Indemnification Agreement - Talk.com Inc. and Access One Communications Corp.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made
effective March 24, 2000 by and among Talk.com, Inc., a Delaware corporation,
("Purchaser") and Access One Communications Corp., a New Jersey corporation (the
"Company" or the "Surviving Corporation").
WHEREAS, Purchaser, Aladdin Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Purchaser ("Merger Subsidiary"),
and the Company entered into an Agreement and Plan of Merger dated March 24,
2000 (the "Merger Agreement"), providing for the merger of Merger Subsidiary
with and into the Company (the "Merger").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, and as an inducement to consummate the
Merger, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
2. Indemnification by the Company and the Stockholders.
(a) Subject to the limitations of Section 2(b), the Company,
prior to the Effective Time agrees, and all of the holders of the Company's
securities (including but not limited to holders of capital stock, warrants
and/or options) (the "Stockholders"), jointly and severally, after the Effective
Time agree, to indemnify in full Purchaser, Merger Subsidiary and the Company
and their respective officers, directors, employees, agents and shareholders
(collectively, the "Purchaser Indemnified Parties") and hold them harmless
against any loss, liability, deficiency, damage, expense or cost (including
reasonable legal expenses), actually incurred or paid (collectively, "Losses"),
which Purchaser Indemnified Parties may suffer, sustain or become subject to,
prior to the first anniversary of the Effective Time, as a result of (i) any
misrepresentation in any of the representations and warranties of the Company
contained in the Merger Agreement or in any exhibits, schedules, certificates or
other documents delivered or to be delivered by or on behalf of the Company
pursuant to the terms of the Merger Agreement or otherwise referenced or
incorporated in the Merger Agreement (collectively, the "Company Documents") or
(ii) any breach of, or failure to perform, any agreement or covenant of the
Company or the Stockholders contained in the Merger Agreement, the Voting
Agreement, this Agreement or any of the Company Documents (collectively,
"Purchaser Losses").
(b) The Company and the Stockholders will be liable to the
Purchaser Indemnified Parties for any Purchaser Losses (i) only if Purchaser
Indemnified Parties deliver to the Company and the Stockholders written notice,
setting forth in reasonable detail the identity, nature and amount of Purchaser
Losses related to such claim or claims prior to the first anniversary of the
Effective Time and (ii) only if the aggregate amount of all Purchaser Losses
exceeds One Million Dollars ($1,000,000) (the "Basket Amount"), in which case
the Company and the Stockholders shall be obligated to indemnify the Purchaser
Indemnified Parties for the
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excess of the aggregate amount of all such Purchaser Losses over the Basket
Amount. A Purchaser Indemnified Party's failure to provide the detail required
by clause (i) in the preceding sentence shall not constitute either a breach of
this Agreement by the Purchaser Indemnified Party or any basis for the Company
or the Stockholders to assert that a Purchaser Indemnified Party did not comply
with the terms of this Section 2 sufficient to cause the Purchaser Indemnified
Party to have waived its rights under this Section 2. Notwithstanding the
foregoing, the Company and the Stockholders shall not be liable for Purchaser
Losses that cannot be satisfied from the proceeds of Parent Shares held pursuant
to the Escrow Agreement.
3. Indemnification by Purchaser.
(a) Subject to the limitations of Section 3(b), Purchaser
agrees to indemnify in full the Stockholders (collectively, the "Stockholder
Indemnified Parties") and hold them harmless against any Losses which any of the
Stockholder Indemnified Parties may suffer, sustain or become subject to prior
to the first anniversary of the Effective Time: (i) as a result of any
misrepresentation in any of the representations and warranties of Purchaser and
Merger Subsidiary contained in the Merger Agreement and (ii) as a result of any
breach of, or failure to perform, any agreement of Purchaser or Merger
Subsidiary contained in the Merger Agreement (collectively, "Stockholder
Losses").
(b) Purchaser will be liable to the Stockholder Indemnified
Parties for any Stockholder Losses only if Stockholder Indemnified Parties
deliver to Purchaser written notice, setting forth in reasonable detail the
identity, nature and amount of Stockholder Losses related to such claim or
claims prior to the first anniversary of the Effective Time. A Stockholder
Indemnified Party's failure to provide the detail required by the preceding
sentence shall not constitute either a breach of this Agreement by the Company
or the Stockholders or any basis for Purchaser to assert that the Company or the
Stockholders did not comply with the terms of this Section 3 sufficient to cause
either the Company or the Stockholders to have waived their rights under this
Section 3.
4. Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a "Purchaser Indemnified Party" or "Stockholder Indemnified
Party," as applicable, the "Notifying Party" shall refer to the party hereto
whose Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for liabilities (or the related costs or expenses
of which) are Losses (any such third party action or proceeding being referred
to as a "Claim"), the Notifying Party shall give the Indemnifying Party prompt
notice thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claims provided that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within twenty (20)
business days after the Notifying
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Party's notice of such Claim (but, in all events, at least five (5) business
days prior to the date that answer to such Claims is due to be filed). Such
contest and defense shall be conducted by reputable attorneys employed by the
Indemnifying Party. The Notifying Party shall be entitled at any time, at its
own cost and expense (which expense shall not constitute a Loss unless the
Notifying Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party that does not involve a Claim, the Notifying
Party shall deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party that
it does not dispute the claim described in such notice or fails to notify the
Notifying Party within thirty (30) days after delivery of such notice by the
Notifying Party whether the Indemnifying Party disputes the claim described in
such notice, the Loss in the amount specified in the Notifying Party's notice
will be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its Liability with respect
to such claims, the Chief Executive Officers of each of the Indemnifying Party
and the Notifying Party (or the principal individuals involved in the case of
the Stockholders) will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through the negotiations of such Chief Executive
Officers or principal individuals within sixty (60) days after the delivery of
the Notifying Party's notice of such claims, such dispute shall be resolved
fully and finally by an arbitrator selected pursuant to, and an arbitration
governed by the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall resolve the dispute within thirty (30) days
after selection and judgment on the award rendered by such arbitrator may be
entered in any court of competent jurisdiction.
(c) After the Closing, the rights set forth in this Agreement
and the Escrow Agreement shall be each party's sole and exclusive remedies
against the other party hereto for misrepresentations or breaches of covenants
contained in the Merger Agreement or this Agreement and the Related Documents.
Notwithstanding the foregoing, nothing herein shall prevent any of the
Indemnified Parties from bringing an action based upon allegations of fraud or
other intentional breach of an obligation of or with respect to either party in
connection with the Merger Agreement or this Agreement and the Related
Documents. In the event such action is brought, the prevailing party's
attorneys' fees and costs shall be paid by the nonprevailing party.
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5. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in this
Agreement for any reason is held to be unenforceable although applicable in
accordance with its terms, the Stockholders, jointly and severally, agree to
contribute the Escrow Amount to satisfy the Purchaser Losses.
6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7. No Third-Party Beneficiaries. Notwithstanding any term or provision
of this Agreement, this Agreement does not create any right of subrogation or
enforcement on the part of (and shall not inure to the benefit of) any person
other than the parties hereto or their respective successors and permitted
assigns.
8. Governing Law; Forum; Jury Trial Waiver. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR
RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
DELAWARE. Each of the parties submits to the jurisdiction of any state or
federal court sitting in the Commonwealth of Virginia in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court. Each of the parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security that might
be required of any other party with respect thereto. Each party appoints C-T
Corporation (the "Process Agent") as his or its agent to receive on his or its
behalf service of copies of the summons and complaint and any other process that
might be served in the action or proceeding. Any party may make service on any
other party by sending or delivering a copy of the process (A) to the party to
be served at the address and in the manner provided for the giving of notices in
Section 10 below or (B) to the party to be served in care of the Process Agent
at the address and in the manner provided for the giving of notices in Section
10 below. Nothing in this Section 8, however, shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
Each party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
9. Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto; provided,
however, that in the event of the death of any Stockholder, such Stockholder's
estate, personal representatives, executors, heirs and legatees shall be bound
hereby as if a party hereto.
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10. Notices. Any notices required to be given hereunder shall be
delivered in accordance with Section 9(g) of the Merger Agreement, with notices
to the Stockholders being sent to the respective addresses specified on the
signature pages hereof.
11. Entire Agreement. This Agreement (together with the Merger
Agreement and the Related Documents) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
12. Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement effective on the date first set forth above.
TALK.COM, INC.
By:
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Its:
ACCESS ONE COMMUNICATIONS CORP.
By:
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Its:
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