Indemnification
Agreement
This Indemnification Agreement (this “
Agreement ”) is executed on March ___, 2007, with an
effective date of January 1, 2007 (the “ Effective
Date ”), by and between Penn Octane Corporation, a
Delaware corporation (the “ Company ”), and ___,
an individual residing in the State of ___(
“Indemnitee” ).
Indemnitee is
an officer or director of the Company or an affiliate of the
Company.
The Company and Indemnitee recognize the
difficulty in obtaining directors’ and officers’
liability insurance, the increases in the cost of such insurance,
and the general limitations in the coverage of such
insurance.
The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting
officers and directors to expensive litigation risks at the same
time as the availability and coverage of liability insurance has
been severely limited.
Indemnitee does not regard the current
protection available as adequate under the present circumstances,
and Indemnitee may not be willing to serve or continue to serve as
a director or officer of the Company without additional
protection.
The Company desires to attract and retain the
services of highly qualified individuals, such as Indemnitee, to
serve as officers and directors of the Company and to indemnify its
officers and directors so as to provide them with the maximum
protection permitted by law.
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual promises set forth in this Agreement, the parties to
this Agreement agree as follows:
Section 1.
Indemnification.
1.1 Third Party Proceedings .
The Company shall indemnify
Indemnitee if he 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 (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director
or officer of the Company, by reason of any action or inaction on
the part of Indemnitee while a director or officer of the Company
or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, manager, officer, employee,
or agent of another corporation, limited liability company,
partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys’ fees), judgments, fines, and
amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by Indemnitee in
connection with such action, suit, or proceeding, if Indemnitee
acted in good faith and in a manner 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 Indemnitee’s conduct was
unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a
manner that 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, had reasonable cause to believe that
Indemnitee’s conduct was unlawful.
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1.2 Proceedings By or in the Right of the
Company . The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Company or any
subsidiary of the Company to procure a judgment in its favor by
reason of the fact that Indemnitee is or was a director or officer
of the Company, or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, manager, officer,
employee, or agent of another corporation, limited liability
company, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys’ fees) and, to the
fullest extent permitted by law, amounts paid in settlement, in
each case to the extent actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such
action or suit, if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification shall be
made pursuant to this Section 1.2 in respect of any
claim, issue, or matter as to which Indemnitee shall have been
adjudged to be liable to the Company, by the Court of Chancery of
the State of Delaware or other court in which such action or suit
was brought, unless and only to the extent that such court
determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses that such court shall deem proper.
1.3 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
Sections 1.1 and 1.2 or the defense of any claim,
issue, or matter in Section 1.1 or 1.2 , Indemnitee
shall be indemnified against expenses (including attorneys’
fees) actually and reasonably incurred by Indemnitee in connection
with such defense.
1.4 Determination That Indemnification Is
Proper . Any
indemnification under this Agreement shall (unless otherwise
ordered by a court) be made by the Company unless a determination
is made that indemnification of such person is not proper in the
circumstances because he or she has not met the applicable
standards of conduct set forth in Section 1.1 or 1.2 .
Any such determination shall be made (i) by a majority vote of
the directors who are not parties to the action, suit or proceeding
in question (“disinterested directors”), even if less
than a quorum, (ii) by a majority vote of a committee of
disinterested directors designated by majority vote of
disinterested directors, even if less than a quorum, (iii) by
a majority vote of a quorum of the stockholders of the Company,
which quorum shall consist of stockholders who are not at that time
parties to the action, suit or proceeding in question, (iv) by
independent legal counsel, or (v) by the Court of Chancery of
the State of Delaware or other court of competent jurisdiction.
Upon submission to the Company of a written request for
indemnification, Indemnitee shall be entitled to a rebuttable
presumption that he has met the applicable standard of conduct for
indemnification set forth in this Section 1 . The
Company shall have the burden of proof to overcome that presumption
in connection with the making of any determination contrary to that
presumption. If the Company contests the right of Indemnitee to
indemnification, the Company shall furnish to Indemnitee a
statement of reasons underlying the Company’s position within
sixty (60) days following receipt of a written request for
indemnification. If the Company fails to respond to a written
request for indemnification within such 60-day period, Indemnitee
may thereafter submit to the Company a second written request for
indemnification. If the Company fails to respond to such second
request within an additional period of thirty (30) days, the
Company shall thereafter be deemed to have waived its right to
contest the right of Indemnitee to indemnification under this
Agreement. Nothing contained in this Agreement shall limit the
ability of the Court of Chancery of the State of Delaware or other
court of competent jurisdiction to determine that Indemnitee has or
has not met the applicable standard of conduct for
indemnification.
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1.5 Amendments to the Delaware General
Corporation Law or Charter . This Agreement is intended to provide
indemnity to Indemnitee to the fullest extent allowed under
Delaware law and the Company’s certificate of incorporation
and bylaws. Accordingly, to the extent permitted by law, if the
General Corporation Law of the State of Delaware or the
Company’s certificate of incorporation and bylaws permit
greater indemnity than the indemnity set forth herein, or if any
amendment is made to the General Corporation Law of the State of
Delaware or the Company’s certificate of incorporation or
bylaws expanding the indemnity permissible under law or such
instruments, the indemnity obligations of the Company contained
herein shall automatically be expanded, without the necessity of
action on the part of any party, to the extent necessary to provide
to Indemnitee the fullest indemnity permissible under law or such
instruments.
Section 2. Expenses: Indemnification
Procedure.
2.1 Advancement of Expenses .
The Company shall advance all
expenses incurred by Indemnitee, and, to the fullest extent
permitted by law, amounts paid in settlement by Indemnitee, in
connection with the investigation, defense, settlement, or appeal
of any civil or criminal action, suit, or proceeding referenced in
Section 1.1 or 1.2 of this Agreement. 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 by this
Agreement.
2.2 Notice/Cooperation by Indemnitee
. Indemnitee shall give
the Company notice in writing as soon as practicable of any claim
made against Indemnitee for which indemnification shall or could be
sought under this Agreement. Notice to the Company shall be
directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement,
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