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Exhibit 10.4
TAX PAYMENT AGREEMENT
WHEREAS, NES Group, Inc. (Shareholder) is the sole Shareholder of
Continental Global Group, Inc. (Global) and Global is the sole Shareholder of
Continental Conveyor & Equipment Company (CC&E) and Xxxxxxx Conveyor Company
(Xxxxxxx); Global, CC&E and Xxxxxxx (collectively the Subsidiaries, each
individually - Subsidiary); each of the foregoing parties hereto; and
WHEREAS, the Subsidiaries have elected to be treated as "S"
Corporations for U.S. Federal Income Tax purposes; and
WHEREAS, the taxable income of the Subsidiaries will be included in the
income of Shareholder for federal income tax purpose, and the tax thereon is
payable by the shareholder of NES Group, Inc., and similar consequences may
result for state or local tax purposes as well;
NOW, THEREFORE, in consideration of the mutual promises herein
exchanged and for other good and valuable consideration, the receipt and
sufficiency of which is mutually acknowledged, the parties agree that the
Subsidiaries shall each make estimated tax payments to Shareholder as set forth
herein based on their respective earnings.
1. Within fifteen (15) days after the end of each month each
Subsidiary shall make distributions to Shareholder relating to the federal,
state, local and foreign income taxes relating to Subsidiary's operations in an
amount which is equal to the Stand-Alone Taxes for such month and the accrued
and unreimbursed Reimbursements, as described in Paragraph 3 below, provided
that:
a) Subsidiary will be, during the entire taxable period to
which the distribution relates, an S corporation for federal income tax
purposes;
b) if the distributions made with respect to a calendar
year exceed the actual taxes for such calendar year (or as subsequently
adjusted by taxpayer and the taxing authority), the excess will be
returned to Subsidiary not later than 45 days after the taxpayer has
received the refund;
c) Distributions shall be made by each Subsidiary
with respect to state or local income taxes in a manner similar to
federal income tax, but only if (i) there is state or local income tax
rules providing for pass-through treatment, which is similar to the
treatment under the Subchapter S rules of the Internal Revenue Code of
1986, and (ii) the Subsidiary is qualified for such treatment for the
entire taxable period.
2. Distributions which comply with the requirements of 1. above
shall be made in one or more installments, including without limitation catch-up
installments at or after the end of a month or tax year, installments after
adjustments made by the Internal Revenue Service and installments made for
Reimbursements.
3. Definitions:
a) "Reimbursements" means an amount equal to the sum of
interest and penalties imposed on the Subsidiary's Shareholder as a result of
an incorrect calculation by such Subsidiary of the amount distributed to such
shareholder by the Subsidiary, adjustments made by the IRS relating to the
Subsidiary, late tax distributions made by the
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Subsidiary to such Shareholder. Notwithstanding the foregoing, Reimbursements
shall not include any amount described in the preceding sentence to the extent
such amount is as a result of, or directly attributable to, an action or
inaction taken by the Subsidiary's shareholder.
b) "Stand-Alone Tax" means an amount (which shall never be less
than zero) computed as of the end of any month for the total U.S. federal,
state, local and foreign (but only to the extent that foreign taxes are imposed
on the Subsidiary's income, but paid or payable by its shareholder to the
foreign jurisdiction imposing such taxes on behalf of the subsidiary) income
taxes (a) for which Subsidiary's Shareholders would be liable if their income
was only from the items of income, gain, loss, deduction or credit arising out
of Subsidiary's business and operations for the period beginning on the first
day of such month and ending on the last day of such month, determined on an
annualized basis, or (b) one twelfth (1/12) of the tax liability expected to be
reported for the year, whichever is greater. The tax rates applied to such
income are to be based on the maximum individual, U.S. federal, state, local
and foreign income tax rates imposed by Section 1 of the Internal Revenue Code
of 1986, as amended and as it may be amended, and by the equivalent provisions
of the state, local and foreign (but only to the extent that foreign taxes are
imposed on the Subsidiary's income, but paid or payable by its Shareholder to
the foreign jurisdiction imposing such taxes on behalf of the subsidiary)
income taxes (based on the assumption that all tax payments are subject to
state and local income tax at the domiciliary of the Shareholders in Ohio and
no other state or municipality). All of the preceding shall be computed
without regard to phase-in and phase-out rules for minimum tax and alternative
minimum tax, interest and penalties, but shall include any surtax, and shall
reflect the benefits of the deducibility of state and local income taxes and
allowable tax credits in effect for each of the respective taxable periods.
These tax payments will not recognize any future carry forward or carry back
tax benefits to Continental Global Group, Continental Conveyor & Equipment
Company and Xxxxxxx Conveyor Company.
c) For the purposes of this Agreement the term "subsidiary" shall
mean all present and future direct and indirect subsidiaries of Continental
Global Group, Inc.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed effective as of the 1st day of April, 1997.
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NES GROUP, INC. CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
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Its: President Its: Vice President
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CONTINENTAL CONVEYOR & XXXXXXX CONVEYOR COMPANY
EQUIPMENT COMPANY
By: /s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxxxxxx X. Xxxxxxxx
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Its: Vice President Its: Vice President
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