Document:

ex10_3.htm

     

     

    Exhibit
10.3

     

    

    May 15,
2009

    Steven B.
Engle

    Chief
Executive Officer

    Xoma,
Ltd.

    2910
Seventh Street

    Berkeley,
California  94710

    

    Dear Mr.
Engle:

    

    The
purpose of this letter agreement (the “Agreement”) is to authorize Canaccord
Adams Inc. (“Canaccord”) and Wedbush Morgan Securities, Inc. (“Wedbush” and,
together with Canaccord, the “Placement Agents”) to contact one or more
institutional investors to explore the degree of interest, if any, of such
investors in providing funding to Xoma, Ltd. or its affiliates (the “Company”).
This authorization shall be exclusive to the Placement Agents for a period of 30
days.  The Company may terminate each of the Placement Agents
authorization to contact investors hereunder at any time upon a 10-day written
notice.  If the Company chooses to accept any funding, on terms to be
mutually agreed upon by the Company and any such investor(s), then the Company
shall pay to each of the Placement Agents the fees set forth below if there is
any funding of the Company (a “Financing”) within 6 months of the date of the
termination or expiration of this Agreement by any investors with which the
Placement Agents arranged a conference call or a meeting for the Company during
the term of this Agreement.

     

    In
consideration of the services rendered by the Placement Agents under this
Agreement, the Company agrees to pay to each of Canaccord and Wedbush a cash fee
payable immediately upon the closing of any portion of the Financing equal to 3%
of the aggregate proceeds raised or committed in such Financing from such
investors.  In addition, but only if a Financing is consummated, the
Company agrees to reimburse each of the Placement Agents at closing for all
reasonable travel and other out-of-pocket expenses incurred in connection with
the Placement Agents’ engagement, including the fees and expenses of each of
Choate, Hall & Stewart LLP, as counsel to the Placement Agents, in an amount
not to exceed $100,000, without the Company’s approval.

     

    The
Company hereby makes to each of the Placement Agents each of the
representations, warranties and covenants made by the Company to the Purchasers
in the Securities Purchase Agreement, to be entered into in connection with the
Financing, as though restated in their entirety herein.

     

    The
Company hereby agrees to the indemnification and other agreements set forth in
the Indemnification Provisions attached hereto as Addendum A, the provisions of
which are incorporated herein by reference and shall survive the termination or
expiration of this Agreement.

     

    This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to conflicts of law principles.  Any
dispute arising out of this Agreement shall be adjudicated in the courts of the
State of New York or in the federal courts sitting in the Southern District of
New York, and each of the parties hereto agrees that service of process upon it
by registered or certified mail at its address set forth herein shall be deemed
adequate and lawful.  Any rights to trial by jury with respect to any
such dispute are hereby waived by each of the Placement Agents and the Company.
The Company shall indemnify each of the Placement Agents against any liabilities
arising under the Securities Act of 1933, as amended, attributable to any
information supplied or omitted to be supplied to any investor by the Company
pursuant to this Agreement.  The Company acknowledges and agrees that
each of the Placement Agents is not and shall not be construed as a fiduciary of
the Company

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    and shall
have no duties or liabilities to shareholders or creditors of the Company or any
other person by virtue of this Agreement or the retention of each of the
Placement Agents hereunder, all of which are hereby expressly
waived.  This Agreement may be modified only in writing signed by the
party to be charged hereunder.

     

    If the
foregoing correctly sets forth our agreement, please sign below and return a
copy of this letter to us.

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Very
      truly yours,

                            
	 
	
                              Canaccord
      Adams Inc.

                            
	 
	 
	
                              By:______________________________

                            
	
                                   
      Name:

                            
	
                                   
      Title:

                            
	 
      
	 
	
                              Wedbush
      Morgan Securities, Inc.

                            
	 
	 
	
                              By:______________________________

                            
	
                                   
      Name:

                            
	
                                   
      Title:

                            

                    

                  

                

              

            

          

        

      

    

    

    

    

    

    
      	
              Agreed
      to and accepted

              as
      of the date first written above:

               

              Xoma,
      Ltd.

