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EXHIBIT 10.(D)
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT dated as of March 10, 1997 is made and
entered into by Ford Motor Company, a Delaware corporation ("FORD") and The
Hertz Corporation, a Delaware corporation ("HERTZ") and the Hertz Affiliates.
RECITALS
WHEREAS, Ford is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue
Code of 1986, as amended (the "CODE") and of combined groups as defined under
similar laws of other jurisdictions ("FORD GROUP") and Hertz and the Hertz
Affiliates are members of such groups; and
WHEREAS, the groups of which Ford is the common parent and Hertz and the
Hertz Affiliates are members file or intend to file Consolidated Returns and
Combined Returns; and
WHEREAS, Ford and Hertz desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes for taxable periods beginning after December 31, 1996.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
1.1. "HERTZ AFFILIATE" means any corporation or other entity directly or
indirectly controlled by Hertz which is includible in the Hertz Group.
1.2. "HERTZ GROUP" means the affiliated group of corporations as defined
in Section 1504(a) of the Code, or similar group of entities as defined under
similar laws of other jurisdictions, of which Hertz would be the common parent
if it were not a subsidiary of Ford, and any corporation or other entity which
may be or become a member of such group from time to time.
1.3. "HERTZ GROUP COMBINED TAX LIABILITY" means, with respect to any
taxable year, the Hertz Group's liability for Non-Federal Combined Taxes as
determined under Section 2.4 of this Agreement.
1.4. "HERTZ GROUP FEDERAL INCOME TAX LIABILITY" means, with respect to
any taxable year, the Hertz Group's liability for Federal Income Taxes as
determined under Section 2.3 of this Agreement.
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1.5. "AUDIT" includes any audit, assessment of Taxes, other examination
by any Tax Authority, proceeding, or appeal of such proceeding relating to
Taxes, whether administrative or judicial.
1.6. "COMBINED GROUP" means a group of corporations or other entities
that files a Combined Return.
1.7. "COMBINED RETURN" means any Tax Return with respect to Non-Federal
Taxes filed on a consolidated, combined (including nexus combination, worldwide
combination, domestic combination, line of business combination or any other
form of combination) or unitary basis wherein one or more members of the Hertz
Group join in the filing of a Tax Return with Ford or a Ford subsidiary that is
not also a member of the Hertz Group.
1.8. "CONSOLIDATED GROUP" means the affiliated group of corporations
within the meaning of Section 1504(a) of the Code of which Ford is the common
parent and which includes the Hertz Group.
1.9. "CONSOLIDATED RETURN" means any Tax Return with respect to Federal
Income Taxes filed by the Consolidated Group pursuant to Section 1501 of the
Code.
1.10. "CREDITABLE FOREIGN TAXES" means the foreign taxes paid, accrued or
deemed paid by members of the Hertz Group that could be allowable as a credit
under Section 901 of the Code.
1.11. "DECONSOLIDATION" means any event pursuant to which Hertz and the
Hertz Group cease to be includible in the Consolidated Group or the Combined
Group.
1.12. "DECONSOLIDATION DATE" means the close of business on the day on
which a Deconsolidation occurs. Unless otherwise required by the relevant Tax
Authority or a court of competent jurisdiction, Ford and Hertz, for itself and
the Hertz Group, agree to file all Tax Returns, and to take all other actions,
relating to Federal Income Taxes or Non-Federal Combined Taxes in a manner
consistent with the position that Hertz and the Hertz Group are includible in
the Consolidated Group and the Combined Group for all days from the date hereof
through and including a Deconsolidation Date.
1.13. "ESTIMATED TAX INSTALLMENT DATE" means the installment due dates
prescribed in Section 6655(c) of the Code (presently April 15, June 15,
September 15 and December 15).
1.14. "FEDERAL INCOME TAXES" means any tax imposed under Subtitle A of
the Code (including the taxes imposed by Sections 11, 55, 59A, and 1201(a) of
the Code), including any interest, additions to tax, or penalties applicable
thereto, and any other income based United States federal taxes which are
hereinafter imposed upon corporations.
