exv10w14



 







Exhibit 10.14
CONFIDENTIAL
TREATMENT REQUESTED




INDEMNIFICATION AGREEMENT



This Indemnification Agreement (this “Agreement”) is made and entered into effective as of February
17, 2004 (the “Effective Date”) by and between Asthmatx, Inc., a California corporation
(“Asthmatx”), and Broncus Technologies, Inc., a California corporation (“Broncus”).




RECITALS




     A. Broncus and Asthmatx have previously entered into a certain Corporate Formation Agreement
dated as of December 26, 2003 (the “Formation Agreement”). Pursuant to the Formation Agreement,
Broncus contributed and assigned to Asthmatx cash and certain assets, agreements and obligations of
Broncus relating to Broncus’ Alair Asthma Treatment System business (the “Alair Business”) in
exchange for shares of Asthmatx capital stock and other consideration described therein and
Asthmatx assumed liabilities relating to the Alair Business.



     B. On December 30, 2003, Broncus distributed all of its shares of Asthmatx capital stock to
its shareholders on a pro rata basis as a dividend (the “Spinoff’).



     C. Broncus and Asthmatx are entering into this Agreement pursuant to the provisions of Section
2.3 of the Formation Agreement, under which Broncus and Asthmatx agreed to enter into an agreement
providing for certain indemnification obligations between themselves and setting forth provisions
regarding certain insurance held or expected to be obtained by the parties.



AGREEMENT




     NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants
hereinafter set forth, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, Asthmatx and Broncus hereby agree as follows:



     1. Certain Defined Terms.  As used herein, the following terms shall have the
following meanings:



          1.1 “Alair” means the Alair Asthma Treatment System which was originally developed by Broncus
and which has been contributed and assigned by Broncus to Asthmatx pursuant to the Formation
Agreement.




          1.2 “Alair Business” shall have the meaning given to that term in Recital A of this Agreement
and includes, without limitation, the business of developing, testing, marketing, selling and
otherwise commercially exploiting Alair and any associated services.




          1.3 “Alair Insurance” means a “first payor” insurance policy that may be purchased by Asthmatx
after the Spinoff Date (as defined below) which will provide



*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



 









 




liability insurance coverage to Asthmatx and/or Broncus for Pre-Spinoff Alair Claim Loss (as
defined below).




          1.4 “Broncus Business” means the activities, business and/or operations engaged in and/or
conducted or carried out by Broncus, including the Exhale Business, but excluding the
Alair Business.




          1.5 “Broncus Insurance Policy” means an existing “occurrence-based” liability insurance policy
that is owned by Broncus as of the Effective Date, that was issued to Broncus prior to the Spinoff
Date and which provides liability insurance coverage for Pre-Spinoff Alair Claims and/or other
matters arising from events or harm occurring with respect to patients who were treated by Broncus
during a specified time period (an “Occurrence Period”). The parties acknowledge that Broncus owns
several Broncus Insurance Policies for different Occurrence Periods, and that the coverage limits
of each Broncus Insurance Policy vary in amount by Occurrence Period.




          1.6 “Exhale” means Broncus’ Exhale Airway Bypass System, which is used to treat emphysema in
humans and which is owned and retained by Broncus.




          1.7 “Exhale Business” means Broncus’ business of developing, testing, marketing, selling and
otherwise commercially exploiting Exhale and any associated services.




          1.8 “Liabilities” means, collectively, any and all liabilities, losses, claims, debts, duties,
obligations (including but not limited to contractual obligations), expenses, claims, deficiencies
or guaranties of any type, whether accrued, absolute, contingent, matured, unmatured or otherwise.




          1.9 “Loss” means, collectively, all Liabilities, loss, damages, expense, cost, fines, fees,
penalties, obligations or injuries, including without limitation those resulting from any and all
claims, actions, suits, demands, assessments, investigations, judgments, awards, arbitrations or
other proceedings, together with reasonable costs and expenses including the reasonable attorneys’
fees and other legal costs and expenses relating thereto.




          1.10 “Other Claim” means and includes, collectively, a claim, suit, action, arbitration,
demand, investigation or other proceeding asserted, brought or made by a third party or parties to
the extent that such third party or parties seeks to recover damages caused or alleged to have been
caused as a result of, or arising from: (i) any individual or individuals having been treated with
or by Exhale at any time prior to the Spinoff Date; (ii) any use of Exhale at any time prior to the
Spinoff Date; or (iii) any activity, conduct or operations of the Broncus Business occurring at any
time prior to the Spinoff Date. The term “Other Claim” shall not include any Pre-Spinoff Alair
Claim.




