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Exhibit 10.2
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Tax Indemnification Agreement
THIS TAX INDEMNIFICATION AGREEMENT (the "Tax Indemnification Agreement"),
dated as of February ___, 1999, is made by and among Gabelli Asset Management
Inc. (formerly known as Alpha G, Inc., a New York corporation) (the "Company"),
and Gabelli Group Capital Partners, Inc. (formerly known as Gabelli Funds, Inc.,
a New York corporation) ("Gabelli Partners").
WHEREAS, the Company intends to offer to the public in an underwritten
offering up to 6,900,000 shares of its Class A Common Stock, par value $.001 per
share (the "Class A Common Stock") (the "Offering");
WHEREAS, immediately prior to the closing of the Offering, the Company
will issue approximately 24 million shares of its Class B Common Stock, par
value $.001 per share (the "Class B Common Stock") to Gabelli Partners in
exchange for substantially all of the operating assets and liabilities of
Gabelli Partners;
WHEREAS, the Company and Gabelli Partners intend that this Tax
Indemnification Agreement shall govern the proper allocation among the Company
and Gabelli Partners of Taxes incurred in or attributable to taxable periods
prior to the Closing Date and shall govern certain other Tax matters.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein set forth, the Company and Gabelli Partners hereby agree as follows:
1. Certain Defined Terms
For purposes of the provisions set forth below:
(a) "IRS" shall mean the Internal Revenue Service.
(b) "Closing" shall mean the consummation of the Offering.
(c) "Closing Date" shall mean the date on which the Closing occurs.
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(d) "Entities" shall mean GAMCO Investors, Inc., Gabelli Funds, LLC
(formerly known as the Gabelli Funds Division), Gabelli Fixed Income, Inc.,
Darien Associates, LLC, Gabelli Fixed Income Distributors, Inc., and Gabelli
Securities, Inc. and each of their direct and indirect subsidiaries.
(e) "Excluded Assets" shall mean assets of the Entities which are
not part of the contribution to the Company.
(f) "Pre-Offering Structuring Transactions" shall mean the formation
of the Company and the contribution of operating assets (other than the Excluded
Assets) and liabilities of Gabelli Partners to the Company in exchange for
approximately 24 million shares of Class B Common Stock.
(g) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
levies, or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, franchise, withholding,
social security, occupation, use, service, license, payroll, transfer and
recording taxes, imposed by the IRS or any Taxing Authority; and such term shall
include interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such taxes,
charges, fees, levies or other assessments.
(h) "Taxing Authority" shall mean any entity that imposes Taxes,
whether domestic or foreign, and whether imposed by a nation, locality,
municipality, government, state, federation or other body.
(i) "Tax Controversy" shall have the meaning as defined in Section 5
of the Tax Indemnification Agreement.
(j) "Tax Indemnified Party or Parties" shall mean Gabelli Partners
and its shareholders.
(k) "Tax Indemnifying Party" shall mean the Company.
(l) "Tax Returns" shall mean all reports, estimates, declarations of
estimated tax, information statements, returns or other documents required to be
filed in connection with any Taxes, including but not limited to original (or
amended) returns and filings, requests for extensions of time, requests for a
change in method
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of accounting, information statements and reports, claims for refund, amended
returns and all documents required to be filed in connection with any Tax
Controversy.
2. Tax Indemnification
(a) The Company shall indemnify the Tax Indemnified Parties and hold
them harmless from, against and in respect of any and all Taxes that arise from
the inclusion in a Tax Return of any items of income, gain, loss, deduction or
credit:
(i) resulting from the operating activities of the Entities
(other than those activities attributable to the Excluded Assets) for all
taxable periods ending on or before the Closing, the Taxes on which have not
been otherwise paid by the Tax Indemnified Parties as of the Closing Date;
(ii) relating to the Pre-Offering Structuring Transactions;
(iii) relating to the Entities for all taxable periods ending
after the Closing Date, except to the extent such items relate to the
[non-operating activities] of the Entities or to the Excluded Assets for taxable
periods which began before the Closing Date; and
(b) The amount of indemnification pursuant to this Section 2 shall
equal the sum of:
(i) the amount of the excess of:
(X) the Tax liability of the Tax Indemnified Party
calculated by including any items of income gain, loss deduction or credit of
the Tax Indemnified Party described in Section 2(a)(i), (ii) or (iii), over,
(Y) the Tax liability of the Tax Indemnified Party
calculated without the inclusion of such items; plus
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(ii) an amount sufficient such that the amount payable
pursuant to this Section 2 net of any Taxes (calculated in accordance with the
Section 2(b)(i)) payable on the receipt by the Indemnified Parties of such
indemnification payment shall equal the amount calculated pursuant to Section
2(b)(i).
