ITEM
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The
following is a summary of the relevant provisions in the articles of incorporation, bylaws, and Nevada law with regard to limitation
of liability and indemnification of officers, directors and employees of the Company.
Limitation
of Liability.
Articles
of Incorporation and Bylaws.
There
are no provisions in the Company’s articles of incorporation or bylaws with regard to liability of a director
Nevada
Revised Statutes.
“NRS
78.138 Directors and officers: Exercise of powers; performance of duties; presumptions and considerations; liability to corporation
and stockholders.
(7) Except
as otherwise provided in NRS 35.230, a director or officer is not individually liable to the corporation or its stockholders for
any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that:
(a)
His act or failure to act constituted a breach of his fiduciary duties as a director or officer; and
(b)
His breach of those duties involved intentional misconduct, fraud or a knowing violation
of law.”
Indemnification.
Articles
of Incorporation and Bylaws.
There
are no provisions in the articles of incorporation with regard to indemnification. The bylaws of the Company provide the following
with regard to indemnification:
“No
director shall be liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director’s duty of loyalty to the corporation or its stockholders,
(2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability which
may be specifically defined by law or (4) a transaction from which the director derived an improper personal benefit, it being
the intention of the foregoing provision to eliminate the liability of the corporation’s directors to the corporation or
its stockholders to the fullest extent permitted by law. The corporation shall indemnify to the fullest extent permitted by law
each person that such law grants the corporation the power to indemnify.”
Nevada
Revised Statutes.
“NRS
78.7502 Discretionary and mandatory indemnification of officers, directors, employees and agents: General provisions.
1. A corporation may indemnify any 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, whether civil, criminal, administrative or investigative, except 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 of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he
:
(a) Is not liable pursuant to d
irectors
and officers duty to exercise their powers in good faith and with a view to the interests of the corporation];
or
(b) Acted
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, had no reasonable cause to believe his conduct was unlawful.
The
termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person
is liable pursuant
to or
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,
or
that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit 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 of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably
incurred by him in connection with the defense or settlement of the action or suit if he
:
(a) Is not liable pursuant to; or
(b) Acted
in
good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation.
Indemnification
may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2,
or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys’
fees, actually and reasonably incurred by him in connection with the defense.”
“NRS 78.751 Authorization
required for discretionary indemnification; advancement of expenses; limitation on indemnification and advancement of expenses.
1. Any
discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court or advanced pursuant to subsection 2, may
be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By
the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c) If
a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If
a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
2. The
articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and
in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director
or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that the director or officer
is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement
of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
3. The indemnification pursuant to NRS 78.7502 and advancement of expenses authorized in or ordered by a court pursuant to this section:
(a) Does
not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an
action in the person’s official capacity or an action in another capacity while holding office, except that indemnification,
unless ordered by a court pursuant to NRS 78.7502 or for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director or officer if a final adjudication establishes that the director’s or officer’s
acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
A right to indemnification or to advancement of expenses arising under a provision of the articles of incorporation or any bylaw
is not eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject
of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of
expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination
or impairment after such action or omission has occurred.
(b) Continues
for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.”
“NRS
78.752 Insurance and other financial arrangements against liability of directors, officers, employees and agents.
(1) A
corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who 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 of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against
him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his
status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.
(2) The
other financial arrangements made by the corporation pursuant to subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The
establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a security interest or
other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety.
No
financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except
with respect to the advancement of expenses or indemnification ordered by a court.
(3) Any
insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation
or any other person approved by the board of directors, even if all or part of the other person’s stock or other securities
is owned by the corporation.
(4) In
the absence of fraud:
(a) The decision of the board of directors as to the propriety of the terms and conditions
of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(b) The
insurance or other financial arrangement:
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(i)
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Is not void or voidable;
and
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(ii)
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Does
not subject any director approving it to personal liability for his action, even if a
director approving the insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
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(5) A
corporation or its subsidiary which provides self-insurance for itself or for another affiliated corporation pursuant to this
section is not subject to the provisions of Title 57 of NRS.”