S CORPORATION TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
This Tax Allocation and Indemnification Agreement dated ___________ ___,
1997 (the "Agreement") is made by and between ACSYS, Inc., a Georgia
corporation (the "Company"), the shareholders of the Company listed on the
signature page hereto (each individually, a "Shareholder" and collectively, the
"Shareholders"), and the following wholly-owned subsidiaries of the Company:
Xxxxx X. Xxxxxx & Associates, Inc., DCCA Professional Temporaries, Inc.,
Infinity Enterprises, Inc., Cama of Tampa, Inc., Xxxxx Xxxxxx Consulting Group,
Inc., and AcSys Resources, Inc. (each a "Subsidiary" and collectively, the
"Subsidiaries"). The term "ACSYS" shall mean the Company and the Subsidiaries.
WHEREAS, the Company is an S corporation, within the meaning of section
1361 of the Internal Revenue Code of 1986, as amended ("Code");
WHEREAS, each Subsidiary is a qualified subchapter S subsidiary, within
the meaning of section 1363(b)(3) of the Code;
WHEREAS, the Company and certain of the Shareholders intend to enter into
an underwriting agreement to sell common stock of the Company in an initial
public offering (the "Public Offering");
WHEREAS, the Shareholders are currently the only shareholders of the
Company and will continue to be so until immediately before the Closing; and
WHEREAS, in connection with the Public Offering, and in order to induce
the investment by the public in the Company, the Company and the Shareholders
desire to provide for an S corporation termination, tax allocation and
indemnification agreement in connection with tax periods prior to and following
the Termination Date (as defined below), as well as the termination of ACSYS as
an S corporation;
NOW, THEREFORE, for mutual consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Shareholders do hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Closing" shall mean the closing and completion of the offering by the
Company of shares of its stock, as described in the Registration Statement on
Form S-1 initially filed by the Company with the Securities and Exchange
Commission on October ___, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"C Short Year" shall have the meaning set forth in section 1362(e)(1)(B)
of the Code.
"S corporation" shall have the meaning set forth in section 1361 of the
Code.
"S corporation Taxable Income" shall mean, for periods beginning on or
after the date ACSYS became an S corporation and ending with the S Short Year,
the sum of (i) ACSYS's items of separately stated income and gain (within the
meaning of section 1366(a)(1)(A) of the Code) reduced, to the extent
applicable, by ACSYS's separately stated items of deduction and loss (within
the meaning of section 1366(a)(1)(A) of the Code) and (ii) ACSYS's
nonseparately computed net income (within the meaning of section 1366(a)(1)(B)
of the Code).
"S Short Year" shall have the meaning set forth in section 1362(e)(1)(A)
of the Code.
"Termination Date" shall mean the date on which ACSYS's status as an S
corporation is terminated by reason of revocation of the election for ACSYS to
be an S corporation pursuant to section 1362(d)(1) of the Code, which date
shall be not less than two days prior to the date of the Closing.
ARTICLE II
THE TERMINATION; TERMINATION DATE
2.1 Termination of S Corporation Status. The Company represents that it
terminated its status as an S corporation pursuant to an election, as permitted
pursuant to section 1362(d)(1) of the Code, on ______________, 1997 (the
"Termination Date").
2.2 Short Taxable Years. The parties acknowledge that the taxable year
in which the S corporation status of ACSYS is terminated will be an S
Termination Year for tax purposes, as defined in section 1362(e)(4) of the
Code. Pursuant to section 1361(e)(1) of the Code, the S Termination Year of
ACSYS shall be divided into two short taxable years: an "S Short Year" and a
"C Short Year." As defined in section 1362(e)(1)(A) of the Code, the S Short
Year shall be that portion of ACSYS's S Termination Year ending on the day
immediately preceding the Termination Date. Pursuant to section 1362(e)(1)(B)
of the Code, that portion of the S Termination Year beginning on the
Termination Date and ending on the last day of the taxable year shall be the C
Short Year of ACSYS.
ARTICLE III
ALLOCATION OF INCOME
ACSYS and the Shareholders agree that for federal tax purposes (including
for purposes of determining ACSYS's S corporation Taxable Income for its fiscal
year ending _____________, 1997) ACSYS shall allocate its items of income,
gain, loss, deduction and credit for its fiscal year ending _____________, 1997
between the S Short Year and the C Short Year in accordance with normal tax
accounting rules (the "closing of the books method"), as permitted by section
1362(e)(3) of the Code. ACSYS will make the election permitted by section
1362(e)(3) in a timely manner. The Shareholders agree to consent to such
election and to provide ACSYS with the statement of consent of all Shareholders
described in section 1.1362-6(b) of the Treasury Regulations. ACSYS and the
Shareholders agree to make, and to provide such information and obtain such
consents as are necessary to make, any comparable election required under
applicable state and local income tax laws.
ARTICLE IV
TAXES
4.1 Liability for Taxes Incurred During the S Short Year and for Tax
Periods Ending Prior to the Termination Date. The Shareholders, severally and
jointly, represent, covenant and agree that: (i) the Shareholders have duly
included, or will duly include, in their own federal income tax returns (and in
their state and local income tax returns, as permitted by applicable law) all
items of income, gain, loss, deduction, or credit attributable to the S Short
Year of ACSYS or to any prior period (or that portion of any period) during
which ACSYS was an S corporation as required by applicable law; (ii) such
returns have included and shall include their allocable share of S corporation
Taxable Income of ACSYS from all sources through and including the close of
business on the last day of the S Short Year of ACSYS; and (iii) the
Shareholders have timely paid and shall timely pay any and all taxes they are
required to pay, as a result of being a shareholder of ACSYS, for all taxable
periods (or that portion of any period) during which ACSYS was an S
corporation.
