Document:

ex10_1.htm

Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of October 18, 2011 between NATIONAL TECHNICAL SYSTEMS, INC., a California corporation (the “Company”), and _______________________ (“Indemnitee”).

 

WITNESSETH THAT:

 

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.  Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions.  At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself.  The By-laws of the Company require indemnification of the officers and directors of the Company.  Indemnitee may also be entitled to indemnification pursuant to the Corporations Code of the State of California (“CCC”).  The By-laws and the CCC expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

 

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

 

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

 

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

 

WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;

 

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.

 

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director from and after the date hereof, the parties hereto agree as follows:

 

  

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1.             Indemnity of Indemnitee.  The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time.  In furtherance of the foregoing indemnification, and without limiting the generality thereof:

 

(a)           Proceedings Other Than Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company.  Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

 

(b)           Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company.  Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made (i) in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the court in which the Proceeding is or was pending shall determine that such indemnification may be made; (ii) of amounts paid in settling or otherwise disposing of a pending action without court approval; and (iii) of Expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval.

 

(c)           Indemnification for Expenses of a Party Who is Wholly or Partly Successful.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter.  For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

2.            Additional Indemnity.  In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, to the extent permitted by applicable law, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee.  The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

 

3.            Contribution.

 

(a)           Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee.  The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

 

  

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(b)           Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered.  The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

 

(c)           The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

 

(d)           To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

4.            Indemnification for Expenses of a Witness.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

 

5.            Advancement of Expenses.  Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.  Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.

 

6.            Procedures and Presumptions for Determination of Entitlement to Indemnification.  It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the CCC and public policy of the State of California.  Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

 

  

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(a)           To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification.  The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.  Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

 

(b)           Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board: (i) by a majority vote of a quorum consisting of disinterested directors, (ii) if such a quorum of directors is not obtainable, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, (iii) by the shareholders of the Company, with the shares owned by the person to be indemnified not being entitled to vote thereon, or (iv) by the court in which the proceeding is or was pending upon application by the Company or the Indemnitee.  For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee.

 

(c)           If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c).  The Independent Counsel shall be selected by the Board.  Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit.  If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof.  The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

 

(d)           In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.  Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

  

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(e)           Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise  in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise.  In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.  Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(f)           If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

 

(g)           Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

 

(h)           The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty.  In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding.  Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(i)           The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that 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 Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

  

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7. 

	
Remedies of Indemnitee.

 

(a)           In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in a court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification.  Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a).  The Company shall not oppose Indemnitee’s right to seek any such adjudication.

 

(b)           In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).

 

(c)           If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d)           In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

 

(e)           The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.  The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

 

(f)           Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

 

8.             Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

 

(a)           The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-laws, any agreement, a vote of stockholders, a resolution of directors of the Company, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.  To the extent that a change in the CCC, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under  the Certificate of Incorporation, By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

  

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(b)           To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies.  If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors' and officers' liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(c)           In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(d)           The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

(e)           The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

 

9.             Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

 

(a)           for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

 

(b)           for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

 

(c)           in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

 

10.          Duration of Agreement.  All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

 

  

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11.           Security.  To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral.  Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

 

12.           Enforcement.

 

(a)           The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

 

(b)           This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

 

(c)           The Company shall not seek from a court, or agree to, a "bar order" which would have the effect of prohibiting or limiting the Indemnitee's rights to receive advancement of expenses under this Agreement.

 

13.           Definitions.  For purposes of this Agreement:

 

(a)           “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

 

(b)           “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

(c)           “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

 

(d)           “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent.  Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(e)           “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the 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 Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.  The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

  

-8-

  

 

(f)           “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

 

14.           Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

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

 

16.           Notice by Indemnitee.  Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder.  The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

 

17.           Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent:

 

To Indemnitee at the address set forth below Indemnitee signature hereto.

 

To the Company at:

 

National Technical Systems, Inc.

24007 Ventura Boulevard, Suite 200

Calabasas, California 91302

Attention:  William McGinnis

Facsimile:  (818) 591-0899

Email: bill.mcginnis@ntscorp.com

 

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

18.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.  This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

  

-9-

  

 

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

 

20.           Governing Law and Consent to Jurisdiction.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of California, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in a court of competent jurisdiction located in the State of California, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the state and federal courts of the State of California for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in a court located in the State of California, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in any court of competent jurisdiction in the State of California has been brought in an improper or inconvenient forum.

 

SIGNATURE PAGE TO FOLLOW

 

  

-10-

  

 

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

 

	 	
NATIONAL TECHNICAL SYSTEMS, INC.

	 	 	 
	 	
By: 

	 
	 	 	Name 
	 	 	Title 
	 	 	 
	 	 	 
	 	
INDEMNITEE

	 	 	 
	 	 	 
	 	 
	 	 	 
	 	Address:
	 	 
	 	 
	 	 
	 	 

 

 

-11-ex4_1.htm

Exhibit 4.1

 

 

 

BP p.l.c.

