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McAFEE & XXXX
FOR DISCUSSION PURPOSES ONLY
DRAFT OF: January 25, 2000
TIME: 2:00 p.m.
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AGREEMENT TO PROVIDE INDEMNITY
THIS AGREEMENT is made and entered into as of January 24, 2000 by and
among XXXXXX COMMUNICATIONS CORPORATION, an Oklahoma corporation ("Xxxxxx")
and XXXXXX XX LIMITED PARTNERSHIP, an Oklahoma limited partnership ("DCCLP")
with reference to the following circumstances:
X. Xxxxxx'x board of directors has approved the distribution of the
stock of Logix Communications Enterprises, Inc. ("Logix") to the Shareholders
(the "Distribution").
B. Based on the opinion of Xxxxxx Xxxxxxxx LLP dated January 24 2000,
Xxxxxx and DCCLP believe that Xxxxxx will not incur any income tax resulting
from the Distribution, provided, among other things, DCCLP does not take, or
cause or permit Logix to take, on or before the second anniversary of the
Distribution, certain actions with respect to Logix or the capital stock of
Logix which DCCLP will receive in the Distribution (the "Logix Stock"), which
actions by DCCLP or Logix could cause Xxxxxx to realize taxable income solely
as a result of the Distribution (a "Prohibited Action").
C. The parties desire to set forth their understanding and agreements
with respect to their respective rights and obligations if income tax is due
from Xxxxxx as a result of a Prohibited Action.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. SHAREHOLDER AGREEMENT. DCCLP agrees prior to taking or causing
or permitting Logix to take a Prohibited Action that results in Xxxxxx
incurring taxable income from the Distribution pursuant to Section 355(e) of
the Internal Revenue Code of 1986, as amended (the "Code") DCCLP shall either
a) Satisfy itself by reasonable means that the fair market
value of Logix at the time of the Distribution, as
estimated in good faith by the Board of Directors of
Xxxxxx, does not exceed the sum of Xxxxxx'x tax basis in
Logix and/or the Logix stock, for federal income tax
purposes, at the time of the Distribution plus the
aggregate net operating losses of Xxxxxx legally available
to offset against such taxable income PLUS PENALTIES OR
INTEREST THEREON; or
b) Cause Logix to enter into and execute an indemnity
agreement with Xxxxxx (the "Indemnity Agreement")
reasonably satisfactory to Xxxxxx, whereby Logix will
indemnify Xxxxxx for any income tax, together with any
penalties or interest thereon (collectively, the "Income
Tax"), incurred by Xxxxxx under Section 355(e) of the Code
solely attributable to the Distribution and arising as a
result of a Prohibited Action and Logix is financially
capable of performing its obligations under the Indemnity
Agreement.
DCCLP or its representative must certify as to the existence of facts or
circumstances necessary to meet Section 1(a) and 1(b) above prior to
consummating a Prohibited Action. Any Indemnity Agreement executed by Logix
and Xxxxxx pursuant to Section 1(b) above will contain terms mutually
agreeable to Xxxxxx and DCCLP. For purposes of calculating any income tax
liability under Section 1(b) above, the amount of income taxes will be
determined after the application of the aggregate net operating losses of
Xxxxxx legally available to offset taxable income incurred under Section
355(e) of the Code as a result of the Distribution.
2. PROCEDURE. If a Taxing Authority claims that Xxxxxx must pay
income tax as a result of a Prohibited Action for which Logix is responsible
under the Indemnity Agreement, DCCLP shall have control over the defense or
prosecution of any proceedings related to such claim (a "Claim"). DCCLP
shall not have the right to settle any Claim unless Xxxxxx would be released
of any and all liability with respect to the facts giving rise to the Claim.
DCCLP shall give Xxxxxx five (5) days notice prior to settling any such Claim
and Xxxxxx shall have the right to approve or reject the settlement of such
Claim; provided, however, that if the settlement provides that Xxxxxx shall
be relieved from all tax liability with respect to the facts giving rise to
the Claim, then upon rejection of the settlement of any such Claim, Xxxxxx
shall assume control of the defense or prosecution of such Claim, at its sole
cost and expense from that point forward, and the liability of Logix with
respect to such Claim as finally resolved shall be limited to the monetary
equivalent of the rejected settlement amount concerning such Claim. Xxxxxx
shall retain the right to employ its own counsel and discuss matters with
Logix related to the defense or prosecution of any such Claim controlled by
Logix. Xxxxxx shall be solely responsible for its own costs and expenses in
connection with such participation; provided, however, that all decisions of
DCCLP shall be final and that Xxxxxx shall cooperate with DCCLP in all
respects in defense of such Claim, including refraining from taking any
position adverse to DCCLP for so long as DCCLP has complied with Section 1(b)
hereof.
3. GOVERNING LAW. This Agreement shall governed by, and construed
in accordance with, the laws of the State of Oklahoma.
4. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns.
5. ENTIRE AGREEMENT. This Agreement constitutes the complete and
exclusive agreement between the parties hereto with respect to the subject
matter hereof and supersedes all
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prior agreements, understandings, and representations (oral, written,
implied, or expressed), with respect to such subject matter.
2. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same instrument.
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DATED the day and year first above written.
XXXXXX: XXXXXX COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By
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Xxxxxxx X. Xxxxxx, Chairman of the Board
and Chief Executive Officer
DCCLP: XXXXXX XX LIMITED PARTNERSHIP
By: RLD, INC., General Partner
By
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Xxxxxxx X. Xxxxxx, President
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