Hertz 2007 Annual Report Download - page 159

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
or the Compensation Committee of Hertz Holdings may determine the specific number of shares to be
offered or options to be granted to an individual employee or director. A maximum of 25 million shares
are reserved for issuance under the Stock Incentive Plan. We currently intend to satisfy any need for
shares of our common stock associated with the exercise of options issued under the Stock Incentive
Plan through those new shares reserved for issuance, not through the use of Treasury shares or open
market purchases of shares. The Stock Incentive Plan was approved by the stockholders of Hertz
Holdings on March 8, 2006.
All option grants will be non-qualified options with a per-share exercise price no less than fair market
value of one share of Hertz Holdings stock on the grant date. Any stock options granted will generally
have a term of ten years, and unless otherwise determined by the Board or the Compensation
Committee of Hertz Holdings, will vest in five equal annual installments. The options granted in 2006 vest
over five years; the options granted in 2007 vest over three years, except for the grants to Mark P.
Frissora, our Chief Executive Officer, and certain key executives, which vest over four years. The options
granted to the outside Directors vest immediately. The Board or Compensation Committee may
accelerate the vesting of an option at any time. In addition, vesting of options will be accelerated if Hertz
Holdings experiences a change in control (as defined in the Stock Incentive Plan) unless options with
substantially equivalent terms and economic value are substituted for existing options in place of
accelerated vesting. Vesting of options will also be accelerated in the event of an employee’s death or
disability (as defined in the Stock Incentive Plan). Upon a termination for cause (as defined in the Stock
Incentive Plan), all options held by an employee are immediately cancelled. Following a termination
without cause, vested options will generally remain exercisable through the earliest of the expiration of
their term or 60 days following termination of employment (180 days in the case of death, disability or
retirement at normal retirement age).
Unless sooner terminated by the Board of Directors, the Stock Incentive Plan will remain in effect until
February 15, 2016.
We are in the process of obtaining shareholder approval for an Omnibus long-term incentive plan
providing for grants of both equity and cash awards, including non-qualified stock options, incentive
stock options, stock appreciation rights, performance awards (shares and units), restricted stock,
restricted stock units and deferred stock units. See Note 16—Subsequent Events.
In May 2007, Hertz Holdings granted options to acquire 1,029,007 shares of Hertz Holdings’ common
stock to key executives, employees and non-management directors at exercise prices ranging from
$20.55 to $21.87. In August 2007, Hertz Holdings granted options to acquire 510,000 shares of Hertz
Holdings’ common stock to certain executives, including an award to Mr. Frissora at exercise prices
ranging from $22.61 to $23.06. In November 2007, Hertz Holdings granted options to acquire 232,000
shares of Hertz Holdings’ common stock to certain executives at exercise prices ranging from $17.14 to
$21.22. These options are subject to and governed by the terms of the Stock Incentive Plan and the
Hertz Global Holdings, Inc. Director Stock Incentive Plan, or the ‘‘Director Plan.’’ See Note 14—Related
Party Transactions—‘‘Director Stock Incentive Plan.’’
We have accounted for our employee stock-based compensation awards in accordance with SFAS
No. 123R. The options are being accounted for as equity-classified awards. We will recognize
compensation cost on a straight-line basis over the vesting period. The value of each option award is
estimated on the grant date using a Black-Scholes option valuation model that incorporates the
assumptions noted in the following table. Because the stock of Hertz Holdings became publicly traded in
November 2006 and has a short trading history, it is not practicable for us to estimate the expected
volatility of our share price, or a peer company share price, because there is not sufficient historical
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