**Exhibit 10.19**

 

INDEMNITY AGREEMENT

 

THIS INDEMNITY AGREEMENT(this “Agreement”) is made by and between PROCYTE CORPORATION, a Washingtoncorporation (the “Company”), and ROBERT W. BENSON (the “Indemnitee”), as ofJune 3, 2004.

 

RECITALS

 

A.            The Company is aware that competent andexperienced persons are increasingly reluctant to serve as directors andofficers of corporations unless they are protected by comprehensive liabilityinsurance or indemnification, due to increased exposure to litigation costs andrisks resulting from their service to such corporations, and due to the factthat the exposure frequently bears no reasonable relationship to thecompensation of such directors or officers;

 

B.            The statutes and judicial decisions regardingthe duties of directors and officers are often difficult to apply, ambiguous,or conflicting, and therefore fail to provide such directors and officers withadequate, reliable knowledge of legal risks to which they are exposed orinformation regarding the proper course of action to take;

 

C.            Plaintiffs often seek damages in such largeamounts and the costs of litigation may be so enormous (whether or not the caseis meritorious), that the defense and/or settlement of such litigation isbeyond the personal resources of directors and officers;

 

D.            The Company believes that it is unfair forits directors and officers to assume the risk of huge judgments and otherexpenses which may occur in cases in which the director or officer received nopersonal profit and in cases where the director or officer was not culpable;

 

E.             The Company recognizes that the issues incontroversy in litigation against a director or officer of a corporation suchas the Company are often related to the knowledge, motives, and intent of suchdirector or officer, that he or she is usually the only witness with knowledgeof the essential facts and exculpating circumstances regarding such matters andthat the long period of time which usually elapses before the trial or otherdisposition of such litigation often extends beyond the time the director orofficer can reasonably recall such matters and may extend beyond the normaltime for retirement of such director or officer with the result that he or she,after retirement (or in the event of death, his or her spouse, heirs, executorsor administrators), may be faced with limited ability and undue hardship inmaintaining an adequate defense, which may discourage such director or officerfrom serving in that position;

 

F.             Based upon their experience as business managers,the Board of Directors of the Company (the “Board”) has concluded that, toretain and attract talented and experienced individuals to serve as directorsand officers of the Company and to encourage such individuals to take thebusiness risks necessary for the success of the Company, it is necessary forthe Company to contractually indemnify its directors and officers, and toassume for itself maximum liability for expenses and damages in connection withclaims against such directors and officers in connection with their service tothe Company, and has further concluded that the failure to provide suchcontractual indemnification could result in great harm to the Company and theCompany’s shareholders;

 

----

 

G.            The shareholders of the Company have adoptedBylaws (the “Bylaws”) providing for indemnification of the officers, directors,agents and employees of the Company as contemplated by the Washington BusinessCorporation Act (the “Statute”);

 

H.            Section 23B.08.510 and .570 of the Statute,under which the Company is organized (“Section 510/570”), empowers the Companyto indemnify persons who serve, at the request of the Company, as thedirectors, officers, employees or agents of the Company or of othercorporations or enterprises;

 

I.              The Bylaws specifically provide that therights provided thereby are not exclusive, and Section 510/570 contemplatesthat contracts may be entered into between the Company and the members of theBoard and its officers, employees and agents with respect to indemnification ofsuch persons;

 

J.             Recent developments with respect to the termsand availability of directors’ and officers’ liability insurance and withrespect to the application, amendment and enforcement of statutory and bylawindemnification provisions generally have raised questions concerning theadequacy and reliability of the protection afforded to directors, officers,employees and agents thereby;

 

K.            The Company desires and has requested theIndemnitee to serve or continue to serve as a director or officer of theCompany free from undue concern for claims for damages arising out of orrelated to such services to the Company; and

 

L.             The Indemnitee is willing to serve, or tocontinue to serve, the Company, provided that he or she is furnished theindemnity provided for herein.

 

THE PARTIES AGREE ASFOLLOWS:

 

1.             Definitions.  As used herein, the followingterms shall have the following meanings:

 

(a)           Agent.  “Agent” of the Company meansany person who is or was a director, officer, employee or other agent of the Companyor a Subsidiary (as defined below); or is or was serving at the request of, forthe convenience of, or to represent the interests of the Company or aSubsidiary as a director, officer, employee or agent of another foreign ordomestic corporation, partnership, joint venture, trust or other enterprise; orwas a director, officer, employee or agent of a foreign or domestic corporationwhich was a predecessor corporation of the Company or a Subsidiary, or is orwas a director, officer, employee or agent of another enterprise at the requestof, for the convenience of, or to represent the interests of such predecessorcorporation.

