FINE AIR SERVICES, INC.
TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
THIS FINE AIR SERVICES, INC. TAX ALLOCATION AND INDEMNIFICATION AGREEMENT is
entered into as of this ___day June, 1997 between X. XXXXX FINE and XXXXX XXXXXX
FINE ("Stockholders"), and FINE AIR SERVICES, INC., a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, Stockholders own _______ shares each of the sole class of stock in
the Company, constituting one hundred percent (100%) of the total outstanding
shares of stock in the Company;
WHEREAS, pursuant to a proposed contribution of 100% of the Agro Air
Associates, Inc. stock to the Company and offering of the Company's stock to the
public, the Company's subchapter S Corporation status will be terminated;
WHEREAS, such termination, under Section 1362(e) of the Internal Revenue
Code of 1986, as amended (the "Code") will result in the Company's 1997 calendar
tax year being divided in two (2) separate tax years, the first of which begins
on January 1, 1997 and ends on the day immediately preceding the day such
termination is effective and ends on December 31, 1997 (the "1997 C Short
Year"); and
WHEREAS, the Company will make distributions (the "Distributions") payable
to Stockholders in amounts intended to equal the amount of the Company's
"accumulated adjustments account" (the "AAA Amount"), as that term is defined in
Code Section 1368(e)(1), calculated taking into account all items of income,
gain, deduction, loss and credit through the last day of the Company's 1997 S
Short Year (as that amount otherwise would be shown on the Company's Form 1120S
immediately prior to any such final Distributions); and
WHEREAS, the Company and Stockholders have determined it to be in their
mutual best interests to set forth in this Agreement certain provisions designed
to clarify which adjustments to the AAA Amount shall be taken into account in
order to achieve the intended results of the Distributions totaling the amount
of Stockholders' respective shares of the Company's AAA Amount through the end
of its 1997 S Short Year; and
WHEREAS, in consideration for the past services of the Stockholders to the
Company which have not been fully compensated heretofore, the Company wishes to
indemnify the Stockholders for any additional tax liabilities that (1) arise
from subsequent Audit adjustments of the Company by any applicable taxing
authority and (2) which tax liabilities are not (a)
attributable to the AAA Amount originally determined by the Company (upon the
filing of its 1997 S Short Year tax return, and (b) the subject of the
Distributions contemplated hereunder, PROVIDED, HOWEVER, that the Stockholders
also waive any claim to additional Distributions with respect to any such
increases in the AAA Amount pursuant to such Audit adjustments;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Stockholders and the Company hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement:
1.1 "Additional Amounts" means any interest, penalties or additions to tax
imposed or assessed by the Internal Revenue Service (the "Service") or any other
taxing authority, as a result of any liability for Taxes and/or Additional
Taxes, as defined herein.
1.2 "Additional Taxes" means, for any Pre-Closing Date Period, as that term
is defined herein, the excess of (i) the product of (A) forty percent (40%) and
(B) the amount of income of the Company taxable to Stockholders under Code
Section 1366 as reported for federal income tax purposes on the Company's Forms
1120S for the 1997 S Short Year or any other tax year in the Pre-Closing Date
Period, as the case may be, calculated after taking into account any adjustments
by the Service or any other taxing authority to such reported amounts (including
any Company adjustment not taken into account in determining the net Stockholder
Adjustment, but excluding any such net Stockholder Adjustment) constituting a
"determination" within the meaning of Code Section 1313 or comparable provision
of state or city law over (ii) an amount equal to the product of (x) forty
percent (40%) and (y) the amount of income of the Company taxable to the
Stockholders as originally reported on the Company's Forms 1120S for the 1997 S
Short Year or any other tax year in the Pre-Closing Date Period, as the case may
be.
1.3 "Audit" means any audit, investigation or exam by the Service or any
other taxing authority (including, but not limited to, the current Service Audit
of the Company's 1993, 1994 and 1995 tax years).
