Exhibit 10.1


 


INDEMNIFICATION AGREEMENT


 


This Indemnification Agreement made and entered into
this 14th day of February, 2006 (“Agreement”), by and between Natrol, Inc.,
a Delaware corporation (together with any successor or successors thereto, the “Company”)
and Wayne Bos (“Indemnitee”):


 


WHEREAS, it is essential to the Company that it be
able to retain and attract as directors the most capable persons available;


 


WHEREAS, increased corporate litigation has subjected
directors to litigation risks and expenses and the limitations on the
availability of directors and officers liability insurance have made it
increasingly difficult for the Company to attract and retain such persons;


 


WHEREAS, its by-laws permit the Company to indemnify
its directors to the fullest extent permitted by law and permit the Company to
make other indemnification arrangements and agreements;


 


WHEREAS, the Company desires to provide Indemnitee
with specific contractual assurance of Indemnitee’s rights to full
indemnification against litigation risks and expenses (regardless, among other
things, of any amendment to or revocation of such by-laws or any change in the
ownership of the Company or the composition of its Board of Directors), which
indemnification is intended to be greater than that which is afforded by the
Company’s certificate of incorporation, by-laws and, to the extent insurance is
available, the coverage of Indemnitee under the Company’s directors and
officers liability insurance policies; and


 


WHEREAS, Indemnitee is relying upon the rights
afforded under this Agreement in continuing in Indemnitee’s position as a
director of the Company:


 


NOW, THEREFORE, in consideration of the premises and
the covenants contained herein, the Company and Indemnitee do hereby covenant
and agree as follows:


 


1.                                      Definitions.


 


(a)                                  “Corporate
Status” describes the status of a person who is serving or has served (i) as
a director of the Company, (ii) in any capacity with respect to any
employee benefit plan of the Company, or (iii) as a director, partner,
trustee, officer, employee, or agent of any other Entity at the request of the
Company.


 


(b)                                 “Entity”
shall mean any corporation, partnership, joint venture, trust, foundation,
association, organization or other legal entity and any group or division of
the Company or any of its subsidiaries.


 


(c)                                  “Expenses”
shall mean all reasonable fees, costs and expenses incurred in connection with
any Proceeding (as defined below), including, without limitation, attorneys’
fees, disbursements and retainers (including, without limitation, any such
fees, disbursements and retainers incurred by Indemnitee pursuant to Section 10
of this Agreement), fees and disbursements of expert witnesses, private
investigators and


 

















 


professional advisors
(including, without limitation, accountants and investment bankers), court
costs, transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges, postage,
delivery services, secretarial services, and other disbursements and expenses.


 


(d)                                 “Indemnifiable
Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have
the meanings ascribed to those terms in Section 3(a) below.


 


(e)                                  “Liabilities”
shall mean judgments, damages, liabilities, losses, penalties, excise taxes,
fines and amounts paid in settlement.


 


(f)                                    “Proceeding”
shall mean any threatened, pending or completed claim, action, suit,
arbitration, alternate dispute resolution process, investigation,
administrative hearing, appeal, or any other proceeding, whether civil,
criminal, administrative or investigative, whether formal or informal,
including a proceeding initiated by Indemnitee pursuant to Section 10 of
this Agreement to enforce Indemnitee’s rights hereunder.


 


2.                                      Services of Indemnitee. In consideration of the Company’s covenants and
commitments hereunder, Indemnitee agrees to serve or continue to serve as a
director of the Company. However, this Agreement shall not impose any
obligation on Indemnitee or the Company to continue Indemnitee’s service to the
Company beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.


 


3.                                      Agreement to Indemnify. The Company agrees to indemnify Indemnitee as
follows:


 


(a)                                  Subject
to the exceptions contained in Section 4(a) below, if Indemnitee 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 Indemnitee’s
Corporate Status, Indemnitee shall be indemnified by the Company against all
Expenses and Liabilities incurred or paid by Indemnitee in connection with such
Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable
Liabilities,” respectively, and collectively as “Indemnifiable Amounts”).


 


(b)                                 Subject
to the exceptions contained in Section 4(b) below, if Indemnitee 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
Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the Company
against all Indemnifiable Expenses.


 


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4.                                      Exceptions to Indemnification. Indemnitee shall be entitled to indemnification
under Sections 3(a) and 3(b) above in all circumstances other
than the following:


 


(a)                                  If
indemnification is requested under Section 3(a) and it has been
adjudicated finally by a court of competent jurisdiction that, in connection
with the subject of the Proceeding out of which the claim for indemnification
has arisen, Indemnitee failed to act in good faith and in a manner 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, Indemnitee had
reasonable cause to believe that Indemnitee’s conduct was unlawful, Indemnitee
shall not be entitled to payment of Indemnifiable Amounts hereunder.


 


(b)                                 If
indemnification is requested under Section 3(b) and


 


(i)                                     it
has been adjudicated finally by a court of competent jurisdiction that, in
connection with the subject of the Proceeding out of which the claim for
indemnification has arisen, Indemnitee failed to act in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, Indemnitee shall not be entitled to payment of
Indemnifiable Expenses hereunder; or


 


(ii)                                  it
has been adjudicated finally by a court of competent jurisdiction that
Indemnitee is liable to the Company with respect to any claim, issue or matter
involved in the Proceeding out of which the claim for indemnification has
arisen, including, without limitation, a claim that Indemnitee received an
improper personal benefit, no Indemnifiable Expenses shall be paid with respect
to such claim, issue or matter unless the Court of Chancery or another 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, Indemnitee is fairly and reasonably entitled to indemnity for such
Indemnifiable Expenses which such court shall deem proper.


 


5.                                      Procedure for Payment of
Indemnifiable Amounts. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and the basis
for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee
within twenty (20) calendar days of receipt of the request. At the request of
the Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee
is entitled to indemnification hereunder.


 


6.                                      Indemnification for Expenses of a
Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee’s Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such


 


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Proceeding, the Company shall indemnify Indemnitee
against all Expenses reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection with each successfully resolved claim, issue or matter. For
purposes of this Agreement, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such claim, issue or matter.


 


7.                                      Effect of Certain Resolutions. Neither the settlement or termination of any
Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which 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 action was unlawful.


 


8.                                      Agreement to Advance Interim
Expenses; Conditions. The Company
shall pay to Indemnitee all Indemnifiable Expenses incurred by Indemnitee in
connection with any Proceeding, including a Proceeding by or in the right of
the Company, in advance of the final disposition of such Proceeding, if
Indemnitee furnishes the Company with a written undertaking to repay the amount
of such Indemnifiable Expenses advanced to Indemnitee if it is finally
determined by a court of competent jurisdiction that Indemnitee is not entitled
under this Agreement to indemnification with respect to such Expenses. Such
undertaking shall be an unlimited general obligation of Indemnitee, shall be
accepted by the Company without regard to the financial ability of Indemnitee
to make repayment, and in no event shall be required to be secured.


 


9.                                      Procedure for Payment of Interim
Expenses. Indemnitee shall submit
to the Company a written request specifying the Indemnifiable Expenses for
which Indemnitee seeks an advancement under Section 8 of this Agreement,
together with documentation evidencing that Indemnitee has incurred such
Indemnifiable Expenses. Payment of Indemnifiable Expenses under Section 8
shall be made no later than twenty (20) calendar days after the Company’s
receipt of such request and the undertaking required by Section 8.


 


10.                               Remedies of Indemnitee.


 


(a)                                  Right
to Petition Court. In the event that Indemnitee makes a request for payment
of Indemnifiable Amounts under Sections 3 and 5 above or a request for an
advancement of Indemnifiable Expenses under Sections 8 and 9 above and the
Company fails to make such payment or advancement in a timely manner pursuant
to the terms of this Agreement, Indemnitee may petition the appropriate
judicial authority to enforce the Company’s obligations under this Agreement.


 


(b)                                 Burden
of Proof. In any judicial proceeding brought under Section 10(a) above,
the Company shall have the burden of proving that Indemnitee is not entitled to
payment of Indemnifiable Amounts hereunder.


 


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(c)                                  Expenses.
The Company agrees to reimburse Indemnitee in full for any Expenses incurred by
Indemnitee in connection with investigating, preparing for, litigating,
defending or settling any action brought by Indemnitee under Section 10(a) above,
or in connection with any claim or counterclaim brought by the Company in
connection therewith.


 


(d)                                 Validity
of Agreement. The Company shall be precluded from asserting in any
Proceeding, including, without limitation, an action under Section 10(a) above,
that the provisions of this Agreement are not valid, binding and enforceable or
that there is insufficient consideration for this Agreement and shall stipulate
in court that the Company is bound by all the provisions of this Agreement.


 


(e)                                  Failure
to Act Not a Defense. The failure of the Company (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders)
to make a determination concerning the permissibility of the payment of
Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this
Agreement shall not be a defense in any action brought under Section 10(a) above,
and shall not create a presumption that such payment or advancement is not
permissible.


 


11.                               Representations and Warranties of
the Company. The Company hereby
represents and warrants to Indemnitee as follows:


 


(a)                                  Authority.
The Company has all necessary power and authority to enter into, and be bound
by the terms of, this Agreement, and the execution, delivery and performance of
the undertakings contemplated by this Agreement have been duly authorized by
the Company.


 


(b)                                 Enforceability.
This Agreement, when executed and delivered by the Company in accordance with
the provisions hereof, shall be a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors’ rights generally.


