EXHIBIT 10.5
FORM OF CHANGE IN CONTROL AGREEMENT (AND CERTAIN TERMS
RELATED THERETO) AMONG THE HERTZ CORPORATION, FORD
MOTOR COMPANY AND EACH OF MESSRS. KOCH, NOTHWANG,
SIRACUSA, TARIDE AND XXXXXXX
On July 27, 2005, The Hertz Corporation and Ford Motor Company entered into
agreements with certain executive officers of The Hertz Corporation which
provide for compensation and benefits upon certain terminations of employment
following a "change in control" of The Hertz Corporation. Each Change in Control
Agreement is identical for each executive officer with the exception of certain
multiples and number of years applicable to computation provisions of the
agreement. The form of such Change in Control Agreements is attached hereto.
For the purposes of individual Change in Control Agreements, the multiples and
number of years for the following executives are: Xx. Xxxx, three times and
three years; Xx. Xxxxxxxx, Xx. Xxxxxxxx, Mr. Taride and Xx. Xxxxxxx two and a
half times and two and a half years.
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") effective as of July
27, 2005 (the "Effective Date") is entered into by and among Ford Motor Company,
a Delaware corporation ("Parent"), The Hertz Corporation, a Delaware corporation
(the "Company") and the individual whose name is set forth on the signature page
of this Agreement as "EXECUTIVE" (the "Executive").
WHEREAS, the Company is a wholly-owned subsidiary of Parent; and
WHEREAS, the Company and Parent have determined that it is in the best
interests of the Company to secure the continued services and dedication of
Executive in the event of any threat or occurrence of a Change in Control (as
defined in Section 2.6).
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Agreement. Subject to Section 16.6, this Agreement shall be in
effect for the period commencing on the Effective Date and ending on the
Executive's termination of employment with the Company or its subsidiaries, or
any successor employer, other than during a Protected Period (as defined in
Section 2.13).
2. Definitions.
2.1. "Affiliate" of a business entity means any company (or other
business entity) controlling, controlled by, or under common control with the
business entity.
2.2. "Base Salary" means the Executive's annual rate of salary or
wages, including any amounts deferred at the election of the Executive, in
effect as of the date immediately prior to the Change in Control.
2.3. "Board" means the Board of Directors of the Company or its
successor.
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2.4. "Bonus Amount" means the average of the annual bonuses payable
to the Executive, including any amounts deferred at the election of the
Executive, with respect to the three calendar years preceding the Change in
Control; provided, however, that in the event the Executive has not been
eligible to earn an annual bonus from the Company in his position as a senior
executive officer of the Company for three full calendar years preceding the
Change in Control, the term "Bonus Amount" shall instead mean 100% of the target
annual bonus that the Executive is eligible to earn in respect of the fiscal
year of the Company in which the Change in Control occurs, or if no target
annual bonus has yet been established for such fiscal year, 100% of the target
annual bonus for the prior fiscal year.
2.5. "Cause" means the Executive's (i) act of dishonesty or knowing
or willful breach of fiduciary duty that is intended to result in the
Executive's enrichment or gain at the expense of the Company or any of its
Affiliates; or (ii) commission of a felony involving moral turpitude of
unlawful, dishonest or unethical conduct that a reasonable person would consider
damaging to the reputation or image of the Company or any of its Affiliates or
improper and unacceptable conduct of the Executive; (iii) material violation of
the Company's published Standards of Business Conduct (Procedure W1-22) (or any
successor standard thereto) that warrants termination; (iv) refusal to comply
with the lawful directions of the Executive's superiors; or (v) deliberate,
willful or intentional act that causes substantial harm, loss or injury to the
Company or any of its Affiliates; or (vi) material failure or inability to
perform duties in a satisfactory and competent manner or to achieve reasonable
profit or performance goals or objectives following warning and a reasonable
opportunity to cure; provided, however, that no such failure or inability may be
deemed to occur if the Executive performs the duties of the
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position with the Company held by the Executive that the Executive is reasonably
expected to perform to achieve such goals or objectives.
2.6. "Change in Control" means:
(a) The direct or indirect acquisition by any Person of beneficial
ownership, through a purchase, merger or other acquisition transaction or series
of transactions occurring within a 24 month period, of securities of the Company
entitling such Person to exercise 50% or more of the combined voting power of
the Company's securities;
(b) The transfer, whether by sale, merger or otherwise, in a single
transaction or in a series of transactions occurring within a 24 month period,
of all or substantially all of the business and assets of the Company in
existence as of the date of this Agreement to any Person; or
(c) The adoption of a plan of liquidation or dissolution of the
Company.