1.4 "Company Adjustment" means any adjustment by the Service or any other
taxing authority of income, gain, deduction, loss, credit or other allowance (i)
that causes any item of net income of the Company that was taken into account
and reported by the Company on its Forms 1120S for federal income tax purposes
for the 1995 tax year or its 1996 S Short Year to be included in taxable income
in a Post-Closing Date Period and not to be included in taxable income in a
Pre-Closing Date period, (ii) that causes any deduction, loss, credit or other
allowance of the Company, which deduction, credit or other allowance has the
effect of reducing taxable income that was taken into account and reported by
the Company on its Form 1120 for federal income tax purposes in a Post-Closing
Date Period, to be taken into account in a Pre-Closing Date Period and not to
be taken into account in a Post-Closing Date Period, and/or (ii) which results
in Taxes and/or Additional Amounts in respect thereof being imposed on Company
as a result of the Company not qualifying as an S corporation for any period
prior to the end of the 1997 S Short Year.
2
1.5 "Indemnitees" means the Stockholders, PROVIDED, HOWEVER, that all rights
of the Indemnitees under SECTION 2 hereof may be exercised only by the
Stockholders Representative.
1.6 "Indemnitor" means the Company.
1.7 "Post-Closing Date Period" means any taxable year of the Company ending
after the first day of the 1997 C short tax year.
1.8 "Pre-Closing Date Period" means any taxable year of the Company ending
before the first day of the 1997 C Short tax year.
1.9 "Stockholders Adjustment" means any adjustment by the Service or any
other taxing authority of income, gain, deduction, loss, credit or other
allowance (i) that causes any item of net income of the Company that originally
was taken into account and reported by the Company on its Forms 1120 for federal
income tax purposes for any tax year in the Post-Closing Date Period to be
included in taxable income in any tax year in the Pre-Closing Date Period and
not to be included in taxable income in a Post-Closing Date period or (ii) that
causes any deduction, loss, credit or other allowance of the Company, which
deduction, credit or other allowance has the effect of reducing taxable income
that was taken into account and reported by the Company on its Form 1120S for
federal income tax purposes in any tax year in the Pre-Closing Date Period, to
be taken into account in any tax year in the Post-Closing Date Period and not to
be taken into account in a tax year in the Pre-Closing Date Period.
1.10 "Stockholder Representative" means XXXXX X. FINE, or such other
shareholder of the Company which all of the shareholders listed on Schedule A
designate to the Company as the Shareholder Representative.
1.11 "Tax Claim" means any written or oral claim or notice by the Service or
any other taxing authority for Taxes, Additional Taxes and/or Additional Amounts
including, without limitation, an assessment for Taxes.
1.12 "Taxes" means U.S. federal income tax and state and local income taxes
and other state and local taxes based on or measured by net income including
franchise taxes.
SECTION 2. COMPANY INDEMNIFICATION OF STOCKHOLDER.
2.1 Company agrees to promptly indemnify Stockholder, as provided for by
this SECTION 2, for the amount of (i) any Taxes and Additional Amounts paid by
Stockholders as a result of any Stockholders Adjustment (and this SECTION 2
shall apply to each successive Stockholders Adjustment), plus (ii) any
Additional Taxes and any related Additional Amounts paid by Stockholders as a
result of any adjustment by the Service or any other taxing authority which is
not the result of a Stockholders Adjustment; PROVIDED, HOWEVER, that, as part of
the consideration for this indemnity, the Stockholders agree to waive any claims
to Distributions that
3
otherwise might be deemed payable with respect to the deemed increase in the AAA
Amount arising from any such underlying Audit adjustments.
2.2 The amount payable by the Company to Stockholders pursuant to SECTION
2.1 shall be "grossed up" so as to provide Stockholders with an amount that, on
current after-tax basis and reflecting the tax consequences to the Stockholders,
equals the amount of Taxes, Additional Taxes and Additional Amounts for which
the Company is obligated to indemnify the Stockholders pursuant to this
Agreement. [For example, if the Taxes, Additional Taxes and Additional Amounts
payable by the Stockholders was $1.2 million, the amount payable to the
Stockholders under this SECTION 2 would be approximately $1,986,755, assuming no
state income tax or social security taxes are applicable (I.E., $1,986,755 x
39.6% = $786,755 current tax, for $1,200,000 "after-tax" amount available to pay
the Taxes, Additional Taxes and Additional Amounts of the Stockholders].
