Exhibit 10.6
XXXXXXX INDEMNITY AGREEMENT
This Indemnity Agreement is made this 6th day of August, 2001, by and
between US LEC Corp., a Delaware corporation (the "Company") and Xxxxxxx X.
Xxxxxxx ("Xxxxxxx"), Xxxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx (collectively, the
"Xxxxxxx Family") and Super STAR Associates Limited Partnership, a Georgia
limited partnership ("Super STAR")
RECITALS
WHEREAS, the Company, Metacomm, LLC ("Metacomm"), Xxxxxxx X. Aab ("Aab"),
Melrich Associates, L.P. ("Melrich"), Xxxxxxx and Super STAR entered into a Plan
of Recapitalization on August 6, 2001 (the "Agreement"); and
WHEREAS, in consideration of the performance by Xxxxxxx and Super STAR of
their respective obligations under the Agreement, the Company has agreed to
indemnify and hold harmless Super STAR and the members of the Xxxxxxx Family
(Super STAR and each such family member is referred to herein as a "Covered
Person") from and against certain tax liabilities, if any, as a result of the
conversion by Super STAR of 3,750,000 shares of the Company's Class B Common
Stock, par value $.01 per share ("Class B Stock"), into a like number of shares
of the Company's Class A Common Stock, par value $.01 per share ("Class A
Stock") as provided in the Agreement.
NOW, THEREFORE, in consideration of the performance by Xxxxxxx and Super
STAR of their respective obligations under the Agreement, the parties hereto
agree as follows:
1. Indemnification. The Company agrees to indemnify and hold harmless each
Covered Person from and against any tax liability (including interest and
penalties), including any tax liability arising from any amounts paid to a
Covered Person pursuant to this Indemnity Agreement, under federal, North
Carolina and Georgia income tax laws that a Covered Person is required to
recognize as a result of the conversion by Super STAR pursuant to the Agreement
of 3,750,000 shares of Class B Stock into 3,750,000 shares of Class A Stock
pursuant to the elective conversion provisions applicable to the Class B Stock
in the Company's Restated Certificate of Incorporation.
2. Notice and Defense. In case any audit or other proceeding shall be
instituted by a federal or North Carolina taxing authority involving any Covered
Person in respect of which indemnity may be sought pursuant to Section 1, such
Covered Person shall notify the Company in writing within thirty (30) days of
the commencement of any such proceeding and the Company, upon request of the
Covered Person, shall retain counsel reasonably satisfactory to the Covered
Person to represent the Covered Person in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any Covered Person shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of such
Covered Person. The failure of a Covered Person to provide the
Company with the thirty (30)-day written notice required by this Section 2 shall
relieve the Company of any obligations to a Covered Person under this Agreement.
3. Settlement. The Company shall not be liable for the settlement of any
audit or other proceeding initiated by a taxing authority that is effected
without the Company's written consent, but if settled with the Company's consent
or if there is a final judgment entered in any such proceeding in favor of any
such taxing authority against a Covered Person, the Company agrees to indemnify
the Covered Person from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written consent
of the Covered Person, effect any settlement of any pending or threatened
proceeding in respect of which any Covered Person is or could have been a party
and indemnity could have been sought hereunder by such Covered Person, unless
such settlement includes an unconditional release of such Covered Person from
all liability for the claims that are the subject matter of such proceeding.
4. Tax Certificate. Xxxxxxx and Super STAR represent and warrant to the
Company that the factual statements relating to Xxxxxxx and Super STAR in the
Tax Certificate of the Xxxxxxx Affiliates addressed to Deloitte & Touche LLP and
executed in connection with the Agreement are true and correct. If this
representation and warranty is not true and correct (an "Inaccuracy"), each
Covered Person acknowledges and agrees that the Company shall be relieved of any
obligations to a Covered Person under this Indemnity Agreement; provided that
the Company shall not be relieved of any such obligations if it can be
reasonable shown by a Covered Person that the inaccuracy was not material to the
imposition of the income tax liability giving rise to a claim for
indemnification hereunder.
5. Arbitration.
(a) Any dispute, controversy, difference or claim arising out of,
relating to or in connection with this Indemnity Agreement, any
transaction hereunder, any agreement delivered pursuant to this Indemnity
Agreement, or the breach hereof, shall be decided by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as otherwise agreed by the
parties. Any such arbitration shall be conducted on the earliest possible
date and conducted in Charlotte, North Carolina. The arbitrators' award
shall be final and binding on the parties hereto and judgment upon the
award may be entered in any court having jurisdiction thereof. Expenses in
the arbitration shall be apportioned between the parties by the
arbitrators.
(b) Notwithstanding subsection (a), any party may, if it believes
that is requires or is entitled to a temporary restraining order or
preliminary injunctive relief to prevent irreparable injury, file a civil
action in any court having jurisdiction seeking a restraining order or
preliminary injunctive relief. Any claim or demand for monetary damages, a
permanent injunction or other relief shall, however, be governed
exclusively by the provisions for arbitration set forth in subsection (a).
2
6. Binding Effect. This Indemnity Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns;
provided, however, neither this Indemnity Agreement nor any of the rights,
interests or obligations of any party may be assigned without the prior written
consent of the other parties.
7. Amendment. This Indemnity Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by all the parties.
8. Entire Agreement. This Indemnity Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
9. Counterparts. This Indemnity Agreement may be executed in counterparts,
each of which shall be an original, but which together shall constitute one and
the same agreement.
10. Section Headings. The section headings herein are for convenience only
and shall not affect the construction or interpretation of this Indemnity
Agreement.
11. Governing Law. The laws of the State of North Carolina (irrespective
of its choice of laws, rules or principles) will govern the validity of this
Indemnity Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto.
3
IN WITNESS WHEREOF, this Indemnity Agreement has been executed as of the
date first above written.
US LEC Corp.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------------
Title: Executive Vice President and Chief
----------------------------------
Financial Officer
----------------------------------
Super STAR Associates Limited Partnership
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx,
General Partner
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxx
