This AMENDED AND RESTATED MASTER EXCHANGE AGREEMENT (this “Agreement”) is entered into as of January 26, 2007, by and among, HERTZ CAR EXCHANGE INC., a Delaware corporation (the “QI”), J.P. MORGAN PROPERTY HOLDINGS LLC, a Delaware limited liability company (“Property Holdings”), THE HERTZ CORPORATION, a Delaware corporation (“Hertz”), HERTZ VEHICLE FINANCING LLC, a Delaware limited liability company (“HVF”) and HERTZ GENERAL INTEREST LLC, a Delaware limited liability company (“HGI”).
W I T N E S S E T H :
WHEREAS, the QI, Property Holdings, Hertz, HVF and HGI entered into a Master Exchange Agreement dated as of December 21, 2005 (the “Prior Agreement”);
WHEREAS, the QI, Property Holdings, Hertz, HVF and HGI desire to amend and restate the Prior Agreement in its entirety as set forth herein;
WHEREAS, HVF and HGI are single member limited liability companies, solely owned by Hertz, and therefore disregarded entities for purposes of the Code and the Treasury Regulations;
WHEREAS, each action taken by a Legal Entity in its individual capacity pursuant to this Agreement shall, for purposes of the Code and the Treasury Regulations, have been taken by Exchangor;
WHEREAS, Exchangor desires to exchange certain Vehicles that are held for productive use in its trade or business and that constitute Relinquished Property for other vehicles to be held for productive use in its trade or business that are like-kind to the Relinquished Property;
WHEREAS, the Relinquished Property will be sold to various buyers (each a “Buyer”) from time to time, including Manufacturers and purchasers at auctions;
WHEREAS, the Replacement Property will be purchased from time to time from various Manufacturers and vehicle dealers (each a “Seller”);
WHEREAS, it is the intention of the parties that each Exchange of Relinquished Property for Replacement Property, and the transactions related thereto, be effectuated pursuant to the terms of this Agreement;
WHEREAS, Exchangor and the QI desire and intend that the Exchanges accomplished by Exchangor and the QI under this Agreement (the “LKE Program”) satisfy the requirements of a “like kind exchange program” pursuant to Section 3.02 of Revenue Procedure 2003-39;
WHEREAS, Exchangor desires to effectuate each Exchange in a manner that will qualify as a like-kind exchange within the meaning of Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”) and the treasury regulations (the “Treasury Regulations”) promulgated thereunder (and any applicable corresponding provisions of state tax legislation) pursuant to one or more of the “safe harbors” described in Section 1.1031(k)-1(g) of the Treasury Regulations, and Revenue Procedure 2003-39;
WHEREAS, the QI is willing to act as a “qualified intermediary” within the meaning of Section 1031 of the Code and Section 1.1031(k)-1(g)(4) of the Treasury Regulations (such entity, a “Qualified Intermediary”) in order to facilitate Exchanges of Relinquished Property for Replacement Property;
WHEREAS, it is the intention of the parties to maintain Joint Collection Accounts, Exchange Accounts and Joint Disbursement Accounts so that for purposes of the Treasury Regulations Exchangor is not determined to be in actual or constructive receipt of proceeds (including any earnings thereon) from the disposition of any Relinquished Property;
WHEREAS, Exchangor and the QI desire and intend this Agreement to satisfy the requirement of a written agreement referred to in Section 1.1031(k)-1(g)(4)(iii)(B) of the Treasury Regulations with respect to the applicable Relinquished Property and the applicable Replacement Property; and
WHEREAS, each Legal Entity will continue to comply with its obligations under the Related Documents to which it is a party;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein, each Legal Entity and the QI hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in Schedule I to the Base Indenture. The following terms used in this Agreement shall have the following meanings, unless otherwise expressly provided herein:
“Accounts” shall mean any Exchange Account, any Joint Collection Account or any Joint Disbursement Account, as the context requires.
“Accession Agreement” shall have the meaning set forth in Section 6.10(d).
“Additional Subsidies” shall mean funds (other than funds that currently constitute Relinquished Property Proceeds) that Exchangor may use for the acquisition of Replacement Property and to make Non-LKE Disbursements, which include:
(i) funds on deposit in any Account that were Relinquished Property Proceeds but have not been identified to Replacement Property within the Identification Period or
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with respect to which any identification has been revoked or the Exchange Period has expired without acquisition of Replacement Property;
(ii) funds on deposit in any Account that were Relinquished Property Proceeds but are no longer Relinquished Property Proceeds because Exchangor has received all of the Replacement Property that was identified with respect to the related Relinquished Property Proceeds during the Identification Period for the related Exchange pursuant to Section 3.01 hereof;
(iii) funds on deposit in any Account that never were Relinquished Property Proceeds, including, among other amounts, Non-Qualified Funds, additional amounts transferred to a Joint Disbursement Account by a Legal Entity pursuant to Section 4.03(e) and any earnings on deposit in any Account that are not Qualified Earnings; and/or
(iv) funds that may be withdrawn pursuant to Section 4.06.
“Agreement” shall have the meaning set forth in the preamble hereto.
“Automated Clearing House” shall mean a facility that processes debit and credit transactions under rules established by a Federal Reserve Bank operating circular on automated clearing house items or under rules of an automated clearing house association.
“Base Indenture” shall mean the Second Amended and Restated Base Indenture, dated as of August 1, 2006, between HVF and BNY Midwest Trust Company, as trustee, as amended, modified or supplemented from time to time.
“Business Day” shall mean any day except a Saturday, Sunday or legal holiday on which the offices of the Trustee, any Legal Entity, the QI or, with respect to any matter involving any Account, the Escrow Agent (or any successor thereto) are not open for business.
“Buyer” shall have the meaning set forth in the recitals hereto.
“Collateral Agency Agreement” means the Second Amended and Restated Collateral Agency Agreement, dated as of the date hereof, among HVF, HGI, Hertz and the Trustee, as amended, modified or supplemented from time to time.
“Disbursement Occurrence” shall have the meaning set forth in Section 4.06 hereof.
“Disqualified Person” shall have the meaning set forth in Section 6.01(k) hereof.
“Downgrade Sale” shall have the meaning set forth in Section 6.10(a) hereof.
“Electronic Funds Transfer” shall mean any funds transfer initiated by an electronic instruction, including, without limitation, any funds transfer via the Automated Clearing House system, any wire transfer via the Federal Reserve System and any funds transfer recorded on the books and records of the banking institution maintaining the relevant accounts.
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“Escrow Accounts” shall mean the “Escrow Accounts” under and as defined in the Escrow Agreement.
“Escrow Agent” shall mean the “Escrow Agent” under and as defined in the Escrow Agreement.