          1.11 “Other Claim Loss” means Loss actually suffered or incurred by Broncus or Asthmatx to the
extent that such Loss is caused by, or results or arises from, an Other Claim.



*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



2









 





          1.12 “Pre-Spinoff Alair Claim” means a claim, suit, action, arbitration, demand, investigation
or other proceeding asserted, brought or made by a third party or parties to the extent that such
third party or parties seeks to recover damages caused or alleged to have been caused as a result
of, or arising from, (a) any individual or individuals having been treated with or by Alair at any
time prior to the Spinoff Date or (b) any use of Alair at any time prior to the Spinoff Date. The
term “Pre-Spinoff Alair Claim” shall not include any Other Claim.




          1.13 “Pre-Spinoff Alair Claim Loss” means Loss (as defined below) actually suffered or
incurred by Broncus or Asthmatx to the extent that such Loss is caused by, or results or arises
from, a Pre-Spinoff Alair Claim.




          1.14 “Spinoff Date” means December 30, 2003.




     2. Indemnification by Asthmatx. Except to the extent that Asthmatx is expressly entitled to
be indemnified for such Loss by Broncus pursuant to the provisions of Section 5.2 below, Asthmatx
hereby agrees to indemnify Broncus and its successors and assigns, and any present or future
officer, director, employee, affiliate, shareholder or agent of Broncus and/or its successors
(collectively, the “Broncus Indemnitees”) against, and hereby agrees to hold each Broncus
Indemnitee harmless from, any and all Loss suffered or incurred by any Broncus Indemnitee arising
out of the Alair Business or any of the Assumed Liabilities (as that term is defined in the
Formation Agreement), including, but not limited to Liabilities arising under the Assigned
Contracts (as that term is defined in the Formation Agreement), whether based on events occurring
before, on or after the Spinoff Date (collectively, “Asthmatx Indemnified Loss”); provided
however, that notwithstanding the foregoing, Asthmatx shall have no obligation to indemnify
any Broncus Indemnitee under this Section 2 for any Loss arising in whole or in part from criminal
or fraudulent conduct on the part of such Broncus Indemnitee. By way of illustration and not
limitation, Asthmatx Indemnified Loss: (a) shall include any Loss arising from any claim, suit,
action, arbitration, demand, investigation or other proceeding asserted, brought or made by a third
party or parties to the extent that such third party or parties seeks to recover damages caused or
alleged to have been caused as a result of, or arising from, (i) any individual(s) having been
treated with or by Alair at any time or (ii) any use of Alair at any time; and (b) shall not
include any Broncus Indemnified Loss (as defined in Section 3).



     3. Indemnification by Broncus. Broncus hereby agrees to indemnify Asthmatx and its successors
and assigns, and any present or future officer, director, employee, affiliate, shareholder or agent
of Asthmatx and/or its successors (collectively, the “Asthmatx Indemnitees”) against, and hereby
agrees to hold each Asthmatx Indemnitee harmless from, any and all Loss suffered or incurred by any
Asthmatx Indemnitee arising out of the Broncus Business, whether based on events occurring before,
on or after the Spinoff Date (collectively, “Broncus Indemnified Loss”); provided
however, that notwithstanding the foregoing, Broncus shall have no obligation to indemnify
any Asthmatx Indemnitee under this Section 3 for any Loss arising in whole or in part from criminal
or fraudulent conduct on the part of such Asthmatx Indemnitee. By way of illustration and not
limitation, Broncus Indemnified Loss: (a) shall include any


*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



3









 







Loss arising from any claim, suit, action, arbitration, demand, investigation or other
proceeding asserted, brought or made by a third party or parties to the extent that such third
party or parties seeks to recover damages caused or alleged to have been caused as a result of, or
arising from, (i) any individual(s) having been treated with or by Exhale at any time or (ii) any
use of Exhale at any time; and (b) shall not include any Asthmatx Indemnified Loss (as defined in
Section 2).



     4. Covenants Regarding Insurance. The parties hereby agree as follows:



          4.1 Asthmatx; Alair Insurance. Asthmatx shall use diligent, good faith efforts to
purchase and obtain the Alair Insurance, and to have the Alair Insurance become effective, as soon
as reasonably practicable after the Effective Date of this Agreement. Asthmatx shall also use
diligent, good faith efforts to cause the Alair Insurance to: (a) have an aggregate coverage limit
of ***** Dollars ($*****); (b) make both Asthmatx and Broncus named insureds of the
Alair Insurance; and (c) cause the Alair Insurance to have a coverage period of at least five (5)
years from the date it is issued. Asthmatx shall consult with Broncus regarding the specific terms
of such Alair Insurance. Asthmatx shall, at its sole expense, (a) pay all premiums and other
charges required to obtain the Alair Insurance and maintain it in effect at all times during the
coverage period of the Alair Insurance and (b) take all other actions reasonably necessary or
appropriate to maintain such Alair Insurance in effect at all times during its coverage period.




