Tax Allocation And Indemnity Agreement

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 ...