Exhibit 10.20
INDEMNIFICATION AGREEMENT dated as of _____________, 19_, between DESTIA
COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and
_____________________ ("Indemnitee").
It is essential to the Company to retain and attract as directors and
officers the most capable persons available. It is becoming increasingly more
difficult for companies to attract the most qualified and experienced people to
serve as officers and directors because of the tendency in the United States of
increasing litigation and other challenges by stockholders and others against
officers and directors of companies. In recognition of Indemnitee's need for
substantial protection against personal liability in order to enhance
Indemnitee's continued and effective service to the Company, and in order to
induce Indemnitee to provide such services to the Company as a director or
officer, the Company wishes to provide in this Agreement for the indemnification
of and the advancing of expenses to Indemnitee to the fullest extent (whether
partial or complete) permitted by law and as set forth in this Agreement,
whether or not insurance is maintained to provide coverage for Indemnitee.
NOW THEREFORE, in consideration of the foregoing and of Indemnitee's
continued service to the Company and intending to be legally bound hereby, the
parties agree as follows:
1. Certain Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall be deemed to have occurred if (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the company is or becomes the "Beneficial
Owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 20% or more of the total voting power
represented by the Company's then outstanding Voting Securities (a "20%
Interest"), (ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation that would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company's assets.
2
"Expenses" shall mean any expense, liability or loss, including attorneys'
fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be
paid in settlement, any interest, assessments, or other charges imposed thereon,
and any federal, state, local or foreign taxes imposed as a result of the actual
or deemed receipt of any payments under this Agreement, paid or incurred in
connection with investigating, defending, being a witness in, or participating
in (including on appeal), or preparing for any of the foregoing, any Proceeding
relating to any Indemnifiable Event.
"Indemnifiable Event" shall mean any event or occurrence that takes place
either prior to or after the execution of this Agreement, related to the fact
that Indemnitee is or was a director or an officer of the Company, or while a
director or officer is or was serving at the request of the Company as a
director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust,
or other enterprise, or was a director, officer, employee, or agent of a foreign
or domestic corporation that was a predecessor corporation of the Company or of
another enterprise at the request of such predecessor corporation, or related to
anything done or not done by Indemnitee in any such capacity, whether or not the
basis of the Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as a
director, officer, employee, or agent of the Company, as described above.
"Independent Counsel" shall mean the person or body appointed in
connection with Section 3.
"Proceeding" shall mean any threatened, pending, or completed action,
suit, or proceeding (including an action by or in the right of the Company) or
any inquiry, hearing, or investigation, whether conducted by the Company, a
stockholder or bond holder of the Company, a governmental body, or any other
party, that Indemnitee in good faith believes might lead to the institution of
any such action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other.
"Reviewing Party" shall mean the person or body appointed in accordance
with Section 3.
"Voting Securities" shall mean any securities of the Company that vote
generally in the election of directors.
2. Agreement to Indemnify.
(a) General Agreement. In the event Indemnitee was, is, or becomes a party
to or witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Proceeding by reason of (or arising out of)
an Indemnifiable Event, the Company shall indemnify Indemnitee from and against
any and all Expenses to the fullest extent permitted by law applicable to the
Indemnifiable Event, or as the same may exist currently or may hereafter be
amended or interpreted (but in the case of any such subsequent amendments or
interpretations, only to the extent that such amendments or interpretations
permit the Company to provide broader indemnification rights than were permitted
prior thereto). The parties hereto intend that this Agreement shall provide for
indemnification in excess of that expressly permitted by statute, including,
without limitation, any indemnification provided by the company's Certificate of
Incorporation, its By-laws, vote of its stockholders or disinterested directors,
or applicable law.
(b) Initiation of Proceeding. Notwithstanding anything in this Agreement
to the contrary, Indemnitee shall not be entitled to indemnification pursuant to
this Agreement in connection with any Proceeding initiated by Indemnitee against
the Company or any director or officer of the Company unless
3
(i) the Company has joined in or the Board has consented to the initiation of
such Proceeding; (ii) the Proceeding is one to enforce indemnification rights
under Section 5 hereof; or (iii) the Proceeding is instituted after a Change in
Control (other than a Change in Control approved by a majority of the directors
on the Board who were directors immediately prior to such Change in Control) and
Independent Counsel has approved its initiation.
