This Indemnity
Agreement, dated as of May 1, 2009, is made by and between RAE
Systems Inc., a Delaware corporation (the “ Company
”), and Sigrun Hjelmquist (the “ Indemnitee
”).
A. The
Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company’s directors,
officers, employees and other agents, the cost of such insurance
and the general reductions in the coverage of such
insurance;
B. The
Company and Indemnitee recognize the substantial increase in
corporate litigation in general, subjecting directors, officers,
employees and other agents to expensive litigation risks at the
same time as the availability and coverage of liability insurance
has been severely limited;
C. The
Company desires to attract and retain the services of talented and
experienced individuals, such as Indemnitee, to serve as directors,
officers, employees and agents of the Company and its subsidiaries
and wishes to indemnify its directors, officers, employees and
other agents to the maximum extent permitted by law;.
D. Section 145
of the General Corporation Law of Delaware, under which the Company
is organized (“ Section 145 ”), empowers
the Company to indemnify its directors, officers, employees and
agents by agreement and 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 145 is not
exclusive.
E. In order
to induce Indemnitee to serve or continue to serve as a director,
officer, employee or agent of the Company and/or one or more
subsidiaries of the Company free from undue concern for claims for
damages arising out of or related to such services to the Company
and/or one or more subsidiaries of the Company, the Company has
determined and agreed to enter into this Agreement with
Indemnitee.
NOW, THEREFORE,
the Indemnitee and the Company hereby agree as follows:
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Definitions . As used in this Agreement:
(a)
“ Agent ” means any person who is or was a
director, officer, employee or other agent of the Company or a
subsidiary of the Company; or is or was serving at the request of,
for the convenience of, or to represent the interests of the
Company or a subsidiary of the Company 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 of the Company, or was a director, officer, employee or
agent of another enterprise at
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the request of,
for the convenience of, or to represent the interests of such
predecessor corporation.
(b)
“ Board ” means the Board of Directors of the
Company.
(c) 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 (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, 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 20% or more of the total
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 constituted
the Board, together with any new directors 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 still in office who either were directors at the
beginning of the period or whose election or nomination was
previously so approved, cease for any reason to constitute a
majority of the Board, (iii) the stockholders of the Company
approve a merger or consolidation or a sale of all or substantially
all of the Company’s assets with or to another entity, other
than a merger, consolidation or asset sale that would result in the
holders of the Company’s outstanding voting securities
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) at least a majority of the total voting
power represented by the voting securities of the Company or such
surviving or successor entity outstanding immediately thereafter,
or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company.
(d)
“ Expenses ” shall include all out-of-pocket
costs of any type or nature whatsoever (including, without
limitation, all attorneys’ fees and related disbursements),
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, or Section 145 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.
(e)
“ Independent Counsel ” means a law firm, or a
partner (or, if applicable, member) of such a law firm, that is
experienced in matters of corporation law and neither currently is,
nor in the past five years has been, retained to represent:
(i) the Company or the Indemnitee in any matter material to
either such party or (ii) any other party to or witness in the
proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the
applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or
the Indemnitee in an action to determine the Indemnitee’s
rights under this Agreement.
(f)
“ Proceeding ” means any threatened, pending, or
completed action, suit or other proceeding, whether civil,
criminal, administrative, or investigative.
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(g)
“ Subsidiary ” means 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 an Agent of the Company, at its will (or under
separate agreement, if such agreement exists), in the capacity the
Indemnitee currently serves as an Agent of the Company, so long as
the Indemnitee is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the
Company or any subsidiary of the Company or until such time as the
Indemnitee tenders his or her resignation in writing; provided,
however, that nothing contained in this Agreement is intended to
create any right to continued employment by the
Indemnitee.
(a)
Maintenance of D&O Insurance . The Company hereby
covenants and agrees that, so long as the Indemnitee shall continue
to serve as an Agent of the Company and thereafter so long as the
Indemnitee shall be subject to any possible Proceeding by reason of
the fact that the Indemnitee was an Agent of the Company, the
Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors’ and
officers’ liability insurance (“ D&O
Insurance ”) in reasonable amounts from established and
reputable insurers, as more fully described below.
(b)
Rights and Benefits . In all policies of D&O Insurance,
the Indemnitee shall qualify as an insured in such a manner as to
provide the Indemnitee the same rights and benefits as are accorded
to the most favorably insured of the Company’s independent
directors (as defined by the insurer) if the Indemnitee is such an
independent director; of the Company’s non-independent
directors if the Indemnitee is not an independent director; of the
Company’s officers if the Indemnitee is an officer of the
Company; or of the Company’s key employees, if the Indemnitee
is not a director or officer but is a key employee.
(c)
Limitation on Required Maintenance of D&O Insurance .
Notwithstanding the foregoing, the Company shall have no obligation
to obtain or maintain D&O Insurance if the Company determines
in good faith that: such insurance is not reasonably available; the
premium costs for such insurance are disproportionate to the amount
of coverage provided; the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit; the
Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company; the Company is to be acquired and a tail
policy of reasonable terms and duration is purchased for
pre-closing acts or omissions by the Indemnitee; or the Company is
to be acquired and D&O Insurance will be maintained by the
acquirer that covers pre-closing acts and omissions by the
Indemnitee.
4.
Mandatory Indemnification . Subject to the terms of this
Agreement:
(a)
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
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indemnify the
Indemnitee against all Expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes and 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, provided 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 action or Proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
(b)
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 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 all Expenses
actually and reasonably incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of such
Proceeding, provided 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 4(b) shall be made in respect
to any claim, issue or matter as to which the Indemnitee shall have
been finally adjudged to be liable to the Company by a court of
competent jurisdiction unless and only to the extent that the
Delaware Court of Chancery or 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, the Indemnitee is fairly and reasonably entitled to
indemnity for such amounts which the Delaware Court of Chancery or
such other court shall deem proper.
(c)
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, and if, prior to,
during the pendency of or after completion of such Proceeding the
Indemnitee is deceased, the Company shall indemnify the
Indemnitee’s heirs, executors and administrators against all
Expenses and liabilities of any type whatsoever to the extent the
Indemnitee would have been entitled to indemnification pursuant to
this Agreement were the Indemnitee still alive.
(d)
Certain Terminations . The termination of any Proceeding or
of any claim, issue, or matter therein by judgment, order,
settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as
otherwise expressly provided in this Agreement) of itself create a
presumption that the Indemnitee did not act in good faith and in a
manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to
any criminal action or Proceeding, that the Indemnitee had
reasonable cause to believe that the Indemnitee’s conduct was
unlawful.
(e)
Limitations . Notwithstanding the foregoing, the Company
shall not be obligated to indemnify the Indemnitee for Expenses or
liabilities of any type whatsoever for which payment is actually
made to or on behalf of the Indemnitee under an insurance policy,
or under a valid and enforceable indemnity clause, by-law or
agreement.
5.
Indemnification for Expenses in a Proceeding in Which the
Indemnitee is Partly Successful . Notwithstanding any other
provisions of this Agreement, to the extent that the
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