INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement") is made as of
_________________, 1999 by and between Communication TeleSystems
International d.b.a. WORLDxCHANGE Communications, a California corporation
(the "Company"), and __________________________ (the "Indemnitee").
BACKGROUND
The Indemnitee currently is serving as a director and/or officer of
the Company and the Company wishes the Indemnitee to continue in such
capacity. In order to induce the Indemnitee to continue to serve as a
director and/or officer for the Company and in consideration of Indemnitee's
continued service, the Company and the Indemnitee hereby agree as follows:
AGREEMENT
SECTION 1. DEFINITIONS
As used in this Agreement:
(a) A "Change in Control" shall be deemed to have occurred
if (i) during any period of two consecutive years, individuals who at the
beginning of the two year period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's shareholders 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 of the Board of Directors, or (ii) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such a merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50%
of the total voting power represented by the voting securities of the Company
or the surviving entity outstanding immediately after the merger or
consolidation, or the shareholders 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 the Company's assets.
(b) The term "Expenses" includes, without limitation,
attorneys' fees, disbursements and retainers, accounting and witness fees,
travel and deposition costs, expenses of investigations, judicial or
administrative proceedings or appeals, amounts paid in settlement by or on
behalf of Indemnitee, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise, including
reasonable compensation for time spent by the Indemnitee in connection with
the investigation, defense or appeal of a Proceeding or action for
indemnification for which he is not otherwise compensated by the Company or
any third
party. The term "Expenses" does not include the amount of judgments, fines,
penalties or ERISA excise taxes actually levied against the Indemnitee.
(c) The term "Proceeding" shall include any threatened,
pending or completed action, suit or proceeding, whether brought by or in the
name of the Company or otherwise and whether of a civil, criminal or
administrative or investigative nature, by reason of the fact that the
Indemnitee is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another enterprise, whether or not he or she is serving in such
capacity at the time any liability or Expense is incurred for which
indemnification or reimbursement is to be provided under this Agreement.
SECTION 2. INDEMNIFICATION
2.1 INDEMNIFICATION IN THIRD PARTY ACTIONS
The Company shall indemnify the Indemnitee in accordance with the
provisions of this subsection 2.1 if the Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any Proceeding
(other than a Proceeding by or in the name of the Company to procure a
judgment in its favor), by reason of the fact that the Indemnitee is or was a
director or officer of the Company, or is or was serving at the request of
the Company as a director, officer, employee or agent of another enterprise
against all Expenses, judgements, fines, penalties and ERISA excise taxes
actually and reasonably incurred by the Indemnitee in connection with the
defense or settlement of the Proceeding, to the fullest extent permitted by
applicable law; provided that any settlement shall be approved in writing by
the Company.
2.2 INDEMNIFICATION IN PROCEEDINGS BY OR IN THE NAME OF THE
COMPANY
The Company shall indemnify the Indemnitee in accordance with the
provisions of this subsection 2.2 if the Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any Proceeding by
or in the name of the Company to procure a judgment in its favor by reason of
the fact that Indemnitee was or is a director or officer of the Company, or
is or was serving at the request of the Company as a director, officer,
employee or agent of another enterprise, against all Expenses actually and
reasonably incurred by Indemnitee in connection with the defense or
settlement of the Proceeding, to the fullest extent permitted by applicable
law.
2.3 PARTIAL INDEMNIFICATION
If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of, but not
the total amount of, the Expenses, judgments, fines, penalties or ERISA
excise taxes actually and reasonably incurred by him in the investigation,
defense, appeal or settlement of any Proceeding, the Company shall
nevertheless indemnify the Indemnitee for the portion of the Expenses,
judgments, fines, penalties or ERISA excise taxes to which the Indemnitee is
entitled.
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2.4 INDEMNIFICATION HEREUNDER NOT EXCLUSIVE
The indemnification provided by this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
under the Articles of Incorporation, the Bylaws, any agreement, any vote of
shareholders or disinterested directors, applicable law or otherwise, both as
to action in his official capacity and as to action in another capacity on
behalf of the Company while holding office.
2.5 INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY
Notwithstanding any other provisions of this Agreement, to the
extent that the Indemnitee has been successful in defense of any Proceeding
or in defense of any claim, issue or matter in the Proceeding, on the merits
or otherwise, including the dismissal of a Proceeding without prejudice, the
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith to the fullest extent permitted by applicable law.
