TAX ALLOCATION AND INDEMNITY AGREEMENT
Agreement dated as of June 11, 1997 and retroactively applied to the
calendar year ended December 31, 1996 by and among, Sunderland Industrial
Holding Corporation, a Delaware corporation ("Parent"), Precise Holding Corp.
("Precise Holding") and Precise Technology, Inc. and its direct and indirect
subsidiaries ("Precise Group").
WITNESSETH
WHEREAS, the parties hereto are members of an affiliated group (the
"Affiliated Group") as defined in section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, an affiliated group as defined in Code section 1504(a) of which
Parent is the common parent has filed consolidated Federal income tax returns
for prior taxable years, and the Affiliated Group will be required to file a
consolidated Federal income tax return for its taxable year ending December 31,
1996 and for subsequent taxable years; and
WHEREAS, it is the intent of the parties hereto that an agreement be
entered into (i) to allocate the consolidated Federal income tax liability of
the Affiliated Group between the Parent, Precise Holding and the Precise Group
pursuant to a method specified in regulations of the Treasury Department that
would impose on Parent, Precise Holding and Precise Group, for the period
beginning January 1, 1996 through December 31, 1996 and for subsequent periods,
liability for an amount that approximates the liability that Parent, Precise
Holding and Precise Group each would incur if they filed Federal income tax
returns as separate affiliated groups; and (ii) to provide that Parent, Precise
Holding and Precise Group each shall bear its appropriate portion of the
liability of the Affiliated Group for consolidated Federal income tax in respect
of prior periods.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Filing of Consolidated Returns. A consolidated Federal income tax return
shall be filed by Parent for the taxable year ending December 31, 1996, and for
each subsequent taxable period in respect of which this Agreement is in effect
and for which the Affiliated Group is required or permitted to file a
consolidated Federal income tax return.
2. Historical and Future Taxable Periods. For the taxable year of the
Affiliated Group ending December 31, 1996 and for each taxable period
thereafter, the Affiliated Group shall be divided into three separate groups,
one consisting of Parent, one consisting of Precise Holding, and the third and
final group consisting of Precise Group. The consolidated Federal income tax
liability of the Affiliated Group shall be allocated among the three groups in
accordance with the method set forth in Treasury regulation
sections 1.1552-1(a)(2) and 1.1502-33(d)(3) (using a fixed percentage of 100%)
by considering each group as a separate affiliated group except that (i)
modifications to the separate taxable income will be made in accordance with
Treasury regulation section 1.1552- l(a)(2)(ii)(a) through (i) in the same
manner as if all corporations were members of a single affiliated group, and
(ii) carryforwards and carrybacks of losses and credits shall be taken into
account, and to the extent of any reduction of tax liability of any separate
group member to which the losses or credits did not arise, the amount of tax
credit utilized will be remitted to the separate group member to which the
losses or credits were generated. The corporate surtax exemption shall be
allocated to Parent. Any liability of the Affiliated Group for alternative
minimum tax, environmental tax or any other Federal income tax imposed on the
Affiliated Group on a consolidated basis by any section of the Code other than
Code section 11 shall be allocated in accordance with any reasonable method that
is consistent with the principles of this Agreement and the provisions of any
governing Treasury regulations or other administrative pronouncements of the
Internal Revenue Service. In any event, no individual party to this tax
allocation agreement shall pay more income tax in any period of one or more
taxable years than it would have paid for the same period if it had filed a
separate Federal income tax return, and any taxes not paid by reason of this
limitation shall be paid by Parent.
3. Payments. Precise Holding and the Precise Group shall pay to Parent
installments, of estimated tax, computed pursuant to the principles set forth in
section 2 above, no later than ten days after the due dates for payments of
estimated tax by the Affiliated Group. Any payments of estimated tax by Precise
Holding or Precise Group to Parent shall be taken into account in determining
the payment due from Precise Holding or Precise Group pursuant to section 2, and
any overpayment of estimated tax shall be refunded to Precise Holding or Precise
Group. A refund or payment of tax, calculated on the basis of the amount of tax
payable for the taxable year as calculated by Parent as of the due date (without
regard to extensions) for the Federal income tax return of the Affiliated Group,
shall be paid within ten days of that due date, and any adjustment to the amount
of refund or payment of tax, calculated on the basis of the amount of tax
payable for that taxable year as shown on the Federal income tax return of the
Affiliated Group as of the due date (with regard to extensions), shall be paid
within ten days of that due date.
4. Adjustments to Tax Liability. If the consolidated Federal income tax
liability of the Affiliated Group is adjusted for any taxable period, whether by
means of an amended return or claim for refund or after an audit by the Internal
Revenue Service, the Federal income tax liability of Precise Holding or Precise
Group pursuant to section 2 or section 4 of this Agreement shall be recomputed,
if necessary, to give effect to those adjustments as if they had been part of
the original computation pursuant to section 2 or section 4. The obligation to
make any payment of additional Federal income tax or the right to receive any
refund of Federal income tax shall be allocated between Parent, Precise Holding
and Precise Group accordingly. Any additional tax that Precise Holding or
Precise Group is obligated to pay shall be paid to Parent, and any refund of tax
to which Precise Holding or Precise Group is entitled to receive shall be paid
by Parent,
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within ten days of, respectively, the date Precise Holding or Precise Group
receives notice from Parent or the date Parent receives the refund from the
Treasury Department.
