TAX INDEMNIFICATION AGREEMENT
THIS TAX INDEMNIFICATION AGREEMENT (this "AGREEMENT") dated as of July 18,
1997 (the "SIGNING DATE") is made in favor of record owners of beneficial
interests (collectively, the "SHAREHOLDERS") of Angeles Mortgage Investment
Trust, an unincorporated California business trust ("AMIT"), by Insignia
Properties Trust, a Maryland real estate investment trust ("IPT").
RECITALS
A. Capitalized terms used in this Agreement, but not otherwise
defined, shall have the meanings set forth in that certain
Agreement and Plan of Merger dated as of July 18, 1997 among AMIT,
IPT, Insignia Financial Group, Inc. and MAE GP Corporation (the
"MERGER AGREEMENT").
B. In furtherance of and in connection with the transactions contemplated
by the Merger Agreement, IPT desires to indemnify the Shareholders
against Damages as defined herein.
AGREEMENT
NOW, THEREFORE, for good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, IPT, intending to be legally
bound, hereby agrees as follows:
ARTICLE 1.
INDEMNIFICATION
Section 1.1 Indemnification. IPT agrees to indemnify and hold harmless
those Persons who are Shareholders as of the Effective Time (collectively, the
"INDEMNITEES," and individually, an "INDEMNITEE") from and against all actual,
direct and provable damages and losses arising from and directly related to the
recognition of taxable gain with respect to the Merger for Federal and state
income tax purposes ("DAMAGES") which recognition is due to a final and
non-appealable determination binding upon the Shareholder that the Merger is
treated as a taxable event with respect to the Indemnitee by virtue of either
(a) failure of the Merger to satisfy the "continuity of business" requirement
due to any action taken by IPT after the Effective Time, or (b) the fact AMIT
failed to qualify as "diversified" within the meaning of Section
368(a)(2)(F)(ii) of the Code; provided, however, that there shall be no
indemnification under clause (b) if any representation made by AMIT to AGSH&F
in connection with the preparation of its legal opinion related to its status
under Section 368(a)(2)(F)(ii) is inaccurate or determined to be inaccurate in
a final and non-appealable determination.
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Section 1.2 Limitation of Damages. With respect to each Indemnitee, the
Damages provided for pursuant to this Agreement (a) shall not exceed the amount
of gain to the Shareholder resulting from the Merger multiplied by the maximum
combined effective Federal and state income tax rate applicable to long or
short-term capital gain, as the case may be, plus any penalties assessed
against such Indemnitee that relate to the reporting position that the Merger
is not a taxable event; and (b) shall take into account any tax benefit
(including the time value of money) to the Indemnitee that has resulted or will
result from the increased basis arising from the recognition of gain on the
Merger.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF IPT
IPT represents and warrants that the statements contained in this Article
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Section 2.1 Organization. IPT is a real estate investment trust (as
defined in Section 8-101(b) of the MCAA) duly organized, validly existing and
in good standing under the laws of the State of Maryland.
Section 2.2 Authority Relative to Transactions. IPT has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance by IPT of this
Agreement and the consummation by IPT of the transactions contemplated hereby
have been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and legally binding obligation of IPT, enforceable against
IPT in accordance with its terms and conditions.
ARTICLE 3.
MISCELLANEOUS
Section 3.1 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement and the application of such
provision to any other part or to any other circumstance shall not be affected
or impaired thereby.
Section 3.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the successors of
the Indemnitees and IPT; provided, however, that this Agreement may not be
assigned by any person.
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Section 3.3 Headings. The captions and headings used in this Agreement are
inserted for convenience only, and shall not be deemed to constitute part of
this Agreement or to affect the construction or interpretation hereof.
Section 3.4 Waiver. Any of the terms or conditions of this Agreement may
be waived in writing at any time by the person which is entitled to the
benefits thereof. No waiver of any provision of this Agreement shall be deemed
or shall constitute a waiver of such provision at any time in the future or a
waiver of any other provision hereof.
Section 3.5 No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, shall create or confer upon any Person, other than the
Shareholders or their respective successors, any rights, remedies, obligations
or liabilities.
Section 3.6 Notices. Except as otherwise provided herein, any notice,
request, instruction, consent or other document required or permitted to be
given pursuant to this Agreement shall be in writing and delivered personally,
by telecopy, by a nationally-recognized overnight courier service or by
registered or certified mail, postage prepaid, as follows:
If to IPT:
Insignia Properties Trust
One Insignia Financial Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxxx
Phone number: 000-000-0000
Fax number: 000-000-0000; and
copy (which shall not constitute notice IPT) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
Fax number: 000-000-0000
or at such other address as shall be specified in writing by that person. Any
notice, request, instruction, consent or other document delivered as provided
herein shall be deemed effectively given upon actual receipt by the Person (but
not necessarily the individual person) to be notified.
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Section 3.7 Governing Law. This Agreement shall be construed in accordance
with and governed by the Laws of the State of California applicable to
agreements made and to be performed wholly within such jurisdiction.
Section 3.8 Interpretation.
(a) References. Except as specifically stated otherwise, references
to articles and sections refer to articles and sections in this Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, feminine and neuter gender.
(b) Drafting. No provision of this Agreement shall be interpreted in
favor of, or against, any person by reason of the extent to which such
person or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
Section 3.9 Entire Agreement. This Agreement, together with any
contemporaneous agreements, constitute the sole understanding with respect to
the matters contemplated hereby and supersedes and renders null and void all
prior agreements and understandings, written and oral, with respect to such
matters. No person shall be liable or bound to any other person in any manner
by any promises, conditions, representations, warranties or covenants except as
specifically set forth herein.
Section 3.10 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the person against whom such amendment,
modification or alteration is sought to be enforced.
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IN WITNESS WHEREOF, IPT has caused this Agreement to executed as of the
Signing Date by a duly authorized officer.
Insignia Properties Trust ("IPT")
By:
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Xxxxxxx X. Xxxxx
Vice President
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