1.15. "FINAL DETERMINATION" means (a) the final resolution of any tax (or
other matter) for a taxable period, including any related interest or
penalties, that, under applicable law, is not subject to further appeal, review
or modification through proceedings or otherwise, including (1) by the
expiration of a statute of limitations (giving effect to any extension, waiver
or mitigation thereof) or a period for the filing of claims for refunds,
amended returns, appeals from adverse
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determinations, or recovering any refund (including by offset), (2) by a
decision, judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable, (3) by a closing
agreement or an accepted offer in compromise under Section 7121 or 7122 of the
Code, or comparable agreements under laws of other jurisdictions, (4) by
execution of an Internal Revenue Service Form 870 or 870AD, or by a comparable
form under the laws of other jurisdictions (excluding, however, any such form
that reserves (whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the Taxing Authority to
assert a further deficiency), or (5) by any allowance of a refund or credit,
but only after the expiration of all periods during which such refund or credit
may be recovered (including by way of offset) or (b) the payment of tax by any
member of the Consolidated Group or Combined Group with respect to any item
disallowed or adjusted by a Taxing Authority provided that Ford determines that
no action should be taken to recoup such payment.
1.16. "FOREIGN TAX AMOUNT" means, with respect to any taxable year, the
amount determined under Section 2.5 of this Agreement.
1.17. "NON-FEDERAL COMBINED TAXES" means any Non-Federal Taxes with
respect to which a Combined Return is filed.
1.18. "NON-FEDERAL SEPARATE TAXES" means any Non-Federal Tax that is not
a Non-Federal Combined Tax.
1.19. "NON-FEDERAL TAXES" includes all state and local charges, fees,
levies, imposts, duties, or other assessments of a similar nature, including
without limitation, income, alternative or add-on minimum, gross receipts,
excise, employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, withholding, Social Security,
unemployment, disability, ad valorem, estimated, highway use, commercial rent,
capital stock, paid up capital, recording, registration, property, real
property gains, value added, business license, custom duties, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
any Tax Authority (excluding any governmental agency of the United States)
including any interest, additions to tax, or penalties applicable thereto.
1.20. "PRE-DECONSOLIDATION PERIOD" means a taxable period ending on or
prior to the Deconsolidation Date.
1.21. "PRO FORMA HERTZ GROUP COMBINED RETURN" means a pro forma
non-federal combined tax return or other schedule prepared pursuant to Section
2.4 of this Agreement.
1.22. "PRO FORMA HERTZ GROUP CONSOLIDATED RETURN" means a pro forma
consolidated federal income tax return prepared pursuant to Section 2.3 of this
Agreement.
1.23. "POST-DECONSOLIDATION PERIOD" means a taxable period beginning
after the Deconsolidation Date.
1.24. "REDETERMINATION AMOUNT" means, with respect to any taxable year,
the amount determined under Section 3.8 of this Agreement.
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1.25. "STRADDLE PERIOD" means a taxable period beginning on or prior to
and ending after the Deconsolidation Date.
1.26. "TAX ASSET" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
deduction, credit or tax attribute which could reduce taxes (including without
limitation deductions and credits related to alternative minimum taxes).
1.27. "TAX AUTHORITY" includes the Internal Revenue Service and any
state, local, or other governmental authority responsible for the
administration of any Taxes.
1.28. "TAXES" means Federal Income Taxes and Non-Federal Taxes.
1.29. "TAX RETURN" means any return, declaration, statement, report,
schedule, certificate, form, information return or any other document (and any
related or supporting information) including an amended tax return required to
be supplied to, or filed with, a Tax Authority with respect to Taxes.
SECTION 2. TAX SHARING
2.1. HERTZ LIABILITY FOR FEDERAL INCOME TAXES AND NON-FEDERAL COMBINED
TAXES. Each taxable year, Hertz shall pay to Ford an amount equal to the sum
of the Hertz Group Federal Income Tax Liability and the Hertz Group Combined
Tax Liability for such taxable year.
