Exhibit 10.1

 

TAX SHARING AGREEMENT

 

THIS AGREEMENT (this “Agreement”) made and entered into as of May 13, 2004, by
and among PP Holding Corporation II, a Delaware corporation (“PHC II”),
PP Holding Corporation, a Delaware corporation and direct wholly owned
subsidiary of PHC II (“PHC”), Polypore, Inc., a Delaware corporation and direct
wholly owned subsidiary of PHC (“Polypore”), and such direct and indirect
subsidiaries of PHC II that are listed on Exhibit A hereto from time to time
(collectively with PHC and Polypore, the “Subsidiaries” and each individually, a
“Subsidiary”).

 

WITNESSETH:

 

WHEREAS, PHC II and each of the Subsidiaries qualifies as an “includible
corporation” within the meaning of Section 1504(b) of the Internal Revenue Code
of 1986, as amended (the “Code”);

 

WHEREAS, the affiliated group of corporations, consisting of PHC II, as the
common parent, and each of the Subsidiaries (the “Polypore Group”), qualifies as
an “affiliated group” within the meaning of Section 1504(a) of the Code; and

 

WHEREAS, the Polypore Group desires to take advantage of the tax savings that
may result from the filing of U.S. federal income tax returns on a consolidated
basis, in accordance with Sections 1501 et seq. of the Code and the Treasury
Regulations promulgated thereunder.

 

NOW, THEREFORE, in consideration of the covenants, agreements, terms and
conditions contained herein, and for other good, valid and binding
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

 

SECTION 1.  Defined Terms.  As used in this Agreement, the following terms shall
have the following meanings.

 

“Code” shall have the meaning set forth in the recitals of this Agreement.

 

“Fiscal Year” shall mean the annual accounting period of PHC II and any other
Member.

 

“Interim Payments” shall have the meaning set forth in Section 3(b) of this
Agreement.

 

“Member” shall mean a member (as defined in Treasury Regulations Section
1.1502-1(b)) of the Polypore Group.

 

“PHC” shall have the meaning set forth in the heading of this Agreement.

 

“PHC II” shall have the meaning set forth in the heading of this Agreement.

 

“Polypore” shall have the meaning set forth in the heading of this Agreement.

 

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“Polypore Group” shall have the meaning set forth in the recitals of this
Agreement.

 

“Separate Return Liability” shall mean, with respect to any Subsidiary for any
Fiscal Year, the U.S. federal income taxes (including any minimum tax or
alternative minimum tax) that would be payable by such Subsidiary to the U.S.
Treasury had the Subsidiary filed a separate income tax return for that Fiscal
Year based on the Subsidiary’s Separate Taxable Income for that Fiscal Year.

 

“Separate Taxable Income” shall mean, with respect to any Subsidiary for any
Fiscal Year, the income, gains, losses, deductions and credits of such
Subsidiary for that Fiscal Year calculated as follows:  (i) any dividends
received by one Member from another Member will be assumed to qualify for the
100% dividends received deduction of Section 243 of the Code or shall otherwise
be eliminated from such calculation; (ii) gain or loss on intercompany
transactions, whether or not deferred, shall be treated by each Member in the
manner required by Treasury Regulations Section 1.1502-13; (iii) limitations on
the calculation of a deduction or the utilization of tax credits or the
calculation of a tax liability shall be made on a consolidated basis; (iv) net
operating losses and credits of a Subsidiary shall be treated as available to
such Subsidiary in determining such Subsidiary’s Separate Taxable Income, and
shall not be reduced even if such net operating losses or credits are used in
determining the consolidated taxable income of the Polypore Group, instead, such
net operating losses and credits shall be reduced only if, when and to the
extent used in determining the Separate Taxable Income of the Subsidiary; and
(v) elections relating to tax credits and tax computations that differ from the
consolidated treatment if separate returns were filed shall be made on an annual
basis by PHC II.

 

“Subsidiary” and “Subsidiaries” shall have the meanings set forth in the heading
of this Agreement.

 

SECTION 2.  Consent to Filing of Consolidated Return.