(d) Notwithstanding the foregoing:
i. A Change in Control under (a) or (b) above shall not be deemed to
occur because of an acquisition by or transfer to Parent or another
Affiliate of Parent;
ii. A Change in Control under (a) above shall not be deemed to occur
solely because of (A) a public offering of the shares of the Company (an
"Offering"), even if the Offering results in a change of ownership of more
than 50% of the then outstanding voting securities of the Company; or (B)
a "spin-off" of the then outstanding voting securities of the Company to
the stockholders of Parent; and
iii. A Change in Control shall not be deemed to have occurred as a
result of a Management Buy-out, as defined in the next sentence. For
purposes of this clause iii, a "Management Buy-out" is a transaction that
has all the following attributes: (a) an offer
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to purchase all the equity interests in the Company for cash has been made
by the Executive and other senior managers of the Company, acting either
alone or with the financial support of financing parties who have been
initially sought out by the Executive and such managers for purposes of
assisting them in financing such a purchase, (b) such an offer has been
accepted by the Company's owners and such a purchase has been consummated,
(c) in connection with such a purchase, the Executive has contributed,
from the Executive's own funds (including any amounts paid or payable to
the Executive under this Agreement), at least 1% of the purchase price
paid and (d) immediately following such a purchase, the Executive and
other senior managers of the Company as a group, separate and apart from
any other financing parties involved in such a purchase, had a
non-forfeitable ownership interest in the Company of at least 25% of the
Company's outstanding equity interests.
2.7. "Employer" means, the Company or another Person continuing to
employ the Executive after a Change in Control.
2.8. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2.9. "Good Reason," means the occurrence, without the Executive's
express written consent, of any of the following events during the Protected
Period:
(a) A reduction by the Employer of the Executive's Base Salary or of
such higher base salary as may have been in effect at any time during the
Protected Period, except in connection with the termination of the Executive's
employment by the Employer for Cause or on account of Long-Term Disability or
death;
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(b) Subject to Section 5.3, the failure by the Employer to pay the
Executive any portion of his aggregate compensation including, without
limitation, annual bonus, long-term incentive and any portion of his
compensation deferred under any plan, agreement or arrangement of or with the
Employer within thirty (30) days after the date payment of any such compensation
is due;
(c) The failure by the Employer to afford the Executive annual bonus
and long-term cash incentive compensation target opportunities with a value that
in the aggregate, is at least equal to 80% of the aggregate value of annual
bonus and long-term cash incentive compensation target opportunities made
available to the Executive immediately prior to the Change in Control; provided,
however, that, in no event shall this Section 2.9(c) apply in connection with a
termination of the Executive's employment by the Employer for Cause or on
account of Long-Term Disability or death;
(d) A change in the Executive's principal work location to a
location that either (i) is more than 50 miles away from the Executive's
principal work location immediately prior to the Change in Control, unless, in
connection therewith, the Executive is afforded a full relocation package under
the relocation program maintained by the Company for its senior executives
immediately prior to the Change in Control, or (ii) is not (A) if the
Executive's principal work location immediately prior to the Change in Control
is the Employer's world headquarters, the Employer's world headquarters or, if
the Executive is the head of a business division, that division's headquarters,
(B) if the Executive's principal work location immediately prior to the Change
in Control is the Employer's European headquarters, the Employer's European
headquarters, and (C) if the Executive's principal work location immediately
prior to
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the Change in Control is the Employer's principal administrative center in
Oklahoma City, Oklahoma, the Employer's principal administrative center;
(e) A material diminution in the Executive's title or
responsibilities;
(f) Changes or terminations, in the aggregate materially adverse to
the Executive, in or of the terms of the health, life insurance and disability
insurance benefits provided by the Employer to the Executive (or, in the case of
health benefits, to the Executive's dependents) from those in effect immediately
prior to the Change in Control (the date on which such material changes or
terminations occur, the "Benefits Trigger Date"); or
(g) An adverse change or termination, as to the Executive, of the
terms of, or of the Executive's participation in, any retirement plan of or
provided by the Employer in which the Executive participates or would, upon
normal retirement, be entitled to participate, including, without limitation,
The Hertz Corporation Supplemental Retirement and Savings Plan ("SERP I"), The
Hertz Corporation Supplemental Executive Retirement Plan ("SERP II"), The Hertz
Corporation Benefit Equalization Plan ("BEP") and The Hertz Corporation Key
Officer - Post Retirement Assigned Car Benefit (the "Retiree Car Plan").
Notwithstanding any other provision of this Agreement, the Executive shall have
the right to terminate his employment with the Employer, with such termination
being deemed as if a termination for Good Reason during a Protected Period, if
any successor to the Company does not assume the obligations of the Employer
under this Agreement upon a Change in Control pursuant to Section 14.1 or by
operation of law.
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2.10. "Long-Term Disability" has the meaning given to such term in
the plan or policy providing long-term disability coverage maintained by the
Employer for its employees.
2.11. "Non-Qualifying Termination" means a termination of the
Executive's employment: (1) by the Employer for Cause; (2) by the Executive for
any reason other than Good Reason; or (3) as a result of the Executive's
Long-Term Disability or death.
2.12. "Person" has the meaning ascribed to such term in Section
3(a)(9) of the Securities Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
2.13. "Protected Period" means the two year period beginning as of
the date of a Change in Control. Anything in the prior sentence to the contrary
notwithstanding, if prior to the date on which a Change in Control occurs, the
Executive's employment with the Company or any of its subsidiaries is terminated
without Cause, or the terms and conditions of the Executive's employment are
adversely changed, in a manner which would constitute grounds for a termination
of employment by the Executive for Good Reason, and it is reasonably
demonstrated that such termination of employment or adverse change: (i) was at
the request of a third party who has taken or is prepared to take actions
reasonably calculated to effect a Change in Control; or (ii) otherwise arose
within six months of and in connection with or in anticipation of the Change in
Control, then for all purposes of this Agreement the "Protected Period" for the
Executive shall begin on the date immediately prior to the date of such
termination of employment or adverse change and shall end two years after the
date of the Change in Control.