2.2 FORD LIABILITY FOR FOREIGN TAX AMOUNT. With respect to each taxable
year, Ford shall pay to Hertz an amount equal to the Foreign Tax Amount for
such taxable year.
2.3. HERTZ GROUP FEDERAL INCOME TAX LIABILITY. (a) IN GENERAL. With
respect to any taxable year, the Hertz Group Federal Income Tax Liability shall
be the sum, for such taxable year, of (1) the Hertz Group's liability for
Federal Income Taxes as determined on the Pro Forma Hertz Group Consolidated
Return, and (2) any interest, penalties and other additions to such taxes.
(b) PRO FORMA FEDERAL RETURN. Each taxable year, Ford shall prepare or
cause to be prepared (and, as requested by Ford, Hertz shall cooperate in
preparing) a pro forma consolidated federal income tax return for the Hertz
Group ("PRO FORMA HERTZ GROUP CONSOLIDATED RETURN") as if the Hertz Group were
not and never were part of the Consolidated Group, but rather were a separate
affiliated group of corporations of which Hertz were the common parent filing a
consolidated federal income tax return pursuant to Section 1501 of the Code.
(c) OPERATING RULES. The Pro Forma Hertz Group Consolidated Return shall
be prepared:
(1) reflecting the elections, methods of accounting, and positions
with respect to specific items made or used in the Consolidated Return;
(2) taking into account any Tax Assets (but excluding any Creditable
Foreign Taxes);
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(3) without regard to any graduated rates of tax; and
(4) reflecting transactions with members of the Consolidated
Group that are not also members of the Hertz Group according to the provisions
of the consolidated return regulations promulgated under the Code governing
intercompany transactions (no item (including income, gains, losses, deductions
and credits) of any member of the Consolidated Group that is not a member of the
Hertz Group shall otherwise be taken into account).
2.4. HERTZ GROUP COMBINED TAX LIABILITY. (a) IN GENERAL. With respect
to any taxable year, the Hertz Group Combined Tax Liability shall be the sum,
for such taxable year, of (1) the Hertz Group's liability for Non-Federal
Combined Taxes as determined on the Pro Forma Hertz Group Combined Return, (2)
any interest, penalties and other additions to such taxes
(b) PRO FORMA COMBINED RETURN. Each taxable year, Ford shall prepare or
cause to be prepared (and, as requested by Ford, Hertz shall cooperate in
preparing) a pro forma combined tax return or other schedule for the Hertz
Group ("PRO FORMA HERTZ GROUP COMBINED RETURN") determined as if the Hertz
Group were not and never were part of the Combined Group, but rather were a
separate group of which Hertz were the common parent filing a combined tax
return.
(c) OPERATING RULES. The Pro Forma Hertz Group Combined Return shall be
prepared by reference to:
(1) the Hertz Group's taxable income or loss from Line 28 of the
Pro Forma Hertz Group Consolidated Return, adjusted to take into account (i)
those members of the Hertz Group which are included in the Combined Return, (ii)
net operating loss carryforwards, and (iii) material adjustments necessary to
reflect the laws of the applicable jurisdiction (e.g., to exclude "SUBPART F
INCOME" and "GROSS-UP");
(2) apportionment factors determined by taking into account only
those members of the Hertz Group which are included in the Combined Return; and
(3) the highest applicable tax rate without regard to any
graduated rates.
(d) ADDITIONAL OPERATING RULES. The following additional provisions
shall apply in determining the Hertz Group Combined Tax Liability:
(1) Ford shall not pay the Hertz Group for any Tax Asset
relating to any Non-Federal Combined Tax, including any net operating loss
carrybacks or carryovers, not otherwise taken into account under Section 2.4(b)
of this Agreement;
(2) the Hertz Group liability with respect to unemployment taxes
for which a Combined Return is filed shall be the lesser of (i) the liability
for such taxes of the members of the Hertz Group which are included in the
Combined Return determined utilizing the tax rate applicable to the Combined
Return and (ii) the liability for such taxes of the members of the Hertz Group
which are included in the Combined Return determined as if such members of the
Hertz Group were not and never were part of the Combined Group, but rather were
a separate group filing a combined unemployment tax return.
