Exhibit 10.2

 

TAX MATTERS AGREEMENT

 

by and among

 

Herc Holdings Inc.,

 

The Hertz Corporation,

 

Herc Rentals Inc.

 

and

 

Hertz Global Holdings, Inc.

 

Dated as of June 30, 2016

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

DEFINITIONS

 

 

 

Section 1.01

General

2

Section 1.02

Additional Definitions

8

 

 

 

ARTICLE II

 

ALLOCATION, PAYMENT AND INDEMNIFICATION

 

 

 

Section 2.01

Responsibility for Taxes; Indemnification

8

Section 2.02

2016 Consolidated Tax Payments

10

Section 2.03

Transaction Taxes

11

Section 2.04

Preparation of Tax Returns

11

Section 2.05

Payment of Sales, Use or Similar Taxes

12

Section 2.06

Audits and Proceedings

12

Section 2.07

Amended Returns; Carrybacks

13

Section 2.08

Refunds

14

Section 2.09

Earnings and Profits Allocation

14

 

 

 

ARTICLE III

 

TAX-FREE STATUS OF THE DISTRIBUTION

 

 

 

Section 3.01

Representations and Warranties

14

Section 3.02

Restrictions Relating to the Distribution

15

Section 3.03

Procedures Regarding Opinions and Rulings

17

 

 

 

ARTICLE IV

 

COOPERATION

 

 

 

Section 4.01

General Cooperation

18

Section 4.02

Retention of Records

19

 

 

 

ARTICLE V

 

MISCELLANEOUS

 

 

 

Section 5.01

Dispute Resolution

20

 

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Section 5.02

Tax Sharing Agreements

20

Section 5.03

Interest on Late Payments

20

Section 5.04

Survival of Covenants

21

Section 5.05

Termination

21

Section 5.06

Severability

21

Section 5.07

Entire Agreement

21

Section 5.08

Assignment; No Third-Party Beneficiaries

21

Section 5.09

Specific Performance

22

Section 5.10

Amendment

22

Section 5.11

Rules of Construction

22

Section 5.12

Counterparts

23

Section 5.13

Employee Matters

23

Section 5.14

Effective Date

23

Section 5.15

Notices

23

Section 5.16

Applicable Law

24

 

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TAX MATTERS AGREEMENT

 

THIS TAX MATTERS AGREEMENT (this “Agreement”), dated as of June 30, 2016, is by
and between Herc Holdings Inc. (f/k/a Hertz Global Holdings, Inc.), a Delaware
corporation (“HERC Parent”), The Hertz Corporation, a Delaware corporation
(“THC”), Herc Rentals Inc. (f/k/a Hertz Equipment Rental Corporation), a
Delaware corporation (“HERC”) and Hertz Global Holdings, Inc. (f/k/a Hertz
Rental Car Holding Company, Inc.), a Delaware corporation (“RAC Parent”).  Each
of HERC Parent, THC, HERC and RAC Parent is sometimes referred to herein as a
“Party” and, collectively, as the “Parties.”

 

WHEREAS, HERC Parent, through its various subsidiaries, is engaged in the Car
Rental Business (as defined below) and the Equipment Rental Business (as defined
below);

 

WHEREAS, the board of directors of HERC Parent has determined that it is in the
best interests of HERC Parent, its shareholders and RAC Parent to create a
separate publicly-traded company that will operate the Car Rental Business;

 

WHEREAS, HERC Parent and RAC Parent have entered into the Distribution
Agreement, pursuant to which (i) HERC Parent and its subsidiaries will undertake
certain internal restructuring transactions, (ii) HERC Parent will contribute
certain entities conducting the Car Rental Business to RAC Parent and (iii) all
of the stock of RAC Parent will be distributed by HERC Parent to its
stockholders on a pro rata basis (the “Distribution”);

 

WHEREAS, prior to consummation of the Distribution, HERC Parent was the common
parent corporation of an affiliated group of corporations within the meaning of
Section 1504 of the Code of which each of THC, HERC and RAC Parent was a member;

 

WHEREAS, the Parties intend that, for federal income Tax purposes, each of the
Spin-Offs will qualify as tax-free to HERC Parent and its subsidiaries, RAC
Parent and HERC Parent’s stockholders pursuant to Sections 355 and (to the
extent applicable) 368 and related provisions of the Code; and

 

WHEREAS, the Parties wish to (a) provide for the payment of Tax liabilities and
entitlement to refunds thereof, allocate responsibility for, and cooperation in,
the filing of Tax Returns, and provide for certain other matters relating to
Taxes, and (b) set forth certain covenants and indemnities relating to the
preservation of the tax-free status of the Spin-Offs.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions,
covenants and provisions of this Agreement, each of the Parties mutually
covenants and agrees as follows:

 

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ARTICLE I

 

DEFINITIONS

 

Section 1.01                             General.  As used in this Agreement,
the following terms shall have the following meanings:

 

“Accounting Firm” has the meaning set forth in Section 5.01.

 

“Affiliate” has the meaning set forth in the Distribution Agreement.

 

“Affiliated Group” means an affiliated group of corporations, within the meaning
of Section 1504(a) of the Code, including the common parent corporation, and any
member of such group.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Ancillary Agreements” has the meaning set forth in the Distribution Agreement.

 

“Car Rental Business” has the meaning set forth in the Distribution Agreement.

 

“Closing Date” means the date on which the Distribution occurs.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Consolidated Taxes” means (i) United States federal income Taxes and (ii) any
other income Taxes determined on a consolidated, combined, unitary or similar
basis.

 

“Counsel” means Debevoise & Plimpton LLP.

 

“Disqualifying Action” means a HERC Parent Disqualifying Action or a RAC Parent
Disqualifying Action.

 

“Distribution” has the meaning set forth in the recitals to this Agreement.

 

“Distribution Agreement” means the Separation and Distribution Agreement by and
between RAC Parent and HERC Parent dated as of June 30, 2016.

 

“Due Date” means (i) with respect to a Tax Return, the date (taking into account
all valid extensions) on which such Tax Return is required to be filed under
applicable Law and (ii) with respect to a payment of Taxes, the date on which
such payment is required to be made to avoid the incurrence of interest,
penalties and/or additions to Tax.

 

“Effective Time” means the time at which the Distribution is effective pursuant
to the Distribution Agreement.

 

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“Employee Matters Agreement” means the Employee Matters Agreement by and between
RAC Parent and HERC Parent dated as of June 30, 2016.

 

“Equipment Rental Business” has the meaning set forth in the Distribution
Agreement.

 

“Extraordinary Transaction” shall mean any action that is not in the ordinary
course of business, but shall not include any action that is undertaken pursuant
to the Spin-Offs.

 

“Fifty-Percent or Greater Interest” has the meaning ascribed to such term for
purposes of Sections 355(d) and (e) of the Code.

 

“Final Determination” means the final resolution of liability for any Tax for
any taxable period, by or as a result of (i) a final decision, judgment, decree
or other order by any court of competent jurisdiction that can no longer be
appealed; (ii) a final settlement with the IRS, a closing agreement or accepted
offer in compromise under Section 7121 or 7122 of the Code, or a comparable
agreement under the Laws of other jurisdictions, that resolves the entire Tax
liability for any taxable period; (iii) any allowance of a refund or credit in
respect of an overpayment of Tax, but only after the expiration of all periods
during which such refund or credit may be recovered by the jurisdiction imposing
the Tax; or (iv) any other final resolution, including by reason of the
expiration of the applicable statute of limitations or the execution of a
pre-filing agreement with the IRS or other Taxing Authority.