               

               

              By:______________________________

            
	
                   
      Name:

            
	
                   
      Title:

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ADDENDUM
A

     

    

     

    INDEMNIFICATION
PROVISIONS

     

    In
connection with the engagement of Canaccord Adams Inc. (“Canaccord”) and Wedbush
Morgan Securities, Inc. (“Wedbush” and, together with Canaccord, the “Placement
Agents”) by Xoma, Ltd. (the “ Company ”) pursuant to a letter agreement dated
May 15, 2009, between the Company and the Placement Agents, as it may be amended
from time to time in writing (the “ Agreement ”), the Company hereby agrees as
follows:

     

    
      	
              1.  

            	
              To
      the extent permitted by law, the Company will indemnify each of the
      Placement Agents and their affiliates, stockholders, directors, officers,
      employees and controlling persons (within the meaning of Section 15 of the
      Securities Act of 1933, as amended, or Section 20 of the Securities
      Exchange Act of 1934, as amended) against all losses, claims, damages,
      expenses and liabilities, as the same are incurred (including the
      reasonable fees and expenses of counsel), relating to or arising out of
      its activities hereunder or pursuant to the Agreement, except to the
      extent that any losses, claims, damages, expenses or liabilities (or
      actions in respect thereof) are found in a final judgment (not subject to
      appeal) by a court of law to have resulted primarily and directly from any
      indemnified person’s willful misconduct or gross negligence or from untrue
      statements or omissions made in reliance upon and conformity with
      information supplied in writing by the Placements Agents or their agents
      specifically for inclusion in a Company Registration Statement or any
      prospectus (including supplements) the Financing (as defined in the
      Agreement).

            

    

     

    
      	
              2.  

            	
              Promptly
      after receipt by Canaccord or the Co-Placement Agent of notice of any
      claim or the commencement of any action or proceeding with respect to
      which the Placement Agents are entitled to indemnity hereunder, one or
      both of the Placement Agents will notify the Company in writing of such
      claim or of the commencement of such action or proceeding, and the Company
      will assume the defense of such action or proceeding and will employ
      counsel reasonably satisfactory to the Placement Agents and will pay the
      fees and expenses of such counsel.  Notwithstanding the
      preceding sentence, the Placement Agents will be entitled to employ one
      counsel to represent both of them separate from counsel for the Company
      and from any other party in such action if counsel for either of the
      Placement Agents reasonably determines that it would be inappropriate
      under the applicable rules of professional responsibility for the same
      counsel to represent both the Company and the Placement
      Agents.  In such event, the reasonable fees and disbursements of
      no more than one such separate counsel will be paid by the
      Company.  The Company will have the exclusive right to settle
      the claim or proceeding provided that the Company will not settle any such
      claim, action or proceeding without the prior written consent of each of
      the Placement Agents, which will not be unreasonably
    withheld.

            

    

     

    
      	
              3.  

            	
              The
      Company agrees to notify each of the Placement Agents promptly of the
      assertion against it or any other person of any claim or the commencement
      of any action or proceeding relating to a transaction contemplated by the
      Agreement.

            

    

     

    
      	
              4.  

            	
              If
      for any reason the foregoing indemnity is unavailable to the Placement
      Agents or insufficient to hold the Placement Agents harmless, then the
      Company shall contribute to the amount paid or payable by each of the
      Placement Agents as a result of such losses, claims, damages or
      liabilities in such proportion as is appropriate to reflect not only the
      relative benefits received by the Company on the one hand and each of the
      Placement Agents on the other, but also the relative fault of the Company
      on the one hand and each of the Placement Agents on the other that
      resulted in such losses, claims, damages or liabilities, as well as any
      relevant equitable considerations.  The amounts paid or payable
      by a party in respect of losses, claims, damages and
      liabilities

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    referred
to above shall be deemed to include any legal or other fees and expenses
incurred in defending any litigation, proceeding or other action or
claim.  Notwithstanding the provisions hereof, each of the Placement
Agent’s share of the liability hereunder shall not be in excess of the amount of
fees actually received by each of the Placement Agents under the Agreement
(excluding any amounts received as reimbursement of expenses incurred by each of
the Placement Agents.

