EXHIBIT 10.7
TAX AGREEMENT
BY AND BETWEEN
CONTINENTAL AIRLINES, INC.,
EXPRESSJET HOLDINGS, INC.
AND
EXPRESSJET AIRLINES, INC.
TAX AGREEMENT
TAX AGREEMENT (this "Agreement"), dated as of April 17, 2002, by and
between Continental Airlines, Inc., a Delaware corporation ("Continental"),
ExpressJet Holdings, Inc., a Delaware corporation ("Holdings"), and ExpressJet
Airlines, Inc. ("ExpressJet Airlines"), a Delaware corporation (formerly known
as New ExpressJet Airlines, Inc.).
RECITALS
WHEREAS, Continental is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Code and of
consolidated, combined, unitary and other similar groups as defined under
similar laws of other jurisdictions, and Holdings and certain Holdings
Affiliates are members of such groups;
WHEREAS, the groups of which Continental is the common parent and
Holdings and the Holdings Affiliates are members file Consolidated Returns and
Combined Returns;
WHEREAS, Continental and XJT Holdings (formerly known as Continental
Express, Inc.) entered into a Tax Agreement effective January 1, 2001 (the
"Original Tax Agreement") setting forth the principles and responsibilities
regarding the allocation of Taxes (as defined herein) and other related
liabilities and adjustments with respect to Taxes during the periods during
which members of the Holdings Group are members of groups of which Continental
is the common parent;
WHEREAS, Continental and Holdings have entered into an Initial Public
Offering Agreement, and as a result of the transactions contemplated by that
agreement Holdings will cease to be a member of the Continental Group; and
WHEREAS, Continental and Holdings now wish to terminate the Original
Tax Agreement effective as of the Deconsolidation Date for federal income tax
purposes and to enter into this Agreement to set forth the principles and
responsibilities regarding Taxes.
NOW, THEREFORE, in consideration of the premises and the
representations, covenants and agreements contained herein and intending to be
legally bound, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Initial Public Offering
Agreement. As used in this Agreement, capitalized terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined).
"Affiliate" means a Holdings Affiliate or a Continental Affiliate, as
the case may be.
"Agreed Rate" means, LIBOR plus 200 basis points.
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"Agreement" has the meaning set forth in the Recitals.
"Allocated Attributes" means with respect to each jurisdiction in which
a Consolidated Return or Combined Return is filed, the Tax Attributes that are
available to the Holdings Group at the end of the period that includes the
Deconsolidation Date.
"Change Event" has the meaning set forth in Section 4.9.
"Change Notice" has the meaning set forth in Section 4.10.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Combined Group" means a group of corporations or other entities that
files a Combined Return.
"Combined Return" means any Tax Return (other than for Federal Income
Taxes) filed on a consolidated, combined (including nexus combination, worldwide
combination, domestic combination, line of business combination or any other
form of combination) or unitary basis wherein Holdings or one or more Holdings
Affiliates join in the filing of such Tax Return (for any taxable period or
portion thereof) with Continental or one or more Continental Affiliates.
"Consolidated Group" means an affiliated group of corporations within
the meaning of Section 1504(a) of the Code that files a Consolidated Return.
"Continental Affiliate" means a Person that is Controlled by
Continental, other than Holdings and its subsidiaries.
"Consolidated Return" means any Tax Return with respect to Federal
Income Taxes filed on a consolidated basis wherein Holdings or one or more
Holdings Affiliates join in the filing of such Tax Return (for any taxable
period or portion thereof) with Continental or one or more Continental
Affiliates.
"Continental" has the meaning set forth in the Recitals.
"Continental Group" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of entities as defined
under corresponding provisions of the laws of other jurisdictions, of which
Continental is the common parent, and any corporation or other entity which is a
member of such group for the relevant taxable period or portion thereof, but
excluding any member of the Holdings Group.
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Deconsolidation" means with respect to each Tax Return (i) any event
pursuant to which Holdings and all Holdings Affiliates cease to be subsidiary
corporations includable in the
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Consolidated Return, and (ii) any event pursuant to which neither Holdings nor
any Holdings Affiliate continues to be included in a Combined Return.
"Deconsolidation Date" means with respect to each jurisdiction in which
a Consolidated or Combined Tax Return is filed, the day on which Continental
reasonably determines a Deconsolidation occurs.
"Expected Restructuring Deductions" has the meaning set forth in
Section 4.8(c).
"Estimated Tax Installment Date" means the installments due dates
prescribed in Section 6655(c) of the Code or any similar provision of the laws
of any other jurisdiction in which a member of the Continental Group or Holdings
Group is subject to Income Tax.
"Federal Income Tax" means any Tax imposed under Subtitle A of the Code
or any other provision of United States federal Income Tax law (including the
Taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code), and any
interest, additions to Tax or penalties applicable or related thereto.
"Final Determination" means the final resolution of any Tax (or other
matter) for a taxable period, including related interest or penalties, that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise, including (1) by the expiration of a statute
of limitations or a period for the filing of claims for Refunds, amending Tax
Returns, appealing from adverse determinations, or recovering any Refund
(including by offset), (2) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable, (3) by
a closing agreement or an accepted offer in compromise under Section 7121 or
7122 of the Code, or comparable agreements under laws of other jurisdictions,
(4) by execution of an Internal Revenue Service Form 870AD, or by a comparable
form under the laws of other jurisdictions (excluding, however, with respect to
a particular Tax Item for a particular taxable period any such form that
reserves (whether by its terms or by operation of law) the right of the taxpayer
to file a claim for Refund and/or the right of the Tax Authority to assert a
further deficiency with respect to such Tax Item for such period), or (5) by any
allowance of a Refund or credit, but only after the expiration of all periods
during which such Refund may be adjusted.
"Holdings" has the meaning set forth in the Recitals.
"Holdings Affiliate" means a Person that directly or indirectly through
one or more intermediaries is Controlled by Holdings.
"Holdings Group" means the affiliated group of corporations as defined
in Section 1504(a) of the Code, or similar group of entities as defined under
corresponding provisions of the laws of other jurisdictions, of which Holdings
(or XJT Holdings or ExpressJet Airlines) is, or would be if it were not a
subsidiary of Continental, the common parent, and any corporation or other
entity which would be a member of such group for the relevant taxable period or
portion thereof.
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"Holdings Group Combined Tax Liability" means, with respect to any
taxable period, the Holdings Group's liability for Non-Federal Combined Taxes as
determined under Section 4.3 of this Agreement.
"Holdings Group Federal Income Tax Liability" means, with respect to
any taxable period, the Holdings Group's liability for Federal Income Taxes as
determined under Section 4.2 of this Agreement.