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2.5. FOREIGN TAX CREDIT. (a) IN GENERAL. With respect to each taxable
year, the Foreign Tax Amount shall be the amount of actual tax savings
(adjusted to reflect cumulative savings), if any, realized for such taxable
year by the Consolidated Group (taking into account carrybacks and
carryforwards) with respect to Creditable Foreign Taxes.
(b) AMOUNT. (1) GENERAL RULE. The amount of any such tax savings for a
taxable year shall be determined either (i) by comparing the Consolidated
Group's foreign tax credit computed by taking into account the Hertz Group to
the Consolidated Group's foreign tax credit computed without taking into
account the Hertz Group, or (ii) if a deduction is claimed for Creditable
Foreign Taxes, by comparing the Consolidated Group's liability for Federal
Income Taxes computed by taking into account such Creditable Foreign Taxes to
the Consolidated Group's liability for Federal Income Taxes computed without
taking into account such Creditable Foreign Taxes.
(2) LIMITATIONS. In no event shall the amount determined under
Section 2.5(b)(1)(i) of this Agreement for a taxable year exceed the amount of
Creditable Foreign Taxes taken into account during such taxable year.
(3) REDUCTION FOR DEFICIT IN OTHER TAXABLE YEARS. If, for any
taxable year, the Consolidated Group's foreign tax credit computed without
taking into account the Hertz Group exceeds the Consolidated Group's foreign tax
credit computed by taking into account the Hertz Group, the amount of such
excess shall be applied against and reduce the Foreign Tax Amount for any other
taxable year (after taking into account any reduction in such Foreign Tax Amount
by reason of such an excess in a prior taxable year) covered by this Agreement.
If Ford has already paid Hertz the Foreign Tax Amount for a taxable year and
such amount is subsequently reduced under this Section 2.5(b)(3), Hertz shall
pay to Ford the amount of such reduction.
SECTION 3. PAYMENT OF TAXES AND TAX SHARING AMOUNTS
3.1. FEDERAL INCOME TAXES. Ford shall pay to the Internal Revenue
Service all Federal Income Taxes, if any, of the Consolidated Group (including
the Hertz Group) due and payable for all Pre-Deconsolidation Periods.
3.2. NON-FEDERAL COMBINED TAXES. Ford shall pay to the appropriate Tax
Authorities all Non-Federal Combined Taxes, if any, of the Combined Group
(including the Hertz Group) due and payable for all Pre-Deconsolidation Periods
and Straddle Periods.
3.3. NON-FEDERAL SEPARATE TAXES. Hertz shall pay to the appropriate Tax
Authorities all Non-Federal Separate Taxes, if any, of the Hertz Group due and
payable for all Pre-Deconsolidation Periods and Straddle Periods.
3.4. OTHER FEDERAL TAXES. The parties shall each pay to the appropriate
governmental authorities all of their respective Federal Taxes (excluding
Federal Income Taxes for Pre-Deconsolidation Periods, which are governed by
Section 3.1 of this Agreement), if any, due and payable for all
Pre-Deconsolidation Periods, Straddle Periods, and Post-Deconsolidation
Periods.
3.5. TAX SHARING INSTALLMENT PAYMENTS. (a) FEDERAL INCOME TAXES. Not
later than five business days prior to each Estimated Tax Installment Date with
respect to any Pre-
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Deconsolidation Period or Straddle Period, Ford shall determine under Section
6655 of the Code the estimated amount of the related installment of the Hertz
Group Federal Income Tax Liability. Hertz shall then pay to Ford not later
than such Estimated Tax Installment Date the amount thus determined.