 


12.                               Insurance. The Company will use its commercially reasonable
efforts to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the Indemnitee with coverage for losses from
wrongful acts, and to ensure the Company’s performance of its indemnification
obligations under this Agreement. In all policies of director and officer
liability insurance, Indemnitee shall be named as an insured in such a manner
as to provide Indemnitee at least the same rights and benefits as are accorded
to the most favorably insured of the Company’s officers and directors. Notwithstanding
the foregoing, if the Company, after employing commercially reasonable efforts
as provided in this section, determines in good faith that such insurance is
not reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, or if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit the Company shall use its commercially reasonable efforts
to obtain and maintain a policy or


 


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policies of insurance with coverage having
features as similar as practicable to those described above.


 


13.                               Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and
advancement of Indemnifiable Expenses provided by this Agreement shall be in
addition to, but not exclusive of, any other rights which Indemnitee may have
at any time under applicable law, the Company’s by-laws or certificate of
incorporation, or any other agreement, vote of stockholders or directors, or
otherwise, both as to action in Indemnitee’s official capacity and as to action
in any other capacity as a result of Indemnitee’s serving as a director of the
Company.


 


14.                               Successors. This Agreement shall be (a) binding upon all
successors and assigns of the Company (including any transferee of all or a
substantial portion of the business, stock and/or assets of the Company and any
direct or indirect successor by merger or consolidation or otherwise by
operation of law) and (b) binding on and shall inure to the benefit of the
heirs, personal representatives, executors and administrators of Indemnitee. This
Agreement shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.


 


15.                               Subrogation. In the event of any payment of Indemnifiable
Amounts under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of contribution or recovery of Indemnitee
against other persons, and Indemnitee shall take, at the request of the
Company, all reasonable action necessary to secure such rights, including the
execution of such documents as are necessary to enable the Company to bring
suit to enforce such rights.


 


16.                               Change in Law. To the extent that a change in applicable law
(whether by statute or judicial decision) shall permit broader indemnification
than is provided under the terms of the by-laws of the Company and this
Agreement, Indemnitee shall be entitled to such broader indemnification and
this Agreement shall be deemed to be amended to such extent.


 


17.                               Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement, or any clause
thereof, shall be determined by a court of competent jurisdiction to be
illegal, invalid or unenforceable, in whole or in part, such provision or
clause shall be limited or modified in its application to the minimum extent
necessary to make such provision or clause valid, legal and enforceable, and
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.


 


18.                               Indemnitee as Plaintiff. Except as provided in Section 10(c) of
this Agreement and in the next sentence, Indemnitee shall not be entitled to
payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with
respect to any Proceeding brought by Indemnitee against the Company, any Entity
which it controls, any director or officer thereof, or any third party, unless
the Company has consented to the initiation of such Proceeding. This Section shall
not apply to counterclaims or affirmative defenses asserted by Indemnitee in an
action brought against Indemnitee.


 


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19.                               Joint and Several Liability. The obligations of the Company hereunder shall be
joint and several.


 


20.                               Modifications and Waiver. Except as provided in Section 16 above with
respect to changes in applicable law which broaden the right of Indemnitee to
be indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.


 


21.                               General Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by
facsimile and receipt is acknowledged, or (c) if mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:


 


(i)                                     If
to Indemnitee, to:


 


Wayne Bos


c/o
Natrol, Inc.


21411
Prairie Street


Chatsworth,
CA 91311


 


(ii)                                  If
to the Company, to:


 


Natrol, Inc.


21411
Prairie Street


Chatsworth,
CA 91311


Attention:  General Counsel


 


or to such other address
as may have been furnished in the same manner by any party to the others.


 


22.                               Governing Law. This Agreement shall be governed by and construed
and enforced under the laws of the State of Delaware without giving effect to
the provisions thereof relating to conflicts of law. Indemnitee shall have the
right to petition the Court of Chancery upon any failure by the Company to perform under
this Agreement.


 


23.                               Consent to Jurisdiction. The Company hereby irrevocably and unconditionally
consents to the jurisdiction of the courts of the State of Delaware and the
United States District Court in the State of Delaware. The Company hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Proceeding arising out of or relating to this Agreement in the courts of
the State of Delaware or the United States District Court in the State of
Delaware, and hereby irrevocably and unconditionally waives and agrees not to
plead or claim that any such Proceeding brought in any such court has been
brought in an inconvenient forum.


 


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24.                               Agreement Governs. This Agreement is to be deemed consistent wherever
possible with relevant provisions of the Company’s by-laws and certificate of
incorporation; however, in the event of a conflict between this Agreement and
such provisions, the provisions of this Agreement shall control.


 


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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.


 


	
   

  	
  NATROL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elliott Balbert

  	
   

  
	
   

  	
  Name: Elliott Balbert

  
	
   

  	
  Title: Executive Chairman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/WayneBos

  	
   

  
	
   

  	
  Wayne Bos