"Holdings Group Taxpayer" means (i) Holdings and any member of the
Holdings Group, (ii) any entity that ceases to be a Holdings Group Taxpayer
other than in a taxable sale of 100% of the stock (or other ownership interests)
of such entity and any affiliated group of corporations as defined in Section
1504(a) of the Code (or similar group of entities as defined under corresponding
provisions of the laws of other jurisdictions) of which any such entity is or
becomes a member, (iii) any entity to which assets of a Holdings Group Taxpayer
are transferred (other than entities that acquire assets in a transaction in
which all gain or loss is recognized or a transaction to which section 1031 of
the Code applies), and (iv) any entity with which a Holdings Group Taxpayer
engages in a merger, consolidation or similar combination (unless such merger,
consolidation or combination is a transaction in which all gain or loss is
recognized).
"Internal Restructuring" means the transfer of assets and liabilities
of XJT Holdings to ExpressJet Airlines in exchange for common stock and Series A
Preferred Stock of ExpressJet Airlines pursuant to the Asset Purchase and Sale
Agreement, dated as of April 16, 2002, by and between XJT Holdings and
ExpressJet Airlines and the sale of such Series A Preferred Stock pursuant to
the Series A Preferred Stock Purchase Agreement, dated as of April 15, 2002, by
and between XJT Holdings and Boeing Capital Loan Corporation.
"Income Tax" means (a) any Tax based upon, measured by, or calculated
with respect to (1) net income or profits (including, without limitation, any
capital gains Tax, minimum Tax and any Tax on items of Tax preference, but not
including sales, use, real or personal property, gross or net receipts, transfer
or similar Taxes) or (2) multiple bases if one or more of the bases upon which
such Tax may be based, measured by, or calculated with respect to, is described
in clause (1) above, or (b) any United States state or local franchise Tax.
"LIBOR" means, for each month (or portion thereof) during any period,
an interest rate per annum equal to the rate per annum reported, on the date two
days prior to the first day of such month, on the Telerate Page 3750 (of if such
screen shall cease to be publicly available, as reported on Reuters Screen page
"LIBO" or by any other publicly available source of such market rate) for London
interbank offered rates for United States dollar deposits for such month (or
portion thereof).
"Person" means and includes any individual, partnership, joint venture,
limited liability company, corporation, association, joint stock company, trust,
unincorporated organization or similar entity or a governmental authority or any
department or agency or other unit thereof.
"Potential Reduction" has the meaning set forth in Section 4.10.
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"Pre-Deconsolidation Period" means any taxable period with respect to
a Consolidated Return or Combined Return, as the case may be, ending on or
before or that includes a Deconsolidation Date.
"Pro Forma Holdings Group Combined Return" means a pro forma
non-federal Combined Tax return or other schedule prepared pursuant to Section
4.3 or Section 4.8 of this Agreement.
"Pro Forma Holdings Group Consolidated Return" means a pro forma
consolidated Federal Income Tax return or other schedule prepared pursuant to
Section 4.2 or Section 4.8 of this Agreement.
"Proceeding" means any assessment, audit, or other examination by any
Tax Authority, relating to Taxes (including Refunds), whether administrative or
judicial, and any appeal of the foregoing.
"Realized Tax Benefit" has the meaning set forth in Section 4.8(b)
"Refund" means any refund of Taxes, including any reduction in Tax
liabilities by means of a credit, offset or otherwise
"Representatives" means with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"Separate Return" means any Tax Return with respect to Holdings or any
Holdings Affiliate other than a Consolidated Return or a Combined Return.
"Stand-Alone Attributes" means with respect to each jurisdiction in
which a Consolidated Return or Combined Return is filed, the Tax Attributes that
would have been available to the Holdings Group at the end of the period that
includes the Deconsolidation Date assuming that:
(i) the members of the Holdings Group had not been included in any
Consolidated Return or Combined Return of Continental in any Pre-Deconsolidation
Period;
(ii) the utilization of any Tax Attribute carryforward by Holdings was
subject to the limitation described in Section 4.2(h);
(iii) the Tax Attributes of the Holdings Group are reduced by the
amount of any such Tax Attributes utilized on a Consolidated Return or Combined
Return for which a member of the Holdings Group was previously compensated under
section 4.7 of the Original Tax Agreement or otherwise; and
(iv) the Internal Restructuring had not occurred and any Tax Items
associated with the Internal Restructuring are ignored.
"Tax" means any charges, fees, levies, imposts, duties, or other
assessments of a similar nature, including income, alternative or add-on
minimum, gross receipts, profits, lease, service,
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service use, wage, wage withholding, employment, workers compensation, business
occupation, occupation, premiums, environmental, estimated, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, withholding, social security, unemployment, disability, ad
valorem, highway use, commercial rent, capital stock, paid up capital,
recording, registration, property, real property gains, value added, business
license, custom duties, or other tax or governmental fee of any kind whatsoever,
imposed or required to be withheld by any Tax Authority including any interest,
or penalties applicable or related thereto.
"Tax Attribute" means a consolidated net operating loss, a consolidated
net capital loss, a consolidated unused investment credit, a consolidated unused
foreign tax credit, or a consolidated excess charitable contribution (as such
terms are used in Treasury Regulations 1.1502-79 and 1.1502-79A), or a U.S.
federal minimum tax credit or U.S. federal general business credit (but not tax
basis or earnings and profits) or any comparable Tax Item reflected on a
Combined Return that arises in a Pre-Deconsolidation Period (including the
taxable period in which a Deconsolidation Date occurs) and can be carried to a
taxable period ending after a Deconsolidation Date.
"Tax Authority" means a governmental authority (foreign or domestic) or
any subdivision, agency, commission or authority thereof or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including, without
limitation, the Internal Revenue Service).
"Tax Benefit Payment" means payments made pursuant to Sections
4.8(a)(ii) and (iii).
"Tax Benefit Percentage" has the meaning set forth in Section 4.8(c)
"Tax Detriment Payment" means payments made pursuant to Sections
4.8(a)(i).
"Tax Item" means any item of income, gain, loss, deduction, credit or
other item reflected on a Tax Return or any Tax Attribute.
"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, amended Tax Return, claim
for Refund or declaration of estimated tax) required to be supplied to, or filed
with, a Tax Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Treasury Regulations" means the final, temporary and proposed income
tax regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"XJT Holdings" means XJT Holdings, a Delaware corporation, formerly
known as ExpressJet Airlines, Inc.
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ARTICLE II
FILING AND PREPARATION OF TAX RETURNS
SECTION 2.1 IN GENERAL.
(a) Continental shall have the sole and exclusive responsibility for
the preparation and filing of, and shall prepare and file or cause to be
prepared and filed: (1) all Consolidated Returns and (2) all Combined Returns.
Holdings hereby consents to be included in all such Tax returns.
(b) Except as otherwise provided in Section 2.1(a) or Section 2.1(c),
Holdings shall have the sole and exclusive responsibility for the preparation
and filing of, and shall prepare and file or cause to be prepared and filed, all
Tax Returns of Holdings and any Holdings Affiliate. In filing such Tax Returns,
Holdings agrees to take (and to cause each Holdings Affiliate to take) all
available action to elect not to carry back losses incurred in periods ending
after the Deconsolidation Date to Pre-Deconsolidation Periods for which
Consolidated Retuns or Combined Returns were filed.
