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Exhibit 10.25
TAX INDEMNIFICATION AGREEMENT, dated as of May __, 1999, among
The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, Inc. (the "Company"), the Schedule I and Schedule II
Limited Partners (each as defined in the Memorandum of Agreement) and other
former partners of The ▇▇▇▇▇▇▇ Sachs Group, L.P. (the "Partnership") or an
Affiliate identified on the signature page hereof (each such former partner, a
"CAS Indemnitee"), Sumitomo Bank Capital Markets, Inc. ("SBCM"), and Kamehameha
Activities Association ("KAA") (such Schedule I Limited Partners, Schedule II
Limited Partners, CAS Indemnitees, SBCM, and KAA, collectively, the
"Indemnitees").
WHEREAS, each of the Indemnitees is currently or was formerly
a partner of the Partnership or one or more of its Affiliates;
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
(a) "Affiliate" means Stone Street Contract Partners, any
entity that at any time prior to the date hereof was consolidated with the
Partnership or ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. for financial reporting purposes, and any
other entity specified by the Company, in its sole discretion.
(b) "Covered Period" means, with respect to an Indemnitee, any
taxable year of the Indemnitee for which, as of the date hereof, a taxing
authority is not precluded by the applicable statute of limitations from
assessing a liability for Tax with respect to a Partnership Item.
(c) "Increased Taxes" means, with respect to each Indemnitee,
an amount, determined by the Company in its sole discretion, equal to the excess
of (i) the excess of Taxes payable by the Indemnitee in respect of Partnership
Items for all Covered Periods over the Taxes in respect of Partnership Items
shown as payable on Returns for all such periods as originally filed (or as
amended prior to the date hereof) over (ii) the amount of any Tax benefits
(including deductions, credits or refunds) estimated by the Company, in its sole
discretion, to be available to such Indemnitee in any period as a result of the
increase in Taxes described in clause (i) of this definition; provided, however,
that, unless otherwise determined by the Company, in its sole discretion, any
adjustments arising from (I) the Internal Revenue Service examination of the
Returns of the Partnership (including the Returns of its Affiliates) for its
1991, 1992 and 1993 taxable years and any resulting correlative adjustments,
whether in the same or other periods (including state and local tax
adjustments), (II) an Indemnitee's individual circumstances and (III)
correlative adjustments resulting from Returns as originally filed, shall not be
taken into account in determining Increased Taxes.
(d) "Memorandum of Agreement" means the Memorandum of
Agreement of the Partnership, amended and restated as of November 28, 1998.
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(e) "Partnership Item" means, with respect to an Indemnitee,
any item of income, gain, loss, deduction, credit or credit recapture directly
relating to any activity of the Partnership or any Affiliate and required to be
reflected in a Return filed by the Partnership or any Affiliate, but only if (i)
the item is required to be reflected in a U.S. federal, state or local or other
Return filed by such Indemnitee or (ii) such Indemnitee is required to make a
Tax payment to any taxing authority in respect of such item.
(f) "Plan of Incorporation" means the Plan of Incorporation
proposed in March 1999 by the general partner of the Partnership and approved by
the Schedule II Limited Partners having 51% of the interests in the profits of
the Partnership, as amended from time to time.
(g) "Return" means any report, information statement or return
relating to, or required to be filed in connection with, any Tax.
(h) "Tax" means any tax, including any interest, penalty or
addition to tax, imposed by any U.S. federal, state, local or other government,
or any agency or political subdivision thereof.
(i) "Tax Rate" means, with respect to U.S. citizens and
resident individuals, 35% or such other rate as the Company shall determine in
its sole discretion as being the effective rate at which a plurality of the
Indemnitees who are U.S. citizen and resident individuals will be subject to
U.S. federal, state and local income tax on the amounts paid by the Company
pursuant to this Agreement. The same Tax Rate shall apply to all such
Indemnitees. The Company shall determine, in its sole discretion, the Tax Rate
applicable to other Indemnitees, based on an estimation of the effective rate at
which the Indemnitee will be subject to income tax on the amounts paid by the
Company pursuant to this Agreement.