 

“HERC” has the meaning set forth in the preamble to this Agreement.

 

“HERC Parent” has the meaning set forth in the preamble to this Agreement.

 

“HERC Parent Consolidated Group” means the Affiliated Group of which HERC Parent
is the common parent corporation.

 

“HERC Parent Consolidated Return” shall mean any Tax Return filed by HERC Parent
or any HERC Subsidiary as the common parent in respect of Consolidated Taxes.

 

“HERC Parent Disqualifying Action” means (i) any action (or the failure to take
any action) within its control by HERC Parent or any HERC Subsidiary (including
entering into any agreement, understanding or arrangement or any negotiations
with respect to any transaction or series of transactions) that, (ii) any event
(or series of events) involving the capital stock of HERC Parent, any assets of
HERC Parent or any assets of any HERC Subsidiary that, or (iii) any breach by
HERC Parent or any HERC Subsidiary of any representation, warranty or covenant
made by them in this Agreement that, in each case, would negate the Tax-Free
Status of the Transactions; provided, however, the term “HERC Parent
Disqualifying Action” shall not include any action described in the

 

3

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Distribution Agreement or any Ancillary Agreement or that is undertaken pursuant
to the Spin-Offs.

 

“HERC Parent Group” means, individually or collectively, as the case may be,
HERC Parent and any HERC Subsidiary.

 

“HERC Parent Proposed Acquisition Transaction” means a transaction or series of
transactions (or any agreement, understanding or arrangement, within the meaning
of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any
other regulations promulgated thereunder, to enter into a transaction or series
of transactions), whether such transaction is supported by HERC Parent
management or shareholders, is a hostile acquisition, or otherwise, as a result
of which HERC Parent would merge or consolidate with any other Person or as a
result of which one or more Persons would (directly or indirectly) acquire, or
have the right to acquire, from HERC Parent and/or one or more holders of
outstanding shares of HERC Parent capital stock, as the case may be, a number of
shares of HERC Parent capital stock that would, when combined with any other
changes in ownership of HERC Parent capital stock pertinent for purposes of
Section 355(e) of the Code, compose 40% or more of (A) the value of all
outstanding shares of stock of HERC Parent as of the date of such transaction,
or in the case of a series of transactions, the date of the last transaction of
such series, or (B) the total combined voting power of all outstanding shares of
voting stock of HERC Parent as of the date of such transaction, or in the case
of a series of transactions, the date of the last transaction of such series. 
Notwithstanding the foregoing, a HERC Parent Proposed Acquisition Transaction
shall not include (A) the adoption by HERC Parent of a shareholder rights plan
or any modification thereof or (B) issuances by HERC Parent that satisfy Safe
Harbor VIII (relating to acquisitions in connection with a person’s performance
of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of
an employer) of Treasury Regulation Section 1.355-7(d).  This definition and the
application thereof is intended to monitor compliance with Section 355(e) of the
Code and shall be interpreted accordingly.  Any clarification of, or change in,
the statute or regulations promulgated under Section 355(e) of the Code shall be
incorporated in this definition and its interpretation.

 

“HERC Parties” means HERC Parent and HERC.

 

“HERC Subsidiary” means any Subsidiary of HERC Parent immediately after the
Effective Time.

 

“Indemnifying Party” means the Party from which the other Party is entitled to
seek indemnification pursuant to the provisions of Section 2.01.

 

“Indemnified Party” means the Party that is entitled to seek indemnification
from the other Party pursuant to the provisions of Section 2.01.

 

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“Internal Reorganization” has the meaning set forth in the Distribution
Agreement.

 

“IRS” means the U.S. Internal Revenue Service or any successor thereto,
including its agents, representatives and attorneys.

 

“IRS Ruling” means the federal income tax ruling, and any supplements thereto,
issued to HERC Parent by the IRS in connection with the Spin-Offs.

 

“Law” means any U.S. or non-U.S. federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code,
administrative pronouncement, order, requirement or rule of law (including
common law).

 

“Notified Action” has the meaning set forth in Section 3.03(a).

 

“Opinions” means the opinions of Counsel and of KPMG, LLP with respect to
certain Tax aspects of the Spin-Offs.

 

“Party” has the meaning set forth in the preamble to this Agreement.

 

“Person” has the meaning set forth in the Distribution Agreement.

 

“Post-Closing Period” means any taxable period (or portion thereof) beginning
after the Closing Date.

 

“Pre-Closing Period” means any taxable period (or portion thereof) ending on or
before the Closing Date.

 

“Pre-Closing Payment Amount” has the meaning set forth in Section 2.02(a).

 

“Proposed Acquisition Transaction” means a HERC Parent Proposed Acquisition
Transaction or a RAC Parent Proposed Acquisition Transaction.

 

“Restriction Period” has the meaning set forth in Section 3.02(b).

 

“SAG” has the meaning ascribed to the term “separate affiliated group” in
Section 355(b)(3)(B) of the Code.

 

“RAC Parent” has the meaning set forth in the preamble to this Agreement.

 

“RAC Parent Disqualifying Action” means (i) any action (or the failure to take
any action) within its control by RAC Parent or any RAC Subsidiary (including
entering into any agreement, understanding or arrangement or any negotiations
with respect to any transaction or series of transactions) that, (ii) any event
(or series of events) involving the capital stock of RAC Parent, any assets of
RAC Parent or any assets of any RAC

 

5

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Subsidiary that, or (iii) any breach by RAC Parent or any RAC Subsidiary of any
representation, warranty or covenant made by them in this Agreement that, in
each case, would negate the Tax-Free Status of the Transactions; provided,
however, the term “RAC Parent Disqualifying Action” shall not include any action
described in the Distribution Agreement or any Ancillary Agreement or that is
undertaken pursuant to the Spin-Offs.

 

“RAC Parent Group” means, individually or collectively, as the case may be, RAC
Parent and any RAC Subsidiary.

 

“RAC Parent Proposed Acquisition Transaction” means a transaction or series of
transactions (or any agreement, understanding or arrangement, within the meaning
of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any
other regulations promulgated thereunder, to enter into a transaction or series
of transactions), whether such transaction is supported by RAC Parent management
or shareholders, is a hostile acquisition, or otherwise, as a result of which
RAC Parent would merge or consolidate with any other Person or as a result of
which one or more Persons would (directly or indirectly) acquire, or have the
right to acquire, from RAC Parent and/or one or more holders of outstanding
shares of RAC Parent capital stock, as the case may be, a number of shares of
RAC Parent capital stock that would, when combined with any other changes in
ownership of RAC Parent capital stock pertinent for purposes of
Section 355(e) of the Code, compose 40% or more of (A) the value of all
outstanding shares of stock of RAC Parent as of the date of such transaction, or
in the case of a series of transactions, the date of the last transaction of
such series, or (B) the total combined voting power of all outstanding shares of
voting stock of RAC Parent as of the date of such transaction, or in the case of
a series of transactions, the date of the last transaction of such series. 
Notwithstanding the foregoing, a RAC Parent Proposed Acquisition Transaction
shall not include (A) the adoption by RAC Parent of a shareholder rights plan or
any modification thereof or (B) issuances by RAC Parent that satisfy Safe Harbor
VIII (relating to acquisitions in connection with a person’s performance of
services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an
employer) of Treasury Regulation Section 1.355-7(d).  This definition and the
application thereof is intended to monitor compliance with Section 355(e) of the
Code and shall be interpreted accordingly.  Any clarification of, or change in,
the statute or regulations promulgated under Section 355(e) of the Code shall be
incorporated in this definition and its interpretation.