 

(b)           Expenses.  “Expenses” include all directand indirect costs of any type or nature whatsoever (including, withoutlimitation, all attorneys’ fees and related disbursements, other out-of-pocketcosts and reasonable compensation for time spent by the Indemnitee for which heor she is not otherwise compensated by the Company or any third party) actuallyand reasonably incurred by the Indemnitee in connection with either theinvestigation, defense or appeal of a Proceeding (as defined below) orestablishing or enforcing a right to indemnification under this Agreement,Section 510/570 or otherwise; provided, however, thatexpenses shall not include any judgments, fines, ERISA excise taxes orpenalties or amounts paid in settlement of a Proceeding.

 

(c)           Proceeding.  “Proceeding” means anythreatened, pending, or completed action, suit or other proceeding, whethercivil, criminal, administrative, investigative or any other type whatsoever.

 

----

 

(d)           Subsidiary.  “Subsidiary” means anycorporation of which more than 50% of the outstanding voting securities isowned directly or indirectly by the Company, by the Company and one or moreother subsidiaries, or by one or more other subsidiaries.

 

2.             Agreement to Serve.  TheIndemnitee agrees to serve and/or continue to serve as a director or officer ofthe Company, at its will, so long as the Indemnitee is duly appointed orelected and qualified in accordance with the applicable provisions of theBylaws or until such time as the Indemnitee tenders his or her resignation inwriting.

 

3.             Maintenance of Liability Insurance.

 

(a)           The Company hereby covenants and agrees that, so long as the Indemniteeshall continue to serve as a director or officer of the Company and thereafterso long as the Indemnitee was an Agent of the Company, the Company, subject toSection 3(b), shall use its best efforts, consistent with prudent businesspractice, to obtain and maintain in full force and effect directors’ andofficers’ liability insurance (“D&O Insurance”) of which the Indemniteewill be an insured, in reasonable amounts from established and reputableinsurers.

 

(b)           Notwithstanding the foregoing, the Company shall have no obligation toobtain or maintain D&O Insurance if the Company determines in good faiththat such insurance is not reasonably available, the premium costs for suchinsurance are disproportionate to the amount of coverage provided, or the coverageprovided by such insurance is limited by exclusions so as to provide aninsufficient benefit.

 

4.             Mandatory Indemnification. Subject to Section 9, if the Indemnitee is a person who was or is aparty or is threatened to be made a party to any Proceeding by reason of thefact that the Indemnitee is or was an Agent of the Company, or by reason ofanything done or not done by the Indemnitee in any such capacity, the Companyshall indemnify and hold harmless the Indemnitee to the fullest extentpermitted by applicable law, as then in effect, without the requirement of anyfurther approval or finding by the shareholders, the Board or independent legalcounsel, against all Expenses, liabilities and losses (including, but notlimited to, judgments, fines, ERISA excise taxes or penalties, and amounts paidin settlement) actually and reasonably incurred by the Indemnitee in connectionwith the investigation, defense, settlement or appeal of the Proceeding.  The Company shall be obligated to providesuch indemnification even if the Indemnitee should be deceased prior to, duringthe pendency of, or after completion of any Proceeding to which suchindemnification applies.

 

5.             Partial Indemnification.  Ifthe Indemnitee is entitled under any provision of this Agreement toindemnification by the Company for some or a portion of any Expenses,liabilities or losses of any type whatsoever (including, but not limited to,judgments, fines, ERISA excise taxes or penalties, and amounts paid insettlement) actually and reasonably incurred by the Indemnitee in connectionwith the investigation, defense, settlement or appeal of a Proceeding but notentitled, however, to indemnification for all of the total amount thereof, theCompany shall nevertheless indemnify the Indemnitee for that portion thereof towhich the Indemnitee is entitled.

