EXHIBIT 10.5
TAX SHARING AND ADMINISTRATIVE SERVICES
AGREEMENT
This TAX SHARING AND ADMINISTRATIVE
SERVICES AGREEMENT (this “ Agreement ”) is
entered into as of this 15th day of March, 2004, by and among True
Temper Corporation, a Delaware corporation (“ TTC
”), True Temper Sports, Inc., a Delaware corporation (“
TTSI ”), El Cajon Equipment Corporation, a Delaware
corporation (“ EEC ”), and True Temper Sports,
PRC Holdings, Inc., a Delaware corporation (“ TTSPRC
”).
WHEREAS, each of TTSI, EEC, and
TTSSPRC are direct or indirect subsidiaries of TTC (each a “
Subsidiary ” and collectively, the “
Subsidiaries ”).
WHEREAS, TTC desires to provide to
its Subsidiaries certain administrative services from time to time,
as provided herein;
WHEREAS, TTC and the Subsidiaries
are members of an affiliated group of corporations as defined in
Section 1504(a) of the Internal Revenue Code of 1986, as
amended (the “ Code ”), of which TTC is the
common parent; and
WHEREAS, the parties desire to agree
upon an equitable method for determining the financial consequences
to TTC and the Subsidiaries of the filing of consolidated Federal
income tax returns by the TTC and the Subsidiaries.
NOW, THEREFORE, in consideration of
the foregoing promises and mutual covenants contained herein, the
parties agree as follows:
1.
DEFINITIONS
(a)
Terms used, but not defined in this
Agreement shall have the meanings ascribed to them in the Code, and
the regulations and rulings issued thereunder, as from time to time
in effect. Concepts referred to in this Agreement shall be
interpreted in view of the provisions of the Code and the
regulations and rulings thereunder then in effect.
(b)
For purposes of this Agreement, the
terms set forth below shall be defined as follows:
(i)
“ Group ” means
Parent (as defined below) and all corporations (whether now
existing or hereafter formed or acquired) that at the time would be
entitled or required to join with Parent in filing a consolidated
Federal income tax return.
(ii)
“ Member ” means
any corporate entity entitled to be included in the
Group.
(iii)
“ Member Tax Liability
” “ means the hypothetical Federal income tax liability
of a Member for a taxable year determined as if such Member had
filed its own separate Federal income tax return for such taxable
year and all prior taxable years ending after the date hereof,
except that the Member shall be treated as having
available
as loss or credit carryovers for
purposes of computing the Member’s Tax Liability all losses
or credits previously generated by it in taxable years ending after
the date hereof and utilized by other Members, except to the extent
such losses or credits were previously taken into account in
computing the Member’s Member Tax Liability or Member Tax
Refund. Such hypothetical Federal income tax liability shall
be determined at the end of the taxable year and shall reflect any
tax elections, conventions, treatments or methods which are
actually utilized by the Group in filing its consolidated Federal
income tax return. Such hypothetical Federal income tax
liability shall not be less than zero.
(iv)
“ Member Estimated Tax
Liability ” means the hypothetical estimated Federal
income tax liability for a Member determined in accordance with the
principles of Section (b)(iii) , above.
(v)
“ Member Tax Refund
” means the hypothetical Federal income tax refund for any
taxable year to which a Member would be entitled determined in
accordance with the principles of Section (b)(iii) ,
above.
(vi)
“ Parent ” means
TTC, or any successor or common parent corporation of the
Group.
(vii)
“ Subsidiary Member
” means a Member other than the Parent.
2.
ADMINISTRATIVE
SERVICES
Subject to the terms and conditions
described herein, Parent shall furnish to the Subsidiary Members
tax preparation, accounting and such other administrative services
as the parties may mutually determine from time to time (the
“ Services ”). Parent will provide the
Services with substantially the same degree of care and diligence,
and using substantially the same procedures and policies, it uses
in providing such services for its own operations. Parent
may, at any time, delegate any or all of the Services to a third
party; provided, however, that such delegation shall not diminish
any of the Parent’s obligations hereunder.
3.
ALLOCATIONS OF CONSOLIDATED
FEDERAL INCOME TAX LIABILITY
(a)
Filing by Parent
Parent shall file consolidated
Federal income tax returns for each taxable year ending after the
date hereof; provided, however, that Parent will prepare all such
tax returns in accordance with Section 2 .
(b)
Payment of Tax
Liability
For each taxable year ending after
(and excluding) the date hereof during which a Subsidiary Member is
included in a consolidated Federal income tax return with Parent,
such Subsidiary Member will pay to Parent an amount equal to its
Member Tax Liability. To the extent that the obligation to
pay such amount has not been fully satisfied pursuant to
Section 3(c) of this Agreement, such Subsidiary Member
shall pay any such remaining amount to Parent on
2
the last date on which Parent is required to
make its final paymen