SECTION 3. CONSENT PROVISIONS.
3.1 Stockholders shall not initiate, effect or permit any Stockholders
Adjustment (through an amended tax return or otherwise) without the written
consent of the Company. Company shall not initiate, effect or settle upon any
Company Adjustment (through an amended tax return or otherwise) without the
written consent of the Stockholders Representative.
3.2 If an Audit is commenced or a Tax Claim is made against the Stockholders
with respect to any amount of income, gain, deduction, loss or credit of the
Company included by the Stockholders under Code Section 1366, Stockholders shall
promptly notify the Company in writing of that Audit or Tax Claim. If an Audit
is commenced or a Tax Claim is made with respect to the Company, the Company
shall promptly notify the Stockholders in writing of that Audit or Tax Claim.
The person against whom the Audit is commenced or Tax Claim is made shall
promptly provide all correspondence to the other person under this Agreement,
with respect to such Audit or Tax Claim. [The parties acknowledge that the
Company currently is the subject of a Service Audit for its 1993, 1994 and 1995
tax years.]
3.3 Indemnitor shall have the right at its option upon timely notice to
Indemnitees to assume control of the proceedings in connection with any Audit or
the defense of any suit, action or proceeding with respect to any Tax Claim at
its own expense and with its own counsel, PROVIDED its counsel is reasonable
satisfactory to Indemnitees.
3.4 Notwithstanding anything herein to the contrary, if Indemnitor exercises
the option of SECTION 3.3, (i) Indemnitor shall not agree to any settlement with
respect to any Taxes or Additional Amounts without Indemnitees' consent if the
effect of the settlement would be an increase in the liability of Indemnitees
for any Taxes or Additional Amounts and if the Indemnitor would not be liable
under this Agreement to pay Indemnitees the full amount of that increase in
liability for Taxes and any related Additional Amounts, (ii) Indemnitor shall
keep Indemnitees informed of all material developments of all material
developments and events relating to such Audit or Tax
4
Claim, and (iii) Indemnitees shall have the right to participate in, but not to
control, the defense of any Audit or Tax Claim.
3.5 Indemnitor shall not agree to any settlement without Indemnitees'
express prior written consent which shall not be unreasonably withheld.
Indemnitor and Indemnitees shall fully cooperate with each other in their
efforts to litigate, defend or otherwise attempt to resolve any proceeding.
SECTION 4. PAYMENT DATES.
4.1 Any payment due pursuant to SECTION 2 of this Agreement shall be made no
later than thirty (30) days after receipt by the Company of written notice from
Stockholders stating that any Taxes, Additional Taxes and Additional Amounts,
for or with respect to which Stockholders are entitled to indemnification
hereunder, are payable by the Stockholders (regardless of whether the
Stockholders intend to pursue a refund of any such payments).
4.2 Any notice under this SECTION 4 with respect to a required
indemnification payment shall include an accurate and reasonable detailed
description, including correspondence, work papers, ETC., of the adjustment by
the subject taxing authority to taxable income, gain, deduction loss, or credit
of Indemnitees. Any indemnification payment required to be made hereunder that
is not made by the Indemnitor to the Indemnitiees when due shall bear interest
until paid at the prime rate published by Citibank, N.A.
4.3 The amount of any Taxes, Additional Taxes or Additional Amounts, as the
case may be, with respect to which Indemnitees have received a payment from
Indemnitor pursuant to this Agreement which are subsequently refunded or
credited to Indemnitees by the subject taxing authority (the "Refunded Amount")
shall be reimbursed to Indemnitor by Indemnitees within thirty (30) days of
Indemnitees receiving such credit or refund. The amount of any Refunded Amount
not paid by Indemnitees to Indemnitor within the time period prescribed by this
SECTION 4.3 shall bear interest until paid at the prime rate published by
Citibank, N.A.