 

 

 

	
RULES OF THE BP RECOVERY PLAN 2011

	 
	Adoption:	 	
7 September 2011

 

 

 

  

  

  

 

	 	Table of Contents	 
	
Contents

	  	
Page

	  	  	  
	
1

	
Grant of Options

	
1

	 	 	 
	
2

	
Option Price

	
2

	 	 	 
	
3

	
Adjustment of Options

	
2

	 	 	 
	
4

	
Exercise and lapse – general rules

	
3

	 	 	 
	
5

	
Exercise and lapse in other circumstances – personal events

	
4

	 	 	 
	
6

	
Exercise and lapse in other circumstances – corporate events

	
5

	 	 	 
	
7

	
Exchange of Options

	
6

	 	 	 
	
8

	
Exercise of Options

	
7

	 	 	 
	
9

	
General

	
9

	 	 	 
	
10

	
Changing the Plan and termination

	
11

	 	 	 
	
11

	
Governing law and jurisdiction

	
11

	 	 	 
	
12

	
Meanings of words used

	
11

	 	 	 
	
Schedule 1

	
14

 

  

  

  

 

Rules of the BP Recovery Plan 2011

 

	
1

	
Grant of Options

 

	
1.1

	
Grant of Options

 

	
  

	
1.1.1

	
The Designated Corporate Officer may resolve to grant to any Eligible Employee an Option to acquire such number of Shares as the Designated Corporate Officer may determine.

 

	
  

	
1.1.2

	
Unless the Designated Corporate Officer decides otherwise in any particular case, Options must not be granted to an Eligible Employee who has given or received notice of termination of employment with a Member of the Group, whether or not such termination is lawful.

 

	
1.2

	
Time when Options may be granted

 

Options may be granted at any time, subject to the application of Dealing Restrictions.

 

	
1.3

	
Conditions

 

When granting an Option, the Designated Corporate Officer may make its exercise conditional on the satisfaction of any condition(s). Conditions may be different for different Optionholders. If conditions apply, an Optionholder will be notified of the conditions in such manner as the Designated Corporate Officer decides. Any condition must be specified at the Date of Grant and may provide that an Option will lapse if it is not satisfied. The Designated Corporate Officer may waive or change a condition in any way he sees fit.

 

	
1.4

	
Notification of grant of Options

 

The Designated Corporate Officer will notify the grant of Options to Optionholders in such manner as he determines.

 

	
1.5

	
No payment

 

Optionholders are not required to pay for the grant of any Option.

 

	
1.6

	
Disclaimer of Option

 

Any Optionholder may disclaim all or part of his Option within 80 days after the Date of Grant by notice in writing to the Company. If this happens, the Option will be deemed never to have been granted under the Plan. Optionholders are not required to pay for the disclaimer.

 

	
1.7

	
Restriction on disposal of interests and hedging

 

	
  

	
1.7.1

	
Subject to rule 1.7.2, an Optionholder may not sell, transfer, assign, hedge, charge or otherwise dispose of an Option (or part of or any interest in an Option) and must not enter into any transaction which transfers the risk of price movements with regard to the Shares subject to an Option. If he does, whether voluntarily or involuntarily, then the Designated Corporate Officer may determine that the whole of the Option lapses.

 

	
  

	
1.7.2

	
Rule 1.7.1 does not apply:

 

  

1

  

 

	
  

	
(i)

	
to the transmission of an Option on the death of an Optionholder to his personal representatives; or

 

	
  

	
(ii)

	
to the assignment of an Option, with the prior consent of the Designated Corporate Officer, subject to any terms and conditions the Designated Corporate Officer imposes.

 

	
1.8

	
Issue of Shares

 

Shares may not be issued or transferred from treasury to satisfy Options without prior approval of this Plan by shareholders of the Company.

 

	
1.9

	
Options over ADSs

 

The Designated Corporate Officer may decide to grant options in the form of an Option to acquire ADSs and references in these rules Share, Option, Price etc. shall be construed accordingly.  Upon the exercise of any Option to acquire ADSs the Company will make arrangements for the Optionholder to acquire ADSs.

 

	
2

	
Option Price

 

	
2.1

	
Setting the Option Price

 

The Option Price will be not less than the Market Value of a Share on the Date of Grant.

 

	
2.2

	
Market Value

 

“Market Value” on any particular day means:

 

	
  

	
(i)

	
the closing middle market quotation of a Share (taken from the Daily Official List of the London Stock Exchange) on the immediately preceding Business Day or, in the case of an ADS listed on the New York Stock Exchange, the closing price quoted on the New York Stock Exchange for that preceding Business Day; or

 

	
  

	
(ii)

	
if the Designated Corporate Officer so decides, the average of the closing middle market quotations of a Share (taken from the Daily Official List of the London Stock Exchange) or, in the case of an ADS listed on the New York Stock Exchange, the closing price quoted on the New York Stock Exchange, over the immediately preceding three or five Business Days;

 

	
3

	
Adjustment of Options

 

	
3.1

	
Power to adjust

 

If there is:

 

	
  

	
(i)

	
a variation in the equity share capital of the Company, including a capitalisation or rights issue, sub-division, consolidation or reduction of share capital;

 

	
  

	
(ii)

	
a demerger (in whatever form) or exempt distribution by virtue of Section 1075 of the Corporation Taxes Act 2010;

 

	
  

	
(iii)

	
a special dividend or distribution

 

the Designated Corporate Officer may adjust the number of Shares comprised in each Option and the Option Price in any way (including retrospective adjustments) which the Designated Corporate Officer considers appropriate.

 

  

2

  

 

	
3.2

	
Nominal value

 

The Option Price may not be adjusted to a price less than the nominal value of a Share.

 

	
3.3

	
Notice

 

The Designated Corporate Officer may notify Optionholders of any adjustment made under this rule 3.

 

	
4

	
Exercise and lapse – general rules

 

	
4.1

	
Exercise

 

An Optionholder may exercise his Option at any time during the Option Period (subject to any Dealing Restriction) following Vesting and subject to any conditions being satisfied in accordance with rule 1.3.