“Escrow Agreement” shall mean that agreement by and among the Escrow Agent, each Legal Entity and the QI, dated as of the date hereof, pursuant to which one or more Exchange Accounts and Joint Disbursement Accounts shall be maintained as escrow accounts on behalf of the Legal Entities and any replacement of such agreement.
“Event of Default” shall have the meaning set forth in the GE Credit Agreement.
“Exchange” shall mean Exchangor’s transfer of Relinquished Property and Exchangor’s corresponding receipt of Replacement Property within the relevant Exchange Period with which the Relinquished Property has been matched by Exchangor that are of like-kind, as defined in Sections 1.1031(a)-1(b) and 1.1031(a)-2 of the Treasury Regulations.
“Exchange Account” shall mean any account established by the QI pursuant to the Escrow Agreement and (a) in the case of any HVF Exchange Account, maintained by the Trustee, in the joint name of the QI and the Trustee pursuant to Section 5A.1 of the Base Indenture or (b) in the case of any Hertz GE Exchange Account, maintained by the GE Collateral Agent in the joint name of the QI and the GE Collateral Agent pursuant to the provisions of the GE Credit Agreement and the GE Collateral Agreement, that (1) is used to receive Relinquished Property Proceeds and any Additional Subsidies from a Joint Collection Account, and (2) is used to provide such funds to another Exchange Account or a Joint Disbursement Account (to the extent of the funds in such Exchange Account pursuant to the Escrow Agreement).
“Exchange Period” shall mean, with respect to the Relinquished Property transferred in an Exchange, as defined in Section 1.1031(k)-1(b)(2) of the Treasury Regulations, the period beginning on the date such Relinquished Property is transferred to the QI and ending at 11:59 p.m. (New York City time) on the earlier of (a) the one hundred eightieth (180th) calendar day thereafter (irrespective of whether such day is a weekend day or a holiday) or (b) the due date (including extensions) for Exchangor’s U.S. federal income tax return for the year in which the transfer of the Relinquished Property takes place.
“Exchangor” shall mean Hertz, HVF and HGI, collectively, which are treated as a single taxpayer for purposes of the Code and the Treasury Regulations.
“GE Collateral Account” shall have the meaning assigned to the term “Collateral Account” in the GE Collateral Agreement.
“GE Collateral Agent” shall have the meaning assigned to the term “Domestic Collateral Agent” in the GE Credit Agreement.
“GE Collateral Agreement” shall mean the Domestic Guarantee and Collateral Agreement, dated as of September 29, 2006, made by Hertz and certain of its subsidiaries in favor of Gelco Corporation dba GE Fleet Services, as administrative agent and collateral agent,
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as amended, amended and restated, modified or supplemented or refinanced or replaced from time to time.
“GE Credit Agreement” means the Credit Agreement, dated as of September 29, 2006, among Hertz and Puerto Ricancars, Inc., as borrowers, the lenders from time to time parties thereto and Gelco Corporation dba GE Fleet Services, as administrative agent, domestic collateral agent and PRUSVI collateral agent, as amended, amended and restated modified or supplemented or refinanced or replaced from time to time.
“GE Financed Vehicle” shall mean a Vehicle that is owned by Hertz that is registered or submitted for registration in the state of Hawaii or Kansas, regardless of whether the GE Collateral Agent is the named lienholder for such Vehicle. Buses, salvage vehicles and tow trucks shall not be deemed to be GE Financed Vehicles.
“GE Loan Documents” shall have the meaning assigned to the term “Loan Documents” in the GE Credit Agreement.
“Hertz” shall have the meaning set forth in the preamble hereto.
“Hertz Exchange Account” shall mean any Exchange Account that receives funds from a Joint Collection Account or another Exchange Account relating to Relinquished Property Proceeds from a Vehicle that was owned by Hertz in the circumstances described in Section 4.02(a) hereof.
“Hertz GE Exchange Account” shall mean the Hertz Exchange Account maintained pursuant to the provisions of the GE Credit Agreement and the GE Collateral Agreement.
“HGI” shall have the meaning set forth in the preamble hereto.
“HGI Exchange Account” shall mean any Exchange Account that (a) receives funds from a Joint Collection Account or another Exchange Account relating to Relinquished Property Proceeds from a Vehicle that was owned by HGI in the circumstances described in Section 4.02(a) hereof and (b) may receive funds from an HVF Exchange Account or a Hertz Exchange Account in the circumstances described in Section 4.02(a) hereof.
“HVF” shall have the meaning set forth in the preamble hereto.
“HVF Exchange Account” shall mean any Exchange Account that receives funds from a Joint Collection Account or another Exchange Account relating to Relinquished Property Proceeds from a Vehicle that was owned by HVF in the circumstances described in Section 4.02(a) hereof.
“Identification Period” shall mean, with respect to the Relinquished Property transferred in an Exchange, as defined in Section 1.1031(k)-l(b)(2) of the Treasury Regulations, the period beginning on the date such Relinquished Property is transferred to the QI and ending at 11:59 p.m. (New York City time) on the forty-fifth (45th) calendar day thereafter (irrespective of whether such day is a weekend day or a holiday).
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“Identified Replacement Vehicles” means vehicles that have been identified and designated as Replacement Property with respect to Relinquished Property pursuant to Section 3.01 hereof, provided such identification has not been revoked pursuant to Section 3.02 hereof.
“Independent Director” shall mean a Person who is not, and during the previous five years was not (i) a stockholder, member, partner, director, officer, employee, affiliate, associate, creditor or independent contractor of Owner or any of its affiliates or associates (excluding, however, any service provided by a Person engaged as an “independent” manager or director, as the case may be) or (ii) a Person owning directly or beneficially any outstanding shares of common stock of Owner or any of its affiliates, or a stockholder, director, officer, employee, affiliate, associate, creditor or independent contractor of such beneficial owner or any of such beneficial owner’s affiliates or associates, or (iii) a member of the immediate family of any Person described above.
“Joint Collection Account” shall mean any account maintained by the Collateral Agent, in the joint name of the QI and the Collateral Agent (as a Collateral Account) pursuant to Section 2.5(a) of the Collateral Agency Agreement that (1) processes funds collected on behalf of each Legal Entity, (2) is used for identification and subsequent separation of the portion of such funds attributable to receipts of Hertz, HVF, and HGI and (3) is used to separate Relinquished Property Proceeds from Additional Subsidies.
“Joint Disbursement Account” shall mean an account as defined in Section 5.02 of Revenue Procedure 2003-39 (1) that is used to receive Relinquished Property Proceeds from an Exchange Account and any Additional Subsidies from whatever source, and (2) which may be used to disburse Relinquished Property Proceeds and Additional Subsidies in order to acquire Replacement Property and to disburse Additional Subsidies to make Non-LKE Disbursements.
“Legal Entity” shall mean each of Hertz, HVF or HGI, individually.