4.4 The obligation of the Company to make a payment under this Agreement
shall be subject to the Indemnitees providing Indemnitor with evidence
reasonable satisfactory to Indemnitor of the amount of the indemnification so
claimed.
SECTION 5. TRANSFER OF ASSETS: TERM.
Company's obligations under this Agreement shall continue and survive
notwithstanding any agreement of merger, acquisition, consolidation, asset
transfer or similar reorganization. Stockholders and the Company intend that the
rights and obligations of each party to this Agreement shall be in force until
all statutes of limitation for any tax adjustment which may give rise to
indemnification under this Agreement shall have expired.
SECTION 6. NOTICES.
5
Any notice, demand, claim or other communication under this Agreement shall
be in writing and shall be deemed to have been given upon the delivery or
mailing thereof, as the case may be, if delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the other party at
the following address (or at another address a party may specify by notice to
the other party):
If to Stockholders, to: X. XXXXX FINE
XXXXX XXXXXX FINE
X.X. Xxx 000000
Xxxxx, XX 00000
If to the Company, to: FINE AIR SERVICES, INC.
X.X. Xxx 000000
Xxxxx, XX 00000
SECTION 7. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida.
SECTION 8. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be seemed to be an original, but all of which together shall constitute
one and the same instrument.
SECTION 9. ASSIGNMENTS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
SECTION 10. AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplimented only be a written
agreement executed by the parties hereto.
6
SECTION 11. 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, convenants or undertakings other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to the
subject matter contained herein.
7
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the day and year first above written.
FINE AIR SERVICES, INC.
By:____________________
Name:__________________
Title:_________________
STOCKHOLDERS:
_______________________
X. XXXXX FINE
_______________________
XXXXX XXXXXX FINE
8
SCHEDULE A
SHAREHOLDERS OF FINE AIR SERVICES, INC.
NUMBER OF SHARES
SHAREHOLDER OF COMMON STOCK
X. Xxxxx Fine _______
Xxxxx Xxxxxx Fine _______
AGRO AIR ASSOCIATES, INC.
TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
THIS AGRO AIR ASSOCIATES, INC. TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
is entered into as of this _____ day of June, 1997 between X. XXXXX FINE and
XXXXX XXXXXX FINE ("Stockholders"), and AGRO AIR ASSOCIATES, INC., a Florida
corporation (the "Company").
WITNESSETH:
WHEREAS, Stockholders own _____ shares each of the sole class of stock in
the Company, constituting one hundred percent (100%) of the total outstanding
shares of stock in the Company;
WHEREAS, pursuant to a proposed contribution of all of the Company's stock
to Fine Air Services, Inc. (the "Parent Company") and offering of the Parent
Company's stock to the public, the Company's subchapter S corporation status wil
be terminated;
WHEREAS, such termination, under Section 1362(e) of the Internal Revenue
Code of 1986, as amended (the "Code"), will result in the Company's 1997
calendar tax year being divided in two (2) separate tax years, the first of
which begins on January 1, 1997 and ends on the day immediately preceding the
day such termination is effective (the "1997 S Short Year") and the second of
which begins on the day such termination is effective and ends on December 31,
1997 (the "1997 C Short Year"); and
WHEREAS, the Company will make distributions (the "Distributions") payable
to Stockholders in amounts intended to equal the amount of the Company's
"accumulated adjustments account" (the "AAA Amount"), as that term is defined in
Code Section 1368(e)(1), calculated taking into account all items of income,
gain, deduction, loss and credit through the last day of the Company's 1997 S
Short Year (as that amount otherwise would be shown on the Company's Form 1120S
immediately prior to any such final Distributions); and
WHEREAS, the Company and Stockholders have determined it to be in their
mutual best interests to set forth in this Agreement certain provisions designed
to clarify which adjustments to the AAa Amount shall be taken into account in
order to achieve the intended results of the Distributions totaling the amount
of Stockholders' respective shares of the Company's AAA Amount through the end
of its 1997 S Short Year; and
WHEREAS, in consideration for the past services of the Stockholders to the
Company which have not been fully compensated heretofore, the Company wishes to
indemnify the Stockholders for any additional tax liabiities that (1) arise from
subsequent Audit adjustments of the Company by any applicable taxing authority
and (2) which tax liabilities are not (a)
attributable to the AAA Amount originally determined by the Company (upon
the filing of its 1997 S Short Year tax return) and (b) the subject of the
Distributions contemplated hereunder, PROVIDED, HOWEVER, that the Stockholders
also waive any claim to additional Distributions with respect to any such
increases in the AAA Amount pursuant to such Audit adjustments;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Stockholders and the Company hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement:
1.1 "Additional Amounts" means any interest, penalties or additions to tax
imposed or assessed by the Internal Revenue Service (the "Service") or any other
taxing authority, as a result of any liability for Taxes and/or Additional
Taxes, as defined herein.
