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Agreement for Distribution of Retained Earnings and Tax Indemnification - Coldwater Creek Inc. and Dennis Pence and Elizabeth Ann Pence

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                              AGREEMENT FOR DISTRIBUTION
                               OF RETAINED EARNINGS AND
                                 TAX INDEMNIFICATION


         This AGREEMENT FOR DISTRIBUTION OF RETAINED EARNINGS AND TAX
INDEMNIFICATION (the "Agreement") is entered into effective the ________
day of __________, 1996, between Coldwater Creek Inc., a Delaware corporation
(the "Company"), and Dennis Pence and Elizabeth Ann Pence (the "Stockholders").

         WHEREAS, the Company is undertaking a public offering of its stock in
order to raise additional equity (the "Public Offering");

         WHEREAS, the Company and the Stockholders have entered into this
Agreement in connection with the Public Offering;

         WHEREAS, the Company will be classified as an S corporation until
immediately prior to the public offering, after which it will be classified as a
C corporation;

         WHEREAS, the Stockholders are stockholders of the Company;

         WHEREAS, the Company wishes to make a distribution to the Stockholders
of all of its retained earnings prior to the termination of its status as an S
corporation; and

         WHEREAS, the Company and the Stockholders wish to provide for tax
indemnification arrangements in connection with the Company's termination as an
S corporation.

         NOW, THEREFORE, the parties agree as follows:

                                      ARTICLE I
                          DISTRIBUTION OF RETAINED EARNINGS

         The Company hereby agrees to distribute to the Stockholders the amount
of the Company's retained earnings, as determined for financial accounting
purposes under generally accepted accounting principles, as of the Termination
Date (as defined below).  The Company currently estimates that its retained
earnings as of the Termination Date will be approximately $_____ million.  The
distribution shall be effected by the


                                          1.

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issuance of a promissory note (or notes) of the Company prior to the Termination
Date.  The promissory note (or notes) shall provide for upward or downward
adjustments based on a final determination of such retained earnings.


                                      ARTICLE II
                         TERMINATION OF S CORPORATION STATUS

         The Company's status as an S corporation under Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), will be terminated as of
the earlier of (i) the date of the closing of the Public Offering or (ii) the
date specified in a revocation of S corporation status duly filed by the Company
(such date being referred to hereinafter as the "Termination Date").  The
Company's status as an S corporation under pertinent state tax laws will also be
terminated on the Termination Date.  The Company shall use the pro rata
allocation method prescribed in Section 1362(e)(2) of the Code in order to
allocate its taxable income between the short S corporation taxable year ending
the day prior to the Termination Date and the C corporation short taxable year
commencing on the Termination Date; provided that, if the Company has revoked
its S corporation status prior to the date of the Public Offering, it shall use
the "closing-of-the-books" method prescribed in Section 1362(e)(3) of the Code.


                                     ARTICLE III
                                        TAXES

         3.1  FILING OF TAX RETURNS.  The Company covenants and agrees that:
(a) the Company shall be responsible for and shall effect the filing of all
federal, state, foreign and local returns for the Company with respect to any
and all taxable periods; and (b) the Company shall pay any and all taxes
required to be paid by the Company for all periods covered by the returns as
required by applicable law, subject to reimbursement by the Stockholders to the
extent prescribed herein.

         3.2  COMPANY'S INDEMNIFICATION OF THE STOCKHOLDERS FOR ADDITIONAL
PRE-OFFERING TAXES.  The Company hereby indemnifies and agrees to hold the
Stockholders harmless from, against and in respect of any federal and state
income tax liability (including penalties, interest and any taxes resulting from
the payments under this section) incurred by the Stockholders as a result of a
final determination of an adjustment (by reason of an amended return, claim for
refund, audit or otherwise) to the Company's tax returns which increases the tax
liability of the Stockholders for taxable periods ending prior to the
Termination Date (including the short taxable period ending the day before the
Termination Date).