(c) Expense Advances. If so requested by Indemnitee, the Company shall
advance (within ten business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance"); provided that, if and to the extent the
Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid in connection with the Proceeding then in question. If
Indemnitee has commenced or commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, as provided in Section 4,any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed). Indemnitee's obligation to
reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon.
(d) Mandatory Indemnification. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits in
defense of any Proceeding relating in whole or in part to an Indemnifiable Event
or in defense of any issue or matter therein, Indemnitee shall be indemnified
against all Expenses incurred in connection therewith.
(e) Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled.
(f) Prohibited Indemnification. No indemnification pursuant to this
Agreement shall be paid by the Company on account of any Proceeding in which
judgment is rendered against Indemnitee for an account of profits made from the
purchase or sale by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
or similar provisions of any federal, state, or local laws, or in the event
Indemnitee is found in the applicable Proceeding to have committed gross
negligence or reckless disregard of his or her fiduciary obligations under
Delaware law.
3. Reviewing Party
Prior to any Change in Control, the Reviewing Party shall be any
appropriate person or body consisting of a member or members of the Board; after
a Change in Control, the Reviewing Party shall be the Independent Counsel
referred to below. With respect to all matters arising after a Change in Control
(other than a Change in Control approved by a majority of the directors
comprising the Board immediately prior to such Change of Control) concerning the
rights of Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or under applicable law or the Company's
Articles of Incorporation or By-laws now or hereafter in effect relating to
indemnification for Indemnifiable Events, the Company shall seek advice only
from Independent Counsel selected by
4
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Company or the
Indemnitee (other than in connection with indemnification matters) within the
last five years. The 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. Such counsel,
among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee should be permitted
to be indemnified under applicable law. The Company agrees to pay the reasonable
fees of the Independent Counsel and to indemnify fully such counsel against any
and all expenses (including attorneys' fees), claims, liabilities, loss and
damages arising out of or relating to this Agreement or the engagement of
Independent Counsel pursuant hereto.
4. Indemnification Process and Appeal.
(a) Indemnification Payment. Indemnitee shall be entitled to
indemnification of Expenses, and shall receive payment thereof, from the Company
in accordance with this Agreement as soon as practicable after Indemnitee has
made written demand on the Company for indemnification, unless the Reviewing
Party has given a written opinion to the Company that Indemnitee is not entitled
to indemnification under this agreement and applicable law.
(b) Suit to Enforce Rights. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification within thirty days
after making a demand in accordance with Section 4(a), Indemnitee shall have the
right to enforce its indemnification rights under this Agreement commencing
litigation in any court in the State of New York having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any determination by the Reviewing
Party or any aspect thereof. The Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
not challenged by the Indemnitee shall be binding on the Company and Indemnitee.
The remedy provided for in this Section 4 shall be in addition to any other
remedies available to Indemnitee in law or equity.
(c) Defense to Indemnification, Burden of Proof, and Presumptions. It
shall be a defense to any action brought by Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the Company) that it is not
permissible under applicable law or under this Agreement for the Company to
indemnify Indemnitee for the amount claimed. In connection with any such action
or any determination by the Reviewing Party or otherwise as to whether
Indemnitee is entitled to be indemnified hereunder, the burden of proving such a
defense or determination shall be on the Company. Neither the failure of the
Reviewing Party or the Company (including its Board, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such action by Indemnitee that indemnification of the claimant is proper under
the circumstances because he has met the standard of conduct set forth in
applicable law, nor an actual determination by the Reviewing Party or Company
(including its Board, independent legal counsel, or its stockholders) that the
Indemnitee had not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination
of any claim, action, suit, or proceeding, by judgment, order, settlement
(whether with or without court approval), conviction, or upon a plea of nolo
contendere, or the equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct
5
or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law.
