Tax Allocation And Indemnification Agreement

DRAFT
8/28/96


TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
--------------------------------------------


AGREEMENT made effective the ______ day of _____________, 1996, by and between Siemens Corporation, a Delaware corporation ("SC"), Siemens Power Corporation, a Delaware corporation ("SPC"), Rofin-Sinar Technologies Inc., a Delaware corporation ("Holdings") and Rofin-Sinar Inc., a Delaware Corporation ("RSI").


WHEREAS, immediately prior to the Distribution Date (defined below), Holdings is a 100% owned subsidiary of SPC; and


WHEREAS, effective as of the date of the First Closing (as defined in a certain Underwriting Agreement, dated as of the date hereof, among Holdings, SC and the Underwriters named therein) (the "Distribution Date"), Holdings will sell its stock pursuant to an initial public offering and redeem all shares of its common stock then owned by SPC; and


WHEREAS, immediately prior to the Distribution Date SPC will sell 100% of the issued and outstanding stock of RSI to Holdings; and


WHEREAS, Holdings and RSI have been members of an affiliated group of corporations of which SC is the common parent (the "SC Consolidated Group") and have joined in the filing of consolidated U.S. federal income tax returns of the SC Consolidated Group at all times from the dates of their respective formations and up to and including the Distribution Date; and


WHEREAS, Holdings and RSI have joined in the filing of certain consolidated, combined or unitary State and local tax returns with certain members of the SC Consolidated Group for certain taxable periods; and


WHEREAS, SPC, SC, Holdings and RSI wish to allocate among themselves the liabilities of the various corporations for taxes attributable to periods before and after the Distribution Date.


NOW, THEREFORE, it is agreed among the parties hereto as follows:


SECTION 1. Definitions. For purposes of this Agreement, the terms set forth
----------- below shall have the following meanings:


"Carryback Item" means any deduction, loss, credit or similar item that is
-------------- economically generated in one or more taxable years and is permitted, under the applicable provisions of law or regulation, to be carried back to a Taxable Period prior to the Taxable Period in which the item was economically generated and thereby to be utilized in computing taxable income or Tax payable for such earlier Taxable


Period.


"Code" means the Internal Revenue Code of 1986, as amended and modified
---- from time to time.


"Closing Balance Sheet" means the Audited Combined Balance Sheet of
--------------------- Holdings and its affiliates as of June 30, 1996, appearing in the final Form S-1 Registration Statement filed with the Securities and Exchange Commission.


"Return" means any return, statement, report or form relating to any Tax.
------


"Tax" means any net income, alternative or add-on minimum tax, gross
--- income, gross receipts, withholding, sales, use, ad valorem, value added, transfer, franchise, profits, license, payroll, employment, excise, severance, property, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (each, a "Taxing Authority") responsible for the imposition of any such tax, whether domestic or foreign.


"Tax Asset" means that portion of the deferred tax asset reflected on the
--------- Closing Balance Sheet which is attributable to the U.S. net operating loss carryforward of RSI.


"Taxable Period" means the calendar period, or portion thereof, with
-------------- respect to which any Tax is imposed by the relevant Taxing Authority.


SECTION 2. Representations and Warranties of SC and SPC. SC and SPC
-------------------------------------------- represent and warrant to Holdings and RSI as of the close of business on the Distribution Date that:


(i) Income Tax Returns Due Before Distribution Date Filed. All income Tax
-----------------------------------------------------
returns, statements, reports and forms (collectively, the "Income Tax
Returns") required to be filed with any Taxing Authority on or before
the close of business on the Distribution Date with respect to any
Taxable Period ending on or before the Distribution Date ("Pre-Closing
Tax Period") by, or with respect to, Holdings or RSI, have been filed
or will be filed on or before the Distribution Date in accordance with
all applicable laws;


(ii) Other Pre-Closing Income Tax Returns Will Be Filed. All other Income
--------------------------------------------------
Tax Returns required to be filed with respect to Holdings or RSI with
respect to any Pre-Closing Tax Period will be filed by SPC and SC when
due (taking into account any extension of a required filing date);


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(iii) Payment of Pre-Distribution Income Taxes. Holdings and RSI have timely
----------------------------------------
paid all Taxes shown as due and payable on the Income Tax Returns that
have been filed; and


(iv) Adequacy of Reserves for Pre-Distribution Income Taxes on Closing
-----------------------------------------------------------------
Balance Sheet. The charges, accruals and reserves for income Taxes with
-------------
respect to Holdings and RSI for any Pre-Closing Tax Period reflected in
the Closing Balance Sheet (excluding any provision for deferred income
taxes) are adequate to cover such income Taxes.


SECTION 3. Indemnity.
---------


(a) Indemnity by SC and SPC. SC and SPC agree to indemnify and hold
----------------------- harmless Holdings and RSI, on a net after-tax basis, against (1) the loss of a Tax Asset if such loss results from an adjustment to taxable income of RSI or Holdings for a Taxable Period ending on or before the Distribution Date (excluding any loss of a Tax Asset attributable to the SC Consolidated Group's use of RSI's net operating loss carryforward for the Taxable Period of the SC Consolidated Group that includes the Distribution Date and during which RSI is a member of the SC Consolidated Group, (2) any loss, damage, liability or expense, including reasonable fees for attorneys and other outside consultants, incurred in contesting or otherwise in connection with any Tax Asset or Tax referred to in clause (1) or (3) of this paragraph, and (3) the following Taxes (except to the extent current taxes on RSI's Closing Balance Sheet have been specifical ...