          4.2 Broncus. The parties acknowledge and agree that no further premiums or other
payments are required to be paid to keep the Broncus Insurance Policies in effect and that such
“occurrence based” policies apply only to claims based on events occurring during specific
Occurrence Periods. Broncus shall, at its sole expense, take all actions reasonably necessary or
appropriate to maintain each Broncus Insurance Policy in effect during the maximum time period
during which such Broncus Insurance Policy can remain in effect in accordance with its current
terms without the payment of any additional premium, fee or other charge.




     5. Insurance Allocations; Special Indemnification. Notwithstanding anything to the contrary in
Section 2, the parties hereby agree as follows:



          5.1 First Recourse to Alair Insurance. If either Broncus or Asthmatx incurs or
suffers any Pre-Spinoff Alair Claim Loss, then it will first seek to obtain coverage for such
Pre-Spinoff Alair Claim Loss from any available Alair Insurance to the maximum extent that coverage
for such Pre-Spinoff Alair Claim Loss is available under the Alair Insurance, before seeking or
obtaining any coverage for such Pre-Spinoff Alair Claim Loss under any Broncus Insurance Policy.




          5.2 Limited Indemnification by Broncus for Pre-Spinoff Alair Claim Loss. Subject to
the provisions of this Section 5.2, Broncus agrees to indemnify Asthmatx against, and to hold
Asthmatx harmless from, that amount (and only that amount) of Pre-Spinoff Alair Claim Loss actually
suffered or incurred by Asthmatx for which Asthmatx has not been reimbursed or provided coverage
under the Alair


*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



4









 






Insurance; provided that, notwithstanding the foregoing (i) under no
circumstance shall Broncus be obligated to indemnify Asthmatx for any amount of Pre-Spinoff Alair
Claim Loss for which coverage is not actually available and actually provided under an Applicable
Broncus Insurance Policy (as defined below) and (ii) in no event shall Broncus have any obligation
under this Section 5.2 to pay any amounts for which it is not provided coverage by a Broncus
Insurance Policy. As used herein, the term “Applicable Broncus Insurance Policy” means, with
respect to any Pre-Spinoff Alair Claim Loss, the Broncus Insurance Policy (or Policies) for which
insurance coverage is available to pay for liability of Broncus in respect of its obligation to
indemnify Asthmatx for such Pre-Spinoff Alair Claim Loss pursuant to this Section 5.2. The parties
acknowledge and agree that the Broncus Insurance Policies also provide Broncus with insurance
coverage for Other Claim Loss. The parties further acknowledge and agree that nothing in this
Section 5.2 or elsewhere in this Agreement imposes any restriction upon Broncus’ right and ability
to at any time seek, obtain, be paid and retain any coverage, proceeds, reimbursements or other
payments available to be paid to Broncus or payable on behalf of Broncus or for the benefit of
Broncus under any Broncus Insurance Policy or Policies as coverage or reimbursement for any Loss,
Liabilities or other amounts (including, but not limited to, any Pre-Spinoff Alair Claim Loss or
Other Claim Loss) and, except to the extent expressly provided in Section 5.3, no rights shall
accrue to Asthmatx as a result of the payment, for any reason, of proceeds of any Broncus Insurance
Policy or Policies to Broncus or a claimant against Broncus, or on behalf of or for the benefit of
Broncus.




          5.3 Insurance Allocation and Reimbursement. Asthmatx and Broncus acknowledge that the
total dollar amount of claims for insurance coverage that may be made against a Broncus Insurance
Policy may exceed the Coverage Limit (as defined below) of that policy. Accordingly the parties
desire to agree in this Section 5.3 to a mechanism for allocating the available insurance coverage
under each Broncus Insurance Policy between Pre-Spinoff Alair Claim Loss and Other Claim Loss and,
accordingly, hereby agree as follows:




               (a) Allocation. If the aggregate dollar amount of claims for insurance coverage made
against a Broncus Insurance Policy and payable thereunder exceed the Coverage Limit of such Broncus
Insurance Policy, then: (i) the maximum dollar amount of the coverage of such Broncus Insurance
Policy that is allocated to cover Pre-Spinoff Alair Claim Loss (the “Alair Allocation Amount”)
shall, in the aggregate, not exceed the greater of (A) *****
percent (*****%) of the Coverage Limit of
such Broncus Insurance Policy or (B) an amount equal to the Coverage Limit of such Broncus
Insurance Policy minus the total amount of Other Claim Loss that is entitled to be paid or covered
by such Broncus Insurance Policy; and (ii) the maximum dollar amount of the coverage of such
Broncus Insurance Policy that is allocable to cover Other Claim Loss (the “Other Allocation
Amount”) shall, in the aggregate, not exceed the greater
of (A) ***** percent (*****% ) of the
Coverage Limit of such Broncus Insurance Policy or (B) an amount equal to the Coverage Limit of
such Broncus Insurance Policy minus the total amount of Pre-Spinoff Alair Claim Loss that is
entitled to be paid or covered by such Broncus Insurance Policy.


*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



5









 





               (b) Reimbursement. If for any reason the payments made under a Broncus Insurance
Policy in respect of Pre-Spinoff Alair Claim Loss exceed the Alair Allocation Amount for such
policy and the remaining coverage under such policy is insufficient to cover in full all Other
Claim Loss that would otherwise be covered by such Broncus Insurance Policy, then Asthmatx shall
reimburse Broncus for that amount of Other Claim Loss for which coverage would otherwise have been
(but is not) available under such Broncus Insurance Policy; provided however, that
the amount of such reimbursement by Asthmatx shall not exceed the aggregate amounts paid under such
Broncus Insurance Policy in respect of all Pre-Spinoff Alair Claim Loss minus the Alair Allocation
Amount for such Broncus Insurance Policy. Likewise, if for any reason payments made under a
Broncus Insurance Policy in respect of Other Claim Loss exceed the Other Allocation Amount for such
policy and the remaining coverage under such policy is insufficient to cover in full all
Pre-Spinoff Alair Claim Loss that would otherwise be covered by such Broncus Insurance Policy, then
Broncus shall reimburse Asthmatx for that amount of Pre-Spinoff Alair Claim Loss for which coverage
would otherwise have been (but is not) available under such Broncus Insurance Policy;
provided however, that the amount of such reimbursement by Broncus shall not exceed
the aggregate amounts paid under such Broncus Insurance Policy in respect of all Other Claim Loss
minus the Other Allocation Amount for such Broncus Insurance Policy. Broncus and Asthmatx shall
each bear their own cost, and shall not be reimbursed by the other party for, any Pre-Spinoff Alair
Claim Loss such party suffers or incurs that is subject to an insurance deductible under a Broncus
Insurance Policy. As used herein, the “Coverage Limit” of a Broncus Insurance Policy means the
total dollar amount of insurance coverage available under such policy as of the Effective Date of
this Agreement.



               (c) Other Terms. Nothing in this Section 5.3 limits either party’s indemnification
obligations set forth in Sections 2 and 3 above for any Loss incurred after taking into account
insurance payments, but rather is intended to set forth how the parties desire to allocate
insurance proceeds. The agreements set forth in this Section 5.3 are intended solely to address the
respective rights of the parties and are not intended to modify the terms of any Broncus Insurance
Policy.



               (d) Examples. Exhibit “A” to this Agreement contains examples that illustrate
the operation of this Section 5.3.



          5.4 Certain Covenants. In the event that either party becomes aware of a claim,
demand, suit, action, investigation or proceeding for which it may be entitled to indemnification
under Section 2, 3 or 5.2 of this Agreement, then such party (“Indemnified Party”) shall:




               (a) provide written notice to the other party (“Indemnifying Party”) of such claim, demand,
suit, action, investigation or proceeding promptly, and in no event later than thirty (30) days,
after it has knowledge of such claim, demand, suit, action, investigation or proceeding;


*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.


6









 





               (b) permit the Indemnifying Party (but only if the Indemnifying Party so chooses, in its sole
and absolute discretion) to assume full responsibility to investigate, prepare for, defend against,
and/or settle, all at the Indemnifying Party’s own expense, any such claim, demand, suit, action,
investigation or proceeding; and



               (c) assist and cooperate with the Indemnifying Party in the investigation of, preparation for,
defense of, and/or settlement of any such claim, demand, suit, action, investigation or proceeding.



