INDEMNIFICATION AGREEMENT
This
Indemnification Agreement (“Agreement”) made this 4th
day of May, 2006 by and between Warwick Valley Telephone Company
(the “Company”), a New York corporation, and
(“Indemnitee”).
WHEREAS,
Section 722(a) of the Business Corporation Law of New York (the
“BCL”) empowers corporations to indemnify any person
made, or threatened to be made, a party to an action or proceeding
( other than one by or in the right of the Company to procure a
judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, which any
director or officer of the Company served in any capacity at the
request of the Company, by reason of the fact that he, his testator
or intestate, was a director or officer of the Company, or served
such other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys` fees actually and necessarily
incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise, not
opposed to, the best interests of the Company and, in criminal
actions or proceedings, in addition, had no reasonable cause to
believe that his conduct was unlawful; and
WHEREAS,
Section 722(c) of the BCL empowers corporations to indemnify any
person made, or threatened to be made, a party to an action by or
in the right of the corporation to procure a judgment in its favor
by reason of the fact that he, his testator or intestate, is or was
a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of any
other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other
enterprise, against amounts paid in settlement and reasonable
expenses, including attorneys’ fees, actually and necessarily
incurred by him in connection with the defense or settlement of
such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any
other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best
interests of the corporation, except that no indemnification under
Section 722(c) may be made in respect of (1) a threatened action,
or a pending action which is settled or otherwise disposed of, or
(2) any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation, unless and only
to the extent that the court in which the action was brought, or,
if no action was brought, any 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 portion of the settlement amount and expenses as
the court deems proper; and
WHEREAS, the
Company and the Indemnitee further recognize the substantial amount
of corporate litigation in general, which subjects directors,
officers, employees, controlling persons, agents and fiduciaries to
expensive litigation risks; and
WHEREAS, the
Company and Indemnitee recognize the increasing expense of or
difficulty in obtaining liability insurance for the Company’s
directors, officers, employees, controlling persons, agents and
fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such
insurance; and
WHEREAS, highly
competent persons have become more reluctant to serve as officers
or directors of publicly-held corporations unless they are provided
with adequate protection through insurance and indemnification
against risks of claims and actions against them arising out of
their service to, and activities on behalf, of the corporation;
and
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WHEREAS, the
Indemnitee is concerned that the current protection available may
not be adequate under the present circumstances, and Indemnitee and
other directors and officers of the Company may not be willing to
serve in such capacities without additional protection;
and
WHEREAS, the
Company’s directors and officers have certain existing
indemnification arrangements pursuant
to the
Company’s Certificate of Incorporation and By-Laws and may be
entitled to indemnification pursuant to Section 722 et
seq. , but the protection provided by such indemnification is
limited and its availability is uncertain as to any particular
situation; and
WHEREAS, in
recognition of Indemnitee’s need for (i) substantial
protection against personal liability for services rendered to the
Company, (ii) specific contractual assurance that the
protection promised by the Company’s Certificate of
Incorporation and By-Laws will be available to Indemnitee
(regardless of, among other things, any amendment to or revocation
of the Certificate of Incorporation or By-Laws or any change in the
composition of the Board of Directors of the Company or acquisition
transaction relating to the Company), and (iii) an inducement
to provide effective services to the Company as a director or
officer, as the case may be, 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 under law (including, without limitation,
Section 721 of the BCL) and as set forth in this Agreement,
and, to the extent insurance is maintained, to provide for the
continued coverage of Indemnitee under the Company’s
directors and officers liability insurance policies; and
WHEREAS, the
Company wishes to obligate itself to advance such expenses to
Indemnitee under the circumstances contemplated by this Agreement
and the Indemnitee wishes to have the Company so obligate itself as
a condition for continuing to serve as
of the Company; and
WHEREAS,
Section 721 of the BCL specifically provides that the
indemnification and advancement of expenses granted pursuant to, or
provided by, Sections 722 through 725 of the BCL shall not be
deemed exclusive of any other rights to which a director or officer
seeking indemnification or advancement of expenses may be entitled,
provided that (1) any agreement providing for such other
rights is authorized by the By-Laws of the Company, and (2) no
indemnification may be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad
faith or were the result of active and deliberate dishonesty and
were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to
which he was not legally entitled.
WHEREAS,
Article X, Section 3 of the Company’s By-Laws
permits the Company to provide indemnification to its officers and
directors beyond that permitted by Section 722 et seq.
, as required by Section 721; and
WHEREAS, the
Board of Directors of the Company has authorized and directed the
proper officers of the Company to enter into this Agreement in the
name of or on behalf of the Company;
NOW, THEREFORE,
in consideration of the premises, the agreements herein set forth,
and other good and valuable consideration, the Company and
Indemnitee hereby agree as follows:
Section 1.01.
DEFINITIONS. As used in this Agreement, the following terms have
the following meanings, unless a Section of this Agreement
specifically provides otherwise:
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1.
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“Agreement” means this
Indemnification Agreement and any amendments pursuant to
Section 7.01 of this Agreement.
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2.
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“Board” means the Board
of Directors of the Company.
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3.
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“Change in Control”
shall have occurred in any of the following circumstances occurring
after the date of this Agreement: (i) an occurrence of an
event required to be reported with respect to the Company in
response to item 6(e) of Schedule 14A or Regulation 14A
(or in response to any similar item on any similar schedule or
form) under the Exchange Act, regardless of whether the Company is
then subject to such reporting requirement; (ii) a
Business
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Combination (as
defined in Article Fifth of the Company’s Certificate of
Incorporation) shall take place which has not been approved
pursuant to Sub-paragraph 2(a) of such Article Fifth;
(iii) any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act)
shall have become, without prior approval of the Company’s
Board, the “beneficial owner”
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(as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company’s then
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4.