 

“RAC Parties” means RAC Parent and THC.

 

“RAC Subsidiary” means any Subsidiary of RAC Parent immediately after the
Effective Time.

 

“Section 3.02(d) Acquisition Transaction” means any transaction or series of
transactions that is not a Proposed Acquisition Transaction but would be a
Proposed Acquisition Transaction if the percentage reflected in the definitions
of HERC Parent

 

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Proposed Acquisition Transaction and RAC Parent Proposed Acquisition Transaction
were 25% instead of 40%.

 

“Spin-Offs” means the First Internal Spin-Off and the Second Internal Spin-Off
(as each of such terms are used with respect to the Internal Reorganization) and
the Distribution.

 

“Standalone Taxes” means Taxes other than Consolidated Taxes.

 

“Subsidiary” has the meaning set forth in the Distribution Agreement.

 

“Tax” means (i) all taxes, charges, fees, duties, levies, imposts, or other
similar assessments, imposed by any U.S. federal, state or local or foreign
governmental authority, including income, gross receipts, excise, property,
sales, use, license, capital stock, transfer, franchise, payroll, withholding,
social security, value added and other taxes of any kind whatsoever, (ii) any
interest, penalties or additions attributable thereto and (iii) all liabilities
in respect of any items described in clause (i) or (ii) payable by reason of
assumption, transferee or successor liability, operation of Law or Treasury
Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any
analogous or similar provision under Law).

 

“Tax-Free Status of the Transactions” means the tax-free treatment accorded to
the Spin-Offs as set forth in the IRS Ruling and the Opinions.

 

“Taxing Authority” means any governmental authority or any subdivision, agency,
commission or entity thereof or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or imposition of any
Tax (including the IRS).

 

“Tax Item” shall mean any item of income, gain, loss, deduction, expense or
credit, or other attribute that may have the effect of increasing or decreasing
any Tax.

 

“Tax Materials” has the meaning set forth in Section 3.01(a).

 

“Tax Matter” has the meaning set forth in Section 4.01.

 

“Tax Notice” has the meaning set forth in Section 2.06(a).

 

“Tax Return” means any return, report, certificate, form or similar statement or
document (including any related or supporting information or schedule attached
thereto and any information return, or declaration of estimated Tax) supplied or
required to be supplied to, or filed with, a Taxing Authority in connection with
the payment, determination, assessment or collection of any Tax or the
administration of any Laws relating to any Tax and any amended Tax return or
claim for refund.

 

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“THC” has the meaning set forth in the preamble to this Agreement.

 

“Transaction Taxes” shall mean (i) any Tax resulting from any income or gain
recognized by HERC Parent, RAC Parent or their Affiliates as a result of any of
the Spin-Offs failing to qualify for tax-free treatment under Sections 355 and
368 and related provisions of the Code or corresponding provisions of other
applicable Tax Laws and (ii) any Tax resulting from any income or gain
recognized by HERC Parent or its Affiliates under Treasury Regulation
Section 1.1502-13 or 1.1502-19 (or any corresponding provisions of other
applicable Tax Laws) as a result of any of the Spin-Offs.

 

“Transfer Taxes” means all sales, use, transfer, real property transfer,
intangible, recordation, registration, documentary, stamp or similar Taxes
imposed on any of the transactions contemplated by the Distribution Agreement
that are effective at or before the Effective Time and not, for the avoidance of
doubt, any Taxes incurred as a result of any changes to the legal entities of
the members of the HERC Parent Group or the operation of the Equipment Rental
Business following the Effective Time.

 

“Transition Services Agreement” means the Transition Services Agreement by and
between RAC Parent and HERC Parent dated as of [ ], 2016.

 

“Treasury Regulations” means the final and temporary (but not proposed) income
Tax regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).

 

“Unqualified Tax Opinion” means a “will” opinion, without substantive
qualifications, of a nationally-recognized law firm to the effect that a
transaction will not affect the Tax-Free Status of the Transactions.

 

“U.S.” means the United States of America.

 

Section 1.02                             Additional Definitions.  Capitalized
terms not defined in this Agreement shall have the meaning ascribed to them in
the Distribution Agreement.

 

ARTICLE II

 

ALLOCATION, PAYMENT AND INDEMNIFICATION

 

Section 2.01                             Responsibility for Taxes;
Indemnification.

 

(a)                                 The HERC Parties shall indemnify and hold
harmless the RAC Parent Group for all Tax liabilities (and any loss, cost,
damage or expense, including reasonable attorneys’ fees and costs, incurred in
connection therewith) attributable to (i) any Taxes of HERC Parent or any member
of the HERC Parent Consolidated Group imposed upon the RAC Parent Group by
reason of the RAC Parent Group being severally liable for

 

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such Taxes pursuant to Treasury Regulation Section 1.1502-6 or any analogous
provision of state or local Law, except to the extent attributable to Taxes for
which any member of the RAC Parent Group is responsible under this Agreement;
(ii) HERC Parent’s portion of any Transaction Taxes determined pursuant to
Section 2.03; (iii) HERC Parent’s portion of any Transfer Taxes determined
pursuant to Section 2.05; (iv) any Taxes of the RAC Parent Group resulting from
the breach of any obligation or covenant of HERC Parent under this Agreement;
(v) any Taxes of the HERC Parent Group for any Post-Closing Period; and (vi) any
Standalone Taxes of HERC Parent or any HERC Subsidiary for any Tax period.

 

(b)                                 The RAC Parties shall indemnify and hold
harmless the HERC Parent Group for all Tax liabilities (and any loss, cost,
damage or expense, including reasonable attorneys’ fees and costs, incurred in
connection therewith) attributable to (i) any Taxes of the RAC Parent Group for
any Post-Closing Period other than Taxes described in Section 2.01(a); (ii) any
Consolidated Taxes of the RAC Parent Group (applying the principles of the last
sentence of Section 2.02(a)) for any Pre-Closing Period in excess of the
Pre-Closing Payment Amount (as adjusted under Section 2.02(b)); (iii) any Taxes
of the HERC Parent Group resulting from the breach of any obligation or covenant
of RAC Parent under this Agreement; (iv) RAC Parent’s portion of any Transaction
Taxes determined pursuant to Section 2.03; (v) RAC Parent’s portion of any
Transfer Taxes determined pursuant to Section 2.05; and (vi) any Standalone
Taxes of RAC or any RAC Subsidiary for any Tax period.

 

(c)                                  For the avoidance of doubt, any Tax
liability calculated pursuant to this Section 2.01, Section 2.02 or Section 2.03
shall be determined after the utilization of any net operating loss, capital
loss or similar Tax attribute, and the Parties agree that no loss or diminution
of any such Tax attribute shall be compensated hereunder. If the Indemnifying
Party is required to indemnify the Indemnified Party pursuant to this
Section 2.01, the Indemnified Party shall submit its calculations of the amount
required to be paid pursuant to this Section 2.01, showing such calculations in
reasonable detail and supplying supporting documentation. Subject to the
following sentence, the Indemnifying Party shall pay to the Indemnified Party,
no later than thirty (30) days after the Indemnifying Party receives the
Indemnified Party’s calculations, the amount that the Indemnifying Party is
required to pay the Indemnified Party under this Section 2.01.  If the
Indemnifying Party disagrees with such calculations, it shall notify the
Indemnified Party of its disagreement and set forth the basis for such
disagreement in writing within ten (10) business days of receiving such
calculations.