 

(a)           PHC II shall file a consolidated U.S. federal income tax return,
and pay to the U.S. Treasury any taxes due thereon, on behalf of the Polypore
Group for the taxable year ending December 31, 2004, and for each subsequent
taxable period for which this Agreement is in effect and for which the Polypore
Group is required or permitted to file a consolidated tax return; provided, that
PHC II shall not be liable for any taxes attributable to a Subsidiary if such
Subsidiary has not complied with its tax payment requirements as set forth in
Section 3 hereof.  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.

 

(b)           Each corporation that, subsequent to the date of this Agreement,
becomes a Member shall be added to the list of Subsidiaries contained in Exhibit
A hereto.  Polypore (or the applicable Member that is the direct parent
corporation of such Subsidiary) shall cause each of the Subsidiaries listed on
Exhibit A hereto, as amended from time to time, to become a party hereto by
executing this Agreement in counterpart.

 

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SECTION 3.  Tax Payments.

 

(a)           Each Subsidiary shall make payments to PHC II with respect to each
Fiscal Year equal to its respective Separate Return Liability for such Fiscal
Year.  Such payments shall be made in the manner set forth in paragraphs (b) and
(c) below.

 

(b)           From time to time during the Fiscal Year each Subsidiary shall
make interim payments (“Interim Payments”) to PHC II with respect to its
Separate Return Liability (i) pursuant to the schedule set forth in Section
6655(c) of the Code and (ii) calculated under the principles Section 6655(d) of
the Code.  Interim Payments shall be made no later than 5 calendar days prior to
the due date of the relevant estimated tax payment.

 

(c)           If a Subsidiary’s Separate Return Liability for a particular
Fiscal Year is greater than its aggregate Interim Payments with respect to such
Fiscal Year, then such Subsidiary shall pay to PHC II the excess of its Separate
Return Liability over its aggregate Interim Payments at least five calendar days
before PHC II files the Polypore Group’s consolidated U.S. federal income tax
return in respect of such Fiscal Year.  If a Subsidiary’s aggregate Interim
Payments for a particular Fiscal Year exceed its Separate Return Liability with
respect to such Fiscal Year, such excess shall be allowed as a credit to the
Subsidiary in respect of the Interim Payment next due from that Subsidiary to
PHC II.

 

SECTION 4.  Adjustments to the Separate Return Liability.

 

(a)           If for any Fiscal Year the Internal Revenue Service makes an
upward adjust to, or PHC II files an amended return resulting in an upward
adjustment of, the Polypore Group’s consolidated U.S. federal income tax
liability with respect to such Fiscal Year, then each Subsidiary shall pay to
PHC II an amount equal to the excess of the Separate Return Liability for such
Fiscal Year, as adjusted, over the Separate Return Liability for such Fiscal
Year paid to date.  In the event of a downward adjustment, the excess of a
Subsidiary’s Separate Return Liability for such Fiscal Year paid to date over
its Separate Return Liability, as adjusted, shall be allowed as a credit to the
Subsidiary in respect of the Interim Payment next due from that Subsidiary to
PHC II under Section 3 of this Agreement.

 

(b)           The payments required under this Section 4 shall be made promptly
after a “determination” (as defined in Section 1313(a) of the Code) in respect
of the amount at issue; provided, however, that payments in the case of the
filing of an amended return shall be made promptly upon such filing.

 

SECTION 5.  Interest Payments.  Interest will be paid pursuant to this Agreement
only with respect to payments required to be made by a Subsidiary as a result of
any adjustment or redetermination of income by the Internal Revenue Service or
in the case of a filing of an amended return.  Such interest will be calculated
at the applicable overpayment or underpayment rate and shall otherwise be
determined in the same manner as would be determined by the Internal Revenue
Service.

 

SECTION 6.  Appointment of PHC II as Agent.  Each Subsidiary hereby appoints
PHC II its agent with full power to act on its behalf in all matters concerning
the consolidated U.S. federal income tax returns filed on behalf of the Polypore
Group, including the preparation

 

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and filing of such returns (including any amendments thereto), making or
revoking all elections with respect thereto, negotiating and settling any audit,
examination or administrative proceeding with respect to such tax returns, and
commencing and prosecuting any judicial proceeding related to such tax returns.