(c) Upon obtaining knowledge that a Tax Indemnified Party is
entitled to indemnification under this Tax Indemnification Agreement, the party
having knowledge shall deliver written notice to the other party. Such notice
shall specify in reasonable detail the basis for and the amount of
indemnification pursuant to Section 2. The Tax Indemnifying Party shall pay the
amount of indemnification pursuant to Section 2 within sixty (60) days after
receipt of the notice or upon obtaining knowledge of such indemnification
obligation. If either the Tax Indemnified Party or the Tax Indemnifying Party
disputes the liability within thirty (30) days of the receipt of the notice or
obtaining knowledge of such indemnification obligation, the dispute shall be
handled as set forth in Section 3(d) below.
3. Tax Returns
(a) The Company shall prepare and timely file (in each case, at its
own cost and expense and consistent with past practice), taking into account any
and all extensions, all Tax Returns (other than those relating specifically to
Excluded Assets) required to be filed in respect of any Taxes of the Entities
for taxable periods ending on or prior to the Closing Date not otherwise filed
prior thereto.
(b) The Company shall prepare and timely file, taking into account
any and all extensions, all Tax Returns with respect to the Entities required to
be filed other than those described in Section 3(a) hereof.
(c) If Gabelli Partners prepares and timely files any Tax Return for
which it would be entitled to indemnification under Section 2(a), then Gabelli
Partners or its shareholders, whichever is applicable, shall pay such Taxes due
on such Tax Returns. Gabelli Partners shall provide the Company with copies of
any such Tax Returns covering the Taxes described in Section 2(a) at least
twenty (20) days prior to the due date thereof (giving effect to any extension
thereto), accompanied by a statement calculating the Tax Indemnifying Party's
indemnification obligation pursuant to Section 2. The Tax Indemnifying Party
shall pay to the Tax Indemnified Parties the amount of the Tax Indemnifying
Party's indemnification
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obligation within ten (10) days of receiving copies of such Tax Returns unless
the parties are unable to agree on the amount of the Tax Indemnifying Party's
indemnification obligation.
(d) In the event that the Tax Indemnifying Party and Tax Indemnified
Parties cannot agree on the amount or the method of calculation of any amount
relating to Taxes covered directly or indirectly by this Tax Indemnification
Agreement, then such dispute shall be resolved by an independent accounting firm
acceptable to both parties whose fees and expenses shall be paid by the Tax
Indemnifying Party and the Tax Indemnified Parties in proportion to each party's
respective liability for Taxes as determined by such accounting firm, and the
Tax Indemnifying Party shall pay the amount determined by such accountants
within ten (10) days of such determination.
4. Refunds
(a) The Tax Indemnified Parties shall be entitled to any refunds or
credits of Tax of the Entities or Tax attributable to operating activities of
the Entities to the extent such Taxes were not paid by the Company. The Company
shall remit such refunds to the Tax Indemnified Parties within ten (10) days of
receiving any such refund.
(b) The Company shall be entitled to any refunds or credits of Tax
of the Entities or Tax attributable to the operating activities of the Entities
for any taxable period ending on or before the Closing Date to the extent such
Taxes were paid by the Company. Gabelli Partners and/or its shareholders shall
remit such refunds to the Company within ten (10) days of receiving any such
refund.
(c) The Company shall be entitled to any refunds or credits of Tax
of the Entities for any taxable period beginning after the Closing Date. To the
extent received by Gabelli Partners and/or its shareholders, Gabelli Partners
shall remit the amount of such refunds to the Company within ten (10) days of
receiving any such refund.
(d) If any refund or credit of Tax of the Entities or Tax
attributable to the operating activities of the Entities cannot be reasonably
determined as a refund or credit of Tax paid by the Company or not paid by the
Company, then such
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refund or credit of tax shall be equitably apportioned between the Tax
Indemnifying Party and the Tax Indemnified Parties.
(e) If the Company in good faith determines that it will not have
any material adverse affect on its tax liability, the Company shall request and
at Gabelli Partner's sole expense file for and obtain any refunds or credits to
which the Tax Indemnified Parties would be entitled under Section 4 hereof. If
the Company makes such a good faith determination, (i) the Company shall permit
Gabelli Partners to control the prosecution of any such refund claim and, where
deemed appropriate by Gabelli Partners, shall authorize by appropriate powers of
attorney such persons as Gabelli Partners shall designate to represent the
Gabelli Partners with respect to such refund claim and (ii) the Company shall
forward to Gabelli Partners any such refund within ten (10) days after the
refund is received (or reimburse Gabelli Partners for any such credit within ten
(10) days after the relevant Tax Return is filed in which the credit is actually
applied against its liability for Taxes).