     

    
      	
              5.  

            	
              These
      Indemnification Provisions shall remain in full force and effect whether
      or not the transaction contemplated by the Agreement is completed and
      shall survive the termination of the Agreement, and shall be in addition
      to any liability that the Company might otherwise have to any indemnified
      party under the Agreement or
otherwise.

            

    

     

    
      
        	
                CANACCORD
      ADAMS INC.

                 

                 

                By:______________________________________

                     
      Name:

                     
      Title:

              
	 
      
	 
      
	 
      
	
                WEDBUSH
      MORGAN SECURITIES, INC.

              
	 
      
	 
      
	
                By:_______________________________________

              
	
                     
      Name:

              
	
                     
      Title:

              

      

    

    

    

    
      	
              Agreed
      to and accepted

              as
      of the date first written above:

               

              XOMA,
      LTD.

               

               

              By:____________________________________

            
	
                   
      Name:

            
	
                   
      Title:<PAGE>

EXHIBIT 10.14

                            INDEMNIFICATION AGREEMENT

         This INDEMNIFICATION AGREEMENT (this "Agreement") is made and executed
as of May 15, 2009, by and between AMERICAN ENVIRONMENTAL ENERGY, INC., a
Nevada corporation (the "Corporation"), and William McManes, an individual
residing at _____________________________________ (the "Indemnitee").

                                    PREAMBLE

         The Corporation is aware that, in order to induce highly competent
persons to serve the Corporation as Directors or in other capacities, the
Corporation must provide such persons with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the Corporation. The
difficulty of obtaining adequate Directors' and officers' liability insurance in
the current market has increased the difficulty of attracting and retaining such
persons. The Board of Directors of the Corporation has determined that (1) it is
essential to the best interests of the Corporation's stockholders that the
Corporation act to assure such persons that there will be increased certainty of
such protection in the future, and that (2) it is reasonable, prudent and
necessary for the Corporation contractually to obligate itself to indemnify such
persons to the fullest extent permitted by applicable law so that they will
continue to serve the Corporation free from undue concern that they will not be
so indemnified. The Indemnitee is willing to serve, continue to serve, and take
on additional service for or on behalf of the Corporation on the condition that
he or she be so indemnified.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Corporation and the Indemnitee do hereby agree as follows:

1. SERVICE BY THE INDEMNITEE

         The Indemnitee will continue to serve as a Director of the Corporation
faithfully and will discharge his duties and responsibilities to the best of his
ability so long as he is duly elected or qualified in accordance with the
provisions of the Articles of Incorporation and Bylaws of the Corporation and
the Nevada Revised Statutes, as may be amended from time to time, or until his
earlier death, resignation or removal. The Indemnitee may at any time and for
any reason resign from such position (subject to any other contractual
obligation or other obligation imposed by operation of law), in which event the
Corporation shall have no obligation under this Agreement to continue the
Indemnitee in any such position. Nothing in this Agreement shall confer upon the
Indemnitee the right to continue in the employ of the Corporation or as a
Director of the Corporation or affect the right of the Corporation to terminate
the Indemnitee's employment at any time in the sole discretion of the
Corporation, with or without cause, subject to any contract rights of the
Indemnitee created or existing otherwise than under this Agreement.

