Filed by the
Registrant ☒ Filed by a party other than the
Registrant ☐
You are cordially invited to attend our annual meeting of stockholders to be held at 9:00 a.m. (local time) on May 17, 2018, at our principal executive
office located at 27500 Riverview Center Blvd., Bonita Springs, Florida 34134.
We will be using the Notice and Access method of providing
proxy materials to you via the Internet at
www.proxyvote.com
, instead of by mail. On or about April 2, 2018, we will begin mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the Notice)
containing instructions on how to access our proxy statement and annual report to stockholders for 2017 and how to vote online. The Notice also contains instructions on how to receive a paper copy of our proxy materials.
Your vote is important. Each share of our common stock that you own represents one vote. If you do not vote your shares, you will not have a say on the
important issues to be voted on at the annual meeting. Whether or not you plan to attend the annual meeting, please vote as promptly as possible. You may vote online or by telephone by following the instructions set forth in the Notice and the proxy
statement. If you requested a paper copy of our proxy materials, you may also vote by completing, signing, dating and returning the proxy card. If you attend the annual meeting, you may vote in person.
Registration and seating will begin at 8:30 a.m. (local time). In order to be admitted to the annual meeting, a stockholder must present proof of stock
ownership as of the close of business on the record date, March 19, 2018, which can be the Notice, the proxy card accompanying our proxy statement if you requested a paper copy of our proxy materials or a brokerage statement reflecting stock
ownership as of March 19, 2018. Stockholders will be asked to sign an admittance card and must also present a form of photo identification such as a drivers license.
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should
consider, and you should read the entire proxy statement carefully before voting. Unless the context otherwise requires, in this proxy statement (i) the Company, we, us and our means Herc Holdings
Inc. and its consolidated subsidiaries, (ii) our Board or the Board means the Board of Directors of the Company and (iii) common stock means the common stock of the Company.
Meeting Information
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Date:
Time:
Record Date:
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May 17, 2018
9:00 a.m. (local time)
March 19, 2018
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Location:
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27500 Riverview Center Blvd.
Bonita Springs,
Florida 34134
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How to Vote
Whether or
not you plan to attend the annual meeting, please vote as promptly as possible using one of the following methods:
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Via
Internet
by following the instructions on
www.proxyvote.com
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Via
telephone
by calling
1-800-690-6903
and following the instructions provided by the
recorded message; or
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Via
mail
by completing, signing and dating the proxy card (if you received printed proxy materials) and returning it to the address listed therein.
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Items of Business
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Proposal
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Board Voting
Recommendation
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Page
Reference
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1. Election of 11 Director Nominees to Serve for a One Year Term
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FOR each nominee
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14
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2. Advisory Vote on Executive Compensation
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FOR
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47
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3. Approval of the 2018 Omnibus Incentive Plan
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FOR
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48
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4. Approval of the Amended and Restated Employee Stock Purchase Plan
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FOR
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55
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5. Ratification of the Companys Auditor for 2018
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FOR
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57
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Where You Can Find Additional Information
Our website is located at
http://ir.hercrentals.com
. Although the information contained on or connected to our website is not part of this proxy
statement, you can view additional information on our website, such as the charters of our Board committees, our Corporate Governance Guidelines, our Code of Ethics and reports that we file with the Securities and Exchange Commission. Copies of
these documents may also be obtained free of charge by writing Herc Holdings Inc., 27500 Riverview Center Blvd., Bonita Springs, Florida 34134, Attention: Corporate Secretary.
1
Director Nominees
The following table provides summary information (as of April 2, 2018) about each director nominee:
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Name
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Age
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Director
Since
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Primary or Former Occupation
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Other
Public
Company
Boards
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Independent
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Board Committee
Membership
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A
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C
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G
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F
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Herbert L. Henkel
(Chairman)
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69
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2016
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Retired Chairman of the Board and Chief Executive Officer of Ingersoll-Rand plc
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2
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✓
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X
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CC
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Lawrence H. Silber
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61
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2016
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Chief Executive Officer and President of the Company
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0
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James H. Browning
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68
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2016
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Retired partner at KPMG LLP
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2
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✓
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CC
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X
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Patrick D. Campbell
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65
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2016
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Retired Senior Vice President and Chief Financial Officer of 3M Company
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3
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✓
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X
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CC
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Nicholas Graziano
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46
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Portfolio Manager of Icahn Capital LP
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0
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✓
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Jean K. Holley
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58
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2017
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Retired Senior Vice President and Chief Information Officer for Brambles Limited
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1
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✓
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X
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X
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Jacob M. Katz
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65
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2017
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Retired National Managing Partner and Global Leader of Financial Services of Grant Thornton LLP
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1
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✓
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X
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X
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Michael A. Kelly
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61
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2016
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Retired Executive Vice President of the Electronics and Energy Business of 3M Company
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1
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✓
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X
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X
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Courtney Mather
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41
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2016
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Portfolio Manager of Icahn Capital LP
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3
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✓
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X
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Louis J. Pastor
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33
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2016
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Deputy General Counsel of Icahn Enterprises L.P.
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3
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✓
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X
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X
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Mary Pat Salomone
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57
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2016
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Retired Chief Operating Officer of The Babcock & Wilcox Company
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2
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✓
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CC
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X
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A Audit Committee; C Compensation Committee; G Nominating and Governance Committee; F Finance
Committee
CC Committee Chair; X Committee Member
Governance Highlights
Our Board is committed to good
corporate governance and promoting the long-term interests of our stockholders by adopting structures, policies and practices that we believe promote responsible oversight of management. Highlights include:
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Independent Chairman
10 of 11 director nominees
are independent
Declassified Board
Majority voting for directors and director resignation policy in uncontested elections
At least 90% Board and
committee attendance in 2017
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Robust stock retention guidelines for senior executives and
non-employee
directors
Prohibition on directors and Section 16 officers pledging Company stock and prohibition on
directors and all employees hedging Company stock
The Board generally will not nominate a
non-management
director for election at an annual meeting if that person has reached age 76
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2
Business Overview
Herc Holdings Inc. is one of the leading equipment rental suppliers with approximately 275 locations at December 31, 2017, principally in North
America. The Company conducts substantially all of its operations through subsidiaries, including Herc Rentals Inc. (Herc). Operations are conducted under the Herc Rentals brand in the United States and under the Hertz Equipment Rental
brand in Canada and other international locations. With over 50 years of experience, we are a full-line equipment rental supplier offering a broad portfolio of equipment for rent. Our classic fleet includes aerial, earthmoving, material handling,
trucks and trailers, air compressors, compaction and lighting. Our equipment rental business is supported by ProSolutions
TM
, our industry-specific solutions-based services which include pumping
solutions, power generation, climate control, remediation and restoration, and studio and production equipment, and our ProContractor professional grade tools. The Company has approximately 4,900 employees. The Companys 2017 total revenues
were approximately $1.75 billion.
On June 30, 2016, the Company, in its previous form as the holding company of both the existing equipment
rental operations as well as the former vehicle rental operations (in its form prior to the
Spin-Off,
Hertz Holdings), completed a
spin-off
(the
Spin-Off)
of its global vehicle rental business through a dividend to stockholders of all of the issued and outstanding common stock of Hertz Rental Car Holding Company, Inc., which was
re-named
Hertz Global Holdings, Inc. (New Hertz). New Hertz is an independent public company that trades on the New York Stock Exchange under the symbol HTZ. The Company changed its name to
Herc Holdings Inc. on June 30, 2016 and trades on the New York Stock Exchange under the symbol HRI. The Company continues to operate its global equipment rental business through its operating subsidiaries, including Herc.
3
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors of Herc Holdings Inc. is soliciting proxies to be used at the annual meeting of stockholders to be held on May 17, 2018, beginning
at 9:00 a.m. (local time) at our principal executive office located at 27500 Riverview Center Blvd., Bonita Springs, Florida 34134. This proxy statement was filed with the Securities and Exchange Commission (the SEC) on April 2,
2018, and we expect to first send the Notice of Internet Availability of Proxy Materials (the Notice) to stockholders on or about April 2, 2018.
Purpose of the Annual Meeting
At the annual meeting,
stockholders will act upon the following matters:
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1.
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Election of the 11 nominees named in this proxy statement to serve as directors until the next annual meeting of stockholders;
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2.
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Approval, by a
non-binding
advisory vote, of the named executive officers compensation;
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3.
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Approval of the Herc Holdings Inc. 2018 Omnibus Incentive Plan;
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4.
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Approval of the Amended and Restated Herc Holdings Inc. Employee Stock Purchase Plan;
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5.
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Ratification of the selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for 2018; and
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6.
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Transaction of any other business that may properly be brought before the annual meeting.
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The Companys
senior management will be available to answer questions from stockholders.
Stockholders Entitled to Vote at the Annual Meeting
Our Board has established the record date for the annual meeting as March 19, 2018. Only holders of record of the Companys common stock at the close
of business on the record date are entitled to receive the Notice and attend and vote at the annual meeting. On March 19, 2018, 28,403,830 shares of our common stock were outstanding.
Voting Procedures
If you are a stockholder of record,
you may vote as follows:
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Voting by Internet:
Follow the instructions on
www.proxyvote.com.
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Voting by Telephone:
Call
1-800-690-6903
and follow the instructions provided by the
recorded message.
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Voting by Mail:
Complete, sign, date and return the proxy card included in the printed proxy materials.
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Voting in Person:
Attend the meeting and vote in person.
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If you hold your shares beneficially in
street name through a broker or other nominee, you must follow the instructions provided by your broker or nominee to vote your shares.
Procedures for Attending the Annual Meeting
For those
stockholders who wish to attend the annual meeting, you will need the following:
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photo identification; and
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proof of stock ownership as of the record date.
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4
Please note that no cameras or recording devices are allowed at the annual meeting. Seating for the annual
meeting starts at 8:30 a.m. (local time) and the annual meeting will start at 9:00 a.m. (local time).
If you hold your shares beneficially in
street name through a broker or other nominee and you intend to vote your shares at the meeting, you will need a proxy from your bank or nominee. Please contact your bank or nominee if you hold your shares in street name and
wish to vote your shares at the meeting.
Voting Options; Quorum
The Board unanimously recommends a vote FOR each director nominee and FOR each of Proposals 2 through 5. Below is a summary of the vote
required for adoption of each proposal and the respective effect of abstentions and broker
non-votes.
For more detailed information, see each respective proposal.
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Proposal
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Vote Required for Adoption
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Effect of
Abstentions
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Effect of Broker
Non-Votes
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1. Election of 11 Director Nominees to Serve for a One Year Term
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Majority of shares cast
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No effect
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No effect
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2. Advisory Vote on Executive Compensation
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Majority of shares present*
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Vote against
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No effect
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3. Approval of the 2018 Omnibus Incentive Plan
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Majority of shares present
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Vote against
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No effect
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4. Approval of the Amended and Restated Employee Stock Purchase Plan
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Majority of shares present
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Vote against
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No effect
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5. Ratification of the Companys Auditor for 2018
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Majority of shares present
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Vote against
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N/A
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The effect of the vote on Proposal 2 is advisory only and
non-binding.
However, the Board and Compensation Committee will consider the results of the vote on Proposal 2 in making
future decisions regarding our named executive officers compensation.
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The presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote at the annual meeting constitutes a quorum. Abstentions and broker
non-votes
are counted as present and entitled to vote for purposes of determining a quorum. A broker
non-vote
occurs when a nominee, such as a broker holding shares in street name for a beneficial owner, does not vote on a proposal because that nominee does not have discretionary voting power with
respect to a proposal and has not received instructions from the beneficial owner.
If you hold your shares beneficially in street name
through a broker or other nominee, and you would like to instruct your broker or nominee how to vote your shares, you should follow the directions provided by your broker or nominee. Under New York Stock Exchange (NYSE) rules, your
broker is permitted to vote on Proposal 5 even if it does not receive instructions from you. However, under NYSE rules, your broker does not have discretion to vote on any other proposal if it does not receive instructions from you.
Each share of common stock is entitled to one vote and stockholders do not have the right to cumulate their votes for the election of directors. We will vote
your shares as you specify when providing your proxy. If you do not specify how you want your shares voted when you provide your proxy, we will vote them in accordance with the Boards recommendation with respect to the matters set forth in
this proxy statement. In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the annual meeting.
Notice of Internet Availability of Proxy Materials
We
are permitted to furnish proxy materials, including this proxy statement and our annual report to stockholders for 2017, to our stockholders by providing access to such documents on the Internet at
www.proxyvote.com
instead of mailing printed
copies. Our stockholders will not receive printed copies of the proxy materials unless they are requested. Instead, the Notice will instruct you as to how you may access and review all of the proxy materials on the Internet. It will also instruct
you as to how you may submit your proxy on the Internet. If you would like to
5
receive a paper copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. If you receive more than one Notice, it generally means that some of
your shares are registered differently or are in more than one account. Please provide voting instructions for each Notice you receive.
Revocation of
Proxies
Even if you voted by telephone or on the Internet, or if you requested paper proxy materials and signed and returned the proxy card, you may
revoke your proxy before it is voted at the annual meeting by submitting a new proxy, dated later than your first proxy, or by a later-dated vote by telephone or on the Internet. You may also revoke your proxy by delivering a signed revocation
letter to Maryann Waryjas, Senior Vice President, Chief Legal Officer and Secretary of the Company. If you are attending the annual meeting in person, you may revoke your proxy by voting in person at the annual meeting. Your attendance at the annual
meeting will not by itself revoke your proxy. If you hold your shares beneficially in street name through a broker or other nominee and you have previously directed your broker or nominee to vote your shares, you should instruct your
broker or nominee to change or revoke your vote if you wish to do so. If you hold your shares beneficially in street name through a broker or other nominee and wish to cast your vote in person at the annual meeting, you should obtain a
proxy to vote your shares from your broker or nominee.
Solicitation of Proxies
Proxies may be solicited on behalf of our Board by mail or telephone, on the Internet or in person, and we will pay the solicitation costs on behalf of the
Company. The Notice will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse those record holders for their reasonable expenses on behalf
of the Company.
Householding Rules
The SECs
proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for proxy materials with respect to two or more stockholders sharing an address by delivering a single set of proxy materials. This
procedure reduces the amount of duplicate information that stockholders receive and lowers printing and mailing costs for companies.
Therefore, only one
copy of the Notice and/or this proxy statement may have been delivered to multiple stockholders sharing a single address. If you wish to opt out of this procedure and receive a separate Notice and/or set of proxy materials in the future, or if you
are receiving multiple copies and would like to receive only one, you should contact your broker or other nominee, or the Company or its agent at the address and telephone number below.
A separate copy of the Notice and this proxy statement will be promptly delivered upon request to either the Companys agent by telephone at
1-800-579-1639
or by email to
sendmaterial@proxyvote.com
, or to the Companys Investor Relations Department by telephone at
1-239-301-1024,
by email to
investor@hercrentals.com
, or by written request to Herc Holdings Inc., 27500 Riverview Center
Blvd., Bonita Springs, Florida 34134, Attention: Corporate Secretary.
Additional Information
The Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2017 (2017 Annual
Report) is filed with the SEC and may also be obtained via a link posted on the Investor Relations portion of our website,
http://ir.hercrentals.com.
Copies of the 2017 Annual Report, or any exhibits thereto, will be sent
within a reasonable time without charge upon written request to Herc Holdings Inc., 27500 Riverview Center Blvd., Bonita Springs, Florida 34134, Attention: Corporate Secretary.
6
CORPORATE GOVERNANCE; BOARD AND COMMITTEE MATTERS
Corporate Governance
Our business is managed with the
oversight of our Board. Our Board is committed to good corporate governance and promoting the long-term interests of our stockholders by adopting structures, policies and practices that we believe promote responsible oversight of management.
Board Independence
Our Board has determined that Messrs.