2.14. "Termination Date" shall be the effective date of the
Executive's termination of employment during the Protected Period; provided,
however, that the date of notice as provided in Article 4 shall be the
Termination Date if the notice is given within the
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Protected Period but the actual date of termination pursuant to such notice
occurs after the Protected Period.
2.15. "Without Cause", when used in reference to a termination of
the Executive's employment with the Employer, shall mean any termination by the
Company of the Executive's employment which is not a termination of employment
for Cause, Long-Term Disability or death.
3. Effect of Change in Control upon Stock Options. Upon a termination of
employment by reason of a Change in Control, the Company and Parent shall take
appropriate action to ensure that such termination of employment shall be
treated under Parent's 1990 Long-Term Incentive Plan (the "Parent 1990 Plan")
Parent's 1998 Long-Term Incentive Plan (the "Parent 1998 Plan") and the Hertz
Long-Term Equity Compensation Plan, as applicable, in the same manner as a
termination by reason of a "sale or other disposition of a subsidiary" under
paragraphs (f)(4) and (f)(8) of Article 5 of the Parent 1998 Plan, subject to
the conditions specified therein and in Article 6 of the Parent 1998 Plan.
Subject to such conditions, this treatment is intended to allow outstanding
options held by the Executive at the time of termination to continue in effect
and continue to accrue until the earlier of (i) the date five years after the
date of such termination or (ii) the expiration date of the applicable option.
Notwithstanding the foregoing, (x) a termination of employment shall not be
deemed to occur in the event the Executive transfers to Parent or a
majority-owned subsidiary of Parent and (y) any outstanding options granted to
the Executive on or after March 10, 2000 shall become immediately vested upon a
termination of employment by reason of a Change in Control.
4. Termination of Employment During the Protected Period.
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4.1. Termination by the Employer. During the Protected Period,
termination of the Executive by the Employer for Cause, for Long-Term
Disability, on account of the Executive's death, or Without Cause shall be in
accordance with the following procedures:
(a) Termination of the Executive's employment for Long-Term
Disability shall become effective 30 days after a notice of intent to terminate
the Executive's employment, specifying Long-Term Disability as the basis for
such termination, is given to the Executive by the Employer. Termination of the
Executive's employment on account of death shall become effective as of the date
of the Executive's death.
(b) The Executive may not be terminated for Cause unless and until
the Executive has been given written notice by the Employer of its intention to
terminate him for Cause, such notice to state in detail the particular act or
acts or failure or failures to act that constitute the grounds on which the
proposed termination for Cause is based.
(c) Termination by the Employer of the Executive's employment
Without Cause shall be effective no less than 30 business days after the
Employer gives to the Executive written notice thereof, specifying that such
termination is Without Cause.
4.2. Termination by the Executive.
During the Protected Period, the Executive shall be entitled to terminate
his employment with the Employer and, if such termination is for Good Reason, to
receive the benefits provided in Section 5.1. The Executive shall give the
Employer written notice of voluntary termination of employment, which notice
need specify only Executive's intent to terminate his employment and, if such
termination is for Good Reason, set forth in reasonable detail the facts and
circumstances claimed by the Executive to constitute Good Reason (such a notice
setting forth Good Reason, a "Notice of Good Reason"). The Employer shall have
thirty (30) days to cure any
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of the grounds for Good Reason stated by the Executive in the Notice of Good
Reason to the extent such cure is possible. If the Employer fails to cure the
applicable grounds during such thirty (30) day period, the Executive's
employment shall be considered terminated for Good Reason effective as of the
end of such 30-day period. Notwithstanding anything set forth in this Agreement
to the contrary, the Executive shall only be entitled to claim Good Reason to
terminate his employment if the Executive delivers a Notice of Good Reason to
the Employer no later than 180 days from the time the Executive first becomes
aware of the facts and circumstances claimed by the Executive to constitute Good
Reason.
5. Payments Upon Termination of Employment During a Protected Period.
5.1. Termination other than Non-Qualifying Termination. If during
the Protected Period, or a period deemed to be a Protected Period pursuant to
Section 2.9(e), a Termination Date occurs with respect to the Executive because
the Executive is terminated Without Cause or the Executive resigns for Good
Reason, the Employer shall provide the following to the Executive:
(a) Accrued Compensation. Subject to the provisions of Section 16.7,
the Employer shall pay to the Executive, within 30 days following the
Termination Date, a lump sum cash amount equal to the sum of (i) the full Base
Salary (without regard to any reduction constituting Good Reason) earned by the
Executive through the Termination Date and unpaid at the Termination Date; (ii)
the amount of any Base Salary attributable to vacation earned by the Executive
but not taken before the Termination Date; (iii) any unreimbursed expenses
incurred by the Executive through the date of termination; and (iv) one twelfth
of the Executive's Bonus Amount times the number of calendar months and parts
thereof from the beginning of the calendar year in which the Termination Date
occurs.