(c) Notwithstanding section 2.1(b), Continental has the right to
control the manner in which Holdings or any Holdings Group Taxpayer prepares any
Tax Return filed with respect to a period ending on or before the second
anniversary of the Closing of the Initial Public Offering to the extent such Tax
Return involves the Allocated Attributes, treatment of the Internal
Restructuring described in Section 2.3, the basis of any tangible or intangible
asset transferred in the Internal Restructuring, the eligibility of any such
asset to be subject to the allowance for depreciation or amortization, or the
amount of any deduction for depreciation or amortization relating to any such
asset. Holdings shall submit all such Tax Returns to Continental (no later than
30 days prior to the earlier of the due date for the filing of such Tax Returns
(taking into account applicable extensions) and the date on which such Tax
Return is filed) for Continental's review and approval, and will make all
changes requested by Continental. Except as otherwise required by a Final
Determination, Holdings and each Holdings Group Taxpayer shall file all Tax
Returns for periods ending after the second anniversary of the Closing of the
Initial Public Offering in a manner consistent with the prior Tax Returns to the
extent such Tax Returns relate to the Allocated Attributes, the Tax treatment of
the Internal Restructuring described in section 2.3, the basis of any tangible
or intangible asset transferred in the Internal Restructuring, the eligibility
of any such asset to be subject to the allowance for depreciation or
amortization, or the amount of any deduction for depreciation or amortization
relating to any such asset. Notwithstanding the forgoing, neither Holdings nor
any Holdings Group Taxpayer shall be required under this section 2.1(c) to take
any position on a Tax Return for which "substantial authority" does not exist
within the meaning of section 6662 of the Code and the Treasury regulations
promulgated thereunder.
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SECTION 2.2 MANNER OF PREPARING AND FILING TAX RETURNS.
(a) Continental shall have the exclusive right, in its sole discretion,
to make all decisions relating to any Tax Return described in Section 2.1(a) of
this Agreement, including the right to determine (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 Item shall be reported, (2) whether any extensions may
be requested, (3) the elections that will be made or revoked by Continental,
each Continental Affiliate, Holdings, and each Holdings Affiliate on such Tax
Return, (4) whether any amended Tax Returns shall be filed, (5) whether any
claims for Refund shall be made, (6) whether any Refunds 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 Return, whom to retain for
such purpose and the scope of any such retention.
(b) Holdings shall, at its expense, be responsible for preparing (or
causing to be prepared) and shall provide to Continental (or cause to be so
provided), all information that Continental shall reasonably request, in such
form as Continental shall reasonably request, relating to the rights and
obligations of Continental with respect to Taxes and Tax Returns hereunder,
including any such information so requested to enable Continental to prepare the
Tax Returns that it is required to prepare under Section 2.1 and allocate Taxes
as required by this Agreement (which information shall be provided by Holdings
no later than the later of thirty days following Continental's request for such
information or ten (10) days prior to the due date (not taking into account
extensions) of such Tax Return).
(c) In the event that a Tax Item affects a Tax Return described in
Section 2.1(a) of this Agreement and also affects a Tax Return described in
Section 2.1(b) of this Agreement that is filed after the date of this Agreement,
Holdings shall, to the extent permitted by law, conform the treatment of such
Tax Item in any Tax Return described in Section 2.1(b) of this Agreement to the
treatment of such Tax Item in the applicable Tax Return described in Section
2.1(a) of this Agreement.
SECTION 2.3 TREATMENT OF INTERNAL RESTRUCTURING. Continental shall treat
(and shall cause each Continental Affiliate to treat) and Holdings shall treat
(and shall cause each Holdings Group Taxpayer to treat) the transfer of tangible
and intangible assets by XJT Holdings to ExpressJet Airlines in connection with
the Internal Restructuring as a taxable sale of such assets to ExpressJet
Airlines for federal income tax purposes. Not later than (60) days after the end
of the Tax year of Continental that includes the Deconsolidation, Continental
shall provide Holdings a schedule (and related supporting documentation)
listing, as of the Deconsolidation Date, the basis allocable to each class of
assets of ExpressJet Airlines and the period, if any, over which such class of
assets is amortizable or depreciable for federal income tax purposes. Absent a
Final Determination to the contrary or a change in applicable law, Continental
shall (and shall cause each Continental Affiliate to) and Holdings shall (and
will cause each Holdings Group Taxpayer to) file all federal income Tax Returns
in a manner consistent with such schedule. Continental and Holdings agree that
all calculations under this Agreement will be made in a manner consistent with
such schedule. Notwithstanding the forgoing, no Holdings Group Taxpayer shall be
required under this section 2.3 to take any position on a Tax Return for which
"substantial
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authority" does not exist within the meaning of section 6662 of the Code and the
Treasury regulations promulgated thereunder.
ARTICLE III
Payment of Taxes to Tax Authorities
SECTION 3.1 CONSOLIDATED AND COMBINED TAXES. Continental shall timely pay
(or cause to be paid) to the appropriate Tax Authority all Taxes with respect to
each Consolidated Return and each Combined Return due for all
Pre-Deconsolidation Periods.
SECTION 3.2 SEPARATE TAXES. Holdings shall timely pay (or cause to be
paid) to the appropriate Tax Authorities all Taxes of Holdings or any member of
the Holdings Group reflected on a Separate Return and, except as provided below,
shall have no claim against Continental or any Continental Affiliate for any
such Taxes.
ARTICLE IV
Allocation of Taxes
SECTION 4.1 HOLDINGS' LIABILITY FOR CONSOLIDATED AND COMBINED TAXES. For
each Pre-Deconsolidation Taxable Period, Holdings shall be liable to Continental
for the Holdings Group Federal Income Tax Liability and the Holdings Group
Combined Tax Liability for such taxable period.
SECTION 4.2 HOLDINGS GROUP FEDERAL INCOME TAX LIABILITY. The Holdings
Group Federal Income Tax Liability for a period shall be the Federal Income
Taxes for such taxable period, as determined on a Pro Forma Holdings Group
Consolidated Return prepared:
(a) assuming that the members of the Holdings Group were not included in
the Continental Consolidated Group for all Pre-Deconsolidation
Periods;
(b) except as provided in section 4.2(f), using all elections,
accounting methods and conventions used on the Consolidated Return
for such period;
(c) applying the highest statutory marginal corporate income Tax rate in
effect for such taxable period (or portion thereof);
(d) assuming that the Tax Attributes of the Holdings Group are reduced
by the amount of any such Tax Attributes utilized on a Consolidated
Return or Combined Return for which a member of the Holdings Group
was previously compensated under section 4.7 of the Original Tax
Agreement or otherwise;
(e) assuming the exemption amount in section 55 of the Code for such
year equals zero and that the amount specified in section 59(a)(a)
of the Code is zero;
(f) assuming that the Holdings Group elects not to carry back any net
operating losses;
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(g) ignoring the effects of the Internal Restructuring; and
(h) assuming that the utilization of any Tax Attribute carryforward by
Holdings (including, but not limited to, the Holdings Group's
deduction for any net operating loss carryforwards under section 172
of the Code, any capital loss carryforwards, any charitable
contribution carryforwards or any Tax credits) is limited to the
amount of such Tax Attributes that would be utilized on the
Consolidated Return for such period ignoring the effect of the
Internal Restructuring.