         3.3  STOCKHOLDERS' INDEMNIFICATION OF THE COMPANY.  The Stockholders
hereby indemnify and agree to hold the Company harmless from, against and in
respect


                                          2.

<PAGE>

of any federal and state income tax liability (including penalties, interest
and any taxes resulting from the payments under this sentence) incurred by
the Company as a result of a final determination that the Company was not an
S corporation for federal or state income tax purposes for any taxable period
ending prior to the Termination Date (including a short taxable period ending
the day before the Termination Date); provided that in no event shall the
Stockholders' aggregate liability under this sentence exceed any refund of
taxes and interest received by the Stockholders as a result of such final
determination and/or any ensuing claim for refund.  The Stockholders further
hereby indemnify and agree to hold the Company harmless from, against and in
respect of any federal and state income tax liability (including penalties,
interest and any taxes resulting from the payments under this sentence) incurred
by the Company as a result of final determination of an adjustment (by reason of
an amended return, claim for refund, audit or otherwise) to the Company's or the
Stockholders' tax returns which decreases the Stockholders' tax liability for a
taxable period ending prior to the Termination Date (including the short taxable
period ending the day before the Termination Date) and correspondingly increases
the tax liability of the Company (or its consolidated subsidiaries) for a
taxable period ending after the Termination Date; provided that in no event
shall the Stockholders' aggregate liability under this sentence exceed any
refund of taxes and interest received by the Stockholders as a result of such
final determination and/or ensuing claim for refund.

         3.4  PAYMENTS.  The Stockholders or the Company, as the case may be,
shall make any payment required under this Agreement within seven days after
receipt of notice from the other party that a payment is due by such party to
the appropriate taxing authority, which notice shall be accompanied by
appropriate documentation demonstrating that such payment is due.

         3.5  COOPERATION.  The parties shall cooperate with each other in
connection with the contest of any additional tax liability asserted by any
taxing authority.  The parties shall also cooperate with each other in securing
a refund of federal and state income tax for the Stockholders as a result of any
final determinations described in Section 3.3.

         3.6  RESPECTIVE LIABILITY.  Each of the Stockholders shall be liable
to the Company for his or her allocable share of the total liabilities of the
Stockholders under this Agreement. Such allocable share shall be based on the
Stockholders' relative percentage interests in the Company as of the day before
the Termination Date.


                                          3.

<PAGE>

                                      ARTICLE IV
                                    MISCELLANEOUS

         4.1  COUNTERPARTS.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute an instrument representing the
Agreement between the parties hereto.

         4.2  CONSTRUCTION OF TERMS.  Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.

         4.3  GOVERNING LAW.  This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Delaware without regard to Delaware choice of
law rules.

         4.4  AMENDMENT AND MODIFICATION.  This Agreement may be amended,
modified or supplemented only by a written agreement executed by the parties.

         4.5  ASSIGNMENT.  This Assignment and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of 
the parties hereto without the prior written consent of the other parties, nor 
is this Agreement intended to confer upon any other person except the parties 
any rights or remedies hereunder.

         4.6  INTERPRETATION.  The title, article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.

         4.7  SEVERABILITY.  In the event that any one or more of the
provisions of this Agreement shall be held to be illegal, invalid or
unenforceable in any respect, the same shall not in any respect affect the
validity, legality or enforceability of the remainder of this Agreement, and the
parties shall use their best efforts to replace such illegal, invalid or
unenforceable provisions with an enforceable provision approximating, to the
extent possible, the original intent of the parties.

         4.8  ENTIRE AGREEMENT.  This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein.  There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein.  This Agreement supersedes all prior agreements and the understandings
between the parties with respect to such subject matter.


                                          4.

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                       COLDWATER CREEK INC.


                                       By
                                           -------------------------------------


STOCKHOLDERS:



                                        ----------------------------------------
                                                   Dennis Pence



                                        ----------------------------------------
                                               Elizabeth Ann Pence




                                          5.