for such Expense Advances upon the execution and delivery
to the Company of this Agreement which shall constitute an
undertaking providing that the Indemnitee undertakes to repay such
Expense Advances if and to the extent that it is ultimately
determined by a court of competent jurisdiction in a final
judgment, not
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subject to appeal, that Indemnitee is
not entitled to be indemnified by the Company. Indemnitee’s
obligation to reimburse the Company for Expense Advances shall be
unsecured and no interest shall be charged thereon.
(d) Mandatory
Indemnification . Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any Proceeding relating in
whole or in part to an Indemnifiable Event or in defense of any
issue or matter therein, Indemnitee shall be indemnified against
all Expenses incurred in connection therewith.
(e) Partial
Indemnification . If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for
some or a portion of Expenses, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled.
(f) Prohibited
Indemnification . No indemnification pursuant to this
Agreement shall be paid by the Company on account of any Proceeding
in which judgment is rendered against Indemnitee 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, as
amended, or similar provisions of any federal, state, or local
laws.
3. Reviewing Party
. Prior to any Change in Control, the Reviewing Party shall be
any appropriate person or body consisting of a member or members of
the Board or any other person or body appointed by the Board who is
not a party to the particular Proceeding with respect to which
Indemnitee is seeking indemnification; after a Change in Control,
the Independent Counsel referred to below shall become the
Reviewing Party. With respect to all matters arising after a Change
in Control (other than a Change in Control approved by a majority
of the directors on the Board who were directors immediately prior
to such Change in Control) concerning the rights of Indemnitee to
indemnity payments and Expense Advances under this Agreement or any
other agreement or under applicable law or the Company’s
Certificate of Incorporation or Bylaws now or hereafter in effect
relating to indemnification for Indemnifiable Events, the Company
shall seek legal advice only from Independent Counsel selected by
Indemnitee and approved by the Company (which approval s
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