(j) "Trigger Amount" means with respect to an Indemnitee the
amount specified by the Company in writing to such Indemnitee.
2. Indemnity Obligation. (a) The Company hereby agrees to
indemnify each Indemnitee against and to pay to, or on behalf of, each
Indemnitee an amount equal to such Indemnitee's Increased Taxes.
(b) If the Company determines, in its sole discretion, that
the initial determination of Increased Taxes was incorrect (whether by reason of
a subsequent examination by a Taxing authority or otherwise), the Company shall
make an additional payment to the Indemnitee or the Indemnitee shall make a
payment to the Company equal to the difference between (i) the payment
previously made pursuant to Section 2(a) hereof and (ii) the payment that would
have been made had such original determination been correct. If more than one
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payment is to be made pursuant to this Section 2(b), the later payments shall
take into account the effect of any prior payments.
(c) After the Company has made payments (as adjusted pursuant
to Section 2(b) hereof) to, or on behalf of, an Indemnitee in respect of
Increased Taxes that equal the Trigger Amount for such Indemnitee, any payments
made by the Company pursuant to this Agreement in respect of any additional
Increased Taxes shall equal the product of (i) such additional Increased Taxes
and (ii) a fraction, the numerator of which is one and the denominator of which
is one minus the Tax Rate.
(d) Notwithstanding anything to the contrary contained herein,
the Company shall be permitted, but not required, to advance the full amount of
Taxes immediately payable by an Indemnitee in circumstances in which the
Increased Taxes are less than the initial Tax payment (e.g. because the Tax
payment gives rise to a tax benefit in the same or subsequent years). The
Company shall be permitted, if it so elects, to charge interest on any advance
made pursuant to this Section 2(d) at the applicable U.S. federal rate described
in Section 7872(f)(2)(B) of the Internal Revenue Code.
3. Procedural Matters. (a) Any Indemnitee who was a Schedule
II Limited Partner on January 1, 1999 hereby agrees to permit the Company's
internal tax department (or, if the Company elects, the Company's designee) to
prepare and file such Indemnitee's personal income tax Returns (including any
amended Returns) for all Covered Periods. The Indemnitee shall, if requested by
the Company, pay to the Company the reasonable costs (including allocable
internal costs) of preparing such Returns. Nothing in this Agreement shall
require the Company to prepare personal income tax Returns for any Indemnitee.
(b) The Company (or its designee) shall, at the Company's
expense, represent the Partnership, each Affiliate and each Indemnitee in any
examination of (or other proceeding relating to) the Partnership's or
Affiliate's Returns for all taxable years and, in the case of an Indemnitee, in
any examination of (or other proceeding relating to) the Indemnitee's Returns
for any Covered Period to the extent the examination relates to a Partnership
Item with respect to which the Company is required to indemnify the Indemnitee.
Each Indemnitee shall, to the extent reasonably requested, promptly cooperate
with the Company (or its designee) in such matters including, without
limitation, by providing a duly executed Internal Revenue Service Form 2848 (or
successor form) or similar form applicable for state, local or other Tax
purposes.
(c) To the extent permitted by law, the Company may make all
Tax payments required to be made pursuant to this Agreement directly to the
relevant taxing authority on behalf of the Indemnitee. To the extent the Company
does not elect to make such Tax payments directly to the taxing authority, the
Company shall either make any required payments to the Indemnitee or deliver to
the Indemnitee a check made out in the amount of the required payments
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payable to the applicable taxing authority, in either case within thirty (30)
days of receiving notice that the Indemnitee has paid Increased Taxes.
(d) To the extent permitted by law, each Indemnitee shall
direct the relevant taxing authority to pay any refund in respect of Taxes for
any Covered Period directly to the Company and these refunds shall be credited
against the Indemnitee's obligation to make payments to the Company under
Sections 2(b), 2(d) and 3(e) (or returned to the Indemnitee if the Indemnitee
does not owe any amounts to the Company). The Indemnitee shall notify the
Company within thirty (30) days of the receipt by such Indemnitee of a refund of
Taxes in respect of any Partnership Item for any Covered Period.
