TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") dated March 30, 1998 by and
among MHE Investments, Inc. ("Parent") and Parent's subsidiaries MMH Holdings,
Inc. f/k/a/ Material Handling Equipment, Inc., Morris Material Handling, Inc.,
PHME Holding Company, SPH Crane & Hoist, Inc., Birmingham Crane & Hoist, Inc.,
PHME Services, Inc., Material Handling Equipment Nevada Corporation, MHE
Technologies, Inc., MPH Crane, Inc., Morris Mechanical Handling, Inc., NPH
Material Handling, Inc., (collectively referred to herein as "Subsidiaries" or
individually as "Subsidiary") and Material Handling LLC, MHE Canada ULC, Morris
Material Handling, LLC, 3014794 Nova Scotia ULC, Mondel ULC, Kaverit ULC,
Hydramach ULC, Morris Blooma Pte Ltd., P&H Middle East, Ltd., Harnishfeger
Distribution and Service LLC, HPH Material Handling, LLC, EPH Material Handling,
LLC, CMH Material Handling, LLC, Morris Material Handling Ltd., Red Crown ULC,
Lowfile Limited, Invercoe Engineering Limited, Butters Engineering Limited, MMH
(Holdings) Limited, Morris Mechanical Handling Limited, Linear Motors Limited,
UK Crane Services Limited, Vaughan Crane Company Limited, Royce Limited, MMH
International Limited, Morris Mechanical (Pty) Limited, Hercules S.A. de CV
(collectively referred to as the "Other Subsidiaries" and each, an "Other
Subsidiary") is effective for the taxable years of Parent and each Subsidiary
ending after March 30, 1998.
WHEREAS, Parent and the Subsidiaries are all members of an affiliated
group as that term is defined in Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), since March 30, 1998. Parent and the Subsidiaries
are collectively referred to herein as the "Affiliated Group."
WHEREAS, the Affiliated Group intends to exercise the privilege granted to
it by Section 1501 of the Code and the Treasury Regulations promulgated
thereunder (the "Treasury Regulations") to file consolidated Federal income tax
returns for taxable years ending after March 30, 1998.
WHEREAS, the Other Subsidiaries are foreign entities and entities that are
either disregarded or treated as partnerships for Federal income tax purposes;
WHEREAS, the parties hereto wish to allocate and settle among themselves,
in an equitable manner, their sharing of the consolidated Federal income tax
liability (and any unitary or combined tax liability under state or local law)
of the Affiliated Group for the taxable years ending after March 30, 1998;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, Parent, each Subsidiary and each
Other Subsidiary do hereby enter into this Agreement and do hereby agree as
follows:
1. Preparation of Consolidated Federal Income Tax Return (and Applicable
Unitary or Combined Tax Returns under State or Local Law)/Payment of Tax
Liability.
a. Each Subsidiary which is member of the Affiliated Group hereby
appoints Parent as its agent, so long as each such Subsidiary is a member of the
Affiliated Group, for purposes of filing consolidated Federal income tax returns
(and any applicable unitary or combined tax returns under state or local law)
and making any election or application or taking any action in connection
therewith on behalf of each such Subsidiary. Parent agrees to prepare or cause
to be prepared and to timely file annually on behalf of the Affiliated Group a
consolidated Federal income tax return (and any applicable unitary or combined
tax returns under state or local law) for all taxable years of the Affiliated
Group ending after March 30, 1998, until such time as it may be determined by
Parent that the best interests of the Affiliated Group are no longer served
thereby, subject to receiving the required consent of the Commissioner of
Internal Revenue to discontinue filing such a consolidated Federal income tax
return (and any applicable unitary or combined tax returns under state or local
law). Parent shall also timely pay or discharge, or cause to be timely paid or
discharged, the consolidated Federal income tax liability (and any applicable
unitary or combined tax liability under state or local law) of the Affiliated
Group for such taxable year.
b. Each Subsidiary which is a member of the Affiliated Group, and
each Other Subsidiary, shall cooperate with Parent in the filing, to the extent
permitted by law, of the Affiliated Group's consolidated Federal income tax
returns (and any applicable unitary or combined tax returns under state or local
law) by maintaining such books and records and providing such information as may
be necessary or useful in the filing of such returns and executing any documents
and taking any actions which Parent may reasonably request in connection
therewith.