Browning, Campbell, Graziano (if elected), Henkel, Katz, Kelly, Mather, Mongillo and Pastor and Mses. Salomone and Holley are independent as defined in the federal securities laws and applicable NYSE rules for service on our Board. The
standards for determining director independence are specified in Annex A to our Corporate Governance Guidelines.
In recommending to the Board that
each of the independent directors and director nominee be classified as independent, the Nominating and Governance Committee considered whether there were any facts or circumstances that might impair the independence of each of those persons
including, with respect to Messrs. Graziano, Mather, Mongillo and Pastor, the agreements described in Certain Relationships and Related Person Transactions Agreements with Carl C. Icahn.
Board Meetings and Annual Meeting Attendance
Our Board
met seven times in 2017. In 2017, each of our directors then in office attended at least 90% of the meetings of the Board and committees on which he or she served during the period of his or her service. Director attendance at annual meetings of
stockholders is encouraged. All directors then in office attended the 2017 annual meeting of stockholders.
Board Committees
Our Board has four standing committees the Audit Committee, the Compensation Committee, the Finance Committee and the Nominating and Governance
Committee. Each committee has a written charter and each charter is available without charge on the Investor Relations portion of our website,
http://ir.hercrentals.com.
Each member of the Audit Committee, Compensation Committee
and Nominating and Governance Committee meets the independence and eligibility standards necessary for service on such committee pursuant to relevant securities laws, NYSE rules, our Corporate Governance Guidelines and the respective charter of each
committee. Similarly, each member of the Finance Committee meets the director independence standards established by the NYSE rules. Our Board has designated Messrs. Browning, Campbell and Katz as audit committee financial experts.
7
Membership, Meetings and Roles and Responsibilities of the Board Committees
Audit Committee
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Members
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Roles and Responsibilities
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Browning (Chair)
Campbell
Holley
Katz
Mongillo*
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Oversees our accounting, financial and external reporting policies and
practices as well as the integrity of our financial statements.
Monitors the independence, qualifications and performance of our independent registered public
accounting firm.
Oversees
the performance of our internal audit function and operational policies and practices that affect our internal controls.
Monitors our compliance with legal and regulatory requirements.
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Number of
Meetings in 2017
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Reviews the
annual internal audit plan and the commitment of internal audit resources, in each case as they relate to risk management.
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18
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Prepares
our Audit Committees report included in our annual proxy statement.
Receives information from management about any significant deficiencies or material weaknesses in
the design or operation of internal control over financial reporting. In addition to the Audit Committees regularly scheduled meetings, a number of meetings were held in 2017 to allow management to provide regular reports to the Audit
Committee on remediation efforts related to outstanding material weaknesses.
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Compensation Committee
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Members
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Roles and Responsibilities
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Salomone (Chair)
Henkel
Kelly
Pastor
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Evaluates the performance of our CEO as related to all elements
of compensation, as well as the performance of our most senior executives.
Approves the annual incentive compensation targets and payouts and grants to our most senior
executives under our long-term incentive plan (both subject, in the case of our CEO, if so directed by the Board, to the final approval of a majority of independent directors of our Board).
Prepares a report on
executive compensation required for inclusion in our annual proxy statement.
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Number of
Meetings in 2017
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6
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Nominating and Governance Committee
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Members
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Roles and Responsibilities
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Henkel (Chair)
Kelly
Pastor
Salomone
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Assists our Board in determining the skills, qualities and
eligibility of individuals recommended for membership on our Board.
Reviews the composition of our Board and its committees to determine whether it may be appropriate
to add or remove individuals.
Reviews and evaluates directors for
re-nomination
and
re-appointment
to committees.
Reviews and assesses the adequacy of our Corporate Governance Guidelines and Directors Code
of Business Conduct and Ethics.
Reviews and recommends to the Board the form and amount of compensation paid to
directors.
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Number of
Meetings in 2017
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4
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8
Finance Committee
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Members
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Roles and Responsibilities
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Campbell (Chair)
Browning
Holley
Katz
Mather
Mongillo*
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Assists our Board in its oversight of the Companys
financing policies.
Reviews and recommends to our Board matters pertaining to the Companys financial structure,
short and long-term financing in both the public and private markets, and other financial matters of importance to the Company.
Approves certain of the Companys and its subsidiaries mergers, acquisitions and
divestitures.
Reviews and
recommends to our Board matters pertaining to the Companys dividend policy and share repurchases.
Periodically reviews the Companys funding, asset performance and strategies for its pension
and other post-retirement benefit plans and delegation of authority policy.
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Number of
Meetings in 2017
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4
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*
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Mr. Mongillo is not standing for
re-election
at the annual meeting and, accordingly, will no longer serve on the Audit Committee and the Finance Committee effective as of the
annual meeting.
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9
Risk Oversight
Risk OversightOur Board and Committees
Our Board is
involved in risk oversight in several ways. Our Boards involvement in overseeing our business strategy is a key part of its assessment of managements risk threshold and also helps determine an appropriate level of risk for us. In
addition, regularly throughout the year, management presents information to either the Board or its committees on areas and topics related to risks faced by the Company. The Board receives regular reports on the Companys significant legal
matters as well as updates on matters that may impact the Company, operations reviews and treasury-related updates.
Various committees of the Board also
have responsibility for risk management. The Audit Committee focuses on financial risk, including internal controls, and annually receives a risk assessment and risk management report from the Companys Internal Audit Department. The Audit
Committee also reviews with management our annual internal audit plan and the commitment of internal audit resources as they relate to risk management. The Companys Vice President of Internal Audit dually reports to our Audit Committee as well
as our Chief Financial Officer. In addition to receiving regular reports from Internal Audit, the Audit Committee regularly meets in private session with our Vice President of Internal Audit and, separately, with our external auditors, which
provides the opportunity for confidential discussion. The Audit Committee also quarterly receives a report on the status of the Companys significant legal matters and ethics helpline activity.
Within the Company, risk responsibilities are aligned to functional expertise and shared among the senior executives with overall responsibility for risk
management residing with our Chief Executive Officer.
Management performs an annual risk assessment with the Compensation Committee regarding the
Companys overall compensation program.
In addition to the foregoing, management performs an annual overall risk assessment and engages in an
enterprise-wide risk management (ERM) process where key financial, operational and compliance risks are identified, mitigated, monitored and reported to senior management and the Board. Management formed an ERM committee, established a
task force and assigned a working group to each of our material weaknesses. Among other things, the ERM committee established an IT subcommittee to focus on the shift of IT systems from New Hertz to the Company.
Risk Considerations in our Compensation Program
In 2017,
the Company conducted a review of the risk profile of our compensation policies and practices. Deloitte Consulting LLP (Deloitte), compensation advisor to the Company, and Meridian Compensation Partners, LLC (Meridian), as
independent compensation advisor to the Compensation Committee, with the assistance of management, prepared a risk profile assessment of the Companys compensation policies and practices. In addition, management, with the assistance of Deloitte
and Meridian, reviewed the Companys compensation plans, policies and practices in 2017 for all employees and presented the findings to the Compensation Committee. Based in part on such report, the Compensation Committee determined that, for
all employees, the Companys enterprise-wide compensation policies and practices, in conjunction with the Companys existing processes and controls, do not motivate employees to take unnecessary risks, or pose a material risk to the
Company, particularly in light of the following factors:
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our use of different types of compensation programs, such as equity- and cash-based programs, that provide a balance of long- and short-term incentives;
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our clawback policy, which allows us to seek the recovery of annual incentive awards, long-term incentive awards, equity-based awards and other performance-based compensation awarded to many of our employees, including
all of our senior executives, under certain circumstances in the event of a financial restatement;
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10
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our structuring of our compensation programs to include features such as caps on payments and multi-year vesting programs for long-term incentive awards; and
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our various policies and procedures designed to monitor risk.
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Stockholder Communications with the Board
Stockholders and other interested parties who wish to contact any of our directors or any group of directors may send written correspondence to: Herc
Holdings Inc., 27500 Riverview Center Blvd., Bonita Springs, Florida 34134, Attention: Corporate Secretary.
Communications addressed to directors that
discuss business or other matters relevant to the activities of our Board will be preliminarily reviewed by the office of the Corporate Secretary and then distributed either in summary form or by delivering a copy of the communication to the
director, or group of directors, to whom they are addressed.
Director Nominations
Stockholders may nominate directors for election at an annual meeting. The procedures for director nominations are set forth in our
By-laws
and are summarized in the section titled Stockholder Proposals for 2019 Annual Meeting below. To recommend a person to serve on the Board, a stockholder should write to: Herc Holdings Inc., 27500
Riverview Center Blvd., Bonita Springs, Florida 34134, Attention: Corporate Secretary. The Nominating and Governance Committee will consider and evaluate persons recommended by stockholders in the same manner as it considers and evaluates other
potential directors. The Nominating and Governance Committee also takes into consideration any written arrangements for director nominations to which the Company is a party, including the Nomination and Standstill Agreement we entered into with Carl
C. Icahn, described under Certain Relationships and Related Person Transactions Agreements with Carl C. Icahn.
Corporate
Governance Guidelines; Code of Ethics
The Board has adopted Corporate Governance Guidelines containing standards for the Nominating and Governance
Committee to determine director qualifications. The Corporate Governance Guidelines provide that the Nominating and Governance Committee, in making recommendations about nominees to the Board, will:
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review candidates qualifications for membership on the Board based on the criteria approved by the Board and taking into account the enhanced independence, financial literacy and financial expertise standards that
may be required under law or NYSE rules for committee membership purposes;
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in evaluating current directors for
re-nomination
to the Board, assess the performance and independence of such directors; and
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periodically review the composition of the Board in light of the current challenges and needs of the Board and the Company, and determine whether it may be appropriate to add or remove individuals after considering
issues of judgment, diversity, age, skills, background, experience and independence.
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The Corporate Governance Guidelines also contain
policies regarding director independence, the retirement age of directors, simultaneous service on other boards and substantial changes relating to a directors affiliation or position of principal employment. Among other things, the Corporate
Governance Guidelines establish responsibilities for meeting preparation and participation, and the evaluation of our financial performance and strategic planning. A copy of our Corporate Governance Guidelines, as well as our Code of Ethics and our
Directors Code of Business Conduct and Ethics, are available without charge on the Investor Relations portion of the Companys website,
http://ir.hercrentals.com
. We intend to include on our website information about
any amendments to, or waivers from, a provision of the Code of Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer or controller in accordance with SEC rules.
11
Director Stock Ownership Guidelines
Our independent directors are required to meet certain stock ownership guidelines. We believe this further aligns their interests with those of our
stockholders. Under these guidelines, the independent directors are expected, over a period of five years from the date they are elected as an independent director or are otherwise determined to be independent, to acquire and hold a number of shares
of our common stock equivalent to five times their base annual cash retainer, currently $350,000.
Our Board Leadership
The Board believes it is important to retain its flexibility to allocate the responsibilities of the offices of the Chair of the Board and Chief Executive
Office (CEO) in a manner that is in the best interests of our Company, including the flexibility to determine whether these offices should be combined or separate. The Board believes that the decision as to who should serve as Chair and
CEO, and whether the offices should be combined or separate, should be assessed periodically by the Board, and that the Board should not be constrained by a rigid policy mandating the structure of such positions. The Board currently believes that
the most effective and efficient leadership structure for our Company is for Lawrence H. Silber to serve as CEO while Herbert L. Henkel serves as our independent
non-executive
Chair of the Board
(Independent
Non-Executive
Chair).
The Board believes that the current leadership structure benefits
the Company by delineating roles of management and oversight over management. Our CEO and his management team provide the overall strategy and
day-to-day
leadership for
our Company, and the Board, along with the Independent
Non-Executive
Chair, provides oversight and evaluates the performance of management. The Independent
Non-Executive
Chair, in consultation with the CEO, has responsibility for chairing and determining the length and frequency of Board meetings as well as setting the agenda for such meetings. The Independent
Non-Executive
Chair also sets the agenda for, and chairs, the Boards regularly-scheduled executive sessions in which management (other than Mr. Silber) does not participate. In addition to the regularly-scheduled executive sessions of the Board that
are held once per fiscal quarter without the presence of management (other than Mr. Silber), our directors hold regular executive sessions where only our independent directors attend. The Independent
Non-Executive
Chair (or, in his absence, another independent director selected by the independent directors present at such executive session) presides over the executive sessions to facilitate the discussion.
In addition, the Independent
Non-Executive
Chair, as a member of the Compensation Committee, also significantly assists in evaluating and in setting the compensation of our CEO by conferring with other
independent members of the Board regarding our CEOs performance.
Policy on Diversity
The Corporate Governance Guidelines and the Nominating and Governance Committee charter specify that the Nominating and Governance Committee consider a number
of factors, including diversity, when evaluating or conducting searches for directors. The Nominating and Governance Committee interprets diversity broadly to mean a variety of opinions, perspectives, personal and professional experiences and
backgrounds, such as international and multicultural experience and understanding, as well as other differentiating characteristics, including race, ethnicity and gender.
Implementation and Assessment of Policies Regarding Director Attributes
The Nominating and Governance Committee, when making recommendations to the Board regarding director nominations, assesses the overall performance of the
Board, and when
re-nominating
incumbent Board members or nominating new Board members, evaluates the potential candidates ability to make a positive contribution to the Boards overall function. The
Nominating and Governance Committee considers the actual performance of incumbent Board members over the previous year, as well as whether the Board has an appropriately diverse membership. The particular experience, qualifications, attributes and
skills of the potential candidate are assessed by the Nominating and Governance Committee to determine whether the potential candidate possesses the professional and personal experiences and expertise necessary to enhance the Board. After conducting
the foregoing analysis the Nominating and Governance Committee makes recommendations to the Board regarding director nominees. In its assessment of director nominees, the Nominating and Governance Committee does not take a formulaic approach, but
rather considers each prospective nominees diversity in perspectives, personal and
12
professional experiences and background and ability. In making director nominations, the Nominating and Governance Committee takes into account the overall diversity of the Board and evaluates
the Board in light of, among other things, the attributes discussed in the section titled Policy on Diversity above.
13
Recent Modifications to Hercs Executive Compensation
Program
As a standalone company after the
Spin-Off,
we expect our executive compensation program to evolve.
The Compensation Committee will review and consider modifications to the Companys executive compensation program to reflect the Companys business strategy and performance as well as evolving corporate governance practices. The
following are recent modifications to our executive compensation program that were made to further align our executive compensation program with our business strategy, performance and strong corporate governance practices:
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M
odifications to Peer Group
Given the change in business size, structure and focus resulting from the
Spin-Off,
in August 2016, the Compensation
Committee determined that it should establish a new peer group applicable to the Company, consisting of 15 equipment rental and leasing companies and distributors. In 2017, the Compensation Committee modified the August 2016 peer group to remove
peers that were less comparable to the Company in terms of size and added several companies based on similarities to the Company in terms of size and industry. The Compensation Committee considers this peer group in its review of the
Companys executive compensation program to assist it in developing a competitive compensation program in order to attract, retain and motivate the Companys executive officers. See Herc Executive Compensation Program
Decision-Making Process Competitive Market Review for a list of the new peer group companies.
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Double Trigger Change in Control Equity Vesting
To further align the Companys executive compensation program with strong corporate governance practices, beginning with the 2017 equity awards,
the vesting of the Companys equity awards will accelerate upon a qualifying termination of employment following a change in control.
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22
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I
ncreased Weighting of PSU Component in Long-Term Equity Incentive Program
For 2017, the Compensation Committee increased the weighting of performance stock units (PSUs) so that they
represent 70% of the targeted long-term equity incentive awards. This change increased the portion of each NEOs equity compensation that is contingent on the achievement of
pre-established
performance goals.
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E
liminated Overlapping Performance Goals under Annual and Long-Term Incentive Programs
In 2017, the Compensation Committee changed the performance goals used under the long-term incentive program,
which eliminated the overlapping performance metrics under the annual and long-term incentive programs by replacing the Adjusted EBITDA (as defined below) performance metric under the PSUs, as described further below, with a return on invested
capital (ROIC) performance metric.