                                        1

<PAGE>

2.       INDEMNIFICATION

         The Corporation shall indemnify the Indemnitee to the fullest extent
permitted by the Nevada Revised Statutes or other applicable law, as in effect
from time to time. Without diminishing the scope of the indemnification provided
by this Section, the rights of indemnification of the Indemnitee provided
hereunder shall include, but shall not be limited to, those rights hereinafter
set forth, except that no indemnification shall be paid to the Indemnitee:

(i)      on account of any suit in which judgment is rendered against the
         Indemnitee for disgorgement of profits made from the purchase or sale
         by the Indemnitee of securities of the Corporation pursuant to the
         provisions of Section 16(b) of the Securities Exchange Act of 1934, as
         amended, or similar provisions of any federal, state or local statutory
         law;

(ii)     on account of conduct of the Indemnitee which is finally adjudged by a
         court of competent jurisdiction to have been knowingly fraudulent or to
         constitute willful misconduct;

(iii)    in any circumstance where such indemnification is expressly prohibited
         by applicable law;

(iv)     with respect to liability for which payment is actually made to the
         Indemnitee under a valid and collectible insurance policy or under a
         valid and enforceable indemnity clause, bylaw or agreement (other than
         this Agreement), except in respect of any liability in excess of
         payment under such insurance, clause, bylaw or agreement;

(v)      if a final decision by a court having jurisdiction in the matter shall
         determine that such indemnification is not lawful (and, in this
         respect, both the Corporation and the Indemnitee have been advised that
         it is the position of the Securities and Exchange Commission that
         indemnification for liabilities arising under the federal securities
         laws is against public policy and is, therefore, unenforceable, and
         that claims for indemnification should be submitted to the appropriate
         court for adjudication); or

(vi)     in connection with any proceeding (or part thereof) initiated by the
         Indemnitee, or any proceeding by the Indemnitee against the Corporation
         or its Directors, officers, employees or other Indemnitees, unless (i)
         such indemnification is expressly required to be made by law, (ii) the
         proceeding was authorized by the Board of Directors of the Corporation,
         (iii) such indemnification is provided by the Corporation in its sole
         discretion, pursuant to the powers vested in the Corporation under
         applicable law, or (iv) except as provided in Sections 10 and 13
         hereof.

3.       ACTIONS OR PROCEEDINGS OTHER THAN AN ACTION BY OR IN THE RIGHT OF THE
         CORPORATION

         The Indemnitee shall be entitled to the indemnification rights provided
in this Section if he is 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 in nature, other than an action by or
in the right of the Corporation, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent or
fiduciary of any other entity, including, but not limited to, another
corporation, partnership, joint venture or trust, or by reason of any act or
omission by him in any such capacity. Pursuant to this Section, the Indemnitee
shall be indemnified against all expenses (including attorneys' fees), costs,
judgments, penalties, fines and amounts paid in settlement which were actually
and reasonably incurred by him in connection with such action, suit or
proceeding (including, but not limited to, the investigation, defense or appeal
thereof), if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful.

                                        2

<PAGE>

4.       ACTIONS BY OR IN THE RIGHT OF THE CORPORATION

         The Indemnitee shall be entitled to the indemnification rights provided
in this Section if he is a person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
brought by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
or fiduciary of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent or fiduciary of another
entity, including, but not limited to, another corporation, partnership, joint
venture or trust, or by reason of any act or omission by him in any such
capacity. Pursuant to this Section, the Indemnitee shall be indemnified against
all expenses (including attorneys' fees), costs and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding (including, but not limited to, the investigation, defense or appeal
thereof), if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to be the best interests of the Corporation; provided,
however, that no such indemnification shall be made in respect of any claim,
issue, or matter as to which applicable law expressly prohibits such
indemnification by reason of any adjudication of liability of the Indemnitee to
the Corporation, unless and only to the extent that the Courts of the State of
Nevada or the court in which such action or suit 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 expenses and costs which such court shall deem proper.

