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EXHIBIT 10.11
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT (the "Agreement") is entered into
effective the ___day of _____, 1997, between Deltek Systems, Inc., a Virginia
corporation (the "Company") and the stockholders of the Company listed on
Exhibit A attached hereto (the "Stockholders") (the Company and each Stockholder
are hereinafter referred to individually as a "party" and collectively as the
"parties").
WHEREAS, the Company is undertaking a public offering of its stock
in order to raise additional equity capital for the expansion of the Company's
business operations (the "Public Offering");
WHEREAS, the Company and the Stockholders have entered into this
Agreement as a condition to the closing of the Public Offering;
WHEREAS, the Company was classified as an S corporation until _____,
1997, after which it will be classified as a C corporation;
WHEREAS, the Stockholders are stockholders of the
Company; and
WHEREAS, the Company and the Stockholders wish to provide for a tax
indemnification agreement in connection with the Company's termination as an S
corporation.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
TERMINATION OF S STATUS
The Company is revoking its status as an S corporation under Section
1362 of the Internal Revenue Code of 1986, as amended (the "Code"), effective as
of _____, 1997 (the "Termination Date"). The Company is also revoking its status
as an S corporation in all states in which it is a qualifying S corporation
effective as of such date. The Company also intends to elect to allocate its
income for its current taxable year prior to the Termination Date using its
normal tax accounting method (rather than the pro rata allocation method) in
accordance with Treasury Regulation Section 1.1362-3(b) ("Accounting Election").
The Stockholders hereby approve such revocation and Accounting Election and
agree to take all necessary steps to effect such revocation and Accounting
Election.
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ARTICLE II
TAXES
2.1 Liability for Taxes Incurred for Taxable Periods Prior to the
Termination Date. The Stockholders covenant and agree that: (a) the Stockholders
have duly included, or will duly include, in their own federal and state income
tax returns all items of income, gain, loss, deduction, or credit of the Company
for any taxable period ending prior to the Termination Date (including the short
taxable period ending the day before the Termination Date) during which the
Company was an S corporation, and (b) the Stockholders shall pay or reimburse
the Company for any and all taxes the Company is required to pay for all such
taxable periods ending prior to the Termination Date; provided that the Company
shall be responsible for (i) the deferred tax liability arising out of the
revocation of the Company's S corporation status that will be recorded as a
charge to income tax provision on the Company's financial statements in the
quarter during which the Termination Date occurs and (ii) any taxes for such
taxable periods in any states where the Company had either not made a comparable
election or was not otherwise entitled to be treated as a S corporation or other
pass-thru entity.
2.2 Filing of Tax Returns. The Company covenants and agrees that: (a) the
Company shall be responsible for and shall effect the filing of all federal,
state, foreign and local returns for the Company (and all composite state income
returns on behalf of the Stockholders) with respect to any and all taxable
periods; and (b) the Company shall pay any and all taxes required to be paid by
the Company for all periods covered by the returns as required by applicable
law, subject to reimbursement by the Stockholders to the extent prescribed
herein.
2.3 Company's Indemnification for Tax Liabilities. The Company hereby
indemnifies and agrees to hold the Stockholders harmless from, against and in
respect of any federal and state income tax liability incurred by the
Stockholder resulting from a final determination of an adjustment (by reason of
an amended return, claim for refund, audit or otherwise) to the Company's or its
consolidated subsidiaries' taxable income resulting in a decrease in the
Company's (or its consolidated subsidiaries') taxable income for any period
commencing on or after the Termination Date and a corresponding increase in the
federal or state taxable income of the Stockholders with respect to taxable
periods ending prior to the Termination Date (including the short taxable period
ending the day before the Termination Date).
2.4 Stockholders' Indemnification for Tax Liabilities. The
Stockholders hereby indemnify and agree to hold the Company
harmless from, against and in respect of any federal and state
income tax liability incurred by the Company resulting from a
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final determination (after all time limitations for appeals has run) of an
adjustment (by reason of an amended return, claim for refund, audit or
otherwise) to the Stockholders' income resulting in a decrease in the
Stockholders' taxable income for a taxable period ending prior to the
Termination Date (including the short taxable period ending the day before the
Termination Date) and a corresponding increase in the federal or state income
tax liability of the Company (or its consolidated subsidiaries) for a taxable
period commencing on or after the Termination Date; provided that the Company
shall be responsible for (i) the deferred tax liability arising out of the
revocation of the Company's S corporation status that will be recorded as a
charge to income tax provision on the Company's financial statements in the
quarter during which the Termination Date occurs and (ii) any taxes for such
taxable periods in any states where the Company had either not made a comparable
election or was not otherwise entitled to be treated as a S corporation or other
pass-thru entity.
2.5 Payments. The Stockholders or the Company, as the case may be, shall
make any payment required under this Agreement within seven days after receipt
of notice from the other party that a payment is due by such party to the
appropriate taxing authority, which notice shall be accomplished by appropriate
documentation demonstrating that such payment is due.
2.6 Respective Liability. Each of the Stockholders shall be liable to the
Company for his, her or its allocable share of the total liabilities of the
Stockholders under this Agreement. Such allocable share shall be based on the
Stockholders' relative percentage interests in the Company as of _________,
1997.
ARTICLE III
MISCELLANEOUS
3.1 Counterparts. This Agreement may be executed in several 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.
3.2 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 and
assigns, any rights or remedies under or by reason of this Agreement.
3.3 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the Commonwealth of Virginia without regard to Virginia
choice of law rules.
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3.4 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by a written agreement executed by the parties.
3.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, nor is
this Agreement intended to confer upon any other person except the parties any
rights or remedies hereunder.
3.6 Interpretation. The title, article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
3.7 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.
3.8 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no representations, promises, warranties, covenants, or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and the understandings between the
parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DELTEK SYSTEMS, INC.
By:____________________________
Title:_________________________
STOCKHOLDERS:
By:____________________________
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By:____________________________
By:____________________________
By:____________________________
By:____________________________
By:____________________________
By_____________________________
By_____________________________
By_____________________________
By_____________________________
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EXHIBIT A
Stockholders of Deltek Systems, Inc.
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