SECTION 3. PRESUMPTIONS
3.1 PRESUMPTION REGARDING STANDARD OF CONDUCT
The Indemnitee shall be conclusively presumed to have met the
relevant standards of conduct as defined by applicable law for
indemnification pursuant to this Agreement, unless a determination that the
Indemnitee has not met the relevant standards is made by (i) the shareholders
of the Company by majority vote, or (ii) in a written opinion by independent
legal counsel, selection of whom has been approved by the Indemnitee in
writing.
3.2 DETERMINATION OF RIGHT TO INDEMNIFICATION
If a claim under this Agreement is not paid by the Company within
30 days of receipt of written request from the Indemnitee, the right to
indemnification as provided by this Agreement shall be enforceable by the
Indemnitee in any court of competent jurisdiction. The burden of proving by
clear and convincing evidence that indemnification or advances are not
appropriate shall be on the Company. Neither the failure of the directors or
shareholders of the Company or independent legal counsel to have made a
determination prior to the commencement of the action that indemnification or
advances are proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, nor an actual determination by the directors
or shareholders of the Company or independent legal counsel that the
Indemnitee has not met the 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.
The Indemnitee's Expenses incurred in connection with any
Proceeding concerning his right to indemnification or advances in whole or in
part pursuant to this Agreement also shall be indemnified by the Company
regardless of the outcome of the Proceeding, unless a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in the Proceeding was not made in good faith or was frivolous.
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SECTION 4. ADVANCES OF EXPENSES
The Expenses incurred by the Indemnitee in any Proceeding shall
be paid promptly by the Company in advance of the final disposition of the
Proceeding at the written request of the Indemnitee to the fullest extent
permitted by applicable law; provided that if applicable law requires an
undertaking, the Indemnitee shall undertake in writing to repay the amount
advanced to the extent that it is ultimately determined that the Indemnitee
is not entitled to indemnification.
SECTION 5. CHANGE IN CONTROL
The Company agrees that if there is a Change in Control of the
Company (other than a Change in Control which has been approved by a majority
of the Company's Board of Directors who were directors immediately prior to
the Change in Control), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnify payments and Expense
advances under this Agreement or any other agreement, the Company's Articles
of Incorporation, or the Company's Bylaws in effect relating to claims for
indemnifiable events, the Company shall seek legal advice only from
independent counsel selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld), and who has not otherwise
performed services for the Company or Indemnitee within the last five years
(other than in connection with such matters) ("Special Independent Counsel").
The Special Independent Counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of the Special Independent Counsel
and may fully indemnify the Special Independent Counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement.
SECTION 6. INDEMNIFICATION PROCEDURE
6.1 NOTICE
Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee will, if a claim is to be made
against the Company under this Agreement, notify the Company of the
commencement of the Proceeding. The omission to notify the Company will not
relieve it from any liability which it may have to the Indemnitee otherwise
than under this Agreement.
6.2 COMPANY PARTICIPATION
With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate in the Proceeding at
its own expense and, except as otherwise provided below, to the extent that
it may wish, the Company may assume the defense of the Proceeding, with
counsel reasonably satisfactory to the Indemnitee. After notice from the
Company to the Indemnitee of its election to assume the defense of a
Proceeding, during the Company's good faith active defense, the Company will
not be liable to the Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the
defense of the Proceeding, other than reasonable costs of investigation or as
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otherwise provided below. The Company shall not settle any Proceeding in any
manner which would impose any penalty or limitation on the Indemnitee without
the Indemnitee's written consent. The Indemnitee shall have the right to
employ his counsel in any Proceeding but the fees and expenses of the counsel
incurred after notice from the Company of its assumption of the defense of
the Proceeding shall be at the expense of the Indemnitee, unless (i) the
employment of counsel by the Indemnitee has been authorized by the Company,
(ii) the Indemnitee shall have reasonably concluded that there may be
conflict of interest between the Company and the Indemnitee in the conduct of
the defense of a Proceeding, or (iii) the Company shall not in fact have
employed counsel to assume the defense of a Proceeding, in each of which
cases the reasonable fees and expenses of the Indemnitee's counsel shall be
at the expense of 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 the Indemnitee has made the conclusion that there may be a conflict of
interest between the Company and the Indemnitee.
