Exhibit 10.1
AMENDED AND
RESTATED
TAX SHARING
AGREEMENT
by and among
CENDANT
CORPORATION
and
PHH
CORPORATION
______________
[***] INDICATES
MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
AMENDED AND RESTATED TAX
SHARING AGREEMENT
This Amended and Restated Tax Sharing Agreement
(this “Agreement”) is amended and restated as of
December 21, 2005, by and among Cendant Corporation, a Delaware
corporation (“Cendant”), PHH Corporation, a Maryland
corporation (“PHH”), and each PHH Affiliate that
executes this Agreement. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in
Article VII hereof.
RECITALS
WHEREAS, Cendant and its direct and indirect
domestic subsidiaries are members of an Affiliated Group, of which
Cendant is the common parent corporation;
WHEREAS, Cendant's Board of Directors determined
that it was appropriate and desirable for Cendant to distribute all
of its shares of PHH common stock to Cendant
shareholders;
WHEREAS, Cendant and PHH agreed to undertake a
series of transactions including (i) as more fully set forth in the
Steps Memo, the contribution by PHH to Cendant Mobility Services
Corporation, a Delaware corporation ("Mobility"), of certain
assets, and, in connection therewith, the distribution by Mobility
to PHH of $100 million to be distributed by PHH to its creditors,
followed by the distribution by PHH to Cendant of all of the stock
of Mobility (collectively, the "Internal Distribution"), (ii) the
distribution by Cendant to its common shareholders pro rata of all
of the stock of PHH (the "Distribution"), and (iii) each of the
other transactions set forth in the Steps Memo and each other
transaction effected on or before the Distribution Date that is
related to the transactions set forth in the Steps Memo
(collectively, the "Internal Reorganization"); and
WHEREAS, the Internal Distribution is intended
to qualify as a reorganization and distribution that are tax-free
to PHH, Mobility, and Cendant under sections 368(a)(1)(D), 361(c),
and 355 of the Code; the Distribution is intended to qualify as a
distribution that is tax-free to Cendant and its shareholders under
section 355 of the Code; and the steps comprising the Internal
Reorganization are intended to be tax-free to Cendant and PHH and
their respective affiliates.
WHEREAS, in contemplation of the Distribution
pursuant to which PHH and its direct and indirect domestic
subsidiaries ceased to be members of the Affiliated Group of which
Cendant is the common parent, Cendant and PHH desire to set forth
their agreement on the rights and obligations of Cendant and PHH
and their respective groups with respect to handling and allocating
Taxes for periods beginning before and after the Distribution Date,
Taxes, if any, resulting from transactions effectuated in
connection with the Internal Distribution, the Distribution, the
Internal Reorganization, and various other Tax matters.
WHEREAS, Cendant and PHH executed the Tax
Sharing Agreement, dated as of January 31, 2005, by and among
Cendant, PHH and each PHH Affiliate that executed such agreement
(the "Tax Sharing Agreement").
WHEREAS, Cendant and PHH desire to amend and
restate the Tax Sharing Agreement.
NOW, THEREFORE, in consideration of the
foregoing and the terms, conditions, covenants and provisions of
this Agreement, Cendant and PHH mutually covenant and agree as
follows:
ARTICLE I
PREPARATION AND FILING OF TAX
RETURNS; PAYMENT OF TAXES
Section 1.1
Cendant’s
Responsibility . (a)
Cendant shall have sole and exclusive responsibility for the
preparation and timely filing of:
(i) all Cendant Separate Income Tax
Returns;
(ii) all Cendant Consolidated and Combined Income Tax
Returns; and
(iii) all Tax Returns required to be filed by Cendant
or any Cendant Affiliate with respect to Other Taxes as determined
pursuant to Section 1.3 hereof.