“Licensed Trademark” shall have the meaning set forth in Section 6.10(a) hereof.
“Licensed Services” shall have the meaning set forth in Section 6.10(a) hereof.
“Material Action” shall mean any action described in clauses (i) through (iii) of Section 8(a) of the QI’s certificate of incorporation.
“LKE Program” shall have the meaning set forth in the recitals hereto.
“Non-LKE Disbursements” shall mean disbursements for items other than the acquisition of Replacement Property (including the acquisition of non-Replacement Property and any fees, expenses or other costs required to be paid pursuant to Section 7.02 hereof) that are funded solely with Additional Subsidies.
“Non-Qualified Funds” shall mean all amounts that are deposited into the Joint Collection Accounts that are not Relinquished Property Proceeds.
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“Owner” shall mean Property Holdings, or any other entity that acquires all of the issued and outstanding shares of the QI pursuant to Section 6.10 hereof.
“Qualified Earnings” shall mean, with respect to any Relinquished Property, the earnings received on the Relinquished Property Proceeds from such Relinquished Property that have been held in an Escrow Account for a period not exceeding the Exchange Period for such Relinquished Property.
“Qualified Intermediary” shall have the meaning set forth in the recitals hereto.
“QI” shall have the meaning set forth in the preamble hereto.
“QI Indemnitee” shall have the meaning set forth in Section 5.02(a) hereof.
“QI Parent Downgrade Event” shall mean, on any date of determination, either (i) JPMorgan Chase Bank, N.A. (or any entity that becomes the ultimate parent of the QI) shall have a short-term credit rating of below “A-1+” from S&P or below “P-1” from Moody’s or (ii) if at any time JPMorgan Chase Bank, N.A. (or any entity that becomes the ultimate parent of the QI) does not have a short-term credit rating, JPMorgan Chase Bank, N.A. (or any entity that is a successor to JPMorgan Chase Bank, N.A. as the ultimate parent of the QI) shall have a long-term credit rating of below “AA-” from S&P or below “Aa3” from Moody’s.
“Relinquished Property” shall mean certain vehicles used in Exchangor’s business and qualifying as “relinquished property” within the meaning of Section 1.1031(k)-1(a) of the Treasury Regulations, which have been identified as such in a written notice delivered by a Legal Entity pursuant to Section 2.05 hereof to each other party to the applicable Relinquished Property Agreement of the assignment of such Relinquished Property Agreement to the QI.
“Relinquished Property Agreement” shall mean any agreement relating to the sale or other disposition of Relinquished Property, including but not limited to each Manufacturer Program relating to Relinquished Property of a Legal Entity, each agreement arising from the exercise by a Legal Entity of its right to sell a Vehicle that is Relinquished Property to a Manufacturer pursuant to the terms of its Manufacturer Program and each agreement by a Legal Entity to sell a Vehicle that is Relinquished Property to any third party otherwise than pursuant to a Manufacturer Program.
“Relinquished Property Proceeds” shall mean, funds derived from or otherwise attributable to the transfer of Relinquished Property, including any Qualified Earnings thereon, and excluding earnings thereon that do not constitute Qualified Earnings.
“Replacement Property” shall mean certain vehicles that are like-kind, as defined in Sections 1.1031(a)-1(b) and 1.1031(a)-2 of the Treasury Regulations, to the Relinquished Property and held for productive use, as described in Section 1.1031(a)-1 of the Treasury Regulations, in connection with Exchangor’s business operations and qualifying as “replacement property” within the meaning of Section 1.1031(k)-1(a) of the Treasury Regulations.
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“Replacement Property Acquisition Cost” shall mean, with respect to a Replacement Property, the amount of consideration required to be paid to the Seller of such Replacement Property under any related Replacement Property Agreement.
“Replacement Property Agreement” shall mean any agreement (including an obligation of HGI) relating to the acquisition of Replacement Property, including but not limited to each agreement by HGI to purchase a vehicle which is Replacement Property from a Manufacturer or a vehicle dealer, whether such agreement to purchase arises under a Manufacturer Program or otherwise.
“Rights” shall mean (1) with respect to any Relinquished Property, each Legal Entity’s rights in a Relinquished Property Agreement (but not its obligations), as defined in Treasury Regulations Section 1.1031(k)-1(g)(4)(iv) and (v), to sell the Relinquished Property and (2) with respect to any Replacement Property, each Legal Entity’s rights in a Replacement Property Agreement (but not its obligations), as defined in Treasury Regulations Section 1.1031(k)-1(g)(4)(iv) and (v), to acquire the Replacement Property.
“S&P” shall mean Standard and Poor’s Rating Service or any successor thereto.
“Safe Harbor” shall mean any one or more of the safe harbors described in Section 1.1031(k)-1(g) of the Treasury Regulations and any one or more of the safe harbor provisions of Revenue Procedure 2003-39.
“Sale Notice” shall have the meaning set forth in Section 6.10(a) hereof.
“Seller” shall have the meaning set forth in the recitals hereto.
“Start Date” shall mean the date on which Exchangor begins exchanging vehicles in the applicable LKE Program.
“Termination Date” shall have the meaning set forth in Section 7.01(a) hereof.
“Treasury Regulations” shall have the meaning set forth in the recitals hereto.
“Vehicle” shall mean a “Vehicle” (as defined in Schedule I to the Base Indenture) or a passenger automobile, light-duty truck, bus or tow truck which is owned by Hertz, as applicable.
ARTICLE II
General Exchange Provisions
SECTION 2.01. Exchange of Property. (a) In accordance with the terms of this Agreement, the QI agrees to transfer Relinquished Property to a Buyer, pursuant to the terms of Section 2.02 hereof, and to subsequently acquire Replacement Property of a like-kind from a Seller pursuant to the terms of Section 2.03 hereof in transactions intended to qualify as exchanges under Section 1031 of the Code.