5. Appointment of Parent as Agent. Parent shall prepare and file the
consolidated Federal income tax returns of the Affiliated Group and any other
returns, documents or statements required to be filed with the Internal Revenue
Service. In its sole discretion, Parent shall have the right in connection with
any of those returns, documents or statements to determine (i) the manner in
which the return, document or statement shall be prepared and filed, including,
without limitation, the manner in which any item of income, gain, loss,
deduction, credit or any other item shall be reported, (ii) whether any
extension shall be requested and (iii) the elections that will be made by the
Affiliated Group or any members thereof. Each member of the Affiliated Group
shall execute and file those consents, elections, appointments, powers of
attorney and other documents that Parent determines may be necessary or
appropriate for the proper filing of those returns, documents or statements.
Each member of the Affiliated Group shall provide Parent or any other member of
the Affiliated Group any data necessary for the proper and timely filing of
returns, documents or statements and otherwise shall cooperate as necessary to
carry out the purposes of this Agreement.
6. New Members. If during any taxable period Parent or any other members of
the Affiliated Group acquires or organizes another corporation that is required
to be included in the consolidated Federal income tax return of the Affiliated
Group, that corporation shall join in and be bound by this Agreement.
7. Indemnification.
a. General Principles. It is the intent of this Agreement that Parent,
Precise Holding and Precise Group each be liable for an amount in respect of
Federal income tax of the Affiliated Group as that amount is determined pursuant
to this Agreement and that Parent, Precise Holding and Precise Group each
receive its respective share, as so allocated, of any reduction in Federal
income tax liability of the Affiliated Group.
b. Indemnification. The Parent shall be responsible for, and shall protect,
defend, indemnify and hold harmless Precise Holding and Precise Group from, any
amount in respect of Federal income tax allocable to Parent pursuant to this
Agreement. Precise Holding and Precise Group, jointly and severally, shall be
responsible for, and shall protect, defend, indemnify and hold harmless the
Parent from, any amount in respect of Federal income tax allocable to Precise
Holding or Precise Group pursuant to this Agreement.
8. Retention of Books and Records. No member of the Affiliated Group shall
destroy or permit the destruction of any books, records or files pertaining to
any other member of the Affiliated Group without first having offered in writing
to deliver those books, records and files to the other member, and the other
member shall have the
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right upon prior notice to inspect and to copy the same at any time during
business hours for any proper purpose
9. Other Income and Franchise Taxes. The liability of Parent, Precise
Holding and Precise Group in respect of state, local and foreign income and
franchise taxes that are computed pursuant to provisions applicable to
affiliated, combined, unitary or other groups shall be determined and paid in a
manner consistent with the provisions of this Agreement used to determine the
liability of Parent, Precise Holding, and Precise Group in respect of Federal
income tax. Calculation of the separate liability of Parent, Precise Holding,
and Precise Group for these other taxes shall conform to the appropriate state,
local and foreign income and franchise tax provisions governing affiliated,
combined, unitary or other groups. Notwithstanding the foregoing, the credit
against Florida corporate income tax for Florida intangible tax shall not be
computed on a separate company basis to the extent a computation on that basis
would disentitle any member of the Affiliated Group to a credit that is
available to that member by reason of joining in the filing of a consolidated
return of Florida corporate income tax with any member of the Affiliated Group.
10. Entire Understanding. This Agreement constitutes the entire agreement
of the parties concerning the subject matter hereof and, effective as of the
date hereof and for the taxable periods to which this Agreement applies,
supersedes all other agreements. This Agreement shall allocate the tax
liabilities of the Affiliated Group for the period January 1, 1996 through
December 31, 1996, and all subsequent taxable years unless Parent, Precise
Holding and Precise Group mutually agree to terminate this Agreement.
Notwithstanding its termination, this Agreement shall continue in effect with
respect to any payment or refunds due for all taxable periods prior to
termination.
11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of any successor, whether by statutory merger, acquisition of
assets or otherwise, to any of the parties hereto, to the same extent as if the
successor had been an original party to the Agreement.
12. Expenses. Parent, Precise Holding and Precise Group each shall bear any
and all expenses that arise from its obligations under this Agreement.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice) and shall be
deemed given on the date on which the notice is received.
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If to Parent:
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Precise Holding:
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Precise Group:
000 Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
14. Resolution of Dispute. Any dispute between the parties with respect to
this Agreement shall be resolved by a public accounting firm or a law firm
reasonably satisfactory to Parent, Precise Holding and Precise Group or pursuant
to an alternative dispute arrangement agreed to by the parties.
15. Legal Enforceability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective as to that
jurisdiction to the extent of that prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
16. Controlling Law. This Agreement shall be governed by the laws of the
State of New York.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
Sunderland Industrial Holding Corporation
by /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
its President
Precise Holding Corporation
by /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
its President
Precise Technology, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
Precise Technology of Illinois, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
Precise Technology of Delaware, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
Precise TMP, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
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Precise Polestar, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
Xxxxxx Tool, Mold & Die, Inc.
by /s/ Xxxx X. Xxxxx
-------------------------------------------
its President
Xxxxxxx X. Xxxxxxxxxxx 9/12/97
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[Notarial Seal]
Xxxxxxx X. Xxxxxxxxxxx, Notary Public
North Versailles Twp., Allegheny County
My Commission Expires Sept. 25, 2000
Member, Pennsylvania Association of Notaries
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