(b) Subject to Section 1.2(c), and Sections 2.1(b),
(c), and (d), Cendant shall be liable for and shall timely pay, or
cause to be paid, to the applicable Taxing Authority all Taxes
required to be reported on Tax Returns for which it has
responsibility under this Section 1.1 and shall be entitled to
receive and retain any refunds of Taxes paid with respect
thereto.
Section 1.2
PHH’s
Responsibility . (a) PHH
shall have sole and exclusive responsibility for the preparation
and timely filing of:
(i) all PHH Separate Income Tax Returns;
(ii) all PHH Consolidated and Combined Income Tax
Returns; and
(iii) all Tax Returns required to be filed by PHH or
any PHH Affiliate with respect to Other Taxes as determined
pursuant to Section 1.3 hereof.
(b) Subject to Section 2.1(a), (c), and (d), PHH
shall be liable for and shall timely pay, or cause to be paid, to
the applicable Taxing Authority all Taxes required to be reported
on Tax Returns for which it has responsibility under this Section
1.2 and subject to Section 1.6, shall be entitled to receive and
retain any refunds of Taxes paid with respect thereto.
(c) Notwithstanding Section 1.1 or any other
provision of this Agreement to the contrary, PHH shall be liable
for any Taxes attributable to transactions or actions taken by PHH
or any PHH Affiliate on the Distribution Date, except for (i) any
transactions or actions undertaken in the ordinary course of
business consistent with past practices or (ii) the Distribution,
to the extent PHH would not otherwise be liable for any such Taxes
under Section 2.1(b), (c), or (d). To the extent required or
permissible, any extraordinary item, within the meaning of Treasury
Regulation Section 1.1502-76(b)(2)(ii)(C), of PHH or any PHH
Affiliate that occurs or results from a transaction that takes
place on the Distribution Date shall be treated as occurring at the
beginning of the day following the Distribution Date.
Section 1.3
Liability for Other
Taxes . PHH shall and
shall cause each PHH Affiliate to prepare and timely file all Tax
Returns for Other Taxes in respect of which the legal incidence of
the Other Tax is imposed on PHH or any PHH Affiliate, as the case
may be, and PHH shall be liable for and timely pay (or cause to be
paid) all such Other Taxes. Cendant shall and shall cause each
Cendant Affiliate to prepare and timely file all Tax Returns for
Other Taxes in respect of which the legal incidence of the Other
Tax is imposed on Cendant or any Cendant Affiliate, as the case may
be, and Cendant shall be liable for and timely pay (or cause to be
paid) all such Other Taxes. Responsibility for filing any Tax
Return and liability for paying any Other Tax that is legally
imposed on more than one legal entity (e.g., joint and several
liability) shall be allocated in accordance with past practices as
reasonably determined by Cendant, or in the absence of such
practices, in accordance with any reasonable allocation method
determined by Cendant.
Section 1.4
Agent . PHH hereby irrevocably designates, and agrees
to cause each PHH Affiliate to so designate, Cendant as its sole
and exclusive agent and attorney-in-fact and agrees to take such
action and to cause the PHH Affiliates to take such action
(including execution of powers of attorney and other documents) as
Cendant may reasonably request in connection with any matter
relating to Taxes, provided , that except as otherwise
provided in Section 1.6(g) and Section 5.4, this Section 1.4 shall
not apply to Taxes described in Section 1.2(b).
Section 1.5
Manner of Tax Return
Preparation .
(a) Unless otherwise required by a Taxing Authority,
the parties hereto shall prepare and file all Tax Returns and take
all other actions in a manner consistent with this Agreement. All
Tax Returns shall be filed on a timely basis (taking into account
applicable extensions) by the party responsible for filing such Tax
Returns under this Agreement.