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(b) Severance Payment. Subject to the provisions of Section 16.7,
the Employer shall pay to the Executive, not later than 30 days following the
Termination Date, a lump sum cash severance payment equal to times the
sum of the Executive's (i) Base Salary and (ii) Bonus Amount.
(c) LTIP. For purposes of any long-term incentive award plan of the
Employer (including, without limitation, The Hertz Corporation 2005 Executive
Long Term Incentive Plan or any successor thereto (the "LTIP")) in which the
Executive participated immediately prior to the Termination Date, regardless of
the Executive's age, years of service or employment status as of the Termination
Date, the termination of the Executive's employment shall be treated as a
"company approved retirement" (as such terms is used in the LTIP), entitling the
Executive to future payouts in accordance with the LTIP based on the performance
results at the end of each performance period in respect of which there was an
LTIP grant in place for the Executive as of the Termination Date.
(d) Retirement Plans. At all times following the Termination Date,
the Employer shall (i) maintain in full force and effect, without any change in
terms that is adverse to the Executive, any retirement plan of, or provided by,
the Employer in which the Executive, immediately prior to the Termination Date,
participated or would, upon normal retirement (as such term is defined in the
applicable retirement plan), be entitled to participate, including, without
limitation, SERP I, SERF II, and BEP, except that the Employer may make changes
required by law or required to maintain any tax-deferred feature of any such
plan or to avoid the imposition on the Executive of a Penalty Tax in respect of
benefits payable under such plan and (ii) credit the Executive with an
additional years of age and an additional "Years of Service"
for all purposes under SERP II.
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(e) Benefits Continuation.
(i) For the year period following the Termination Date,
the Employer shall maintain in full force and effect (or otherwise provide) with
respect to the Executive (and, to the extent applicable, Executive's dependents)
all health benefits upon the same terms (including the Executive's contributions
toward the annual costs of such benefits) and otherwise to the same extent as
such benefits were in effect immediately prior to the Termination Date (or, in
the event the Executive's employment is being terminated by the Executive for
Good Reason as described in Section 2.9(f), immediately prior to the Benefits
Trigger Date), provided that the Executive's (and, where applicable, the
Executive's dependents') continued participation is possible under the
applicable benefit provisions of the applicable plan(s). Thereafter, the
Executive and Executive's spouse shall be entitled to participate in the health
benefits provided from time to time by the Employer to its active employees by
contributing the same amount as former employees of the Employer with dependents
from time to time contribute when obtaining "COBRA continuation coverage" under
Section 601 et seq. of ERISA and Section 4980B of the Internal Revenue Code of
1986, as amended (the "Code").
(ii) The Employer shall also maintain in full force and effect (or
otherwise provide) with respect to the Executive all life insurance benefits
upon the same terms (including the Executive's contributions toward the annual
costs of such benefits) and otherwise to the same extent as such coverage was in
effect immediately prior to the Termination Date (or, in the event the
Executive's employment is being terminated by the Executive for Good Reason as
described in Section 2.9(f), immediately prior to the Benefits Trigger Date)
until the expiration of years from the Termination Date, provided that
Executive's continued participation is possible
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under the applicable benefit provisions of the applicable plan(s). In the event
that the Executive's (or, where applicable, the Executive's dependents)
continued participation in any such health or life benefit plan as provided
under this Section 5.1(e)) above is not possible, the Employer shall arrange to
provide the Executive (and, where applicable, the Executive's dependents) with
benefits substantially similar to those which the Executive (and, where
applicable, the Executive's dependents) was entitled to receive under such
benefit plan.
(iii) Notwithstanding anything set forth in this Section 5.1(e) to
the contrary, (A) any health benefits continued under Section 5.1(e)(i) above
shall cease on the first to occur of (1) the date on which the Executive becomes
reemployed and is (along with Executive's applicable dependents) covered,
without any qualification for preexisting conditions, under another employer's
health benefit plan and (2) the date on which the Executive (along with
Executive's spouse) becomes eligible for health coverage, without any
qualification for preexisting conditions, under any other comprehensive health
benefit plan (including, without limitation, the United States Medicare program
(or any successor program)) and (B) any life insurance benefits continued under
Section 5.1(e)(ii) above shall cease on the date on which the Executive becomes
reemployed and receives at least an equal amount of life insurance coverage
under another employer's group life insurance benefit plan. Further, the
Executive hereby acknowledges that at such time(s) as the Executive (and
Executive's applicable dependents) ceases to be entitled to receive any coverage
under Section 5.1(e)(i) or (ii) above, as applicable, either by operation of
either such Section(e)(i) or (ii) or by this Section 5.1(e)(iii), as applicable,
in no event shall the Executive (nor any of Executive's applicable dependents)
again become entitled to receive any such coverage, regardless of whether the
Executive (or any of Executive's
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applicable dependents) later ceases to be covered by another employer's benefit
plans or otherwise.