4.2 Shareholder Indemnification for Tax Liabilities. The Shareholders,
severally (according to the percentage of the outstanding shares of the
Company's common stock owned by each Shareholder on the last day of any
applicable period to which a liability described below relates) hereby
indemnify and hold ACSYS harmless from, against and in respect of any federal
income tax liabilities of ACSYS, including interest and penalties imposed
thereon (and any state and local income tax liabilities as provided by
applicable law) (i) which are attributable to any taxable period (or portion
thereof) ending on or prior to the Termination Date, or (ii) which are incurred
by ACSYS as a result of a final determination of an adjustment (by reason of an
amended return, claim for refund, audit, judicial decision or otherwise) to the
taxable income of the Shareholders for any period (including, without
limitation, the S Short Year) which (in the case of this clause (ii)) results
in a decrease for any period in the Shareholders' taxable income and a
corresponding increase for any period in the taxable income of ACSYS.
4.3 ACSYS's Indemnification for Tax Liabilities. ACSYS hereby
indemnifies and agrees to hold the Shareholders harmless from, against and in
respect of federal income tax liabilities, including interest and penalties
imposed thereon (and any state and local income tax liabilities as provided by
applicable law), if any, incurred by the Shareholders as a result of a final
determination of an adjustment (by reasons of an amended return, claim for
refund, audit, judicial decision or otherwise) to the taxable income of ACSYS
for any period (including, without limitation, the C Short Year) which results
in a decrease for any period in ACSYS's taxable income and a corresponding
increase for any period in the taxable income of the Shareholders.
4.4 Payments. The Shareholders or ACSYS, as the case may be, shall make
any payment required under Section 4.2 or Section 4.3 of this Agreement within
14 days after receipt of notice from the other party that a final determination
has occurred and a payment is due by such party to the appropriate taxing
authority.
4.5 Refunds. If ACSYS receives a refund of any income tax (including
penalties and interest) for any period prior to the Termination Date, or as to
which it has previously been indemnified by the Shareholders, it shall pay an
amount equal to such refund, within 14 days after receipt thereof, to the
Shareholders in accordance with the percentage of the outstanding shares of
ACSYS common stock owned by each such Shareholder on the last day of any
applicable period to which the refund relates. If the Shareholders receive a
refund of any income tax (including penalties and interest) as to which they
have previously been indemnified by ACSYS, they shall, within 14 days after
receipt thereof, remit an amount equal to such refund to ACSYS.
4.6 Notice and Control of Proceedings. Each of ACSYS and the
Shareholders agree that (i) within 10 days of receiving written notice of any
income tax examinations, claims, settlements, proposed adjustments or related
matters that may affect in any way the income tax liability of a party under
this Agreement, such person shall provide written notice thereof to such other
party, and (ii) the party or parties who would be responsible for the payment
of the applicable taxes if the matter in question were to be resolved adversely
shall be entitled, in his or its reasonable discretion and at his or its sole
expense, to handle, control and compromise or settle the defense thereof, so
long as such party or parties are acting diligently and in good faith. Such
party or parties shall keep the other party(ies) apprised of the status thereof
and shall consult with such other party(ies) concerning the conduct of the
defense thereof. Notwithstanding the foregoing, however, the party handling
such matters shall not compromise or settle any matter which could adversely
affect the tax liability of another party without such other party's prior
written consent, which shall not be unreasonably withheld. The parties hereto
shall execute all instruments required to effectuate the provisions of this
Section 4.6.
4.7 Cooperation. The parties will make available to one another, as
reasonably requested, and to any taxing authority, all information, records or
documents relating to the liability for taxes covered by this Agreement and
will preserve any such information, records or documents until the expiration
of the applicable statute of limitations or extensions thereof. The party
requesting such information shall reimburse the other party for all reasonable
out-of-pocket costs incurred in producing such information.
4.8 Costs. Except as otherwise provided herein, each party shall bear
his or its own costs in administering this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which counterparts
collectively shall constitute an instrument representing the Agreement between
the parties hereto.
5.2 Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors, any
rights or remedies under or by reason of this Agreement.
5.3 Intent of Parties. It is the parties' intent that the liability for
income taxes arising from the operations of ACSYS will be borne by the
Shareholders for the period through and including the S Short Year and by ACSYS
for periods beginning with the C Short Year, and this Agreement shall be
construed so as most equitably to achieve such intent.
5.4 Governing Law. This Agreement between the parties hereto shall be
governed by and construed in accordance with the substantive laws of the State
of Georgia without regard to its choice of law rules.
5.5 Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this _____ day of ____________, 1997.
ACSYS, Inc.
By:_________________________________________
Name:
Title:
XXXXX X. XXXXXX & ASSOCIATES, INC. CAMA OF TAMPA, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
DCCA PROFESSIONAL TEMPORARIES, INC. XXXXX XXXXXX CONSULTING GROUP, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
INFINITY ENTERPRISES, INC. ACSYS RESOURCES, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
THE SHAREHOLDERS
__________________________________________
__________________________________________
__________________________________________
__________________________________________