2. Allocation of Consolidated Tax Liability for the Taxable Years Ending
After March 30, 1998.
a. Each Subsidiary shall compute its respective separate Federal
income tax liability (and any applicable state or local tax liability) (before
tax credits) as if it were filing its own Federal income tax return (or its own
state or local tax return) on a stand alone basis. The Federal income tax
liability (or state or local tax liability) referred to in the immediately
preceding sentence (i) shall include the alternative minimum tax (if
appropriate) and (ii) shall be determined without regard to the provisions set
forth in Section 1561 Code. The consolidated Federal income tax liability (and
any unitary or combined tax liability under state or local law) shall be
allocated among the Parent and the Subsidiaries in method similar to the
provisions of Sections 1552(b) and 1552(a)(1) of the Code. In general terms,
allowing for various adjustments pursuant to
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such sections, the method set forth in this paragraph 2 provides that the tax
liability for the Affiliated Group will be allocated among the Parent and the
Subsidiaries hereto in the ratio that each party's separate taxable income bears
to the sum of the separate taxable incomes of all parties having taxable income
for the taxable year. Each Subsidiary shall pay such tax liability to Parent in
the manner set forth in Section 4 below.
(b) Each Other Subsidiary shall compute its respective separate
Federal income tax liability (and any applicable state or local tax liability)
(before tax credits) as if it were filing its own Federal income tax return (or
its own state or local tax return) on a stand alone basis. The Federal income
tax liability (or state or local tax liability) referred to in the immediately
preceding sentence (i) shall include the alternative minimum tax (if applicable)
and (ii) shall be determined without regard to the provisions set forth in
Section 1561 Code. The consolidated Federal income tax liability of a particular
Subsidiary (and any applicable state or local tax liability of a Subsidiary)
shall be allocated among such Subsidiary and each Other Subsidiary whose income
and losses are required to be included in such Subsidiary's stand alone return,
in the manner set forth in Section 2(a) above. Each Other Subsidiary shall pay
its allocable portion of such tax liability, if any, to the Subsidiary required
to include such Other Subsidiary's income and losses in its stand alone return
as provided in Section 2(a) above.
3. Compensation for Tax Benefit Liability for Taxable Years Ending After
March 30, 1998.
a. In general terms, the method set forth herein provides that the
tax liability for the entire Affiliated Group be allocated among the Parent and
Subsidiaries hereto in proportion to the tax liability which each party would
have had if calculated separately from the group. If any such party's resulting
tax liability is reduced (the "Non-Generating Party") by using another party's
tax losses or other tax attributes (the "Generating Party"), the Non-Generating
Party shall pay its proportionate share of the tax savings to the Generating
Party as compensation for the use of its tax losses or other tax attributes at
such time as the Generating Party could have used such loss or other tax
attributes (e.g., in the year when the Generating Party has a positive tax
liability that could have been reduced if the benefit was still available). If a
determination is made that some other method of allocation of tax liability is
required by law, then such required allocation method shall be used in lieu of
the method described herein.
b. A Non-Generating Party agrees to reimburse a Generating Party as
required in this paragraph 3 within thirty (30) days after filing of the
consolidated Federal income tax return (or any unitary or combined return under
state or local law).
4. Time of Payment.
a. Estimated Tax Payments. On or about April 15, June 15, September
15, and December 15 of each taxable year, each Subsidiary shall pay to Parent
its portion of the consolidated Federal estimated tax (or any unitary or
combined
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estimated tax under state or local law) of the Affiliated Group. On or about
April 15, June 15, September 15 and December 15 of end taxable year each Other
Subsidiary shall pay to the Subsidiary required to include such Other
Subsidiary's income and loss on its stand alone return as provided in Section
2(b), its portion of the consolidated Federal income tax (or unitary or combined
tax under state or local law) of the Affiliated Group.
