Hertz 2007 Annual Report Download - page 176

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Indemnifications
In the ordinary course of business, we execute contracts involving indemnifications standard in the
relevant industry and indemnifications specific to a transaction such as the sale of a business. These
indemnifications might include claims relating to the following: environmental matters; intellectual
property rights; governmental regulations and employment-related matters; customer, supplier and
other commercial contractual relationships; and financial matters. Performance under these indemnities
would generally be triggered by a breach of terms of the contract or by a third party claim. We regularly
evaluate the probability of having to incur costs associated with these indemnifications and have
accrued for expected losses that are probable and estimable. The types of indemnifications for which
payments are possible include the following:
Sponsors; Directors
On the Closing Date, Hertz entered into customary indemnification agreements with Hertz Holdings, the
Sponsors and Hertz Holdings’ stockholders affiliated with the Sponsors, pursuant to which Hertz
Holdings and Hertz will indemnify the Sponsors, Hertz Holdings’ stockholders affiliated with the
Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents,
representatives and controlling persons, against certain liabilities arising out of performance of a
consulting agreement with Hertz Holdings and each of the Sponsors and certain other claims and
liabilities, including liabilities arising out of financing arrangements or securities offerings. We do not
believe that these indemnifications are reasonably likely to have a material impact on us. We have also
entered into indemnification agreements with each of our directors.
Environmental
We have indemnified various parties for the costs associated with remediating numerous hazardous
substance storage, recycling or disposal sites in many states and, in some instances, for natural
resource damages. The amount of any such expenses or related natural resource damages for which we
may be held responsible could be substantial. The probable losses that we expect to incur for such
matters have been accrued and those losses are reflected in our consolidated financial statements. As of
December 31, 2007 and December 31, 2006, the aggregate amounts accrued for environmental
liabilities including liability for environmental indemnities, reflected in our consolidated balance sheet in
‘‘Other accrued liabilities’’ were $2.7 million and $3.7 million, respectively. The accrual generally
represents the estimated cost to study potential environmental issues at sites deemed to require
investigation or clean-up activities, and the estimated cost to implement remediation actions, including
ongoing maintenance, as required. Cost estimates are developed by site. Initial cost estimates are
based on historical experience at similar sites and are refined over time on the basis of in-depth studies
of the site. For many sites, the remediation costs and other damages for which we ultimately may be
responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our
connection to the site, the materials there, the involvement of other potentially responsible parties, the
application of laws and other standards or regulations, site conditions, and the nature and scope of
investigations, studies, and remediation to be undertaken (including the technologies to be required and
the extent, duration, and success of remediation).
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