Ratification Agreement
Exhibit 10.2
Execution Version
This Ratification Agreement (this “Agreement”), dated as of June 26, 2009 by and among
Avis Budget Group, Inc., a Delaware corporation (formerly known as Cendant Corporation)
(“ABG”), Realogy Corporation, a Delaware corporation (“Realogy”), Wyndham Worldwide
Corporation, a Delaware corporation (“Wyndham”), and Xxxxxx Express Corporation, a Delaware
corporation (“WEX”, collectively with ABG, Realogy and Wyndham, the “parties” and
each individually, a “party”).
Capitalized terms used in this Agreement but not otherwise defined have the meanings set forth
in the TRA (as defined below).
WHEREAS, WEX, ABG and Cendant Mobility Services Corporation, a Delaware corporation (now known
as Cartus Corporation), are parties to that certain Tax Receivable Agreement, dated as of February
22, 2005 (the “TRA”) which provides for, among other things, certain payments to be made
from WEX to ABG;
WHEREAS, pursuant to that certain Separation and Distribution Agreement, dated as of July 27,
2006, by and among ABG, Realogy, Wyndham and Travelport Inc. (the “Separation Agreement”),
the payments to be received by ABG under the TRA are a Cendant Contingent Asset (as defined in the
Separation Agreement) to be distributed to Realogy and Wyndham, 62.5% and 37.5%, respectively (the
“Applicable Percentages”) and the liabilities and obligations of ABG under the TRA are an
Assumed Cendant Contingent Liability (as defined in the Separation Agreement) to be assumed by
Realogy and Wyndham in accordance with their Applicable Percentages;
WHEREAS, Section 10.07 of the TRA provides that ABG may assign some or all its rights,
interests or entitlements and obligations under the TRA to any Affiliate (as defined in the TRA)
without the consent of WEX and ABG may assign some or all of its rights (but not its obligations)
under the TRA to another person without the consent of WEX;
WHEREAS, as of the Effective Time of the Separation Agreement, Realogy and Wyndham were
Affiliates of ABG;
WHEREAS, pursuant to the Separation Agreement, ABG assigned its rights and obligations under
the TRA to Realogy and Wyndham in accordance with their Applicable Percentages (the “Assignment”)
and each of Realogy and Wyndham assumed the obligations of ABG under the TRA in accordance with
their Applicable Percentages (the “Assumption”). In particular, pursuant to Section 2.2 of the
Separation Agreement, ABG assigned (i) to Realogy the Real Estate Assets, which are defined to
include, among other things, the Applicable Realogy Percentage (i.e., 62.5%) of any Cendant
Contingent Asset and (ii) to Wyndham the Hospitality Assets, which are defined to include, among
other things, the Applicable Wyndham Percentage (i.e., 37.5%) of any Cendant Contingent Asset.
Further, pursuant to Section 2.3 of the Separation Agreement, (i) Realogy assumed all of the Real
Estate Liabilities, which are defined to include,
among other things, the Applicable Realogy Percentage (i.e., 62.5%) of any Assumed Cendant
Contingent Liability and (ii) Wyndham assumed all of the Hospitality Liabilities, which are
defined to include, among other things, the Applicable Wyndham Percentage (i.e., 37.5%) of any Assumed
Cendant Contingent Liability;
WHEREAS, contemporaneously with the execution of this Agreement, WEX and Realogy have entered
into the Tax Receivable Prepayment Agreement (the “TRPA”); and
WHEREAS, in furtherance of the arrangements set forth in the Separation Agreement, including
without limitation, the obligations of ABG, Realogy and Wyndham set forth in Sections 2.2 (Transfer
of Assets), 2.3 (Assumption and Satisfaction of Liabilities) and 7.1(a) (Cendant Contingent Assets
and Assumed Cendant Contingent Liabilities) thereof, the parties desire to affirm and ratify the
Assignment and Assumption.
NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound, the parties hereto agree to the following terms and conditions.
1 Affirmation of Assignment.
1.1 Affirmation of Assignment of Rights and Obligations Under the TRA. ABG hereby
affirms and ratifies its assignment, conveyance, and transfer to Realogy and Wyndham pursuant to
the Separation Agreement, in accordance with their respective Applicable Percentages, of all of
ABG’s right, title, obligations and interest under the TRA, including, without limitation, the
right in and to all future payments to be made by WEX to ABG under Sections 3.01, 3.02, 3.03, 8.02
and 8.03 of the TRA, any right to indemnification under Section 4.01 of the TRA, any right to the
provision of information pursuant to Section 2.04 (Provision of Information) of the TRA and any
right to cooperation pursuant to Section 6.01 (Cooperation) of the TRA, provided, however that ABG
shall retain all right, title, obligations and interest under Section 2.01 (Cendant Tax Returns) of
the TRA and Section 6.01 (Cooperation) of the TRA (solely with respect to Cendant Returns). Each
of Realogy and Wyndham hereby confirms the acquisition and acceptance of such assignment. Realogy
agrees that any payments made on or after the date hereof by WEX to Realogy or Wyndham under the
TRA or the TRPA shall not be taken into account as adjustments to the Purchase Price pursuant to
Section 2.05(c) of the TRA, or otherwise, for purposes of determining the amount of any further
payments to be made by WEX to Realogy under the TRA or the TRPA.