 

(d)                                 For purposes of this Agreement, any
liability for Taxes attributable to a taxable period that begins before and ends
after the Closing Date shall be apportioned between the portion of such period
ending on the Closing Date and the portion beginning on the day after the
Closing Date (i) in the case of real and personal property Taxes, by
apportioning such Taxes on a per diem basis and (ii) in the case of all other
Taxes, on the

 

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basis of a closing of the books as of the close of business on the Closing Date,
provided that exemptions, allowances or deductions that are calculated on an
annual basis shall be apportioned on a per diem basis.

 

(e)                                  All indemnity payments pursuant to this
Section 2.01 shall be treated as relating to periods ending on or prior to the
Effective Time and shall be treated for all tax purposes as (i) a contribution
of cash to RAC Parent pursuant to the Distribution Agreement or (ii) a reduction
to the cash deemed to be contributed pursuant to clause (i), or to the extent
the aggregate net indemnity payments to the HERC Parent Group and its Affiliates
would exceed the amount of such deemed contributed cash, as a distribution with
respect to stock of RAC Parent.

 

Section 2.02                             2016 Consolidated Tax Payments.

 

(a)                                 On or prior to the Closing Date, HERC Parent
shall, in good faith, estimate the Tax liability, if any, of the RAC Parent
Group for Consolidated Taxes for which HERC Parent or any HERC Subsidiary is
liable as the common parent, in each case for the taxable year ending on the
Closing Date, and if any such liability is estimated, then the RAC Parent Group
shall pay to HERC Parent an amount equal to the excess of such estimated
liability over all amounts previously paid to HERC Parent by any members of the
RAC Parent Group or paid to RAC Parent pursuant to any assignment of such
payment by HERC Parent to RAC Parent for Consolidated Taxes for such taxable
year (the amount of such payment, together with the amounts of such prior
payments and assignments, the “Pre-Closing Payment Amount”).  Such Tax liability
shall be computed solely by reference to the members of the RAC Parent Group
that are members of the HERC Parent Consolidated Group prior to the Closing
Date, and shall be determined as though such members filed on a consolidated
basis with RAC Parent as the common parent, taking into account the utilization
of any net operating loss carryforward or other tax attribute of the RAC Parent
Group determined as though such members had always filed on such basis. 
Notwithstanding the preceding sentence, in the case of any state or local
Consolidated Taxes, such Tax liability shall be computed by multiplying the
income or loss determined by reference to the members of the RAC Parent Group
that are members of the HERC Parent Consolidated Group prior to the Closing Date
by the apportionment or allocation factors (e.g., property, payroll, sales or
similar factors) as reflected on the Tax Return for such Consolidated Tax for
the relevant Tax period.

 

(b)                                 Following the filing of the HERC Parent
Consolidated Returns for the taxable year including the Closing Date, HERC
Parent shall calculate the Tax liability, if any, of the RAC Parent Group for
Consolidated Taxes for such taxable year as reflected in such HERC Parent
Consolidated Returns, and the RAC Parent Group shall pay to HERC Parent an
amount equal to the difference between (x) the amount of such Liability and
(y) the Pre-Closing Payment Amount, or if such difference is a negative number,
HERC Parent shall pay, or cause to be paid, to RAC Parent an amount equal to
such

 

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difference. Such Tax liability shall be computed in the same manner as the
estimated Tax liability determined under Section 2.02(a).

 

(c)                                  HERC Parent shall prepare and deliver to
RAC Parent a schedule showing in reasonable detail HERC Parent’s calculation of
any amount payable by HERC Parent to RAC Parent pursuant to Section 2.02(b) or
any amount payable by RAC Parent to HERC Parent pursuant to Section 2.02(a) or
(b), as the case may be, and, subject to Section 5.01, RAC Parent shall pay to
HERC Parent, or HERC Parent shall pay to RAC Parent, as applicable, the amount
shown on such schedule no later than thirty (30) days following the delivery of
such schedule by HERC Parent to RAC Parent.

 

Section 2.03                             Transaction Taxes.  Any Transaction
Taxes attributable to a HERC Parent Disqualifying Action (but not any RAC Parent
Disqualifying Action) shall be borne 100% by HERC Parent.  Any Transaction Taxes
attributable to a RAC Parent Disqualifying Action (but not any HERC Parent
Disqualifying Action) shall be borne 100% by RAC Parent. Any Transaction Taxes
(i) not attributable to any Disqualifying Action or (ii) attributable to both a
HERC Parent Disqualifying Action and a RAC Parent Disqualifying Action shall be
borne by HERC Parent and by RAC Parent in proportion to the relative fair market
values of the stock of HERC Parent and of RAC Parent, based upon the 10-day
volume-weighted average trading price (beginning with the trading day
immediately following the Closing Date) of the stock of HERC Parent and RAC
Parent.  Notwithstanding the foregoing provisions of this Section 2.03, if
(A) HERC Parent knowingly makes a false written representation on or prior to
the Effective Time to KPMG LLP or Counsel, and such misrepresentation causes a
HERC Parent Disqualifying Action, or (B) a HERC Parent Disqualifying Action
relates solely to a representation made, or action taken, prior to the Effective
Time and is not described in clause (A) of this sentence, then Transaction Taxes
attributable to a matter described in clause (A) of this sentence shall be borne
100% by RAC Parent and Transaction Taxes attributable to a matter described in
clause (B) of this sentence shall be borne by HERC Parent and RAC Parent in the
proportions described in clause (ii) of the immediately preceding sentence.  THC
may make payments to RAC Parent in respect of any Transaction Taxes imposed on
RAC Parent that are borne by RAC Parent pursuant to this Agreement, and HERC may
make payments to HERC Parent in respect of any Transaction Taxes imposed on HERC
Parent that are borne by HERC Parent pursuant to this Agreement.

 

Section 2.04                             Preparation of Tax Returns.

 

(a)                                 Subject to the Transition Services
Agreement, HERC Parent shall prepare and timely file (taking into account
applicable extensions) all HERC Parent Consolidated Returns, and shall pay all
Taxes (subject to any indemnification rights it may have against RAC Parent). 
HERC Parent shall provide copies of all HERC Parent Consolidated Returns for
Pre-Closing Periods to RAC Parent for RAC Parent’s review and comment not less
than 30 days prior to the due date for filing such HERC Parent Consolidated
Returns (taking into account extensions).  If HERC Parent and RAC Parent

 

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cannot reach agreement on any item with respect to such HERC Parent Consolidated
Returns, such disagreement shall be resolved in accordance with Section 5.01. 
Each of HERC Parent and RAC Parent shall be responsible for filing Tax Returns
of the members of the HERC Parent Group and of the RAC Parent Group,
respectively, in respect of Standalone Taxes.

 

(b)                                 Unless otherwise required by a Taxing
Authority, the Parties agree to prepare and file all Tax Returns, and to take
all other actions, in a manner consistent with this Agreement.

 

(c)                                  Notwithstanding anything to the contrary in
this Agreement, for all Tax purposes, the Parties shall report any Extraordinary
Transactions that are caused or permitted by RAC Parent or any RAC Subsidiary on
the Closing Date after the completion of the Distribution as occurring on the
day after the Closing Date pursuant to Treasury Regulation
Section 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state,
local or foreign Law.  HERC Parent shall not make a ratable allocation election
pursuant to Treasury Regulation Section 1.1502-76(b)(2)(ii)(D) or any similar or
analogous provision of state, local or foreign Law.