SECTION 4.3 HOLDINGS GROUP COMBINED TAX LIABILITY. With respect to any
Pre-Deconsolidation Period, the Holdings Group Combined Tax Liability shall be
the sum for such taxable period of the Holdings Group's liability for each
Non-Federal Combined Tax, as determined on Pro Forma Holdings Group Combined
Returns prepared in a manner consistent with the principles and procedures set
forth in Section 4.2 hereof.
SECTION 4.4 PREPARATION AND DELIVERY OF PRO FORMA TAX RETURNS. With
respect to Pre-Deconsolidation Periods for which the Tax Return has not been
filed as of the date hereof, not later than thirty (30) days following the date
on which the related Consolidated Return or Combined Return, as the case may be,
is filed with the appropriate Tax Authority, Continental shall prepare and
deliver to Holdings a pro forma Tax Return calculating the Holdings Group
Federal Income Tax Liability or the Holdings Group Combined Tax Liability which
is attributable to the period covered by such filed Tax Return.
SECTION 4.5 INSTALLMENT PAYMENTS AND EXTENSIONS.
(a) Estimated Consolidated Taxes. Not later than five (5) days prior to
each Estimated Tax Installment Date with respect to any Consolidated Return for
a Pre-Deconsolidation Period, Continental may reasonably determine under the
principles of Section 6655 of the Code the estimated amount of the related
installment of the Holdings Group Federal Income Tax Liability and provide
Holdings with a written notice of such determination. Holdings shall pay to
Continental no later than the Estimated Tax Installment Date the amount thus
determined.
(b) Estimated Combined Taxes. Following the payment of any installment
payment with respect to any Combined Tax Return for any Pre-Deconsolidation
Period, Continental may reasonably determine the estimated amount of the
Holdings Group Federal Income Tax Liability and Holdings Group Combined Tax
Liability and within the first twenty (20) days following such payment provide
Holdings with a written notice of such determination. Holdings shall pay to
Continental the amount thus determined within five (5) days of the receipt of
such notice.
(c) Extensions. If Continental files for an extension of time to file a
Tax Return relating to Consolidated Taxes or Combined Taxes for a
Pre-Deconsolidation Period, not later than five (5) days prior to due date of
such Tax return (without extension), (i) Continental will provide to Holdings a
good faith estimate of the Holdings Group Federal Income Tax Liability or
Holdings Group Combined Tax Liability for the entire period cover by the Tax
Return, and (ii) to the extent such amount differs from the aggregate amount of
payments made pursuant
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to Sections 4.5(a) or (b) with respect to the Taxes covered by such Tax Return,
Holdings shall pay to Continental, or Continental shall pay to Holdings, as
appropriate, the amount of such difference.
SECTION 4.6 TRUE-UP PAYMENTS.
(a) Consolidated Taxes. Not later than fifteen (15) days following the
completion and delivery to Holdings of the Pro Forma Holdings Group Consolidated
Return for any Pre-Deconsolidation Period, Holdings shall pay to Continental, or
Continental shall pay to Holdings, as appropriate, an amount equal to (i) the
difference, if any, between the Holdings Group Federal Income Tax Liability for
such period and the aggregate amount paid by Holdings with respect to such
period under Sections 4.5(a) and (c) of this Agreement and Section 4.5(a) of the
Original Tax Agreement, plus (ii) interest on such amount computed (A) in the
case of payments from Holdings to Continental, under principles of Code Sections
6601 and 6655 substituting the Agreed Rate for the interest rates provided for
in such Code sections, and (B) in the case of payments from Continental to
Holdings, under principles of Code Section 6611 substituting the Agreed Rate for
the interest rates provided for in such Code section.
(b) Combined Taxes. Not later than fifteen (15) days following the
completion and delivery to Holding of the Pro Forma Holdings Group Combined
Return of any for any Pre-Deconsolidation Period, Holdings shall pay to
Continental, or Continental shall pay to Holdings, as appropriate, an amount
equal to (i) the difference, if any, between the Holdings Group Combined Tax
Liability for the Pre-Deconsolidation Period and the amounts paid by Holdings
with respect to such period under Sections 4.5(b) and (c) of this Agreement and
Section 4.5(b) of the Original Tax Agreement, plus (ii) interest on such amount
computed (A) in the case of payments from Holdings to Continental, under
principles of Code Sections 6601 and 6655 substituting the Agreed Rate for the
interest rates provided for in such Code sections, and (B) in the case of
payments from Continental to Holdings, under principles of Code Section 6611
substituting the Agreed Rate for the interest rates provided for in such Code
section.
SECTION 4.7 [Intentionally Omitted]
SECTION 4.8 COMPENSATION FOR TAX BENEFITS.
(a) Tax Detriment/Benefit Payments. With respect to each taxable period
ending after the Deconsolidation Date, Continental and Holdings will make the
following payments in the manner provided in Section 4.8(d):
(i) Continental shall pay to Holdings 100% of the amount of
any Realized Tax Detriment;
(ii) Holdings shall pay 100% of the amount of any Realized Tax
Benefit to Continental until the cumulative amount of all payments made pursuant
to this Section 4.8(a)(ii) equals the cumulative amount of Payments made by
Continental pursuant to Section 4.8(a)(i) that are attributable to Tax Items
resulting from the Internal Restructuring; and
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(iii) Holdings shall pay to Continental the product of (A) any
Realized Tax Benefit for such period in excess of those included in Section
4.8(a)(ii), multiplied by (B) the applicable Tax Benefit Percentage.
(b) Calculation of Realized Tax Detriment and Realized Tax Benefit.
(i) The Realized Tax Detriment for any taxable period is the
excess, if any, of the actual liability for Taxes of Holdings Group Taxpayers
with respect to such period (computed assuming that the Holdings Group Taxpayers
make all available elections to cause any losses to be carried forward to future
periods rather than carried back to prior years) over the Adjusted Holdings Tax
Liability.
(ii) The Realized Tax Benefit for any taxable period is the
excess, if any, of the Adjusted Holdings Tax Liability over the actual liability
for Taxes of the Holdings Group Taxpayers with respect to such period (computed
assuming that the Holdings Group Taxpayers make all available elections to cause
any losses to be carried forward to future periods rather than carried back to
prior years).