(e) Any Indemnitee will forfeit any right to receive any
payments under this Tax Indemnification Agreement (and promptly refund to the
Company any amounts previously paid by the Company to, or on behalf of, such
Indemnitee under this Agreement) if such Indemnitee (i) takes any action
independent of the Tax Matters Partner (as defined in Section 6231(a)(7) of the
Internal Revenue Code) or the Company on any examination or other proceeding in
respect of the Partnership's or any Affiliate's Returns, (ii) takes any position
in any Return or other Tax filing inconsistent with the position taken by the
Partnership, the Company or any Affiliate, (iii) fails to cooperate fully with
the Company or the Tax Matters Partner in pursuing any contest or other
proceeding in respect of Taxes or fails to permit the Company or the Tax Matters
Partner to file amended returns on behalf of such Indemnitee, if so requested by
the Company, (iv) fails to provide the Company or its designee upon request with
a duly executed Internal Revenue Service Form 2848 (or successor form) or
similar form applicable for state, local or other Tax purposes or (v) fails to
notify the Company of the receipt of a refund of Taxes as required by Section
3(d) hereof.
(f) Each Indemnitee agrees to promptly and timely file Returns
which are required to be filed by such Indemnitee and which include any
Partnership Item, and to timely pay the Taxes shown as due on such Returns. To
the extent permitted by law, each Indemnitee agrees to report any item on such
Returns, and to take positions in any other Tax filings, in a manner consistent
with the positions taken by the Partnership, the Company or an Affiliate.
4. Character of Payment. Any payments made by the Company
pursuant to this Agreement to an Indemnitee other than a CAS Indemnitee who is
not participating in the Plan of Incorporation shall be treated as additional
payments made by the Company to the Indemnitee pursuant to the Plan of
Incorporation. Any payments made by the Company pursuant to this Agreement to a
CAS Indemnitee who is not participating in the Plan of Incorporation shall be
treated as additional payments made by the Company to the CAS Indemnitee.
5. Determinations. The Company shall make all determinations
necessary to administer this Agreement including, without limitation,
determinations of (i) eligibility for payment, (ii) the amount of any payment to
be made by the Company and (iii) the amount of any
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refund to be paid to the Company by an Indemnitee. Any such determinations by
the Company shall, absent manifest error, be final, binding and conclusive on
the Indemnitee.
6. Arbitration. (a) Without diminishing the finality and
conclusive effect of any determination by the Company of any matter under this
Agreement which is provided herein to be determined by the Company, and subject
to the provisions of paragraphs (b) and (c) below, any dispute, controversy or
claim arising out of or relating to or concerning the provisions of this
Agreement shall be finally settled by arbitration in New York City before, and
in accordance with the rules then obtaining of, the New York Stock Exchange,
Inc. (the "NYSE") or, if the NYSE declines to arbitrate the matter, the American
Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules of the AAA.
(b) Notwithstanding the provisions of Section 6(a), and in
addition to its right to submit any dispute or controversy to arbitration, the
Company may bring an action or special proceeding in a state or federal court of
competent jurisdiction sitting in the City of New York, whether or not an
arbitration proceeding has theretofore been or is ever initiated, for the
purpose of temporarily, preliminarily, or permanently enforcing the provisions
of this Agreement, or to enforce an arbitration award, and, for the purposes of
this Section 6(b), each Indemnitee (i) expressly consents to the application of
Section 6(c) to any such action or proceeding, (ii) agrees that proof will not
be required that monetary damages for breach of the provisions of this Agreement
would be difficult to calculate and that remedies at law would be inadequate and
(iii) irrevocably appoints the General Counsel of GS Inc. as the Indemnitee's
agent for service of process in connection with any such action or proceeding,
who shall promptly advise the Indemnitee of any such service of process.
