INDEMNITY AGREEMENT
This Indemnity Agreement dated April 13, 2007 among SCIENTIFIC
INDUSTRIES, INC., a Delaware corporation (the "Company"),
ALTAMIRA
INSTRUMENTS, INC., a Delaware corporation ("Altamira") and GRACE
S.
MORIN ("Morin"), HEATHER L. HAUGHT ("Haught") and WILLIAM D.
CHANDLER
(along with Morin and Haught, the "Sellers").
WHEREAS, the Company and the Sellers having recently completed
the purchase by the Company from the Sellers and the sale by the
Sellers
to the Company (the "Transaction") of the outstanding shares of
capital
stock of Altamira (the "Shares") pursuant to a Stock Purchase
Agreement,
dated as of November 30, 2006, for a consideration which included
shares of
Common Stock of the Company, and;
WHEREAS, at the date of the Transaction Altamira was an "S
Corporation" as defined in section 1361(a)(1) of the Internal
Revenue Code
of 1986 (the "Code"); and
WHEREAS, the Company intends and requests that the Transaction
be
governed by section 338(h)(10) of the Internal Revenue Code (the
"Code"), and;
WHEREAS, in consideration of the Sellers' cooperation and
consent
to the filing of an election pursuant to section 338(h)(10) of the
Code,
the Company and Altamira jointly and severally agree and undertake
to
provide the indemnities to Sellers as provided in this
Indemnity
Agreement;
WHEREAS, as a result of the Transaction, in the absence of the
Election the Sellers would each realize a long term capital gain
on
the sale of the Shares in the amount of the difference between the
sales
price for the Shares and the adjusted tax basis of the Shares in
the
hands of each Seller.
WHEREAS, as a result of the Election, Altamira shall be deemed
to have sold its assets in a taxable transaction immediately prior
to
the Transaction and shall realize a gain or loss in an amount equal
to
the difference between the Asset Deemed Sales Price ("ADSP") as
defined in
Treas. Reg Sec. 1.338-4 and the adjusted tax basis of Altamira's
assets.
Such gain or loss will be reported to and realized by the Sellers
in
respect of Altamira's final S Corporation US Return of Income, Form
1120S,
and any comparable state or local income tax return,
NOW THEREFORE, it is hereby agreed that:
1. Sellers
will execute Form 8023, "Elections under Section 338
for Corporations Making Qualified Stock Purchases", attached hereto
as
Exhibit A, and such other documents and papers as may be required
by
the Code or the Internal Revenue Service (the "Service") providing
for an
election (the "Election") pursuant to Section 338(h)(10) of the
Code on
behalf of Sellers with respect to the Transaction. In furtherance
of the
Election, the Sellers will deliver within five business days of
the
delivery by the Company to the Sellers of the Forms K-1 the signed
Form
8023 to the Company to be filed with the Internal Revenue Service
("IRS")
Form 8023.
2. (a)
Parties to this Indemnity Agreement contemplate that the
Sellers
will incur certain additional taxes and professional fees
(hereinafter
"Adverse Consequences") as a result of the filing of Form 8023 with
respect
to the Transaction. In
consideration of the Sellers' undertaking
to execute Form 8023 with respect to the Transaction, the Company
and
Altamira will indemnify, defend and hold harmless each of the
Sellers,
their successors, heirs or assigns (the "Indemnified Parties"), for
any
Adverse Consequences.
For purposes of this Indemnity Agreement
"Adverse Consequences" shall include but shall not be limited to
any and all
additional federal, state and local tax liabilities, penalties,
interest and
tax administrative expenses in the form of tax return preparation
and audit
fees related to audit and adjustment by federal, state or local
tax
authorities including but not limited to any Adverse
Consequences
incurred by the Indemnified Parties that would otherwise not have
been
incurred by the Indemnified Parties had the Buyer purchased the
stock of
Altamira pursuant to the Stock Purchase Agreement without the
filing of a
Section 338(h)(10) Election. It is the intention of the parties
to this
Agreement to broadly construe the scope of any Adverse Consequences
which
may arise on account of the filing of the Election to include, by
way of
example but n