(iii) For purposes of this Section 4.8(b), the Adjusted
Holdings Tax Liability is the Tax liability of the Holdings Group Taxpayers
calculated (A) using the same methods and elections used on the relevant Tax
Returns as filed, (B) excluding the effects of the Internal Restructuring
(including any Tax Items associated with the Internal Restructuring that are
recognized as a result of the Deconsolidation), (C) assuming the Tax Attributes
of the Holdings Group as of the end of the year that includes the
Deconsolidation Date equaled the Stand-Alone Attributes, and (D) assuming that
all available elections are made to cause any losses to be carried forward to
future periods rather than carried back to prior year. The calculation of
Adjusted Holdings Tax Liability shall take into account any tax consequences of
an "ownership change" of Holdings within the meaning of section 382 of the Code
resulting from any sales of Holdings stock pursuant to or after the Initial
Public Offering.
(iv) It is the intent of the parties that no Tax Item shall
result in duplicate payments under this Agreement, and accordingly, once a Tax
Item has been reflected in the calculation of Realized Tax Benefit or Realized
Tax Detriment, subsequent calculations of those amounts shall be performed in a
manner so as to avoid any duplication of benefit for the same Tax Item.
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(c) Calculation of Tax Benefit Percentage.
(i) The Tax Benefit Percentage equals (A) 100% until the
Holdings Group Taxpayers have Realized Tax Benefits attributable to Expected
Restructuring Deductions in an aggregate amount equal to 33.33% of the total
Expected Restructuring Deductions, (B) 90% until the Holdings Group Taxpayers
have Realized Tax Benefits attributable to additional Expected Restructuring
Deductions equal to 33.33% of the total Expected Restructuring Deductions, and
(C) 80% for the remaining Realized Tax Benefits. Notwithstanding the forgoing,
for any period beginning after December 31, 2018, the Tax Benefit Percentage
shall be 100%.
(ii) For purposes of the calculation of Tax Benefit
Percentage, the Expected Restructuring Deductions shall equal the total increase
in the basis of tangible and intangible assets of Holdings resulting from the
Internal Restructuring that are actually subject to amortization or depreciation
for federal income tax purposes.
(d) Estimated Payments and True-Up.
(i) Not later than five (5) days prior to each Estimated Tax
Installment Date of the Holdings Group (or any member thereof) , (i) Holdings
will provide to Continental a good faith estimate of the anticipated Tax
Detriment Payment or Tax Benefit Payment expected to accrue under the principles
of Section 6655 of the Code during the period to which the Estimated Tax
Installment Date relates and (ii) Holdings shall pay to Continental, or
Continental shall pay to Holdings, as appropriate, such estimated amount.
Notwithstanding the foregoing, no payment will be required to be made under this
Section 4.8(d)(i) prior to fifteen (15) days following the delivery of the
schedule described in Section 2.3.
(ii) If the Holdings Group (or a member thereof) files for an
extension of time to file a Tax Return, not later than five (5) days prior to
due date of such Tax return (without extension), (i) Holdings will provide to
Continental a good faith estimate of the anticipated Tax Detriment Payment or
Tax Benefit Payment expected to accrue during the entire period cover by the Tax
Return and (ii) to the extent such amount differs from the aggregate amount of
payments made pursuant to Section 4.8(d)(i), Holdings shall pay to Continental,
or Continental shall pay to Holdings, as appropriate, the amount of such
difference. Notwithstanding the foregoing, no payment or will be required to be
made under this Section 4.8(d)(ii) prior to fifteen (15) days following the
delivery of the schedule described in Section 2.3.
(iii) Not later than fifteen (15) days following the filing of
the applicable Tax Return, Holdings shall provide to Continental for its review
the calculation of the Tax Detriment Payment or Tax Benefit Payment for the
period covered by such Tax Return. Not later than fifteen (15) days following
the delivery of the calculation of the Tax Benefit Payment for the period,
Holdings shall pay to Continental, or Continental shall pay to Holdings, as
appropriate, an amount equal to (A) the difference, if any, between the Tax
Detriment Payment or Tax Benefit Payment for the period covered by the Tax
Return and the aggregate amount of any payments made under Section 4.8(d)(i) and
(ii) with respect to such period, plus (B) interest on such amount computed (1)
in the case of payments from Holdings to Continental, under principles of Code
Sections 6601 and 6655 substituting the Agreed Rate for the interest rates
provided
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for in such Code sections, and (2) in the case of payments from Continental to
Holdings, under principles of Code Section 6611 substituting the Agreed Rate for
the interest rates provided for in such Code section.
(e) Separate Application for Each Tax Jurisdiction. The payment
obligations and calculations made pursuant to this section 4.8 shall be made
separately for each jurisdiction in which the Holdings Group (or any Member
thereof) is subject to Income Tax, and in the case of a taxing jurisdiction
other than the United States, references in section 4.8 to provisions the Code
shall be to any similar provision of the laws of such other jurisdiction.
(f) Prior Compensation. Notwithstanding any other provision of this
section 4.8, in no event shall a party to this Agreement be required to make any
payment pursuant to this section to the extent compensation was previously paid
for the same Tax Attributes or Tax Items pursuant to section 4.7 of the Original
Tax Agreement or otherwise.
SECTION 4.9 SUBSEQUENT CHANGES IN TREATMENT OF TAX ITEMS. In the event of
a change in the treatment of any Tax Item of any member of the Continental Group
or any Holdings Group Taxpayer for any taxable period as a result of a Final
Determination, the filing of a claim for Refund, the filing of an amended Tax
Return for such period or the reflection of a change in treatment reflected in a
subsequently filed Tax Return (a "Change Event"), the following steps shall be
taken:
(a) To the extent the change affects a Pre-Deconsolidation Period,
Continental shall prepare Pro Forma Holdings Group Consolidated Returns and/or
Pro Forma Holdings Group Combined Returns, as appropriate, for each such period
with and without the changed Tax Items and determine the amount of change, if
any, in the amount of the Holdings Group Federal Income Tax Liability and/or the
Holdings Group Combined Tax Liability for each such period that results from the
change. If the change results in a net increase in the Holdings Group Federal
Income Tax Liability and Holdings Group Combined Tax Liability for all affected
periods, Holdings shall pay to Continental the amount of the increase no later
than twenty (20) days following the relevant Change Event. If the change results
in a net decrease in the Holdings Group Federal Income Tax Liability and
Holdings Group Combined Tax Liability for all affected periods, Continental
shall pay to Holdings the amount of the increase no later than twenty (20) days
following the relevant Change Event.
(b) To the extent the change affects a taxable period ending after the
Deconsolidation Date, the Tax Detriment Payments and Tax Benefit Payments shall
be recalculated under Section 4.8. If the recalculated payment differs from the
original amount, Holdings shall pay to Continental, or Continental shall pay to
Holdings, as appropriate, an amount equal to such difference, no later than
twenty (20) days following the relevant Change Event. In performing the
recalculations required by this paragraph, the Adjusted Holdings Tax Liability
will not include any interest and penalties from the relevant change (to the
extent such interest and penalties result from changes to the Tax treatment of
the Internal Restructuring described in Section 2.3), with the result that any
such interest and penalties incurred by a Holdings Group Taxpayer will decrease
the recalculated Tax Benefit Payments or increase the recalculated Tax Detriment
Payments. As appropriate, to the extent that a recalculated payment made
pursuant to this Section 4.9(b)
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does not include interest (or a similar charge) paid to a Tax Authority, such
recalculated payment shall include interest computed under the principles of
4.8(d)(iii).