1.2 Security Interests. ABG hereby represents and warrants to WEX that upon
completion of its assignment, conveyance and transfer to Realogy and Wyndham of its right, title,
obligations and interest described in Section 1.1 above, to the knowledge of ABG at such time,
such right, title, obligations and interest were free and clear of any material mortgage, pledge,
security interest, or other lien arising as a direct result of an action taken by ABG.
1.3 Amendment of Section 3.01 of the TRA. Section 3.01 of the TRA is hereby amended
by replacing the text thereof in its entirety with the following:
“SECTION 3.01. Estimated Tax Benefit Payments. At least ten (10) days prior to the
installment due date for the payment of any estimated Income Tax under Section 6655 of the
Code or any comparable provision of state or local or other law (“Installment Date”) with
respect to any WEX Return, WEX shall submit to Wyndham a preliminary determination of (A) the
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liability for Taxes that would be due on such Installment Date assuming the same facts and using
the same methods, elections, conventions and practices used in determining the actual liability for
Taxes on such date; provided, however, that such liability shall be calculated (i) with reference
to the Beginning Tax Basis instead of the Stepped-Up Tax Basis of each Asset or class of Assets, as
shown on the Basis Schedule, (ii) assuming that any losses and/or other Tax attributes for all
Taxable Years are carried forward to future taxable years rather than carried back to prior Taxable
Years, and (iii) excluding any deduction attributable to Imputed Interest (“Hypothetical Tax
Liability”) and (B) the actual liability for Taxes due on such date with respect to such WEX
Return, provided, however, that such liability shall be calculated assuming that all payments made
by WEX to Realogy solely under the Tax Receivable Prepayment Agreement, dated June 26, 2009,
between WEX and Realogy (“TRPA”) have not been made, but rather, that all payments under
this Tax Receivable Agreement that would have been required to be made but for the TRPA were
actually made by WEX to Realogy at each applicable date (“Actual Tax Liability”). Upon review by
Wyndham, WEX shall promptly make adjustments to such determination to the extent reasonably
requested by Wyndham. Within five (5) days after finalizing such determination, WEX shall pay
Wyndham 31.875% of the excess, if any, of the Hypothetical Tax Liability over the Actual Tax
Liability.”
1.4 Amendment of Section 3.02 of the TRA. Section 3.02 of the TRA is hereby amended
by replacing the text thereof in its entirety with the following:
“SECTION 3.02. True-Ups. Within thirty (30) days after the filing of any WEX Return for
Income Taxes for a Taxable Year (other than a Tax Return with respect to estimated Income Taxes),
WEX shall submit to Wyndham a preliminary determination of (i) the Hypothetical Tax Liability for
such entire Taxable Year and (ii) the Actual Tax Liability for such entire Taxable Year and, upon
review by Wyndham, shall promptly make adjustments to such determination to the extent reasonably
requested by Wyndham. Within five (5) days after finalizing such determination, WEX shall pay to
Wyndham the excess, if any, of (A) 31.875% of the excess, if any, of such Hypothetical Tax
Liability over such Actual Tax Liability over (B) the aggregate amount previously paid by WEX to
Wyndham under Section 3.01 with respect to such Taxable Year. Any excess of (X) the aggregate
amount previously paid by WEX to Wyndham under Section 3.01 with respect to such Taxable Year over
(Y) 31.875% of the excess of such Hypothetical Tax Liability over such Actual Tax Liability shall
offset to the extent of such excess the next succeeding payment(s) otherwise due from WEX to
Wyndham under Sections 3.01 and/or 8.02; provided, however, that if Wyndham and WEX mutually agree
that no further payments could possibly be made pursuant to Section 3.01 hereof, then Wyndham shall
pay to WEX the amount of such excess.”
1.5 Intent of Parties; and Interpretation. With respect to each payment required to
be made by WEX to Wyndham pursuant to this Agreement and the TRA on or after the date hereof, (i)
the parties intend that the amount of each such payment shall be exactly equal to the amount that
would have been required to have been paid by WEX to Wyndham pursuant to this Agreement and the TRA
assuming that (A) WEX and Realogy had not entered into the TRPA and, as a result thereof, no
payments had been made by WEX to Realogy pursuant to the TRPA, (B) Realogy had retained all of its
rights pursuant to this Agreement and the TRA,
including all rights to receive payments pursuant to Sections 3.01, 3.02, 3.03, 8.02 and 8.03
of the TRA and (C) all such payments were actually made by WEX to Realogy and (ii)
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notwithstanding
anything to the contrary contained herein, the TRA or the TRPA, this Agreement and the TRA shall be
interpreted in a manner consistent with clause (i) of this Section 1.5.
