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Exhibit 10(g)
TAX-SHARING AGREEMENT
THIS AGREEMENT is entered into as of the ____ day of ________________,
1997, between Kennametal Inc., a Pennsylvania corporation ("Kennametal"), and
JLK Direct Distribution Inc., a Pennsylvania corporation ("JLK").
RECITALS
A. Kennametal owns all of the issued and outstanding Class B
Common Stock, par value $.01 per share, of JLK.
B. JLK is effecting an initial public offering (the "Offering")
of shares of Class A Common Stock, par value $.01 per share,
of JLK (the "Class A Common Stock").
C. Upon completion of the Offering, JLK will cease to be a
wholly-owned subsidiary of Kennametal.
D. For United States federal income tax purposes JLK and its
subsidiaries will continue to be members of the Kennametal
Group, and for state or local franchise or income tax
purposes will continue to be members of certain unified,
combined or consolidated groups which include Kennametal
notwithstanding the results of the Offering.
E. The parties wish to address certain tax matters which may
arise as a result of the Offering.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, and intending to be
legally bound hereby, the parties hereby agree as follows:
1.1 As used in this Agreement, in addition to the terms defined in
the Preamble and Recital, the following terms will have the following meanings,
applicable to both the singular and plural forms of the terms described:
"CONSOLIDATION PERIODS" shall mean, with respect to JLK or any of its
subsidiaries, the taxable periods or portions thereof in which JLK will be a
member of the Kennametal Group.
"EFFECTIVE DATE" means the date of this Agreement.
"KENNAMETAL GROUP" shall mean the affiliated group of corporations for
United States federal income tax purposes of which Kennametal is the common
parent.
1.2 INTERNAL REFERENCES. Unless the context indicates otherwise,
references to articles, sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
2. With respect to each of the Consolidation Periods:
(a) JLK shall pay to Kennametal an amount equal to the aggregate
United States federal income taxes, if any, JLK and its
subsidiaries would have been required to pay for such
taxable period if JLK had filed a separate consolidated
United States federal income tax return for such period as
the common parent of an affiliated group of corporations
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including only JLK and its subsidiaries, rather than as a
member of the Kennametal Group. JLK will be reimbursed,
however, for tax attributes that it generates, such as net
operating losses, if and when they are used on a Kennametal
consolidated basis.
(b) JLK shall be responsible for any and all liabilities arising
as a result of any United States federal payroll withholding
taxes related to JLK employees.
(c) JLK and its subsidiaries shall be responsible for any and
all liabilities arising as a result of state or local
income, franchise, excise, single business, gross receipts
or withholding tax returns filed by JLK and its subsidiaries
on a separate-return basis. JLK shall pay to Kennametal an
amount equal to the aggregate state or local income or
franchise taxes which JLK or any of its subsidiaries who are
included as a member of a unitary, combined or consolidated
group which includes Kennametal or any of its subsidiaries
would have been required to pay for such period if JLK or
the relevant subsidiaries had filed a separate state or
local income tax return at such time.
(d) JLK and its subsidiaries shall be responsible for any tax
liability due any foreign jurisdiction arising as a result
of their business activities and/or domicile.
(e) Except as set forth below, payments required pursuant to
Paragraphs 2(a), (b), (c) and (d) of this Agreement shall be
billed to JLK by Kennametal based upon estimated payments
made by Kennametal to taxing authorities, with final billing
being made after filing of the returns. If income tax
deficiencies or tax refunds relating to JLK or its
subsidiaries result from a tax audit, amended return, claim,
final determination by any court or otherwise related to the
income tax returns for the Consolidation Period, the amounts
due under Paragraphs 2(a), (b), (c) and (d) of this
Agreement shall be recalculated by Kennametal's Tax
Department in accordance with the terms of such Paragraphs,
and an appropriate adjustment to payments due under those
Paragraphs shall be made.
(f) If JLK has any net operating loss carryover, capital loss
carryover, tax credit or other tax attribute, which is not
used to reduce the amounts due to Kennametal under (a)
above, then Kennametal shall pay to JLK an amount equal to
the reduction in the taxes of the Kennametal Group on
account of the absorption or use of any such tax attribute
if and when used by Kennametal on a consolidated basis.
Further, the benefit of a foreign tax credit, if any,
against the United States federal income tax liability
arising from income upon which such foreign tax was imposed
shall be assigned to JLK at such time as such benefit is
realized in the Kennametal consolidated tax return. The
assignment of such benefit shall be reflected in the net
amounts properly chargeable pursuant to Paragraph 2(a)
above.