 

	
4.2

	
Lapse

 

An Option will lapse at the end of the Option Period or, if earlier, on the earliest of:

 

	
  

	
4.2.1

	
the date the Optionholder ceases to be an employee;

 

	
  

	
4.2.2

	
the end of the last day on which the Option can be exercised in any circumstance referred to in rules 5.1, 5.2, 5.3 or 6; or

 

	
  

	
4.2.3

	
the date when any circumstance referred to in rule 1.7, occurs.

 

	
4.3

	
Priority

 

If an Option becomes exercisable under more than one provision of the rules of the Plan, the provision which results in the shortest Exercise Period of the Option will prevail.

 

	
4.4

	
Forfeiture

 

	
  

	
4.4.1

	
Notwithstanding any other rules of the Plan (including, without limitation, rules 5.1,  5.2 or 5.3), if the Designated Corporate Officer determines that an Optionholder has engaged in personal conduct (including, but not limited to, a violation of the BP Code of Conduct) which the Designated Corporate Officer considers was contrary to the legitimate expectations of the Company for an employee in the Optionholder's position then the Designated Corporate Officer may reduce the number of Shares subject to an Option (including to zero) or if an Option has already been exercised but Shares have not yet been transferred (because of, for example, any Dealing Restrictions), transfer to the Optionholder a reduced number of Shares or no Shares at all.

 

	
  

	
4.4.2

	
Where an Optionholder has ceased to be an employee but has retained his Option as a consequence of rule 5.1, the Designated Corporate Officer retains the right to lapse his Option if, prior to the Option being exercised, the Optionholder joins a Competitor Organisation of any Member of the Group within 12 months of ceasing to be an employee. The Designated Corporate Officer will have the sole discretion to determine the definition of “Competitor Organisation”.

 

	
4.5

	
Ceasing to be an employee

 

For the purposes of these rules, an Optionholder will not be treated as ceasing to be an employee of a Member of the Group:

 

  

3

  

 

	
  

	
4.5.1

	
until he ceases to be an employee of all Members of the Group; or

 

	
  

	
4.5.2

	
unless the Designated Corporate Officer decides otherwise, if he recommences employment with, or becomes a director of, a Member of the Group within seven days.

 

	
5

	
Exercise and lapse in other circumstances – personal events

 

This rule 5 sets out exceptions to the general rules of exercise and lapse in rule 4.

 

	
5.1

	
Leaving in exceptional circumstances

 

	
  

	
5.1.1

	
If an Optionholder ceases to be an employee for any of the reasons set out below at least one year after the Date of Grant, his Options will not lapse and he may exercise them in accordance with rule 5.1.2. The reasons are:

 

	
  

	
(i)

	
redundancy;

 

	
  

	
(ii)

	
ill-health, injury, disability;

 

	
  

	
(iii)

	
the Optionholder’s employing company ceasing to be a Member of the Group;

 

	
  

	
(iv)

	
a transfer of the undertaking, or the part of the undertaking, in which the Optionholder works to a person which is neither under the Control of the Company nor a Member of the Group; and

 

	
  

	
(v)

	
any other reason, if the Designated Corporate Officer so decides in any particular case.

 

	
  

	
5.1.2

	
Where rule 5.1.1 applies, if the Optionholder ceases to be an employee:

 

	
  

	
(i)

	
before Vesting, he may exercise his Option within one year of Vesting,

 

	
  

	
(ii)

	
on or after Vesting, he may exercise his Option within one year of the date he ceases to be an employee.

 

The Option is only exercisable to the extent that any condition has been satisfied.

 

	
  

	
5.1.3

	
In addition, if either of rules 5.1.1(i), 5.1.1(iii) or 5.1.1(iv) apply unless the Designated Corporate Officer decides otherwise, the extent to which the Option is exercisable will be reduced pro rata to reflect any period during which the Optionholder was not an employee between the Date of Grant and Vesting.

 

	
  

	
5.1.4

	
The Designated Corporate Officer must exercise any discretion provided for in rule 5.1.1(v) within 80 days after cessation of the relevant Optionholder’s employment. If the Designated Corporate Officer allows an Optionholder to exercise his Option in accordance with rule 5.1.1(v) he will set the period during which the Option can be exercised but this may not be longer than one year from the date the Optionholder ceases to be an employee, unless the Designated Corporate Officer determines otherwise in any particular case. The Designated Corporate Officer may also impose any other conditions.

 

	
5.2

	
Death

 

If an Optionholder dies, his Options may be exercised by his personal representatives in full up to one year from his death.

 

  

4

  

 

	
5.3

	
Career breaks

 

	
  

	
5.3.1

	
If an Optionholder is on a Career Break on the date that his Option would Vest under the Plan, then unless the Designated Corporate Officer determines otherwise in any particular case, the Option will only become exercisable after the Designated Corporate Officer determines that the Optionholder has returned to normal employment at the end of the Career Break and has continued to be in his normal employment for a period of three months from the date of return, and in that period has not given or received notice of termination of employment.

 

	
  

	
5.3.2

	
Unless any of the reasons set out in rules 5.1, 5.2 or 6 apply, if the Optionholder ceases to be an employee of any Member of the Group before having returned to normal employment at the end of the Career Break or during the three month period referred to in rule 5.3.1, then his Option will lapse on cessation of employment. If any of the reasons set out in rules 5.1, 5.2 or 6 do apply, his Option will become exercisable in accordance with those rules.

