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EXHIBIT 10.2
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT, dated as of this 25th day of November,
1996, is entered into by Xxxxxxxxx Research, Inc., a Delaware corporation (the
"Company") and Xxxxxx X. Colony (the "Stockholder").
RECITALS
WHEREAS, the Stockholder holds all of the outstanding shares of the
Company's Common Stock, par value $.01, per share (the "Common Stock").
WHEREAS, the Company has elected to be taxed as S corporation under the
Code.
WHEREAS, the Company is now contemplating offering and selling shares of
its Common Stock to the public (the "Public Offering").
WHEREAS the Company plans, just prior to the completion of the Public
Offering, to terminate its S corporation election.
WHEREAS, after the termination of the Company's S corporation election, the
Stockholder will continue to be liable for his own federal, state, and
local income taxes on the Company's Tax Items that pass through to the
Stockholder under the provisions of Subchapter S of the Code and any
similar provisions of state and local law for all periods prior to the time
the Company ceases to be an S Corporation. The Company will be subject to a
corporate level tax under Subchapter C of the Code and certain state and
local taxing statutes for periods thereafter. The purpose of this Agreement
is to set forth the agreement of the Company and the Stockholder with
respect to certain adjustments to the federal, state, and local personal
income tax liability of the Stockholder attributable to Tax Items of the
Company that pass through to the Stockholder under the provisions of
Subchapter S of the Code and any similar provisions of state and local law
for periods during which the Company is an S Corporation.
The parties agree as follows:
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ARTICLE I
DEFINITIONS
For purposes of this Agreement the following definitions shall apply:
(a) "Adjustment" shall mean any proposed or final change in any S
Corporation Tax Liability initiated by the IRS, state or local taxing authority,
or any other relevant taxing authority.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect for the taxable period in question.
(c) "Final Determination" shall mean the final resolution of any tax Income
Tax liability (including all related interest and penalties) for a taxable
period. A Final Determination shall result from the first to occur of:
(i) the expiration of 30 days after IRS acceptance of a Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax and
Acceptance of Overassessment on Federal Revenue Form 870 or 870-AD (or any
successor comparable form or the expiration of a comparable period with
respect to any comparable agreement or form under the laws of other
jurisdictions), unless, within such period, the taxpayer gives notice to
the other party of the taxpayer's intention to attempt to recover all or
part of any amount paid pursuant to the Waiver by the filing of a timely
claim for refund;
(ii) a decision, judgment, decree, or other order by a court of
competent jurisdiction that is not subject to further judicial review (by
appeal or otherwise) and has become final;
(iii) the execution of a closing agreement under section 7121 of the
Code or the acceptance by the IRS or its counsel of an offer in compromise
under section 7122 of the Code, or comparable agreements under the laws of
other jurisdictions;
(iv) the expiration of the time for filing a claim for refund or for
instituting suit in respect of a claim for refund disallowed in whole or
part by the IRS or other relevant taxing authority;
(v) any other final disposition of the tax liability for such period
by reason of the expiration of the applicable statute of limitations; or
(vi) any other event that the parties agree is a final and irrevocable
determination of the liability at issue.
(d) "Income Tax" shall mean federal income taxes and state and local taxes
imposed upon, or measured by, income. Income Tax includes interest, penalties,
additions to tax, and additional amounts, and any related professional or other
expenses.
(e) "IRS" shall mean the United States Internal Revenue Service or any
successor, including, but not limited to, its agents, representatives, and
attorneys.
(f) "S Corporation"shall mean an S Corporation within the meaning of
section 1361 of the Code.
(g) "S Corporation Tax Liability" shall mean the personal Income Tax
liability of the Stockholder for Income Taxes attributable to (a) the Company's
Tax Items that pass through to the Stockholder under the provisions of
Subchapter S of the Code and any similar provisions of state and local law or
(b) the Stockholder's receipt of indemnity payments hereunder.
(h) "Tax Benefit" shall mean a reduction in the personal Income Tax
liability of the Stockholder (as a result of Tax Items of the Company and all
other Tax Items reflected on the Stockholder's tax return) for any taxable
period. The Stockholder shall be deemed to have realized or received a Tax
Benefit from a Tax Item in a taxable period only if and to the extent that the
Stockholder's personal Income Tax liability for such period is less than it
would have been if such liability were determined without regard to such Tax
Item. The Stockholder shall be deemed to have realized or received a
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Tax Benefit with respect to a carryover only if, when, and to the extent the
carryover is used to produce a Tax Benefit.
(i) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable by the Stockholder (when the Company is an S
Corporation) or by the Company.
ARTICLE II
INDEMNIFICATION FOR CERTAIN TAXES
(a) The Stockholder shall pay to the Company an amount equal to any Tax
Benefit realized or received arising from an Adjustment with respect to a Tax
Item of the Company for any taxable period in which the Company was taxable as
an S Corporation.
(b) If based on a Final Determination the Company is deemed to have been a
C corporation for federal, state or local income tax purposes during any period
in which it reported (or intends to report) its taxable income as an S
corporation, the Stockholder agrees to contribute to the capital of the Company
an amount necessary to hold the Company harmless from any taxes (net of any
refunds) and interest arising from such Final Determination. The obligations of
the Stockholder under this subsection (b) shall include all taxes (net of any
refunds) and interest incurred by the Company as a C Corporation for periods
ending before the date of termination of the Company S election during 1996 (the
"Termination Date"), other than (i) any obligation arising from an adjustment to
the Company's tax return for a period ending before the Termination Date which,
if the Company had been an S corporation for such period, would have given rise
to an obligation of the Company to the Stockholder under subsection (c) hereof
and (ii) any taxes and interest incurred by the Company for its 1985 and 1986
taxable years. The Stockholder's obligation under this subsection (b) shall be
limited to the total distributions to the Stockholder made by the Company
through and including the Termination Date, reduced by any taxes (net of any
refunds) and interest of the Stockholder attributable to such distributions.