 

(d)                                 RAC Parent shall make all decisions
regarding any election (including a protective election) under Section 336(e) of
the Code (and any corresponding provision under state or local tax law) with
respect to the Spin-Offs and the HERC Parties shall cooperate as requested by
RAC Parent in connection with making any such election.

 

Section 2.05                             Payment of Sales, Use or Similar
Taxes.  All Transfer Taxes shall be borne equally by the HERC Parties on the one
hand and RAC Parties on the other.  Notwithstanding anything in Section 2.03 to
the contrary, the Party required by applicable Law shall remit payment for any
Transfer Taxes and duly and timely file such Tax Returns, subject to any
reimbursement rights it may have against the other Party, which shall be paid in
accordance with Section 2.01(c).  RAC Parent, HERC Parent and their respective
Affiliates shall cooperate in (i) determining the amount of such Taxes,
(ii) providing all requisite exemption certificates and (iii) preparing and
timely filing any and all required Tax Returns for or with respect to such Taxes
with any and all appropriate Taxing Authorities.

 

Section 2.06                             Audits and Proceedings.

 

(a)                                 Notwithstanding any other provision hereof,
if after the Closing Date, an Indemnified Party or any of its Affiliates
receives any notice, letter, correspondence or claim from any Taxing Authority
(a “Tax Notice”) and, upon receipt of such Tax Notice, believes it has suffered
or potentially could suffer any Tax liability for which it is indemnified
pursuant to Section 2.01 in respect of Consolidated Taxes, the Indemnified Party
shall promptly deliver such Tax Notice to the Indemnifying Party; provided, that
HERC Parent shall deliver to RAC Parent any Tax Notice in respect of Transaction
Taxes

 

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and provided further that the failure of the Indemnified Party to provide the
Tax Notice to the Indemnifying Party shall not affect the indemnification rights
of the Indemnified Party pursuant to Section 2.01, except to the extent that the
Indemnifying Party is materially prejudiced by the Indemnified Party’s failure
to deliver such Tax Notice.  HERC Parent shall have the right to handle, defend,
conduct and control, at its own expense, any Tax audit or other administrative
or judicial proceeding that relates to such Tax Notice; provided that RAC Parent
shall have the right to handle, defend, conduct and control, at its own expense,
the portion of any Tax audit or administrative or judicial proceeding
(i) relating to Transaction Taxes or (ii) which could give rise to an indemnity
claim against the RAC Parties pursuant to Section 2.01 (and HERC Parent shall
have the right to participate, at its own expense, in any such audit or
proceeding described in clauses (i) and (ii)).  The party controlling such Tax
audit or administrative or judicial proceeding shall have the right to
compromise or settle any such Tax audit or proceeding that it has subject, in
the case of a compromise or settlement that would materially and adversely
affect the other party, to such party’s consent, which consent shall not be
unreasonably withheld, provided that such consent shall not be required if the
party controlling such Tax audit or proceeding agrees to indemnify the other
party for any liabilities for Taxes resulting from such compromise or
settlement.  If the Indemnifying Party fails within a reasonable time after
notice to defend any such Tax Notice or the resulting audit or administrative or
judicial proceeding as provided herein, the Indemnifying Party shall be bound by
the results obtained by the Indemnified Party in connection therewith.  The
Indemnifying Party shall pay to the Indemnified Party the amount of any Tax
liability within 30 days after a Final Determination of such Tax liability.  For
the avoidance of doubt, in the case of any such liability pertaining to a state
or local Consolidated Tax, such liability will be determined pursuant to the
principles set forth in the last sentence of Section 2.02(a), including
apportionment factors, as recomputed pursuant to such Final Determination.

 

(b)                                 Each of HERC Parent and RAC Parent shall
handle, defend, conduct and control Tax audits or administrative or judicial
proceedings of any member of the HERC Parent Group and RAC Parent Group,
respectively, in respect of Standalone Taxes.

 

Section 2.07                             Amended Returns; Carrybacks.

 

(a)                                 Except as required by Law, without the prior
written consent of RAC Parent or one of its Affiliates, HERC Parent may not
amend or cause to be amended any HERC Parent Consolidated Return with respect to
any Pre-Closing Period to the extent such amendment would reasonably be expected
adversely to affect the Tax liability of any member of the RAC Parent Group,
provided that such consent shall not be required if HERC Parent agrees to
indemnify RAC Parent for any liabilities for Taxes resulting from such
amendment.  If RAC Parent requests that HERC Parent amend any HERC Parent
Consolidated Return with respect to any Pre-Closing Period, HERC Parent shall
promptly make such amendment unless (i) such amendment is not permitted by
applicable Law, (ii)

 

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such amendment would result in a carryback of a federal income Tax Item as
described in Section 2.07(b) (in which case such amendment shall be subject to
Section 2.07(b)), or (iii) such amendment would reasonably be expected adversely
to affect the Tax liability of any member of the HERC Parent Group, provided
that HERC Parent shall make an amendment described in clause (iii) if RAC Parent
agrees to indemnify HERC Parent for any liabilities for Taxes resulting from
such amendment.

 

(b)                                 To the extent permitted by applicable Law,
no member of the RAC Parent Group shall carry back any Tax Item in respect of
Consolidated Taxes to a Pre-Closing Period.  To the extent any such carryback is
required by applicable Law, RAC Parent shall be entitled to the benefit of any
resulting refund in accordance with Section 2.08.

 

(c)                                  Each of HERC Parent and RAC Parent may
amend any Tax Returns of any member of the HERC Parent Group and RAC Parent
Group, as the case may be, in respect of Standalone Taxes.

 

Section 2.08                             Refunds.  Any refund of Consolidated
Taxes received from a Taxing Authority by any member of the HERC Parent Group or
the RAC Parent Group with respect to a HERC Parent Consolidated Return shall be
the property of the HERC Parent Group, except to the extent that such Tax refund
relates to any Taxes for which the RAC Parent Group is responsible under this
Agreement.  Each of HERC Parent and RAC Parent shall be entitled to any Tax
refunds of the members of the HERC Parent Group and RAC Parent Group,
respectively, in respect of Standalone Taxes.  If HERC Parent or its Affiliates,
or RAC Parent and its Affiliates, receives a refund to which the other Party and
its Affiliates is entitled pursuant to this agreement, the Party receiving such
refund shall promptly pay to the other Party the amount of such refund, net of
any out-of-pocket costs (including Taxes) incurred in connection with securing
and receiving such refund.  If any such refund is subsequently disallowed by the
relevant Taxing Authority, the applicable Party shall promptly make a
reconciling payment to the other Party.

 

Section 2.09                             Earnings and Profits Allocation.  HERC
Parent will advise RAC Parent in writing of the decrease in HERC Parent earnings
and profits attributable to the Distribution under Section 312(h) of the Code on
or before the first anniversary of the Distribution.

 

ARTICLE III

 

TAX-FREE STATUS OF THE DISTRIBUTION

 

Section 3.01                             Representations and Warranties.

 

(a)                                 RAC Parent. RAC Parent hereby represents and
warrants or covenants and agrees, as appropriate, that the facts presented and
the representations made in (i) the IRS Ruling, (ii) the Opinions, (iii) each
submission to the IRS in connection with the IRS

 

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Ruling, (iv) the representation letters from HERC Parent and RAC Parent
addressed to Counsel and to KPMG, LLP supporting the Opinions, and (v) any other
materials delivered or deliverable by HERC Parent or RAC Parent in connection
with the rendering of the Opinions and the issuance by the IRS of the IRS Ruling
(all of the foregoing, collectively, the “Tax Materials”), to the extent
descriptive of the RAC Parent Group (including the plans, proposals, intentions
and policies of the RAC Parent Group), are, or will be from the time represented
or made through and including the Effective Time and thereafter as relevant,
true, correct and complete in all respects.