(b) NON-FEDERAL COMBINED TAXES. Not later than November 15 of each
taxable year with respect to any Pre-Deconsolidation Period or Straddle Period,
Ford shall deliver to Hertz an estimate of the Hertz Group Combined Tax
Liability for the taxable year determined by using the previous year's
apportionment factors. Hertz shall then pay to Ford, not later than 10
business days after receipt of such estimate, the amount thus determined.
3.6. TAX SHARING TRUE-UP PAYMENTS. (a) FEDERAL INCOME TAXES. Not later
than 30 business days after the Consolidated Return is filed with respect to
any Pre-Deconsolidation Period or Straddle Period, Ford shall deliver to Hertz
a Pro Forma Hertz Group Consolidated Return or other comparable schedule
reflecting the Hertz Group Federal Income Tax Liability. Not later than 10
business days after the date such pro forma or other schedule is delivered,
Hertz shall pay to Ford, or Ford shall pay to Hertz, as appropriate, an amount
equal to the difference, if any, between the Hertz Group Federal Income Tax
Liability for the taxable year and the aggregate amount paid by Hertz with
respect to such taxable year under Section 3.5(a) of this Agreement.
(b) NON-FEDERAL COMBINED TAXES. Not later than November 15 following
each taxable year with respect to any Pre-Deconsolidation Period or Straddle
Period, Ford shall deliver to Hertz a Pro Forma Hertz Group Combined Return or
other comparable schedule reflecting the Hertz Group Combined Tax Liability for
the taxable year. Not later than 10 business days following delivery of such
pro forma or other schedule, Hertz shall pay to Ford, or Ford shall pay to
Hertz, as appropriate, an amount equal to the difference, if any, between the
Hertz Group Combined Tax Liability for the taxable year and the amount paid by
Hertz with respect to such taxable year under Section 3.5(b) of this
Agreement.
3.7. FOREIGN TAX AMOUNTS. (a) IN GENERAL. Not later than 30 business
days after the Consolidated Return is filed with respect to any
Pre-Deconsolidation Period or Straddle Period, Ford shall deliver to Hertz a
schedule reflecting the amounts required to be paid under this Section 3.7.
(b) GENERAL RULE. Ford shall pay to Hertz the Foreign Tax Amount, if
any, with respect to a taxable year in two installments.
(1) Not later than 5 business days after the date the schedule is
delivered, Ford shall pay to Hertz the first installment. The first installment
shall be an amount equal to the lesser of (i) the amount of tax savings for such
taxable year computed under the principles of Section 2.5(b) of this Agreement
without taking into account carrybacks from, or deficits in, succeeding taxable
years, or (ii) the amount of tax savings the Hertz Group would realize for such
taxable year with respect to Creditable Foreign Taxes if the Hertz Group were
not and never were part of the Consolidated Group, but rather were a separate
affiliated group of corporations of which Hertz was the common parent filing a
consolidated federal income tax return pursuant to Section 1501. The amount of
the Hertz Group's tax savings for a taxable year shall be computed by comparing
the Hertz Group's Federal Income Taxes for the taxable year determined under
Section 2.3(c) of this Agreement to the Hertz Group's liability for Federal
Income Taxes
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for the taxable year determined under Section 2.3(c) of this Agreement without
regard to the exclusion of Creditable Foreign Taxes under Section 2.3(c)(2) of
this Agreement.
(2) Ford shall pay Hertz the second installment upon the earlier of
(i) the date at which the ability to claim a credit for such Creditable Foreign
Taxes for such taxable year would expire under Section 904(c) of the Code if
unutilized, or (ii) the Deconsolidation Date. The second installment shall be
an amount equal to the difference, if any, between the Foreign Tax Amount for
such taxable year and the amount paid to Hertz in the first installment under
Section 3.7(b)(1) of this Agreement for such taxable year.