 

	
5.4

	
Overseas transfer

 

This rule applies if an Optionholder is transferred to work in another country, and, as a result of that transfer, the Optionholder may either:

 

	
  

	
5.4.1

	
suffer a tax disadvantage in relation to his Options (this being shown to the satisfaction of the Designated Corporate Officer); or

 

	
  

	
5.4.2

	
become subject to restrictions on his ability to exercise his Options or to hold or deal in the Shares or the proceeds of the sale of the Shares acquired on exercise because of the security laws or exchange control laws of the country to which he is transferred.

 

If the Optionholder continues to hold an office or employment with a Member of the Group, the Designated Corporate Officer may permit the Optionholder to exercise the Option to such extent as he determines and during the period starting three months before and ending three months after the transfer takes place. If the Optionholder does not exercise his Options, following this rule 5.4, the usual exercise rules will apply to him at the appropriate times.

 

	
6

	
Exercise and lapse in other circumstances – corporate events

 

	
6.1

	
Takeovers

 

	
  

	
6.1.1

	
This rule 6.1 does not apply if Options are to be replaced in accordance with rule 6.4.

 

	
  

	
6.1.2

	
This rule applies where a person (or a group of persons acting in concert) obtains Control of the Company as a result of making an offer to acquire Shares.

 

	
  

	
6.1.3

	
When this rule applies, Options may be exercised (subject to any condition set in accordance with rule 1.3) until the earlier of:

 

	
  

	
(i)

	
the date six months after the date on which the person making the offer has obtained Control of the Company; and

 

	
  

	
(ii)

	
six weeks after the date on which a notice to acquire Shares under Section 979 of the Companies Act 2006 or any other equivalent local legislation is first served.

 

  

5

  

 

	
6.2

	
Company reconstructions

 

	
  

	
6.2.1

	
This rule does not apply if Options are to be replaced in accordance with rule 6.4.

 

	
  

	
6.2.2

	
This rule applies when, under Section 899 of the Companies Act 2006 or any other equivalent local legislation:

 

	
  

	
(i)

	
a court sanctions a compromise or arrangement in connection with the acquisition of Shares; or

 

	
  

	
(ii)

	
there is any other local equivalent to that sanction procedure.

 

	
  

	
6.2.3

	
When this rule applies, Options may be exercised (subject to any condition set in accordance with rule 1.3) within six months after the date of the sanction. Any Option not so exercised will lapse at the end of that period.

 

	
6.3

	
Demergers and other significant distributions

 

This rule does not apply if Options are to be replaced in accordance with rule 6.4.

 

If the Designated Corporate Officer becomes aware that the Company is or is expected to be affected by any demerger, dividend in specie, super dividend or other transaction not falling within rule 6.1 or 6.2 which, in the opinion of the Designated Corporate Officer, would affect the current or future value of any Option, the Designated Corporate Officer may, acting fairly, reasonably and objectively, in his discretion, allow some or all Options to be exercised (subject to any condition set in accordance with rule 1.3). The Designated Corporate Officer will specify the period of exercise of such Options, whether the Options will lapse at the end of the period

 

The Designated Corporate Officer will notify any Optionholder who is affected by the Designated Corporate Officer exercising his discretion under this rule.

 

	
6.4

	
Mergers and reorganisations

 

If, as a result of events specified in rules 6.1 to 6.2.3, a company (the “Acquiring Company”) obtains Control of the Company and:

 

	
  

	
6.4.1

	
the shareholders of the Acquiring Company, immediately after it has obtained Control, are substantially the same as the shareholders of the Company before then; or

 

	
  

	
6.4.2

	
the obtaining of Control is pursuant to a merger with the Company; and

 

	
  

	
6.4.3

	
the Company and the Acquiring Company consent to the replacement of Options under this rule 6.4,

 

then Options will not become exercisable. Instead, all rights under the Plan will be replaced in accordance with rule 7.3.

 

	
6.5

	
Designated Corporate Officer

 

In rules 6.1, 6.2 and 6.2.3, “Designated Corporate Officer” means the person who was the Designated Corporate Officer immediately before the relevant event.

 

	
7

	
Exchange of Options

 

	
7.1

	
Application

 

This rule 7 applies to all Options if any of the following occur:

 

  

6

  

 

	
  

	
7.1.1

	
a person (or a group of persons acting in concert) has obtained Control of the Company as a result of making an offer to acquire Shares;

 

	
  

	
7.1.2

	
a court sanctions a scheme of arrangement under Section 899 of the Companies Act 2006 (or equivalent local legislation) in connection with the acquisition of Shares or there is a local equivalent to that sanction procedure;

 

	
  

	
7.1.3

	
any person becomes entitled or bound to acquire Shares under Section 981 of the Companies Act 2006 (or equivalent legislation); or

 

	
  

	
7.1.4

	
the Company and the Acquiring Company consent to the replacement of Options in accordance with rule 6.4.

 

	
7.2

	
Agreement to exchange

 

If this rule 7 applies, Options may be exchanged during the period of six months after the relevant event and with the agreement of the company offering the exchange.

 

	
7.3

	
Exchange terms

 

Where an Option is to be exchanged, the Optionholder will be granted a new option to replace it.

