EXHIBITS FOR S-1 REGISTRATION STATEMENT
OF METRO INFORMATION SERVICES, INC.
EXHIBIT 10.18 TAX INDEMNIFICATION AGREEMENT DATED AS OF DECEMBER 24, 1996 BY
AND BETWEEN SHAREHOLDERS OF REGISTRANT AND REGISTRANT
TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement, dated as of December 24, 1996, is
entered into by and among Metro Information Services, Inc., a Virginia
corporation and its successors and assigns (the "Company"), and the
undersigned shareholders of the Company set forth on SCHEDULE I attached
hereto (collectively, the "Shareholders" and individually, a "Shareholder").
R E C I T A L S
A. In 1987, the Company elected to be treated as an S corporation
under subchapter S of the Internal Revenue Code of 1986, as amended (the
"Code").
B. As an S corporation, the Company has not paid federal and certain
state income taxes at the corporate level.
C. In connection with its public offering (the "Public Offering") of
Common Stock, par value $.01 per share, the Company plans to terminate its
S corporation status effective as of January 1, 1997.
D. Each Shareholder has received distributions from the Company with
respect to the Company's shares.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Shareholders agrees, jointly and severally, to the
following:
1. INDEMNIFICATION. Each Shareholder agrees, jointly, to indemnify and
hold harmless the Company against, and to reimburse the Company for, any
corporate level income taxes (state and federal) which are imposed on the
Company with respect to any period ending on or before December 31, 1996 and
any interest and penalties associated therewith (collectively, the
"Assessment") to which the Company may become subject. Each Shareholder shall
make any payment required hereunder within 14 days after receipt of notice
from the Company that a final determination or final settlement has occurred
and a payment is due by the Company to an appropriate taxing authority. The
cumulative liability of each Shareholder for all Assessments hereunder shall
not exceed the aggregate amount of distributions made by the Company to such
Shareholder with respect to stock of the Company since the earlier of (i) the
date of the Company's election to be treated as an S corporation and (ii) the
date a Shareholder became a Shareholder of the Company, which aggregate
amount is set forth opposite the name of each Shareholder on SCHEDULE I;
provided, however, the cumulative liability of ▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") shall be
an amount equal to the difference between the aggregate amount distributed by
the Company since it became an S corporation and the aggregate amount
distributed to all other Shareholders, which amount is set forth opposite
▇▇▇▇'▇ name on SCHEDULE I. If any Shareholder has an indemnification claim
asserted against him under this Agreement which exceeds his pro rata share of
the Assessment, that Shareholder shall have the right of contribution against
all other Shareholders for an amount equal to the excess of the amount
asserted against him over his pro
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Tax Indemnification Agreement
rata share of the Assessment. In no case, however, shall a Shareholder be
entitled to receive a contribution payment from another Shareholder unless he
has made or will make contemporaneously an indemnification payment to the
Company in excess of his pro rata share of the Assessment. For purposes of
this Agreement, each Shareholder's pro rata share of each Assessment will
equal the amount of the Assessment multiplied by the percentage appearing
next to the Shareholder's name on SCHEDULE I.
2. NOTICE AND CONTROL OF PROCEEDINGS. The Company and each of the
Shareholders agree that, within 10 days of receiving written notice of any
income tax examinations, claims, settlements, proposed adjustments or related
matters that may affect in any way the income tax liability of the Company
for any period ending on or before December 31, 1996, the Company shall
provide a copy to each Shareholder and any Shareholder receiving such a
notice shall provide a copy to the Company which, in turn, shall provide a
copy to each other Shareholder. On the receipt of any such notice, the
Company, at its sole expense and in the exercise of its good faith business
judgment, shall respond or defend, as appropriate, to attempt to minimize or
eliminate any potential income tax liability or, based on the advice of its
tax advisors, settle any such claim. Notwithstanding the foregoing, however,
the Company shall not compromise or settle any matter which could give rise
to liability under this Agreement if Shareholders having more than 30% of the
aggregate amount shown on SCHEDULE I object in writing within 30 days of
receiving written notice of such proposed compromise or settlement from the
Company and each objecting Shareholder (i) agrees in writing that the
Company's liability with respect to any proposed Assessment is eligible for
indemnification as provided in Section 1 of this Agreement and (ii)
demonstrates to the reasonable satisfaction of the Company
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Tax Indemnification Agreement
that such Shareholder has the financial resources to pay his pro rata share
of such matter. The Company and each Shareholder agree to execute all
instruments required to effectuate the provisions of this Section 2,
including without limitation, powers of attorney.