(b) Subject to Section 1.5(a), Cendant shall have
the exclusive right in its reasonable discretion with respect to
any Tax Return described in Section 1.1 to determine all relevant
matters, including without limitation (1) the manner in which such
Tax Return shall be prepared and filed, including the elections,
methods of accounting, positions, conventions and principles of
taxation to be used and the manner in which any Tax Asset or Tax
related matter regarding such Tax Return shall be reported,
provided that Cendant shall elect out of bonus depreciation
under section 168(k) of the Code for PHH and each PHH Affiliate for
the taxable year ended December 31, 2004, (2) whether any
extensions may be requested, (3) the elections that will be made by
Cendant, any Cendant Affiliate, PHH, or any PHH Affiliate on such
Tax Return, (4) whether any amended Tax Return(s) shall be filed,
(5) whether any claim(s) for refund shall be made, (6) whether any
refund shall be paid by way of refund or credited against any
liability for the related Tax, and (7) whether to retain outside
firms to prepare or review such Tax Returns.
Section 1.6
Certain Tax Benefits
.
(a) PHH shall pay to Cendant the amount of any Tax
Benefit Realized by PHH or any PHH Affiliate in each taxable year
that is attributable to the transactions undertaken pursuant to the
Avis Merger Agreement being characterized in a manner other than as
reported by Cendant or any Cendant Affiliate on its originally
filed applicable income Tax Returns. Within sixty (60) days of any
Final Determination that may give rise to an obligation of PHH
under this Section 1.6(a) (an "Avis Final Determination"), Cendant
shall notify PHH in writing of such Avis Final Determination and
shall provide PHH with such information reasonably required by PHH
for PHH and each relevant PHH Affiliate to account for any Tax
Asset (or any increase in any Tax Asset) and to determine the Tax
Benefit potentially available attributable to the Avis Final
Determination. Notwithstanding the foregoing, the failure of
Cendant to provide notice to PHH within the time required by the
preceding sentence shall not relieve PHH of any liability and/or
obligation which it may have under this Section 1.6.
(b) Within sixty (60) days after PHH receives notice
of any Avis Final Determination, PHH shall provide to Cendant a
schedule showing, in reasonable detail, the effect of the Avis
Final Determination (the "Tax Benefit Schedule") on any Tax Asset
or Tax liability of PHH and the PHH Affiliates for each taxable
period ending on or before the date of the notice for which PHH
filed the applicable Tax Return. Within thirty (30) days of the
finalization of the Tax Benefit Schedule, as described in
subsection (d) below, PHH shall take or cause to be taken all steps
necessary or appropriate to Realize any Tax Benefit attributable to
past taxable periods, including the prompt filing of amended Tax
Returns and/or claims for refund.
(c) PHH shall file and shall cause each PHH
Affiliate to file all current and future Tax Returns consistent
with the Avis Final Determination and so as to Realize as quickly
as possible any Tax Benefit potentially available to PHH and each
PHH Affiliate, and shall provide to Cendant a Tax Benefit Schedule
and a calculation of the Tax Benefit Realized annually, no later
than 120 days prior to the due date, including applicable
extensions, of PHH's federal Income Tax Return until such time as
the parties in good faith agree that PHH has no remaining
obligation for any Tax Benefit.
(d) Each time PHH delivers the Tax Benefit Schedule
to Cendant, PHH shall also (i) deliver to Cendant schedules and
work papers providing reasonable detail regarding the preparation
of the Tax Benefit Schedule and the Tax Benefit Realized and an
Advisory Firm Letter supporting such Tax Benefit Schedule and Tax
Benefit Realized and (ii) allow Cendant reasonable access to the
appropriate representatives at PHH and each PHH Affiliate and the
Advisory Firm in connection with its review of such schedule. The
Tax Benefit Schedule shall become final and binding on the parties
unless Cendant, within thirty (30) calendar days after receiving
such schedule, provides PHH with notice of a good faith objection
to such Tax Benefit Schedule. If a Dispute arises between PHH and
Cendant with respect to the Tax Benefit Schedule, Tax Benefit or
the Tax Benefit Realized, such Dispute shall be resolved in
accordance with the principles and procedures set forth in Section
6.3.