1.2 "Additional Taxes" means, for any Pre-Closing Date Period, as that term
is defined herein, the excess of (i) the product of (A) forty percent (40%) and
(B) the amount of income of the Company taxable to Stockholders under Code
Section 1366 as reported for federal income tax purposes on the Company's Forms
1120S for the 1997 S Short Year or any other tax year in the Pre-Closing Date
Period, as the case may be, calculated after taking into account any adjustment
by the Service or any other taxing authority to such reported amounts (including
any Company Adjustment not taken into account in determining the net Stockholder
Adjustment, but excluding any such net Stockholder Adjustment) constituting a
"determination" within the meaning of Code Section 1313 or comparable provision
of state or city law over (ii) an amount equal to the product of (x) forty
percent (40%) and (y) the amount of income of the Company taxable to the
Stockholders as originally reported on the Company's Forms 1120S for the 1997 S
Short Year or any other tax year in the Pre-Closing Date Period, as the case may
be.
1.3 "Audit" means any audit, investigation or exam by the Service or any
other taxing authority (including, but not limited to, the current Service Audit
of the Company's 1993, 1994 and 1995 tax years).
1.4 "Company Adjustment" means any adjustment by the Service or any other
taxing authority of income, gain, deduction, loss, credit or other allowance (i)
that causes any item of net income of the Company that was taken into account
and reported by the Company on its Forms 1120S for federal income tax purposes
for the 1995 tax year or its 1996 S Short Year to be included in taxable income
in a Post-Closing Date Period and not to be included in taxable income in a
Pre-Closing Date period, (ii) that causes any deduction, loss, credit or other
allowance of the Company, which deduction, credit or other allowance has the
effect of reducing taxable income that was taken into account and reported by
the Company on its Form 1120 for federal income tax purposes in a Post-Closing
Date Period, to be taken into account in a Pre-Closing Date Period and not to be
taken into account in a Post-Closing Date Period, and/or (iii) which results in
Taxes and/or Additional Amounts in respect thereof being imposed on Company as a
result of the Company not qualifying as an S corporation for any period prior to
the end of the 1997 S Short Year.
2
1.5 "Indemnitees" means the Stockholders, PROVIDED, HOWEVER, that all
rights of the Indemnitees under SECTION 2 hereof may be exercised only by the
Stockholders Representative.
1.6 "Indemnitor" means the Company.
1.7 "Post-Closing Date Period" means any taxable year of the Company ending
after the first day of the 1997 C short tax year.
1.8 "Pre-Closing Date Period" means any taxable year of the Company ending
before the first dayof the 1997 C short tax year.
1.9 "Stockholders Adjustment" means any adjustment by the Service or any
other taxing authority of income, gain, deduction, loss, credit or other
allowance (i) that causes any item of net income of the Company that originally
was taken into account and reported by the Company on its Forms 1120 for federal
income tax purposes for any tax year in the Post-Closing Date Period to be
included in taxable income in any tax year in the Pre-Closing Date Period and
not to be included in taxable income in a Post-Closing Date period or (ii) that
causes any deduction, loss, credit or other allowance of the Company, which
deduction, credit or other allowance has the effect of reducing taxable income
that was taken into account and reported by the Company on its Form 1120S for
federal income tax purposes in any tax year in the Pre-Closing Date Period, to
be taken into account in any tax year in the Post-Closing Date Period and not to
be taken into account in a tax year in the Pre-Closing Date Period.
