EXHIBIT 10.8
FORM OF
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT (the "Agreement") is entered into
this ___ day of ______, 1996 between _________________________, a ____________
corporation (the "Company") and the stockholders of the Company listed on
Exhibit A attached hereto (the "Stockholders") (the Company and each Stockholder
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are hereinafter referred to individually as a "party" and collectively as the
"parties").
WHEREAS, the Company contemplates 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 contemplated Public Offering;
WHEREAS, the Company will be an S corporation until ______ __, 1997,
after which it will be 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 intends to terminate its status as an S corporation by
revoking its status as an S corporation under Code Section 1362 effective as of
the day before the pending closing date of the Public Offering (the "Termination
Date"). The Company also intends to revoke 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.
ARTICLE II
TAXES
2.1 Liability for Taxes Incurred for Taxable Periods Prior to the
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Termination Date. The Stockholders covenant and agree that: (a) the
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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 all taxes reflected on the balance
sheet set forth in the Company's consolidated financial statements as of
________ , 1997 (the "Financial Statements").
2.2 Filing of Tax Returns. The Company covenants and agrees that:
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(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
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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
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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 final determination 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
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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 all taxes reflected on the balance sheet set
forth in the Financial Statements.
2.5 Payments. The Stockholders or the Company, as the case may be,
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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
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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
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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
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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
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the parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Delaware without regard to Delaware choice of
law rules.
3.4 Amendment and Modification. This Agreement may be amended,
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modified or supplemented only by a written agreement executed by the parties.
3.5 Assignment. This Agreement and all of the provisions hereof
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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.
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3.6 Interpretation. The title, article and section headings
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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
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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
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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.
__________________________, INC.
By
____________
Chief Operating Officer
STOCKHOLDERS:
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