(e) PHH shall pay Cendant the amount of Tax Benefit
Realized by PHH and each PHH Affiliate within thirty (30) days of
the date on which such Tax Benefit is Realized by PHH or such PHH
Affiliate, as the case may be.
(f) There shall be an adjustment to any Tax Benefit
calculated under Section 1.6 hereof in the event of an Audit which
results in a Final Determination that increases or decreases the
amount of such Tax Benefit to PHH or any PHH Affiliate reported on
any relevant Tax Return of PHH or any PHH Affiliate. PHH shall
promptly inform Cendant of any such Audit, shall use its reasonable
best efforts to sustain the Tax Benefit at issue in the Audit, and
shall, at Cendant's request, allow Cendant to participate in the
Audit. Upon receiving written notice of a Final Determination
affecting any Tax Benefit, PHH shall redetermine the relevant Tax
Benefit, taking into account the Final Determination (the
“Restated Tax Benefit”). If the Restated Tax Benefit is
greater than the relevant Tax Benefit, PHH shall promptly pay
Cendant the difference between such amounts. If the Restated Tax
Benefit is less than the relevant Tax Benefit, Cendant shall pay to
PHH the difference between such amounts promptly after receipt of
written notice setting forth the amount due and the computation
thereof.
(g)
New Jersey Business Incentive
Program .
(i) Notwithstanding anything to the contrary set
forth in this Agreement, Cendant shall have the exclusive right and
sole discretion to control, contest and represent the interests of
PHH and each PHH Affiliate in any filing, claim and/or proceeding
relating or attributable to the New Jersey Business
Employment
Incentive Program (the "BEIP") for all periods ending on or prior
to the Distribution Date. In connection with this Section 1.6(g),
PHH shall designate, and shall cause each PHH Affiliate to
designate, Cendant (and Cendant employees and representatives of
Cendant) as its attorney-in-fact and agrees to take such action and
cause each PHH Affiliate to take such action (including execution
of appropriate powers of attorney and other documents) as Cendant
may reasonably request for all periods ending on or prior to the
Distribution Date. With respect to a filing, claim and/or
proceeding relating or attributable to the BEIP for a Straddle
Period (as defined below), PHH shall have the right and discretion
to control, contest and represent the interests of PHH and each PHH
Affiliate, provided that (x) Cendant shall have the right to
participate in any such contest or other matter relating to the
BEIP for such Straddle Period, and PHH and each PHH Affiliate shall
keep Cendant fully informed of all matters relating to such contest
or other matter and (y) PHH shall use reasonable best efforts to
obtain any BEIP Payments (as defined below) that are attributable
to such Straddle Period and are otherwise legally obtainable by PHH
and/or one or more PHH Affiliates.
(ii) Notwithstanding anything to the contrary set
forth in this Agreement, PHH shall pay to Cendant, no later than
five calendar days after receipt by PHH and each PHH Affiliate, as
the case may be, of each BEIP Payment (as defined below), an amount
equal to (x) with respect to all periods ending on or before the
Distribution Date, the Net BEIP Payment (as defined below)
attributable to each BEIP Payment and (y) with respect to any
period that begins on or before and ends after the Distribution
Date (a "Straddle Period"), the Net BEIP Payment for such Straddle
Period multiplied by a fraction the numerator of which is the
number of calendar days in the Straddle Period ending on (and
including) the Distribution Date and the denominator of which is
the number of calendar days in such entire Straddle Period. For
purposes of the Agreement, (i) "BEIP Payment" means each payment
received by PHH and each PHH Affiliate from the State of New Jersey
attributable to the BEIP, (ii) "Net BEIP Payment" means the excess
of (x) one hundred percent (100%) of each BEIP Payment received by
PHH and each PHH Affiliate over (y) the PHH BEIP Deductible Amount,
and (iii) "PHH BEIP Deductible Amount" means, with respect to each
BEIP Payment, the lesser of (x) 10 percent of such BEIP Payment and
(y) [***]. PHH shall provide to Cendant promptly upon request any
contract (and any modification or amendments thereto) between PHH
and the PHH Consultant.