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(b) No transfer by a Legal Entity of Relinquished Property pursuant to this Agreement shall be made unless each of the following conditions are satisfied: (u) the Escrow Agreement shall be in effect; (v) no Manufacturer Event of Default with respect to the Manufacturer Program pursuant to which such Relinquished Property is intended to be transferred pursuant to this Agreement shall have occurred and be continuing at the time of such transfer; (w) in connection with the transfer of any Program Vehicle pursuant to an Eligible Manufacturer Program, the applicable Legal Entity shall have contracted to sell such Program Vehicle pursuant to such Eligible Manufacturer Program (the Manufacturer party to which shall have consented to the purchase and sale of Vehicles by the QI pursuant to an Assignment Agreement, which consent shall not have been revoked) and shall have directed the QI to sell such Program Vehicle pursuant to such Eligible Manufacturer Program on the date such Program Vehicle becomes Relinquished Property pursuant to this Agreement; (x) on the date of any transfer of any Vehicle to the QI, the only obligations or liabilities, if any, secured by such Vehicle are obligations or liabilities arising under the Related Documents, the GE Credit Agreement, the GE Collateral Agreement or the other GE Loan Documents; (y) solely with respect to (i) a proposed transfer by HVF of Relinquished Property pursuant to this Agreement or (ii) a proposed transfer by Hertz of Relinquished Property with respect to a GE Financed Vehicle pursuant to this Agreement, as of the date of any such transfer, a QI Parent Downgrade Event shall not have occurred and continued unremedied for a period of seven calendar days (ending at 11:59 p.m. on such seventh day) prior to such date (unless such QI Parent Downgrade Event has been remedied) and (z) on the date of any such transfer, the following statements shall be true: (i) solely with respect to a proposed transfer by HVF of Relinquished Property pursuant to this Agreement, no Potential Amortization Event or Amortization Event and no Liquidation Event of Default or Limited Liquidation Event of Default has occurred and is continuing or would result from the making of such transfer, (ii) solely with respect to a proposed transfer by Hertz of Relinquished Property with respect to a GE Financed Vehicle pursuant to this Agreement, no Event of Default has occurred and is continuing or would result from the making of such transfer, (iii) the Termination Date has not occurred and (iv) the representations and warranties of the QI in Article VI hereof are true and correct on and as of such date and shall be deemed to have been made on and as of such date with the same effect as though made on and as of such date. In connection with any such transfer of Relinquished Property, (A) the applicable Legal Entity, by making such transfer, shall be deemed to have represented and warranted to the effect set forth in clauses (z)(i), (ii) and (iii) above, and (B) the QI shall be deemed to have represented and warranted to the effect set forth in clause (z)(iv) above.
SECTION 2.02. Disposition and Transfer of Relinquished Property. Each Legal Entity has entered, and/or from time to time may enter, into one or more Relinquished Property Agreements with one or more Buyers for the sale of Relinquished Property. In connection with each Exchange, the applicable Legal Entity shall, in accordance with Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations: (a) assign to the QI all of its Rights with respect to such Relinquished Property under the applicable Relinquished Property Agreements in accordance with Section 2.04 hereof, such assignment to be made without recourse to the QI (and the QI agrees to accept such assignments); (b) notify all parties to the applicable Relinquished Property Agreements in writing of the assignment in accordance with Section 2.05 prior to or concurrent with the date of transfer of the Relinquished Property to the applicable Buyer, and (c) transfer its interest in the Relinquished Property to the applicable Buyer pursuant to the applicable Relinquished Property Agreements.
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SECTION 2.03. Acquisition and Transfer of Replacement Property. HGI has entered, and/or from time to time may enter, into one or more Replacement Property Agreements with one or more Sellers for the purchase of Replacement Property. In connection with each Exchange, HGI shall, in accordance with Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations: (a) assign to the QI all of its Rights with respect to such Replacement Property under the applicable Replacement Property Agreements in accordance with Section 2.04 hereof, any such assignment to be made without recourse to the QI (and the QI agrees to accept such assignments); (b) notify all parties to the applicable Replacement Property Agreement in writing of the assignment in accordance with Section 2.05 prior to or concurrent with the date of transfer of the Replacement Property from the applicable Seller, and (c) receive an ownership interest in the Replacement Property from the applicable Seller pursuant to the applicable Replacement Property Agreement.
SECTION 2.04. Assignment of Agreements.
(a) Existing Agreements. Each Legal Entity hereby assigns to the QI, solely in the QI’s capacity as Qualified Intermediary, such Legal Entity’s Rights, but not its obligations, under each related Relinquished Property Agreement to which such Legal Entity is a party as of the date hereof, such assignment to be effective only upon such Legal Entity’s transfer of such Relinquished Property pursuant to Section 2.02 hereof and only with respect to such Relinquished Property, and the QI hereby agrees to accept such assignment, solely in its capacity as Exchangor’s Qualified Intermediary. HGI hereby assigns to the QI, solely in the QI’s capacity as Exchangor’s Qualified Intermediary, HGI’s Rights, but not its obligations, under each related Replacement Property Agreement to which HGI is a party as of the date hereof with respect to such Replacement Property, and the QI hereby accepts such assignment, solely in its capacity as Exchangor’s Qualified Intermediary.
(b) New Agreements. Each Legal Entity hereby assigns to the QI, solely in the QI’s capacity as Qualified Intermediary, such Legal Entity’s Rights, but not its obligations, under each related Relinquished Property Agreement that it enters into after the date of this Agreement, such assignment to be effective only upon such Legal Entity’s transfer of such Relinquished Property pursuant to Section 2.02 hereof and only with respect to such Relinquished Property. HGI hereby assigns to the QI, solely in the QI’s capacity as Qualified Intermediary, HGI’s Rights, but not its obligations, under each Replacement Property Agreement that it enters into after the date of this Agreement with respect to such Replacement Property. Unless otherwise agreed by the parties, each Legal Entity shall make available to the QI a report of daily activity listing such new agreements into which it entered during the period covered by such report. The QI shall and hereby does accept each assignment pursuant to this Section 2.04(b) from each Legal Entity, solely in its capacity as Exchangor’s Qualified Intermediary.
(c) Revocation of, or Change in, Assignment. (i) By notice to the QI, each Legal Entity may revoke its assignment to the QI of its Rights with respect to any Replacement Property identified in such notice. (ii) By notice to the QI, each Legal Entity may cease assigning to the QI such Legal Entity’s Rights pursuant to this Section 2.04 with respect to any of its Relinquished Property identified in such notice and any related Relinquished Property Agreement, if then in existence, whereupon the property identified in such notice shall cease to be Relinquished Property and any related agreement shall cease to be a Relinquished Property
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Agreement to the extent related to the property specified in such notice. (iii) Not later than the Termination Date specified in any notice of termination delivered pursuant to Section 7.01(a) hereof or the Special Termination Date specified in Section 7.01(b) hereof, the applicable Legal Entity or all the Legal Entities, in the case of the occurrence of the Special Termination Date, shall cease assigning to the QI its Rights with respect to any Relinquished Property arising on or after such date. Any such notices shall only be effective with respect to property transferred or received after the date on which such notice is given.
(d) Safe Harbor. For purposes of the Code and the Treasury Regulations, each assignment to the QI made by a Legal Entity pursuant to this Section 2.04 is made by Exchangor pursuant to the assignment Safe Harbor set forth in Section 6.02 of Revenue Procedure 2003-39 and, except as may be otherwise required by applicable law, shall be effective when provided in Section 2.04(a) or 2.04(b) hereof, as applicable, without the need for any further actions other than those provided in Sections 2.01, 2.02, 2.03, 2.04(a) and 2.04(b) hereof by a Legal Entity or the QI with respect to the transfer of any Relinquished Property or any Replacement Property.