5. Indemnification for Expenses Incurred in Enforcing Rights.
The Company shall indemnify Indemnitee against any and all Expenses that
are incurred by Indemnitee in connection with any action brought by Indemnitee
for (i) indemnification of Expenses by the Company under this Agreement or any
other agreement or under the Company's Articles of Incorporation or By-laws now
or hereafter in effect relating to indemnification for Indemnifiable Events,
and/or (ii) recovery under directors' and officers' liability insurance policies
maintained by the Company, but only in the event that Indemnitee ultimately is
determined to be entitled to such indemnification or insurance recovery, as the
case may be. In addition, the Company shall, if so requested by Indemnitee,
advance the foregoing Expenses to Indemnitee, subject to and in accordance with
Section 2(c).
6. Notification and Defense of Proceeding.
(a) Notice. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee, will, if a claim in respect thereof
is to be made against the Company under this Agreement, notify the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve it from any liability that it may have to Indemnitee, except as provided
in Section 6(c).
(b) Defense. With respect to any Proceeding as to which Indemnitee
notifies the Company of the commencement thereof, the Company will be entitled
to participate in the Proceeding at its own expense and except as otherwise
provided below, to the extent the Company so wishes, it may assume the defense
thereof with counsel reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of its election to assume the defense of any
Proceeding, the Company will not be liable to Indemnitee under this Agreement or
otherwise for any Expenses subsequently incurred by Indemnitee under this
Agreement except as otherwise provided below. Indemnitee shall have the right to
employ his own counsel in such Proceeding, but all Expenses related thereto
incurred after notice from the Company of its assumption of the defense shall be
at Indemnitee's expense unless: (i) the employment of counsel by Indemnitee has
been authorized by the Company, (ii) Indemnitee has reasonably determined that
there may be a conflict of interest between Indemnitee and the Company in the
defense of the Proceeding and such determination has been affirmed by any then
existing Independent Counsel, (iii) after a Change in Control (other than a
Change in Control approved by a majority of the directors on the Board who were
directors immediately prior to such Change in Control), the employment of
counsel by Indemnitee has been approved by the Independent Counsel, or (iv) the
Company shall not in fact have employed counsel to assume the defense of such
Proceeding, in each of which case all Expenses of the Proceeding shall be borne
by the Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the determination provided for in (ii) above.
(c) Settlement of Claims. The Company shall not be liable to indemnify
Indemnitee under this Agreement or otherwise for any amounts paid in settlement
of any Proceeding effected without the Company's written consent, provided,
however, that if a Change in Control has occurred (other than a Change in
Control approved by a majority of the directors on the Board who were directors
immediately prior to such Change in Control), the Company shall be liable for
indemnification of Indemnitee for amounts paid in settlement if the Independent
Counsel has approved the settlement. The Company shall
6
not settle any Proceeding in any manner that would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee will unreasonably withhold their consent to any proposed
settlement. The Company shall not be liable to indemnify Indemnitee under this
Agreement with regard to any judicial award if the Company was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action; the Company's liability hereunder shall not be excused if
participation in the Proceeding by the Company was barred by this Agreement.
7. Establishment of Trust.
In the event of a Change in Control (other than a Change in Control
approved by a majority of the directors on the Board who were directors
immediately prior to such Change in Control) the Company shall, upon written
request by Indemnitee, create a Trust for the benefit of Indemnitee and from
time to time upon written request of Indemnitee shall fund the Trust in an
amount sufficient to satisfy any and all Expenses reasonably anticipated at the
time of each such request to be incurred in connection with investigating,
preparing for, participating in, and/or defending any Proceeding relating to an
Indemnifiable Event. The amount or amounts to be deposited in the Trust pursuant
to the foregoing funding obligation shall be determined by the Reviewing Party.