1.10 "Stockholders Representative" means XXXXX X. FINE, or such other
shareholder of the Company which all of the shareholders listed on Schedule A
designate to the Company as the Shareholder Representative.
1.11 "Tax Claim" means any written or oral claim or notice by the Serivce
or any other taxing authority for Taxes, Additional Taxes and/or Additional
Amounts including, without limitation, an assessment for Taxes.
1.12 "Taxes" means U.S. federal income tax and state and local income taxes
and other state and local taxes based on or measured by net income, including
franchise taxes.
SECTION 2. COMPANY INDEMNIFICATION OF STOCKHOLDERS.
2.1 Company agrees to promptly indemnify Stockholders, as provided for by
this SECTION 2, for the amount of (i) any Taxes and Additional Amounts paid by
Stockholders as a result of any Stockholders Adjustment (and this SECTION 2
shall apply to each successive Stockholders Adjustment), plus (ii) any
Additional Taxes and any related Additional Amounts paid by Stockholders as a
result of any adjustment by the Service or any other taxing authority which is
not the result of a Stockholders Adjustment; PROVIDED, HOWEVER, that, as part of
the consideration for this indemnity, the Stockholders agree to waive any claims
to Distributions that
3
otherwise might be deemed payable with respect to the deemed increase in
the AAA Amount arising from any such underlying Audit adjustments.
2.2 The amount payable by the Company to Stockholders pursuant to SECTION
2.1 shall be "grossed up" so as to provide Stockholders with an amount that, on
current after-tax basis and reflecting the tax consequences to the Stockholders,
equals the amount of Taxes, Additional Taxes and Additional Amounts for which
the Company is obligated to indemnify the Stockholders pursuant to this
Agreement. [For example, if the Taxes, Additional Taxes and Additional Amounts
payable by the Stockholders was $1.2 million, the amount payable to the
Stockholders under this SECTION 2 would be approximately $1,986,755, assuming no
state income tax or social security taxes are applicable (I.E., $1,986,755 x
39.6% = $786,755 current tax, for $1,200,000 "after-tax" amount available to pay
the Taxes, Additional Taxes and Additional Amounts of the Stockholders.]
SECTION 3. CONSENT PROVISIONS.
3.1 Stockholders shall not initiate, effect or permit any Stockholders
Adjustment (through an amended tax return or otherwise) without the written
consent of the Company. Company shall not initiate, effect or settle upon any
Company Adjustment (through an amended tax return or otherwise) without the
written consent of the Stockholders Representative.
3.2 If an Audit is commenced or a Tax Claim is made against the
Stockholders with respect to any amount of income, gain, deduction, loss or
credit of the Company included by the Stockholders under Code Section 1366,
Stockholders shall promptly notify the Company in writing of that Audit or Tax
Claim. If an Audit is commenced or a Tax Claim is made with respect to the
Company, the Company shall promptly notify Stockholders in writing of that Audit
or Tax Claim. The person against whom the Audit is commenced or Tax Claim is
made shall promptly provide all correspondence to the other person under this
Agreement, with respect to such Audit or Tax Claim. [The parties acknowledge
that the Company currently is the subject of a Service Audit for its 1993, 1994
and 1995 tax years.]
3.3 Indemnitor shall have the right at its option upon timely notice to
Indemnitees to assume control of the proceedings in connection with any Audit or
the defense of any suit, action or proceeding with respect to any Tax Claim at
its own expense and with its own counsel, PROVIDED its counsel is reasonably
satisfactory to Indemnitees.
3.4 Notwithstanding anything herein to the contrary, if Indeminitor
exercises the option of SECTION 3.3, (i) Indemnitor shall not agree to any
settlement with respect to any Taxes or Additional Amounts without Indemnitees'
consent if the effect of the settlement would be an increase in the liability of
Indemnitees for any Taxes or Additional Amounts and if the Indemnitor would not
be liable under this Agreement to pay Indemnitees the full amount of that
increase in liability for Taxes and any related Additional Amounts, (ii)
Indemnitor shall keep Indemnitees informed of all material developments and
events relating to such Audit or Tax
4
Claim, and (iii) Indemnitees shall have the right to participate in, but
not to control, the defense of any Audit or Tax Claim.