(e) Limitation on Rights Transferred to QI. Each of the parties hereto agrees and acknowledges that any assignment to the QI hereunder shall not give the QI any rights under any Relinquished Property Agreement to which any Legal Entity is a party relating to the disposition of a Vehicle except the Rights in respect of a Vehicle that becomes Relinquished Property. The QI hereby acknowledges that it shall have no interest in any Relinquished Property Agreement with respect to any Vehicle that is not Relinquished Property.
SECTION 2.05. Notice to Purchasers and Sellers. Each Legal Entity represents and agrees that it will provide notice, on or before the date of the relevant transfer of property, to each other party to any Relinquished Property Agreement or any Replacement Property Agreement with respect to which any of its Rights thereunder have been assigned to the QI that such Legal Entity’s Rights in such Relinquished Property Agreement or such Replacement Property Agreement, as the case may be, have been assigned, to the extent set forth herein, to the QI, as its Qualified Intermediary.
SECTION 2.06. Direct Transfers. For purposes of this Agreement, the QI shall be considered to have (1) acquired Relinquished Property from Exchangor and transferred it to the Buyer thereof in each case where such Relinquished Property is in fact transferred by a Legal Entity directly to such Buyer pursuant to the relevant Relinquished Property Agreement in accordance with Section 2.02 hereof, and (2) acquired Replacement Property from the Seller thereof and transferred it to Exchangor in each case where the Replacement Property is in fact transferred by such Seller to HGI pursuant to the relevant Replacement Property Agreement in accordance with Section 2.03 hereof, in each case as provided by Sections 1.1031(k)-1(g)(4)(iv) and (v) of the Treasury Regulations.
Each Legal Entity and the QI agree that the QI shall not (1) take possession of, (2) hold legal title to, or (3) be the registered owner of, any Relinquished Property or Replacement Property.
SECTION 2.07. Matching of Relinquished and Replacement Property. Exchangor shall match Replacement Property with Relinquished Property for each Exchange on
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its books and records in accordance with Section 1.1031(a)-2 of the Treasury Regulations and the Safe Harbor set forth in Sections 4.01 and 4.02 of Revenue Procedure 2003-39.
SECTION 2.08. Disclosure of Relationship. Each Legal Entity acknowledges and agrees that the QI shall have the right to disclose the relationships set forth in this Agreement to any Seller, Buyer or other person and that the QI is, and is acting in the sole capacity as, Exchangor’s Qualified Intermediary.
SECTION 2.09. Exclusivity. Except as permitted under this Agreement and the Escrow Agreement, the QI agrees that it will not enter into any agreements or conduct any transactions or other business other than agreements, transactions or business with the Legal Entities pursuant to agreements between such Legal Entities and the QI, or any transactions directly ancillary thereto.
SECTION 2.10. Records. The QI agrees that it will monitor and keep detailed and accurate records of the transactions carried out pursuant to this Agreement, including the dollar amounts involved in each of such transactions. Such records shall include information concerning the date of each transfer of Relinquished Property to a Buyer and the date of each receipt of Replacement Property from a Seller. Such records shall be maintained in accordance with recognized accounting practices and in such a manner so as they may be readily audited. All such records will be available for inspection by the Collateral Agent, the GE Collateral Agent, the Trustee, each Enhancement Provider and each Legal Entity, or its designated representatives, upon such Legal Entity’s request, at reasonable, mutually agreeable times, while this Agreement remains in force. After expiration, termination or cancellation of this Agreement, at the applicable Legal Entity’s expense (which expenses shall be reasonable and approved by such Legal Entity), the QI shall continue to maintain such records, and to allow such Legal Entity to audit or inspect the records, until such time as such Legal Entity notifies the QI that the records are no longer required. The QI shall cooperate with the applicable Legal Entity, or its designated representatives, in the conduct of any such inspection. Notwithstanding anything set forth above, unless otherwise requested by a Legal Entity, the records relating to any particular day’s activities may be destroyed at any time, upon 10 Business Days’ prior written notice to the applicable Legal Entity, after the date which is ten (10) years from the date such record was originated.
ARTICLE III
Identification
SECTION 3.01. Identification of Replacement Property. Any Legal Entity may, at any time during the Identification Period, with respect to an Exchange, by written notice to the QI, signed by such Legal Entity and sent to the QI in any manner prescribed by Section 1.1031(k)-1(c)(2) of the Treasury Regulations, identify and designate the Replacement Property with respect to the Relinquished Property transferred in such Exchange; provided, however, that (a) HVF shall not so identify and designate Replacement Property (i) after 11:59 p.m. on the seventh calendar day after the occurrence of a QI Parent Downgrade Event that continues unremedied at such time, unless such QI Parent Downgrade Event has been remedied or (ii) after the occurrence of an Amortization Event with respect to any Series of Notes or an
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Event of Termination pursuant to the Purchase Agreement; (b) Hertz shall not so identify and designate Replacement Property with respect to GE Financed Vehicles (i) after 11:59 p.m. on the seventh calendar day after the occurrence of a QI Parent Downgrade Event that continues unremedied at such time, unless such QI Parent Downgrade Event has been remedied or (ii) after the occurrence of an Event of Default that continues unremedied at such time; and (c) no Legal Entity shall so identify and designate Replacement Property after the Special Termination Date. The Legal Entities shall only designate Replacement Property that is like-kind to such Relinquished Property, as defined in Sections 1.1031(a)-(b) and 1.1031(a)-2 of the Treasury Regulations. The Legal Entities shall identify as Replacement Property either (a) no more than three vehicles in the aggregate or (b) any number of vehicles whose aggregate fair market value does not exceed 200% of the aggregate fair market value of the related Relinquished Property involved in such Exchange.
SECTION 3.02. Revocation of Identification. (a) Any identification by a Legal Entity pursuant to Section 3.01 hereof may be revoked by written notice from any Legal Entity to the QI prior to the end of the Identification Period.
(b) Upon the occurrence of an Amortization Event with respect to any Series of Notes or an Event of Termination pursuant to the Purchase Agreement, any identification pursuant to Section 3.01 with respect to Relinquished Property of HVF which can be revoked pursuant to Section 3.02(a) shall be revoked; and upon the occurrence of an Event of Default, any identification pursuant to Section 3.01 with respect to Relinquished Property of Hertz with respect to GE Financed Vehicles which can be revoked pursuant to Section 3.02(a) shall be revoked.
(c) If a QI Parent Downgrade Event shall have occurred and continues unremedied at 11:59 p.m. on the seventh calendar day after the occurrence of such event, any identification pursuant to Section 3.01 with respect to Relinquished Property of HVF or Relinquished Property of Hertz with respect to GE Financed Vehicles which can be revoked pursuant to Section 3.02(a) shall be revoked.