 

6.             Mandatory Advancement of Expenses. Subject to Section 9(f), the Company shall advance all reasonableexpenses incurred by the Indemnitee in connection with the investigation,defense, settlement or appeal of any Proceeding to which the Indemnitee is aparty or is threatened to be made a party by reason of the fact that theIndemnitee is or was an Agent of the Company. The Indemnitee hereby undertakes to repay such amounts advanced only if,and to the extent that, it shall ultimately be determined pursuant to Section 8that the Indemnitee is not entitled to be indemnified by the Company as

 

----

 

authorizedhereby.  The advances to be madehereunder shall be paid by the Company to the Indemnitee within 20 daysfollowing delivery of a written request therefor by the Indemnitee to theCompany.

 

7.             Notice and Other Indemnification Procedures.

 

(a)           Promptly after receipt by the Indemnitee of notice of the commencementof, or the threat of commencement of, any Proceeding, the Indemnitee shall, ifthe Indemnitee believes that indemnification with respect thereto may be soughtfrom the Company under this Agreement, notify the Company of the commencementor threat of commencement thereof.

 

(b)           If, at the time of receipt of a notice of the commencement of aProceeding pursuant to Section 7(a), the Company has D&O Insurance ineffect, the Company shall give prompt notice of the commencement of suchProceeding to the insurers in accordance with the procedures set forth in therespective policies.  The Company shallthereafter take all necessary or desirable action to cause such insurers topay, on behalf of the Indemnitee, all amounts payable as a result of suchProceeding in accordance with the terms of such policies.

 

(c)           If the Company shall be obligated to pay the Expenses of any Proceedingagainst the Indemnitee, the Company, if appropriate, shall be entitled toassume the defense of such Proceeding, with counsel approved by the Indemnitee(which approval shall not be unreasonably withheld), upon the delivery to theIndemnitee of written notice of its election so to do.  After delivery of such notice, approval ofsuch counsel by the Indemnitee and the retention of such counsel by theCompany, the Company will not be liable to the Indemnitee under this Agreementfor any fees of counsel subsequently incurred by the Indemnitee with respect tothe same Proceeding, provided that:  (i)the Indemnitee shall have the right to employ his or her counsel in any suchProceeding at the Indemnitee’s expense; and (ii) if (A) the employment ofcounsel by the Indemnitee has been previously authorized by the Company, (B)the Indemnitee shall have reasonably concluded that there may be a conflict ofinterest between the Company and the Indemnitee in the conduct of any suchdefense, or (C) the Company shall not, in fact, have employed counsel to assumethe defense of such Proceeding, the fees and Expenses of Indemnitee’s counselshall be at the expense of the Company.

 

(d)           The Company shall not be entitled to assume the defense of any action,suit or Proceeding brought by or on behalf of the Company or as to which theIndemnitee shall have reached the conclusion provided for in Section7(c)(ii)(B).

 

8.             Determination of Right to Indemnification.

 

(a)           To the extent the Indemnitee has been successful on the merits orotherwise in defense of any Proceeding referred to in Section 4 or in thedefense of any claim, issue or matter described therein, the Company shallindemnify the Indemnitee against Expenses actually and reasonably incurred byhim or her in connection with the investigation, defense, or appeal of suchProceeding.

 

(b)           In the event that Section 8(a) is inapplicable, the Company shall alsoindemnify the Indemnitee unless, and only to the extent, that it is determinedby a forum described in Section 8(c) that the Indemnitee has not met theapplicable standard of conduct required to entitle the Indemnitee to suchindemnification.  The Indemnitee shallbe presumed to be entitled to indemnification hereunder upon submission of awritten claim (and, in any action brought to enforce a claim for expensesincurred in defending any Proceeding, in advance of its final disposition) andthereafter the Company shall have the burden of proof to overcome thepresumption that the Indemnitee is not so entitled.

 

----

 

(c)           The Indemnitee shall be entitled to select the forum in which thevalidity of the Company’s claim under Section 8(b) that the Indemnitee is notentitled to indemnification will be heard from among the following:

 

(l)            A quorum of the Board consisting of directorswho are not at the time parties to the Proceeding for which indemnification isbeing sought;

 

(2)           If a quorum cannot be obtained under (1) of this subsection, by amajority vote of a committee duly designated by the Board, in which designationdirectors who are parties may participate, consisting solely of two or moredirectors who are not at the time parties to the Proceeding for whichindemnification is being sought;

 

(3)           The shareholders of the Company (provided that shares owned by or votedunder the control of directors who are at the time parties to the Proceedingmay not be voted on the determination); or

 

(4)           Special legal counsel (i) selected by the Board or its committee in themanner prescribed in (1) or (2) of this subsection or (ii) if a quorum of theBoard cannot be obtained under (1) of this subsection and a committee cannot bedesignated under (2) of this subsection, selected by majority vote of the fullBoard, in which selection directors who are parties may participate.