3.5 Indemnitor shall not agree to any settlement without Indemnitees'
express prior written consent which shall not be unreasonably withheld.
Indemnitor and Indemnitees shall fully cooperate with each other in their
efforts to litigate, defend or otherwise attempt to resolve any proceeding.
SECTION 4. PAYMENT DATES.
4.1 Any payment due pursuant to SECTION 2 of this Agreement shall be made
not later than thirty (30) days after receipt by the Company of written notice
from Stockholders stating that any Taxes, Additional Taxes and Additional
Amounts, for or with respect to which Stockholders are entitled to
indemnification hereunder, are payable by the Stockholders (regardless of
whether the Stockholders intend to pursue a refund of any such payments).
4.2 Any notice under this SECTION 4 with respect to a required
indemnification payment shall include an accurate and reasonably detailed
description, including correspondence, work papers, ETC., of the adjustment by
the subject taxing authority to taxable income, gain, deduction loss, or credit
of Indemnitees. Any indemnification payment required to be made hereunder that
is not made by the Indemnitor to the Indemnitees when due shall bear interest
until paid at the prime rate published by Citibank, N.A.
4.3 The amount of any Taxes, Additional Taxes or Additional Amounts, as the
case may be, with respect to which Indemnitees have received a payment from
Indemnitor pursuant to this Agreement which are subsequently refunded or
credited to Indemnitees by the subject taxing authority (the "Refunded Amount")
shall be reimbursed to Indemnitor by Indemnitees within thirty (30) days of
Indemnitees receiving such credit or refund. The amount of any Refunded Amount
not paid by Indemnitees to Indemnitor within the time period prescribed by this
SECTION 4.3 shall bear interest until paid at the prime rate published by
Citibank, N.A.
4.4 The obligation of the Company to make a payment under this Agreement
shall be subject to the Indemnitees providing Indemnitor with evidence
reasonably satisfactory to Indemnitor of the amount of the indemnification so
claimed.
SECTION 5. TRANSFER OF ASSETS: TERM.
Company's obligations under this Agreement shall continue and survive
notwithstanding any agreement of merger, acquisition, consolidation, asset
transfer or similar reorganization. Stockholders and the Company intend that the
rights and obligations of each party to this Agreement shall be in force until
all statutes of limitation for any tax adjustment which may give rise to
indemnification under this Agreement shall have expired.
5
SECTION 6. NOTICES.
Any notice, demand, claim or other communication under this Agreement shall
be in writing and shall be deemed to have been given upon the delivery or
mailing thereof, as the case may be, if delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the other party at
the following address (or at another address a party may specify by notice to
the other party):
If to Stockholders, to: X. XXXXX FINE
XXXXX XXXXXX FINE
X.X. Xxx 000000
Xxxxx, XX 00000
If to the Company, to: AGRO AIR ASSOCIATES, INC.
X.X. Xxx 000000
Xxxxx, XX 00000
SECTION 7. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida.
SECTION 8. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
SECTION 9. ASSIGNMENTS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, including, without
limitation, the Parent Company with respect to all rights and obligations of the
Company hereunder following the contribution of all of the Company's stock to
the Parent Company.
SECTION 10. AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by a written
agreement executed by the parties hereto.
SECTION 11. 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.
6
This Agreement supersedes all prior agreements and understandings between
the parties with respect to the subject matter contained herein.
7
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the day and year first above written.
AGRO AIR ASSOCIATES, INC.
By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
STOCKHOLDERS:
--------------------------------------
X. XXXXX FINE
--------------------------------------
XXXXX XXXXXX FINE
8
SCHEDULE A
SHAREHOLDERS OF AGRO AIR ASSOCIATES, INC.
NUMBER OF SHARES
SHAREHOLDER OF COMMON STOCK
----------- ----------------
X. Xxxxx Fine ______________
Xxxxx Xxxxxx Fine ______________
