Hertz 2009 Annual Report Download - page 153

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
stock held in treasury or authorized but unissued shares of common stock, not reserved for any other
purpose.
Shares subject to any award granted under the Omnibus Plan that for any reason are canceled,
terminated, forfeited, settled in cash or otherwise settled without the issuance of common stock after the
effective date of the Omnibus Plan will generally be available for future grants under the Omnibus Plan.
Stock Options and Stock Appreciation Rights
All stock options and stock appreciation rights granted under the Omnibus Plan will have a per-share
exercise price of not less than the fair market value of one share of Hertz Holdings common stock on the
grant date. Stock options and stock appreciation rights will vest based on a minimum period of service or
the occurrence of events (such as a change in control, as defined in the Omnibus Plan) specified by the
compensation committee of our Board of Directors. No stock options or stock appreciation rights will be
exercisable after ten years from the grant date. The compensation committee may at its discretion
accelerate the vesting of an option or stock appreciation right at any time. In addition, vesting of options
and stock appreciation rights will be accelerated if Hertz Holdings experiences a change in control (as
defined in the Omnibus Plan) unless options or stock appreciation rights with substantially equivalent
terms and economic value are substituted for existing options and stock appreciation rights in place of
accelerated vesting. Vesting of options and stock appreciation rights will also be accelerated in the event
of an employee’s death or disability (as defined in the Omnibus Plan). Upon a termination for cause (as
defined in the Omnibus Plan), all options and stock appreciation rights held by the employee are
immediately cancelled. Following a termination without cause, vested options and stock appreciation
rights will generally remain exercisable through the earliest of the expiration of their term or 30 days
following termination of employment (or one year in the case of death or disability).
In February 2009, we granted options to acquire 52,500 shares of our common stock at an exercise price
of $3.24 per share under the Omnibus Plan.
We have accounted for our employee stock-based compensation awards in accordance with ASC 718,
‘‘Compensation-Stock Compensation.’’ 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 information about past volatility. Therefore, we have used the calculated value method,
substituting the historical volatility of an appropriate industry sector index for the expected volatility of
Hertz Holdings’ common stock price as an assumption in the valuation model. We selected the Dow
Jones Specialized Consumer Services sub-sector within the consumer services industry, and we used
the U.S. large capitalization component, which includes the top 70% of the index universe (by market
value).
The calculation of the historical volatility of the index was made using the daily historical closing values of
the index for the preceding 6.25 years, because that is the expected term of the options using the
simplified approach.
The risk-free interest rate is the implied zero-coupon yield for U.S. Treasury securities having a maturity
approximately equal to the expected term, as of the grant dates. The assumed dividend yield is zero. We
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