5.       INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF SUCCESSFUL PARTY

         Notwithstanding the other provisions of this Agreement, to the extent
that the Indemnitee has served on behalf of the Corporation as a witness or
other participant in any claim, action or proceeding, or has been successful, on
the merits or otherwise, in defense of any action, suit or proceeding referred
to in Sections 3 and 4 hereof, or in defense of any claim, issue or matter
therein, including, but not limited to, the dismissal of any action without
prejudice, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

6.       PARTIAL INDEMNIFICATION

         If the Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the expenses
(including attorneys' fees), costs, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
investigation, defense, appeal or settlement of such suit, action, investigation
or proceeding described in Section 3 or 4 hereof, but is not entitled to
indemnification for the total amount thereof, the Corporation shall nevertheless
indemnify the Indemnitee for the portion of such expenses (including reasonable
attorneys' fees), costs, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him to which the Indemnitee is
entitled. Without limiting the generality of the foregoing, if the action suit,
and so forth, is brought against the Indemnitee in his capacity as a director,
officer, or employee and a stockholder, the presumption shall be that recovery
is sought by reason of the Indemnitee's status as a director, officer or
employee.

                                        3

<PAGE>

7.       DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION

         Upon written request by the Indemnitee for indemnification pursuant to
Section 3 or 4 hereof, the entitlement of the Indemnitee to indemnification
pursuant to the terms of this Agreement shall be determined by the following
person or persons, who shall be empowered to make such determination: (a) the
Board of Directors of the Corporation, by a majority vote of a quorum consisting
of Disinterested Directors (as hereinafter defined); or (b) if such a quorum is
not obtainable or, even if obtainable, if the Board of Directors, by the
majority vote of Disinterested Directors, so directs, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of Directors, a copy of
which shall be delivered to the Indemnitee. Such Independent Counsel shall be
selected by the Board of Directors and approved by the Indemnitee. Upon failure
of the Board to so select, or upon failure of the Indemnitee to so approve such
Independent Counsel, such Independent Counsel shall be selected by the
appropriate authority of the State of Nevada or such other person as the such
authority shall designate to make such selection. Such determination of
entitlement to indemnification shall be made not later than 45 days after
receipt by the Corporation of a written request for indemnification. Such
request shall include documentation or information which is necessary for such
determination and which is reasonably available to the Indemnitee. Any costs or
expenses (including attorneys' fees) incurred by the Indemnitee in connection
with his request for indemnification hereunder shall be borne by the
Corporation. The Corporation hereby indemnifies and agrees to hold the
Indemnitee harmless therefrom irrespective of the outcome of the determination
of the Indemnitee's entitlement to indemnification. If the person making such
determination shall determine that the Indemnitee is entitled to indemnification
as part (but not all) of the application for indemnification, such person shall
reasonably prorate such partial indemnification among such claims, issues or
matters.

8.       PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS

         The Secretary of the Corporation shall, promptly upon receipt of the
Indemnitee's request for indemnification, advise in writing the Board of
Directors, or such other person or persons as are empowered to make the
determination pursuant to Section 7, that the Indemnitee has made such request
for determination. Upon making such request for indemnification, the Indemnitee
shall be presumed to be entitled to indemnification hereunder and the
Corporation shall have the burden of proof in the making of any determination
contrary to such presumption. If the person or persons so empowered to make such
determination shall have failed to make the requested indemnification within 45
days after receipt by the Corporation of such request, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and the Indemnitee shall be absolutely entitled to such indemnification,
absent actual and material fraud in the request for indemnification. The
termination of any action, suit, investigation or proceeding described in
Section 3 or 4 hereof by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself: (a) create a
presumption that the Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that the
Indemnitee had reasonable cause to believe that his conduct was unlawful; or (b)
otherwise adversely affect the rights of the Indemnitee to indemnification,
except as may be provided herein.

9.       ADVANCEMENT OF EXPENSES AND COSTS

         All reasonable expenses and costs actually incurred by the Indemnitee
(including attorneys' fees, retainers and advances of disbursements required of
the Indemnitee) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding, if so requested by the

                                        4

<PAGE>

Indemnitee, within 20 days after the receipt by the Corporation of a statement
or statements from the Indemnitee requesting such advance or advances. The
Indemnitee may submit such statements from time to time. The Indemnitee's
entitlement to such expenses shall include those incurred in connection with any
proceeding by the Indemnitee seeking an adjudication or award in arbitration
pursuant to this Agreement. Such statement or statements shall reasonably
evidence the expenses and costs incurred by him in connection therewith and
shall include or be accompanied by an undertaking by or on behalf of the
Indemnitee to repay such amount if it is ultimately determined that the
Indemnitee is not entitled to be indemnified against such expenses and costs by
the Corporation pursuant to this Agreement or otherwise.