          In no case shall the Indemnified Party or any of its employees, officers, directors,
consultants or agents compromise, settle, and/or admit to, any such claim, demand, suit, action,
investigation or proceeding without the Indemnifying Party’s prior written consent, which shall not
be unreasonably withheld or delayed.




     6. No Third Party Rights. Except for any third party who is a permitted assignee of
this Agreement in accordance with the terms of Section 7.7 hereof, no third party shall be a
beneficiary of this Agreement or any of its provisions, nor shall any third party have any right or
ability to enforce this Agreement or any of its provisions, or to assert any rights under, pursuant
to or in connection with this Agreement.



7. General Provisions.




          7.1 Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to that body of laws pertaining to
conflict of laws.




          7.2 Further Assurances. The parties agree to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to carry out the
purposes and intent of this Agreement.




          7.3 Counterparts; Facsimile Signatures. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered will be deemed an original, and all
of which together shall constitute one and the same agreement. This Agreement may be executed and
delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the
same effect as if the original signature had been delivered to the other party.




          7.4 Severability. If any provision of this Agreement is determined by any court or
arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such
provision will be enforced to the maximum extent possible given the intent of the parties hereto.
If such clause or provision cannot be so enforced, then such provision shall be stricken from this
Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or
unenforceable clause or provision had (to the extent not enforceable) never been contained in this
Agreement.




          7.5 Notices. Any and all notices required or permitted to be given to a party
pursuant to the provisions of this Agreement will be in writing and will be effective




			



*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



7









 




and deemed to provide such party sufficient notice under this Agreement on the earliest of the
following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business
day after deposit with an express overnight courier for United States deliveries, or two (2)
business days after such deposit for deliveries outside of the United States, with proof of
delivery from the courier requested; or (iii) three (3) business days after deposit in the United
States mail by certified mail (return receipt requested) for United States deliveries. All notices
for delivery outside the United States will be sent by express courier. All notices not delivered
personally will be sent with postage and/or other delivery charges prepaid and properly addressed
to the party to be notified at the address set forth on the signature page to this Agreement (or at
such other address as the party to be notified may have designated to the other party by one of the
indicated means of notice herein).




          7.6 Amendment and Waivers. This Agreement may not be altered or amended except by an
instrument in writing executed by Broncus and Asthmatx. No rights of a party under this Agreement
may be waived, except by an instrument in writing executed by such party. No waiver of any terms,
provision or condition of or failure to exercise or delay in exercising any rights or remedies
under this Agreement, in any one or more instances shall be deemed to be, or construed as, a
further or continuing waiver of any such term, provision, condition, right or remedy or as a waiver
of any other term, provision or condition of this Agreement.




          7.7 Successors and Assigns. No party to this Agreement (“Assigning Party”) may assign
this Agreement or delegate its rights hereunder except: (a) with the written consent of the other
party hereto; (b) by operation of law pursuant to a statutory merger or consolidation in which such
Assigning Party is merged or consolidated with one or more other corporations or other entities; or
(c) in connection with a sale of all or substantially all such Assigning Party’s assets and
properties to a third party who expressly agrees in writing with the other party to this Agreement
to assume and be obligated and liable for, all of the Assigning Party’s obligations under this
Agreement.




[The remainder of this page has intentionally been left blank]



			




*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



8









 








          7.8 Entire Agreement. This Agreement and the documents referred to herein and
exhibits hereto constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Agreement, and supersede all prior understandings and agreements,
whether oral or written, between or among the parties hereto with respect to the specific subject
matter hereof.




     In Witness Whereof, the parties hereto have executed this Indemnification
Agreement as of the Effective Date set forth in the first paragraph of this Agreement.



	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	ASTHMATX, INC.	 	BRONCUS TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Glen French
	 	By:
	 	/s/ Cary Cole	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Glen French, President
	 	 	 	Cary Cole, President	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	Address:	 	 
	1340 Space Park Way	 	1400 North Shoreline Blvd, Suite A8	 	 
	Mountain View, CA 94043	 	Mountain View, CA 94043	 	 






Attachments:



Exhibit “A”: Certain Examples of the Operation of Section 5.3




			



*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



9









 








Exhibit “A”




Certain Examples of the Operation of Section 5.3




     The following hypothetical examples are intended to illustrate the operation of Section 5.3 of
this Indemnification Agreement.


Example
1: *****.



 



Example
2: *****.



 




			




*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.



10









 





Example
3:   *****.




			




*****   Certain
portions of this exhibit have been omitted and confidential treatment
has been requested for these omitted portions pursuant to an
application for confidential treatment sent to the Securities and
Exchange Commission.




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