 

SECTION 7.  State Tax Returns.  The provisions of this Agreement shall apply, as
appropriately adjusted, to any Members filing combined, consolidated, unitary or
similar income or franchise returns for state tax purposes.

 

SECTION 8.  Miscellaneous.

 

(a)           This Agreement and any provision hereof may be amended, waived,
discharged or terminated only by an instrument in writing signed by the party
against whom enforcement of the amendment, waiver, discharge or termination is
sought.

 

(b)           This Agreement shall constitute the entire agreement between the
parties concerning the subject matter hereof and shall supersede any prior
agreements and understandings between or among the parties with respect to the
subject matter hereof.

 

(c)           The validity, interpretation and enforceability of this Agreement
shall be governed in all respects by the laws of the State of New York, without
regard to conflict of law principles.

 

(d)           Failure of any party at any time to require the other party’s
performance of any obligation under this Agreement shall not affect the right to
require performance of that obligation.  Any waiver by any party of any breach
of any provision of this Agreement shall not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver or modification of
the provision itself, or a waiver of any right under this Agreement.

 

(e)           Section and other headings contained in this Agreement are for
reference purposes only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or of any
provision hereof.

 

(f)            Every provision of this Agreement is intended to be severable. 
If any term or provision hereof is determined to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement.

 

(g)           This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which together shall constitute one
agreement.  The signatures of any party to any such counterpart shall be deemed
to be a signature to, and may be appended to, any other counterpart.

 

(h)           This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations herein shall be assigned by any
party hereto without the prior written consent of the other parties hereto.

 

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(i)            Matters of interpretation and calculations under this Agreement
shall be made in good faith by PHC II.

 

(j)            Upon request by PHC II, each Subsidiary shall pay to PHC II, no
later than the due date of the next Interim Payment due following such request,
such Subsidiary’s pro rata share of (i) amounts expended by PHC II in connection
with the determination of the tax liability of the Polypore Group and the
preparation of necessary tax return filings and (ii) amounts expended by PHC II
in determining amounts due pursuant to this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.

 

 

PP HOLDING CORPORATION II

 

PP HOLDING CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lynn Amos

 

By:

/s/ Lynn Amos

Name:

 

Name:

Title:

 

Title:

 

 

 

 

 

 

 

 

 

 

POLYPORE, INC.

 

CELGARD, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lynn Amos

 

By:

/s/ Lynn Amos

Name:

 

Name:

Title:

 

Title:

 

 

 

 

 

 

 

 

 

 

DARAMIC, INC.

 

DARAMIC ASIA, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lynn Amos

 

By:

/s/ Lynn Amos

Name:

 

Name:

Title:

 

Title:

 

 

 

 

 

 

 

 

 

 

DARAMIC INTERNATIONAL, INC.

 

POLYPORE HOLDINGS, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Lynn Amos

 

By:

/s/ Lynn Amos

Name:

 

Name:

Title:

 

Title:

 

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EXHIBIT A

 

Celgard, Inc., a Delaware corporation

 

Daramic, Inc., a Delaware corporation

 

Daramic Asia, Inc., a Delaware corporation

 

Daramic International, Inc., a Delaware corporation

 

Polypore Holdings, Inc., a Delaware corporation

 

 

Daramic Acquisition Corporation

 

By:

/s/ Lynn Amos

 

Name: Lynn Amos

Title: Chief Financial Officer

 

 

Microporous Holding Corporation

 

By:

/s/ Lynn Amos

 

Name: Lynn Amos

Title: Chief Financial Officer

 

 

MPI Acquisition Corporation

 

By:

/s/ Lynn Amos

 

Name: Lynn Amos

Title: Chief Financial Officer

 

 

MP Assets Corporation

 

By:

/s/ Lynn Amos

 

Name: Lynn Amos

Title: Chief Financial Officer

 

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