1
EXHIBIT 10.11
TAX INDEMNITY AGREEMENT
AGREEMENT made as of September___, 1997 between SPR Inc., a Delaware
corporation (the "Company"), and Xxxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxxx,
Xxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxx
Xxxxx, Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxxx and
Xxxxxxx Xxxxxxx (collectively, the "Shareholders).
WHEREAS, the Company and its predecessors, SPR Chicago Inc. ("SPR
Chicago"), Systems & Programming Resources of Tulsa, Inc. ("SPR Tulsa"),
SPR-Wisconsin, Inc. ("SPR Wisconsin"), Systems and Programming Resources, Inc.
("Systems Inc.") and Consulting Acquisition, Inc. ("Data Flex") have previously
elected to be treated as an S Corporation (as defined in Section 1361 of the
Internal Revenue Code of 1986, as amended ("the Code");
WHEREAS, the Shareholders and the Company acknowledge that such S
Corporation election will terminate (the "Termination") upon completion of a
public offering of the Company's stock (the "Initial Public Offering") by reason
of the company ceasing to be a Small Business Corporation (as defined in Section
1361 of the Code);
NOW THEREFORE, the parties hereto agree as follows:
1. Payment of Taxes.
(a) Each Shareholder agrees to pay all federal, state and local income
taxes (other than those taxes described in Section 1(b) below) payable with
respect to the income of the Company or any predecessor of which he or she
was or is a Shareholder to the extent of his or her pro rata interest as a
Shareholder, for all taxable years ending with or prior to the Termination;
provided, however, that if, and to the extent, an adjustment is made (as a
result of a final determination made by a competent tax authority) to the
taxable income of the Company or any predecessor for any taxable period
ending with or prior to the Termination which results in (i) an increase in
income taxes payable by the respective Shareholders for any period for
which such Shareholders are required to report income of the Company or any
predecessor for a period of the Company or any predecessor ending with or
prior to the Termination, and (ii) a tax credit or a decrease in taxable
income of the Company or any other item which would reduce the income
2
taxes otherwise payable by the Company for any period following the
Termination, then the Company shall promptly make a payment (the "Company
Payment") to the respective Shareholders in an amount equal to the present
value of the sum (the "Tax Benefits") of (x) such decrease in taxable
income multiplied by the then applicable corporate tax rate, plus (y) the
amount of such tax credits, plus (z) the amount of any tax savings which
would be caused by any such other item, which will be realized by the
Company, calculated by discounting the Tax Benefits utilizing a discount
rate equal to the Applicable Federal Rate ("AFR") (as defined in Section
1274(d) of the Code) which corresponds to the period over which the Tax
Benefits will be realized, provided, however, that if, and to the extent,
such Tax Benefit is not actually realized by the Company during the period
in which such Tax Benefit or portion thereof, was assumed to be realized
for purposes of calculating the Company Payment, then the respective
Shareholders shall promptly make a payment (the "Shareholder Payment") to
the Company equal to the portion of the Tax Benefit which is not actually
realized by the Company, together with interest thereon, at the AFR in
effect as of the Assumed Tax Benefit Date (as defined below), for the
period from the date as of which such Tax Benefit, or portion thereof, was
assumed to be realized for purposes of calculating the Company Payment (the
"Assumed Tax Benefit Date") to the date of such Shareholder Payment.
(b) The Company acknowledges that it shall be solely responsible for
any federal, state and local taxes (including interest and penalties, if
any): (i) directly imposed on the Company, or (ii) computed without regard
to the Shareholders' distributive share of the Company's income, including
but not limited to the Built-In Gains Tax imposed by Section 1374 of the
Code, the Tax on Excess Passive Investment Income imposed by Section 1375
of the Code, and the Illinois Personal Property Replacement Tax.
2. Pro Rata Allocation of S Corporation Items. The Shareholders and
the Company acknowledge that the Company's items of income, loss,
deduction, or credit described in Section 1366(a)(1)(A) of the Code, and
the amount of the Company's non-separately computed income or loss for the
taxable year in which the S Corporation election is terminated shall be
allocated between the "short S year" and the "short C year" (as those terms
are defined in Section 1362(e)(1) of the Code) pursuant to Section
1362(e)(2) of the Code. The Shareholders and the Company further agree not
to make the election provided for under Section 1362(e)(3) of the Code.
2
3
SPR INC.
-----------------------------
SHAREHOLDERS
----------------------------- -----------------------------
Xxxxxx Xxxxxxxx Xxxxxxx Xxxxxxxx
----------------------------- -----------------------------
Xxxxx Xxxxxxxx Xxxxxx Xxxxx Xxxxx
----------------------------- -----------------------------
Xxxx Xxxxxxxx Xxxxxx Xxxxxxxx
----------------------------- -----------------------------
Xxxx Xxxxxx Xxxx Xxxxxxxx
----------------------------- -----------------------------
Xxxx Xxxxxxxx Xxxxxxx Xxxxxxx
----------------------------- -----------------------------
Xxxxx Xxxxxxxx Xxxxxx Xxxxxxxx
-----------------------------
Xxxxxxx Xxxxxxx
3