10.      REMEDIES OF THE INDEMNITEE IN CASES OF DETERMINATION NOT TO INDEMNIFY
         OR TO ADVANCE EXPENSES

         In the event that a determination is made that the Indemnitee is not
entitled to indemnification hereunder or if payment has not been timely made
following a determination of entitlement to indemnification pursuant to Sections
7 and 8, or if expenses are not advanced pursuant to Section 9, the Indemnitee
shall be entitled to a final adjudication in an appropriate court of the State
of Nevada or any other court of competent jurisdiction of his entitlement to
such indemnification or advance. Alternatively, the Indemnitee may, at his
option, seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association, such award to be
made within 60 days following the filing of the demand for arbitration. The
Corporation shall not oppose the Indemnitee's right to seek any such
adjudication or award in arbitration or any other claim. Such judicial
proceeding or arbitration shall be made de novo and the Indemnitee shall not be
prejudiced by reason of a determination (if so made) that he is not entitled to
indemnification. If a determination is made or deemed to have been made pursuant
to the terms of Section 7 or Section 8 hereof that the Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination and shall
be precluded from asserting that such determination has not been made or that
the procedure by which such determination was made is not valid, binding and
enforceable. The Corporation further agrees to stipulate in any such court or
before any such arbitrator that the Corporation is bound by all the provisions
of this Agreement and is precluded from making any assertions to the contrary.
If the court or arbitrator shall determine that the Indemnitee is entitled to
any indemnification hereunder, the Corporation shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnitee in
connection with such adjudication or award in arbitration (including, but not
limited to, any appellate proceedings).

11.      NOTIFICATION AND DEFENSE OF CLAIM

         Promptly after receipt by the Indemnitee of notice of the commencement
of any action, suit or proceeding, the Indemnitee will, if a claim in respect
thereof is to be made against the Corporation under this Agreement, notify the
Corporation in writing of the commencement thereof, but the omission to so
notify the Corporation will not relieve the Corporation from any liability that
it may have to the Indemnitee otherwise than under this Agreement.
Notwithstanding any other provision of this Agreement, with respect to any such
action, suit or proceeding as to which the Indemnitee gives notice to the
Corporation of the commencement thereof:

(i) The Corporation will be entitled to participate therein at its own expense;
and

                                        5

<PAGE>

(ii) Except as otherwise provided in this Section 11(b), to the extent that it
may wish, the Corporation, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnitee. After notice from the Corporation to the
Indemnitee of its election to so assume the defense thereof, the Corporation
shall not be liable to the Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. The Indemnitee shall have the right to employ his own counsel in
such action, suit or proceeding, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
thereof shall be at the expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the Corporation, (ii) the
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Corporation and the Indemnitee in the conduct of the
defense of such action, or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which the Indemnitee shall
have reached the conclusion provided for in clause (ii) above.

(iii) The Corporation shall not be liable to indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Corporation shall not settle any action or
claim in any manner that would impose any penalty or limitation on the
Indemnitee without the Indemnitee's written consent. Neither the Corporation nor
the Indemnitee will unreasonably withhold their consent to any proposed
settlement.

12.      OTHER RIGHTS TO INDEMNIFICATION

         The indemnification and advancement of expenses (including attorneys'
fees) and costs provided by this Agreement shall not be deemed exclusive of any
other rights to which the Indemnitee may now or in the future be entitled under
any provision of the Bylaws of the Corporation, any provision of the Certificate
of Incorporation of the Corporation, any vote of stockholders or Disinterested
Directors, any provision of law or otherwise.