(d) Hertz will give the QI written notice of the occurrence of an Amortization Event with respect to any Series of Notes, an Event of Termination pursuant to the Purchase Agreement, an Event of Default or a QI Parent Downgrade Event promptly after Hertz becomes aware of the occurrence of such event.
ARTICLE IV
Accounts
SECTION 4.01. Accounts. (a) Each Legal Entity and the QI shall enter into the Escrow Agreement with the QI and the Escrow Agent, pursuant to which the Legal Entities and the QI shall maintain one or more Exchange Accounts and Joint Disbursement Accounts, at Bank of New York or JPMorgan Chase Bank, N.A. One or more Joint Collection Accounts have been or will be established and will be maintained by the Collateral Agent in accordance with Section 2.5 of the Collateral Agency Agreement; one or more HVF Exchange Accounts have been or will be established and will be maintained by the Trustee in accordance with
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Section 5A.1 of the Base Indenture, each in the name of “BNY Midwest Trust Company, as Trustee, and Hertz Car Exchange Inc., as Qualified Intermediary for HVF”; and one or more Hertz GE Exchange Accounts have been or will be established and will be maintained by the GE Collateral Agent in accordance with the provisions of the GE Credit Agreement and the GE Collateral Agreement, each in the name of “Gelco Corporation dba GE Fleet Services, as Collateral Agent, and Hertz Car Exchange, Inc., as Qualified Intermediary for Hertz”. All such Accounts shall be operated in accordance with the terms of this Agreement, the Collateral Agency Agreement, the Base Indenture, the GE Credit Agreement and the GE Collateral Agreement, as applicable. If any Joint Collection Account is not maintained in accordance with Section 2.5 of the Collateral Agency Agreement, then within ten (10) Business Days of obtaining knowledge of such fact, the Collateral Agent and the QI shall establish a new Joint Collection Account which complies with such section and transfer into the new Joint Collection Account all funds from the old Joint Collection Account. If any HVF Exchange Account is not maintained in accordance with Section 5A.1 of the Base Indenture, then within ten (10) Business Days of obtaining knowledge of such fact, the Trustee and the QI shall establish a new HVF Exchange Account which complies with such section and transfer into the new HVF Exchange Account all funds from the old HVF Exchange Account. If any Hertz GE Exchange Account is not maintained in accordance with the provisions of the GE Credit Agreement and the GE Collateral Agreement, then within ten (10) Business Days of obtaining knowledge of such fact, the GE Collateral Agent and the QI shall establish a new Hertz GE Exchange Account which complies with such provisions and transfer into the new Hertz GE Exchange Account all funds from the old Hertz GE Exchange Account.
(b) The Joint Collection Accounts are intended to facilitate the orderly and efficient collection of proceeds from the disposition of the Relinquished Property, including the collection of all Relinquished Property Proceeds, and to allow (1) the identification and subsequent separation of the portion of such funds attributable to Vehicles disposed of by Hertz, HVF or HGI and (2) the further identification and subsequent separation of the portion of such funds of each Legal Entity that are Relinquished Property Proceeds of such Legal Entity from the portion of such funds that are Non-Qualified Funds of such Legal Entity. All proceeds received from Buyers by or on behalf of the QI or a Legal Entity in respect of sales of Relinquished Property shall be immediately deposited in a Joint Collection Account.
(c) The Exchange Accounts are intended (i) to receive all Relinquished Property Proceeds and (ii) (A) in the case of an HVF Exchange Account or a Hertz Exchange Account, to provide Relinquished Property Proceeds to an HGI Exchange Account upon the purchase of a vehicle by Hertz or HVF from HGI and (B) in the case of an HGI Exchange Account, to provide Relinquished Property Proceeds to the Joint Disbursement Accounts.
(d) The Joint Disbursement Accounts are intended to facilitate the orderly and efficient disbursement of funds to the Sellers, including the disbursement of all funds relating to the acquisition of Replacement Property under the LKE Program.
(e) Pursuant to the Escrow Agreement, Relinquished Property Proceeds held by the QI on behalf of a Legal Entity in (i) an HVF Exchange Account shall be invested in Permitted Investments, (ii) a Hertz GE Exchange Account shall be invested in Cash Equivalents (as defined in the GE Credit Agreement) or (iii) any other Exchange Account shall be invested as
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directed by Hertz or HGI, in each case, until such funds are used, in the case of Hertz or HVF, to fund an HGI Account upon the purchase of a vehicle from HGI, and in the case of HGI, to fund a Joint Disbursement Account, as the case may be.
(f) All Relinquished Property Proceeds (and any earnings thereon), whether in a Joint Collection Account, a Joint Disbursement Account or an Exchange Account, shall be held subject to Sections 1.1031(k)-1(g)(4)(ii) and 1.1031(k)-1(g)(6) of the Treasury Regulations, including the restrictions on Exchangor’s right to receive, pledge, borrow, or otherwise obtain the benefits of Relinquished Property Proceeds and Qualified Earnings thereon held by the QI. Subject to the limitation that each Legal Entity shall have no right to receive, pledge, borrow, or otherwise obtain the benefits of Relinquished Property Proceeds or the Qualified Earnings thereon held by either the QI or the bank maintaining the account where such Relinquished Property Proceeds are on deposit, Relinquished Property Proceeds may be withdrawn from any Exchange Account or Joint Disbursement Account upon a Disbursement Occurrence with respect to the related Relinquished Property. Upon any Disbursement Occurrence, the QI shall, at such time and in satisfaction of the QI’s remaining obligations under this Agreement as to the related Exchange with respect to such Disbursement Occurrence, have the bank maintaining the Account where the applicable funds are on deposit pay any remaining amount relating to such Exchange, including without limitation accumulated interest as to such Exchange in any Exchange Account, to, or as directed by, the Legal Entities; provided that in the case of HVF, such amount shall be paid to the Collection Account.
SECTION 4.02. Separation and Application of Funds in Joint Collection Accounts and Exchange Accounts; Proceeds from Transfer of Relinquished Property by the QI.