(f) Automobile. Subject to the provisions of Section 16.7, (i) at
all times following the Termination Date, the Employer shall maintain in full
force and effect, without any change in terms that is adverse to the Executive,
the Retiree Car Plan, and (ii) for purposes of the Retiree Car Plan, the
Employer shall, regardless of the Executive's age, years of service or
employment status, deem the Executive to be a retiree eligible for participation
in the Retiree Car Plan, or, with the written consent of the Executive, pay
leasing, insurance and maintenance costs on a car leased by the Executive
providing the Executive with a benefit comparable to that which would be
provided under the Retiree Car Plan. The Employer shall also, for so long as the
Employer is providing a car or making payments under the preceding sentence,
provide to the Executive those rental car privileges that, as of the
commencement of the Protected Period (or period that is deemed a Protected
Period pursuant to Section 2.9(h)), the Employer had afforded to retired
executives of the Employer.
(g) Outplacement. Within the twelve months following the Termination
Date, the Employer shall cause outplacement assistance to be provided to the
Executive, within a reasonable period of time following receipt from the
Executive in writing a request to be so provided. The Employer shall pay the
cost of such outplacement assistance up to a maximum of $25,000 directly to the
outplacement service provider.
5.2. Non-Qualifying Termination. If during the Protected Period the
employment of the Executive shall terminate by reason of a Non-Qualifying
Termination, then the Employer shall pay, or cause to be paid, to the Executive
(or to the Executive's beneficiary if the Executive dies while any amount would
still be payable to the Executive hereunder had the
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Executive continued to live) the normal benefit and compensation entitlement
that apply with respect to the Executive under the Employer's customary
practices and procedures for the applicable circumstance.
5.3. No Duplication. Notwithstanding any provision in this Agreement
to the contrary, if the Executive is entitled upon a termination of employment
to any change of control related benefits or payments under an employment or
other agreement, or a severance plan, the Executive shall not be entitled upon
such termination to any duplicative payment or benefits under this Agreement but
instead shall receive only the greater payment or benefit, determined on an item
by item basis.
5.4. Excise Taxes. In the event it shall be determined that any
payment, benefit or distribution (or combination thereof) by the Employer, any
of its affiliates, or one or more trusts established by the Employer for the
benefit of its employees, to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement,
or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, hereinafter collectively referred to as the "Excise Tax"), the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions
of this Section 5.4, if it shall be determined that the Executive would
otherwise be entitled to a
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Gross-Up Payment hereunder, but that the Payments do not exceed 110% of the
greatest amount that could be paid to the Executive without giving rise to any
Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to
the Executive and the amounts payable under this Agreement shall be reduced so
that the Payments, in the aggregate, are reduced to the Safe Harbor Amount. In
the event the provisions of this Section 5.4 become applicable, the terms set
forth in Appendix A attached to this Agreement shall also apply and are hereby
incorporated by reference into this Agreement.
6. Withholding Taxes and Deductions. The Employer may withhold or deduct
from all payments due to the Executive, his beneficiary or estate hereunder all
taxes which, by applicable federal, state, local or other law, the Employer is
required to withhold or deduct therefrom.
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7. Employer and Parent Obligation.
7.1. Payment Obligations are Absolute. Except as otherwise provided
in Section 5.3, the Employer's obligations to the Executive to make the payments
and the arrangements provided for in this Agreement shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Employer or Parent may have against the Executive or anyone
else, except to the extent the Executive must pay, as provided in Section
5.1(e), his share, if applicable, of costs for health benefits or life insurance
and fails to do so. All amounts payable by the Employer hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the Employer
shall be final, and the Employer shall not seek to recover all or any part of
such payment from the Executive or from whomsoever may be entitled thereto.
7.2. No Mitigation. The Executive shall not be obligated to seek
other employment or take other action by way of mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and the
obtaining of any such other employment shall in no event effect any reduction of
the Employer's obligations to make the payments and arrangements required to be
made under this Agreement, except to the extent expressly provided in Section
5.1(e).
7.3. Indemnification. The Employer shall indemnify the Executive and
hold the Executive harmless from and against any claim, loss or cause of action
arising from or out of the Executive's performance as an officer, director or
employee of the Employer or any of its Affiliates or in any other capacity,
including any fiduciary capacity, in which the Executive serves at the request
of the Employer to the maximum extent permitted by applicable law and the
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Employer's Charter and By-Laws, provided that in no event shall the protection
afforded to the Executive hereunder be less than that afforded under these
documents as in effect immediately prior to the Change in Control.
7.4. No Obligations of Parent. Parent is not responsible for any
obligations of the Employer or any successor to the Company, to the Executive
and his heirs and assigns under this Agreement. In no event shall this Section
7.4 relieve the Company or Parent, as the case may be, from its responsibility
under Section 14.1.
7.5. Obligations Must be Satisfied. Notwithstanding the expiration
of the term of this Agreement, any obligations of the Employer or a successor to
the Company to the Executive arising from events which occurred during the term
of the Agreement must be satisfied, and any obligations of the Executive to the
Employer or a successor to the Company arising from events which occurred during
the term of the Agreement also must be satisfied.
