EXHIBIT 10.10
TAX CREDIT REIMBURSEMENT AND
INDEMNITY AGREEMENT
THIS TAX CREDIT REIMBURSEMENT AND
INDEMNITY AGREEMENT (this “ Agreement ”),
dated as of December 8, 2006, is by and among AUTOVAXID, INC.,
a Florida corporation, (“ Borrower ” or
“ Indemnitor ”), having an address at 377
Plantation Street, Worcester, Massachusetts 01605, for the benefit
of U.S. BANCORP COMMUNITY INVESTMENT CORPORATION, a Delaware
corporation (the “ Investor ”), whose
address is 1307 Washington Ave., Suite 300, St. Louis, Missouri
63103, or at such other address as it shall designate.
RECITALS
St. Louis New Markets Tax Credit
Fund-II, LLC, a Missouri limited liability company (the “
CDE ”), has received a sub-allocation of New
Markets Tax Credits (the “ Tax Credits ”)
under Section 45D of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder
(collectively, the “ Code ”).
AutovaxID Investment LLC, a Missouri
limited liability company (the “ Fund ”)
has contributed equity to the CDE (the “ QEI
Contribution ” ), which equity is expected to
constitute a “qualified equity investment” (“
QEI ”) under the New Markets Tax Credit program
authorized by Section 45D of the Code (the “ NMTC
Program ”) and administered by the Community
Development Financial Institutions Fund of the United States
Treasury Department (together with any successor agency, the
“ CDFI Fund ”).
The QEI Contribution is being funded
in part with the proceeds of equity contributed to the Fund by the
Investor. The proceeds of the QEI Contribution will be used by the
CDE to fund a loan to Borrower in the aggregate amount of
$7,700,000 (the “ CDE Loan ”), which is
expected to constitute a “qualified low-income community
investment” (“ QLICI ”) under the
NMTC Program.
The documents evidencing or securing
the CDE Loan are hereinafter collectively referred to as the
“ Investment Documents ”.
The Tax Credits claimable by the
Investor in connection with the QEI Contribution have allowed the
Fund to provide the QEI Contribution to the CDE on more favorable
terms, which in turn has allowed the CDE to provide the CDE Loan to
Borrower on more favorable terms and, as a result, Borrower
believes that it shall substantially benefit, directly or
indirectly, from the making of the QEI Contribution.
The Borrower is primarily engaged in
the business of manufacturing an automated cell culture instrument
currently in clinical trial, within United States population census
tract number 29510113500 which constitutes a Low-Income Community
under the NMTC Program (the “ Project Area
”); and
The proceeds of the CDE Loan will be
used to finance certain activities of Borrower associated with the
foregoing activities.
As a condition of making the QEI
Contribution, the Investor has required the Indemnitor to indemnify
it as herein set forth and is making the QEI Contribution in
reliance on the Indemnitor’s agreement to do so.
AGREEMENT
NOW, THEREFORE
, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Indemnitor hereby agree for the benefit of the
Investor as follows:
DEFINITIONS
“ Final
Determination ” means the first to occur of:
(i) the filing of a federal information return reporting a
Recapture Event by the CDE, the Fund, or the Investor; (ii) a
decision, judgment or decree or other order issued by any court of
competent jurisdiction confirming the assertion by the IRS that a
Recapture Event has occurred, which decision, judgment, decree or
other order has become final (i.e., all allowable appeals have been
exhausted); or (iii) any binding settlement in writing is made
between the CDE, the Fund or the Investor and the IRS.
“ Financial
Forecast ” shall mean the projections prepared by the
Fund’s accountants and attached as Exhibit A, of anticipated
federal income tax income, gain, losses, deductions and credits, as
well ad Net Cash Flow and Liquidation, Sale of Refinancing Proceeds
(as each term is defined in the Fund Operating Agreement) that, as
of the date hereof, are expected to be realized by Investor
pursuant to the QEI Contribution and the CDE Loan.
“ Fund Operating
Agreement ” shall mean the Amended and Restated
Operating Agreement, dated as of December 8, 2006, of the
Fund, as the same may be amended.
“ IRS ”
means the United States Internal Revenue Service.
