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


 


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the last date on
which Parent is required to make its final payment of Federal income taxes for
the taxable year without incurring any penalties or additions to tax.


 


(c)                                  Estimated
Payments


 


On any date on which Parent is required to make an
estimated payment of the consolidated Federal income tax of the Group under
Section 6655 of the Code, each Subsidiary Member will make estimated
payments to Parent in an amount equal to its Member Estimated Tax Liability.  If the total of such estimated payments made
by such Subsidiary Member to Parent with respect to a taxable year shall be in
excess of the liability of such Subsidiary Member to Parent pursuant to Section 3(b)
of this Agreement for such taxable year, Parent shall pay the amount of such
excess to such Subsidiary Member no later than the date on which Parent files
the consolidated Federal income tax return for the Group.


 


(d)                                 Tax
Refunds


 


(i)                                     Parent
shall pay to each Subsidiary Member the amount of such Subsidiary Member’s Member
Tax Refund for each taxable year ending after the date hereof.


 


(ii)                                  The
payments described in this Section 3(d) shall be made not later
than five days after such refund is received by Parent.


 


4.                                       CHANGES IN TAX LIABILITY


 


(a)                                  If
the Member Tax Liability of a Subsidiary Member is changed as the result of any
final administrative or judicial determination (including a final
“determination” as defined in Section 1313(a) of the Code) with respect to
consolidated Federal income tax returns actually filed by the Group, then the
amount of the payments required from such Subsidiary Member to Parent under Section 3(b)
or the amount of the payment required from Parent to such Subsidiary Member
under Section 3(d)(i), as the case may be, shall be recomputed by substituting
the amount of such Subsidiary Member’s Member Tax Liability (or Member Tax
Refund) after the adjustments described above in place of such Subsidiary
Member’s Member Tax Liability (or Member Tax Refund), provided that the
principles of Section 1(b)(iii) shall be applied in connection with
such recomputation notwithstanding any contrary determination.  If such final determination results in an
increase in such Subsidiary Member’s Member Tax Liability, such Subsidiary
Member shall pay to Parent not later than five days after such final
determination an amount equal to the excess of the new Member Tax Liability of
such Subsidiary Member over the amount previously paid to Parent by such
Subsidiary Member.  If such final
determination results in a Member Tax Refund or increases the amount of a
Member Tax Refund for such Subsidiary Member, Parent shall pay to such
Subsidiary Member not later than five days after receiving such refund an
amount equal to the excess of the new Member Tax Refund of such Subsidiary
Member over the amount previously paid to such Subsidiary Member by
Parent.  The parties recognize that such
new liability (or refund) for any taxable year is not necessarily such
Subsidiary’s final liability (or refund) for that year, and may be recomputed
more than once.


 


(b)                                 Payments
made pursuant to Section 4(a) shall bear interest at the same rate
and in the same manner as any late payment or refund of Federal income tax.


 


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5.                                       PAYMENT


 


(a)                                  Any
payment required by a Subsidiary Member to Parent pursuant to Section 3
of this Agreement shall, if not remitted in cash, be made (i) first, by
reducing the amount of any account payable created under Section 5(b)
(but not below zero), and (ii) then by entering or increasing an account
payable to Parent on the books of account of such Subsidiary Member.


 


(b)                                 Any
payment required by Parent to a Subsidiary Member pursuant to Section 3
of this agreement shall be made (i) first by reducing the amount of any account
payable created under Section 5(a) (but not below zero), and (ii)
then by entering or increasing an account payable to such Subsidiary Member on
the books of account of Parent.


 


(c)                                  Any
account payable created under this paragraph shall be due in whole or in part
on five days’ notice by the Subsidiary Member or Parent, as the case may be,
whose liability such account payable is, and any due but unpaid amounts shall
bear interest from and after such due date at the rate of one percent (1%) per
month until paid in full.


 


6.                                       INDEMNITY


 


Parent agrees to indemnify, defend and hold each
Subsidiary Member harmless from and against any and all liabilities for Federal
income tax and Federal estimated income tax (including, in both cases, interest
and penalties thereon) with respect to any taxable year to which this agreement
applies; provided that the amount of such indemnity shall be reduced by and
shall offset any payment required to be made by each Subsidiary Member pursuant
to this Agreement.


 


7.                                       EFFECT OF AGREEMENT


 


(a)                                  As
between Parent and each Subsidiary Member, the provisions of this Agreement
shall fix the liability of each to the other as to the matters covered
hereunder, even if such provisions are not controlling for tax or other
purposes (including, but not limited to, the computation of earnings and
profits for Federal income tax purposes).


 


(b)                                 This
Agreement shall be effective as between Parent and each Subsidiary Member in
respect of all taxable years during which such Subsidiary Member is a member of
the Group.  Any corporation that becomes
a Subsidiary Member after the date hereof shall become a party to this
Agreement as a result of becoming a Subsidiary Member without any further
action on its part or on the part of Parent or any Subsidiary Member, and shall
execute this Agreement as soon as practicable thereafter.


 


8.                                       STATE AND LOCAL TAXES


 


In the event Parent actually files consolidated,
combined or unitary income or franchise tax returns or reports in any state or
local jurisdiction on behalf of and pays such taxes owed by all or part of the
Group, the principles and procedures (including the indemnity in Section 6)
stated in this Agreement shall apply for purposes of allocating such state tax
liability.


 


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9.                                       TERM AND TERMINATION


 


This Agreement shall have an initial term of five (5)
years and shall automatically renew for successive one-year terms unless
earlier terminated by either party.


 


10.                                 MISCELLANEOUS PROVISIONS


 


(a)                                  This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter contained herein. 
No alteration, amendment or modification of any of the terms of this
Agreement shall be valid unless made by an instrument signed in writing by an
authorized officer of each party.


 


(b)                                 This
Agreement has been made in and shall be construed and enforced in accordance
with the law of the State of New York from time to time obtaining, without
regard to the conflicts of laws provisions thereof.


 


(c)                                  This
Agreement shall be binding and upon and inure to the benefit of each party
hereto and its respective successors and assigns.


 


(d)                                 All
notices and other communications hereunder shall be deemed to have been duly
given if delivered by hand or mailed, certified or registered mail, with
postage prepaid addressed to the party to which the notice or other
communication is given.


 


(e)                                  This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.


 


(f)                                    The
headings of the paragraphs of this Agreement are inserted for convenience only
and shall not constitute a part hereof.


 


[Signature page follows]


 


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IN WITNESS WHEREOF, the parties hereto have caused
this agreement to be signed by their duly authorized representatives as of the
date first above written.


 


 


	
   

  	
  TRUE TEMPER
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  FRED H. GEYER

  	
   

  
	
   

  	
   

  	
  Name:  Fred H. Geyer

  
	
   

  	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRUE TEMPER
  SPORTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  FRED H. GEYER

  	
   

  
	
   

  	
   

  	
  Name:  Fred H. Geyer

  
	
   

  	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRUE TEMPER
  SPORTS-PRC

  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  FRED H. GEYER

  	
   

  
	
   

  	
   

  	
  Name:  Fred H. Geyer

  
	
   

  	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EL CAJON
  EQUIPMENT

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  FRED H. GEYER

  	
   

  
	
   

  	
   

  	
  Name:  Fred H. Geyer

  
	
   

  	
   

  	
  Title:  President

  



 


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