 

Where an Optionholder is granted a new option:

 

	
  

	
7.3.1

	
the new option will be in respect of shares in any body corporate determined by the company offering the exchange;

 

	
  

	
7.3.2

	
the new option will be equivalent to the Option that was exchanged;

 

	
  

	
7.3.3

	
the new option will be treated as having been acquired at the same time as the Option that was exchanged and will be exercisable in the same manner and at the same time;

 

	
  

	
7.3.4

	
the new option will be subject to the rules as they last had effect in relation to the Option that was exchanged; and

 

	
  

	
7.3.5

	
with effect from the exchange, the rest of the rules will be construed in relation to the new option as if references to Shares were references to the shares over which the new option is granted and references to the Company were references to the body corporate determined under rule 7.3.1.

 

	
8

	
Exercise of Options

 

	
8.1

	
Exercise

 

An Optionholder can exercise his Option validly only in the way described in, and subject to, this rule 8.

 

	
8.2

	
Part exercise

 

Subject to any other restriction in the rules, an Option may be exercised in respect of all the Shares under the Option or only some of those Shares. The Designated Corporate Officer may set a minimum limit in respect of which an Option can be exercised.

 

	
8.3

	
Manner of exercise

 

Options must be exercised in a form specified by the Company and must be accompanied by correct payment in full of the Option Price for the number of Shares being acquired or details of arrangements agreed between the Optionholder and the Company made for the payment of the Option Price for the number of Shares being acquired.

 

  

7

  

 

	
8.4

	
Option exercise date

 

	
  

	
8.4.1

	
Subject to rules 8.4.2, the “Option Exercise Date” will be the date of receipt by the Company or other duly appointed agent of the notice and, if appropriate, documents and the payment referred to in rule 8.3.

 

	
  

	
8.4.2

	
If an option exercise notice is delivered at a time when there is a Dealing Restriction, the Option Exercise Date will be the date when the Optionholder is permitted to exercise an Option following the lifting of such Dealing Restriction provided, however, this rule does not extend any period in which an Option is exercisable.

 

	
  

	
8.4.3

	
If an Option lapses before the Option Exercise Date, any attempted exercise of that Option is invalid. No employee has any right to compensation if an Option becomes exercisable under the Plan but lapses before the Option Exercise Date.

 

	
8.5

	
Transfer of Shares

 

Subject to rule 8.7 (Consents) following the exercise of an Option, the Designated Corporate Officer will procure that the Shares are transferred to the Optionholder within 30 days of the Option Exercise Date.

 

	
8.6

	
Rights

 

Optionholders will be entitled to all rights attaching to the Shares by reference to a record date on or after the transfer date. They will not be entitled to rights before that date.

 

	
8.7

	
Consents

 

All transfers of Shares will be subject to any necessary consents under any relevant enactments or regulations for the time being in force in the United Kingdom or elsewhere.

 

	
8.8

	
Articles of association

 

Any Shares acquired on the exercise of Options are subject to the articles of association of the Company from time to time in force.

 

	
8.9

	
Cash alternative

 

The Designated Corporate Officer may at any time determine not to procure the transfer of Shares to an Optionholder who exercises his Option, but instead to pay to him (subject to the withholding provisions in rule 8.10) a cash amount. This cash amount must be equal to the amount by which the market value of the Shares in respect of which the Option is exercised exceeds the Option Price. Alternatively, the Designated Corporate Officer may procure the transfer of Shares to the value of that cash amount. If the Designated Corporate Officer so determines, the Optionholder need not pay the Option Price or, if he has paid it, the Company will repay the Option Price to him.

 

	
8.10

	
Withholding, deduction and offsets

 

	
  

	
8.10.1

	
Any Member of the Group, duly appointed agent or trustee of any employee benefit trust may withhold such amount and make such arrangements as it considers necessary to meet any liability to taxation or social security contributions in respect of Options. These arrangements may include the sale or reduction in number of any Shares or the Optionholder discharging the liability himself.

 

  

8

  

 

	
  

	
8.10.2

	
In addition, it shall be a condition of exercise that any Member of the Group, duly appointed agent or trustee may deduct from and set off against the Shares (whether payable in cash or Shares and whenever payable) any debt, obligation, liability, or other amount owed by the Optionholder to a Member of the Group, including but not limited to amounts under an expatriate tax policy (as currently in effect or as amended from time to time), or amounts advanced on behalf of the Optionholder with respect to employment taxes, as determined in the sole discretion of the Designated Corporate Officer.

 

	
9

	
General

 

	
9.1

	
Notices

 

	
  

	
9.1.1

	
Any notice or other document which has to be given to an Eligible Employee or Optionholder under or in connection with the Plan may be:

 

	
  

	
(i)

	
delivered or sent by post to him at his home address according to the records of the Member of the Group employing him;

 

	
  

	
(ii)

	
sent by e-mail or fax to any e-mail address or fax number which according to the records of the Member of the Group is used by him; or

 

	
  

	
(iii)

	
posted on the Company’s website

 

or in the case of (i) or (ii) above, such other address which the Company considers appropriate.

 

	
  

	
9.1.2

	
Any notice or other document which has to be given to the Company or other duly appointed agent under or in connection with the Plan may be delivered or sent by post to it at its respective registered office (or such other place as the Designated Corporate Officer or duly appointed agent may from time to time decide and notify to Optionholders) or sent by e-mail or fax to any e-mail address or fax number notified to the sender.

 

	
  

	
9.1.3

	
Notices sent by post will be deemed to have been given on the earlier of the date of actual receipt and the second day after the date of posting. However, notices sent by or to an Optionholder who is working overseas will be deemed to have been given on the earlier of the date of actual receipt and the seventh day after the date of posting.

