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EXHIBIT 10.8
MELITA INTERNATIONAL CORPORATION/___________
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT, dated as of the 5th day of March,
1997, is entered into by MELITA INTERNATIONAL CORPORATION, a Georgia corporation
(the "Company") and _____________ (the "Stockholder").
RECITALS
WHEREAS, prior to February 7, 1997, the Stockholder held four percent
of the outstanding shares of the Company's Voting Common Stock, no par
value, (the "Common Stock"); and
WHEREAS, the Company has elected to be taxed as S corporation under the
Code and that election has not been terminated; and
WHEREAS, the Company is now contemplating offering and selling shares
of its Common Stock to the public (the "Public Offering"); and
WHEREAS, the Company plans, just prior to the commencement of the
Public Offering, to terminate its S corporation election; and
WHEREAS, the parties hereto wish to set forth their agreement with
respect to certain adjustments to the federal and state income tax
liability of the Stockholder and the Company 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 law for the period during which the Company is an S Corporation;
NOW, THEREFORE, for value received, the parties agree as follows:
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.
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(c) "Final Determination" shall mean the final resolution of any
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, and other additions to tax.
(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:
(i) 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
(ii) the Stockholder's receipt of indemnity payments
hereunder.
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(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
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 actually 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 1997 (the "Termination Date"), other than 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) of this Article II.
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.
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(d) Any payment required under this Article shall be made by the
earliest 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
either party believes could give 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 and good faith consultation.
If a party who will be required to make an indemnification payment (the
"Indemnifying Party") proposes to accept a settlement offered by the relevant
taxing authority with respect to an issue for one or more taxable years, but the
party who will be entitled to receive the payment (the "Indemnified Party")
disagrees with the proposed settlement, then the Indemnifying Party may pay to
the Indemnified Party the amount that would be due under this Agreement pursuant
to such settlement and, in that event, the Indemnifying Party shall have no
further responsibility for amounts attributable to that issue for the taxable
years involved.
ARTICLE IV
DISPUTES
If the parties are, after negotiation in good faith, unable to agree
upon the appropriate calculation of amounts due under this Agreement, the
controversy shall be settled by Xxxxxx Xxxxxxxx, L.L.P. (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.
Any dispute arising between the parties with reference to the legal
interpretation of this Agreement or their rights hereunder shall, upon written
request of either party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. Each party shall submit its case
to its arbitrator within thirty days of the appointment of the third arbitrator.
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The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered upon
the final decision of the arbitrators in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and equally
bear with the other party the expense of the third arbitrator and of the
arbitration.
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, except that this Agreement shall be void and of no effect if the
Company's S corporation status is not terminated before January 1, 1998.
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. 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.
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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 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
Melita International
0000 Xxxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
Attn: President
copy to:
Xxxxxx X. Xxxxxx
General Counsel
Melita International
0000 Xxxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
if to the Stockholder, to:
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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 Georgia 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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Section 5.13 No Double Recovery. The total recovery received by the
Company pursuant to Article II(b) of this Agreement, the Melita International
Corporation/Xxxxxxxxxx Xxxxx Tax Indemnification Agreement, and the Melita
International Corporation/Xxxxxx Xxxxx, as Trustee U/A/D February 7, 1997 Tax
Indemnification Agreement shall not exceed the total taxes (net of refund) and
interest arising from the Final Determination referred to therein.
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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.
MELITA INTERNATIONAL CORPORATION: STOCKHOLDER:
By: (SEAL)
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J. Xxxx Xxxxx, President
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