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Herc Executive Compensation Program Decision-Making Process
Compensation Philosophy and the Role of the Compensation Committee
The Compensation Committee reviews and establishes the executive compensation program for our senior executives, including the NEOs. The Compensation Committee
is committed to creating incentives for our senior executives that reward them for the Companys, as well as their individual, performance. The Compensation Committees philosophies include an emphasis on the following:
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The compensation programs structure should be aligned with the Companys financial performance:
The Compensation Committee believes that creating goals that are aligned with the Companys
financial performance will focus executives on the long-term interests of our stockholders.
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The compensation design should be simple, transparent and clearly articulated to participants and our
stockholders:
The Compensation Committee is committed to designing our annual incentive and
long-term equity compensation programs to focus our senior executives attention on business goals that will support the long-term success of the Company, which would be expected to positively impact our common stock.
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The compensation program should provide short- and long-term components to drive performance over the long run:
Long-term results are important to our stockholders and the Compensation Committee believes
that a compensation program that rewards results both annually and on a multi-year basis provides a framework for superior long-term performance.
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The compensation program should be competitive and market-based to attract and retain senior executives:
The Compensation Committee believes our executive compensation program should provide a combination of
incentives that will allow us to hire, retain and reward talented individuals at every position.
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The compensation program should responsibly balance incentives with prudent risk management:
The Compensation Committee believes that responsible use of different types of incentives with appropriate goals
and caps will create and foster a culture of growth that is sustainable and appropriate for the Company.
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Role of the Compensation
Consultant
Meridian Compensation Partners, LLC (Meridian) provides executive compensation consulting services to the Compensation
Committee. Meridian is retained by and reports directly to the Compensation Committee. Under the terms of Meridians engagement, Meridian is prohibited from performing any services for management outside of services needed in connection with
advising the Compensation Committee. The Compensation Committee has assessed Meridians independence and concluded that Meridians work for the Compensation Committee does not raise any conflict of interest.
23
During 2017, the Company also retained the services of Deloitte Consulting, Inc. (Deloitte) to
provide advice with respect to executive compensation matters. Deloittes responsibilities for 2017 included providing input regarding market data on, and governance matters related to, executive compensation practices, analysis of the
positions of proxy advisory firms and institutional investors, and the design of the Companys annual and long-term incentive programs. The Compensation Committee, with input from Meridian, evaluated the findings of Deloitte in its review of
the 2017 executive compensation program. The Compensation Committee has assessed the independence of Deloitte pursuant to the NYSE rules, and the Company concluded that Deloittes work did not raise any conflict of interest that impaired
Deloittes ability to render services to the Compensation Committee or the Company.
Role of the CEO
Our CEO provides input to the Compensation Committee on topics related to business and executive officer performance. As part of this process, our CEO reviews
and makes observations regarding performance and provides additional data and detail for the Compensation Committee to consider regarding the overall compensation program and with respect to executive compensation decisions. While our CEO provides a
perspective on the Companys performance as well as the performance of the Companys other senior executives, the final determinations over compensation reside with the Compensation Committee.
Competitive Market Review
As noted above, one of
the key objectives of our executive compensation program is to provide competitive and market-based compensation to attract and retain executive officers. For 2017, the Compensation Committee considered market pay practices when setting
executive compensation, but did not target the specific compensation elements or total compensation against the market data. Instead, the Compensation Committee used market data to assess the overall competitiveness and reasonableness of the
Companys executive compensation program. The Compensation Committee believes that compensation decisions are complex and require a deliberate review of Company and individual performance, scope of the executives experience, criticality
to the Company, internal equity and peer compensation levels. The factors that influence the amount of compensation awarded include market competition for a particular position, an individuals experience and past performance inside or outside
the Company, compensation history, role and responsibilities within the Company, and associated knowledge of the equipment rental and other related industries.
The Compensation Committee believes that the Companys peer group should reflect the markets in which the Company competes for business and executive
talent. Accordingly, the Companys peer group includes equipment rental and leasing companies and distributors whose primary market is North America and whose revenue ranges from approximately $400 million to $5.8 billion. The median
revenue, market capitalization and total assets of this peer group, as reported by Meridian, was $2.2 billion, $2.8 billion and $2.0 billion, respectively. The peer group used for evaluating 2017 compensation decisions consisted of
the companies below, which is the same peer group that was used for evaluating 2016
post-Spin-Off
compensation decisions except for the (i) removal of Avis Budget Group, Inc. and Ryder System, Inc. due to
size as compared to the Company, (ii) removal of TAL International Group, Inc. as a result of its 2016 merger and (iii) addition of Applied Industrial Tech Inc., KAR Auction Services Inc., NOW Inc., Ritchie Bros Auctioneers Inc. and Triton
International Ltd based on similarities with the Company with respect to size and industry.
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Aggreko plc
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H&E Equipment Services
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Pool Corp.
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Applied Industrial Tech Inc.
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KAR Auction Services Inc.
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Ritchie Bros Auctioneers Inc.
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Ashtead Group plc
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McGrath Rentcorp
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Triton International Ltd.
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Beacon Roofing Supply, Inc.
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Mobile Mini, Inc.
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United Rentals, Inc.
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Fastenal Company
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Neff Corporation
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Watsco Inc.
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GATX Corp.
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NOW Inc.
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24
Response to Advisory Vote on Executive Compensation
In 2017, the Companys stockholders were given an opportunity to cast an advisory vote on the compensation of the Companys NEOs, as reported in the
Companys 2017 proxy statement. Approximately 97.6% of the votes cast for that say on pay vote at the Companys 2017 Annual Meeting of Stockholders were voted in favor of the say on pay proposal. The Compensation
Committee did not make any specific changes to the Companys executive compensation program in response to the 2017 say on pay vote.
Elements of Executive Compensation Program
Principal Elements of the 2017 Executive Compensation Program
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Element
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Type
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How and Why We Pay It
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Salary
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Fixed Cash
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Paid throughout the year to attract and retain senior executives
Sets the baseline for bonus
and certain retirement programs
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Annual Cash Bonus
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Performance-Based Cash
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Paid annually in cash to reward performance of the Company and individual
Designed to align senior
executives interests with our stockholders interests, reinforce key strategic initiatives and encourage superior individual performance
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Long-Term Equity
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PSUs
RSUs
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Granted annually, with vesting occurring in subsequent years based on satisfying
performance conditions for PSUs or continued service for restricted stock units (RSUs)
Designed to align senior executives interests with stockholders interests and drive
key performance goals
Designed to be competitive with market practices in order to attract and retain executive
talent
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Annual Cash Compensation
Salary
For the Companys senior executives, the
Compensation Committee determines salary and any increases after reviewing individual performance, conducting internal compensation comparisons and reviewing competitive compensation information. The Company also takes into account other factors
such as an individuals prior experience, total mix and scope of job responsibilities versus market comparables and internal equity. The Compensation Committee authorized a salary increase for the CEO in 2017 to reflect the CEOs strong
performance, his experience in and the scope of his role and to further align his compensation with market and peer data. The Compensation Committee also consults with the CEO regarding salary decisions for senior executives (except as to the
CEOs own compensation) and takes into consideration any contractual obligations we have with such senior executives. The following table sets forth the 2017 and, for comparative purposes, the 2016
year-end
salary levels for each of our NEOs:
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Name
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2016 Salary
($)
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2017 Salary
($)
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Mr. Silber
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800,000
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850,000
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Ms. Brasier
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485,000
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485,000
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Mr. Cunningham
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365,000
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365,000
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Mr. Dressel
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500,000
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500,000
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Ms. Waryjas
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400,000
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400,000
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2017 Annual Cash Incentive Award Program
The Companys annual cash incentive award program is designed to motivate and reward executive officers for achieving short-term financial objectives. The
program is composed of two inter-related plans: the Senior Executive Bonus Plan (SEBP), which is a stockholder-approved plan providing an overall limit on annual incentive
25
payments for participants, and the Executive Incentive Compensation Plan (the EICP), which is a Compensation Committee-administered plan for determining incentive awards. The SEBP was
designed to provide annual incentive awards that qualified as performance-based compensation and, therefore, were
tax-deductible
without regard to the limitation on deductibility imposed by
Section 162(m) of the Internal Revenue Code (the Code), assuming technical regulatory requirements were satisfied. The EICP provides participants, including the NEOs, with annual cash incentive award opportunities for the
achievement of
pre-established
performance goals. The EICP provides target payout opportunities that are expressed as a percentage of a participants fiscal year base salary, with actual payouts for 2017
ranging from 0% to 200% of target for various levels of performance. For participants in the SEBP, the Compensation Committee applies negative discretion factors to reduce the maximum annual award under the SEBP (with the SEBP maximum being defined
with reference to a percentage of Gross EBITDA, as defined in the SEBP).
The target award for each NEO is a percentage of the NEOs 2017
base salary. The Compensation Committee generally considered the experience, responsibilities and historical performance of each NEO when determining target awards. Each NEOs 2017 target award, as a percentage of base salary as of
December 31, 2017, is set forth in the table below. The target opportunity, as a percentage of base salary, for Mr. Cunningham was increased by 10% as compared to 2016 to further align his compensation with the competitive market data and
the compensation received by other executive officers within the Company.
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Named Executive Officer
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Salary as of
December 31, 2017
($)
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Target Award as a % of
Salary
(%)
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Target Award
($)
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Mr. Silber
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850,000
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100
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850,000
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Ms. Brasier
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485,000
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70
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339,500
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Mr. Cunningham
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365,000
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60
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219,000
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Mr. Dressel
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500,000
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75
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375,000
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Ms. Waryjas
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400,000
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65
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260,000
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To arrive at the annual award, the NEOs target award (the NEOs salary multiplied by the percentage specified in
the table above) was first multiplied by a Corporate Performance Modifier, which was calculated based on the Companys achievement of a combination of financial metrics and
non-financial
objectives (NFOs) selected by the Compensation Committee in March 2017. The financial metrics and their 2017 weightings were Adjusted EBITDA (50%), Return on Revenue Earning Equipment (30%) and Equipment Rental Revenue Growth (20%). The
Compensation Committee selected these measures as they were viewed as core drivers of the Companys performance and stockholder value creation. The financial performance goals were determined based on Hercs financial plan at the time. The
NFOs selected by the Compensation Committee for 2017 were (i) the achievement of safety goals, including that the total recordable incident rate (TRIR) and days away, restricted or transferred (DART) rate would be better
than the prior years performance and the industry average and that safety ratings under the Companys Safety Dashboard would improve; (ii) the maintenance of a strong compliance program and internal controls, including making
meaningful progress toward remediating material weaknesses and minimizing new control deficiencies; (iii) the reduction of services performed for the Company by New Hertz under the transition services agreement entered into at the time of the
Spin-Off,
including progress toward the implementation of a new financial system; (iv) the monetization of select real estate assets; and (v) the divestiture of certain operations outside of North America,
with each of the five NFOs weighted at 20% of the total opportunity. Under the 2017 design of the EICP, the NFOs could reduce the financial score to 0% or amplify the score by up to 125%. The Compensation Committee has discretion to modify the
calculated award payout based on individual performance and other subjective factors considered by the Compensation Committee (Personal Performance Modifier), which could reduce the payout to 0% or amplify it by up to 150%.
For purposes of the EICP, Adjusted EBITDA is calculated as the sum of net income (loss), provision for income taxes, interest expense, net, depreciation of
revenue earning equipment and
non-rental
depreciation and amortization, plus the sum of merger and acquisition related costs, restructuring and restructuring-related charges,
spin-off
costs,
non-cash
stock-based compensation charges, loss on extinguishment of debt (which is included in interest expense, net), impairment charges, gain on the
disposal of a business and certain other items as used for external reporting purposes. Return on Revenue Earning Equipment is Adjusted EBITDA, divided by the average original equipment cost of revenue earning equipment (based on American Rental
Association guidelines, which is
26
calculated as the cost of the asset at the time it was first purchased plus additional capitalized refurbishment costs, with the basis of refurbished assets reset at the refurbishment date).
Equipment Rental Revenue Growth is the increase in equipment rental revenue during the 2017 Plan Year (as defined in the EICP) compared to the 2016 Plan Year, divided by equipment rental revenue in the 2016 Plan Year.
The following table shows the Adjusted EBITDA, Return on Revenue Earning Equipment and Equipment Rental Revenue Growth performance goals that were used to
determine 2017 payouts under the EICP:
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Adjusted
EBITDA (50% Weighting)
|
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|
Adjusted EBITDA
(in millions)
|
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|
Payout Percentage
(1)
|
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|
Adjusted EBITDA as % of Target
|
|
Threshold
(2)
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$
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540
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50
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%
|
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90
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%
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Target
|
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$
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600
|
|
|
|
100
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%
|
|
|
100
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%
|
Maximum
(3)
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$
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660
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200
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%
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110
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%
|
Actual Performance
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$
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585.4
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87.8
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%
|
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97.6
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%
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Return on
Revenue Earning Equipment (30% Weighting)
|
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|
Return on Revenue
Earning Equipment
|
|
|
Payout Percentage
(1)
|
|
|
Return on Revenue Earning
Equipment as % of Target
|
|
Threshold
(2)
|
|
|
14.9
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%
|
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|
50
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%
|
|
|
90
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%
|
Target
|
|
|
16.6
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%
|
|
|
100
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%
|
|
|
100
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%
|
Maximum
(3)
|
|
|
18.3
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%
|
|
|
200
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%
|
|
|
110
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%
|
Actual Performance
|
|
|
16.0
|
%
|
|
|
82.9
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%
|
|
|
96.6
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%
|
|
Equipment
Rental Revenue Growth (20% Weighting)
|
|
|
|
Equipment Rental
Revenue Growth
|
|
|
Payout Percentage
(1)
|
|
|
Equipment Rental Revenue
Growth as % of Target
|
|
Threshold
(2)
|
|
|
3.9
|
%
|
|
|
50
|
%
|
|
|
60
|
%
|
Target
|
|
|
6.5
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Maximum
(3)
|
|
|
8.5
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%
|
|
|
200
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%
|
|
|
130
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%
|
Actual Performance
|
|
|
10.8
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%
|
|
|
200
|
%
|
|
|
166.3
|
%
|
(1)
|
For the financial performance criteria, linear interpolation is used to determine the multiplier for results that are between the threshold and target and target and maximum performance levels.
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(2)
|
Any performance results that are below the threshold receive a 0% multiplier.
|
(3)
|
Any performance results that equal or exceed the maximum performance level are capped at the 200% multiplier.
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The 2017 plan design for the EICP included a payout range for threshold, target and maximum achievement of the financial metrics of 50%, 100% and 200%,
respectively. The Compensation Committee reviewed the Companys performance against the established performance criteria, and determined that (i) the Companys achievement of the 2017 financial metrics yielded a score of 108.8% toward
the Corporate Performance Modifier, and (ii) the Companys achievement of each of the established NFOs yielded an aggregate score of 100% based on the level of achievement of all the NFOs, which did not increase or reduce the financial
result score.
27
The Compensation Committee may make a positive, negative or no adjustment to each NEOs performance-based
variable compensation based on its evaluation of the Personal Performance Modifier applicable to such NEO. In evaluating the appropriate Personal Performance Modifier, the Compensation Committee considered various qualitative factors, such as
the NEOs:
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performance in his or her principal area of responsibility;
|
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degree of success in leading the Company to meet its strategic objectives; and
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championing of the values and competencies that are important to the success of the Company
|
The Personal
Performance Modifier for certain of the NEOs varied from 100% (which would have a neutral result on the payout calculated based on the Corporate Performance Modifier), based upon individual performance in 2017. The Compensation Committee did
not find it practical, nor did it attempt, to assign relative weights to any individual factors or subject them to
pre-defined,
rigid formulas, or set financial or other objective goals related to personal
performance, and the importance and relevance of specific factors varied for each NEO.