 

	
  

	
9.1.4

	
Notices sent by e-mail or fax, in the absence of evidence of non-delivery, will be deemed to have been received on the day after sending.

 

	
9.2

	
Documents sent to shareholders

 

The Company, if it considers appropriate, may send to Optionholders copies of any documents or notices normally sent to the holders of its Shares at or around the same time as issuing them to the holders of its Shares.

 

	
9.3

	
Designated Corporate Officer’s decisions final and binding

 

The decision of the Designated Corporate Officer on the interpretation of the rules or in any dispute relating to an Option or matter relating to the Plan will be final and conclusive.

 

  

9

  

 

	
9.4

	
Costs

 

The Company will pay the costs of introducing and administering the Plan. The Company may ask an Optionholder’s employer to bear the costs in respect of an Option granted to that Optionholder.

 

	
9.5

	
Regulations

 

The Designated Corporate Officer has the power from time to time to make or vary regulations for the administration and operation of the Plan, but these must be consistent with the rules.

 

	
9.6

	
Terms of employment

 

	
  

	
9.6.1

	
For the purposes of this rule, “Employee” means any employee of a Member of the Group.

 

	
  

	
9.6.2

	
This rule 9.6 applies during an Employee’s employment and after the termination of an Employee’s employment, whether or not the termination is lawful.

 

	
  

	
9.6.3

	
Where a contract of employment exists for an Optionholder, nothing in the rules or the operation of the Plan forms part of the contract of employment of an Employee. Where no contract of employment exists, nothing in the rules or the operation of the Plan creates in whole or in part a contract of employment.  The rights and obligations arising from the employment relationship between the Employee and his employer are separate from, and are not affected by, the Plan. Participation in the Plan does not create any right to, or expectation of, continued employment.

 

	
  

	
9.6.4

	
No employee has a right to participate in the Plan. Participation in the Plan or the grant of Options on a particular basis in any year does not create any right to or expectation of participation in the Plan or the grant of Options on the same basis, or at all, in any future year.

 

	
  

	
9.6.5

	
The terms of the Plan do not entitle the Employee to the exercise of any discretion in his favour.

 

	
  

	
9.6.6

	
The Employee will have no claim or right of action in respect of any decision, omission or discretion which may operate to the disadvantage of the Employee even if it is unreasonable, irrational or might otherwise be regarded as being in breach of the duty of trust and confidence (and/or any other implied duty) between the Employee and his employer.

 

	
  

	
9.6.7

	
No Employee has any right to compensation for any loss in relation to the Plan, including any loss in relation to:

 

	
  

	
(i)

	
any loss or reduction of rights or expectations under the Plan in any circumstances (including lawful or unlawful termination of employment);

 

	
  

	
(ii)

	
any exercise of a discretion or a decision taken in relation to an Option or to the Plan, or any failure to exercise a discretion or take a decision; or

 

	
  

	
(iii)

	
the operation, suspension, termination or amendment of the Plan.

 

	
  

	
9.6.8

	
Participation in the Plan is permitted only on the basis that the Optionholder accepts all the provisions of the rules, including this rule 9.6. By participating in the Plan, an Employee waives all rights under the Plan, other than the right to exercise an Option subject to and in accordance with the express terms of the rules.

 

  

10

  

 

	
  

	
9.6.9

	
Nothing in this Plan confers any benefit, right or expectation on a person who is not an Employee. No such third party has any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Plan. This does not affect any other right or remedy of a third party which may exist.

 

	
9.7

	
Employee trust

 

The Company and any Member of the Group may provide money to the trustee of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by Section 682 of the Companies Act 2006.

 

	
9.8

	
Data protection

 

By participating in the Plan, the Optionholder consents to the holding and processing of personal data provided by the Optionholder to any Member of the Group, trustee or third party service provider for all purposes relating to the operation of the Plan. These include, but are not limited to:

 

	
  

	
9.8.1

	
administering and maintaining Optionholder records;

 

	
  

	
9.8.2

	
providing information to Members of the Group, trustees of any employee benefit trust, registrars, brokers or third party administrators of the Plan;

 

	
  

	
9.8.3

	
providing information to future purchasers of the Company or the business in which the Optionholder works; and

 

	
  

	
9.8.4

	
transferring information about the Optionholder to a country or territory outside the European Economic Area that may not provide the same statutory protection for the information as the Optionholder’s home country.

 

	
10

	
Changing the Plan and termination

 

	
10.1

	
Designated Corporate Officer’s powers

 

The Designated Corporate Officer may change or terminate the Plan at any time with or without prior notification to the Optionholders. However, Options granted before such termination will continue to be valid and will be exercisable as described in these rules.

 

	
10.2

	
Notice

 

The Designated Corporate Officer may give written notice of any changes made to or termination of the Plan to any Optionholder affected.

 

	
11

	
Governing law and jurisdiction

 

English law governs the Plan and all Options and their construction. The English courts have non-exclusive jurisdiction in respect of disputes arising under or in connection with the Plan or any Option.