(c) The Company shall pay and indemnify the Stockholder for any S
Corporation Tax Liability arising from an Adjustment with respect to a Tax Item
of the Company.
(d) Any payment required under this Article shall be made by the earlier of
(1) 20 days after the Stockholder receives a refund or credit, (2) 20 days after
a Final Determination with respect to such tax, (3) with respect to a carryover,
20 days after the Stockholder files a tax return on which the carryover produces
a Tax Benefit, or (4) 20 days after the determination by the parties or pursuant
to Article IV that such payment is due.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
Whenever the Stockholder or the Company becomes aware of an issue which it
believes gives rise to payment or indemnification from the other party under
Article II, the Stockholder or the Company (as the case may be) shall promptly
give notice of the issue to the other party. The indemnitor and its
representatives, at the indemnitor's expense, shall be entitled to participate
in all conferences, meetings, or proceedings with the IRS or other taxing
authority with respect to the issue.
The parties agree to consult and cooperate with each other in the
negotiation and settlement or litigation of any Adjustment that may give rise to
any payment or an indemnification payment under this Agreement. All decisions
with respect to such negotiation and settlement or litigation shall be made by
the parties after full, good faith consultation or pursuant to the dispute
resolution provisions of Article IV.
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ARTICLE IV
DISPUTES
If the parties are, after negotiation in good faith, unable to agree upon
the appropriate application of this Agreement, the controversy shall be settled
by the "Big 6" accounting firm remaining on the list of firms set forth on
Schedule A hereto after the Company and the Stockholder, commencing with the
Company, shall have objected seriatim, to the other firms on the list (the
"Accounting Firm"). The decision of the Accounting Firm shall be final, and each
of the Company and the Stockholder agree immediately to pay to the other any
amount due under this Agreement pursuant to such decision. The expenses of the
Accounting Firm shall be borne one-half by the Company and one-half by the
Stockholder unless the Accounting Firm specifies otherwise.
ARTICLE V
MISCELLANEOUS
Section 5.1 Term of Agreement. This Agreement shall become effective as
of the date of its execution and shall continue in full force and effect
indefinitely.
Section 5.2 Severability. If any term of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remainder of the terms
set forth herein shall remain in full force and effect and shall in no way be
impaired. The parties stipulate that they would have executed the remaining
terms without including any which may hereafter be declared unenforceable. In
the event that any term is held to be unenforceable, the parties shall use their
best efforts to find an alternative means to achieve the same or substantially
the same result as that contemplated by such term.
Section 5.3 Assignment. Except by operation of law or in connection with
the sale of all or substantially all the assets of a party, this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by the
Stockholder without the written consent of the Company or by the Company without
the written consent of the Stockholder. Any attempt to assign any right or
obligations arising under this Agreement without such consent shall be void.
However, the provisions of this Agreement shall be binding upon inure to the
benefit of, and be enforceable by the parties and their respective successors
and permitted assigns.
Section 5.4 Further Assurances. Subject to the provisions of this
Agreement, the parties shall acknowledge such other instruments and documents,
and take all other actions, as may be reasonably required in order to effectuate
the purposes of this Agreement.
Section 5.5 Parties in Interest. Except as herein otherwise specifically
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon any person, firm, or corporation other than the
parties and their respective successors and permitted assigns.
Section 5.6 Waivers, Etc. No failure or delay on the part of the parties
in exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by the parties therefrom shall in any event be
effective unless it shall be in writing, and then such waiver or consent shall
be effective only in the specific instance and for the purpose which given.
Section 5.7 Set-off. All payments to be made by any party under this
Agreement shall be made without set-off, counterclaim, or withholding, all of
which are expressly waived.
Section 5.8 Change of Law. If, due to any change in applicable law or
regulations or the interpretation thereof by any court or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement shall be impracticable or
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impossible, the parties shall use their best efforts to find an alternative
means to achieve the same or substantially the same results as are contemplated
by such provision.
Section 5.9 Headings. Descriptive headings are for convenience only and
shall not control or affect the meaning of any provision of this Agreement.
Section 5.10 Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties and each
executed counterpart shall be an original instrument.
Section 5.11 Notices. All notices provided for in this Agreement shall be
validly given if in writing and delivered personally or sent by registered mail,
postage prepaid
if to the Company, at
General Counsel
Xxxxxxxxx Research, Inc.
0000 Xxxxxxxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
copy to:
Xxx X. Xxxxxx, Esquire
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
if to the Stockholder, to:
Xxxxxx X. Colony
c/o Forrester Research, Inc.
0000 Xxxxxxxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
or to such other addresses as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by mail shall be deemed
delivered five calendar days after the date mailed.
Section 5.12 Governing Law. This Agreement shall be governed by the
domestic substantive laws of The Commonwealth of Massachusetts without regard to
any choice or conflict of laws rule or provision that would cause the
application of the domestic substantive laws of any other jurisdiction.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first written above.
XXXXXXXXX RESEARCH, INC.
By: /S/ XXXXX X. XXXXXX
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Name: Xxxxx X. Xxxxxx
Title: Director, Operations
/S/ XXXXXX X. COLONY
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Xxxxxx X. Colony
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SCHEDULE A
Xxxxxx Xxxxxxxx LLP
Coopers & Xxxxxxx LLP
Deloitte & Touche LLP
Ernst & Young LLP
KPMG Peat Marwick LLP
Price Waterhouse LLP
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