(a) Identification of Funds. On each Business Day, (i) each Legal Entity shall: (1) identify funds in the Joint Collection Accounts as of such Business Day which constitute Non-Qualified Funds with respect to such Legal Entity and direct the QI to immediately transfer such funds to (A) in the case of Non-Qualified Funds of HVF, the Collection Account, (B) in the case of Non-Qualified Funds of Hertz with respect to GE Financed Vehicles, the GE Collateral Account and (C) in the case of other Non-Qualified Funds of Hertz or Non-Qualified Funds of HGI, to such other account as shall be specified by the applicable Legal Entity; (2) initiate on such Business Day proposed Electronic Funds Transfers from the Joint Collection Accounts in order to transfer funds in the Joint Collection Accounts as of such Business Day which constitute Relinquished Property Proceeds with respect to Relinquished Property transferred by such Legal Entity to the applicable Exchange Account and (3) notify the QI and (A) in the case of transfers to the Collection Account or an HVF Exchange Account, the Trustee or (B) in the case of transfers to the GE Collateral Account or a Hertz GE Exchange Account, the GE Collateral Agent of such proposed transfers and (ii) each Legal Entity shall: (1) identify funds in the Exchange Accounts as of such Business Day which constitute Non-Qualified Funds with respect to such Legal Entity and direct the QI to immediately transfer such funds to (A) in the case of Non-Qualified Funds of HVF, the Collection Account, (B) in the case of Non-Qualified Funds of Hertz with respect to GE Financed Vehicles, the GE Collateral Account and (C) in the case of other Non-Qualified Funds of Hertz and Non-Qualified Funds of HGI, to such other account as shall be specified by the applicable Legal Entity; (2) initiate on such Business Day proposed Electronic Funds Transfers from (x) an Exchange Account in order to transfer funds in such Exchange Account as of such Business Day which constitute Relinquished Property Proceeds
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with respect to Relinquished Property transferred by a Legal Entity (but which funds were previously transferred to the Exchange Account of a different Legal Entity) to the applicable Exchange Account, provided that, in the case of an HVF Exchange Account, no Aggregate Asset Amount Deficiency exists or would result therefrom, and (y) a Hertz Exchange Account or an HVF Exchange Account in order to transfer funds in such Exchange Account as of such Business Day which constitute Relinquished Property Proceeds with respect to Relinquished Property transferred by such Legal Entity hereunder to an HGI Exchange Account upon the purchase of a vehicle by Hertz or HVF from HGI and (3) notify the QI and, in the case of a transfer from an HVF Exchange Account, the Trustee or, in the case of a transfer from a Hertz GE Exchange Account, the GE Collateral Agent of such proposed transfers.
(b) Approval of Certain Transfers. If upon notification to the QI of the proposed Electronic Funds Transfers of Relinquished Property Proceeds pursuant to clause (i)(2) or (ii)(2) of Section 4.02(a) hereof, the QI approves of such proposed Electronic Funds Transfers, the QI agrees to take, within one hour of the receipt of such notification of transfers, all appropriate actions needed to approve and transmit such transfers. If the QI does not approve of any of such proposed Electronic Funds Transfers of Relinquished Property Proceeds, the QI shall immediately notify (1) the applicable Legal Entity, and (A) in the case of Relinquished Property Proceeds of HVF, the Trustee or (B) in the case of Relinquished Property Proceeds of Hertz with respect to the GE Financed Vehicles, the GE Collateral Agent, and (2) the banking institution maintaining the applicable Joint Collection Account or Exchange Account via telephone or fax (any such notice given by telephone to be confirmed in writing), of the disapproval and the reasons for such disapproval. The QI shall cause the bank maintaining the Joint Collection Accounts and Exchange Accounts to accept the instructions of the applicable Legal Entity to make each Electronic Funds Transfer described in Section 4.02(a) hereof that is subsequently approved by the QI pursuant to this Section 4.02(b) hereof.
(c) Ownership of Funds; Restricted Transfers. Each of the Legal Entities and the QI hereby acknowledge and agree that it is the intent of the parties hereto that funds deposited into the Joint Collection Accounts, Exchange Accounts and Joint Disbursement Accounts and funds held in accounts maintained by the Escrow Agent shall be used solely to enable the QI to perform its obligations hereunder to acquire Replacement Property and shall not be considered part of the QI’s general assets nor subject to claims by the QI’s creditors.
(d) Non-Qualified Funds. The QI shall apply any Non-Qualified Funds, or shall cooperate with each Legal Entity for purposes of executing any authorization to cause any Non-Qualified Funds to be applied, as directed by the applicable Legal Entity pursuant to clause (i)(1) or (ii)(1) of Section 4.02(a) hereof.
(e) Effectuation of Transfer. On each Business Day, the QI shall cause the bank maintaining each Joint Collection Account or Exchange Account to cause the amount, if any, set forth in the instructions described in Section 4.02(a)(i) or (a)(ii) hereof, to be transferred from such Joint Collection Account to the applicable Exchange Account. The QI hereby agrees that it shall not approve any transfer of Relinquished Property Proceeds from the Joint Collection Accounts to any account other than an Exchange Account. HVF shall provide notice to the Trustee of any transfer from (i) a Joint Collection Account to the Collection Account or an HVF Exchange Account and (ii) an HVF Exchange Account to an HGI Exchange Account.
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SECTION 4.03. Payment for Replacement Property.
(a) Reports. On each Business Day, HGI shall provide the QI with a report with respect to each Joint Disbursement Account setting forth for such day (1) the aggregate Replacement Property Acquisition Cost expected to be disbursed from such Joint Disbursement Account, (2) the aggregate amount to be transferred to such Joint Disbursement Account from an HGI Exchange Account, if any, to fund such aggregate Replacement Property Acquisition Cost, (3) the amount (if any) to be transferred to such Joint Disbursement Account from any other source to fund such aggregate Replacement Property Acquisition Cost, (4) the aggregate amount (if any) to be transferred to such Joint Disbursement Account from any other account, to fund disbursements not related to the LKE Program, and (5) adjustments, if any, to amounts previously funded from an HGI Exchange Account.
(b) Funding by the QI. On each Business Day, HGI shall initiate a series of proposed Electronic Funds Transfers in order to withdraw from an HGI Exchange Account and transfer to one or more Joint Disbursement Accounts on such day amounts to fund the aggregate Replacement Property Acquisition Cost on such day in accordance with the report delivered pursuant to Section 4.03(a) hereof and shall notify the QI of such proposed Electronic Funds Transfers. If upon such notification of the proposed Electronic Funds Transfers the QI approves of the proposed Electronic Funds Transfers, the QI agrees to take, within one hour of the receipt of such notification, all appropriate actions needed to approve and transmit such transfers. If the QI does not approve of any of such proposed Electronic Funds Transfers, the QI shall immediately notify HGI, via telephone or fax (any such notice given by telephone to be confirmed in writing), of the disapproval and the reasons for such disapproval. The QI shall cause the bank maintaining each Joint Disbursement Account to accept the instructions of HGI to make each Electronic Funds Transfer described above that is subsequently approved by the QI.
(c) Shortfalls in Funding. If, for any reason, the sum of the amounts proposed to be transferred from an HGI Exchange Account to a Joint Disbursement Account for the purchase of Replacement Property on any Business Day exceeds the total amount of funds in such Exchange Account available for such purpose on such Business Day, including any funds earned from the investment of funds held in such Exchange Account pursuant to the Escrow Agreement, the QI shall promptly notify HGI of such shortfall, and the amounts to be transferred to a Joint Disbursement Account from such HGI Exchange Account on such Business Day to fund the aggregate Replacement Property Acquisition Cost shall be reduced by the amount of such shortfall.
