Hertz 2007 Annual Report Download - page 68

or the making of loans by such subsidiaries to Hertz Holdings. See ‘‘Item 1A—Risk Factors—Risks
Relating to Our Substantial Indebtedness—Restrictive covenants in certain of the agreements governing
our indebtedness may adversely affect our financial flexibility.’’ In addition, Delaware law may impose
requirements that may restrict our ability to pay dividends to holders of our common stock.
If the ownership of our common stock continues to be highly concentrated, it will prevent other
stockholders from influencing significant corporate decisions.
The concentrated holdings of the funds associated with the Sponsors, certain provisions of the
Stockholders Agreement among the funds and us and the presence of these funds’ nominees on our
board of directors may result in a delay or the deterrence of possible changes in control of our company,
which may reduce the market price of our common stock. The interests of the Sponsors may conflict with
the interests of our other stockholders. See ‘‘Item 1A—Risk Factors—Risks Related to our Business—
The Sponsors currently control us and may have conflicts of interest with us in the future.’’ Our board of
directors has adopted corporate governance guidelines that, among other things, address potential
conflicts between a director’s interests and our interests. In addition, we have adopted a code of
business conduct that, among other things, requires our employees to avoid actions or relationships
that might conflict or appear to conflict with their job responsibilities or the interests of Hertz Holdings,
and to disclose their outside activities, financial interests or relationships that may present a possible
conflict of interest or the appearance of a conflict to management or corporate counsel. These corporate
governance guidelines and code of business ethics will not, by themselves, prohibit transactions with
our significant stockholders.
Our share price may decline due to the large number of shares eligible for future sale.
Sales of substantial amounts of our common stock, or the possibility of such sales, may adversely affect
the price of our common stock and impede our ability to raise capital through the issuance of equity
securities.
There were 321,862,083 shares of our common stock outstanding as of December 31, 2007. Of these
shares, the 88,235,000 shares of common stock sold in the initial public offering and the 51,750,000
shares of common stock sold in the June 2007 registered secondary offering are freely transferable
without restriction or further registration under the Securities Act, unless purchased by our ‘‘affiliates’’ as
that term is defined in Rule 144 under the Securities Act. The remaining shares of common stock
outstanding will be restricted securities within the meaning of Rule 144 under the Securities Act, but will
be eligible for resale subject to applicable volume, manner of sale, holding period and other limitations of
Rule 144 or pursuant to an exemption from registration under Rule 701 under the Securities Act. In
November 2006, we filed a registration statement under the Securities Act to register the shares of
common stock to be issued under our stock incentive plans and, as a result, all shares of common stock
acquired upon exercise of stock options and other equity-based awards granted under these plans will
also be freely tradable under the Securities Act unless purchased by our affiliates. A total of 28.5 million
shares of common stock are reserved for issuance under our stock incentive plans.
Certain of our existing stockholders have the right under certain circumstances to require that we
register their shares for resale. As of December 31, 2007, these registration rights apply to approximately
177.8 million shares of our outstanding common stock owned by the investment funds affiliated with or
designated by the Sponsors.
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