Exhibit 10.38
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (this "Agreement") dated as of February 1,
2004
between GP Strategies Corporation, a
Delaware corporation ("GP Strategies"), and
Five Star Products, Inc., a Delaware
corporation, ("Five Star").
WHEREAS, GP Strategies anticipates that it may increase its
ownership
to at least 80% of Five Star's outstanding
stock and, in such case, Five Star
would become, for federal income tax
purposes, part of the affiliated group of
which GP Strategies is the common parent
and GP Strategies and Five Star and
their respective subsidiaries would join in
the filing of a consolidated federal
income tax return for a group of affiliated
companies of which GP Strategies is
the common parent and Five Star is a member
(the "GP Strategies Consolidated
Group"); and
WHEREAS, GP Strategies and Five Star wish to provide for the
payment of
tax liabilities and entitlement to refunds,
allocate responsibility and provide
for cooperation in the filing of tax
returns, provide for the realization and
payment of tax benefits arising out of
adjustments to the tax returns of the
parties, and to provide for certain other
matters;
NOW, THEREFORE, in consideration of the mutual covenants
contained
herein and intending to be legally bound,
GP Strategies and Five Star agree as
follows:
1. Definitions.
For purposes of this Agreement:
(a) "Taxes" means all federal, state, local, foreign and other
net income, gross income, gross receipts,
sales, use, ad valorem, transfer,
franchise, profits, license, lease,
service, service use, withholding, payroll,
employment, excise, severance, stamp,
occupation, premium, property (including,
without limitation, real property Taxes and
any assessments, special or
otherwise), windfall profits, customs,
duties or other Taxes, fees, assessments
or charges of any kind whatever, together
with any interest and penalties,
additions to tax or additional amounts with
respect thereto (and "Tax" means any
one of the foregoing Taxes).
(b) "Returns" means all returns, declarations, reports,
statements and other documents required
under a Tax Law (as hereinafter defined)
either (i) to be filed with a Governmental
Authority (as hereinafter defined) in
respect of Taxes; or (ii) to be provided to
a person other than a Governmental
Authority (and "Return" means any one of
the foregoing Returns).
(c) "Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code, or to
the Treasury Regulations promulgated
thereunder, shall include any amendments or
any substitute or successor
provisions thereto.
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(d) "Section" means a section of this Agreement, unless
indicated otherwise.
(e) "Governmental Authority" means the government of the
United States or any foreign country or any
state, province, municipality or
other political subdivision of the United
States or any foreign country, or any
agency, department, board, instrumentality,
authority or commission (including
regulatory and administrative bodies) of
any of the foregoing.
(f) "Tax Law" means a statute, regulation or administrative
rule enacted or promulgated for the
determination, imposition, assessment or
collection of any Tax.
(g) "Common Consolidated Tax Return" shall mean any
consolidated, combined or unitary Return
that includes at least one member of
the GP Strategies Consolidated Group (other
than Five Star or any of its
subsidiaries) and Five Star or any of its
subsidiaries.
(h) "Tax Attribute" shall mean any net operating loss, capital
loss, credit or other tax attribute (other
than the basis of property) relevant
to the calculation of a tax liability.
(i) "Applicable Federal Rate" shall have the meaning set forth
in Section 1274(d) of the Code for a short
term rate, compounded quarterly.
(j) "Accounting Firm" means (i) the nationally recognized
accounting firm that is the principal
independent auditor of both GP Strategies
and Five Star at the time of a dispute
governed by Section 7 hereof; or (ii) if
the firm described in clause (i) is
unwilling or unable to serve under Section
7, the nationally recognized accounting
firm appointed by the firm described in
clause (i); or (iii) if GP Strategies and
Five Star do not use the same
accounting firm as their principal
independent auditor, then the nationally
recognized accounting firm jointly selected
by the principal independent
auditors of GP Strategies and Five Star at
the time of a dispute governed by
Section 7 hereof.
(k) "Disaffiliation" means any event that results in Five Star
no longer being a member of the GP
Strategies Consolidated Group.
(l) "Disaffiliation Date" means the date on which
Disaffiliation occurs.
(m) "Affiliation" means that GP Strategies has become the
owner of at least 80% of the outstanding
Five Star stock and Five Star has
become a member of the GP Strategies
Consolidated Group.
(n) "Affiliation Date" means the first day on which Five Star
is a member of the GP Strategies
Consolidated Group for federal income tax
purposes.
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2. Returns and Payments.
(a) Filing of Returns.
(i) GP Strategies shall prepare and shall timely file or
cause to be timely filed (1) all Returns
filed on a separate company basis for
any member of the GP Strategies
Consolidated Group other than Five Star or any
of its subsidiaries, (2) all Returns filed
on a consolidated, combined or
unitary basis that include members of the
GP Strategies Consolidated Group
(other than Five Star or any of its
subsidiaries) that is not a Common
Consolidated Tax Return, and (3) all Common
Consolidated Tax Returns. Subject to
Section 2(c), GP Strategies shall make full
and timely payment of all Taxes
shown due on all Returns described in this
Section 2(a)(i).
(ii) Five Star shall prepare, at its own expense, and shall
timely file or cause to be timely filed (1)
all Returns filed on a separate
company basis for Five Star or any of its
subsidiaries, (2) all Returns filed on
a consolidated, combined or unitary basis
that include Five Star or any of its
subsidiaries other than any Common
Consolidated Tax Return, and (3) all Returns
with respect to Five Star or any of its
subsidiaries for any taxable year or
other taxable period beginning after the
Disaffiliation Date. Five Star shall
make full and timely payment of all Taxes
shown due on all Returns described in
this Section 2(a)(ii).
(iii) To the extent required or permitted by law or
administrative practice, in the case of any
Common Consolidated Tax Return that
includes the Disaffiliation Date, the
taxable year of Five Star and its
subsidiaries shall be treated as closing at
the close of the Disaffiliation
Date.
(b)
Obligation to Remit Taxes. Five Star and GP Strategies
shall each timely remit or cause to be
remitted any Taxes due in respect of any
Tax for which it is required to file a
Return hereunder and shall be entitled to
reimbursement for such payments only to the
extent provided in Section 2(c).
(c) Tax Sharing Obligations.
(i) Five Star's Obligations. Other than liabilities dealt
with elsewhere in this Agreement, Five Star
shall be liable for and shall
indemnify and hold GP Strategies and its
subsidiaries (other than Five Star and
its subsidiaries) harmless against any Tax
liability of Five Star or any of its
subsidiaries, including the portion of any
Tax liability resulting from the
inclusion of Five Star or any of its
subsidiaries in a Common Consolidated Tax
Return as determined under Section
2(c)(iii).
(ii) GP Strategies' Obligations. Other than liabilities
dealt with elsewhere in
