TAX SHARING AGREEMENT
This Tax Sharing Agreement, effective as of June 23, 1997, by and among
Roller Bearing Holding Company, Inc., a Delaware corporation ("Parent"), and
Roller Bearing Company of America, Inc., a Delaware corporation, Industrial
Tectonics Bearings Corporation, a Delaware corporation, RBC Linear Precision
Products, Inc. , a Delaware corporation, and RBC Nice Bearings, Inc., a Delaware
corporation (hereinafter referred to collectively as "Subsidiaries"):
WITNESSETH:
WHEREAS, the parties (each of which is hereinafter sometimes referred to
as a "Member" or, in the plural, as "Members") hereto are members of an
affiliated group of corporations ("Affiliated Group") as defined by Section
1504(a) of the Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, it is the intent and desire of the parties hereto that a method
be established for allocating the "consolidated tax liability" (as determined
under Treasury Regulation ss. 1.1502-2), as well as the aggregate Income Tax (as
hereinafter defined) liability of any combined, consolidated or unitary group of
Members which may be due under the provisions of applicable state, local or
foreign tax law, of the Affiliated Group among the appropriate Members; for
reimbursing the Parent for payment of any tax liabilities of the Affiliated
Group and its Members; and to provide for the allocation and payment of any
refund arising from a carryback of net operating losses or tax credits from
subsequent taxable years.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. A consolidated federal income tax return shall be filed by Parent for
the taxable year ended March 31, 1997, and for each subsequent taxable year 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. The
Parent and each Subsidiary shall execute and file such consents, elections, and
other documents that may be required or appropriate for the proper filing of
such returns.
2. (a) A combined, consolidated or unitary Income Tax return shall be
filed by Parent or such Member as may be appropriate for any taxable year for
which any two or more Members of the Affiliated Group are required or permitted
to file
such a combined, consolidated or unitary Income Tax return. The appropriate
Members shall execute and file such consents, elections, and other documents as
may be required or appropriate for the proper filing of such returns.
(b) The term "Income Tax" means any state, local or foreign tax imposed
upon, measured by, or determined by reference to, or one of the bases of which
is, gross or net income, gross or net receipts, or analogous concepts.
3. (a) For purposes of computing each Member's earnings and profits for
tax purposes, the consolidated federal income tax liability of such Affiliated
Group shall be apportioned among the Members in accordance with the method set
forth in Section 1552(a)(1), Treasury Regulation ss. 1.1552-1(a)(1), and
Treasury Regulation ss. 1.1502-33(d)(2)(ii).
(b) Notwithstanding paragraph (a), for purposes of determining the
amount of a Member's payments to Parent under paragraph 5 hereof, each Member's
federal income tax liability for a taxable period shall be the amount which
would be due and payable by such Member if it had filed a separate federal
income tax return for such taxable period. For this purpose, such tax liability
shall be determined by taking into account any net operating loss or capital
loss carryforward of such Member.
(c) For all purposes hereunder, the tax liability shown on any
combined, consolidated or unitary Income Tax return shall be apportioned between
or among the appropriate Members in a similar manner as Federal income tax
liability is apportioned pursuant to this agreement, or if such apportionment is
not possible then in accordance with the provisions of applicable law, if any,
and otherwise in the ratio that the amount of each Member's separate, positive
taxable income (or other base upon which taxation is imposed) bears to the sum
of the separate, positive taxable income (or other base) amounts of all
appropriate Members.
4. The provisions of this Agreement shall be administered by Parent for
the benefit of all the Members.
5. (a) Subject to clause (b) below, for each taxable period during which
income, loss, or credit against tax of any Member is includible in the United
States consolidated federal income tax return of the Affiliated Group, each
Member (other than the Parent) shall pay to Parent an amount equal to its
consolidated federal income tax liability and any state, local or foreign income
tax liability relating to a combined, consolidated, or unitary group, in each
case as determined under paragraph 3(b) of this Agreement. Such payment is due
and payable no later than ten days after delivery of notice of such
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amounts. The actual amount of tax required to be paid by such Member pursuant to
the preceding sentence is hereinafter referred to as the "Member Payment."
(b) If the sum of the Member Payments made or to be made for a given
taxable year exceeds the consolidated federal tax liability of the Affiliated
Group for such taxable year (the "Excess Amount"), the Parent shall make a
payment to the Members or the Members shall reduce their payments to Parent, as
applicable, pursuant to this Section 5, in an amount equal to the product of (1)
such Member's net operating loss, capital loss or capital loss carryforward, as
applicable (each, a "Loss") or credit against tax (a "Credit"), used to offset
the income of any other Member for such taxable year multiplied by (2) the
highest rate of Federal income tax applicable to corporations, provided that the
aggregate of such payments or reduction of payments shall not exceed the Excess
Amount. In determining whether the Loss or Credit of such Member was used by the
Affiliated Group to offset the income of any other Member, with respect to a
Loss, the provisions of Treasury Regulation ss. 1.1502-21T shall apply and, with
respect to a Credit, Treasury Regulation ss. 1.1502-3 shall apply, in each case,
until such regulation is superseded or finalized at which time such superseding
or finalized regulations shall apply.