SECTION 4.10 ESCROW OF TAX BENEFIT PAYMENTS. If Continental or any member
of the Continental Group or any Holdings Group Taxpayer receives a notice of
proposed adjustment (I.R.S. Form 5701), a final audit report, a statutory notice
of deficiency or similar written notice from any Tax Authority (collectively, a
"Change Notice"), which, if sustained, would result in Continental being
required to make a payment to Holdings under section 4.9(b) with respect to Tax
Benefit Payments made prior to the receipt of the Change Notice or a reduction
in future Tax Benefit Payments required to be paid pursuant to by Holdings to
Continental (collectively, the "Potential Reduction"), then:
(a) From the date such Change Notice is received until there is a Final
Determination with respect to the adjustments proposed therein, any Tax Benefit
Payments required to be made by Holdings to Continental pursuant to section 4.8
shall instead be paid by Holdings (i) first, to a mutually agreed upon escrow
agent that will hold such funds until such Final Determination is received with
respect to the Change Notice, until the amount held by the escrow agent equals
the Potential Reduction, and (ii) thereafter, to Continental.
(b) If the Final Determination (i) results in no adjustment to the Tax
Benefit Payments, then the escrowed funds (along with interest earned thereon)
shall be distributed to Continental, and (ii) results in an adjustment to the
Tax Benefit Payments, the escrowed funds (along with interest earned thereon)
shall be distributed to Continental and/or Holdings in accordance with the
recalculated Tax Benefit Payment determined under Section 4.9.
ARTICLE V
Tax Attributes
SECTION 5.1 ALLOCATION OF TAX ITEMS UPON DECONSOLIDATION.
(a) In General. All Tax computations for any period that includes a
Deconsolidation Date, shall be made pursuant to the principles of Section
1.1502-76(b) of the Treasury Regulations or of a corresponding provision under
the laws of other jurisdictions. For the avoidance of doubt, the parties agree
that the Tax Items relating to the Internal Restructuring are attributable to
the Pre-Deconsolidation Period and will be reflected on the appropriate
Consolidated Return and Combined Return.
(b) Reattribution. Continental may, at its option, elect to reattribute
to itself certain Tax Items of the Holdings Group pursuant to Section
1.1502-20(g) of the Treasury Regulations. If Continental makes such election,
Holdings shall comply with the requirements of Section 1.1502-20(g)(4) of the
Treasury Regulations.
SECTION 5.2 ALLOCATION OF TAX ATTRIBUTES. To the extent permitted by
applicable law, the relevant Tax Attributes with respect to the Consolidated
Group or Combined Group, as the case may be, shall be allocated (except as
otherwise provided under section 5.1(b)) to the corporation or entity that
created or generated such Tax Attributes.
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SECTION 5.3 EARNINGS AND PROFITS. The Federal Income Tax liability of the
Consolidated Group shall, for purposes of determining the earnings and profits
of each member, be allocated in accordance with the methods prescribed in
Treasury Regulation section 1.1552-1(a)(2) and Treasury Regulation section
1.1502-33(d)(2)(ii) (using 100% as the fixed percentage).
ARTICLE VI
Additional Rights and Obligations
SECTION 6.1 PROVISION OF INFORMATION AND MUTUAL COOPERATION.
(a) Holdings shall (and shall cause the Holdings Affiliates to), (1)
furnish to Continental in a timely manner such information, documents and other
materials as Continental may reasonably request for purposes of (i) preparing
any Tax Return (or pro forma Tax return prepared in accordance with Section 4
hereof) or portion thereof for which the Continental has responsibility for
preparing under this Agreement, (ii) contesting or defending any Proceeding, and
(iii) making any determination or computation necessary or appropriate under
this Agreement, (2) make its employees available to the other to provide
explanations of documents and materials and such other information as the other
may reasonably request in connection with any of the matters described in
subclauses (i), (ii) and (iii) of clause (1) above, and (3) reasonably cooperate
in connection with any Proceeding. Except as provided in section 2.1(c),
Continental shall not be entitled to review the Tax Returns and associated
workpapers and similar documents of Holdings. Notwithstanding any other
provision of this Agreement, no member of the Holdings Group shall be required
to provide Continental or any Continental Affiliate access to or copies of (1)
any Tax information as to which any member of the Holdings Group is entitled to
assert the protection of any privilege, or (2) any Tax information as to which
any member of the Holdings Group is subject to an obligation to maintain the
confidentiality of such information. If a dispute arises regarding accuracy of
any information required to be supplied pursuant to this section 6.1(a),
Holdings and Continental shall engage an Independent Entity pursuant to the
procedures in Section 8.1 to resolve any such dispute.
(b) Continental shall (and shall cause the Continental Affiliates to)
(1) furnish to the Holdings in a timely manner such information, documents and
other materials as Holdings may reasonably request for purposes of (i) preparing
any Tax Return (or pro forma Tax return prepared in accordance with Section 4
hereof) or portion thereof for which the other has responsibility for preparing
under this Agreement, (ii) contesting or defending any Proceeding, and (iii)
making any determination or computation necessary or appropriate under this
Agreement, (2) make its employees available to the other to provide explanations
of documents and materials and such other information as the other may
reasonably request in connection with any of the matters described in subclauses
(i), (ii) and (iii) of clause (1) above, and (3) reasonably cooperate in
connection with any Proceeding. Notwithstanding any other provision of this
Agreement, no member of the Continental Group shall be required to provide
Holdings or any Holdings Affiliate access to or copies of (1) any Tax
information that relates exclusively to any member of the Continental Group, (2)
any Tax information as to which any member of the Continental Group is entitled
to assert the protection of any privilege, or (3) any Tax information as to
which any member of the Continental Group is subject to an obligation to
maintain the confidentiality of such information. Continental shall use
reasonable efforts to separate any such information from
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any other information to which Holdings is entitled to access or to which
Holdings is entitled to copy under this Agreement, to the extent consistent with
preserving its rights under this Section 6.1(b). If a dispute arises regarding
accuracy of any information required to be supplied pursuant to this section
6.1(b), Holdings and Continental shall engage an Independent Entity pursuant to
the procedures in Section 8.1 to resolve any such dispute.
SECTION 6.2 INDEMNIFICATION.
(a) Failure to Pay. Continental and each Continental Affiliate shall
jointly and severally indemnify Holdings and each Holdings Affiliate, and hold
them harmless from and against any Tax or Losses that are attributable to, or
results from the failure of Continental or any Continental Affiliate to make any
payment required to be made under this Agreement. Holdings and each Holdings
Affiliate shall jointly and severally indemnify Continental and each Continental
Affiliate, and hold them harmless from and against any Tax or Losses that are
attributable to, or results from, the failure of Holdings or any Holdings
Affiliate to make any payment required to be made under this Agreement.
