Avis 2012 Annual Report Download - page 88

F-32
Standard Guarantees/Indemnifications
In the ordinary course of business, the Company enters into numerous agreements that contain standard guarantees and
indemnities whereby the Company indemnifies another party, among other things, for breaches of representations and
warranties. In addition, many of these parties are also indemnified against any third-party claim resulting from the
transaction that is contemplated in the underlying agreement. Such guarantees or indemnifications are granted under
various agreements, including those governing (i) purchases, sales or outsourcing of assets or businesses, (ii) leases of
real estate, (iii) licensing of trademarks, (iv) access to credit facilities and use of derivatives and (v) issuances of debt or
equity securities. The guarantees or indemnifications issued are for the benefit of the (i) buyers in sale agreements and
sellers in purchase agreements, (ii) landlords in lease contracts, (iii) licensees under licensing agreements, (iv) financial
institutions in credit facility arrangements and derivative contracts and (v) underwriters and placement agents in debt or
equity security issuances. While some of these guarantees extend only for the duration of the underlying agreement,
many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of
limitations). There are no specific limitations on the maximum potential amount of future payments that the Company
could be required to make under these guarantees, nor is the Company able to develop an estimate of the maximum
potential amount of future payments to be made under these guarantees as the triggering events are not subject to
predictability. With respect to certain of the aforementioned guarantees, such as indemnifications provided to landlords
against third-party claims for the use of real estate property leased by the Company, the Company maintains insurance
coverage that mitigates its potential exposure.
Other Guarantees
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of Realogy, Wyndham and
Travelport, which, as previously discussed, were disposed in 2006. These guarantees relate primarily to various real
estate operating leases. The maximum potential amount of future payments that the Company may be required to make
under the guarantees relating to these leases is estimated to be approximately $91 million, the majority of which expire
by the end of 2014. At December 31, 2012, the liability recorded by the Company in connection with these guarantees
was approximately $2 million. To the extent that the Company would be required to perform under any of these
guarantees, the Company is entitled to indemnification by Realogy, Wyndham and Travelport, as applicable. The
Company monitors the credit ratings and other relevant information for Realogy, Wyndham and Travelport’s parent
company in order to assess the status of the payment/performance risk of these guarantees.
17. Stockholders’ Equity
Cash Dividend Payments
During 2012, 2011 and 2010, the Company did not declare or pay any cash dividends.
Share Repurchases
During 2012, 2011 and 2010, the Company did not repurchase any of its common stock.
Convertible Note Hedge and Warrants
In 2009, the Company purchased a convertible note hedge for approximately $95 million, to potentially reduce the net
number of shares required to be issued upon conversion of the Convertible Notes. Concurrently, the Company issued
warrants for approximately $62 million to offset the cost of the convertible note hedge.
The convertible note hedge and warrants, which will be net-share settled, initially covered the purchase and issuance,
respectively, of approximately 21.2 million shares of common stock, subject to customary anti-dilution provisions. The
initial strike price per share of the convertible note hedge and warrants is $16.25 and $22.50, respectively. The
convertible note hedge expires in October 2014 and is exercisable before expiration only to the extent that corresponding
amounts of the Convertible Notes are exercised. The warrants expire ratably over 80 trading days beginning January 5,
2015. The convertible note hedge and warrant transactions were accounted for as capital transactions and included as a
component of stockholders’ equity. The significant terms of the Convertible Notes can be found in Note 14—Long-term
Debt and Borrowing Arrangements.
During 2012, concurrently with the Company’s repurchase of a portion of its 3½% convertible notes, the Company
repurchased warrants for the purchase of the Company’s common stock for $29 million and sold an equal portion of its
convertible note hedge for $43 million, reducing the number of shares related to each of the hedge and warrant by