 

(d)           As soon as practicable, and in no event later than 30 days afterwritten notice of the Indemnitee’s choice of forum pursuant to Section 8(c),the Company shall, at its own expense, submit to the selected forum, in suchmanner as the Indemnitee or the Indemnitee’s counsel may reasonably request,its claim that the Indemnitee is not entitled to indemnification; and theCompany shall act in the utmost good faith to ensure the Indemnitee a completeopportunity to defend against such claim.

 

(e)           If the forum listed in Section 8(c) selected by the Indemniteedetermines that the Indemnitee is entitled to indemnification with respect to aspecific Proceeding, such determination shall be final and binding on theCompany.  If the forum listed in Section8(c) selected by the Indemnitee determines that the Indemnitee is not entitledto indemnification with respect to a specific Proceeding, the Indemnitee shallhave the right to apply to the court in which that Proceeding is or was pendingor any other court of competent jurisdiction for the purpose of enforcing theIndemnitee’s right to indemnification pursuant to this Agreement.

 

(f)            Notwithstanding any other provision in thisAgreement to the contrary, the Company shall indemnify the Indemnitee againstall reasonable Expenses incurred by the Indemnitee in connection with anyhearing or Proceeding under this Section 8 involving the Indemnitee and againstall reasonable Expenses incurred by the Indemnitee in connection with any otherProceeding between the Company and the Indemnitee involving the interpretationor enforcement of the rights of the Indemnitee under this Agreement unless acourt of competent jurisdiction finds that each of the claims and/or defensesof the Indemnitee in any such Proceeding was frivolous or made in bad faith.

 

9.             Exceptions.  Any other provisions hereinto the contrary notwithstanding, the Company shall not be obligated pursuant tothe terms of this Agreement to indemnify the Indemnitee for Expenses,liabilities or losses of any type whatsoever (including, but not limited to,judgments, fines, ERISA excise taxes or penalties, and amounts paid insettlement):

 

(a)           D&O Insurance. Which have been paid directly to the Indemnitee pursuant to policy ofD&O Insurance purchased and maintained by the Company; or

 

----

 

(b)           Certain Remuneration. With respect to remuneration paid to the Indemnitee if it shall bedetermined by a final judgment or other final adjudication that suchremuneration was in violation of law; or

 

(c)           Certain Statutory Claims.  Onaccount of any suit in which judgment is rendered against the Indemnitee for anaccounting of profits made from the purchase or sale by the Indemnitee ofsecurities of the Company pursuant to the provisions of Section 16(b) of theSecurities Exchange Act of 1934 and amendments thereto or similar provisions ofany federal, state or local statutory law; or

 

(d)           Certain Conduct.  Onaccount of the Indemnitee’s conduct which is determined by the forum describedin Section 8(c) or by a court pursuant to Section 8(e) to have beenintentional misconduct, a knowing violation of law or RCW 23B.08.310 or anysuccessor provision of Section 510/570, or a transaction from which theIndemnitee derived benefit in money, property or services to which theIndemnitee is not legally entitled, unless and only to the extent that a courtshall determine upon application that, despite the adjudication of liabilitybut in view of all the circumstances of the case, the Indemnitee is fairly andreasonably entitled to indemnity for such amounts which the court shall deemproper; or

 

(e)           Court Decision.  Inthe event a determination has not been made by the forum described in Section8(c) or in the event of a determination by such forum from which the Indemniteehas applied to a court pursuant to Section 8(e), if a final decision by a courthaving jurisdiction in the matter shall determine that such indemnification isnot lawful; or

 

(f)            Claims Initiated by Indemnitee. With respect to Proceedings or claims initiated or brought voluntarilyby the Indemnitee and not by way of defense, except with respect to Proceedingsbrought to establish or enforce a right to indemnification under this Agreementor any other statute or law or otherwise as required under Section 510/570, butsuch indemnification or advancement of Expenses may be provided by the Companyin specific cases if the Board finds it to be appropriate; or

 

(g)           Lack of Good Faith. With respect to any Proceeding instituted by the Indemnitee to enforceor interpret this Agreement, if a court of competent jurisdiction determinesthat each of the material assertions made by the Indemnitee in such Proceedingwas not made in good faith or was frivolous; or

 

(h)           Unauthorized Settlements.  Forany amounts paid in settlement of any action or claim effected without itswritten consent.  The Company shall notsettle any action or claim in any manner which would impose any penalty orlimitation on the Indemnitee without the Indemnitee’s written consent.  Neither the Company nor the Indemnitee willunreasonably withhold its, his or her consent to any proposed settlement.