(d) Effectuation of Transfers. On each Business Day, the QI shall cause the bank maintaining each Exchange Account to cause the amounts, if any, set forth in the instructions described in Section 4.03(b) hereof, reduced, if necessary, as described in Section 4.03(c) hereof, to be transferred from the applicable Exchange Account to the applicable Joint Disbursement Account.
(e) Funding by Exchangor. In the event that the aggregate funds transferred from an HGI Exchange Account to the Joint Disbursement Accounts on any Business Day are insufficient to fund all Replacement Property Acquisition Costs and Non-LKE Disbursements to be made from each Joint Disbursement Account on such day, the QI shall promptly notify HGI
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of such shortfall, and HGI may transfer Additional Subsidies to the applicable Joint Disbursement Account in an amount sufficient for the QI to acquire the Replacement Property and make such Non-LKE Disbursements. The QI shall not be required to pay Replacement Property Acquisition Costs or make Non-LKE Disbursements for which sufficient funds are not available.
SECTION 4.04. Investment of Funds in the Exchange Account.
(a) Investment of Funds. On each Business Day, all funds in the Exchange Accounts shall be invested in accordance with the terms of Section 4.01(e) and the Escrow Agreement. Each Legal Entity shall provide the QI instructions from time to time in accordance with the Escrow Agreement setting forth the manner in which such funds shall be invested.
(b) Interest Reporting. Each Legal Entity and the QI acknowledge and agree that the income earned on funds invested pursuant to the Escrow Agreement will be attributed to Exchangor for income tax purposes.
SECTION 4.05. Disbursements from Account. All Relinquished Property Proceeds shall be held subject to the terms of this Agreement (including, without limitation, the terms of Section 4.01(f) and, following any transfer of such Relinquished Property Proceeds to an Exchange Account or a Joint Disbursement Account in accordance with the terms hereof, the Escrow Agreement.
SECTION 4.06. Disbursement Occurrence. All Relinquished Property Proceeds and Additional Subsidies shall be held subject to the terms of this Agreement, the Escrow Agreement, the Collateral Agency Agreement, and, in the case of Relinquished Property Proceeds and Additional Subsidies with respect to GE Financed Vehicles, the GE Credit Agreement and the GE Collateral Agreement. In particular, all Relinquished Property Proceeds (and any Qualified Earnings thereon) shall be held subject to Treasury Regulations Sections 1.1031(k)-1(g)(4)(ii) and (g)(6). Without limiting the foregoing, Exchangor’s rights to receive, pledge, borrow, or otherwise obtain the benefits of any Relinquished Property Proceeds (whether in the form of money or other property) and any Qualified Earnings thereon are expressly limited as provided in Treasury Regulations Sections 1.1031(k)-1(g)(4)(ii) and 1.1031(k)-1(g)(6). Exchangor shall have no right to receive, pledge, borrow, or otherwise obtain the benefits of Relinquished Property Proceeds or the Qualified Earnings thereon held in the Accounts except for amounts withdrawn solely for one of the following occurrences (each a “Disbursement Occurrence”): (a) if Exchangor has not identified, or has revoked an identification with respect to, any Replacement Property on or before the end of the Identification Period, (b) after identification and after the Identification Period has expired, Exchangor has received all of the identified Replacement Property to which Exchangor is entitled, (c) after the end of the Exchange Period for any Relinquished Property or (d) HGI, HVF or Hertz receiving written notification from one or more Manufacturers of Identified Replacement Vehicles with respect to Relinquished Property, stating that Manufacturers of Identified Replacement Vehicles will not be delivering, before the end of the applicable Exchange Period or otherwise, Identified Replacement Vehicles with an aggregate purchase price of at least 80% of the aggregate proceeds of the sale of such Relinquished Property. All funds held in the Joint Collection Accounts, Exchange Accounts and Joint Disbursement
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Accounts shall be subject to such restrictions as are necessary for such accounts to satisfy the requirements of Sections 5.02 and 5.03 of Rev. Proc. 2003-39.
ARTICLE V
Indemnity By Each Legal Entity
SECTION 5.01. No Personal Liability. The parties hereto agree that no director, officer, employee, member, shareholder or agent of any party to this Agreement shall have any personal liability under or in connection with this Agreement.
SECTION 5.02. Indemnity. (a) Hertz agrees to indemnify, hold harmless, and defend the QI, its respective agents, officers, directors, employees, members and affiliates (each a “QI Indemnitee”) from and against any and all losses, liabilities, costs and expenses suffered in connection with any claims or actions to the extent directly related to the QI’s involvement under this Agreement as a “Qualified Intermediary”, pursuant to Treasury Regulation Section 1.1031(k)-1(g)(4)(iii), unless such losses, liabilities, costs or expenses resulted from the gross negligence or willful misconduct of a QI Indemnitee. This indemnity shall include losses, liabilities and claims resulting from payments, withdrawals or orders made or purported to be made in accordance with, or from actions taken in good faith and in reliance upon the provisions of this Agreement. This indemnity shall include any and all claims arising from or in connection with the presence, release, threat of release, generation, analysis, storage, transportation, discharge or disposal of hazardous substances or hazardous materials (as such terms or similar terms may be defined in the provisions of applicable federal, state or local laws, irrespective of whether such laws, regulations, directives or ordinances are in existence at the date of this Agreement) to, in, under, about, adjacent, or from any Relinquished Property or Replacement Property, and all costs of investigation, soil and water sampling, drilling, testing, reporting, repair, removal, remediation, clean-up, closure, decontamination and detoxification of any property, including the rental and use of any equipment used in connection therewith; and including the cost of any professionals and persons performing any services in connection with any environmental clean-up, in each case, to the extent related to the QI’s involvement under this Agreement.
(b) If the QI Indemnitee seeks indemnification for any loss, liability, cost, expense, claim or action described in Section 5.02(a) above, Hertz shall defend the claim at its expense and shall pay any settlements approved by the QI Indemnitee and any judgments which may be finally awarded, provided that Hertz shall have the right to control the defense of such third party claims or actions. The QI Indemnitee agrees to consult and cooperate to the extent reasonably deemed necessary by Hertz in such defense.
SECTION 5.03. Survival. The indemnities in this Article V shall survive the expiration or sooner termination of this Agreement and shall not merge into any document executed in conjunction herewith. It is intended that the provisions of this Article V take precedence over the provisions of any other agreements between the parties entered into pursuant to this Agreement, and the parties agree that the provisions of this Article V may not be amended or modified except by a written agreement between the parties making express reference to this Article V.
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