b. Year-end True-up. For each taxable year referred to in Section
4(a), each Subsidiary shall pay to Parent and each Other Subsidiary shall pay to
the Subsidiary required to include such Other Subsidiary's income and loss on
its stand alone return, an amount equal to the excess, if any, of such
Subsidiary's, or Other Subsidiary's, if applicable, separate Federal income tax
liability (or unitary or combined tax liability under state or local law), as
determined under paragraphs 2 or 3 herein, as the case may be, over the
aggregate amount of estimated tax paid by such Subsidiary or Other Subsidiary
pursuant to paragraph 4(a) herein. If the aggregate amount of payments actually
made by any Subsidiary or Other Subsidiary's pursuant to paragraph 4(a) exceeds
such Subsidiary's or Other Subsidiary's separate tax liability as determined
under paragraphs 2 or 3 herein, as the case may be, Parent shall pay to such
Subsidiary, or a Subsidiary shall pay to Other Subsidiary, an amount equal to
such excess. Payments to be made under this paragraph 4(b) shall be made no
later than the due date of the Affiliated Group's Federal income tax return (or
applicable unitary or combined tax return under state or local law) for the
relevant taxable year. If the due date for filing such return is extended, any
payments to be made at the time of filing a request for extension of time to
file shall be made on an estimated basis. No later than one (1) day prior to the
extended due date for such return, each Subsidiary's or Other Subsidiary's
payment shall be recalculated and any difference between the Federal tax
liability (or applicable state or local tax liability) of such Subsidiary or
Other Subsidiary and all of such Subsidiary's or Other Subsidiary prior payments
with respect to such taxable year shall be paid by the appropriate party to the
party entitled thereto by such day.
5. Redetermination of Tax Liability.
a. In the event of any redetermination of the consolidated Federal
income tax liability (or any unitary or combined tax liability under state or
local law) of the Affiliated Group for any taxable year covered by this
Agreement, including as a result of audit by the Internal Revenue Service (or
other appropriate authority), a claim for refund or otherwise, the Affiliated
Group's consolidated Federal tax liability (or any unitary or combined tax
liability under state or local law) shall be recomputed in the same manner as
set forth in paragraphs 2 or 3 herein, as the case may be, for such taxable year
and any subsequent taxable years to take into account such redetermination and
the payments pursuant to paragraph 4 herein shall be appropriately adjusted. Any
payment between Parent and any Subsidiary, or between any Subsidiary and any
Other Subsidiary, required by such adjustment shall be paid no later than thirty
(30) days after the date of a Final Determination (as defined below) with
respect to such redetermination, or as soon as such adjustment could practically
be calculated, if later. A Final Determination shall mean a closing agreement,
or other agreement finally settling a tax liability with the
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Internal Revenue Service, a claim for refund which has been allowed, a
deficiency notice with respect to which the period for filling a petition with
the Tax Court has expired, or a decision of any court of competent jurisdiction
that is not subject to appeal or as to which the time for appeal has expired.
b. In any suit, conference, or other preceding with the Internal
Revenue Service or in any judicial proceeding concerning the determination of
Federal income tax liabilities of the Affiliated Group, the relevant taxpayer(s)
shall be represented by persons selected by Parent. The settlement and terms of
settlement of any issues relating to such preceding shall be in the sole
discretion of Parent and each party hereto appoints Parent as its agent for the
purposes of proposing and concluding any such settlement.
c. Payments pursuant to paragraph 4 shall also be appropriately
adjusted as soon as practicable to take into account any changes to the
consolidated Federal income tax liability (or any unitary or combined tax
liability under state or local law) resulting from the filing of an amended
consolidated Federal income tax return (or amended unitary or combined tax
return under state or local law) for the Affiliated Group for any taxable year.
6. Interpretation. This Agreement is intended to allocate certain Federal
income tax liabilities (an any applicable state or local or foreign tax
liabilities) of the Affiliated Group, and any situation or circumstance
concerning such allocation that is not specifically contemplated hereby or
provided for herein shall be dealt with in a manner consistent with the
underlying principles of allocation in this Agreement.
7. Legal and Accounting Fees. Any fees or expenses for legal, accounting
or other professional services rendered in connection with (i) the preparation
of a consolidated Federal income tax return (or any applicable unitary or
combined income tax return under state or local law) for the Affiliated Group,
(ii) the application of the provisions of this Agreement or (iii) the conduct of
any audit, conference or preceding of the Internal Revenue Service or judicial
proceeding relevant to any determination required to be made hereunder shall be
allocated among the Parent and its Subsidiaries (and Other Subsidiaries) in a
manner resulting in each such Party bearing a reasonable approximation of the
actual amount of such fees or expenses hereunder reasonably related to, and for
the benefit of, such member, rather than to or for the benefit of other Parties.