7.6. Amendment of SERP II. To the fullest extent that such action
shall not give rise to adverse tax consequences to the Executive or other
employees participating in SERP II, the Employer shall promptly, with effect
from the Effective Date, amend the terms of Article 3 of SERP II so that, as to
the Executive, the vesting of benefits referred to in Section 3.2 shall occur
if, and only if, during a Protected Period (or a period deemed to be a Protected
Period pursuant to Section 2.9(h) hereof), the Executive's employment is
terminated, prior to his attainment of the age of 55 years, Without Cause or on
account of resignation for Good Reason.
8. Executive Covenants.
8.1. Unauthorized Disclosure. The Executive agrees and understands
that in the Executive's position with the Employer, the Executive will be
exposed to and receive information relating to the confidential affairs of the
Employer and its Affiliates, including but
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not limited to technical information, business and marketing plans, strategies,
customer information, other information concerning the Employer's and its
Affiliates' products, promotions, development, financing, expansion plans,
business policies and practices, and other forms of information considered by
the Employer to be confidential and in the nature of trade secrets. The
Executive agrees that during the term of his employment hereunder and
thereafter, he will keep such information confidential and will not disclose
such information, either directly or indirectly, to any third person or entity
without the prior written consent of the Employer except (a) as he reasonably
and in good faith believes such disclosure or use is required or appropriate in
connection with his work as an employee, officer or director of the Employer,
(b) with respect to confidential information that becomes publicly available or
generally known in the car or equipment rental industry other than by a breach
of this Section by the Executive, or (c) information that the Executive is
legally compelled to disclose. The Executive shall not divulge the contents of
this Agreement to any person other than his counsel and spouse, and except as
otherwise required by law or as may be necessary to enforce his rights
hereunder. This confidentiality covenant has no temporal, geographical or
territorial restriction.
8.2. Return of Property. Upon termination of his employment, the
Executive will promptly return to the Employer all of its property, keys,
computers, notes, memoranda, writings, lists, files, reports, customer lists,
correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical
data or any other tangible or intangible property which has been furnished to
him by the Employer or any of its Affiliates or otherwise belonging to the
Employer or any of its Affiliates.
8.3. Non-Competition. By and in consideration of the Employer's and
Parent's entering into this Agreement and the compensation and benefits to be
provided by the Employer
20
to Executive hereunder, and further in consideration of the Executive's exposure
to the confidential and proprietary information of the Employer or any of its
Affiliates, the Executive agrees that during the term of his employment with the
Employer and for a period of one year following termination thereof due to his
resignation (other than for Good Reason) or his termination for Cause, he will
not, without the prior written consent of the Board, directly or indirectly,
own, manage, operate, join, control, be employed by, participate in the
ownership, management, operation or control of, or be connected in any manner,
including, but not limited to, holding the position of shareholder, principal,
director, officer, consultant, advisor, independent contractor, employee,
partner, member or investor, with any competing enterprise; provided, however,
that (i) the foregoing shall not prohibit the Executive from investing less than
$500,000 in any single business or owning less than 5% (by vote or value) of the
securities of any publicly-traded entity and (ii) nothing in this Section 8.3
shall be construed to supersede, modify or affect the terms or provisions of any
existing executive or employee benefit plan or award agreement. For purposes of
this Section 8.3, the term "competing enterprise" shall mean any person,
corporation, partnership or other entity engaged in the car or industrial and
construction equipment rental business.
8.4. Non-Solicitation. For a period of two years after his
termination, the Executive shall not encourage or solicit any employee of the
Employer or any of its Affiliates to terminate his or her employment with the
Employer or any of its Affiliates.
8.5. Remedies. The Executive agrees that any breach of the terms of
this Article 8 would result in irreparable injury and damage to the Employer for
which the Employer would have no adequate remedy at law; the Executive therefore
agrees that in the event of said breach or any threat of breach, the Employer
shall be entitled to seek an immediate injunction
21
and restraining order to prevent such breach and/or threatened breach and/or
continued breach by the Executive and/or any and all persons and/or entities
acting for and/or with the Executive, without having to prove damages, and to
all costs and expenses, including reasonable attorneys' fees and costs (if
successful in obtaining an injunction), in addition to any other remedies to
which the Employer may be entitled at law or in equity. The terms of this
Section 8.5 shall not prevent the Employer from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Executive. The Executive and the Employer
further agree that the provisions of the covenant not to compete are reasonable.
Should a court determine, however, that any provision of the covenant not to
compete is unreasonable, either in period of time, geographical area, or
otherwise, the parties hereto agree that the covenant should be interpreted and
enforced to the maximum extent which such court deems reasonable.
The provisions of this Article 8 shall survive any termination of the
Executive's employment, and the existence of any claim or cause of action by the
Executive against the Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Employer of
the covenants and agreements of this Section. The preceding sentence of this
Section 8.5 does not in any manner limit the Executive's power to terminate his
employment for Good Reason, or otherwise, and exercise his rights thereunder.
9. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be effective upon personal delivery or upon receipt if
sent by registered or certified mail, postage prepaid, addressed to the other
parties at the addresses shown below, or at such other address or addresses as
any party shall designate to the other parties in accordance with this
Article 9.
