| Item 6. |
Indemnification of Directors and Officers. |
The Virginia Stock Corporation Act (the “VSCA”) permits, and the Company’s articles of incorporation (the “Articles”)
require, to the fullest extent permitted by Virginia law, that the Company indemnify its officers and directors in a variety of circumstances, which may include indemnification for liabilities under the Securities Act. Under Sections 13.1-697 and 13.1-702 of the VSCA, a Virginia corporation generally is authorized to indemnify its directors and officers in civil and criminal actions if such officer or
director acted in good faith and believed, in the case of conduct in his or her official capacity with the corporation, that his conduct was in the best interests of the corporation or in all other cases, that his conduct was at least not opposed to
its best interests, and, in the case of any criminal proceeding, he had no reasonable cause to believe that his conduct was unlawful. The VSCA requires such indemnification, unless limited by a corporation’s articles of incorporation, when a
director or officer entirely prevails in the defense of any proceeding to which he was a party because he is or was a director or officer of the corporation.
The Articles provide that the Company must indemnify any individual who is, was or is threatened to be made a party to a civil, criminal,
administrative, investigative or other proceeding (including a proceeding by or in the right of the Company or by or on behalf of its shareholders) because such individual is or was a director or officer of the Company or of any legal entity
controlled by the Company, or is or was a fiduciary of any employee benefit plan established at the direction of the Company, against all liabilities and reasonable expenses incurred by him on account of the proceeding, provided that the directors
of the Company (excluding the indemnified party) determine in good faith that his course of conduct which caused the loss or liability was in the best interests of the Company, and provided further that such liabilities and expenses were not
incurred because of his willful misconduct, bad faith, reckless disregard of duties or knowing violation of the criminal law. Before any indemnification is paid, a determination must be made that indemnification is permissible in the
circumstances because the person seeking indemnification is eligible for indemnification and has met the standard of conduct set forth above. Such determination must be made in the manner provided by Virginia law for determining that
indemnification of a director is permissible; provided, however, that if a majority of the directors of the Company has changed after the date of the alleged conduct giving rise to a claim for indemnification, the determination that indemnification
is permissible must, at the option of the person claiming indemnification, be made by special legal counsel agreed upon by the board of directors of the Company and such person.
Unless a determination has been made that indemnification is not permissible, the Company must make advances and reimbursement for expenses
incurred by any person named above upon receipt of an undertaking from him to repay the same if it is ultimately determined that such individual is not entitled to indemnification. The Company is authorized to contract in advance to indemnify its
directors and officers to the extent it is required to indemnify them pursuant to the provisions described above.
Notwithstanding the
above, indemnification will not be allowed for any liability imposed by judgment, and costs associated therewith, including attorneys’ fees, arising from or out of an alleged violation of federal or state securities laws associated with the
public offering of the Company’s common shares unless (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Commission and of the published position of any state securities regulatory
authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.
The rights of
each person or entity entitled to indemnification under the Articles shall inure to the benefit of such person’s or entity’s heirs, executors, administrators, successors or assigns. Indemnification pursuant to the Articles shall not be
exclusive of any other right of indemnification to which any person or entity may be entitled, including indemnification pursuant to a valid contract, indemnification by legal entities other than the Company, and indemnification under policies of
insurance purchased and maintained by the Company or others. However, no person or entity shall be entitled to indemnification by the Company to the extent such person or entity is indemnified by another, including an insurer.
Insofar as the foregoing provisions permit indemnification of directors or officers for liability arising under the Securities Act, we have
been informed that, in the opinion of the Commission, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