As a result of the foregoing, the Compensation Committee approved
award payouts for each of the NEOs that were calculated based on a Corporate Performance Modifier of 108.8%, and taking into account the recommendations of the Chief Executive Officer for each of the other NEOs, Personal Performance Modifiers
ranging from 80% to 130%. Each NEOs 2017 EICP award is reflected as
Non-Equity
Incentive Plan Compensation in the 2017 Summary Compensation Table.
Long-Term
Equity Incentives
Long-term equity incentive compensation composes a significant portion of the total compensation paid to our senior executives and in 2017 was awarded under
the Herc Holdings Inc. 2008 Omnibus Incentive Plan (as amended to date, the 2008 Omnibus Plan). Under the 2008 Omnibus Plan, the Compensation Committee has the flexibility to make equity awards based on our common stock, including time-
and performance-based awards of RSUs, PSUs, stock options, stock appreciation rights, restricted stock and deferred stock units.
Summary of 2017
Annual Award Structure
For 2017, the Compensation Committee reviewed the structure of the long-term equity incentive plan and concluded that the
annual equity awards for employees would be delivered in the form of 70% PSUs vesting based on three-year average return on invested capital (Average ROIC) performance and 30% service-based RSUs. For more information about the 2017 PSU
and RSU awards, see 2017 Grants of Plan-Based Awards table below.
2017 Average ROIC PSUs
The Compensation Committee chose Average ROIC as a performance metric because it is one of the primary metrics used to analyze investment decisions, measuring
both profitability and capital efficiency. For purposes of the 2017 PSU awards, Average ROIC is defined as the average return on invested capital for the performance period; provided, however, in the event of any (i) material acquisitions or
dispositions, (ii) currency fluctuations, (iii) changes in law or accounting standards or (iv) other nonrecurring or infrequently occurring events or items reflected in the Companys audited financial statements or notes thereto,
which occur during the performance period, the Compensation Committee shall make appropriate adjustments to the performance incentive threshold, target and maximum criteria and/or the determination of Average ROIC, in accordance with any applicable
provisions of the Plan and Section 162(m) of the Code.
The Compensation Committee approved a multi-year design for earning the PSUs in order to
drive the Companys Average ROIC performance over a multi-year period.
At the beginning of 2017, the Compensation Committee set an Average ROIC goal
for the January 1, 2017 through December 31, 2019 performance period. Under the terms of the 2017 PSUs, the vesting of the PSUs will depend on Average ROIC performance over the three-year period. Given the economic and market conditions at
the time the Average ROIC targets were set, the target vesting level was designed to be achievable with strong Company performance, while vesting at the maximum level was designed to be very difficult to achieve.
28
2017 RSUs
At the beginning of 2017, our NEOs received service-based RSUs as the remaining 30% of their 2017 equity awards. These service-based RSUs will cliff vest after
three years, subject to the participants continued service through the vesting date.
2016 Adjusted EBITDA PSUs
Prior to the
Spin-Off,
our NEOs received PSUs granted by the Compensation Committee of the Board of Directors of Hertz
Holdings, the consolidated enterprise that the Company was a part of (the Hertz Holdings Compensation Committee). At the beginning of 2016, the Hertz Holdings Compensation Committee set Adjusted EBITDA goals for 2016, 2017
and 2018. In anticipation of the
Spin-Off,
the Hertz Holdings Compensation Committee reviewed certain information, estimates and assumptions relating to the performance of the equipment rental division
rather than relating to the consolidated Hertz Holdings enterprise (the
Pre-Spin-Off
Assumptions), and approved performance goals for individuals continuing
with the Company following the
Spin-Off
that were limited to the equipment rental division rather than the consolidated Hertz Holdings enterprise. Accordingly, under the original terms of the 2016 PSU awards,
performance for purposes of determining payouts and vesting was intended to be determined based solely on our performance, based on the
Pre-Spin-Off
Assumptions.
Following the
Spin-Off,
the Compensation Committee reviewed updated information not included in the
Pre-Spin-Off
Assumptions and,
in its subjective discretion, approved revised financial targets, which took into account, among other things, stand-alone public company costs and the impact of the Companys exposure to the oil and gas markets.
Under the terms of the 2016 PSUs, the vesting of the PSUs depends on three years of cumulative Adjusted EBITDA performance, with the ability to
lock-in
up to 25% or 50% of the total award based on
one-year
and
two-year
cumulative performance, respectively. To be eligible to earn
the target number of PSUs based on the second tranche of the award, the Company needed to achieve cumulative 20162017 Adjusted EBITDA performance of $1,150 million.
For cumulative 20162017 performance, Adjusted EBITDA was $1,123.2 million, resulting in participants earning 88.3% of target on 50% of the award,
or a total of 44.2% (i.e., 88.3% x 50%). These shares will not vest until the third anniversary of the date of grant, subject to the participants continued service through the vesting date. The following table shows the target PSUs granted and
the portion of such PSUs earned based on cumulative 20162017 performance:
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Target Granted
PSUs
(#)
|
|
|
20162017
Performance PSUs
Earned
(1)
(#)
|
|
Mr. Silber
|
|
|
20,238
|
|
|
|
8,945
|
|
Ms. Brasier
|
|
|
14,166
|
|
|
|
6,261
|
|
Mr. Cunningham
|
|
|
7,386
|
|
|
|
3,265
|
|
Mr. Dressel
|
|
|
10,119
|
|
|
|
4,473
|
|
Ms. Waryjas
|
|
|
7,589
|
|
|
|
3,354
|
|
(1)
|
A portion of the PSUs included in this column were previously reported as earned based on 2016 performance under the terms of the 2016 PSUs. The incremental number of PSUs earned for cumulative 20162017
performance was 4,432 for Mr. Silber, 3,102 for Ms. Brasier, 1,618 for Mr. Cunningham, 2,216 for Mr. Dressel and 1,662 for Ms. Waryjas. These PSUs will vest in March 2019, subject to the participants continued service
through such date.
|
2015 Adjusted EBITDA PSUs
In 2015, Hertz Holdings Compensation Committee set Adjusted EBITDA goals for 2015, 2016 and 2017.
One-third
of
the award granted in 2015 was forfeited based on the lack of achievement of 2015 Adjusted EBITDA goals,
one-third
of such award vested based on achievement of 2016 Adjusted EBITDA goals and the remaining
one-third
of such award vested based on the achievement of 2017 Adjusted EBITDA goals.
29
For 2017 performance, Adjusted EBITDA was $585.4 million against a target of $600 million, resulting in
the earning of 87.8% of target.
The three NEOs who had received PSUs in 2015 earned their 2015 PSU awards based on 2016 and 2017 performance as set forth
in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer(1)
|
|
2015 Total PSUs
Granted
|
|
|
2015 Tranche
Actual PSUs
Earned
(0% of target)
|
|
|
2016 Tranche
Actual PSUs
Earned
(89.0% of target)
|
|
|
2017
Tranche
Actual PSUs
Earned
(87.8% of target)
|
|
Mr. Silber
|
|
|
8,509
|
|
|
|
0
|
|
|
|
2,524
|
|
|
|
2,491
|
|
Mr. Cunningham
|
|
|
2,462
|
|
|
|
0
|
|
|
|
730
|
|
|
|
721
|
|
Mr. Dressel
|
|
|
4,763
|
|
|
|
0
|
|
|
|
1,413
|
|
|
|
1,394
|
|
(1)
|
Ms. Brasier and Ms. Waryjas did not receive PSUs in 2015 due to their respective hire dates.
|
Other Compensation Elements
Retirement
Programs
In connection with the
Spin-Off,
we established a new
tax-qualified
defined benefit pension plan (the Herc Holdings Retirement Plan), and the assets and liabilities attributable to Herc Holdings employees and former employees whose last place of
employment was with the equipment rental business were transferred from The Hertz Corporation (Hertz) Account Balance Defined Benefit Pension Plan (the Hertz Retirement Plan), a
tax-qualified
cash balance pension plan, to the Herc Holdings Retirement Plan. In connection with the
Spin-Off,
we also established a new defined contribution plan. In
addition, we established
non-qualified
retirement plans similar to those that were in place prior to the
Spin-Off.
The liabilities (and where applicable, the related
assets) of the Hertz
non-qualified
plans attributable to Herc Holdings employees and former employees whose last place of employment was with the equipment rental business were transferred to our
non-qualified
plans. As of December 31, 2017, certain of our NEOs participated in Herc Rentals Supplemental Income Savings Plan, a
non-qualified
deferred compensation
plan that we adopted in connection with the
Spin-Off,
and none of our NEOs participated in the Herc Holdings Retirement Plan.
Perquisite Policy
We provide perquisites and other
personal benefits to our senior management that the Compensation Committee believes are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. These perquisites
consist of a Company-provided vehicle, tax and financial planning with a value of up to $7,500 annually and executive medical benefits providing for a comprehensive physical examination and related services with value of up to $6,000 annually.
We use leased corporate aircraft for the purpose of encouraging and facilitating business travel by our senior executives (primarily our CEO and Chief
Operating Officer) and directors, generally for travel in the United States and, less frequently, Canada. In addition, the Compensation Committee has authorized our CEO to use our leased corporate aircraft for personal air travel, up to a maximum
annual value of $100,000. The Compensation Committee periodically reviews our perquisite policies.
Severance and Change in Control Policy
Our severance and change in control policy (the Severance Policy) provides senior executives of the Company, including the NEOs, with the following
severance and change in control benefits: (i) for an involuntary termination of employment, the CEO will be entitled to severance calculated as two times the CEOs base salary and target bonus, and each of our other NEOs will be entitled
to severance equal to the NEOs base salary and target bonus, and (ii) upon a change in control and a qualifying termination of employment (a double trigger provision), the CEO will be entitled to severance calculated as
two-and-one-half
times the CEOs base salary and target bonus, and each of our other NEOs will be entitled to severance calculated
as two times the NEOs base salary and target bonus. Health and welfare benefits will be provided for the number of years equivalent to the multiples indicated, on the same basis as active employees.
30
In adopting the Severance Policy, it was the intention of the Compensation Committee to provide senior executives
with severance arrangements that they would view as appropriate in light of their existing arrangements, while at the same time considering the terms of arrangements provided by peer companies. The Severance Policy and the treatment of equity awards
upon a termination of employment or a change in control are described below under Potential Payments Upon a Termination or a Change in Control.
Policies and Practices for Recovering Bonuses in the Event of a Restatement
We maintain a clawback policy to promote responsible risk management and to help ensure that the incentives of management are aligned with those of our
stockholders. The clawback policy applies to all of our employees who are at the director level and above, including the NEOs, and covers:
|
|
|
equity-based awards (including awards granted under the 2008 Omnibus Plan); and
|
|
|
|
other performance-based compensation arrangements.
|
The policy provides that a repayment obligation is
triggered if the Compensation Committee determines that the employees gross negligence, fraud or willful misconduct caused or contributed to the need for a restatement of our financial statements within three years of the issuance of such
financial statements.
In addition, our equity award agreements include clawback provisions. Our clawback policy and any related plans or award agreements
will be further revised, to the extent necessary, to comply with any rules promulgated by the SEC pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Stock Ownership Guidelines and Hedging Policy
Stock
Ownership Guidelines
The Company has stock ownership guidelines for senior executives and
non-employee
directors. The guidelines establish the following target ownership levels:
|
|
|
Equity equal to five times base salary for our CEO;
|
|
|
|
Equity equal to three times base salary for our CFO and senior vice presidents;
|
|
|
|
Equity equal to one times base salary for our other senior executives (who are designated as officers under Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act));
and
|
|
|
|
Equity equal to five times the annual cash retainer for
non-employee
directors.
|
Senior executives and
non-employee
directors have five years to reach the target ownership levels. Senior executives
subject to the guidelines are permitted to count toward the target ownership levels shares owned outright, the value of unvested RSUs and the value of unvested PSUs (at target), even if the service requirement has not been met.
Non-employee
directors subject to the guidelines are permitted to count towards the target ownership levels shares owned outright and the value of phantom shares. Shares owned indirectly by a trust or family members
are also permitted to count toward target ownership levels. As of March 19,
2018, each NEO has met his or her respective ownership guideline.
31
Pledging and Hedging Policy
The Companys policy regarding trading in Company securities prohibits employees and directors from entering into any type of arrangement, contract or
transaction that has the effect of hedging the value of our common stock. Under the policy, directors and officers subject to Section 16 of the Exchange Act are also prohibited from pledging the shares they hold in the Company, and other
employees are strongly discouraged from doing so.
Tax and Accounting Considerations
Section 162(m) of the Code operates to disallow public companies from taking a federal tax deduction for compensation in excess of $1 million paid to
certain of its executive officers. Historically, there was an exemption for performance-based compensation that met certain requirements mandated by the statute and related tax regulations. With the enactment of tax reform in December 2017, the
performance-based compensation exemption has been repealed except with respect to certain grandfathered arrangements. As part of its role, the Compensation Committee historically reviewed and considered compliance with the performance-based
compensation exemption under Section 162(m) of the Code. The Compensation Committee, however, retained discretion to approve compensation that did not meet the requirements for deductibility under Section 162(m) of the Code in order to
attract and retain qualified senior executives and to provide total compensation for the Companys senior executives consistent with the policies described above.
32
ANNUAL REPORT FOR 2017
The Companys annual report to stockholders for the year 2017 is being made available on or about April 2, 2018
to persons who were stockholders of record as of March 19, 2018, the record date for the annual meeting.
65
ANNEX A
HERC HOLDINGS INC.
2018
OMNIBUS INCENTIVE PLAN
ARTICLE I
PURPOSES
The purposes of this Plan are to
foster and promote the long-term financial success of the Company and its Subsidiaries by (a) motivating superior performance by Participants, (b) providing Participants with an ownership interest in the Company, and (c) enabling the
Company and the Subsidiaries to attract and retain the services of outstanding employees, officers, directors and consultants upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.
ARTICLE II
DEFINITIONS
2.1
Certain Definitions
. Capitalized terms used herein without definition shall have the respective meanings set forth below:
Adjustment Event
means any change in the number of outstanding Shares after the Effective Date by reason of any
dividend payable in capital stock, stock split, share combination, recapitalization, reorganization, merger, consolidation,
split-up,
spin-off,
combination or
transaction, exchange of shares or other corporate exchange, any equity restructuring (as defined under Financial Accounting Standards Board Accounting Standards Codification 718) or any distribution to stockholders other than regular cash
dividends, or any similar transaction or event affecting the Common Stock.
Affiliate
means, with respect to any
Person, any other Person controlled by, controlling or under common control with such Person.
Alternative Award
has
the meaning given in Section 9.2.
Award
means any Option, Stock Appreciation Right, Performance Stock Unit,
Restricted Stock, Restricted Stock Unit, Deferred Stock Unit or Performance-Based Award granted pursuant to this Plan, including an Award combining two or more types in a single grant.
Award Agreement
means any written agreement, contract, or other instrument or document evidencing any Award granted by the
Committee pursuant to this Plan. The terms of any plan or guideline adopted by the Committee and applicable to an Award shall be deemed incorporated in and part of the related Award Agreement. The Committee may provide for the use of electronic,
internet or other
non-paper
Award Agreements and means for the Participants acceptance of, or actions under, an Award Agreement. In the event of any inconsistency or conflict between the terms of this
Plan and an Award Agreement, the terms of this Plan shall govern.
Business
has the meaning given in Section 4.6.
Board
means the Board of Directors of the Company.