22
If to the Company:
The Hertz Corporation
000 Xxxx Xxxxxxxxx
Xxxx Xxxxx, XX 00000
Attention to both: Senior Vice President, General Counsel and
Secretary
Senior Vice President, Employee Relations
If to Parent:
Ford Motor Company
Xxx Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Vice President,Corporate Human Resources
If to the Executive, to the address appearing under his signature,
below.
10. Arbitration of Disputes.
10.1. Any disagreement, dispute, controversy or claim arising out of
or relating to this Agreement or the interpretation or validity hereof (other
than disputes or controversies or claims for injunctive relief arising under or
in connection with Article 8 of this Agreement which shall be resolved
exclusively under Section 8.5) shall be settled exclusively and finally by
binding arbitration. It is specifically understood and agreed that any
disagreement, dispute or controversy which cannot be resolved between the
parties including, without limitation, any matter relating to the interpretation
of this Agreement, shall be submitted to arbitration irrespective of the
magnitude thereof, the amount in controversy or whether such disagreement,
dispute or controversy would otherwise be considered justifiable or ripe for
resolution by a court or arbitral tribunal.
10.2. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA"), except as otherwise provided below.
23
10.3. The arbitral tribunal shall consist of three arbitrators
selected in accordance with the rules of the AAA. The parties to the arbitration
jointly shall directly appoint each such arbitrator within 50 days of initiation
of the arbitration. If the parties shall fail to appoint any such arbitrator as
provided above, such arbitrator shall be appointed in accordance with the
Arbitration Rules of the AAA and shall be a person who (i) maintains his or her
principal place of business within 50 miles of the location of the arbitration
as set forth in Section 10.4 and (ii) has had substantial experience in
executive compensation matters. The Employer shall pay all of the fees and
expenses of such arbitrators.
10.4. The arbitration shall be conducted within 50 miles of the
Executive's principal work location, or in such other city in the United States
of America as the parties to the dispute may designate by mutual written
consent.
10.5. The claim shall be decided by a majority vote of the three
arbitrators. Equitable remedies shall be available in any arbitration. Punitive
damages shall not be awarded. The arbitrators will give effect to the statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable will be determined by the arbitrators. Any decision or award
of the arbitral tribunal shall be final and binding upon the parties to this
Agreement. The parties hereto hereby waive to the extent permitted by law any
rights to appeal or to seek review of such award by any court or tribunal. The
parties hereto agree that the arbitral award may be enforced against the parties
to the arbitration proceeding or their assets wherever they may be found and
that a judgment upon the arbitral award may be entered in any court having
jurisdiction. Notwithstanding the applicability of other law to any other
provisions of this Agreement, the Federal Arbitration Act, 9 U.S.C.A. Sec. 1 et
seq. will apply to the construction and interpretation of this Article 10.
24
10.6. Nothing herein contained shall be deemed to give the arbitral
tribunal any authority, power, or right to alter, change, amend, modify, add to,
or subtract from any of the provisions of this Agreement.
11. Legal Fees. The Employer agrees to pay, to the full extent permitted
by law, on a quarterly basis, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest in which there is a reasonable
basis for the claims or defenses asserted by the Executive and such claims and
defenses are asserted by the Executive in good faith (regardless of the outcome
thereof) regarding the validity or enforceability of, or liability under, any
provision of this Agreement (including as a result of any contest by the
Executive about the amount of any payment pursuant to Article 5); provided,
however, that the Employer shall not be obligated to pay any such fees and
expenses, and the Executive shall be obligated to return any such fees and
expenses that were advanced plus simple interest on such amount from the date of
advancement at the 90-day US Treasury Xxxx rate as in effect from time to time,
compounded annually, if the arbitrators (as provided in Article 10) determine
that the Executive was terminated for Cause or that the Executive did not have a
good faith basis to assert the claim in question.
12. Entire Agreement. This Agreement constitutes the entire agreement
among the parties as of the Effective Date with respect to the subject matter
hereof and supersedes all prior agreements and understandings with respect to
the subject matter hereof, whether written or oral (including any change in
control agreement to which the Company and the Executive are parties).
Notwithstanding the preceding sentence, if the Executive has a separate written
employment agreement with the Employer, this Agreement shall not supersede that
agreement except as specifically provided in Section 5.3.
25
13. Amendment. This Agreement may be amended or modified only by a written
instrument executed by the parties hereto.
14. Successors and Assignment.
14.1. Successors to the Company. In the event of a Change in Control
resulting in a successor to the Company, Parent will use reasonable efforts to
obtain the assumption by the successor to the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise) of the obligations of
the Employer under this Agreement. Upon the assumption by the successor to the
Company of such obligations, Parent shall cease to have any further obligations
under this Section 14.1. Failure to obtain such assumption upon any such
succession shall entitle the Executive to resign and to have such resignation
deemed to be, and treated as, a termination for Good Reason during the Protected
Period.
