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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 thereof being
hereinafter referred to as an " NMTC Audit "). Upon
request by the Indemnitor, the Investor shall permit the Indemnitor
to file written materials (provided the same shall have been
approved by the Investor) with the IRS in connection with any NMTC
Audit or any tax ad
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