SECTION 7. LIMITATIONS ON INDEMNIFICATION
No payments pursuant to this Agreement shall be made by the
Company:
(a) to indemnify or advance Expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to Proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under applicable law, but the
indemnification or advancement of Expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) to indemnify the Indemnitee for any Expenses, judgements,
fines, penalties or ERISA excise taxes for which payment is actually made to
the Indemnitee under a valid and collectible insurance policy, except in
respect of any excess beyond the amount of payment under the insurance;
(c) to indemnify the Indemnitee for any Expenses, judgements,
fines or penalties sustained in any Proceeding for an accounting 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, the rules and regulations promulgated thereunder and amendments thereto
or similar provisions of any federal, state or local statutory law;
(d) to indemnify the Indemnitee for any Expenses, judgements,
fines, penalties or ERISA excise taxes resulting from Indemnitee's conduct
which is finally adjudged to have been willful misconduct, knowingly
fraudulent or deliberately dishonest; or
(e) if a court of competent jurisdiction shall finally determine
that any indemnification hereunder is unlawful.
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SECTION 8. MAINTENANCE OF LIABILITY INSURANCE
8.1 AFFIRMATIVE COVENANT OF THE COMPANY
The Company covenants and agrees that, as long as the Indemnitee
shall continue to serve as a director or officer of the Company and
thereafter so long as the Indemnitee shall be subject to any possible
Proceeding, the Company, subject to subsection 8.3 of this Agreement, shall
promptly obtain and maintain in full force and effect directors' and
officers' liability insurance ("D&O Insurance") in reasonable amounts from
established and reputable insurers.
8.2 INDEMNITEE NAMED AS INSURED
In all D&O Insurance policies, the Indemnitee shall be named as
an insured in a manner that provides the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors and officers.
8.3 EXEMPTION FROM MAINTENANCE OF INSURANCE
Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines in
its sole discretion that insurance is not reasonably available, the premium
costs are, in its opinion, disproportionate to the amount of coverage
provided, the coverage provided by insurance is so limited by exclusions that
it provides an insufficient benefit, or the Indemnitee is covered by similar
insurance maintained by a subsidiary of the Company.
SECTION 9. MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon, and shall inure to the
benefit of the Indemnitee and his heirs, personal representatives and
assigns, and the Company and its successors and assigns.
9.2 SEVERABILITY
Each provision of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision of this
Agreement shall be held to be invalid or unenforceable for any reason, the
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions of this Agreement. To the extent
required, any provision of this Agreement may be modified by a court of
competent jurisdiction to preserve its validity and to provide the Indemnitee
with the broadest possible indemnification permitted under applicable law.
9.3 SAVINGS CLAUSE
If this Agreement or any portion of it is invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties
or ERISA excise taxes with respect to any Proceeding to
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the fullest extent permitted by any applicable portion of this Agreement that
shall not have been invalidated or by any other applicable law.
9.4 INTERPRETATION; GOVERNING LAW
This Agreement shall be construed as a whole and in accordance
with its fair meaning. Headings are for convenience only and shall not be
used in construing meaning. This Agreement shall be governed and interpreted
in accordance with the laws of the State of California, without regard to the
conflicts of laws principles thereof.
9.5 AMENDMENTS
No amendment, waiver, modification, termination or cancellation
of this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought. The indemnification rights afforded to
the Indemnitee by this Agreement are contract rights and may not be
diminished, eliminated or otherwise affected by amendments to the Company's
Articles of Incorporation, Bylaws or agreements including D&O Insurance
policies.
9.6 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
9.7 NOTICES
Any notice required to be given under this Agreement shall be
directed to Communication TeleSystems International d.b.a. WORLDXCHANGE
Communications at 0000 Xxxxxx Xxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
Attention: Legal Department and to Indemnitee at the address set forth below
or to another address as either shall designate in writing.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
INDEMNITEE
___________________________________
Name: _____________________________
Address: __________________________
__________________________
__________________________
__________________________
COMMUNICATION TELESYSTEMS INTERNATIONAL
d.b.a. WORLDxCHANGE COMMUNICATIONS,
a California corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
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EXHIBIT A
Each of the following officers and/or directors have entered into
an Indemnification Agreement in substantially the foregoing form:
Xxxx Xxxxxxxx
Xxxxx X. Xxxxxx
Xxxxxxxxxxx Xxxxxxx
Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxxxxx
Xxxx X. Xxxxxx
Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx
Xxxx X. Xxxxxxxx
Xxxx Xxxxxx
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