TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement ("the Agreement"), is entered into
this ____ day of January, 1998, by and among PMCC FINANCIAL CORP., a Delaware
corporation (the "Company"), PREMIER MORTGAGE CORP., a New Jersey corporation
("Premier"), and each of XXXXXX XXXXXXXX ("Xxxxxx"), XXXXXX XXXXXXXX ("Xxxxxx"),
XXXXXXX XXXXXX ("Xxxxxxx"), XXXXX XXXXX ("Xxxxx") and the XXXXXX XXXXXXXX 1998
GRANTOR RETAINED ANNUITY TRUST (the "Trust"). Robert, Ronald, Xxxxxxx, Xxxxx and
the Trust are collectively referred to as the "Stockholders."
W I T N E S S E T H:
WHEREAS, Premier was an S corporation within the meaning of Section
1361 of the Internal Revenue Code of 1986, as amended ("the Code"), and the
corresponding provisions of state income tax law, continuously since January 1,
1992 through the day immediately preceding the date of the effectiveness of the
Company's initial public offering (the "S Period"); and
WHEREAS, immediately prior to the date of this Agreement the
Stockholders held all the outstanding shares of capital stock, no par value, of
Premier (the "Capital Stock"); and
WHEREAS, as of the date of this Agreement the Stockholders have
contributed all of the shares of Capital Stock held by them to the Company in
exchange for shares of common stock, $ .01 par value per share, of the Company;
and
WHEREAS, Premier will be a C corporation within the meaning of Section
1361 of the Code and the corresponding provisions of state income tax law from
the date of this Agreement and thereafter.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Representations and Warranties of the Parties.
(a) The Stockholders, jointly and severally, represent and
warrant to the Company and Premier that:
(i) During the S Period, the Stockholders duly and timely
filed all tax reports and returns required to be filed by them ("Stockholder Tax
Return").
(ii) The Stockholders have duly included, or will duly
include, in each of their Stockholder Tax Returns their allocable share of
Premier's taxable income from all sources through and including the last
business day of the S Period (the "S Corporation Taxable Income"). All positions
taken by the Stockholders on their Stockholder Tax Returns have been consistent
with Premier's subchapter S tax returns.
(iii) There are no audits, inquiries, investigations or
examinations relating to any of the Stockholder Tax Returns pending, and there
are no claims which have been asserted relating to any of the Stockholder Tax
Returns which if determined adversely would result in the assertion by any
entity of the federal government or any state including the State of New Jersey,
asserting a claim of tax deficiency against Premier.
(iv) The Stockholders caused a valid S Corporation
election to be made with respect to Premier. Further, Premier has duly filed or
will duly file, all tax returns required to be filed by it with respect to its
operations during the S Period.
(b) Each of the parties, severally and not jointly, represents
to the other parties hereto that Premier will not change the method of
accounting previously employed by it in connection with the operations of
Premier during the S Period, including but not limited to the method of
accounting employed with respect to the preparation of the Stockholder Tax
Returns, the determination of the S Corporation Taxable Income, and otherwise.
2. Indemnifications.
(a) The Stockholders, jointly and severally, shall be
responsible for and shall indemnify and save and hold harmless the Company and
Premier from and against all taxes imposed on Premier resulting from a final
determination of an adjustment to the Stockholders' Taxable Income resulting in
a decrease in the Stockholders' S Corporation Taxable Income and a corresponding
increase in Premier's taxable income.
(b) The Company and Premier, jointly and severally, shall be
responsible for and shall indemnify and save and hold harmless each Stockholder
from and against all taxes imposed on such Stockholder resulting from a final
determination of an adjustment to Premier's taxable income resulting in a
decrease in Premier's taxable income and a corresponding increase in such
Stockholder's S Corporation Taxable Income. Further, Premier shall indemnify and
hold harmless the Stockholders from and against taxes incurred by such
Stockholders resulting from the receipt of any indemnification payments made to
such Stockholders pursuant to the foregoing sentence.
(c) The Stockholders, the Company or Premier, as the case may
be, shall make any payment required under this Agreement within thirty (30) days
after receipt of notice from the other party that a payment is due by such party
to the appropriate taxing authority.
(d) If a tax audit is commenced with respect to the S Period
or any tax is claimed for which the Stockholders would be required to indemnify
Premier, written notice thereof shall be given to the Stockholders as promptly
as practicable; provided, however, that the failure to give timely notice shall
not affect rights to indemnification hereunder except to the extent that the
Stockholders demonstrate actual damage caused by such failure. After such
notice, if the Stockholders shall acknowledge in writing to Premier that they
are obligated under the terms of their indemnity hereunder in connection with
such audit or claim, then the Stockholders shall be entitled, if they so elect,
to take control of the defense and investigation of such audit or claim and to
employ and engage attorneys of their own choice to handle and defend the same,
at the Stockholder's cost, risk and expense provided that the Stockholders and
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their counsel shall proceed with diligence and in good faith with respect
thereto. Premier shall cooperate in all reasonable respects with the
Stockholders and such attorney in the defense and investigation of such audit or
claim and any appeal arising therefrom, and shall not enter into any agreement
with any tax authority with respect to such audit or claim without the prior
consent of the Stockholders; provided, however, that Premier may, subject to the
Stockholders' control of the defense and investigation of such audit or claim,
at its own cost, participate in the defense and investigation of such audit or
claim and any appeal arising therefrom.
3. Deferred Tax Liability. Notwithstanding the foregoing, the
Stockholders shall not be responsible for any portion of any deferred tax
liability which may be recorded on the balance sheet of Premier upon termination
of the S corporation status.
4. Notices. All notices and other communications made in connection
with this Agreement shall be in writing and shall be deemed given when delivered
personally or sent by facsimile transmission to the numbers indicated below (if
physical confirmation of transmissions retained) or on the third succeeding
business day after being mailed by registered or certified mail, deposited in
the United States mail, postage prepaid, return receipt requested, to the
appropriate party at its, his or her address below or at such other address for
such party (as shall be specified by written notice when in fact delivered
pursuant hereto):
If to the Company or Premier, at: PMCC Financial Corp.
00 Xxxxxxxxxx Xxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: President
If to the Stockholders, at: c/o Xxxxxx Xxxxxxxx
PMCC Financial Corp.
00 Xxxxxxxxxx Xxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
With a copy to: Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
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IN WITNESS WHEREOF, the parties have executed this Agreement in Xxxxxx
Heights, New York, as of this day of _____ day of January, 1998.
PMCC FINANCIAL CORP.
By: __________________________
Xxxxxx Xxxxxxxx, President
PREMIER MORTGAGE CORP.
By: __________________________
Xxxxxx Xxxxxxxx, President
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XXXXXX XXXXXXXX
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XXXXXX XXXXXXXX
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XXXXXXX XXXXXX
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XXXXX XXXXX
XXXXXX XXXXXXXX 1998 GRANTOR
RETAINED ANNUITY TRUST
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XXXXXX XXXXXXXX, TRUSTEE
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