3. COOPERATION. The parties will make available to one another, as
reasonably requested, and to any taxing authority, all information, records or
documents relating to the liability for taxes covered by this Agreement and
will preserve any such information, records or documents until the expiration
of the applicable statute of limitations or extensions thereof. The party
requesting such information shall reimburse the other party for all reasonable
out-of-pocket costs incurred in producing such information.
4. GOVERNING LAW AMENDMENTS. This Indemnification Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of
the Commonwealth of Virginia. This Indemnification Agreement may not be
amended or terminated without the consent of a majority of the Independent
directors of the Company.
5. COUNTERPARTS. This Indemnification Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the date and year first above written.
METRO INFORMATION SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇, President
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Tax Indemnification Agreement
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Tax Indemnification Agreement
/s/ R. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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R. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
THE ▇▇▇▇ IRREVOCABLE TRUST dated
December 27, 1993
By: /s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, Co-Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇, Co-Trustee
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇, as Custodian for
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ under the
Virginia Uniform Transfers to
Minors Act
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▇▇▇▇▇▇▇ ▇▇▇▇▇, as Custodian for
▇▇▇▇▇▇ ▇. ▇▇▇▇ under the
Virginia Uniform Transfers to
Minors Act
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Tax Indemnification Agreement
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/s/ ▇▇▇▇▇▇ ▇. Council
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65029028/inderoagm2.bdb
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Tax Indemnification Agreement
Schedule I
to Metro Information Services, Inc.
Tax Indemnification Agreement
Name of Shareholder Total Distributions Received Percentage
▇▇▇▇ ▇. ▇▇▇▇ $22,016,089 63.40%
▇▇▇▇▇ ▇. ▇▇▇▇▇ 1,821,497 5.25
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,842,881 5.31
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 171,804 0.49
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 242,162 0.70
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 141,633 0.41
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 8,930 0.03
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 7,601 0.02
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ 7,601 0.02
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 15,131 0.04
▇▇▇▇ ▇▇▇▇▇▇▇▇ 26,607 0.08
R. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 25,387 0.07
THE ▇▇▇▇ IRREVOCABLE TRUST 2,295,842 6.61
dated December 27, 1993, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ as Co-Trustees
▇▇▇▇▇▇▇ ▇▇▇▇▇, as Custodian for 409,437 1.18
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ under the
Virginia Uniform Transfers to
Minors Act
Metro Information Services, Inc. Page 8
Tax Indemnificaiton Agreement
Schedule I
to Metro Information Services, Inc.
Tax Indemnification Agreement
(continued)
Name of Shareholder Total Distributions Received Percentage
▇▇▇▇▇▇▇ ▇▇▇▇▇, as Custodian for $ 376,877 1.09%
▇▇▇▇▇▇ ▇. ▇▇▇▇ under the
Virginia Uniform Transfers to
Minors Act
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,707,495 4.92
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 1,020,541 2.94
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. 572,460 1.65
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. 242,162 0.70
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 230,253 0.66
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33,861 0.10
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 24,978 0.07
▇▇▇ ▇. ▇▇▇▇▇ 31,224 0.09
▇▇▇▇▇▇ ▇. Council 18,745 0.05
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 31,224 0.09
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 9,830 0.03
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 17,810 0.05
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 17,810 0.05
TOTAL --------------------------- ---------
100%
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Tax Indemnificaiton Agreement