Cause
means, except as otherwise defined in an Award Agreement, with respect to any Participant (as determined by the
Committee) (i) willful and continued failure to perform substantially the Participants material duties with the Company (other than any such failure resulting from the Participants incapacity as a result of physical or mental
illness) after a written demand for substantial performance specifying the manner in which the Participant has not performed such duties is delivered to the Participant by the Person that supervises or manages the Participant, (ii) engaging in
willful and serious misconduct that is injurious to the Company or any of its Subsidiaries, (iii) one or more acts of fraud or personal dishonesty resulting in or intended to result in personal enrichment at the expense of the Company or any of
its Subsidiaries, (iv) substantial abusive use of alcohol, drugs or
A-1
similar substances that, in the sole judgment of the Company, impairs the Participants job performance, (v) material violation of any Company policy that results in harm to the Company
or any of its Subsidiaries or (vi) indictment for or conviction of (or plea of guilty or
nolo contendere
) to a felony or of any crime (whether or not a felony) involving moral turpitude. A Termination for Cause, shall include
a determination by the Committee following a Participants termination of employment for any other reason that, prior to such termination of employment, circumstances constituting Cause existed with respect to such Participant.
Change in Control
means the first occurrence of any of the following events after the Effective Date:
(a) any Person or Group, other than the Company, the Subsidiaries, or any employee benefit plan of the Company or the Subsidiaries, is or
becomes the beneficial owner (as defined in Rules
13d-3
and
13d-5
under the Exchange Act), directly or indirectly, of more than 30% of the total voting power
of the voting stock of the Company (or any entity which controls the Company) within a 12 month period, including by way of merger, consolidation, tender or exchange offer;
(b) within any
12-month
period, the Incumbent Directors shall cease for any reason to constitute at
least a majority of the Board or the board of directors of any successor to the Company; provided that any director elected to the Board, or nominated for election, by a majority of the Incumbent Directors then still in office (or whose election or
nomination for election was previously approved as set forth in this proviso) shall be deemed to be an Incumbent Director for purposes of this clause (b);
(c) the consummation of a reorganization, recapitalization, merger or consolidation (a
Corporate Transaction
) involving the
Company, unless securities representing 50% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate
Transaction (or the parent of such corporation) are held subsequent to such transaction by the Person or Persons who were the beneficial owners of the outstanding voting securities entitled to vote generally in the election of directors
of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction;
(d) the approval by the Companys shareholders of the liquidation or dissolution of the Company other than a liquidation of the Company
into any Subsidiary or a liquidation a result of which Persons who were stockholders of the Company immediately prior to such liquidation own, directly or indirectly, more than 50% of the combined voting power entitled to vote generally in the
election of directors of the entity that holds substantially all of the assets of the Company following such event; and
(e) the sale,
transfer or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than the Company, the Subsidiaries, or any employee benefit plan of the Company or the
Subsidiaries.
Change in Control Price
means the price per share on a fully diluted basis offered in conjunction with
any transaction resulting in a Change in Control, as determined in good faith by the Committee as constituted before the Change in Control, if any part of the offered price is payable other than in cash.
Code
means the Internal Revenue Code of 1986, as amended, or any successor thereto and the regulations and guidance
promulgated thereunder.
Committee
means the Compensation Committee of the Board or, if applicable, the delegate of the
Compensation Committee of the Board as permitted or required herein, or such other committee of the Board (including, without limitation, the full Board) to which the Board has delegated power to act under or pursuant to the provisions of this Plan.
Common Stock
means the common stock, par value $0.01 per share, of the Company and any other securities into which the
Common Stock is changed or for which the Common Stock is exchanged.
A-2
Company
means Herc Holdings Inc., a Delaware corporation, and any successor
thereto.
Covered Period
has the meaning given in Section 4.6.
Deferred Annual Amount
has the meaning given in Section 8.1.
Deferred Stock Unit
means a Participants contractual right to receive a stated number of Shares or, if provided by
the Committee on or after the grant date, cash equal to the Fair Market Value of such Shares or any combination of Shares and cash, under this Plan at the end of a specified period of time.
Disability
means, unless otherwise provided in an Award Agreement, a physical or mental disability or infirmity that
prevents or is reasonably expected to prevent the performance of a Participants employment-related duties for a period of six months or longer and, within 30 days after the Company notifies the Participant in writing that it intends to
terminate his employment, the Participant shall not have returned to the performance of his employment-related duties on a full-time basis; provided, that (i) for purposes of Section 5.1(e) in respect of ISOs, the term
Disability shall have the meaning assigned to the term Permanent and Total Disability by section 22(e)(3) of the Code (i.e., physical or mental disability or infirmity lasting not less than 12 months), and (ii) with
respect to any Award that constitutes deferred compensation subject to section 409A of the Code, Disability shall have the meaning set forth in section 409A(a)(2)(c) of the Code. The Committees reasoned and good faith judgment of
Disability shall be final, binding and conclusive, and shall be based on such competent medical evidence as shall be presented to it by such Participant and/or by any physician or group of physicians or other competent medical expert employed by the
Participant or the Company to advise the Committee. Notwithstanding the foregoing (but except in the case of ISOs and awards subject to section 409A of the Code), with respect to any Participant who is a party to an employment agreement with the
Company or any Subsidiary, Disability shall have the meaning, if any, specified in such Participants employment agreement.
Dividend Equivalents
means an amount equal to any dividends and distributions paid by the Company with respect to the
number of Shares subject to an Award; provided that, subject to Section 4.3, (i) Dividend Equivalents shall not be payable with respect to Options or Stock Appreciation Rights, and (ii) any Dividend Equivalents payable on other Awards
shall be subject to the same Restriction Period and other restrictions that apply to the underlying Award.
Effective Date
means the date the stockholders of the Company approve this Plan.
Exchange Act
means the Securities Exchange Act of
1934, as amended, or any successor statute thereto, and the rules promulgated thereunder.
Executive Officer
means each
person who is an officer of the Company or any Subsidiary and who is subject to the reporting requirements under Section 16(a) of the Exchange Act.
Fair Market Value
means, unless otherwise defined in an Award Agreement, on a given date, (i) if the Common Stock is
listed or traded on the New York Stock Exchange (the
NYSE
), the closing price of one share of Common Stock as reported on the NYSE composite tape on such date or, if there is no such reported sale price of a Share on the NYSE
composite tape on such date, then the closing price of a Share as reported on the NYSE composite tape on the last previous day on which a sale price of a Share was reported on the NYSE composite tape, and (ii) if at any time the Common Stock is
no longer listed or traded on the NYSE, the Fair Market Value shall be the value established by the Committee in good faith.
Group
means a group, as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.
Incumbent Director
means, with respect to any period of time specified under this Plan for purposes of determining a Change
in Control, the persons who were members of the Board at the beginning of such period; provided, that a director elected, or nominated for election, to the Board in connection with a proxy contest shall not be considered an Incumbent Director.
A-3
ISOs
has the meaning given in Section 5.1(a).
New Employer
means a Participants employer, or the parent or a subsidiary of such employer, immediately following a
Change in Control.
NSOs
has the meaning given in Section 5.1(a).
Option
means the right granted to a Participant pursuant to this Plan to purchase a stated number of Shares at a stated
price for a specified period of time.
Option/SAR Financial Gain
shall equal, on each date of exercise during the
Wrongful Conduct Period, (I) with respect to Options, the excess of (A) the greater of (i) the Fair Market Value on the date of exercise and (ii) the Fair Market Value on the date of sale of the Option shares, over (B) the
exercise price, multiplied by the number of Shares subject to such Award (without reduction for any Shares surrendered or attested to), and (II) with respect to Stock Appreciation Rights, the excess of (A) the Fair Market Value on the date
of exercise, over (B) the base price, multiplied by the number of Shares subject to such Stock Appreciation Right.
Participant
means any
non-employee
director, officer or employee of, or any natural
person who is a consultant to, the Company or any Subsidiary.
Performance Period
means the period, as determined by
the Committee, during which the performance of the Company, any Subsidiary, any business unit and any individual is measured to determine whether and the extent to which the applicable performance measures have been achieved.
Performance Stock Unit
means a Participants contractual right to receive a stated number of Shares or, if provided by
the Committee on or after the grant date, cash equal to the Fair Market Value of such Shares or any combination of Shares and cash having an aggregate Fair Market Value equal to such stated number of Shares, under this Plan at a specified time that
is forfeitable by the Participant until the attainment of specified performance goals, or until otherwise determined by the Committee or in accordance with this Plan, subject to the continuous employment of the Participant through the completion of
the applicable Performance Period (or such portion of the applicable Performance Period as otherwise provided in Article VI).
Performance-Based Award
has the meaning given in Section 6.1.
Performance-Based Financial Gain
shall equal, in the case of each Performance Stock Unit or other Performance-Based Award
Vesting Date during the Wrongful Conduct Period, (I) the greater of (A) the Fair Market Value of a share of the underlying Common Stock on the Vesting Date of such Award and (B) the per share Fair Market Value on the date of any sale
of such underlying Common Stock, multiplied by (II) the number of Shares subject to such Award (without reduction for any Shares surrendered or attested to).
Person
means any individual, company, government or political subdivision, agency or instrumentality of a government, as
the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act.
Plan
means this
Herc Holdings Inc. 2018 Omnibus Incentive Plan, as the same may be interpreted by the Committee and/or be amended from time to time.
Prior Plan
means the Herc Holdings Inc. 2008 Omnibus Incentive Plan (formerly known as the Hertz Global Holdings, Inc. 2008
Omnibus Incentive Plan).
Replacement Award
means an Award made to employees of companies or businesses acquired by the
Company to replace incentive awards and opportunities held by such employees prior to such acquisition.
Restricted
Stock
means a grant of a stated number of Shares to a Participant under this Plan that is forfeitable by the Participant until the completion of a specified period of future service, or until otherwise determined by the Committee or in
accordance with this Plan.
A-4
Restricted Stock Unit
means a Participants contractual right to receive
a stated number of Shares or, if provided by the Committee on or after the grant date, cash equal to the Fair Market Value of such Shares or any combination of Shares and cash having an aggregate Fair Market Value equal to such stated number of
Shares, under this Plan at the end of a specified period of time that is forfeitable by the Participant until the completion of a specified period of future service, or until otherwise determined by the Committee or in accordance with this Plan.
Restriction-Based Financial Gain
shall equal, on each Restricted Stock and Restricted Stock Unit Vesting Date during
the Wrongful Conduct Period, (I) the greater of (A) the Fair Market Value of a share of the underlying Common Stock on the Vesting Date and (B) the per share Fair Market Value on the date of sale of such underlying Common Stock,
multiplied by (II) the number of Shares subject to such Award (without reduction for any Shares surrendered or attested to).
Restriction Period
means (i) with respect to any Performance Stock Unit, the period beginning on the grant date of
such Award and ending on the certification by the Committee that the performance objectives or objectives for the applicable Performance Period have been attained (in whole or in part) in accordance with Section 6.2(d), (ii) with respect to any
Restricted Stock or Restricted Stock Unit, the Restriction Period specified in the Award Agreement evidencing such Award, and (iii) with respect to any freestanding Deferred Stock Unit as to which the Committee has specified a Restriction
Period in accordance with Section 8.3, the Restriction Period so specified.
Retirement
means, except as otherwise
defined in an Award Agreement, a Participants retirement from active employment with the Company and any Subsidiary at or after such Participant attains age 65, or after such Participant attains age 55 and has provided, at minimum, 10 years of
service to the Company or any Subsidiary.
Share Award
means an Award of unrestricted Shares pursuant to
Section 7.6 of this Plan.
Share-Based Financial Gain
shall equal, in the case of each Share Award grant date
during the Wrongful Conduct Period, (I) the greater of (A) the Fair Market Value of a share of the underlying Common Stock on the grant date of such Award and (B) the per share Fair Market Value on the date of any sale of such
underlying Common Stock, multiplied by (II) the number of Shares subject to such Award (without reduction for any Shares surrendered or attested to).
Shares
means shares of Common Stock.
Stock Appreciation Right
means a Participants right to receive, upon exercise, a payment from the Company in cash
and/or Shares equal to the product of (i) the excess, if any, of the Fair Market Value of one Share on the exercise date over a specified base price fixed by the Committee on the grant date, multiplied by (ii) a stated number of Shares
covered by the Stock Appreciation Right and subject to such exercise.
Subsidiary
means any corporation in which the
Company owns, directly or indirectly, stock representing 50% or more of the combined voting power of all classes of stock entitled to vote, and any other business organization, regardless of form, in which the Company possesses, directly or
indirectly, 50% or more of the total combined equity interests in such organization.
Vesting Date
means (i) with
respect to any Performance Stock Unit, Restricted Stock or Restricted Stock Unit, the expiration date of the applicable Restriction Period, and (ii) with respect to any Option or Stock Appreciation Right, the date such Award first becomes
exercisable in accordance with this Plan and the Award Agreement evidencing such Award.
Wrongful Conduct
has the
meaning given in Section 4.6.
Wrongful Conduct Period
has the meaning given in Section 4.6.
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2.2
Gender and Number
. Except when otherwise indicated by the context, words in the
masculine gender used in this Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.
ARTICLE III
POWERS OF
THE COMMITTEE
3.1
Eligibility and Participation
. The Committee (or its delegate) may designate Participants to participate in
this Plan.
3.2
Power to Grant and Establish Terms of Awards
. The Committee shall have the authority, to determine the type or
types of Awards to be granted and the terms and conditions of any Award, consistent with the provisions of this Plan, and to waive any such terms and conditions at any time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee may establish different terms and conditions for different types of Awards, for different Participants receiving the same type of Award, and for the same Participant for each type of Award such Participant may receive,
whether or not granted at the same or different times. Awards may, in the discretion of the Committee, be made under this Plan in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or
any of its Subsidiaries or with which the Company or any of its Subsidiaries combines. The number of Shares underlying such substitute awards shall not be counted against the aggregate number of Shares available for Awards under this Plan.
3.3
Administration
. The Committee shall be responsible for the administration of this Plan. The Committee shall have authority to
prescribe, amend and rescind rules and regulations relating to this Plan, to interpret this Plan and to make all other determinations as it deems necessary or desirable for the administration of this Plan and to carry out its provisions and
purposes, and may delegate such authority as it deems appropriate. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan in the manner and to the extent the Committee deems necessary or desirable.
Any determination, interpretation or other action made or taken (including any failure to make any determination or interpretation, or take any other action) by the Committee pursuant to the provisions of this Plan, shall, to the greatest extent
permitted by law, be within its sole and absolute discretion and shall be final, binding and conclusive for all purposes and binding upon all Persons and shall be given deference in any proceeding with respect thereto. The Committee may appoint
accountants, actuaries, counsel, advisors and other Persons that it deems necessary or desirable in connection with the administration of this Plan. The Committees determinations under this Plan need not be uniform and may be made by the
Committee selectively among Persons who receive, or are eligible to receive, Awards under this Plan, whether or not such Persons are similarly situated. To the maximum extent permitted by law, no member of the Committee shall be liable for any
action taken or decision made in good faith relating to this Plan or any Award hereunder.
3.4
Delegation by the Committee
. The
Committee may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two individuals who are intended to qualify as
Non-Employee
Directors
within the meaning of Rule
16b-3
under the Exchange Act and independent directors within the meaning of the New York Stock Exchanges listed company rules. Additionally, the Committee may
delegate the authority to grant Awards under this Plan to any officer or group of officers of the Company or a Subsidiary; provided that (i) such delegation and grants are consistent with applicable law and any guidelines established by the
Board from time to time and (ii) no such delegation shall be permitted with respect to grants of Awards to Participants who are Executive Officers or members of the Companys Board. Only the Committee may select, grant, administer, or
exercise any other discretionary authority under this Plan in respect of Awards granted to Participants who are Executive Officers.
3.5
Participants Based Outside the United States
. In order to conform with provisions of local laws and regulations in foreign countries in which the Company or its Subsidiaries operate, the Committee may (i) modify the terms and conditions
of Awards granted to Participants employed outside the United States, (ii) establish subplans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances presented by local laws and
regulations, and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to this Plan or any subplan established
hereunder; provided, however, that the Committee
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may not make any
sub-plan
that (a) increases the number of shares available under this Plan, as set forth in Section 4.1; or (b) causes this
Plan to cease to satisfy any conditions under Rule
16b-3
under the Exchange Act. Subject to the foregoing, the Committee may amend, modify, administer or terminate such
sub-plans,
and prescribe, amend and rescind rules and regulations relating to such
sub-plans.