(c) TRUE-UP PAYMENTS. If, for any reason (including a carryback from, or
a deficit in, a succeeding taxable year, but excluding a redetermination taken
into account under Section 3.8 of this Agreement), the Foreign Tax Amount for a
taxable year is reduced, Hertz shall pay to Ford, not later than 5 business
days after the date the schedule is delivered, an amount equal to the
difference, if any, between the amounts Ford has paid to Hertz for such taxable
year under Section 3.7(b) of this Agreement and the amount Ford would have paid
to Hertz under Section 3.7(b) of this Agreement taking into account such
reduction.
3.8. REDETERMINATION AMOUNTS. (a) IN GENERAL. In the event of any
redetermination of any item of income, gain, loss, deduction or credit of any
member of the Consolidated Group or Combined Group as a result of a Final
Determination or any settlement or compromise with any Tax Authority (including
any amended tax return or claim for refund filed by Ford), Hertz shall pay Ford
or Ford shall pay Hertz, as the case may be, the Redetermination Amount.
(b) COMPUTATION. The Redetermination Amount shall be the difference, if
any, between all amounts previously determined under Section 2 of this
Agreement and all amounts that would have been determined under Section 2 of
this Agreement taking such redetermination into account (including any
additions to tax or penalties applicable thereto), together with interest for
each day calculated (1) with respect to redeterminations affecting Federal
Income Taxes, at the rate determined, in the case of payment by Hertz to Ford,
under Section 6621(a)(2) of the Code and, in the case of payment by Ford to
Hertz, under Section 6621(a)(1) of the Code, and (2) with respect to
redeterminations affecting Non-Federal Combined Taxes, under similar laws, if
any, of other jurisdictions.
(c) PAYMENT. Ford shall deliver to Hertz a schedule reflecting the
computation of any Redetermination Amount with respect to any taxable year.
Not later than 5 days after the date such schedule is delivered, Hertz shall
pay Ford, or Ford shall pay Hertz such Redetermination Amount, provided
however, that in no event shall any Redetermination Amount attributable to any
Foreign Tax Amount be paid earlier than the date provided in Section 3.7 of
this Agreement.
3.9. INTEREST. Payments under this Section 3 that are not made within
the prescribed period shall thereafter bear interest at the Federal short-term
rate established pursuant to Section 6621 of the Code.
SECTION 4. PROCEDURAL MATTERS
4.1. AGENT; PREPARATION AND FILING OF RETURNS. Ford shall be the sole
and exclusive agent of Hertz and any member of the Hertz Group in any and all
matters relating to (a) Federal Income Taxes of the Consolidated Group and (b)
any Non-Federal Combined Taxes for all Pre-
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Deconsolidation Periods and Straddle Periods. Ford shall have the sole and
exclusive responsibility for the preparation and filing of any (a) Consolidated
Return or (b) Combined Return for all Pre-Deconsolidation Periods and Straddle
Periods. In its sole discretion, Ford shall have the exclusive right with
respect to any such Consolidated Return or Combined Return (a) to determine (1)
the manner in which such Tax Return shall be prepared and filed, including,
without limitation, the manner in which any item of income, gain, loss,
deduction or credit shall be reported, (2) whether any extensions may be
requested, (3) the elections that will be made by any member of the
Consolidated Group or Combined Group, and (4) whether any amended tax returns
should be filed, (b) to control, contest, and represent the interests of the
Consolidated Group and Combined Group in any Audit and to resolve, settle, or
agree to any adjustment or deficiency proposed, asserted or assessed as a
result of any Audit, (c) to file, prosecute, compromise or settle any claim for
refund, and (d) to determine whether any refunds, to which the Consolidated
Group or Combined Group may be entitled, shall be paid by way of refund or
credited against the tax liability of the Consolidated Group and Combined
Group. Hertz, for itself and its subsidiaries, hereby irrevocably appoints
Ford as its agent and attorney-in-fact to take such action (including the
execution of documents) as Ford may deem appropriate to effect the foregoing.