8. Effect of the Agreement. This Agreement shall determine the liability
of Parent, the Subsidiaries and the Other Subsidiaries among themselves as to
matters provided for herein, whether or not such determination is effective for
purposes of the Code, financial reporting purposes or other purposes.
9. Entire Agreement. This Agreement embodies the entire understanding
among the parties relating to its subject matter and supersedes and terminates
all prior agreements and understandings among the parties with respect to such
subject matter; any
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and all prior correspondence, conversations and memoranda are merged herein and
shall be without effect hereon. This Agreement shall not be modified except by a
writing duly signed by each of the parties hereto, and no waiver of any
provisions of this Agreement shall be effective unless in writing duly signed by
the party sought to be bound.
10. Code References. Any references to the Code or Treasury Regulations
shall be deemed to refer to the relevant provisions of any successor statute or
regulation and shall refer to such provisions as in effect from time to time.
11. Term. As set forth above, this Agreement is effective for taxable
years ending after March 30, 1998, and shall continue in effect until
termination or canceled as hereinafter provided. If terminated or canceled, the
obligations and liabilities of the parties arising under this Agreement shall
nevertheless continue to apply in full force and effect to all taxable years
(and that part of any taxable year ending as of the date of cancellation or
termination) during which such party is or was a member of the group.
(a) This Agreement shall be terminated if -
(i) the parties agree in writing to a termination effective as of
the first day of any month by giving 30 days prior written notice of such
cancellation;
(ii) as to any member, membership in the group ceases or is
terminated for any reason whatsoever; or
(iii) Parent fails to file, on behalf of the Affiliated Group, a
consolidated Federal income tax return (or any applicable unitary or
combined return under state or local law) for any taxable year.
(b) Upon termination or cancellation of this Agreement, the parties will
make appropriate arrangements to compensate either Parent, any Subsidiary or any
Other Subsidiary, as the case may be, for tax incidents generated by such entity
and utilized by the Affiliated Group in the consolidated Federal income tax
return (or any applicable unitary or combined tax return under state or local
law) if under this Agreement the entity generating the tax incidents had not
previously been compensated for such tax benefit.
12. Assignment or Transfer. This agreement shall not be assignable or
transferable by any party hereto without the prior written consent of the other
parties.
13. Binding Effect; Governing Law; Successors. This Agreement shall be
binding upon the parties that are signatories hereto and those subsidiaries that
become parties hereto pursuant to paragraph 12. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware. This
Agreement shall inure to the benefit of and be binding upon any successors or
permitted assigns of parties hereto.
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PARENT
By: /s/ Michael S. Shein
--------------------------------
MHE Investments, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH Holdings, Inc. f/k/a Material
Handling Equipment, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling, Inc.
SUBSIDIARY
By: /s/ John P. Garniewski
--------------------------------
PHMH Holding Company
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
SPH Crane and Hoist, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Birmingham Crane & Hoist, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
PHME Service, Inc.
SUBSIDIARY
By: /s/ Patrick Dorn
--------------------------------
Material Handling Equipment Nevada
Corporation
SUBSIDIARY
By: /s/ John P. Garniewski
--------------------------------
MHE Technologies, Inc.
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SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MPH Crane, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical Handling, Inc.
SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
NPH Material Handling, Inc.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MHE Canada ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
3016117 Nova Scotia ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Mondel ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Kaverit Steel and Crane ULC
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OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Hydramach ULC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Blooma Pte Ltd.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
P&H Middle East, Ltd.
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Harnishfeger Distribution and
Service, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
HPH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
EPH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
CMH Material Handling, LLC
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Material Handling Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Red Crown, ULC
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OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Lowfile Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Invercoe Engineering Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Butters Engineering Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH (Holdings) Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical Handling Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Linear Motors Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
UK Crane Services Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
Vaughan Crane Company Limited
OTHER SUBSIDIARY
By: /s/ Steve Davis
--------------------------------
Royce Limited
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OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
MMH International Limited
OTHER SUBSIDIARY
By: /s/ David D. Smith
--------------------------------
Morris Mechanical (Pty) Limited
OTHER SUBSIDIARY
By: /s/ Michael S. Erwin
--------------------------------
Hercules S.A. de C.V.
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