Hertz 2009 Annual Report Download - page 178

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13—Related Party Transactions
Relationship with Hertz Investors, Inc. and the Sponsors
Stockholders Agreement
In connection with the Acquisition, we entered into a stockholders agreement, or, as amended, the
‘‘Stockholders Agreement,’’ with investment funds associated with or designated by the Sponsors. The
Stockholders Agreement contains agreements that entitle investment funds associated with or
designated by the Sponsors to nominate all of our directors. The director nominees are to include three
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), two nominees of investment funds
associated with Carlyle, two nominees of an investment fund associated with MLGPE (collectively, the
‘‘Sponsor Designees’’) and up to six independent directors (subject to unanimous consent of the
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
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