ARTICLE IV
STOCK
SUBJECT TO PLAN; PROVISIONS APPLICABLE TO AWARDS
4.1
Number
. Subject to the provisions of this Article IV, the maximum number
of Shares available for Awards under this Plan shall not exceed 2,200,000 Shares (all of which may be the subject of ISOs granted under this Plan). The Shares to be delivered under this Plan may consist, in whole or in part, of Common Stock held in
treasury or authorized but unissued Shares, not reserved for any other purpose.
4.2
Canceled, Terminated, or Forfeited Awards,
etc.
The issuance of Shares upon the exercise or settlement of an Award (other than a Replacement Award) shall reduce the total number of Shares available under this Plan. Shares which are subject to an award granted under this Plan or the Prior
Plan (other than a Replacement Award) which expires according to its terms, lapses or terminates, is forfeited, canceled or surrendered, in each case, without such Shares having been issued, and Shares subject to any award granted under this Plan or
the Prior Plan (other than a Replacement Award) that is settled in cash or that are tendered or withheld to pay the exercise price of an option granted under this Plan or the Prior Plan or to satisfy any tax withholding obligations with respect to
an award granted under this Plan or the Prior Plan, shall become available for future grant under this Plan, but such Shares may not be issued pursuant to ISOs. Replacement Awards that for any reason are canceled, terminated, forfeited, settled in
cash or otherwise settled without the issuance of Common Stock shall not be available for grant under this Plan. Shares issued in connection with Awards that are assumed, converted or substituted pursuant to an Adjustment Event or Change in Control
(i.e., Alternative Awards), shall not be counted against the maximum limitation specified in Section 4.1. For purposes of this Article IV, if a Stock Appreciation Right is granted in tandem with an Option so that only one may be exercised with
the other being surrendered on such exercise in accordance with Section 5.2(b), the number of shares subject to the tandem Option and Stock Appreciation Right award shall only be taken into account once (and not as to both Awards).
4.3
Adjustment in Capitalization
. In the event of any Adjustment Event affecting the Common Stock, the Committee shall make an
equitable anti-dilution adjustment, if any, as it deems reasonably necessary to address, on an equitable basis, the effect of such event as to any resultant change in the
pre-share
price of the Common Stock
and to preserve the intrinsic value of Options and any other Awards granted under this Plan. Such mandatory adjustment may include a change in any or all of (a) the number and kind of Shares or other securities which thereafter may be awarded
or optioned and sold under this Plan (including, but not limited to, adjusting any limits on the number and types of Awards that may be made under this Plan), (b) the number and kind of Shares or other securities subject to outstanding Awards,
(c) the grant, exercise or conversion price with respect to any Award and (d) applicable performance measures. In addition, the Committee may make provisions for a cash payment to a Participant who has an outstanding Award. Any such
adjustment shall be consistent with sections 424 and 409A of the Code to the extent the Awards subject to adjustment are subject to such sections of the Code.
4.4
Minimum Vesting Requirements
. No Award granted under this Plan shall become exercisable or vested prior to the
one-year
anniversary of the date of grant; provided, however, that, such restriction shall not apply to Awards granted under this Plan with respect to the number of shares of Common Stock which, in the aggregate,
does not exceed five percent (5%) of the total number of shares initially available for awards under this Plan. This Section 4.4 shall not restrict the right of the Committee to accelerate or continue the vesting or exercisability of an Award
upon or after a Change in Control or termination of employment or otherwise pursuant to
Article 3
of the Plan.
4.5
Prohibition
Against Repricing
. Except (i) to the extent approved in advance by a majority of the shares of the Company entitled to vote generally in the election of directors or (ii) as a result of any Adjustment Event, the repricing of an Option
or Stock Appreciation Right, once granted hereunder, is prohibited. For this purpose, a repricing means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of an Option or
Stock Appreciation Right to lower the exercise price or the base
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price, as applicable; (ii) any other action that is treated as a repricing under generally accepted accounting principles; and (iii) repurchasing for cash or canceling an
Option or Stock Appreciation Right in exchange for another Award at a time when the exercise price or base price, as applicable, is greater than the Fair Market Value of the underlying Shares, unless the cancellation and exchange occurs in
connection with a change in capitalization or similar change permitted under Section 4.3 or in the case of Options or Stock Appreciation Rights granted in substitution of awards previously granted by a company acquired by the Company or any of
its Subsidiaries, as described in Section 3.2.
4.6
Forfeiture
. Unless otherwise determined by the Committee at or after the
grant date, notwithstanding anything contained in this Plan to the contrary, if, during the period commencing with a Participants employment or service with the Company or any Subsidiary, and continuing until the first anniversary of the later
of (i) the Participants employment or service termination and (ii) the expiration of any post-termination exercise period (the
Covered Period
) the Participant, except with the prior written consent of the
Committee, agrees not to:
(a) directly or indirectly, own any interest in, operate, join, control or participate as a partner, director,
principal, officer, or agent of, enter into the employment of, act as a consultant to, or perform any services for any entity which has operations that compete with any business of the Company and the Subsidiaries in which the Participant was
employed (in any capacity) in any jurisdiction in which such business is engaged, or in which any of the Company and the Subsidiaries have documented plans to become engaged of which the Participant has knowledge at the time of the
Participants termination of employment (the
Business
), except where (x) the Participants interest or association with such entity is unrelated to the Business, (y) such entitys gross revenue from the
Business is less than 10% of such entitys total gross revenue, and (z) the Participants interest is directly or indirectly less than two percent (2%) of the Business;
(b) directly or indirectly, solicit for employment, employ or otherwise interfere with the relationship of the Company or any of its
Affiliates with any natural person who is or was employed by or otherwise engaged to perform services for the Company or any of its Affiliates at any time during the Participants employment with the Company or any Subsidiary (in the case of
any such activity during such time) or during the twelve-month period preceding such solicitation, employment or interference (in the case of any such activity after the termination of the Participants employment); or
(c) directly or indirectly, disclose or misuse any confidential information of the Company or any of its Affiliates (such activities in
subsections (a), (b) and (c) hereof to be collectively and individually referred to as
Wrongful Conduct
),
In the event of a
violation of any of these restrictions, any Awards granted to the Participant hereunder, to the extent they remain unexercised or for which the Restriction Period has not then lapsed, as applicable, shall automatically terminate and be canceled upon
the date on which the Participant first engaged in such Wrongful Conduct and, in such case or in the case of the Participants termination for Cause, the Participant shall pay to the Company in cash: (i) any Share-Based Financial Gain the
Participant realized from all or a portion of the Share Awards granted hereunder having a grant date within the Wrongful Conduct Period, and (ii), any Option/SAR Financial Gain, Performance-Based Financial Gain or Restriction-Based Financial Gain,
as applicable, the Participant realized from the exercise or vesting, as applicable, of all or a portion of the Awards granted hereunder (with respect to Options and SARs) or having a Vesting Date (with respect to Performance Stock Units and other
Performance-Based Awards) within the twelve-month period ending on the date of the Participants violation (or such other period as determined by the Committee) (such period, the
Wrongful Conduct Period
).
Unless otherwise determined by the Committee at or after the grant date, each Award Agreement shall provide for the Participants consent to and
authorization of the Company and the Subsidiaries to deduct from any amounts payable by such entities to such Participant any amounts the Participant owes to the Company under this Section 4.6 with respect to such Award. This right of
set-off
is in addition to any other remedies the Company may have against the Participant for the Participants Wrongful Conduct. The Participants obligations under this Section 4.6 shall be
cumulative (but not duplicative) of any similar obligations the Participant has under this Plan, any Award Agreement, any Company policy, standard or code (including, without limitation, the Companys Code of Ethics), or any other agreement
with the Company or any Subsidiary.
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4.7
Compensation Recovery Policy
. Without limiting any other provision of this Plan, any
Award granted hereunder shall be subject to the Companys Amended and Restated Compensation Recovery Policy (as amended from time to time, and including any successor or replacement policy or standard).
ARTICLE V
STOCK OPTIONS
AND STOCK APPRECIATION RIGHTS
5.1
Options
.
(a)
Grant
. Options may be granted to Participants at such time or times as shall be determined by the Committee. Options pursuant to
this Plan may be of two types: (i) incentive stock options within the meaning of section 422 of the Code (
ISOs
) and
(ii) non-qualified
stock options
(
NSOs
), which are not ISOs. The grant date of an Option under this Plan will be the date on which the Option is awarded by the Committee or such other future date as the Committee shall determine. Each Option shall be evidenced by
an Award Agreement that shall specify such terms and conditions as the Committee shall determine. No Option shall be an ISO unless so designated by the Committee at the time of grant or in the Award Agreement evidencing such Option, and which
otherwise meets the requirements of section 422 of the Code. In addition to the foregoing, except as otherwise determined by the Committee and evidenced in the related Award Agreement, Options shall be subject to the terms and conditions specified
in this Article V.
(b)
Exercise Price
. Each Option granted pursuant to this Plan shall have an exercise price per Share determined
by the Committee;
provided
, that except in the case of Replacement Awards, such per share exercise price may not be less than the Fair Market Value of one Share on the Option grant date
.
(c)
Exercisability
. Subject to the minimum vesting requirements in Section 4.4, each Option awarded to a Participant under this
Plan shall become exercisable at such time and upon such terms and conditions as the Committee shall determine, either at or after the grant date, but in no event shall an Option be exercisable after the tenth anniversary of its grant date. Except
as otherwise provided in this Plan, the applicable Award Agreement or as determined by the Committee at or after the grant date, after becoming exercisable each installment of an Option shall remain exercisable until expiration, termination or
cancellation of the Option and, until such time, may be exercised from time to time in whole or in part, up to the total number of Shares with respect to which it is then exercisable.
(d)
Payment
. The Committee shall establish procedures governing the exercise of Options, which procedures shall generally require that
notice of exercise thereof be given and that the aggregate exercise price thereof and any applicable withholding tax obligations be paid in full at the time of exercise. The methods of payment permitted under this Section are: (i) in cash or
cash equivalents, including by personal check, (ii) through delivery of Shares, (iii) if there is a public market for the Shares at such time, to the extent permitted by and subject to such rules as may be established by the Committee,
through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate exercise price
for the Shares being purchased; (iv) by a net settlement arrangement (i.e., having Shares with a Fair Market Value equal to the aggregate exercise price withheld by the Company from any Shares that would have otherwise been received
by the Participant upon exercise of the Option); provided that Shares will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that they are (A) used to pay the exercise price pursuant to the net
settlement, (B) delivered to the Participant as a result of such exercise, or (C) withheld to satisfy tax withholding obligations; or (v) such other method or combination of methods as approved by the Committee.
(e)
ISOs.
The Committee may grant Options under this Plan that are intended to be ISOs. Such ISOs shall comply with the requirements of
Section 422 of the Code. No ISO may be granted to any Participant who at the time of such grant is not an employee of the Company or of any of its Subsidiaries. In addition, no ISO may be granted to any Participant who at the time of such grant
owns more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Subsidiaries, unless (i) the exercise price for such ISO is at least 110% of the Fair Market Value of a Share on the date the ISO is
granted and (ii) the date on which such ISO terminates is a date not later than the day preceding the fifth anniversary of the date on which the ISO is granted.
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Any Participant who disposes of Shares acquired upon the exercise of an ISO either (I) within two years after the date of grant of such ISO or (II) within one year after the transfer of
such Shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition. If an Option is intended to be an ISO, and if for any reason such Option (or portion thereof) shall not qualify as an ISO,
then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a
non-qualified
stock option granted under this Plan;
provided
that such Option (or portion thereof)
otherwise complies with this Plans requirements relating to
non-qualified
stock options. In no event shall any member of the Committee, the Company or any of its Subsidiaries (or their respective
employees, officers or directors) have any liability to any Participant (or any other Person) due to the failure of an Option to qualify for any reason as an ISO.
5.2
Stock Appreciation Rights
.
(a)
Grant
. Stock Appreciation Rights may be granted (i) in tandem with Options or (ii) independent of Options. Unless
otherwise determined by the Committee at or after the grant date, a Stock Appreciation Right granted in tandem with an Option (i) may be granted either at the same time as the related Option is granted or at any time prior to the exercise or
cancellation of the related Option, (ii) shall cover the same number of Shares covered by the Option (or such lesser number of Shares as the Committee may determine) and (iii) shall be subject to the same terms and conditions as such
Option except for such additional limitations as are contemplated by this Section 5.2 (or such additional limitations as may be included in an Award Agreement). The grant date of any Stock Appreciation Right will be the date on which the Stock
Appreciation Right is awarded by the Committee or such other future date as the Committee shall determine. No Stock Appreciation Right shall be exercisable on or after the tenth anniversary of its grant date. Stock Appreciation Rights shall be
evidenced in writing, whether as part of the Award Agreement governing the terms of the Options, if any, to which such Stock Appreciation Right relates or pursuant to a separate Award Agreement with respect to freestanding Stock Appreciation Rights,
in each case, containing such conditions as the Committee shall determine.
(b)
Exercise
. Subject to the minimum vesting
requirements set forth in Section 4.4, Stock Appreciation Rights awarded to a Participant under this Plan shall become exercisable at such times and upon such terms and conditions as the Committee shall determine, either at or after the grant
date. The grant price per Share of a Stock Appreciation Right shall be an amount determined by the Committee but in no event shall such amount be less than 100% of the Fair Market Value of a Share on the date the Stock Appreciation Right is granted
(other than in the case of Replacement Awards); provided, however, that in the case of a Stock Appreciation Right granted in tandem with an Option, or a portion thereof, the exercise price may not be less than the Option Price of the related Option;
and provided, further, that the exercise price of a Stock Appreciation Right that is granted in exchange for an Option may be less than the Fair Market Value on the grant date if such grant price is equal to the Option Price of the exchanged Option.
Stock Appreciation Rights that are granted in tandem with an Option may only be exercised upon the surrender of the right to exercise such Option for an equivalent number of Shares, and may be exercised only with respect to the Shares for which the
related Option is then exercisable. The date a notice of exercise is received by the Company shall be the exercise date. The Committee may impose, in its discretion, such conditions or restrictions on the exercisability or transferability of any
Stock Appreciation Right as it may deem appropriate, but in no event shall a Stock Appreciation Right be exercisable more than ten years after the date it is granted.
(c)
Settlement
. Subject to Section 11.4, upon exercise of a Stock Appreciation Right, the Participant shall be entitled to receive
an amount (in the form(s) determined by the Committee), equal to the product of:
(i) the excess of (A) the Fair Market Value of one
Share on the exercise date over (B) the price per Share fixed by the Committee on the grant date of such Stock Appreciation Right, which may not be less than the Fair Market Value of a Share on the grant date (except if awarded in tandem with
an Option but after the grant date of such Option, then not less than the exercise price of such Option), by
(ii) the number of Shares
with respect to which the Stock Appreciation Right is exercised.
Each Stock Appreciation Right granted in tandem with an Option shall entitle a
Participant to surrender to the Company the unexercised Option, or any portion thereof, and to receive from the Company in exchange therefore an amount equal to the product of (i) the excess of (A) the Fair Market Value of a Share on the
exercise date over (B) the grant price per Share, times (ii) the number of Shares covered by the Option, or portion thereof, which is
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surrendered. Payment to the Participant shall be made in Shares or in cash, or partly in Shares and partly in cash (any such Shares valued at such Fair Market Value), all as shall be determined
by the Committee. Stock Appreciation Rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of Shares with respect to which the Stock Appreciation Right is being exercised. No
fractional Shares will be issued in payment for Stock Appreciation Rights, but instead cash will be paid for a fraction or, if the Company should so determine, the number of Shares will be rounded downward to the next whole Share.