 

(b)                                 HERC Parent.  HERC Parent hereby represents
and warrants or covenants and agrees, as appropriate, that the facts presented
and the representations made in the Tax Materials, to the extent descriptive of
the HERC Parent Group (including the plans, proposals, intentions and policies
of the HERC Parent Group), are, or will be from the time represented or made
through and including the Effective Time and thereafter as relevant, true,
correct and complete in all respects.

 

(c)                                  No Contrary Knowledge.  Each of HERC Parent
and RAC Parent represents and warrants that it knows of no fact (after due
inquiry) that may cause the Tax treatment of the Spin-Offs to be other than the
Tax-Free Status of the Transactions.

 

(d)                                 No Contrary Plan.  Each of HERC Parent and
RAC Parent represents and warrants that neither it, nor any of its Affiliates,
has any plan or intent to take any action that is inconsistent with any
statements or representations made in the Tax Materials.

 

Section 3.02                             Restrictions Relating to the
Distribution.

 

(a)                                 General.  Neither HERC Parent nor RAC Parent
shall, nor shall HERC Parent or RAC Parent permit any HERC Subsidiary or any RAC
Subsidiary, respectively, to take or fail to take, as applicable, any action
that constitutes a Disqualifying Action described in the definitions of HERC
Parent Disqualifying Action and RAC Parent Disqualifying Action, respectively.

 

(b)                                 Restrictions.  Prior to the first day
following the second anniversary of the Distribution (the “Restriction Period”),
the following restrictions shall apply, respectively, to HERC Parent and RAC
Parent:

 

(i)                                     each of HERC Parent and RAC Parent shall
continue and cause to be continued the active conduct of the Equipment Rental
Business and the Car Rental Business, respectively, (as such terms are defined
in the submissions to the IRS in connection with the IRS Ruling), in each case
taking into account Section 355(b)(3) of the Code, in all cases as conducted
immediately prior to the Distribution.

 

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(ii)                                  neither HERC Parent nor RAC Parent shall
voluntarily dissolve or liquidate (including any action that is a liquidation
for federal income tax purposes).

 

(iii)                               neither HERC Parent nor RAC Parent shall
(A) enter into any HERC Parent Proposed Acquisition Transaction or RAC Parent
Proposed Acquisition Transaction (as applicable) or, to the extent HERC Parent
or RAC Parent (as applicable) has the right to prohibit any HERC Parent Proposed
Acquisition Transaction or RAC Parent Proposed Acquisition Transaction (as
applicable), permit any such HERC Parent Proposed Acquisition Transaction or RAC
Parent Proposed Acquisition Transaction to occur, (B) redeem or otherwise
repurchase (directly or through an Affiliate) any stock, or rights to acquire
stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of
Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue
Procedure by Revenue Procedure 2003-48), (C) amend its certificate of
incorporation (or other organizational documents), or take any other action,
whether through a stockholder vote or otherwise, in each case, to the extent
affecting the relative voting rights of its capital stock (including through the
conversion of any capital stock into another class of capital stock), (D) merge
or consolidate with any other Person or (E) take any other action or actions
(including any action or transaction that would be reasonably likely to be
inconsistent with any representation made in the Tax Materials) that in the
aggregate (and taking into account any other transactions described in this
Section 3.02(b)(iii)) would be reasonably likely to have the effect of causing
or permitting one or more Persons (whether or not acting in concert) to acquire
directly or indirectly stock representing a Fifty-Percent or Greater Interest in
HERC Parent or RAC Parent (as applicable) or otherwise jeopardize the Tax-Free
Status of the Transactions.

 

(iv)                              Neither HERC Parent nor RAC Parent shall, and
neither shall permit any member of its respective SAG to, sell, transfer, or
otherwise dispose of or agree to sell, transfer or otherwise dispose (including
in any transaction treated for federal income tax purposes as a sale, transfer
or disposition) of assets (including any shares of capital stock of a
Subsidiary) that, in the aggregate, constitute more than 30% of the gross assets
of RAC Parent or HERC Parent, as applicable, or more than 30% of the
consolidated gross assets of RAC Parent or HERC Parent, as applicable, and
members of their respective SAG.  The foregoing sentence shall not apply to
(A) sales, transfers, or dispositions of assets in the ordinary course of
business, (B) any cash paid to acquire assets from an unrelated Person in an
arm’s-length transaction, (C) any assets transferred to a Person that is
disregarded as an entity separate from the transferor for federal income tax
purposes or (D) any mandatory or optional repayment (or pre-payment) of any
indebtedness of RAC Parent or HERC Parent (or any member of their respective
SAG).  The percentages of gross assets or consolidated gross

 

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assets of RAC Parent, HERC Parent or their respective SAG, as the case may be,
sold, transferred, or otherwise disposed of, shall be based on the fair market
value of the gross assets of RAC Parent or HERC Parent, as applicable, and the
members of their respective SAG as of the Closing Date.  For purposes of this
Section 3.02(b)(iv), a merger of RAC Parent or HERC Parent (or a member of their
respective SAG) with and into any Person shall constitute a disposition of all
of the assets of RAC Parent, HGH or such member, as applicable.

 

(c)                                  Notwithstanding the restrictions imposed by
Section 3.02(b), during the Restriction Period, each of the Parties may proceed
with any of the actions or transactions described therein, if (i) such Party
obtains an Unqualified Tax Opinion, reasonably satisfactory to the other
Parties, to the effect that such action or transaction will not affect the
Tax-Free Status of the Transactions, (ii) HERC Parent obtains a supplemental
ruling from the IRS (in the case of an action or transaction with respect to the
RAC Parent Group, at RAC Parent’s request and expense) that such action or
transaction will not affect the Tax-Free Status of the Transactions or (iii) the
other Parties shall have waived in writing the requirement to obtain such ruling
or opinion.

 

(d)                                 Notice of Certain Transactions.  If HERC
Parent or RAC Parent proposes to enter into any Section 3.02(d) Acquisition
Transaction or, to the extent HGH or RAC Parent (as applicable) has the right to
prohibit any Section 3.02(d) Acquisition Transaction, proposes to permit any
Section 3.02(d) Acquisition Transaction to occur, in each case, during the
Restriction Period, HERC Parent or RAC Parent (as applicable) shall provide the
other party, no later than ten (10) days following the signing of any written
agreement with respect to any Section 3.02(d) Acquisition Transaction, with a
written description of such transaction (including the type and amount of
capital stock to be issued in such transaction).

 

(e)                                  Tax Reporting.  Each of HERC Parent and RAC
Parent covenants and agrees that it will not take, and will cause the HERC
Subsidiaries or the RAC Subsidiaries, as applicable, to refrain from taking, any
position on any income or franchise Tax Return that is inconsistent with the
Tax-Free Status of the Transactions.

 

Section 3.03                             Procedures Regarding Opinions and
Rulings.