1.6 TRPA. For the avoidance of doubt, Sections 1.3, 1.4 and 1.5 hereof relate solely
to matters between WEX and Wyndham. Nothing herein shall alter the rights and obligations of WEX
and Realogy under the TRPA.
2 Affirmation of Obligations
2.1 Affirmation of Assumption of Obligations Under the TRA. Each of Realogy and
Wyndham hereby affirms and ratifies for the benefit of the other parties its respective assumption
pursuant to the Separation Agreement of all of ABG’s obligations and liabilities under the TRA, in
accordance with its respective Applicable Percentage, including without limitation, ABG’s
obligation to make any payments under Section 3.03 of the TRA and any obligation of ABG to
indemnify under Section 4.01 of the TRA; provided, however that ABG shall retain the obligations
set forth under Section 2.01 (Cendant Tax Returns) of the TRA and Section 6.01 (Cooperation) of the
TRA (solely with respect to Cendant Returns). Except for the obligations set forth in the proviso
of the previous sentence, each of Realogy (both on its behalf and on behalf of Cartus Corporation),
Wyndham and WEX hereby releases, remises and forever discharges ABG, its affiliates, shareholders
and employees from any further obligations under the TRA. Except as set forth in Section 2.02 (WEX
Tax Returns) and Section 6.01 (Cooperation) of the TRA, ABG (solely on its behalf, and not on
behalf of Realogy or Wyndham) hereby releases, remises and forever discharges WEX, its affiliates,
shareholders and employees from any further obligations under the TRA.
2.2 Affirmation of Tax Liability and Cost and Expense Sharing Obligations under Tax
Sharing Agreement. Each of Realogy and Wyndham hereby affirms and ratifies for the benefit of
the other parties its respective obligations under Section 3.2 (Responsibility of Realogy to pay
Taxes), Section 3.3 (Responsibility of Wyndham to pay Taxes) and Section 8.2(f) (Sharing of costs
and expenses related to Pre-2007 Shared Entity Audits) of the Tax Sharing Agreement, dated as of
July 28, 2006, by and among ABG, Realogy, Wyndham and Travelport Inc. as such obligations relate to
ABG’s obligations under Section 2.01 (Cendant Tax Returns) of the TRA. For the avoidance of doubt,
nothing in this Section 2.2 shall affect ABG’s obligations to WEX under Section 2.01 (Cendant Tax
Returns) of the TRA in a manner adverse to WEX.
3 Miscellaneous
3.1 Entire Agreement. Each of ABG, Realogy and Wyndham acknowledges and agrees that
the transactions and agreements set forth in this Agreement are intended to further the
arrangements contemplated by the Separation Agreement with respect to the rights and obligations of
ABG under the TRA.
3.2 No Third Party Beneficiaries. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and permitted assigns,
and nothing in this Agreement, express or implied, is intended to or shall confer upon
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any other
person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
3.3 Counterparts. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.
3.4 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable principles of conflict
of laws.
3.5 Successors; Assignments. Any party may assign any of its rights hereunder without
the consent of any of the other parties. This Agreement will be binding upon, inure to the benefit
of and be enforceable by, the parties and their respective successors and assigns.
3.6 Amendments. No amendment to this Agreement shall be effective unless it shall be
in writing and signed by each of the parties.
3.7 Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in construing this
Agreement.
3.8 Effect of this Agreement. For the avoidance of doubt, except as expressly
provided in Sections 1.1 and 2.1 of this Agreement, the consummation of the transactions
contemplated by this Agreement shall in no way affect the rights and obligations of the parties
under the Separation Agreement. Each of the parties hereto agrees that ABG shall have no liability
of any kind arising out of the transactions effected pursuant to this Ratification Agreement,
except as expressly set forth in Sections 1.1, 1.2 and 2.1 of this Agreement.
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IN WITNESS WHEREOF, ABG, Realogy, Wyndham and WEX have each duly executed this Agreement as of
the date first written above.
| AVIS BUDGET GROUP, INC. (formerly known as Cendant Corporation) |
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| By: | /s/ Xxxxx X. Xxxxxxx | |||
| Name: | Xxxxx X. Xxxxxxx | |||
| Title: | EVP & CFO | |||
| REALOGY CORPORATION |
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| By: | /s/ Xxxxxxx Xxxx | |||
| Name: | Xxxxxxx Xxxx | |||
| Title: | CFO | |||
| WYNDHAM WORLDWIDE CORPORATION |
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| By: | /s/ Xxxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President and Chief Financial Officer | |||
| XXXXXX EXPRESS CORPORATION |
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| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: | Xxxxxxx X. Xxxxx | |||
| Title: | CFO, Executive Vice President, Finance and Operations | |||
[Signature page to Ratification Agreement]
