FORM OF TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement (this "Agreement"),
is entered into this ___ day of ____________, 1996, by and
between DELTA FUNDING CORPORATION, a New York corporation
("Delta"), and each of XXXXXX X. XXXXXX, XXXX X. XXXXXX, the
XXXXXX X. XXXXXX GRANTOR RETAINED ANNUITY TRUST and the XXXX X.
XXXXXX GRANTOR RETAINED ANNUITY TRUST ("collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, Delta 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, for the period July 1, 1985 through the day preceding the
date of this Agreement (the "S Period");
WHEREAS, immediately prior to the date of this
Agreement the Shareholders held all the outstanding shares of capital
stock, no par value, of Delta (the "Capital Stock");
WHEREAS, as of the date of this Agreement the
Shareholders have contributed all of the shares of Capital Stock held
by them to Delta Financial Corporation, a Delaware corporation, in
exchange for shares of common stock, $.01 par value per share, of
Delta Financial Corporation;
WHEREAS, Delta 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.
The Shareholders jointly and severally represent and warrant to
Delta that:
(a) During the S Period, the Shareholders duly and
timely filed all tax reports and returns required to be filed by them
("Shareholder Tax Returns").
(b) The Shareholders have duly included, or will
duly include, in their Shareholder Tax Returns their allocable share
of Delta's taxable income from all sources through and including the
last business day of the S Period (the "S Corporation Taxable
Income").
(c) There are no audits, inquiries, investigations
or examinations relating to any of the Shareholder Tax Returns
pending, and there are no claims which have been asserted relating to
any of the Shareholder Tax Returns which if determined adversely would
result in the assertion by any entity of the federal government or New
York State government of any federal or New York State income tax
("Tax") deficiency against Delta.
2. Indemnifications. (a) The Shareholders,
jointly and severally, shall be responsible for and shall
indemnify and save and hold harmless Delta against all Tax imposed on
Delta resulting from a final determination of an adjustment to the
Shareholders' taxable income resulting in a decrease in the
Shareholders' S Corporation Taxable Income and a corresponding
increase in Delta's taxable income.
(b) Delta shall indemnify and save and hold harmless
each Shareholder from and against all Tax imposed on such Shareholder
resulting from a final determination of an adjustment to Delta's
taxable income resulting in a decrease in Delta's taxable income and a
corresponding increase in such Shareholder's S Corporation Taxable
Income. Further, Delta shall indemnify and hold harmless the
Shareholders from and against Tax incurred by such Shareholders
resulting from the receipt of any indemnification payments made to
such Shareholders pursuant to the foregoing sentence.
(c) The Shareholders or Delta, 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 Shareholders would be
required to indemnify Delta, written notice thereof shall be given to
the Shareholders 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 Shareholders
demonstrate actual damage caused by such failure. After such notice,
if the Shareholders shall acknowledge in writing to Delta that they
are obligated under the terms of their indemnity hereunder in
connection with such audit or claim, then the Shareholders 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
Shareholders' cost, risk and expense provided that the Shareholders
and their counsel shall proceed with diligence and in good faith with
respect thereto. Delta shall cooperate in all reasonable respects with
the Shareholders and such attorneys in the defense and investigation
of such audit or claim and any appeal arising
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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 Shareholders; provided, however, that Delta may,
subject to the Shareholders' 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 Shareholders shall not be responsible for any
portion of any deferred tax liability which may be recorded on
the balance sheet of Delta upon termination of the S corporation
status.
4. Notice. 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 transmission is 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 Delta, at:
Xxxx X. Xxxxxx
c/o Delta Funding Corporation
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
If to the Shareholders, at:
Xxxx X. Xxxxxx
c/o Delta Funding Corporation
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
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IN WITNESS WHEREOF, the parties have executed this Agreement in New
York, New York, as of this day of ____ day of ____, 1996.
DELTA FUNDING CORPORATION
By:_________________________________
Name:
Title:
____________________________________
Xxxxxx X. Xxxxxx
____________________________________
Xxxx X. Xxxxxx
XXXXXX X. XXXXXX GRANTOR RETAINED
ANNUITY TRUST
By:_________________________________
Xxxxxx X. Xxxxxx, as Trustee
By:_________________________________
Xxxx X Xxxxxx, as Trustee
XXXX X. XXXXXX GRANTOR RETAINED
ANNUITY TRUST
By:_________________________________
Xxxx X. Xxxxxx, as Trustee
By:_________________________________
Xxxx X Xxxxxx, as Trustee
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