EXHIBIT 10.2
APEX PC SOLUTIONS, INC.
S CORPORATION INDEMNIFICATION AGREEMENT
THIS S CORPORATION INDEMNIFICATION AGREEMENT (the "Agreement") is made the
29 day of December, 1995, by and between Apex PC Solutions, Inc., a Washington
corporation (the "Company"), and Xxxxxxxx Xxxx (the "Shareholder").
Whereas, the Company has filed as an S corporation, as defined in
Section 1361 of the Internal Revenue Code of 1986, as amended (the "Code"), for
federal and state income tax purposes since inception and terminated its S
corporation status on October 31, 1995 (the "Termination Date");
Whereas, it is anticipated that the Company will sell and issue debt and
equity securities to certain investors (the "Investors") named in the Company's
Stock and Subordinated Note Purchase Agreement dated of even date herewith (the
"Purchase Agreement"); and
Whereas, the Investors have required the Shareholder and the Company to
enter into this Agreement to provide indemnification to the Company in the event
income tax liabilities are incurred by the Company, to the extent provided in
this Agreement; and
Now, therefore, the parties hereto agree as follows:
ARTICLE I
TAX INDEMNIFICATION
1.1 SHAREHOLDER INDEMNIFICATION FOR TAX LIABILITIES. Except with respect
to tax imposed by any tax jurisdiction that does not recognize S corporations as
pass-through entities, the Shareholder hereby indemnifies and agrees to hold the
Company harmless from, against and in respect of any U.S. federal or state
income tax liability (including interest and penalties), if any, resulting from
the Company failing to qualify as an S corporation under Code
section 1361(a)(1)for any taxable period ending on or prior to the Termination
Date (the "Indemnification Period").
1.2 AUDIT AND CONTEST RIGHTS. The parties hereto shall cooperate with
each other in the conduct of any audit or other proceeding relating to the
Company's income taxes relating to the Indemnification Period. Within twenty
(20) days notice of any proposed or threatened adjustment which could give rise
to a claim for indemnification under Section 1.1, the Company shall notify the
Shareholder thereof and thereafter, the Shareholder shall have the right to
control any resulting proceedings and to determine when, whether and to what
extent to settle any such claim, assessment or dispute; provided, however, that
the Shareholder shall not settle or otherwise agree to any adjustment or
adjustments that would have the effect of increasing any tax liability with
respect to the Company without obtaining the prior written consent of the
Company.
1.3 PAYMENTS. The Shareholder shall make any payment under Section 1.1
within thirty (30) days after the final determination (as such term is defined
in Section 1313(a) of the Code) of any tax liability resulting in a claim for
indemnification. Any amounts paid by the Shareholder hereunder shall be treated
as contributions to the capital of the Company.
ARTICLE II
MISCELLANEOUS
2.1 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.
2.2 CONSTRUCTION OF TERMS. Nothing herein implied is intended, or shall
be construed, to confer upon or give any person, form or corporation, other than
the parties hereto or their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
2.3 GOVERNING LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Washington.
2.4 AMENDMENT AND MODIFICATION. 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, except as specifically set forth herein, is this Agreement
intended to confer upon any other person except the parties any rights or
remedies hereunder. Notwithstanding the foregoing, no provision of this
Agreement may be amended or waived by the Company or the Shareholder without the
prior written consent of the Designated Representative (as such term is defined
in the Purchase Agreement).
The Company and the Shareholder agree and acknowledge that the Investors
are purchasing securities of the Company in reliance, in part, upon the
agreements between the Company and the Shareholders set forth in this Agreement.
2.5 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.
2.6 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to 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.
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2.7 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 with respect to the subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SHAREHOLDER APEX PC SOLUTIONS, INC.
a Washington corporation
/s/ Xxxxxxxx Xxxx By: /s/ Xxxxx Xxxxx
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Xxxxxxxx Xxxx Xxxxx Xxxxx, President
[Signature Page to S Corporation Indemnification Agreement]
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