Notwithstanding the foregoing, on the grant date the Committee may establish a maximum amount per share which will be payable upon exercise of a Stock
Appreciation Right.
5.3
Termination of Employment.
All of the terms relating to the exercise, cancellation or other disposition of an Option or Stock Appreciation Right (
i
) upon a
termination of employment with or service to the Company of the holder of such option or Stock Appreciation Right, as the case may be, whether by reason of Disability, Retirement, death or any other reason, or (
ii
) during a paid or
unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Award Agreement.
5.4
Committee
Discretion
. Notwithstanding anything to the contrary contained in this Article V, the Committee may, at or after the date of grant, accelerate or waive any conditions to the exercisability of any Option or Stock Appreciation Right granted
under this Plan, and may permit all or any portion of any such Option or Stock Appreciation Right to be exercised following a Participants termination of employment for any reason on such terms and subject to such conditions as the Committee
shall determine for a period up to and including, but not beyond, the expiration of the term of such Options or Stock Appreciation Rights.
ARTICLE VI
PERFORMANCE
STOCK UNITS
AND OTHER PERFORMANCE-BASED AWARDS
6.1
Grant
. The Committee, in its sole discretion, may grant Awards which are denominated in Shares or cash and are subject to
performance conditions (such Awards,
Performance-Based Awards
). Subject to the minimum vesting requirements in Section 4.4, any Performance-Based Awards granted under this Plan shall be in such form, and dependent on such
conditions, as the Committee shall determine. The grant date of any Performance-Based Awards under this Plan will be the date on which such Performance-Based Awards are awarded by the Committee or on such other future date as the Committee shall
determine. Performance Stock Units shall be evidenced by an Award Agreement that shall specify the number of Performance Stock Units to which such Award pertains, the Restriction Period, the Performance Period, and such other conditions as the
Committee shall determine. Other Performance-Based Awards shall be evidenced by an Award Agreement that shall contain such terms and conditions as the Committee shall determine. No Shares will be issued at the time an Award of Performance Stock
Units is made, and the Company shall not be required to set aside a fund for the payment of any such Award.
6.2
Vesting
.
(a)
In General
. Performance Stock Units granted to a Participant under this Plan shall be subject to a Restriction Period, which shall
lapse upon the attainment of specified performance objectives or the occurrence of any event or events, including a Change in Control, as the Committee shall determine, either at or after the grant date.
(b)
Performance Objectives
. The performance objectives for any Performance-Based Award may be based upon the relative or comparative
achievement of one or more performance goals approved by the Committee for a Performance Period established by the Committee. The applicable performance goals may be objective or subjective, and shall be based upon one or more criteria selected by
the Committee in its sole discretion, including,
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without limitation, any of the following: net sales; revenue (gross or net); revenue growth or equipment rental revenue growth; operating income (before or after taxes);
pre-
or
after-tax
income (before or after allocation of corporate overhead and bonus); net earnings; earnings per share; net income (before or after taxes); net income per
Share; book value per Share; return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of share price; market share; gross profits; earnings (including adjusted
pre-tax
earnings, earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization (
EBITDA
) or adjusted EBITDA); maintenance or
improvement of profit margins or EBITDA or adjusted EBITDA margins; economic value-added models or equivalent metrics; comparisons with various stock market indices; expense management; total net cash flow; cash flow or cash flow per share (before
or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; capital expenditures or fleet capital expenditures (gross or net); improvement in or attainment of expense
levels or working capital levels; operating margins, gross margins or cash margin;
year-end
cash; debt reductions; improvements in capital structure; shareholder equity; market share; regulatory achievements;
and implementation, completion or attainment of objectives with respect to customer satisfaction; merger, acquisition and divestiture projects; other projects; or recruiting and maintaining personnel.
(c)
Special Rules Relating to Performance Objectives
. Performance objectives may be established on a Company-wide basis or with respect
to one or more Company business units or divisions (if applicable), Subsidiaries or any combination of the foregoing; and either in absolute terms, relative to the performance of one or more peer group companies or indices, or any combination
thereof. The Committee may, in its sole discretion, adjust either the performance objectives or the performance results to reflect any extraordinary or unforeseeable events, including, without limitation, the charges or costs associated with
restructurings of the Company, discontinued operations, other unusual,
non-recurring
or infrequently occurring items, and the cumulative effects of accounting or tax law changes.
(d)
Determination of Attainment of Performance Objectives
. The Committee shall determine whether, with respect to a Performance Period,
the applicable performance goals have been met with respect to a given Participant. Regardless of the extent to which the applicable performance objectives are achieved, the Committee may, in its discretion, increase or decrease the amount of the
Performance-Based Award actually paid to a given Participant. The Restriction Period with respect to any Performance Stock Units or any other Performance-Based Award shall lapse upon the determination by the Committee as to the attainment of the
performance objective or objectives for the applicable Performance Period. The Committee may provide at the time of grant that if the performance objective or objectives are attained in part, the Restriction Period with respect to a specified
portion (which may be zero) of the Award will lapse and any remaining portion shall be cancelled.
6.3
Newly Eligible Participants
.
Notwithstanding anything in this Article VI to the contrary, the Committee shall be entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive an Award of
Performance Stock Units or other Performance-Based Awards after the commencement of a Performance Period.
6.4
Additional Provisions
Relating to Performance Stock Units
.
(a)
Rights as a Stockholder
. The Committee shall determine whether and to what extent
Dividend Equivalents will be credited to the account of a Participant receiving an Award of Performance Stock Units;
provided
that Dividend Equivalents shall be subject to the same Restriction Period and Performance Period and other
restrictions that apply to the underlying Performance Stock Units. Unless and until the Company issues Shares in respect of an Award of Performance Stock Units, or otherwise determined by the Committee at or after the grant date, a Participant
holding outstanding Performance Stock Units shall not be entitled to exercise any voting rights and any other rights as a stockholder with respect to the Shares underlying such Award.
(b)
Settlement of Performance Stock Units.
Unless the Committee determines otherwise at or after the grant date, as soon as reasonably
practicable, but not more than 60 days, after the lapse of the Restriction Period with respect to any Performance Stock Units then held by a Participant, the Company shall issue to the Participant the Shares underlying such Performance Stock Units
or, if the Committee so determines in its sole discretion, an amount in cash equal to the Fair Market Value of such Shares or any combination of Shares and cash having an aggregate Fair Market Value equal to such Shares. To the extent permitted by
applicable law (including section
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409A of the Code), upon such terms and conditions as the Committee may establish from time to time, a Participant may be permitted to defer the receipt of the Shares or cash otherwise deliverable
upon settlement of Performance Stock Units. Upon issuance of Shares underlying Performance Stock Units following lapse of the Restriction Period, such shares may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated in
compliance with all applicable securities laws, the Award Agreement and any other agreement to which such Shares are subject.
6.5
Termination of Employment.
All of the terms relating to the satisfaction of performance objectives and the termination of the Performance Period relating to Performance Stock Units or other Performance-Based Award, or any forfeiture and
cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of Disability, Retirement, death or any other reason, or (ii) during a paid or unpaid leave of
absence, shall be determined by the Committee and set forth in the applicable Award Agreement.
ARTICLE VII
RESTRICTED STOCK AND RESTRICTED STOCK UNITS; SHARE AWARDS
7.1
Grant
. The grant date of any Restricted Stock or Restricted Stock Units under this Plan will be the date on which such Restricted
Stock or Restricted Stock Units are awarded by the Committee or on such other future date as the Committee shall determine. Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement that shall specify such terms and
conditions as the Committee shall determine. No Shares will be issued at the time an Award of Restricted Stock Units is made and the Company shall not be required to set aside a fund for the payment of any such Award.
7.2
Vesting
. Subject to the minimum vesting requirements in Section 4.4, Restricted Stock and Restricted Stock Units granted to a
Participant under this Plan shall be subject to a Restriction Period, which may lapse upon the performance of a minimum period of service, or the occurrence of any event or events, including a Change in Control, as the Committee shall determine,
either at or after the grant date.
7.3
Additional Provisions Relating to Restricted Stock
.
(a)
Legend.
Each certificate evidencing Shares subject to an Award of Restricted Stock shall be registered in the name of the
Participant holding such Restricted Stock and shall bear the following legend (or similar legend):
THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE HERC HOLDINGS INC. 2018 OMNIBUS INCENTIVE PLAN AND THE RELATED AWARD AGREEMENT AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE
OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH SUCH PLAN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b)
Rights as a Stockholder.
Unless otherwise determined by the Committee at or after the grant date, a Participant holding outstanding Restricted Stock shall be entitled to (i) receive all dividends and distributions paid in respect of
Shares underlying such Award;
provided
, that, if any such dividends or distributions are paid in Shares or other securities, such shares and other securities shall be subject to the same Restriction Period and other restrictions as apply to
the Restricted Stock with respect to which they were paid, and (ii) exercise full voting rights and other rights as a stockholder with respect to the Shares underlying such Award during the period in which such Shares remain subject to the
Restriction Period.
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7.4
Additional Provisions Relating to Restricted Stock Units
.
(a)
Rights as a Stockholder.
The Committee shall determine whether and to what extent Dividend Equivalents will be credited to the
account of, or will be paid currently to, a Participant receiving an Award of Restricted Stock Units;
provided
that Dividend Equivalents shall be subject to the same Restriction Period and other restrictions that apply to the underlying
Restricted Stock Units. Unless and until the Company issues Shares to a Participant in respect of his or her Award of Restricted Stock Units, or otherwise determined by the Committee at or after the grant date, a Participant holding outstanding
Restricted Stock Units shall not be entitled to exercise any voting rights and any other rights as a stockholder with respect to the Shares underlying such Award.
(b)
Settlement of Restricted Stock Units.
Unless the Committee determines otherwise at or after the grant date, as soon as reasonably
practicable, but not more than 60 days, after the lapse of the Restriction Period with respect to any Restricted Stock Units, the Company shall issue the Shares underlying such Restricted Stock Units (plus additional Shares for Restricted Stock
Units credited in respect of dividends or distributions, if any) or, if the Committee so determines in its sole discretion, an amount in cash equal to the Fair Market Value of such Shares or any combination of Shares and cash having an aggregate
Fair Market Value equal to such Shares. To the extent permitted by applicable law (including section 409A of the Code), upon such terms and conditions as the Committee may establish from time to time, a Participant may be permitted to defer the
receipt of the Shares or cash otherwise deliverable upon settlement of Restricted Stock Units. Upon issuance of Shares following lapse of the Restriction Period, such shares may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated in compliance with all applicable securities law, the Award Agreement and any other agreement to which such shares are subject.
7.5
Termination of Employment
. All of the terms relating to the termination of the Restriction Period relating to a Restricted Stock or
Restricted Stock Unit Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of Disability, Retirement, death or any other
reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable Award Agreement.
7.6
Share Awards
. Share Awards may be made as additional compensation for services rendered by a Participant to the Company or any
Subsidiary or may be in lieu of cash or other compensation to which the Participant may be entitled from the Company or any Subsidiary.
ARTICLE VIII
DEFERRED
STOCK UNITS
8.1
In General
. Freestanding Deferred Stock Units may be granted to Participants at such time or times as shall be
determined by the Committee without regard to any election by the Participant to defer receipt of any compensation or bonus amount payable to such Participant. The grant date of any freestanding Deferred Stock Units under this Plan will be the date
on which such freestanding Deferred Stock Units are awarded by the Committee or on such other future date as the Committee shall determine. In addition, to the extent permitted by applicable law (including section 409A of the Code), on fixed dates
established by the Committee and subject to such terms and conditions as the Committee shall determine, the Committee may permit a Participant to elect to defer receipt of all or a portion of such Participants annual compensation and/or
incentive bonus (
Deferred Annual Amount
) payable by the Company or a Subsidiary and receive in lieu thereof an Award of elective Deferred Stock Units equal to the greatest whole number which may be obtained by dividing
(i) the amount of the Deferred Annual Amount by (ii) the Fair Market Value of one Share on the date of payment of such compensation and/or annual bonus. Deferred Stock Units shall be evidenced by an Award Agreement that shall specify the
number of Shares to which the Deferred Stock Units pertains, and such terms and conditions as the Committee shall determine. Upon the grant of Deferred Stock Units pursuant to this Plan, the Company shall establish a notional account for the
Participant and will record in such account the number of shares of Deferred Stock Units awarded to the Participant. No Shares will be issued to the Participant at the time an award of Deferred Stock Units is granted.
8.2
Rights as a Stockholder
. The Committee shall determine whether and to what extent Dividend Equivalents will be credited to the
account of, or will be paid currently to, a Participant receiving an Award of Deferred Stock Units. A Participant shall not have any rights as a stockholder in respect of Deferred Stock Units awarded pursuant to this Plan (including, but not limited
to, the right to vote on any matter submitted to the Companys stockholders) until such time as the Shares attributable to such Deferred Stock Units have been issued to such Participant or his beneficiary.
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8.3
Settlement
. Unless the Committee determines otherwise at or after the grant date, the
Company shall issue the Shares underlying any of a Participants freestanding Deferred Stock Units (and related Dividend Equivalents, if any) for which the Restriction Period shall have lapsed on or prior to the date of such Participants
termination of employment with the Company and any Subsidiary, other than a termination for Cause, as soon as administratively practicable, but not later than 90 days, following the date of such termination of employment (or on such earlier date as
the Committee shall permit or such later date as may be elected by the Participant in accordance with section 409A of the Code and the rules and procedures of the Board or as may be required by applicable law). Unless the Committee determines
otherwise at or after the grant date, in the event of the termination of a Participants employment with the Company and the Subsidiaries for Cause, the Participant shall immediately forfeit all rights with respect to any freestanding Deferred
Stock Units (and underlying Shares and related Dividend Equivalents, if any) credited to his account, whether or not the Restriction Period shall have then lapsed. Subject to Article IX and Article XI, and the last sentence of Section 8.1,
unless the Committee determines otherwise at or after the grant date, the Company shall issue the Shares underlying any of a Participants elective Deferred Stock Units (and related Dividend Equivalents, if any) credited to such
Participants account under this Plan as soon as administratively practicable, but not later than 90 days, following the date of such Participants termination of employment (or such later date as may be elected by the Participant in
accordance with the rules and procedures of the Committee or as may be required by applicable law). The Committee may provide in the Award Agreement applicable to any Award of Deferred Stock Units that, in lieu of issuing Shares in settlement of any
Deferred Stock Units, the Committee may direct the Company to pay to the Participant the Fair Market Value of the Shares corresponding to such Deferred Stock Units in cash, or in any combination of Shares and cash having an aggregate Fair Market
Value equal to such Shares.
8.4
Further Deferral Election
s. To the extent permitted by applicable law (including section
409A of the Code), upon such terms and conditions as the Committee may establish from time to time, a Participant may elect to further defer receipt of Shares issuable in respect of Deferred Stock Units (or an installment of an Award) for a
specified period or until a specified event.
ARTICLE IX
CHANGE IN CONTROL
9.1
Accelerated Vesting and Payment
.
(a)
In General.