 

	
12

	
Meanings of words used

 

In these rules:

 

“ADS” means an American depositary share representing ordinary shares of the Company;

 

  

11

  

 

“Business Day” means a day on which the London Stock Exchange (or, if relevant and if the Designated Corporate Officer determines, any stock exchange nominated by the Designated Corporate Officer on which the Shares are traded) is open for the transaction of business;

 

“Career Break” means an extended period of unpaid leave from normal work, without ceasing to be an employee or director of any Member of the Group, with the agreement of the Company and which is designated by the Designated Corporate Officer as a Career Break for the purposes of these rules;

 

“Company” means BP p.l.c.;

 

“Control” has the meaning given to it by Section 995 of the Income Tax Act 2007;

 

“Date of Grant” means the date which the Designated Corporate Officer sets for the grant of an Option;

 

“Dealing Restrictions” means restrictions imposed by statute, order, regulation or Government directive, or by the Model Code or any code adopted by the Company based on the Model Code and for this purpose the Model Code means the Model Code on dealings in securities set out in Listing Rule 9, annex 1 (of the London Stock Exchange), as varied from time to time;

 

“Designated Corporate Officer” means the Group Chief Executive or other appropriate Corporate Officer or employee authorised under BP’s System of Internal Control and associated delegations;

 

“Eligible Employee” means any person who is an employee of a Member of the Group but excludes an executive director of the Company;

 

“Exercise Period“ means the period between the vesting of an Option and its lapse.

 

“Listing Rules” means the rules relating to admission to the Official List;

 

“London Stock Exchange” means London Stock Exchange plc or its successor;

 

“Member of the Group” means:

 

	
  

	
(i)

	
the Company;

 

	
  

	
(ii)

	
its Subsidiaries from time to time; or

 

	
  

	
(iii)

	
any other company which is associated with the Company and is so designated by the Designated Corporate Officer;

 

“Model Code” means the Model Code on dealings in securities set out in Listing Rule 9, annex 1;

 

“Official List” means the list maintained by the Financial Services Authority for the purpose of section 74(1) of the Financial Services and Markets Act 2000;

 

“Option” means a right to acquire Shares granted under the Plan which is subject to the rules;

 

“Optionholder” means a person holding an Option or his personal representatives;

 

“Option Period” means a period starting on the Date of Grant of an Option and ending at the end of the day before the tenth anniversary of the Date of Grant, or such shorter period as may be specified on the Date of Grant;

 

  

12

  

 

“Option Price” means the amount payable for each Share on the exercise of an Option calculated as described in rule 2;

 

“Plan” means these rules known as “The BP Recovery Plan 2011”, as changed from time to time;

 

“Regulatory Information Service” means a service that is approved by the Financial Services Authority as meeting the Primary Information Provider criteria and is on the list of Regulatory Information Services maintained by the Financial Services Authority;

 

“Shares” means fully paid ordinary shares in the capital of the Company;

 

“Subsidiary” means a company which is a subsidiary of the Company within the meaning of Section 1159 of the Companies Act 2006; and

 

“Vesting” means the date on which an Option ordinarily becomes exercisable as set by the Designated Corporate Officer on the Date of Grant and “Vest” shall be construed accordingly.

 

  

13

  

 

Schedule 1

 

US

 

This United States (“US”) Schedule has been adopted by the Company and shall vary the terms of the Plan (and any other related documents) accordingly for all US Optionholders. For the purposes of this Schedule 1, a “US Optionholder” means an Optionholder who is:

 

	
(i)

	
a US citizen;

 

	
(ii)

	
a US permanent resident (as may be evidenced by a so-called “green card” and/or participation in a US tax-qualified pension plan sponsored by a Member of the Group);

 

	
(iii)

	
a non-US citizen who is posted to the United States as of a Vesting Date and who is (or expected to become) subject to US taxation as a resident alien; or

 

	
(iv)

	
a non-US citizen subject to US taxation, including a non-resident alien taxpayer of the United States, but only to the extent that his or her grant, Vesting or Exercise of Options, in whole or in part, is deemed to be income from a US source subject to taxation under the Internal Revenue Code of 1986, as amended (the “Code”).

 

Rule 1.3 shall be varied by adding the following:

 

For purposes of Rule 1.3, the Designated Corporate Officer may not waive or change conditions for a US Optionholder in a manner which would waive or change Rules 4.2 and/or 4.4.1.

 

Rule 1.7.2(ii) shall be varied by removing the following:

 

Rule 1.7.2 (ii): This subsection shall not apply.

 

Rule 2.2 shall be varied by adding the following:

 

If such an average is used for Options granted to US Optionholders, the Designated Corporate Officer shall designate the US Optionholder receiving the Options, the number of Shares or ADSs subject to the Options and the method for determining the Option Price, including the period over which the averaging will occur, before the beginning of the specified averaging period.

 

Rule 3.1 shall be varied by adding the following:

 

The Designated Corporate Officer may, in his/her discretion, modify such adjustment with respect to Options held by US Optionholders to the extent necessary to avoid non-compliance with Section 409A of the Code.

 

Rule 5.1.1 shall be replaced in its entirety to read as follows:

 

5.1.1        Leaving in exceptional circumstances

 

If a US Optionholder ceases to be employed by any Member of the Group before the Vesting date but at least one year after the Date of Grant for any of the reasons set out below, his Options do not lapse and will Vest on the Vesting date and can be exercised as provided in 5.1.2. The reasons are:

 

(i) Disability. For the purposes of this Rule, a US Optionholder will be considered Disabled if he is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of a Member of the Group; or (c) otherwise disabled within the meaning of Section 409A of the Code;

 

  

14

  

 

(ii) a US Optionholder’s involuntary termination of employment with any Member of the Group, other than due to such Optionholder’s conduct or performance. For avoidance of doubt, the following circumstances will be considered an involuntary termination of employment: (a) termination of a US Optionholder’s employment by his or her employer with no anticipated return to employment with a Member of the Group, or a termination considered by the Designated Corporate Officer to have been initiated by the US Optionholder’s employer with no anticipated return to employment with a Member of the Group, in both cases where the termination is not based on the US Optionholder’s conduct or performance; or (b) termination of a US Optionholder’s employment as a result of a Change in Control.  A transfer of employment from one Member of the Group to another will not be considered a termination of employment, nor will a reduction in hours, unless such is considered an involuntary termination of employment within the meaning of Section 409A of the Code.