(b) Inaccurate or Incomplete Information. Continental and each
Continental Affiliate shall jointly and severally indemnify Holdings, each
Holdings Affiliate and each of their respective Representatives, and hold them
harmless from and against any net Taxes or net Losses attributable to
Continental or any Continental Affiliate supplying Holdings or any Holdings
Affiliate with inaccurate or incomplete information, in connection with the
preparation of any Tax Return, any Proceeding, or any calculation under this
Agreement. Holdings and each Holdings Affiliate shall jointly and severally
indemnify Continental, each Continental Affiliate and their respective
Representatives, and hold them harmless from and against any net Taxes or net
Losses attributable to Holdings or any Holdings Affiliate supplying Continental
or any Continental Affiliate with inaccurate or incomplete information, in
connection with the preparation of any Tax Return, any Proceeding or any
calculation under this Agreement.
SECTION 6.3 INTEREST. Unless a different rate of interest is provided for
in this Agreement, payments pursuant to this Agreement that are not made within
the period prescribed in this Agreement or, if no period is prescribed, within
fifteen (15) days after demand for payment is made, shall bear interest through
and including the date of payment at a per annum rate equal the Agreed Rate or
such lesser rate as may be required by applicable law. Such interest will be
payable at the same time as the payment to which it relates and shall be
calculated based on a year of 365 or 366 days, as appropriate, for the actual
number of days for which due.
SECTION 6.4 CLOSING OF TAX PERIODS. For Federal Income Tax purposes, the
taxable year of the Holdings Group shall end as of the close of the
Deconsolidation Date and, with respect to all other Income Taxes, Continental
(or the appropriate member of the Continental Group) and Holdings (or the
appropriate member of the Holdings Group) shall, unless prohibited by applicable
law, take all action necessary or appropriate to close the taxable period of the
members of the Holdings Group as of the close of the Deconsolidation Date.
Neither any member of the Continental Group nor any member of the Holdings Group
shall take any position inconsistent with the preceding sentence on any Income
Tax Return.
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ARTICLE VII
Proceedings
SECTION 7.1 IN GENERAL.
(a) Subject to Section 7.1(b) of this Agreement, Continental shall have
the exclusive right, in its sole discretion, to control, contest, and represent
the interests of Continental, any Continental Affiliate, Holdings or any
Holdings Group Taxpayer that is a Holdings Affiliate and to resolve, settle or
agree to any deficiency, claim or adjustment proposed, asserted or assessed in
connection with or as a result of any Proceeding relating to (i) any Tax Return
described in Section 2.1(a) of this Agreement or (ii) the Allocated Attributes,
the treatment of the Internal Restructuring, the basis of any tangible or
intangible asset transferred in the Internal Restructuring, the eligibility of
any such asset to be subject to the allowance for depreciation or amortization
or the amount of any deduction for depreciation or amortization relating to any
such asset (in each case without regard for the identity of the taxpayer or the
entity that is responsible for filing the relevant Tax Return). Continental's
rights shall extend to any matter pertaining to the management and control of
any Proceeding, including, without limitation, execution of waivers, choice of
forum and scheduling of conferences. Continental may require Holdings to pay any
Tax with respect to a claim or adjustment described in (i) or (ii) and βββ for a
refund, provided that Continental advance to Holdings the amount of such payment
on an interest-free basis. Continental shall use reasonable efforts to cooperate
and coordinate with Holdings or any Holdings Group Taxpayer that is a Holdings
Affiliate with respect to Proceedings described above that also involve Tax
Returns and Tax Items not described in clauses (i) and (ii).
(b) Except as provided in Section 7.1(a), Holdings shall have the
exclusive right, in its sole discretion, to control, contest, and represent the
interests of Holdings or any Holdings Group Taxpayer in any Proceeding relating
to any Tax Return described in Section 2.1(b) of this Agreement and to resolve,
settle, or agree to any deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such Proceeding.
(c) In addition to the parties' obligations under Section 6.1 of this
Agreement, (i) Holdings shall, and shall cause each Holdings Group Taxpayer that
is a Holdings Affiliate to, cooperate fully with Continental in contesting or
defending any Proceeding described in Section 7.1(a), including, without
limitation, by furnishing to Continental in a timely manner such information,
documents or other materials as Continental may reasonably request and (ii)
Continental shall, and shall cause each Continental Affiliate to, cooperate
fully with Holdings in contesting or defending any Proceeding described in
Section 7.1(b), including, without limitation, by furnishing to Holdings in a
timely manner such information, documents or other materials as Holdings may
reasonably request.
SECTION 7.2 NOTICE. If Continental or any member of the Continental Group
receives written notice of or relating to, any Proceeding from a Tax Authority
that asserts, proposes or recommends a deficiency, claim or adjustment that, if
sustained, would result in the redetermination of a Tax Item of a Holdings Group
Taxpayer, Continental shall promptly provide a copy of such notice to Holdings
(but in no event later than fifteen (15) days following the receipt of such
notice). If Holdings or any Holdings Group Taxpayer that is a Holdings Affiliate
receives
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written notice of, or relating to, any Proceeding from a Tax Authority with
respect to a Tax Return described in Section 2.l(a) of this Agreement, Holdings
shall promptly provide a copy of such notice to Continental (but in no event
later than fifteen (15) days following the receipt of such notice).
SECTION 7.3 FAILURE TO NOTIFY. The failure of Continental or Holdings to
notify the other of any matter relating to a particular Tax for a taxable period
or to take any action specified in this Agreement shall not relieve such other
party of any liability and/or obligation which it may have under this Agreement
with respect to such Tax for such taxable period except to the extent that such
other party's rights hereunder are actually prejudiced by such failure.
ARTICLE VIII
Dispute Resolution
SECTION 8.1 DISPUTE RESOLUTION. In the event that Continental and Holdings
disagree as to the amount or calculation of any payment to be made under this
Agreement, or the interpretation or application of any provision under this
Agreement, the parties shall attempt in good faith to resolve such dispute. If
such dispute is not resolved within sixty (60) days following the commencement
of the dispute, Continental and Holdings shall jointly retain a nationally
recognized law firm or independent public accounting firm, which firm is
independent of both parties (the "Independent Entity"), to resolve the dispute.
The Independent Entity shall act as an arbitrator to resolve all points of
disagreement and its decision shall be final and binding upon all parties
involved. Following the decision of the Independent Entity, Continental and
Holdings shall each take or cause to be taken any action necessary to implement
the decision of the Independent Entity. The fees and expenses relating to the
Independent Entity shall be borne equally by Continental and Holdings.
ARTICLE IX
Miscellaneous
SECTION 9.1 EFFECTIVENESS. This Agreement shall be effective on closing
date of the Initial Public Offering.
