Exhibit 99.1
INDEMNIFICATION
AGREEMENT
This INDEMNIFICATION AGREEMENT (this
“ Agreement ”) is made and entered into this
25th day of August, 2005 (the “ Effective Date
”) by and between eCOST.com, Inc., a Delaware corporation
(the “ Company ”), and Man-Jit Singh (the
“ Indemnitee ”).
WHEREAS, the Company believes it is
essential to retain and attract qualified directors and
officers;
WHEREAS, the Indemnitee is a
director and/or officer of the Company;
WHEREAS, both the Company and the
Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors and officers of public
companies;
WHEREAS, the Company’s Amended
and Restated Bylaws (the “ Bylaws ”) require the
Company to indemnify and advance expenses to its directors and
officers to the extent permitted by the DGCL (as hereinafter
defined);
WHEREAS, the Indemnitee has been
serving and intends to continue serving as a director and/or
officer of the Company in part in reliance on the
Bylaws;
WHEREAS, in recognition of the
Indemnitee’s need for (i) substantial protection against
personal liability based on the Indemnitee’s reliance on the
Bylaws, (ii) specific contractual assurance that the protection
promised by the Bylaws will be available to the Indemnitee,
regardless of, among other things, any amendment to or revocation
of the Bylaws or any change in the composition of the
Company’s Board of Directors (the “ Board
”) or acquisition transaction relating to the Company, and
(iii) an inducement to continue to provide effective services to
the Company as a director and/or officer thereof, the Company
wishes to provide for the indemnification of the Indemnitee and to
advance expenses to the Indemnitee to the fullest extent permitted
by law and as set forth in this Agreement, and, to the extent
insurance is maintained by the Company, to provide for the
continued coverage of the Indemnitee under the Company’s
directors’ and officers’ liability insurance
policies;
NOW, THEREFORE, in consideration of
the premises contained herein and of the Indemnitee continuing to
serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Certain Definitions
.
(a) A “ 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, and the rules and regulations
thereunder (the “ Exchange Act ”), other than
(a) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company; (b) a corporation owned,
directly or indirectly, by the stockholders
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of the Company in substantially the
same proportions as their ownership of stock of the Company; or (c)
any current beneficial stockholder or group, as defined by Rule
13d-5 of the Exchange Act, including the heirs, assigns and
successors thereof, of beneficial ownership, within the meaning of
Rule 13d-3 of the Exchange Act, of securities possessing more than
50% of the total combined voting power of the Company’s
outstanding securities; hereafter becomes the “beneficial
owner,” as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of securities of the Company representing
20% or more of the total combined voting power represented by the
Company’s then outstanding Voting Securities;
(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 of the
directors then 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 thereof; or
(iii) the stockholders of the
Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which 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 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.
(b) “ DGCL ”
shall mean the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended or interpreted;
provided, however, that 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.
(c) “ Expense ”
shall mean attorneys’ fees and all other costs, expenses and
obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing for any of the foregoing, any Proceeding
relating to any Indemnifiable Event.
(d) “ Indemnifiable
Event ” shall mean any event or occurrence that takes
place either prior to or after the execution of this Agreement,
related to the fact that the Indemnitee is or was a director or
officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, or by reason of anything done or not done by the Indemnitee
in any such capacity.
(e) “ Potential Change in
Control ” shall be deemed to occur if (i) the Company
enters into an agreement or arrangement, the consummation of which
would result in
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the occurrence of a Change in
Control; (ii) any person (including the Company) publicly announces
an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control; (iii) any person
(other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company acting in such capacity 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) who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the
Company’s then outstanding Voting Securities, increases his
or her beneficial ownership of such securities by 5% or more over
the percentage so owned by such person on the date hereof; or (iv)
the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has
occurred.
(f) “ Proceeding
” shall mean any threatened, pending or completed action,
suit, investigation or proceeding, and any appeal thereof, whether
civil, criminal, administrative or investigative and/or any inquiry
or investigation, whether conducted by the Company or any other
party, that the Indemnitee in good faith believes might lead to the
institution of any such action.
(g) “ Reviewing Party
” shall mean any appropriate person or body consisting of a
member or members of the Company’s Board or any other person
or body appointed by the Board (including the special independent
counsel referred to in Section 6) who is not a party to the
particular Proceeding with respect to which the Indemnitee is
seeking indemnification.
(h) “ Voting Securities
” shall mean any securities of the Company which vote
generally in the election of directors.
2. Indemnification. In the
event the Indemnitee was or is a party to or is involved (as a
party, witness, or otherwise) in any Proceeding by reason of (or
arising in part out of) an Indemnifiable Event, whether the basis
of the Proceeding is the Indemnitee’s alleged action in an
official capacity as a director or officer or in any other capacity
while serving as a director or officer, the Company shall indemnify
the Indemnitee to the fullest extent permitted by the DGCL against
any and all Expenses, liability, and loss (including judgments,
fines, ERISA excise taxes or penalties, and amounts paid or to be
paid in settlement, and any interest, assessments, or other charges
imposed thereon, and any federal, state, local, or foreign taxes
imposed on any director or officer as a result of the actual or
deemed receipt of any payments under this Agreement) (collectively,
“ Liabilities ”) reasonably incurred or suffered
by such person in connection with such Proceeding. The Company
shall provide indemnification pursuant to this Section 2 as soon as
practicable, but in no event later than 30 days after it receives
written demand from the Indemnitee. Notwithstanding anything in
this Agreement to the contrary and except as provided in Section 5
below, the Indemnitee shall not be entitled to indemnification
pursuant to this Agreement (i) in connection with any Proceeding
initiated by the Indemnitee against the Company or any director or
officer of the Company unless the Company has joined in or
consented to the initiation of such Proceeding or (ii) on account
of any suit in which judgment is rendered against the Indemnitee
pursuant to Section 16(b) of the Exchange Act for an accounting of
profits made from the purchase or sale by the Indemnitee of
securities of the Company.
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3. Advancement of Expenses.
The Company shall advance Expenses to the Indemnitee within 30
business days of such request (an “ Expense Advance
”); provided, however, that if required by applicable
corporate laws such Expenses shall be advanced only upon delivery
to the Company of an undertaking by or on behalf of the Indemnitee
to repay such amount if it is ultimately determined that the
Indemnitee is not entitled to be indemnified by the Company; and
provided further, that the Company shall make such advances only to
the extent permitted by law. Expenses incurred by the Indemnitee
while not acting in his/her capacity as a director or officer,
inclu