13.      ATTORNEYS' FEES AND OTHER EXPENSES TO ENFORCE AGREEMENT

         In the event that the Indemnitee is subject to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at issue
or seeks an adjudication or award in arbitration to enforce his rights under, or
to recover damages for breach of, this Agreement, the Indemnitee, if he prevails
in whole or in part in such action, shall be entitled to recover from the
Corporation and shall be indemnified by the Corporation against any actual
expenses for attorneys' fees and disbursements reasonably incurred by him.

14.      DURATION OF AGREEMENT

         This Agreement shall continue until and terminate upon the later of:
(a) five years after the Indemnitee has ceased to occupy any of the positions or
have any relationship described in Sections 3 and 4 of this Agreement, and (b)
the final termination of all pending or threatened actions, suits, proceedings
or investigations to which the Indemnitee may be subject by reason of the fact
that he is or was a director, officer, employee, agent or fiduciary of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, agent or fiduciary of any other entity, including,
but not limited to, another corporation, partnership, joint venture or trust, or
by reason of any act or omission by him in any such capacity. The
indemnification provided under this Agreement shall continue as to the
Indemnitee even though he may have ceased to be a director or officer of the
Corporation. This Agreement shall be binding upon the Corporation and its
successors and assigns and shall inure to the benefit of the Indemnitee and his
spouse, successors, assigns, heirs, devisees, executors, administrators or other
legal representatives.

                                        6

<PAGE>

15.      SEVERABILITY

         If any provision or provisions of this Agreement shall be held invalid,
illegal or unenforceable for any reason whatsoever, (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including, but
not limited to, all portions of any Sections of this Agreement containing any
such provision held to be invalid, illegal, or unenforceable) shall not in any
way be affected or impaired thereby, and (b) to the fullest extent possible, the
provisions of this Agreement (including, but not limited to, all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifest by
the provision held invalid, illegal or unenforceable.

16.      COUNTERPARTS

         This Agreement may be executed in counterparts, each of which shall for
all purposes be deemed to be an original but all of which together shall
constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought shall be required to be produced to
evidence the existence of this Agreement.

17.      CAPTIONS

         The captions and headings used in this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.

18.      DEFINITIONS

         For purposes of this Agreement: "Disinterested Director" shall mean a
Director of the Corporation who is not or was not a party to the action, suit,
investigation or proceeding in respect of which indemnification is being sought
by the Indemnitee. "Independent Counsel" shall mean a law firm or a member of a
law firm that neither is presently nor in the past five years has been retained
to represent: (i) the Corporation or the Indemnitee in any matter material to
either such party, or (ii) any other party to the action, suit, investigation or
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 Corporation or the
Indemnitee in an action to determine the Indemnitee's right to indemnification
under this Agreement.

                                        7

<PAGE>

19.      MODIFICATION AND WAIVER

         No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.

20.      NOTICES

         All notices, requests, demands or other communications hereunder shall
be in writing and shall be deemed to have been duly given if (i) delivered by
hand with receipt acknowledged by the party to whom said notice or other
communication shall have been directed or if (ii) mailed by certified or
registered mail, return receipt requested, with postage prepaid, on the date
shown on the return receipt:

         If to the Indemnitee, to:          William McManes

         If to the Corporation, to:         American Environmental Energy, Inc.
                                            Attention:  Secretary

or to such other address as may be furnished to the Indemnitee by the
Corporation or to the Corporation by the Indemnitee, as the case may be.

21.      GOVERNING LAW

         The parties hereto agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada,
applied without giving effect to any conflicts-of-law principles. IN WITNESS
WHEREOF, the parties hereto have executed this Agreement on the day and year
first above written.

AMERICAN ENVIRONMENTAL ENERGY, INC.

By:      /s/ BRENT A. BREWER
    -------------------------------------------------
         Brent A. Brewer, CEO and President

INDEMNITEE

By:      /s/ WILLIAM MCMANES
    -------------------------------------------------
         William McManes

                                        8

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