TAX INDEMNIFICATION AGREEMENT
AGREEMENT made this 6th day of June, 1997, by and between Robocom
Systems Inc., a New York corporation (the "Company"), and the shareholders of
the Company named on the signature page hereto (each, a "Shareholder" and
collectively, the "Shareholders").
W I T N E S S E T H
WHEREAS, since June 1990, the Company has elected to be taxed as an "S"
corporation under subchapter S of the Internal Revenue Code of 1986, as amended
(the "Code"), and under similar provisions of state and local tax laws;
WHEREAS, the Company's election will be terminated on the date (the
"Termination Date") of its execution and delivery of an underwriting agreement
for the public offering and sale of its common stock;
WHEREAS, for periods prior to the Termination Date (the "S Corporation
Period"), the Company's items of income, gain, loss, deduction and credit were
passed through to and reported on the individual tax returns of the Company's
shareholders;
WHEREAS, in contemplation of the public offering and sale of the
Company's stock, the parties to this Agreement desire to set forth their rights
and obligations with respect to certain taxes and related liabilities that may
be imposed upon the Shareholders as a result of the conduct of the Company's
business during the S Corporation Period;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and conditions hereinafter contained, the parties hereto
agree as follows:
1. Indemnification. The Company agrees to indemnify, defend and hold
harmless each Shareholder from and against any and all losses, liabilities,
obligations, damages, impositions, assessments, fines, deficiencies, costs and
expenses, including without limitation reasonable attorneys' and accountants'
fees and expenses (a "Loss") with respect to any and all Federal, state or local
taxes of any kind whatsoever, including interest, penalties and additions to
taxes ("Taxes") imposed upon a Shareholder as a result of (i) any change which
results in an increase in an item of the Company's income or gain with respect
to one of the taxable years in the S Corporation Period and a corresponding
decrease in an item of the Company's income or gain with respect to another
taxable year that is not in the S Corporation Period, or (ii) any change which
results in a decrease in an item of the Company's loss, deduction or credit with
respect to one of the taxable years in the S Corporation Period and a
corresponding increase in an item of or loss, deduction or credit with respect
to another taxable year that is not in the S Corporation Period.
2. Notification of Proposed Adjustment. Each Shareholder shall notify
the Company within fifteen (15) days after receiving any notice of an intention
of a taxing authority to audit any return of such Shareholder that includes any
item of income, gain, loss, deduction or credit reported by the Company with
respect to the S Corporation Period. Each Shareholder shall notify the Company
within fifteen (15) days after receiving any notice from a taxing authority of
any proposed adjustment for which the Company may be required to indemnify such
Shareholder under this Agreement (a "Proposed Adjustment").
3. Contest of Proposed Adjustment. Upon receipt of a notice of a
Proposed Adjustment, the Company may (i) decide not to contest the Proposed
Adjustment, (ii) require the affected Shareholder(s) to contest the Proposed
Adjustment at the Company's expense, or (iii) require the affected
Shareholder(s) to permit the Company and its representatives to contest the
Proposed Adjustment at the Company's expense. All costs of contesting the
Proposed Adjustment in any forum, including all administrative and judicial
appeals, shall be borne by the Company. If the Company requires any Shareholder
to contest a Proposed Adjustment, the Company shall pay to such Shareholder on
demand all costs and expenses (including attorneys' and accounting fees) that
such Shareholder may incur in contesting the Proposed Adjustment. No Shareholder
shall make, accept or enter into a settlement or other compromise with respect
to any Proposed Adjustment without the written consent of the Company, which
consent shall not be unreasonably withheld.
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4. Payment; Refund. Upon the final resolution of any proceeding to
contest a Proposed Adjustment, or if the Company decides not to contest or
decides to abandon its contest of a Proposed Adjustment, the Company shall pay
to each affected Shareholder, in cash, the amount of the Loss for Taxes with
respect to the Proposed Adjustment no later than 10 days prior to the due date
of any payment required to be made by such Shareholder with respect thereto. If
any portion of any Loss for Taxes paid to any Shareholder by the Company is
thereafter refunded or repaid to such Shareholder by any taxing authority, such
Shareholder shall repay to the Company the amount of such refund or repayment,
less any unreimbursed costs incurred by such Shareholder with respect to the
refund or repayment.
5. Gross-up. If any Shareholder notifies the Company that such
Shareholder is required to include any payment received pursuant to this
Agreement in computing such Shareholder's gross income in a tax return, other
than (i) any payment received prior to the expiration of the "post-termination
transition period" defined in section 1377(b) of the Code, or (ii) any payment
for which such Shareholder failed to give the Company timely notice to allow the
Company to make such payment prior to the expiration of the post-termination
transition period, then, in addition to all other payments made under this
Agreement, the Company shall also pay to such Shareholder an amount which, when
added to the payment so included, will place such Shareholder in the same net
after-tax position that such Shareholder would have been in if the payment had
not been so included.
6. Tax Matters. Each Shareholder agrees to prepare all tax returns
consistent with the manner in which each item of income, gain, loss, deduction
and credit of the Company is reported to such Shareholder. Xxxxx Xxxxxxx is the
"tax matters person" of the Company for the S Corporation Period.
7. Notices. Any notice requested or permitted to be given under this
Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, if to the
Company, at the Company's principal place of business, and if to a Shareholder,
at such Shareholder's address set forth on the signature page hereto, or to such
other address or addresses as any party shall have designated in writing to the
other parties hereto.
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8. Survivability. The covenants and agreements of the parties set forth
in this Agreement shall survive indefinitely, and shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
9. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, between the parties with respect
to the subject matter hereof.
10. Modification. No provision of this Agreement may be amended,
waived, or otherwise modified without the written consent of the parties.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
ROBOCOM SYSTEMS INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
President and Chief
Executive Officer
SHAREHOLDERS:
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Address:
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/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Address:
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/s/ Xxxxxxxx Xxxxx
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Xxxxxxxx Xxxxx
Address:
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/s/ Xxxxxx Xxxx
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Xxxxxx Xxxx
Address:
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/s/ Xxxxxx X'Xxxxxx
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Xxxxxx X'Xxxxxx
Address:
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/s/ Xxxxx-Xxxx Xxx
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Xxxxx-Xxxx Xxx
Address:
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/s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
Address:
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/s/ Xxx Xxxxxxx
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Xxx Xxxxxxx
Address:
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