4.2. FURNISHING INFORMATION. Each member of the Hertz Group shall (a)
furnish to Ford in a timely manner such information and documents as Ford may
reasonably request for purposes of (1) preparing any original or amended
Consolidated Return or Combined Return, (2) contesting or defending any Audit,
and (3) making any determination or computation necessary or appropriate under
this Agreement, (b) cooperate in any Audit of any Consolidated Return or
Combined Return, (c) retain and provide on demand books, records, documentation
or other information relating to any tax return until the later of (1) the
expiration of the applicable statute of limitations (giving effect to any
extension, waiver, or mitigation thereof) and (2) in the event any claim is
made under this Agreement for which such information is relevant, until a Final
Determination with respect to such claim, and (d) take such action as Ford may
deem appropriate in connection therewith. Ford shall provide the Hertz Group
any assistance reasonably required in providing any information requested
pursuant to this Section 4.2.
4.3. EXPENSES. Hertz shall reimburse Ford for any outside legal and
accounting expenses incurred by Ford in the course of the conduct of any Audit
regarding the tax liability of the Combined Group or Consolidated Group, and
for any other expense incurred by Ford in the course of any litigation relating
thereto, to the extent such costs are reasonably attributable to the Hertz
Group and provided Ford has conferred with Hertz as to the portion of the Audit
relating to the Hertz Group. Notwithstanding the foregoing, Ford shall have
the sole discretion to control, contest, represent, file, prosecute, challenge
or settle any Audit pursuant to Section 4.1.
SECTION 5. DECONSOLIDATION
5.1. CONTINUING COVENANTS. Hertz, for itself and the Hertz Affiliates,
covenants that on or after a Deconsolidation it will not, nor will it cause or
permit any member of the Hertz Group to make or change any tax election, change
any accounting method, amend any tax return or take any tax position on any tax
return, take any action, omit to take any action or enter into any transaction
that results in any increased tax liability or reduction of any Tax Asset of
the Ford Group in respect of any Pre-Deconsolidation Period or Straddle Period.
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5.2 REATTRIBUTION OF TAX ASSETS. In the event of a Deconsolidation, Ford
may, at its option, elect to reattribute to itself certain Tax Assets of the
Hertz Group pursuant to Treasury Regulations Section 1.1502-20(g) or similar
provisions of other jurisdictions. If Ford makes such an election, Hertz shall
comply with any applicable requirements, including those of Treasury
Regulations Section 1.1502-20(g)(5).
5.3. CARRYBACKS. Ford agrees to pay to Hertz the actual tax benefit
received by the Ford Group from the use in any Pre-Deconsolidation Period of a
carryback of any Tax Asset of the Hertz Group from a Post-Deconsolidation
Period. Such benefit shall be considered equal to the lesser of (a) the amount
Ford would have paid Hertz had such Tax Asset arisen in a Pre-Deconsolidation
Period and (b) the excess of (1) the amount of Federal Income Taxes imposed on
the Consolidated Group or the amount of Combined Taxes imposed on the Combined
Group, as the case may, that would have been payable by the Consolidated Group
or Combined Group in the absence of such carryback over (2) the amount of
Federal Income Taxes or Combined Taxes, as the case may be, actually paid.
Payment of the amount of such benefit shall be made within 90 days of the
filing of the applicable tax return for the taxable year in which the Tax Asset
is utilized. If subsequent to the payment by Ford to Hertz of any such amount,
there shall be (a) a Final Determination which results in a disallowance or a
reduction of the Tax Asset so carried back or (b) a reduction in the amount of
the benefit realized by the Ford Group as a result of any other Tax Asset that
arises in a Post-Deconsolidation Period, Hertz shall repay to Ford, within 90
days of such event any amount which would not have been payable to Hertz
pursuant to this Section 5.3 had the amount of the benefit been determined in
light of these events. Hertz shall hold Ford harmless for any penalty,
addition to tax or interest payable by any member of the Ford Group as a result
of any such event. Any such amount shall be paid by Hertz to Ford within 90
days of the payment by Ford or any member of the Consolidated Group or Combined
Group of any such penalty, addition to tax, or interest. Nothing in this
Section 5.3 shall require Ford to file a claim for refund of Federal Income
Taxes or Combined Taxes.