SECTION 9.2 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and, unless otherwise
provided herein, shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is given, (ii) on the
day of transmission if sent via facsimile transmission to the facsimile number
given below; provided, telephonic confirmation of receipt is obtained promptly
after completion of transmission, (iii) on the business day after delivery to an
overnight courier service or the Holdings mail service maintained by the United
States Postal Service, provided, receipt of delivery has been confirmed, or (iv)
on the fifth day after mailing, provided, receipt of delivery is confirmed, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed and return-receipt
requested, to the party as follows:
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If to Continental or any Continental Affiliate, to:
Continental Airlines, Inc.
ββββ βββββ ββββββ, βββββ
βββββββ, βββββ βββββ
Attention: Chief Financial Officer
Telecopy No.: (βββ) βββ-ββββ
with a copy to:
Continental Airlines, Inc.
ββββ βββββ ββββββ, βββββ
βββββββ, βββββ βββββ
Attention: General Counsel
Telecopy No.: (βββ) βββ-ββββ
if to Holdings, to:
ExpressJet Holdings, Inc.
ββββ βββββ ββββββ, βββββ
βββββββ, βββββ βββββ
Attention: Chief Financial Officer
Telecopy No.: (βββ) βββ-ββββ
Any party may change its address or fax number by giving the other party written
notice of its new address or fax number in the manner set forth above.
SECTION 9.3 CHANGES IN LAW. Any reference to a provision of the Code or a
law of another jurisdiction shall include a reference to any applicable
successor provision or law.
SECTION 9.4 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party.
Holdings shall cause any entity that becomes a Holding Group Taxpayer after the
date hereof to agree to be bound by the terms of this agreement and acknowledge
that Continental is a beneficiary of that agreement.
SECTION 9.5 AUTHORIZATION, ETC. Each of the parties hereto hereby
represents and warrants that it has the power and authority to execute, deliver
and perform this Agreement, that this Agreement has been duly authorized by all
necessary corporate action on the part of such party, that this Agreement
constitutes a legal, valid and binding obligation of such party (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equity principles) and
that the execution, delivery and performance of this Agreement by such party
does not contravene or conflict with any provision of law or of its charter or
bylaws or any agreement, instrument or order binding on such party.
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SECTION 9.6 COMPLETE AGREEMENT. This Agreement shall constitute the entire
agreement between Continental or any Continental Affiliate and Holdings or
Holdings Group Taxpayer with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter. Unless the context indicates otherwise, any reference to
Holdings in this Agreement shall refer to Holdings and each Holdings Group
Taxpayer and any reference to Continental in this Agreement shall refer to
Continental and the Continental Affiliates. Notwithstanding anything to the
contrary herein, nothing in this Agreement shall modify the rights and
obligations of the parties as set forth in the Initial Public Offering
Agreement.
SECTION 9.7 ORIGINAL TAX AGREEMENT TERMINATED. The Original Tax Agreement
is hereby terminated and no party thereto shall be entitled to pursue any rights
or remedies thereunder after the effective date of this Agreement.
SECTION 9.8 RIGHTS OF HOLDINGS AND EXPRESSJET AIRLINES Whenever this
Agreement provides for an obligation of Continental to make a payment to
Holdings, the obligation shall be construed as an obligation of Continental to
make a payment to either Holdings or ExpressJet Airlines, and either Holdings or
ExpressJet Airlines shall be entitled to enforce such obligation.
SECTION 9.9 INTERPRETATION. The Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. Whenever any words are used herein in the masculine gender, they
shall be construed as though they were also used in the feminine gender in all
cases where they would so apply. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
SECTION 9.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas
(regardless of the laws that might otherwise govern under applicable principles
of conflicts law) as to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.12 LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 9.13 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of Continental, the Continental Affiliates, Holdings and the
Holdings Group Taxpayers, and is not intended to confer upon any other person
any rights or remedies hereunder.
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SECTION 9.14 JURISDICTION; FORUM.
(a) By the execution and delivery of this Agreement, Continental and
Holdings submit and agree to cause the Continental Affiliates and Holdings
Affiliates, respectively, to submit to the personal jurisdiction of any state or
federal court in the State of Texas in any suit or proceeding arising out of or
relating to this Agreement.
(b) To the extent that Continental, Holdings, any Continental Affiliate
or any Holdings Affiliate has or hereafter may acquire any immunity from
jurisdiction of any Delaware court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, Continental or
Holdings, as the case may be, hereby irrevocably waives, and agrees to cause the
Continental Affiliates and the Holdings Affiliate, respectively, to waive such
immunity in respect of its obligations with respect to this Agreement.
(c) The parties hereto agree that an appropriate and convenient,
non-exclusive forum for any disputes between any of the parties hereto or the
Continental Affiliates and the Holdings Group Taxpayers arising out of this
Agreement shall be in any state or federal court in the State of Delaware.
SECTION 9.15 RIGHT OF OFFSET. If any party hereto shall be in default
hereunder, then the non-defaulting party shall be entitled to set off any amount
owed by the defaulting party to the non-defaulting hereunder against any amounts
owed by the non-defaulting party to the defaulting party under (i) the Amended
and Restated Capacity Purchase Agreement, dated as of April 17, 2002, among
Continental, Holdings, XJT Holdings and ExpressJet Airlines and (ii) the
Promissory Note, dated as of March 31, 2001, made by Continental Express, Inc.
in favor of Continental (the "Note"). It is specifically agreed that (i) for
purposes of the set-off by any non-defaulting party, mutuality shall be deemed
to exist among Continental, Holdings, XJT Holdings and ExpressJet Airlines; (ii)
reciprocity among Continental, Holdings, XJT Holdings and ExpressJet Airlines
exists with respect to their relative rights and obligations in respect of any
such set-off; and (iii) the right of set-off is given as additional security to
induce the parties to enter into the transactions contemplated hereby. Upon
completion of any such set-off, the obligation of the defaulting party to the
non-defaulting party shall be extinguished to the extent of the amount so
set-off. Each party hereto further waives any right to assert as a defense to
any attempted set-off the requirements of liquidation or mutuality. This set-off
provision shall be without prejudice, and in addition, to any right of set-off,
combination of accounts, lien or other right to which any non-defaulting party
is at any time otherwise entitled (either by operation of law, contract or
otherwise).
SECTION 9.16 CONFIDENTIALITY. Each party shall hold and cause its
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other parties
hereto furnished it by such other party or its Representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the party to which it was furnished, (b) in the public
domain through no fault of such party, or (c) later
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lawfully acquired from other sources by the party to which it was furnished),
and each party shall not release or disclose such information to any other
person, except its Representatives who shall be advised of the provisions of
this Section. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
SECTION 9.17 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of the parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer as of the date first above written.
Continental Airlines, Inc.,
on behalf of itself and each
of the Continental Affiliates
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ExpressJet Holdings, Inc.
on behalf of itself and each of
the Holdings Affiliates
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ExpressJet Airlines, Inc.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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