 

(a)                                 If RAC Parent notifies HERC Parent that it
desires to take one of the actions described in Section 3.02(b) (a “Notified
Action”), HERC Parent shall cooperate with RAC Parent and use its reasonable
best efforts to seek to obtain, as expeditiously as possible, a supplemental
ruling from the IRS or an Unqualified Tax Opinion (including by making any
representation or reasonable covenant or providing any materials requested by
the IRS or the law firm issuing such opinion) for the purpose of permitting RAC
Parent to take the Notified Action unless HERC Parent shall have waived the
requirement to obtain such ruling or opinion; provided that HERC Parent shall
not be required to make (or cause a HERC Subsidiary to make) any representation
or covenant

 

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that is inconsistent with historical facts or as to future matters or events
over which it has no control.  If such a ruling is to be sought, HERC Parent
shall apply for such ruling and HERC Parent and RAC Parent shall jointly control
the process of obtaining such ruling.  In no event shall HERC Parent be required
to file any ruling request under this Section 3.03(a) unless RAC Parent
represents that (i) it has read such ruling request, and (ii) all information
and representations, if any, relating to any member of the RAC Parent Group
contained in such ruling request documents are (subject to any qualifications
therein) true, correct and complete.  RAC Parent shall reimburse HERC Parent for
all reasonable costs and expenses incurred by the HERC Parent Group in obtaining
a ruling or Unqualified Tax Opinion requested by RAC Parent within thirty (30)
days after receiving an invoice from HERC Parent therefor.

 

(b)           If HERC Parent notifies RAC Parent that it desires to take a
Notified Action, RAC Parent shall (and shall cause each RAC Subsidiary to)
cooperate with HERC Parent and take any and all actions reasonably requested by
HERC Parent in connection with obtaining such ruling or opinion (including by
making any representation or reasonable covenant or providing any materials
requested by the IRS or the law firm issuing such opinion); provided that RAC
Parent shall not be required to make (or cause a RAC Subsidiary to make) any
representation or covenant that is inconsistent with historical facts or as to
future matters or events over which it has no control.  In connection with
obtaining such ruling, HERC Parent shall apply for such ruling and HERC Parent
and RAC Parent shall jointly control the process of obtaining such ruling.  HERC
Parent shall reimburse RAC Parent for all reasonable costs and expenses incurred
by the RAC Parent Group in obtaining a ruling or Unqualified Tax Opinion
requested by HERC Parent within thirty (30) days after receiving an invoice from
RAC Parent therefor.

 

(c)           Except as provided in Sections 3.03(a) and (b), neither RAC Parent
nor HERC Parent (or any Affiliate thereof) shall seek any guidance from the IRS
or any other Taxing Authority (whether written, verbal or otherwise) at any time
concerning the Spin-Offs (including the impact of any transaction on the
Spin-Offs) without the consent of the other Party, such consent not to be
unreasonably withheld.

 

ARTICLE IV

 

COOPERATION

 

Section 4.01          General Cooperation.  The Parties shall each cooperate
(and each shall cause its respective Subsidiaries to cooperate) with all
reasonable requests in writing from another Party hereto, or from an agent,
representative or advisor to such Party, in connection with the preparation and
filing of Tax Returns, claims for Tax refunds, Tax proceedings, and calculations
of amounts required to be paid pursuant to this Agreement, in each case, related
or attributable to or arising in connection with Taxes of any of the Parties or
their respective Subsidiaries covered by this Agreement and the establishment

 

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of any reserve required in connection with any financial reporting (a “Tax
Matter”).  Such cooperation shall include the provision of any information
reasonably necessary or helpful in connection with a Tax Matter and shall
include, at each Party’s own cost:

 

(a)           the provision of any Tax Returns of the Parties and their
respective Subsidiaries, books, records (including information regarding
ownership and Tax basis of property), documentation and other information
relating to such Tax Returns, including accompanying schedules, related work
papers, and documents relating to rulings or other determinations by Taxing
Authorities;

 

(b)           the execution of any document (including any power of attorney) in
connection with any Tax proceedings of any of the Parties or their respective
Subsidiaries, or the filing of a Tax Return or a Tax refund claim of the Parties
or any of their respective Subsidiaries;

 

(c)           the use of the Party’s reasonable best efforts to obtain any
documentation in connection with a Tax Matter;

 

(d)           the use of the Party’s reasonable best efforts to obtain any Tax
Returns (including accompanying schedules, related work papers, and documents),
documents, books, records or other information in connection with the filing of
any Tax Returns of any of the Parties or their Subsidiaries; and

 

(e)           in the case of participation in any audit or administrative
proceeding as provided in Section 2.06 by any Party, the Party controlling such
audit or proceeding shall provide the participating Party with copies of the
relevant portions of all correspondence with the relevant Taxing Authority and
other relevant documentation, and shall permit the participating Party to
attend, but not control, such audits and proceedings.

 

Each Party shall make its employees, advisors, and facilities available, without
charge, on a reasonable and mutually convenient basis in connection with the
foregoing matters.

 

Section 4.02          Retention of Records.  HERC Parent and RAC Parent shall
retain or cause to be retained all Tax Returns, schedules and workpapers, and
all material records or other documents relating thereto in their possession,
until sixty (60) days after the expiration of the applicable statute of
limitations (including any waivers or extensions thereof) of the taxable periods
to which such Tax Returns and other documents relate, provided, for the
avoidance doubt, that in the case of records or documents relating to a net
operating loss or capital loss carryforward, such records shall be maintained
until sixty (60) days after the expiration of the statute of limitations for the
taxable period to which such loss is carried and utilized, or until the
expiration of any additional period that any Party reasonably requests, in
writing, with respect to specific material records or

 

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documents.  A Party intending to destroy any material records or documents shall
provide the other Party with reasonable advance notice and the opportunity to
copy or take possession of such records and documents.  The Parties hereto will
notify each other in writing of any waivers or extensions of the applicable
statute of limitations that may affect the period for which the foregoing
records or other documents must be retained.

 

ARTICLE V

 

MISCELLANEOUS

 

Section 5.01          Dispute Resolution.  The Parties shall appoint a
nationally-recognized independent public accounting firm (the “Accounting Firm”)
to resolve any dispute as to matters covered by this Agreement.  In this regard,
the Accounting Firm shall make determinations with respect to the disputed items
based solely on representations made by the Parties and their respective
representatives, and not by independent review, and shall function only as an
expert and not as an arbitrator and shall be required to make a determination
only in favor of either the HERC Parties or the RAC Parties.  The Parties shall
require the Accounting Firm to resolve all disputes no later than thirty (30)
days after the submission of such dispute to the Accounting Firm, but in no
event later than the Due Date for the payment of Taxes or the filing of the
applicable Tax Return, if applicable, and agree that all decisions by the
Accounting Firm with respect thereto shall be final, conclusive and binding on
the Parties.  The Accounting Firm shall resolve all disputes in a manner
consistent with this Agreement and, to the extent not inconsistent with this
Agreement, in a manner consistent with the past practices of HERC Parent and its
Subsidiaries, except as otherwise required by applicable Law.  The Parties shall
require the Accounting Firm to render all determinations in writing and to set
forth, in reasonable detail, the basis for such determination.  The fees and
expenses of the Accounting Firm shall be paid by the non-prevailing Party.

 

Section 5.02          Tax Sharing Agreements.  All Tax sharing, indemnification
and similar agreements, written or unwritten, as between HERC Parent or a HERC
Subsidiary, on the one hand, and RAC Parent or a RAC Subsidiary, on the other
(other than this Agreement, the Distribution Agreement and any other Ancillary
Agreement), shall be or shall have been either (a) terminated no later than the
Effective Time and, after the Effective Time, none of HERC Parent or a HERC
Subsidiary, or RAC Parent or a RAC Subsidiary shall have any further rights or
obligations under any such Tax sharing, indemnification or similar agreement or
(b) assumed by members of the RAC Parent Group.

