TAX INDEMNITY AGREEMENT
1. Payment of Additional Income Taxes. Pursuant to Paragraph
6.2.11 of that certain Merger Agreement, dated June 27, 1996, as amended and
restated as of September 18, 1996, between Synergistic Holdings Corp.
("Synergistic") and Salex Corporation (the "Merger Agreement"), and the Stock
and Asset Purchase Agreement, dated September 18, 1996 ("Divestiture
Agreement"), between Synergistic and Xxxxxxxxx Holding Corp. ("Holding"), the
undersigned, Holding and Xxxxxxxxx & Co. Inc. ("Xxxxxxxxx"), hereby jointly and
severally indemnify Synergistic and its affiliated Corporations and respective
successors and assigns and hold Synergistic and its affiliated Corporations and
respective successors and assigns harmless from, and agree to reimburse
Synergistic for 50% of any Additional Income Taxes (as hereinafter defined),
paid as a result of the Divestiture (as that term is defined in the Merger
Agreement and the Divestiture Agreement).
In addition to the Additional Income Taxes, if any, which
Holding and Xxxxxxxxx have agreed to pay by reimbursement pursuant to the above
paragraph, Xxxxxxxxx and Holding agree to pay to Synergistic an amount equal to
the amount of additional total federal, state and local income taxes paid by
Synergistic on the amount of the Additional Income Taxes received pursuant to
the above paragraph by Synergistic (which shall hereinafter be
referred to as "Surplus Tax"). Neither Holding nor Xxxxxxxxx shall be obligated
to reimburse Synergistic for any income tax on Synergistic's receipt of the
Surplus Tax.
The term Additional Income Taxes shall be defined to mean the
excess of (i) the total federal, state and local income taxes paid by
Synergistic and members of its affiliated group as defined under Section 1504 of
the Internal Revenue Code of 1986, as amended, and the applicable regulations
thereunder, if they file a consolidated return (or only Synergistic if they do
not file a consolidated return), for the taxable year of Synergistic in which
the Divestiture is consummated (after giving effect to the deductibility of any
state and local income taxes attributable to the Divestiture), over (ii) the
total federal, state and local income taxes which would have been payable by
Synergistic and members of its affiliated group, if they file a consolidated
return (or only Synergistic if they do not file a consolidated return), for such
taxable year had the total gain, if any, attributable to the Divestiture been
excluded from the taxable income of Synergistic. The same formula shall be used
for the purpose of determining the amount of Surplus Tax payable hereunder, with
the calculation under clause (ii) of the immediately preceding sentence made by
excluding the amount of Additional Income Taxes reimbursed to Synergistic from
taxable income for the taxable year in which the reimbursement is required to be
included in Synergistic's taxable income.
-2-
2. Tax Claims. If any claim shall be made by the Internal
Revenue Service ("IRS") or the applicable state or local tax agency relative to
the amount of gain includible in the taxable income of Synergistic for the
taxable year in which the Divestiture occurs, such claim, including all notices,
copies of all reports, correspondence or other materials relating to the claim
or contention, shall be delivered to Holding and Xxxxxxxxx.
The contesting of any claims and the handling of any
controversies arising before the IRS or the applicable state or local tax
agencies, including, but not limited to, any appearance before the IRS, any
state or local tax agency or any court, shall be by counsel selected and paid
for by Xxxxxxxxx or Holding, subject to approval by Synergistic which approval
shall not be unreasonably delayed or withheld. Adjustments, settlements or other
final determinations of such claims or controversies shall be made only with the
approval of Synergistic if in accord with the recommendations of counsel and
shall be binding upon Xxxxxxxxx, Holding and Synergistic.
In the event that Holding and Xxxxxxxxx fail to employ counsel
hereunder for the purpose of contesting any claim or handling any controversy
(including, but not limited to filing any petition, claim for refund, or other
applicable document with the IRS, a state or local tax agency or any applicable
court), Synergistic shall be entitled to employ counsel, if it so chooses, to
contest, handle and represent Synergistic with
-3-
respect to the claim or controversy or proceeding and all expenses and fees and
expenses of such counsel shall be payable by Holding and Xxxxxxxxx; provided,
however, Synergistic shall not be required to employ counsel so to contest,
handle or represent it in such claim, controversy or proceeding if it does not
elect to do so, and the amount of additional taxes determined by the IRS or any
applicable state or local tax agency attributable to the Divestiture may be paid
by Synergistic to the proper taxing authority, and the amount so paid shall be
included in determining the amount of Additional Income Taxes and Surplus Tax
payable hereunder.
3. Payment of Additional Income Tax and Other Amounts. If
Synergistic makes any payments of Additional Income Taxes or Surplus Tax,
Holding and Xxxxxxxxx agree to reimburse Synergistic in the amount required
hereunder, within thirty days after Xxxxxxxxx and Holding receive written notice
from Synergistic (after the filing of Synergistic's income tax returns for its
applicable taxable year) with a detailed calculation of the amount required to
be paid, and a letter from Synergistic's firm of certified public accountants
which prepared the applicable returns stating that the calculation is in
accordance with the provisions of this Agreement, provided that if it is later
determined that Synergistic overpaid Additional Income Taxes, Synergistic shall
within thirty days following the determination reimburse Xxxxxxxxx or Holding
for the amount of
-4-
the overpayment plus the amount of Surplus Tax attributable thereto plus
interest on such sums from the date of payment by Xxxxxxxxx or Holding to the
date of repayment to Xxxxxxxxx or Holding at the same rate which Synergistic is
entitled to receive interest from the applicable taxing authority as a result of
such overpayment.
4. Fees and Expenses. In the event that Xxxxxxxxx or Holding
fail to perform any of the obligations provided for hereunder, Synergistic shall
be entitled to recover from Holding and/or Xxxxxxxxx, in addition to the amounts
of Additional Income Taxes, Surplus Taxes and fees and expenses of counsel
employed by Synergistic payable hereunder, all costs and expenses, including
reasonable legal fees, paid or incurred by Synergistic in seeking to enforce and
enforcing the obligations of Xxxxxxxxx or Holding provided for herein. In the
event that Synergistic fails to perform any of the obligations provided for
hereunder, Holdings and Xxxxxxxxx shall be entitled to recover from Synergistic,
in addition to the amounts of the overpayments of Additional Income Taxes and
Surplus Taxes, all costs and expenses, including reasonable legal fees, paid or
incurred by Holding and Xxxxxxxxx in seeking to enforce and enforcing the
obligations of Synergistic provided for herein.
-5-
5. Governing Law. This Agreement shall be governed by the laws
of the State of New York (applicable to contracts to be performed wholly within
such state).
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the day and the year first above written.
SYNERGISTIC HOLDINGS CORP.
By:_____________________________
XXXXXXXXX HOLDING CORP.
By:_____________________________
XXXXXXXXX & CO. INC.
By:_____________________________
-6-