The terms of the Trust shall provide that (i) the Trust shall not be revoked or
the principal thereof invaded, without the written consent of Indemnitee, (ii)
the Trustee shall advance, within ten business days of a request by Indemnitee,
any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse
the Trust under the same circumstances for which Indemnitee would be required to
reimburse the Company under Section 2(c) of this Agreement), (iii) the Trust
shall continue to be funded by the Company in accordance with the funding
obligation set forth above, (iv) the Trustee shall promptly pay to Indemnitee
all amounts for which Indemnitee shall be entitled to indemnification pursuant
to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall
revert to the Company upon a final determination by the Reviewing Party or a
court of competent jurisdiction, as the case may be, that Indemnitee has been
fully indemnified under the terms of this Agreement. The Trustee shall be chosen
by Indemnitee. Nothing in this Section 7 shall relieve the Company of any of its
obligations under this Agreement. All income earned on the assets held in the
Trust shall be reported as income by the Company for federal, state, local, and
foreign tax purposes. The Company shall pay all costs of establishing and
maintaining the Trust, and shall indemnify the Trustee against any and all
expenses (including attorneys' fees), claims, liabilities, loss, and damages
arising out of or relating to this Agreement or the establishment and
maintenance of the Trust.
8. Non-Exclusivity.
The rights of Indemnitee hereunder shall be in addition to any other
rights Indemnitee may have under the Company's Certificate of Incorporation,
By-laws, applicable law, or otherwise. To the extent that a change in applicable
law (whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company's Certificate of
Incorporation, By-laws, applicable law, or this Agreement it is the intent of
the parties that Indemnitee enjoy by this Agreement the greater benefits so
afforded by such change.
9. Liability Insurance.
To the extent the Company maintains an insurance policy or policies
providing directors' and officers' liability insurance, 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 Company director or
officer.
7
10. Period of Limitations.
No legal action shall be brought and no cause of action shall be asserted
by or on behalf of the Company or any affiliate of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors, or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, or such longer period as may be required by state law
under the circumstances. Any claim or cause of action of the Company or its
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such period; provided, however, that if
any shorter period of limitations is otherwise applicable to any such cause of
action, the shorter period shall govern.
11. Retroactivity.
This Agreement shall be deemed to have been in effect during all periods
that Indemnitee was an officer or director of the Company, regardless of the
date of this Agreement.
12. Amendment of this Agreement.
No supplement, modification, 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 binding unless in the form of a
writing signed by the party against whom enforcement of the waiver is sought,
and no such waiver shall operate as a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.
Except as specifically provided herein, no failure to exercise or any delay in
exercising any right or remedy hereunder shall constitute a waiver thereof.
13. Subrogation.
In the event of 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 reasonably required and shall do
everything that may be reasonably necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
14. No Duplication of Payments.
The Company shall not be liable under this Agreement to make any payment
in connection with any claim made against Indemnitee to the extent Indemnitee
has otherwise received payment (under any insurance policy, By-law, or
otherwise) of the amounts otherwise indemnifiable hereunder.
15. Binding Effect.
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 and/or assets of the Company), assigns,
spouses, heirs, and personal and legal representatives. The Company shall
require
8
and cause any successor (whether direct or indirect by purchase, merger,
consolidation, or otherwise) to all, substantially all, or a substantial part,
of the business and/or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity
pertaining to an Indemnifiable Event even though he may have ceased to serve in
such capacity at the time of any Proceeding.
16. Severability.
If any provision (or portion thereof) of this Agreement shall be held by a
court of competent jurisdiction to be invalid, void, or otherwise unenforceable,
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each portion of this Agreement
containing any provision held to be invalid, void, or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void, or
unenforceable.
17. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in such State without giving effect to the principles of
conflicts of laws.
18. Notices.
All notices, demands, and other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand, against receipt, or mailed, postage prepaid, certified or
registered mail, return receipt requested, and addressed as follows:
COMPANY: DESTIA COMMUNICATIONS, INC.
ATTENTION: Chairman of the Board
[Address]
With copy to: DESTIA COMMUNICATIONS, INC.
ATTENTION: General Counsel
[Address]
INDEMNITEE: __________________________________
______________________________________________
______________________________________________
Notice of change of address shall be effective only when done in
accordance with this Section. All notices complying with this Section shall be
deemed to have been received on the earlier of the date of delivery or on the
third business day after mailing.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
DESTIA COMMUNICATIONS, INC.,
By
---------------------------------------
Name:
Title:
[INDEMNITEE]
By
---------------------------------------
Name:
Title:
