(c) If the Internal Revenue Service were to succeed in a tax determination that the common stock received had value greater than that upon which the transaction was based, the additional value would constitute ordinary income to Purchaser as of the date of its receipt by Purchaser. The additional taxes (and interest) due would be payable by Purchaser. In certain cases, the Internal Revenue Service could have up to six years from the due date for filing the return (or the actual filing date of the return if filed thereafter) within which to assess Purchaser for the additional tax and interest, which would then be due. The events described in these clauses (b) and (c) will hereinafter be referred to collectively as an Adverse Tax Event.
(d) The Company would have the benefit, in any such transaction, if a determination was made prior to the three year statute of limitations period affecting the Company, of an increase in its deduction for compensation paid, which would offset its operating profits, or, if not profitable, would create net operating loss carry forward arising from operations in that year.
(e) Notwithstanding the terms of this Section 7, the Company covenants and agrees to indemnify, defend and hold harmless Purchaser and his heirs, executors, administrators, successors and assigns (collectively, the Other Indemnified Parties) from and against all taxes, interest, fines, penalties and costs and expenses (including, without limitation, reasonable attorneys fees, court costs and costs of appeal) that Purchaser or any of the Other Indemnified Parties suffer or incur arising out of, in connection with or related to an Adverse Tax Event. Purchaser (or the Other Indemnified Parties as the case may be) will promptly notify the Company in writing of any notice or other communication received and pertaining to a possible Adverse Tax Event; provided, however, that the failure to so notify the Company will not relieve the Company from liability under this Agreement with respect to such claim for indemnification unless the Company is materially prejudiced as result of such failure to give prompt notice. If the Company declines or fails to assume the defense of such Adverse Tax Event or fails to employ counsel reasonably satisfactory to Purchaser (or the Other Indemnified Parties as the case may be), in each case within thirty (30) days after receipt of the notice, then Purchaser and any of the Other Indemnified Parties may employ counsel to represent or defend them in regard to the Adverse Tax Event, and the Company will pay the reasonable fees and disbursements of such counsel as incurred. Purchaser (and the Other Indemnified Parties as the case may be) will have the right to participate in defense of the Adverse Tax Event and to retain their own counsel at such persons own expense. The Company will at all times keep the Purchaser (and the Other Indemnified Parties as the case may be) reasonably apprised of the status of the defense of any Adverse Tax Event, and the Company and Purchaser (and the Other Indemnified Parties as the case may be) will cooperate in good faith with each other with respect to the defense of any such matter. Neither the Company nor the Purchaser (nor any of the Other Indemnified Parties as the case may be) may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the other, unless (i) the Company fails to assume and maintain the defense of such claim or (ii) such settlement, compromise or consent includes an unconditional release of Purchaser (and the Other Indemnified Parties as the case may be) from all liability and obligations to pay any amounts arising out of the Adverse Tax Event. The terms of Sections 7(b), (c) and (e) shall survive for a period of six (6) years after the due date for filing Purchasers federal income tax return (Form 1040) for the tax year in which the Stock was issued to Purchaser.