 

Section 5.03          Interest on Late Payments.  With respect to any payment
between the Parties pursuant to this Agreement not made by the due date set
forth in this Agreement for such payment, the outstanding amount will accrue
interest at a rate per annum equal to the rate in effect for underpayments under
Section 6621 of the Code from

 

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such due date to and including the earlier of the ninetieth (90th) day or the
payment date and thereafter will accrue interest at a rate per annum equal to 9%
if it is higher.

 

Section 5.04          Survival of Covenants.  Except as otherwise contemplated
by this Agreement, all covenants and agreements of the Parties contained in this
Agreement shall survive the Effective Time and remain in full force and effect
in accordance with their applicable terms; provided, however, that the
representations and warranties and all indemnification for Taxes shall survive
until sixty (60) days following the expiration of the applicable statute of
limitations (taking into account all extensions thereof), if any, of the Tax
that gave rise to the indemnification; provided, further, that, in the event
that notice for indemnification has been given within the applicable survival
period, such indemnification shall survive until such time as such claim is
finally resolved.

 

Section 5.05          Termination.  Notwithstanding any provision to the
contrary, this Agreement may be terminated at any time prior to the Effective
Time by and in the sole discretion of HERC Parent without the prior approval of
any Person, including RAC Parent.  In the event of such termination, this
Agreement shall become void and no Party, or any of its officers and directors
shall have any liability to any Person by reason of this Agreement.  After the
Effective Time, this Agreement may not be terminated except by an agreement in
writing signed by each of the Parties to this Agreement.

 

Section 5.06          Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced under any Law or as
a matter of public policy, all other conditions and provisions of this Agreement
shall remain in full force and effect.  Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
to this Agreement shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible in a
mutually acceptable manner.

 

Section 5.07          Entire Agreement.  Except as otherwise expressly provided
in this Agreement, this Agreement constitutes the entire agreement of the
Parties hereto with respect to the subject matter of this Agreement and
supersedes all prior agreements and undertakings, both written and oral, among
or on behalf of the Parties hereto with respect to the subject matter of this
Agreement.  In the event of any conflict or inconsistency between the provisions
of this Agreement and the provisions of the Distribution Agreement, the
provisions of this Agreement shall govern and control.

 

Section 5.08          Assignment; No Third-Party Beneficiaries.  This Agreement
shall not be assigned by any Party without the prior written consent of the
other Parties hereto, except that such Party may assign (i) any or all of its
rights and obligations under this Agreement to any of its Affiliates and
(ii) any or all of its rights and obligations under this Agreement in connection
with a sale or disposition of any assets or entities or lines of business of
such Party; provided, however, that, in each case, no such assignment shall
release such Party from any liability or obligation under this Agreement. 
Except as

 

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provided in Article II with respect to indemnified Parties, this Agreement is
for the sole benefit of the Parties to this Agreement and their respective
Subsidiaries and their permitted successors and assigns and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.

 

Section 5.09          Specific Performance.  In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the Party who is or is to be thereby aggrieved shall have the
right to specific performance and injunctive or other equitable relief of its
rights under this Agreement, in addition to any and all other rights and
remedies at law or in equity, and all such rights and remedies shall be
cumulative.  The Parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, may be inadequate compensation
for any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.  Any requirements for the securing or
posting of any bond with such remedy are waived by the Parties to this
Agreement.

 

Section 5.10          Amendment.  No provision of this Agreement may be amended
or modified except by a written instrument signed by the Parties to this
Agreement.  No waiver by any Party of any provision of this Agreement shall be
effective unless explicitly set forth in writing and executed by the Party so
waiving.  The waiver by any Party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other subsequent breach.

 

Section 5.11          Rules of Construction.  Interpretation of this Agreement
shall be governed by the following rules of construction: (i) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other gender as the context requires;
(ii) references to the terms Article, Section, and clause are references to the
Articles, Sections and clauses of this Agreement unless otherwise specified;
(iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or
similar words refer to this entire Agreement; (iv) references to “$” shall mean
U.S. dollars; (v) the word “including” and words of similar import when used in
this Agreement shall mean “including without limitation,” unless otherwise
specified; (vi) the word “or” shall not be exclusive; (vii) references to
“written” or “in writing” include in electronic form; (viii) provisions shall
apply, when appropriate, to successive events and transactions; (ix) the
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement; (x) HGH
and RAC Parent have each participated in the negotiation and drafting of this
Agreement and if an ambiguity or question of interpretation should arise, this
Agreement shall be construed as if drafted jointly by the Parties hereto and no
presumption or burden of proof shall arise favoring or burdening any Party by
virtue of the authorship of any of the provisions in this Agreement or any
interim drafts of this Agreement; and (xi) a reference to any Person includes
such Person’s successors and permitted assigns.

 

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Section 5.12          Counterparts.  This Agreement may be executed in one or
more counterparts each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement. 
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or portable document format (PDF) shall be as effective as delivery of
a manually-executed counterpart of this Agreement.

 

Section 5.13          Employee Matters.  Any items of deduction in respect of
equity-based awards to employees of the HERC Parent Group or the RAC Parent
Group arising in Post-Closing Periods shall be the property of the relevant
employer and its Affiliates, and the Parties shall file their Tax Returns
accordingly.  To the extent any covenants or agreements between the Parties with
respect to employee withholding Taxes are set forth in the Employee Matters
Agreement, such Taxes shall be governed exclusively by the Employee Matters
Agreement and not by this Agreement.

 

Section 5.14          Effective Date.  This Agreement shall become effective
only upon the occurrence of the Distribution.

 

Section 5.15          Notices.  All notices and other communications hereunder
shall be in writing, shall reference this Agreement and shall be hand delivered
or mailed by registered or certified mail (return receipt requested) to the
Parties at the following addresses (or at such other addresses for a Party as
shall be specified by like notice) and will be deemed given on the date on which
such notice is received:

 

To HERC Parent:

 

Herc Holdings Inc.
27500 Riverview Center Blvd.
Bonita Springs, FL 34134
Attention: Maryann Waryjas
Marlin Shaw
Fax: (239)-301-1109
mwaryjas@hertz.com
marlin.shaw@hertz.com

 

To RAC Parent:

 

Hertz Global Holdings, Inc.
8501 Williams Road
Estero, FL 33928
Attention: Richard J. Frecker
William J. Murphy
Fax: (866) 888-3765
rfrecker@hertz.com
wjmurphy@hertz.com

 

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Section 5.16          Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

 

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the day and year first above written.

 

 

 

Herc Holdings Inc.

 

 

 

 

 

 

 

By:

/s/ Lawrence H. Silber

 

 

Name: Lawrence H. Silber

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

 

Herc Rentals Inc.

 

 

 

 

 

 

 

By:

/s/ Lawrence H. Silber

 

 

Name: Lawrence H. Silber

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

 

The Hertz Corporation

 

 

 

 

 

 

 

By:

/s/ Richard J. Frecker

 

 

Name: Richard J. Frecker

 

 

Title: Senior Vice President, Deputy General Counsel,

 

 

Secretary and Acting General Counsel

 

 

 

 

 

 

 

Hertz Global Holdings, Inc.

 

 

 

 

 

 

 

By:

/s/ Richard J. Frecker

 

 

Name: Richard J. Frecker

 

 

Title: Senior Vice President, Deputy General Counsel,

 

 

Secretary and Acting General Counsel

 

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