 

Rule 5.1.3 shall be replaced in its entirety to read as follows:

 

In addition, if rule 5.1 of this US schedule applies, the extent to which the Option is exercisable will be reduced pro rata to reflect any period during which the Optionholder was not an employee between the Date of Grant and Vesting.

 

Rule 5.1.4 shall be varied as follows:

 

Rule 5.1.4 shall not apply

 

Rule 5.2 shall be varied by adding the following:

 

In relation to any deceased US Optionholder, an Option may not be exercised under this rule 5.2 until all relevant US securities filings have been made and any other relevant US securities laws’ requirements have been satisfied in respect of the Plan.

 

Rule 5.3 shall be varied by adding the following:

 

Rule 5.3 is not intended to be applied to a Optionholder who is considered a US Optionholder. If applicable non-US law requires the general application of Rule 5.3 to any US Optionholder, Rule 5.3 will be applied in a manner consistent with the provisions of Rule 5.1 of this US Schedule.

 

Rule 5.4 shall be varied by adding the following:

 

Rule 5.4 is not intended to be applied to a US Optionholder.

 

Rule 6 shall be varied by adding the following:

 

This Rule 6 will only apply to US Optionholders and Options issued to them when there is a Change in Control, as defined herein.

 

Rule 7 shall be varied by adding the following:

 

This Rule 7 will only apply to US Optionholders and Options issued to them when there is a Change in Control, as defined herein.

 

Rule 7.3 shall be varied by adding the following:

 

The Designated Corporate Officer may, in his/her discretion, modify the terms of any exchange made under the Rule 7 with respect to Options held by US Optionholders to the extent necessary to avoid non-compliance with Section 409A of the Code.

 

  

15

  

 

Rule 9.2 shall be varied as follows:

 

The Company will send to US Optionholders copies of any documents or notices required to be sent to US Optionholders in accordance with the rules and regulations of the US securities laws.

 

Rule 9.7 shall be varied as follows:

 

Rule 9.7 shall not apply, but only to avoid non-compliance with Section 409A of the Code.

 

Rule 11 shall be varied by adding the following:

 

11           Governing law and jurisdiction

 

11.1        Compliance with Section 409A and Other Applicable Laws

 

To the extent that the grant of Options results in the deferral of compensation under Section 409A of the Code: (i) the intent of all terms used by the Plan is to comply with Section 409A and its implementing regulations, as currently in effect or as hereafter may be amended; (ii) for US Optionholders the delivery of Shares or other property will not occur until the earliest date permitted under Section 409A(a)(2) and (a)(3) of the Code; and (iii) the Plan shall be unfunded for the purposes of Section 409A of the Code.

 

Notwithstanding any provision of this Plan to the contrary, including but not limited to rule 10.1 the Designated Corporate Officer may amend or terminate the grant, Vesting and/or exercise of Options under this Plan at any time and without prior notice if he determines in his sole discretion that such action is necessary or advisable to avoid or mitigate potential non-compliance with applicable law or if compliance would create unreasonable administrative burdens. If the terms of a grant, Vesting or exercise of Options are amended or terminated, the Company is under no obligation to provide any consideration or remuneration in lieu of the grant, Vesting and/or exercise of Options.

 

All taxes, penalties, or interest imposed on any Optionholder due to any failure to comply with Section 409A of the Code or other tax rule shall be the Optionholder’s responsibility and no Member of the Group shall have any obligation to keep the Optionholder whole.  The Company shall not be liable for any action or determination made with respect to the Plan or any action or determination with respect to an Option or Options that results in such Options (individually or entirely) becoming subject to taxation or penalties under Section 409A of the Code.

 

Rule 12 shall be varied by adding the following:

 

“Change of Control” shall mean a change in the ownership of the Company, change in effective control of the Company or change in the ownership of a substantial portion of the Company’s assets, as such phrases are specifically defined by United States Treasury Regulations Section 1.409A-2(i)5(v), (vi) and (vii), as applicable to the terms herein and as may hereafter be amended.

 

Rule 12, definition of “Career Break” shall be varied by adding the following:

 

For US Optionholders, a Career Break shall only be recognized for purposes of this Plan if the Optionholder is reasonably expected to return to work with a Member of the Group after the expiration of the break and such break is approved by a Member of the Group in advance of the break’s onset.  The maximum recognized period for a Career Break will be six (6) months (or such longer period if the Optionholder has a legal or contractual right to return to work with a Member of the Group immediately following the expiration of the break), with a voluntary termination of employment considered to have taken place for purposes of the Plan for any such longer period.

 

  

16

  

 

Rule 12, subsection (iii) of the definition of “Member of the Group” shall be amended to read as follows:

 

(iii) Any other company which is associated with the Company, is so designated by the Designated Corporate Officer and is permitted to be included as an employer of US Optionholders for purposes of any relevant US securities laws’ registration statements.

 

 

17

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