Hertz 2008 Annual Report Download - page 205

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Sponsor Designees, for so long as Hertz Holdings remains a ‘‘controlled company’’ within the meaning
of the New York Stock Exchange rules), subject to adjustment in the case that the applicable investment
fund sells more than a specified amount of its shareholdings in us. In addition, upon Hertz Holdings
ceasing to be a ‘‘controlled company’’ within the meaning of the New York Stock Exchange rules, if
necessary to comply with the New York Stock Exchange rules, the director nominees of the Sponsors
shall be reduced to two nominees of an investment fund associated with CD&R (one of whom shall serve
as the chairman or, if the chief executive officer is the chairman, the lead director), one nominee of
investment funds associated with Carlyle, and one nominee of an investment fund associated with
MLGPE, and additional independent directors will be elected by our Board of Directors to fill the resulting
director vacancies. The Stockholders Agreement also provides that our chief executive officer shall be
designated as a director, unless otherwise approved by a majority of the Sponsor Designees. In addition,
the Stockholders Agreement provides that one of the nominees of an investment fund associated with
CD&R shall serve as the chairman of the executive and governance committee and, unless otherwise
agreed by this fund, as Chairman of our Board of Directors. On October 12, 2006, our Board elected four
independent directors, effective from the date of the completion of the initial public offering of our
common stock. In order to comply with New York Stock Exchange rules, we will be required to have a
majority of independent directors on our Board of Directors within one year of our ceasing to be a
‘‘controlled company’’ within the meaning of the New York Stock Exchange rules.
The Stockholders Agreement also grants to the investment funds associated with CD&R or to the
majority of the Sponsor Designees the right to remove our chief executive officer. Any replacement chief
executive officer requires the consent of investment funds associated with CD&R as well as investment
funds associated with at least one other Sponsor. It also contains restrictions on the transfer of our
shares, and provides for tag-along and drag-along rights, in certain circumstances. The rights described
above apply only for so long as the investment funds associated with the applicable Sponsor maintain
certain specified minimum levels of shareholdings in us.
In addition, the Stockholders Agreement limits the rights of the investment funds associated with or
designated by the Sponsors that have invested in our common stock and our affiliates, subject to several
exceptions, to own, manage, operate or control any of our ‘‘competitors’’ (as defined in the Stockholders
Agreement). The Stockholders Agreement may be amended from time to time in the future to eliminate
or modify these restrictions without our consent.
Registration Rights Agreement
On the Closing Date, we entered into a registration rights agreement, or, as amended, the ‘‘Registration
Rights Agreement,’’ with investment funds associated with or designated by the Sponsors. The
Registration Rights Agreement grants to certain of these investment funds the right, to cause us, at our
own expense, to use our best efforts to register such securities held by the investment funds for public
resale, subject to certain limitations. The exercise of this right is limited to three requests by the group of
investment funds associated with each Sponsor, except for registrations effected pursuant to Form S-3,
which are unlimited, subject to certain limitations, if we are eligible to use Form S-3. The secondary
offering of our common stock in June 2007 was effected pursuant to this Registration Rights Agreement.
In the event we register any of our common stock, these investment funds also have the right to require
us to use our best efforts to include shares of our common stock held by them, subject to certain
limitations, including as determined by the underwriters. The Registration Rights Agreement also
provides for us to indemnify the investment funds party to that agreement and their affiliates in
connection with the registration of our securities.
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