5. Notification and Control of Tax Controversy
(a) Notification of Tax Controversy. If a claim for Taxes shall be
made by any Taxing Authority in writing, which, if successful, could reasonably
result in an indemnity payment pursuant to Section 2 hereof, the Tax Indemnified
Party shall promptly notify the Tax Indemnifying Party in writing of such claim
(a "Tax Controversy"). If notice of the Tax Controversy is delivered to the
party that would be the Tax Indemnifying Party for such Tax Controversy, the Tax
Indemnifying Party shall notify the Tax Indemnified Party, in writing, of the
existence of such claim. In either case, the party receiving notice of the Tax
Controversy shall forward to the other all information received in respect of
such Tax Controversy from the applicable Taxing Authority. If a notice of a Tax
Controversy is not given to the Tax Indemnifying Party by the Tax Indemnified
Party within a reasonably sufficient period of time to allow the Tax
Indemnifying Party effectively to contest the Tax Controversy, taking into
account the facts and circumstances with respect to such Tax Controversy, the
Tax Indemnifying Party shall not be liable to the Tax Indemnified Party or any
of its affiliates to the extent that the Tax Indemnifying Party's position is
actually and materially prejudiced as a result thereof.
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(b) Control of Tax Controversy. With respect to any Tax Controversy
which might result in an indemnification payment by the Company pursuant to
Section 2, the Company shall control all proceedings in connection with such Tax
Controversy (including, without limitation, selection of counsel) and without
limiting the foregoing, may in its sole discretion and at its sole expense
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with any Taxing Authority with respect thereto, and may, in its sole
discretion, either pay the Tax Controversy and xxx for a refund where applicable
law permits such refund suits or contest such Tax Controversy in any permissible
manner. In no case shall Gabelli Partners settle or otherwise compromise any Tax
Controversy referred to in the preceding sentence without the Company's prior
written consent.
(c) Mutual Cooperation. Gabelli Partners and/or its shareholders
shall cooperate with the Company in connection with any Tax Controversy which
might result in an indemnification payment by the Company pursuant to Section 2,
which cooperation shall include, without limitation, the reasonable retention
and (upon the Company's request) the provision to the Company of records and
information which would be reasonably relevant to such Tax Controversy, and
making employees available to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Controversy. Any out-of-pocket expenses of Gabelli Partners and/or its
shareholders shall be reimbursed by the Company.
6. Maintenance of Books and Records. Until the applicable statute of
limitations (including periods of waiver) expired for any Tax Returns filed or
required to be filed covering the periods up to and including the Closing,
Gabelli Partners or its affiliates shall retain all workpapers and related
materials in its possession and under its control that were used in the
preparation of any Tax Returns of Gabelli Partners or the Entities. Gabelli
Partners will notify the Company sixty (60) days prior to disposing of any
records relating to pre-Closing periods and will deliver to the Company, at the
Company's expense, any such records requested by the Company.
7. Terms of Agreement. This Tax Indemnification Agreement shall be
effective as of the Closing Date and shall not terminate until the later of (i)
the expiration (with valid extensions) of any applicable statute of limitations
relating to
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the Taxes covered thereby and (ii) the payment of any indemnification payment
pursuant to Section 2.
8. Entire Agreement; Alteration, Amendment, etc. This Tax Indemnification
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter contained herein. No alteration, amendment or modification
of any of the terms of this Tax Indemnification Agreement shall be valid unless
made by a written instrument, signed by an authorized officer of the Company and
Gabelli Partners.
9. Governing Law. This Tax Indemnification Agreement has been made in and
shall be construed and enforced in accordance with the law of the State of New
York (regardless of the laws that might be applicable under principles of
conflicts of laws) from time to time obtaining.
10. Assignments and Third Party Beneficiaries. This Tax Indemnification
Agreement shall be binding upon and shall inure only to the benefit of the
parties hereto, the shareholders of Gabelli Partners and their respective
successors and assigns.
11. Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceablility of
the remainder hereof in that jurisdiction or the validity or enforceablility of
this Tax Indemnification Agreement, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, each party waives any
provision of applicable law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Tax Indemnification
Agreement is held to be unenforceable for any reason, it shall be adjusted
rather than voided, if possible, or order to achieve the intent of the parties
to the extent possible.
IN WITNESS WHEREOF, the parties hereto have duly executed this Tax
Indemnification Agreement as of the date first above written.
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GABELLI ASSET MANAGEMENT, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
GABELLI GROUP CAPITAL PARTNERS, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
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