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outstanding voting securities
(provided that as used in clause (iii), the term
“person” excludes a trustee or other fiduciary holding
securities under an employee benefit plan of the Company),
(iv) there occurs a merger or consolidation of the Company
with another entity, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving or resulting entity) more
than 51% of the combined voting power of the voting securities of
the surviving or resulting entity outstanding immediately after
such merger or consolidation and with the power to elect at least a
majority of the board of directors or other governing body of such
surviving or resulting entity; (v) all or substantially all
the assets of the Company are sold or otherwise disposed of in a
transaction or series of related transactions; (vi) the
approval by the stockholders of the Company of a complete
liquidation of the Company or the sale or other disposition of all
or substantially all of the assets of the Company, or
(vii) the individuals who on the date of this Agreement
constitute the Board (including, for this purpose, any new director
whose election or nomination for election by the Company’s
stockholders was approved by a vote of at least a majority of the
directors then still in office who were directors on the date
hereof or whose election or nomination was so approved) cease for
any reason to constitute at least a majority of the members of the
Board.
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5.
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“Company” means Warwick
Valley Telephone Company and any parent, affiliate, subsidiary and
any successors (whether direct or indirect by purchase, merger,
consolidation, or otherwise) and any assigns.
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6.
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“Controlling Person”
means any person who controls Indemnitee or Indemnitee’s
Spouse or any person or entity who may be liable within the meaning
of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as
amended.
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7.
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“Disinterested Director”
means a director of the Company who is not and was not a party to
the Proceeding in respect of which indemnification or advancement
of Expenses is sought by Indemnitee, Indemnitee’s Spouse, or
a Controlling Person.
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8.
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“Expenses” means any and
all costs and fees reasonably incurred in connection with any
Proceeding including, without limitation, costs and fees reasonably
incurred by counsel, consultants and experts, including all costs
and fees reasonably incurred in connection with the enforcement of
this Agreement.
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9.
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“Independent Counsel”
means the law firm or a member(s) of a law firm, that is
experienced in matters of corporate law and neither currently is,
nor in the past five years has, been retained by the Company or
Indemnitee, Indemnitee’s Spouse or any Controlling Person
with respect to any matter materially related to the Proceeding for
which indemnification is being sought and otherwise complies with
any requirements of independence that may be applicable. Prior
service as Independent Counsel under this Agreement or in any
similar capacity with respect to any dispute involving the Company
shall be grounds for disqualification from serving as Independent
Counsel. This Agreement is not intended to and does not supersede
any obligation incumbent upon Independent Counsel pursuant to
applicable standards of professional conduct. Independent Counsel
shall be an independent decision-maker and shall not owe any
fiduciary responsibility to, or have any attorney-client
relationship with, any of the Company, Indemnitee,
Indemnitee’s Spouse or any Controlling Person.
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10.
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“Liabilities” means all
judgments, fines (including any excise taxes assessed with respect
to any employee benefit plan), penalties and amounts paid in
settlement and other liabilities (including all interest,
assessments and other charges paid or payable in connection with or
in respect of any such amounts) arising out of or in connection
with any Proceeding; provided that Liabilities shall not include
any Expenses.
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11.
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“Proceeding” means any
reasonably foreseeable, threatened, pending or completed action,
suit, hearing, investigation or inquiry (whether internal or
external), arbitration or other alternative dispute mechanism, or
other proceeding, whether civil, criminal, administrative,
regulatory, congressional or investigative investigations,
including, without limitation any action, suit or hearing seeking
injunctive or declarative relief regarding the existence of any
fiduciary
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12.
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duty, brought or conducted by any
third party or by or in the right of the Company or an affiliate of
the Company.
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13.
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“Spouse” means the
person with whom Indemnitee has entered into a lawful marriage,
civil union or domestic partnership arrangement that has not been
annulled, dissolved, or otherwise invalidated or terminated under
the law of the jurisdiction in which it was entered.
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14.
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“State” means any of the
fifty states, the District of Columbia and any territory of the
United States.
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15.
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“To The Fullest Extent
Authorized By Law” means (i) to the fullest extent
permitted by the BCL as in effect on the date of this Agreement,
and (ii) to the fullest extent authorized or permitted by any
amendments to or replacements of the BCL adopted after the date of
this Agreement that increases the extent to which a corporation may
provide indemnification, and shall be understood to include
indemnification for Liabilities and Expenses and the advancement of
funds for Expenses to the extent permitted by the BCL for
indemnification or advancement under an agreement permitted
pursuant to Section 721, clause (iii) of the BCL, subject
only to any prohibitions or limitations set forth expressly in the
BCL as being applicable even with respect to such an agreement,
such as the proviso set forth in Section 721 of the BCL
immediately after such clause (iii).
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Section 2.01. SERVICES BY INDEMNITEE.
Indemnitee hereby agrees to serve or continue to serve the Company,
for so long as Indemnitee is duly elected or appointed or until
Indemnitee tenders his resignation or is removed, subject to the
terms of any retention agreement between Indemnitee and the
Company.
Section 3.01. INDEMNIFICATION GENERALLY
. The Company will indemnify, pay on behalf of, or will
reimburse Indemnitee, Indemnitee’s Spouse and each
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