3. Notwithstanding anything to the contrary herein, no party shall
be entitled to duplicate payments from the other parties hereunder.
Kennametal's Director of Taxes, in his sole discretion, may net any payments
due to Kennametal from JLK pursuant to this Agreement against any amount due
from Kennametal to JLK pursuant to this Agreement or otherwise.
4. Interest shall accrue on payments due or advances made under this
Agreement at the interest rate then being charged by the Internal Revenue
Service on United States federal income tax deficiencies. Interest shall begin
to accrue on the date payment is due, provided, however, that interest shall
not accrue for any period during which interest is being charged by or paid by
the Internal Revenue Service and such interest is included as
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part of the payment due under this Agreement. Payments under this Agreement
may, in Kennametal's discretion, be evidenced by a demand promissory note
bearing interest as provided in this Paragraph 4.
5. (a) Kennametal agrees that it will indemnify and hold JLK and
its subsidiaries harmless from and against any United States
federal, state or local unitary, combined or consolidated
income or franchise tax liabilities (including interest,
penalties, additions to tax, legal fees, court costs and any
other reasonable costs of defense) with respect to the
portion of the Kennametal Group consolidated federal income
tax liability or state or local unitary, combined or
consolidated income or franchise tax liability which is
allocable to members of the Kennametal Group, other than JLK
or its subsidiaries.
(b) Except as otherwise provided in this Agreement, JLK agrees
that it will indemnify and hold all members of the
Kennametal Group harmless from and against any United States
federal, state or local unitary, combined or consolidated
income or franchise tax liability (including interest,
penalties, additions to tax, legal fees, court costs and any
other reasonable costs of defense) with respect to the
portion of the Kennametal Group consolidated federal income
tax liability or state or local unitary, combined or
consolidated income or franchise tax liability which is
allocable to JLK and its subsidiaries.
6. JLK agrees to: (i) provide Kennametal access to JLK's books and
records; (ii) provide Kennametal with papers, schedules and any other
information or assistance necessary to prepare tax returns or make computations
pursuant to this Agreement; (iii) maintain and preserve books, records and
other information as may be needed by Kennametal pursuant to this Agreement or
pursuant to the preparation of any required tax return or the conduct of any
tax audit by a governmental authority for at least such time as has been
customary; (iv) cooperate in any audit or investigation of tax returns and
execute appropriate powers of attorney in connection therewith in favor of
Kennametal; and (v) sign all documents, including settlement agreements,
relating to the tax returns for Consolidation Periods.
7. With respect to all taxable periods during the Consolidation
Period, Kennametal shall have sole and exclusive authority and responsibility
for: (i) preparing any United States federal income or state and local income,
franchise, excise, single business, gross receipts or withholding tax returns
(including any amended returns or claims for refund) of JLK; (ii) representing
JLK with respect to any United States federal income or state and local income,
franchise, excise, single business, gross receipts or withholding tax audit or
United States federal income or state and local income, franchise, excise,
single business, gross receipts or withholding tax contest (including, without
limitation, any litigation regarding United States federal income or state and
local income, franchise, excise, single business, gross receipts or withholding
taxes or refunds); (iii) engaging outside counsel and accountants with respect
to tax matters regarding JLK; and (iv) performing such other acts and duties
with respect to JLK's' tax returns as he determines is appropriate.
Kennametal's Director of Taxes shall have the discretion to reasonably
determine the intent of, and resolve any ambiguities contained in, this
Agreement.
8. This Agreement is entered into by the parties hereto on their own
behalf as well as on behalf of any subsidiaries such parties may have
respectively. This Agreement shall be deemed to have been joined in and
consented to by all such subsidiaries, without further action of them or the
parties hereto. The parties hereto hereby guarantee the performance by such
subsidiaries of all the terms of this Agreement. This Agreement shall also be
binding upon, and inure to the benefit of, the successors and assigns of the
parties hereto.
9. This Agreement may be executed in several counterparts, each of
which shall be an original, but all of which shall constitute one document.
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10. This Agreement will be governed by, and construed in accordance
with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
KENNAMETAL INC. JLK DIRECT DISTRIBUTION INC.
By ____________________________________ By ______________________________
Name __________________________________ Name ____________________________
Title _________________________________ Title ___________________________
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