SECTION 6. MISCELLANEOUS
6.1. TERM. Except as provided in Section 6.14 and this Section 6.1, this
Agreement shall expire upon the Deconsolidation Date. However, all rights and
obligations arising hereunder with respect to a Pre-Deconsolidation Period or
Straddle Period shall survive until they are fully effectuated or performed.
Further, notwithstanding anything in this Agreement to the contrary, all rights
and obligations arising hereunder with respect to a Post-Deconsolidation Period
shall remain in effect and its provisions shall survive for the full period of
all applicable statutes of limitation (giving effect to any extension, waiver
or mitigation thereof).
6.2. ALLOCATIONS. All computations with respect to the
Pre-Deconsolidation Period ending on the Deconsolidation Date, the immediately
following taxable period of Hertz and the Hertz Group and any Straddle Period
shall be made pursuant to the principles of Treasury Regulations Section
1.1502-76(b), taking into account such elections thereunder as Ford, in its
sole discretion, shall make.
6.3. CHANGES IN LAW. Any reference to a provision of the Code or a
similar law of another jurisdiction shall include a reference to any successor
provision to such provision.
6.4. CONFIDENTIALITY. Each party shall hold and cause its advisors and
consultants to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in
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the opinion of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such information can be shown to have been (a) previously known by the
party to which it was furnished, (b) in the public domain through no fault of
such party, or (c) later lawfully acquired from other sources not under a duty
of confidentiality by the party to which it was furnished), and each party
shall not release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants who
shall be advised of and agree to be bound by the provisions of this Section
6.4. Each party shall be deemed to have satisfied its obligation to hold
confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
6.5. SUCCESSORS. This Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, to any
of the parties hereto (including any successor of Ford and Hertz succeeding to
the tax attributes of such party under Section 381 of the Code), to the same
extent as if such successor had been an original party.
6.6. AUTHORIZATION, ETC. Each of the parties hereto hereby represents
and warrants that it has the power and authority to execute, deliver and
perform this Agreement, that this Agreement has been duly authorized by all
necessary corporate action on the part of such party, that this Agreement
constitutes a legal, valid and binding obligation of each such party and that
the execution, delivery and performance of this Agreement by such party does
not contravene or conflict with any provision of law or of its charter or
bylaws or any agreement, instrument or order binding on such party.
6.7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements.
6.8. SECTION CAPTIONS. Section captions used in this Agreement are for
convenience and reference only and shall not affect the construction of this
Agreement.
6.9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without giving effect to
laws and principles relating to conflicts of law.
6.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
6.11. WAIVERS AND AMENDMENTS. This Agreement shall not be waived,
amended or otherwise modified except in writing, duly executed by all of the
parties hereto.
6.12. SEVERABILITY. In case any one or more of the provisions in this
Agreement should be invalid, illegal or unenforceable, the enforceability of
the remaining provisions hereof will not in any way be effected or impaired
thereby.
6.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and the other members of the
Affiliated Group and should not be
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deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other rights in excess of those existing
without this Agreement.
6.14. OPTION ALLOCATION AGREEMENTS. Hertz agrees that so long as it
purchases vehicles from Ford that are subject to Ford's Daily Rental Repurchase
Program, Hertz will enter into an Option Allocation Agreement in substantially
similar form to that appended hereto as Exhibit A, in which the amount
allocated to the repurchase option shall equal the estimate, reasonably
determined by Ford, of any loss on the resale of such vehicles. Each such
agreement will provide that the parties will reflect the allocations set forth
therein in all federal, state and local income tax returns. The rights and
obligations set forth in this Section 6.14 (and in the Option Allocation
Agreements) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer as of the date first above written.
FORD MOTOR COMPANY
By /s/ Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx
Title: Chief Tax Officer
THE HERTZ CORPORATION
on behalf of itself and its subsidiaries
By /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Staff Vice President - Tax
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