“ Minimum Return
Shortfall ” shall mean, as of any date, the amount
necessary to be paid to the Investor for the Investor to achieve
the after tax internal rate of return anticipated by the Investor
in connection with the QEI Contribution, as reflected in the
Financial Forecast, taking into account: (i) the
Investor’s capital contributions to the Fund, (ii) all
distributions to the Investor by the Fund and payments to the
Investor pursuant to this Agreement, (iii) all amounts paid or
to be paid by the Investor to the IRS, and reasonable expenses
incurred by the Investor, in connection with, or in defending
against, a Recapture Event, (iv) all items of income, gain,
loss and deduction and credit allocated to the Investor under the
Fund Agreement or incurred by the Investor by reason of payments,
expenses or distributions covered by clauses (ii) or
(iii) above or in connection with the exercise of any put or
call option or the loss, transfer or abandonment or the
Investor’s interest in the Fund or the CDE, and presuming for
this purpose the full ability of the Investor to utilize the tax
credits and tax losses and a presumed 38% federal tax rate for the
Investor. The determination of the Minimum Return Shortfall shall
be made using the methodology used in the Financial Forecasts, to
the extent not inconsistent with this definition.
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1. Covenants, Representations
and Warranties .
Borrower represents and warrants to
and covenants and agrees with the Investor as follows:
(a) each representation and warranty
made by it in any of the Investment Documents to which it is a
party is true and correct in all material respects and the Investor
may rely thereon;
(b) it shall not take any action or
omit to take any action that would cause the Borrower to cease to
qualify as a “qualified active low-income community
business” (“ QALICB ”) as such term
is defined in Section 45D of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations and guidance
thereunder;
(c) the execution, delivery and
performance by it of this Agreement does not and will not
contravene or conflict with any law, order, rule, regulation, writ,
injunction or decree now in effect of any government, governmental
instrumentality or court or tribunal having jurisdiction over it,
or any contractual restriction binding on or affecting
it;
(d) there are no facts or
circumstances of any kind or nature whatsoever of which it is aware
that could in any way impair or prevent it from performing its
obligations under this Agreement;
(e) any and all financial
information with respect to it that it has given to the Investor in
connection with the transactions contemplated by this Agreement
fairly and accurately present its financial condition and results
of operations as of the respective dates thereof and for the
respective dates indicated therein, and, since the respective dates
thereof, there has been no material adverse change in the financial
condition or results of its operations;
(f) with the assistance of counsel
of its choice, it has read and reviewed this Agreement and such
other documents as it and its counsel deemed necessary or desirable
to read;
(g) it is a corporation, validly
organized and existing and in good standing under the laws of the
jurisdiction of its incorporation (and all other jurisdictions
where its failure to be so qualified would have a material adverse
effect on its financial condition or results of operations) and has
the full power and authority to enter into and perform its
obligations under this Agreement; and
(h) this Agreement has been duly
authorized, executed and delivered on behalf of Borrower and is
fully enforceable against it in accordance with its terms, except
to the extent enforceability is limited by bankruptcy and other
similar laws affecting creditors rights generally.
2. Reimbursement and Indemnity
Obligation .
(a) The Indemnitor shall pay the
Recapture Amount (as defined in Section 2(c)) upon a Recapture
Event; provided, that such payment shall be subordinated to the
Borrower’s obligations to Laurus Master Fund, Ltd., a Cayman
Islands company (the “ Senior
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Lender ”), as described in and on the terms set
forth in that certain Subordination Agreement, dated as of or about
the date hereof, by and among Senior Lender, the CDE, the Investor,
the Borrower and Biovest International, Inc.
(b) A “ Recapture
Event ” shall occur upon: (i) a Final
Determination evidencing a recapture, disallowance or other loss of
the Tax Credits attributable to the QEI Contribution, if such
recapture, disallowance or other loss is due to the failure of the
CDE Loan to constitute a QLICI, either on the date hereof or
subsequently, or (ii) a payment of principal under the CDE
Loan (for which purpose it will be assumed that the full amount of
such payment will be distributed by the CDE to its members and no
reinvestment of such amounts will be made, and neither the failure
to reinvest nor any actual reinvestment shall be a defense to, or
otherwise reduce, the payment hereunder, unless a reinvestment
qualifying as a QLICI is presented by the Borrower and approved by
the Investor pursuant to the terms of the Investment
Documents.
(c) The Recapture Amount shall equal
the sum of (i) the Minimum Return Shortfall as of the date of
the Final Determination and (ii) reasonable out of pocket
costs and expenses incurred by Investor in defending or processing
any claim or audit covered by this Agreement.
(d) All computations required under
this Section 2 shall be made by the Investor, and the results
of such computations, together with a statement describing in
reasonable detail the manner in which such computations were made,
shall be delivered to the Indemnitor in writing.
(e) Investor covenants and agrees
that it will promptly give written notice to the Indemnitor of the
occurrence of any audit by the IRS of the Investor or any owner,
directly or indirectly of any interest therein, if the adverse
resolution of such audit (or portion thereof) would result in
liability for the Indemnitor under this Agreement (such audits or
relevant portions th