14.2. Assignment by the Executive. The obligations of the Executive
are personal and shall not be assigned by him, except that this Agreement shall
inure to the benefit of and be enforceable by the Executive and the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while any amount
would still be payable to the Executive hereunder had the Executive continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the Executive's beneficiary. If
the Executive has not named a beneficiary, then such amounts shall be paid to
the Executive's devisee, legatee, or other designee, or if there is no such
designee, to the Executive's estate.
15. Governing Law. To the extent not preempted by federal law, this
Agreement shall be construed, interpreted and enforced in accordance with the
laws of the State of New Jersey
26
without reference to the principles of conflict of laws, except that a covenant
of good faith and fair dealing shall apply with respect to all obligations
created under this Agreement.
16. Miscellaneous.
16.1. No delay or omission by any party in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by a party on any one occasion shall be effective only
in that instance and shall not be construed as a bar or waiver of any right on
any other occasion.
16.2. The captions of the Articles and Sections of this Agreement
are for convenience of reference only and in no way define, limit or affect the
scope or substance of any Article or Section of this Agreement.
16.3. In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
16.4. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
16.5. This Agreement does not, and will not, alter the status of the
Executive as an employee-at-will.
16.6. Notwithstanding anything contained in this Agreement to the
contrary, the terms of this Agreement shall apply only if a Change in Control
occurs on or prior to the third anniversary or the Effective Date, and if no
Change in Control occurs on or prior to such anniversary, this Agreement shall
terminate and be of no further force and effect on such anniversary. However,
if, prior to either the occurrence of a Change in Control or the expiration
27
of this Agreement pursuant to the preceding sentence, an Offering occurs, then
on and after the effective date of the Offering, the terms of this Agreement
shall continue to apply for an initial period of two years following such date
(the "Initial Term"). If no Change in Control occurs during the Initial Term, at
the end of the Initial Term and on each successive anniversary thereof (each, an
"Extension Date"), the terms of this Agreement shall be automatically extended
for an additional one-year period, unless the Company or the Executive provides
the other party hereto with written notice, no later than one hundred and eighty
(180) days before the applicable Extension Date, that the terms of this
Agreement shall not be so extended; in which case, absent the occurrence of a
Change in Control or commencement of a Protected Period prior to such Extension
Date, this Agreement shall terminate and be of no further force and effect on
the date that would otherwise constitute the next applicable Extension Date.
16.7. Notwithstanding anything contained in this Agreement to the
contrary, if the provision of any payment, distribution, or benefit that is
qualified by this Section 16.7 would result in the imposition on the Executive
of the tax described in Section 409A of the Code (the "Penalty Tax"), then the
provision of any such payment, distribution or benefit shall instead be made at
such time(s) and/or in such manner as may be permitted under Section 409A of the
Code in order to avoid the imposition of the Penalty Tax on the Executive,
unless such changed provision would materially and adversely affect the
Executive's rights to receive such payment, distribution or benefit.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
FORD MOTOR COMPANY
By: /s/ Xxx X.Xxxxxx
----------------------------------------
Title: Group Vice President, Corporate Human
Resources and Labor Affairs
THE HERTZ CORPORATION
BY: /s/ Xxxxx X. Xxxxxxx 7/28/05
----------------------------------------
Title: Senior Vice President,
Employee Relations
EXECUTIVE
--------------------------------------------
--------------------------------------------
Address
--------------------------------------------
Address
APPENDIX A
The following provisions shall apply in the event Section 5.4 of the
Agreement is applicable:
(a) All determinations required to be made under Section 5.4 of the
Agreement, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by a national accounting firm retained by
the Company (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and Executive within ten business days of the
receipt of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company; provided that for purposes of determining
the amount of any Gross-Up Payment, Executive shall be deemed to pay federal
income tax at the highest marginal rates applicable to individuals in the
calendar year in which any such Gross-Up Payment is to be made and deemed to pay
state and local income taxes at the highest effective rates applicable to
individuals in the state or locality of Executive's residence or place of
employment in the calendar year in which any such Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account limitations
applicable to individuals subject to federal income tax at the highest marginal
rates. All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to Section 5.4 of the
Agreement, shall be paid by the Company to Executive (or to the appropriate
taxing authority on Executive's behalf) when due. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall so indicate to
Executive in writing. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code, it is possible that the amount of the
Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf
of) Executive was lower than the amount actually due ("Underpayment"). In the
event that the Company exhausts its remedies pursuant to clause (b) below and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of Executive.
(b) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of any Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the thirty day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall (i) give the Company any
information reasonably requested by the Company relating to such claim, (ii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iii) cooperate with the
30
Company in good faith in order to effectively contest such claim and (iv) permit
the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this clause (b), the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, further, that if the
Company directs Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to Executive, on an interest-free
basis, and shall indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; provided, further, that if Executive is
required to extend the statute of limitations to enable the Company to contest
such claim, Executive may limit this extension solely to such contested amount.
The Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(c) If, after the receipt by Executive of an amount paid or advanced
by the Company as described above, Executive becomes entitled to receive any
refund with respect to a Gross-Up Payment, Executive shall (subject to the
Company's complying with the requirements of clause (b) above) promptly pay to
the Company the amount of such refund received (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to clause (b) above, a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of the Gross-Up Payment required to be paid.