 

10.           Nonexclusivity; Continuation of Rights.  Theprovisions for indemnification and advancement of Expenses set forth in thisAgreement shall not be deemed exclusive of any other rights which theIndemnitee may have under any provision of law, the Company’s Articles ofIncorporation or Bylaws, the vote of the Company’s shareholders ordisinterested directors, other agreements, or otherwise, both as to action inthe Indemnitee’s official capacity and to action in another capacity whileoccupying the position as an Agent of the Company.  All agreements and obligations of the Company contained hereinshall continue during the period the Indemnitee is a director, officer,employee or Agent of the Company and shall continue thereafter so long as theIndemnitee shall be subject to any possible claim or threatened, pending orcompleted action, suit or Proceeding, whether civil, criminal, administrativeor investigative, by reason of the fact that the Indemnitee was an Agent of theCompany.

 

----

 

11.           Interpretation of Agreement.  Itis understood that the parties hereto intend this Agreement to be interpretedand enforced so as to provide indemnification to the Indemnitee to the fullestextent now or hereafter permitted by law.

 

12.           Severability.  Ifany provision or provisions of this Agreement shall be held to be invalid,illegal or unenforceable for any reason whatsoever:  (i) the validity, legality and enforceability of the remainingprovisions of this Agreement (including, without limitation, all portions ofany paragraphs of this Agreement containing any such provision held to beinvalid, illegal or unenforceable, that are not themselves invalid, illegal orunenforceable) shall not in any way be affected or impaired thereby; and (ii)to the fullest extent possible, the provisions of this Agreement (including,without limitation, all portions of any paragraph of this Agreement containingany such provisions held to be invalid, illegal or unenforceable, that are notthemselves invalid, illegal or unenforceable) shall be construed so as to giveeffect to the intent manifested by the provision held invalid, illegal orunenforceable and to give effect to Section 11.

 

13.           Modification and Waiver.  Nosupplement, modification or amendment of this Agreement shall be binding unlessexecuted in writing by both parties hereto. No waiver of any of the provisions of this Agreement shall be deemed orshall constitute a waiver of any other provision hereof (whether or notsimilar) nor shall such waiver constitute a continuing waiver.

 

14.           Successors and Assigns.  Theterms of this Agreement shall bind, and shall inure to the benefit of, thesuccessors and assigns of the parties hereto.

 

15.           Notices.  All notices, requests,demands and other communications under this Agreement shall be in writing andshall be deemed duly given:  (i) ifdelivered by hand and receipted for by the party addressee; or (ii) if mailedby certified or registered mail with postage prepaid, on the third business dayafter the mailing date.  Address fornotice to either party is as shown on the signature pages of this Agreement, oras subsequently modified by written notice.

 

16.           Governing Law. This Agreement shall be governed exclusively by and construed accordingto the laws of the State of Washington, as applied to contracts betweenWashington residents entered into and to be performed entirely withinWashington.

 

17.           Consent to Jurisdiction.  TheCompany and the Indemnitee each hereby irrevocably consent to the jurisdictionof the state and federal courts in the State of Washington for all purposes inconnection with any action or proceeding which arises out of or relates to thisAgreement and agree that any action instituted under this Agreement shall bebrought only in the state or federal courts in the State of Washington.

 

----

 

The parties hereto haveentered into this Agreement effective as of the date first above written.

 

 
|   | **PROCYTE CORPORATION** |
|--------|-------------------------|
|   |                    |
|   | [Address:]              |
|   |                    |
|   | By:                     | /s/  John F. Clifford |   |
|   |                    | John  F. Clifford |
|   |                    | President  and Chief Executive Officer |
|   |                    |
|   | **INDEMNITEE**          |
|   |                    |
|   | [Address:]              |
|   |                    |
|   |                    | /s/  Robert W. Benson |   |
|   |                    | Robert W. Benson |

 

----