Section 1.7
Net Operating Losses
. Notwithstanding any other
provision of this Agreement, PHH shall elect (under section
172(b)(3) of the Code and, to the extent feasible, any similar
provision of any state, local or foreign Tax law) to relinquish any
right to carry back net operating losses to any Cendant
Consolidated and Combined Income Tax Return.
______________
[***] INDICATES
MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
ARTICLE II
DISTRIBUTION TAXES AND INTERNAL
REORGANIZATION TAXES
Section 2.1
Distribution Taxes and Internal
Reorganization Taxes .
(a) Cendant’s Liability for
Distribution Taxes and Internal Reorganization Taxes .
Notwithstanding any other provision of this Agreement to the
contrary other than Section 2.1(c), Cendant shall be liable for one
hundred percent (100%) of any Distribution Taxes and/or Internal
Reorganization Taxes that are attributable to, or result from, one
or more of the following:
(i) any action, or failure or omission to act, by
Cendant or any Cendant Affiliate that is inconsistent with any
material, information, fact, or statement, or that constitutes a
breach of any covenant or representation, pertaining to Cendant or
any Cendant Affiliate in the Cendant Representation
Letters;
(ii) any action, or failure or omission to act, by
Cendant or any Cendant Affiliate after the Distribution, including,
without limitation, a cessation, transfer to affiliates, or
disposition of its active trades or businesses or other businesses,
or an issuance of stock, stock buyback, or payment of an
extraordinary dividend by Cendant or any Cendant Affiliate
following the Distribution;
(iii) any acquisition of stock or other equity or
assets of Cendant or any Cendant Affiliate by one or more other
Persons occurring prior to or following the Distribution;
or
(iv) any issuance of stock by Cendant or any Cendant
Affiliate, or change in ownership of stock in Cendant or any
Cendant Affiliate, that causes section 355(d) or section 355(e) of
the Code to apply to the Distribution.
(b)
PHH’s Liability for
Distribution Taxes and Internal Reorganization Taxes
. Notwithstanding any other
provision of this Agreement to the contrary other than Section
2.1(c), PHH shall be liable for one hundred percent (100%) of any
Distribution Taxes and/or Internal Reorganization Taxes that are
attributable to, or result from, one or more of the
following:
(i) any action, or failure or omission to act, by
PHH or any PHH Affiliate that is inconsistent with any material,
information, fact, or
statement, or
that constitutes a breach of any covenant or representation,
pertaining to PHH in the PHH Representation Letter;
(ii) any action, or failure or omission to act, by
PHH or any PHH Affiliate after the Distribution, including without
limitation, a cessation, transfer to affiliates or disposition of
its active trades or businesses or other businesses, or an issuance
of stock, stock buyback, or payment of an extraordinary dividend by
PHH or any PHH Affiliate following the Distribution;
(iii) any acquisition of stock or other equity or
assets of PHH or any PHH Affiliate by one or more other Persons
following the Distribution; or
(iv) any issuance of stock by PHH or any PHH
Affiliate, or change in ownership of stock in PHH or any PHH
Affiliate, that causes section 355(d) or section 355(e) of the Code
to apply to the Distribution.
(c)
First Party
Responsible . The first
party to act or fail to act in a manner that results in the
imposition of Distribution Taxes and/or Internal Reorganization
Taxes shall be liable for one hundred percent (100%) of such
Distribution Taxes and/or Internal Reorganization Taxes pursuant to
Section 2.1(a) or 2.1(b), as applicable; provided , that if
such first party is subsequently able to act, and does act, in a
manner that results in Distribution Taxes and/or Internal
Reorganization Taxes not being imposed, then such first party shall
not be liable for any Distribution Taxes and/or Internal
Reorganization Taxes imposed as a result of any act, or failure or
omission to act, by the other party subsequent to the first
party’s action, or failure or omission to act.