(c) (i) THE INDEMNITEE AND THE COMPANY HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE CITY OF NEW YORK OVER ANY SUIT, ACTION, OR PROCEEDING ARISING OUT OF OR
RELATING TO OR CONCERNING THIS AGREEMENT THAT IS NOT OTHERWISE ARBITRATED OR
RESOLVED ACCORDING TO SECTION 6(a) HEREOF. This includes any suit, action or
proceeding to compel arbitration or to enforce an arbitration award. The
Indemnitee and the Company acknowledge that the forum designated by this Section
6(c) has a reasonable relation to this Agreement, and to the Indemnitee's
relationship to the Company. Notwithstanding the foregoing, nothing herein shall
preclude the Company from bringing any action or proceeding in any other court
for the purpose of enforcing the provisions of this Section 6.
(ii) The agreement of the Indemnitee and the Company as to
forum is independent of the law that may be applied in the action, and the
Indemnitee and the Company agree to such forum even if the forum may under
applicable law choose to apply non-forum law. The Indemnitee and the Company
hereby waive, to the fullest extent permitted by applicable law, any objection
which the Indemnitee or the Company now or hereafter may have to personal
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jurisdiction or to the laying of venue of any such suit, action or proceeding
brought in any court referred to in Section 6(c)(i). The Indemnitee and the
Company undertake not to commence any action arising out of or relating to or
concerning this Agreement in any forum other than a forum described in this
Section 6(c). The Indemnitee and the Company agree that, to the fullest extent
permitted by applicable law, a final and non-appealable judgment in any such
suit, action, or proceeding in any such court shall be conclusive and binding
upon the Indemnitee and the Company.
7. Notices. Any notice under this Agreement shall be in
writing and shall be deemed to have been given upon the delivery or mailing
thereof, as the case may be, if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the following address:
Notice to the Company:
The ▇▇▇▇▇▇▇ Sachs Group, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: Director of Taxation
Notice to an Indemnitee:
At the last address appearing on the Company's business
records.
8. Indemnitee Addresses. Each Indemnitee hereby agrees to
provide prompt notice to the Company of any change in the address and telephone
and telecopy numbers of such Indemnitee.
9. Entire Agreement. This Agreement represents the entire
understanding between the Company and each Indemnitee with respect to the
subject matter hereof and supersedes all prior negotiations among the parties
hereto with respect to such subject matter.
10. Amendments. The Company will be permitted to amend this
Agreement in any respect, so long as such amendment does not materially
adversely affect the amount which an Indemnitee is entitled to receive from the
Company pursuant to this Agreement.
11. Miscellaneous. (a) This Agreement shall inure solely to
the benefit of GS Inc. and its successors and assigns and the Indemnitees and
their respective heirs, executors, administrators and successors, and no other
person shall acquire or have any right under or by virtue of this Agreement.
(b) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
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(c) If any provision of this Agreement is finally held to be
invalid, illegal or unenforceable (whether in whole or in part), such provision
shall be deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability and the remaining provisions shall
not be affected thereby.
(d) With respect to KAA, such Indemnitee's Increased Taxes
shall include Increased Taxes of Royal Hawaiian Shopping Center, Inc.
attributable to periods during which Royal Hawaiian Shopping Center, Inc. was a
partner in the Partnership. With respect to an Indemnitee that is treated as a
partnership or other flow-through entity for United States tax purposes, such
Indemnitee's Increased Taxes shall, to the extent determined by the Company in
its sole discretion, include Taxes payable by direct or indirect holders of
interests in such Indemnitee, and the other provisions of this Agreement shall
apply, where relevant, to such direct or indirect holders of interests in the
Indemnitee.
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In witness whereof, the Company and each Indemnitee have
executed this Agreement as of the day and year first above written.
THE ▇▇▇▇▇▇▇ ▇▇▇▇▇ GROUP, INC.
By:__________________________________
Name:
Title:
SUMITOMO BANK CAPITAL MARKETS, INC.
By:__________________________________
Name:
Title:
KAMEHAMEHA ACTIVITIES ASSOCIATION
By:__________________________________
Name:
Title:
SCHEDULE I LIMITED PARTNERS: [Names of partners]
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SCHEDULE II LIMITED PARTNERS: [Names of partners]
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FORMER PARTNERS: [Names of partners]
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