6. Parent shall have the right to assess Members their shares of any
estimated tax payments to be made with respect to the projected consolidated
federal income tax liability and any combined, consolidated, or unitary group
state, local or foreign Income Tax liability, for each year. Payment to Parent
shall be due and payable no later than ten days after such assessment. Each
Member will receive appropriate credit for such estimated tax payments in the
year-end computation under this Agreement.
7. If the consolidated federal income tax liability, or the Income Tax
liability of any combined, consolidated, or unitary group, is adjusted for any
taxable period, whether by means of an amended return, claim for refund, audit
by the Internal Revenue Service ("IRS") or other taxing authority, or by a final
judgment by a court of competent jurisdiction or other governmental authority,
the liability of each Member shall be recomputed under paragraphs 1, 2 and 3 of
this Agreement to give effect to such adjustments. In the case of a refund,
Parent shall make payment to each appropriate Member for its share of the
refund, determined in the same manner as in paragraph 5 of this Agreement,
within ten days after the refund is received by Parent, and in the case of an
increase in tax liability, each Member shall pay to Parent its allocable share
of such increased tax liability within ten days after receiving notice of such
liability from Parent. If any interest is to be paid or received as a result of
an income tax deficiency or refund described in
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this section, such interest shall be allocated among the Members in the ratio
which each Member's change in consolidated federal income tax liability (or the
appropriate combined, consolidated or unitary Income Tax liability) bears to the
total change in consolidated federal income tax liability (or the appropriate
combined, consolidated or unitary Income Tax liability). Any penalty shall be
allocated upon such basis as Parent deems just and proper in view of all
applicable circumstances.
8. This Agreement shall apply to the taxable year ending March 31, 1997,
and all subsequent taxable years, unless all of the Members agree in writing to
terminate the Agreement. Notwithstanding any termination, this Agreement shall
continue in effect with respect to any payment or refunds due for all taxable
periods prior to termination.
9. Parent will have the responsibility for conducting all IRS examinations
for the Affiliated Group, and all audits, inquiries or other proceedings by a
governmental authority involving any combined, consolidated or unitary group
Income Tax returns. All expenses of the examination and of defending any
adjustments or proposed adjustments which are directly identifiable with a
Member shall be billed to such Member. In addition, all costs and expenses not
directly identifiable with any Member will be allocated by Parent in an
equitable manner. Each Member agrees that any adjustment to its taxable income
or loss arising out of an examination of Parent by the IRS or another taxing
authority will be computed on the basis of agreements reached by Parent and the
IRS or such taxing authority, or on the basis of a decision of the Tax Court or
other courts of competent jurisdiction, where applicable. The redetermined tax
liability resulting from such adjustment shall be allocated pursuant to
paragraphs 3 and 7 of this Agreement.
10. Any Member which leaves the Affiliated Group shall be bound by this
Agreement for all taxable periods, or portions thereof, during which such Member
was a Member of the Affiliated Group.
11. The Members hereto specifically recognize that from time to time other
corporations may become Members of the Affiliated Group and hereby agree that
such new Members may become parties to this Agreement by executing the master
copy of this Agreement which shall be maintained at Parent's headquarters.
12. Any alteration, modification, addition, deletion, or other change in
the consolidated income tax return provisions of the Code or the regulations
thereunder, or to the provisions of any state, local or foreign Income Tax law
relating to combined, consolidated or unitary groups, shall automatically be
applicable
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to this Agreement.
13. Failure of one or more parties hereto to qualify by meeting the
definition of a Member of the "Affiliated Group" shall not operate to terminate
this Agreement with respect to the other parties as long as two or more parties
hereto continue so to qualify.
14. This Agreement cancels and supersedes any and all previously existing
agreements relating to the sharing of any federal, state, local or foreign
income tax liabilities among any and all of the Members of the Affiliated Group.
15. This Agreement shall bind and inure to the respective successors and
assigns of the parties hereto.
16. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
ROLLER BEARING HOLDING COMPANY, INC.
By:
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ROLLER BEARING COMPANY OF AMERICA, INC.
By:
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INDUSTRIAL TECTONICS BEARINGS
CORPORATION
By:
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RBC LINEAR PRECISION PRODUCTS, INC.
By:
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RBC NICE BEARINGS, INC.
By:
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