(d)
"No Fault" Allocation
. In the event of the imposition of
Distribution Taxes or Internal Reorganization Taxes for which
neither party is liable pursuant to Sections 2.1(a) or 2.1(b), such
Taxes shall be borne 86.3 percent by Cendant and 13.7 percent by
PHH.
Section 2.2
Continuing Covenants
.
(a) PHH shall not and shall cause the PHH Affiliates
not to take any action, or fail or omit to take any action that
would cause any of the facts, representations or statements set
forth in the PHH Representation Letter to be untrue. Moreover, (x)
during the two-year period following the Distribution Date, PHH
will not cease to be engaged in the active trade or business relied
upon for purposes of satisfying the requirements of Section 355(b)
of the Code with respect to the Internal Distribution and/or the
Distribution, and (y) during the applicable period provided in
Section 355(e)(2)(B) of the Code with respect to the Distribution,
PHH will not enter into any transaction or make or permit any
change in equity structure (including, without limitation, stock
issuances, pursuant to the exercise of options, option grants or
otherwise, capital contributions, or mergers or acquisitions, but
not including the Distribution) that could cause the Distribution
or the Internal Distribution to be treated as part of a plan
pursuant to which one or more Persons acquire directly or
indirectly PHH stock representing a "50-percent or greater
interest" within the meaning of Section 355(e) of the
Code.
(b) Notwithstanding Section 2.2(a), PHH shall be
permitted to take and shall permit the PHH Affiliates to take
actions inconsistent with the covenants contained in such section
if: (i) PHH obtains a ruling from the IRS in form and substance
acceptable to Cendant to the effect that such actions will not
result in the Distribution, the Internal Distribution or the
Internal Reorganization, as the case may be, being taxable
transactions, in whole or in part, or (ii) PHH obtains an opinion
in form and substance acceptable to Cendant of nationally
recognized tax counsel acceptable to Cendant to the effect that
such actions will not result in the Distribution, the Internal
Distribution or the Internal Reorganization being taxable
transactions, in whole or in part. Notwithstanding the receipt of
an IRS ruling or a tax opinion described in this Section 2.2(b),
PHH and the PHH Affiliates shall not be relieved of any
indemnification obligations under this Agreement.
ARTICLE
III
INDEMNIFICATION
(a) Cendant shall indemnify PHH, each PHH Affiliate,
and their respective directors, officers and employees, and hold
them harmless from and against all Taxes and associated Losses,
without duplication, (i) for which Cendant is liable under this
Agreement, (ii) imposed on PHH or any PHH Affiliate under Treasury
Regulation Section 1.1502-6 (or any corresponding provision of
state, local, or foreign Tax law) as a result of PHH or any PHH
Affiliate being a member of the Affiliated Group (or similar group
under state, local, or foreign Tax law) of which Cendant or any
Cendant Affiliate is the common parent, except to the extent that
PHH otherwise would be liable for such Taxes under Article II of
this Agreement, or (iii) attributable to a breach of any covenant
or obligation of Cendant under this Agreement.
(b) PHH shall indemnify Cendant, each Cendant
Affiliate, and their respective directors, officers, and employees,
and hold them harmless from and against all Taxes and associated
Losses, without duplication, (i) for which PHH is liable under this
Agreement, (ii) imposed on any Cendant Affiliate under Treasury
Regulation Section 1.1502-6 (or any corresponding provision of
state, local, or foreign Tax law) as a result of any Cendant
Affiliate being a member of the Affiliated Group (or similar group
under state, local, or foreign Tax law) of which PHH or any PHH
Affiliate is the common parent, except to the extent that Cendant
otherwise would be liable for such Taxes under Article II of this
Agreement, or (iii) attributable to a breach of any covenant or
obligation of PHH under this Agreement.
Section 3.2
No Indemnification for Tax
Attributes .
Notwithstanding anything to the contrary contained in this
Agreement, Cend