Unless the Committee otherwise determines in the manner set forth in
Section 9.2, upon the occurrence of a Change in Control, (i) all Options and Stock Appreciation Rights shall become immediately exercisable, (ii) the Restriction Period on all Restricted Stock, Restricted Stock Units and freestanding
Deferred Stock Units shall lapse immediately prior to such Change in Control and (iii) Shares underlying Awards of Restricted Stock Units and Deferred Stock Units shall be issued to each Participant then holding such Award immediately prior to
such Change in Control; provided, that, at the discretion of the Committee (as constituted immediately prior to the Change in Control), each such Option, Stock Appreciation Right, Restricted Stock Unit and/or Deferred Stock Unit may be canceled in
exchange for an amount equal to the product of (A)(I) in the case of Options and Stock Appreciation Rights, the excess, if any, of the product of the Change in Control Price over the exercise price or base price, as applicable, for such Award, and
(II) in the case of other such Awards, the Change in Control Price multiplied by (B) the aggregate number of Shares covered by such Award;
provided, further
, that where the Change in Control does not constitute a change in
control event as defined under section 409A of the Code, the shares to be issued, or the amount to be paid, for each Award that constitutes deferred compensation subject to section 409A of the Code shall be paid at the time or schedule
applicable to such Awards (assuming for these payment purposes (but not the lapsing of the Restriction Period) that no such Change in Control had occurred). Notwithstanding the foregoing, the Committee may, in its discretion, instead terminate any
outstanding Options or Stock Appreciation Rights if either (x) the Company provides holders of such Options and Stock Appreciation Rights with reasonable advance notice to exercise their outstanding and unexercised Options and Stock
Appreciation Rights or (y) the Committee reasonably determines that the Change in Control Price is equal to or less than the exercise price or base price, as applicable, for such Options or Stock Appreciation Rights.
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(b)
Performance Stock Units and Other Performance-Based Awards.
In the event of a Change
in Control, Performance Stock Units, other Performance-Based Awards and elective Deferred Stock Units that are outstanding shall be treated as provided in the individual Award Agreement governing such Awards.
(c)
Timing of Payments.
Payment of any amounts calculated in accordance with Section 9.1(a) shall be made in cash or, if
determined by the Committee (as constituted immediately prior to the Change in Control), in shares of the common stock of the New Employer having an aggregate fair market value equal to such amount and shall be payable in full, as soon as reasonably
practicable, but in no event later than 30 days, following the Change in Control (subject to the payment timing restrictions contained in the second proviso of the first sentence of Section 9.1(a)). For purposes hereof, the fair market value of
one share of common stock of the New Employer shall be determined by the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control), in good faith.
9.2
Alternative Awards
. Notwithstanding Section 9.1, no cancellation, termination, acceleration of exercisability or vesting,
lapse of any Restriction Period or settlement or other payment shall occur with respect to any outstanding Award (other than an award of Performance Stock Units, other Performance-Based Awards or elective Deferred Stock Units except as provided
therein), if the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control) reasonably determines, in good faith, prior to the Change in Control that such outstanding Awards shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or substituted Award being hereinafter referred to as an
Alternative Award
) by the New Employer, provided, that any Alternative Award must:
(i) be based on Shares that are traded on an established U.S. securities market or another public market determined by the Committee prior to
the Change in Control; provide the Participant (or each Participant in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not
limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment (including liquidity rights with respect to Shares received in settlement of such Award);
(ii) have substantially equivalent economic value to such Award (determined at the time of the Change in Control);
(iii) have terms and conditions which provide that in the event that the Participant suffers an involuntary termination without Cause within
two years following the Change in Control, any conditions on the Participants rights under, or any restrictions on transfer or exercisability applicable to, each such Award held by such Participant shall be waived or shall lapse, as the case
may be; and
(iv) not result in adverse tax consequences to the Participant under section 409A of the Code.
ARTICLE X
EFFECTIVE
DATE, AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
This Plan was adopted by the Board on February 16, 2018, and shall become effective upon
approval by stockholders of the Company. The Plan shall continue in effect, unless sooner terminated pursuant to this Article X, until May 17, 2028; provided that no ISOs may be granted after February 16, 2028. The Board or the Committee
may at any time terminate or suspend this Plan, and from time to time may amend or modify this Plan;
provided
, that without the approval by a majority of the votes cast at a meeting of shareholders at which a quorum representing a majority of
the shares of the Company entitled to vote generally in the election of directors is present in person or by proxy, no amendment or modification to this Plan may (i) except as otherwise expressly provided in Section 4.3, materially
increase the number of Shares subject to this Plan, (ii) modify the restrictions provided in Section 4.4 or (iii) materially modify the requirements for participation in this Plan. No amendment, modification, or termination of this
Plan shall in any manner adversely affect any Award theretofore granted under this Plan, without the consent of the Participant. Notwithstanding the foregoing, the Board or Committee may take such actions as it deems appropriate to ensure that this
Plan and any Awards may comply with any tax, securities or other applicable law. Nothing herein shall restrict the Committees ability to exercise its discretionary authority as provided in this Plan.
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Subject to other applicable provisions of this Plan, all Awards made under this Plan prior to such termination of this Plan shall remain in effect until such Awards have been satisfied or
terminated in accordance with this Plan and the terms of such Awards. Except as otherwise determined by the Board, termination of this Plan shall not affect the Committees ability to exercise the powers granted to it hereunder with respect to
Awards granted under this Plan prior to the date of such termination. On the Effective Date, the Prior Plan shall terminate, and no further grants shall be made thereunder. Following a Change in Control, no action shall be taken under this Plan that
will cause any Award that has previously been determined to be (or is determined to be) subject to section 409A of the Code to fail to comply in any respect with section 409A of the Code without the written consent of the Participant.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1
Nontransferability of Awards
. No Award shall be assignable or transferable except by will or the laws of descent and distribution,
or to the extent an Award Agreement permits the transfer of such Award to a trust or entity established by the Participant for estate planning purposes. Except to the extent required by law, no Award shall be subject to any lien, obligation or
liability of the Participant. An Award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributes of the Participant.
11.2
Beneficiary Designation
. Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may
be named contingently or successively) to whom any benefit under this Plan is to be paid or by whom any right under this Plan is to be exercised in case of his or her death. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his or her lifetime. In the absence of any such designation, benefits remaining unpaid at the
Participants death shall be paid to or exercised by the Participants surviving spouse, if any, or otherwise to or by his or her estate.
11.3
No Guarantee of Employment or Participation
. Nothing in this Plan or any Award Agreement shall interfere with or limit in any way
the right of the Company or any Subsidiary to terminate any Participants employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Subsidiary (regardless of whether such termination
results in (1) the failure of any Award to vest; (2) the forfeiture of any unvested or vested portion of any Award; and/or (3) any other adverse effect on the individuals interests under this Plan or any Award Agreement). No
Employee shall have a right to be selected as a Participant, or, having been so selected, to receive any future Awards.
11.4
Tax
Withholding
. The Company shall have the right and power to deduct from all amounts paid to a Participant in cash or shares (whether under this Plan or otherwise) or to require a Participant to remit to the Company promptly upon notification of
the amount due, an amount to satisfy federal, state, local, foreign or other taxes or obligations required by law to be withheld with respect thereto with respect to the grant, vesting or exercise of any Award under this Plan. The Company may defer
payments of cash or issuance or delivery of Shares until such requirements are satisfied, and take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes and other
amounts due. Without limiting the generality of the foregoing, the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Participants to elect (i) to
tender, Shares (including Shares issuable in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld, (ii) to have Shares with a Fair Market Value equal to the withholding liability withheld by the Company from
any Shares that would have otherwise been received by the Participant (i.e., through a net settlement of such tax withholding due), (iii) if there is a public market for the Shares at such time, subject to such rules as may be
established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and deliver promptly to the Company an amount equal to the withholding liability, or
(iv) such other method as approved by the Committee. Shares to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the maximum individual statutory tax rate in the employees
applicable jurisdiction; provided that the Company shall be permitted to limit the number of shares so withheld to a lesser number if necessary, in the judgment of the Committee, to avoid adverse accounting consequences or for administrative
convenience.
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11.5
Compliance with Legal and Exchange Requirements
. The Plan, the granting and
exercising of Awards thereunder, and any obligations of the Company under this Plan, shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be
required, and to any rules or regulations of any exchange on which the Common Stock is listed. The Company, in its discretion, may postpone the granting, exercising and settlement of Awards, the issuance or delivery of Shares under any Award or any
other action permitted under this Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or registration or qualification of such Shares or other required action under any federal or state law, rule or
regulation and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules and regulations.
11.6
No Limitation on Compensation
. Nothing in this Plan shall be construed to limit the right of the Company to establish other plans
or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under this Plan.
11.7
409A
Compliance
. The Plan is intended to be administered in a manner consistent with the requirements, where applicable, of section 409A of the Code. Where reasonably possible and practicable, this Plan shall be administered in a manner to avoid the
imposition on Participants of immediate tax recognition and additional taxes pursuant to such section 409A. Notwithstanding the foregoing, neither the Company nor the Committee shall have any liability to any person in the event such section 409A
applies to any such Award in a manner that results in adverse tax consequences for the Participant or any of his beneficiaries or transferees.
Solely for
purposes of determining the time and form of payments due under any Award that is considered nonqualified deferred compensation under section 409A of the Code and that is not otherwise exempt from section 409A of the Code, a Participant shall not be
deemed to have incurred a termination of employment unless and until he shall incur a separation from service within the meaning of section 409A of the Code. Notwithstanding any other provision in this Plan, if as of Participants
separation from service, the Participant is a specified employee as determined by the Company, then to the extent any amount payable under any Award that is considered nonqualified deferred compensation under section 409A of the Code and
that is not otherwise exempt from section 409A of the Code, for which payment is triggered by Participants separation from service (other than on account of death), and that under the terms of the Award would be payable prior to the
six-month
anniversary of the Participants separation from service, such payment shall be delayed until the earlier to occur of (a) the
six-month
anniversary of such
separation from service or (b) the date of the Participants death.
11.8
Governing Law
. The Plan shall be construed in
accordance with and governed by the laws of the State of Delaware, without reference to principles of conflict of laws.
11.9
Severability; Blue Pencil
. In the event that any one or more of the provisions of any Award or this Plan shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. If, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not reasonable and to enforce the remainder of these covenants as so amended.
11.10
No Impact on Benefits
. Except as may otherwise be specifically stated under any employee benefit plan, policy or program, no
amount payable in respect of any Award shall be treated as compensation for purposes of calculating a Participants right under any such plan, policy or program. No amount payable in respect of any Award shall be deemed part of a
Participants regular, recurring compensation for purposes of any termination, indemnity or severance pay laws.
11.11
Headings
and Captions
. The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan.
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11.12
No Trust or Fund Created
. Neither this Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a grantee or any other Person. To the extent that any grantee or other Person acquires a right to receive payments from the Company pursuant
to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
11.13
Fractional
Shares
. Notwithstanding other provisions of this Plan or Award Agreements hereunder, no fractional Shares shall be issued or delivered pursuant to this Plan or any Award, and the Company shall determine whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional shares, or whether such fractional shares or any rights thereto shall be canceled, terminated or otherwise eliminated with, or without, consideration.
11.14
No Obligation to Exercise Awards; No Right to Notice of Expiration Date
. The grant of an Award of an Option or Stock Appreciation
Right will impose no obligation upon the Participant to exercise the Award. The Company, its Affiliates and the Committee have no obligation to inform a Participant of the date on which any Award lapses except in the Award Agreement.
11.15
Right to Offset
. Notwithstanding any provisions of this Plan to the contrary, and to the extent permitted by applicable law
(including section 409A of the Code), the Company may offset any amounts to be paid to a Participant (or, in the event of the Participants death, to his beneficiary or estate) under this Plan against any amounts that such Participant may owe
to the Company or its Affiliates.
11.16
Furnishing Information
. A Participant will cooperate with the Committee by furnishing any
and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of this Plan and the payments of benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary when eligibility or entitlement to any compensation or benefit based on Disability is at issue.
11.17
Successors and Assigns
. This Plan shall be binding on all successors and assigns of the Company and a Participant, including
without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participants creditors.
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ANNEX B
Herc Holdings Inc. Employee Stock Purchase Plan
(As Amended and Restated, Effective as of May 17, 2018)
B-1
Table of Contents
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ARTICLE I Introduction
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B-4
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1.1 Purpose of the Plan
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B-4
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1.2 Employee Stock Purchase Plan
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B-4
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1.3 Other similar plans
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B-4
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1.4 Shares for the Plan and
Sub-Plans
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B-4
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ARTICLE II Meaning of Words Used
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B-4
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2.1 In this Plan
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B-4
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2.2 Headings
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B-5
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ARTICLE III Eligibility
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B-6
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3.1 Eligible Employees
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B-6
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3.2 Restrictions on eligibility
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B-6
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ARTICLE IV Invitations
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B-6
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4.1 Operation
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B-6
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4.2 Time when invitations may be made
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B-6
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4.3 Form of invitation
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B-6
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4.4 Limit on participation
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B-7
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ARTICLE V Applying to join the Plan
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B-7
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5.1 Form of application
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B-7
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5.2 Subsequent Offerings
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B-7
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5.3 Incorporation of terms
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B-7
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ARTICLE VI Purchase Price
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B-7
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6.1 Setting the price
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B-7
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6.2 Fair Market Value
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B-7
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ARTICLE VII Grant of Purchase Right
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B-8
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7.1 Grant
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B-8
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7.2 Correction
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B-8
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7.3 Transferability
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B-8
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ARTICLE VIII Shares available for the Plan
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B-8
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8.1 Limit required by IRS rules
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B-8
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8.2 Exclusions
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B-8
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8.3 Types of Shares
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B-8
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ARTICLE IX Scaling down
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B-8
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9.1 Method
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B-8
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9.2 Insufficient Shares
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B-8
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ARTICLE X Payroll deductions
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B-9
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10.1 Start and end
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B-9
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10.2 Suspending Contributions
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B-9
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10.3 Changing Contributions
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B-9
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10.4 Withdrawal from an Offering
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B-9
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10.5 Continued participation
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B-9
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10.6 The account
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B-9
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10.7 Compliance with Section 423
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10.8 Approved leave of absence
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ARTICLE XI Termination of employment
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11.1 General rule on termination and death
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11.2 Beneficiary designation
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ARTICLE XII Exercise of Purchase Right
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12.1 Exercise
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12.2 Contributions
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12.3 Registration compliance
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12.4 Lapse
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ARTICLE XIII Acquisition of Shares
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13.1 Issue or transfer
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13.2 Rights
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13.3 Certificate of incorporation and bylaws
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13.4 Listing
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ARTICLE XIV Corporate events
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14.1 Change in Control
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14.2 Liquidation or dissolution of the Company
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14.3 Change in the securities of the Company
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14.4 Terms used
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ARTICLE XV General
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15.1 Notices
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15.2 Documents sent to shareholders
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15.3 Costs
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15.4 Terms of employment
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15.5 Corporate actions
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15.6 Employee trust
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15.7 Withholding
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15.8 Data privacy
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15.9 Legal compliance
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15.10 Crediting Service
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ARTICLE XVI Administration
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16.1 Committees powers
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16.2 Committees decision final and binding
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16.3 Indemnification of Committee
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ARTICLE XVII Changing the Plan and Termination
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17.1 Changing the Plan
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17.2 Notice
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17.3 Termination of the Plan
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ARTICLE XVIII Overseas Participants
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18.1 Establishing plans
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18.2 Overseas laws
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ARTICLE XIX Governing Law
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Herc Holdings Inc.
Employee Stock Purchase Plan
ARTICLE I
Introduction
1.1
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Purpose of the Plan.
The purpose of the Plan is to provide employees of Participating Companies with the opportunity to acquire Shares or an interest in Shares of the Company. Employees who participate in the
Plan are given a right, called a Purchase Right, to buy Shares at the end of the specified Contribution Period.
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1.2
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Employee Stock Purchase Plan.
The Plan is intended to constitute an employee stock purchase plan within the meaning of Section 423 of the Code. The provisions of the Plan will be construed so as
to extend and limit participation in a manner consistent with that section of the Code.
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1.3
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Other similar plans.
The Company may establish similar plans for operation in other countries (
Sub-Plans
), as set out in Article 18 (Overseas
Participants). The
Sub-Plans
may be set forth in a schedule to this Plan or set out in separate documents. The Plan is, however, a separate and independent plan from the
Sub-Plans.
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1.4
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Shares for the Plan and
Sub-Plans.
The number of Shares authorized to be issued under the Plan in Article 8 (Shares available for the Plan) applies in total to both the
Plan and any
Sub-Plans.
The Committee will determine, at its discretion, the method for allocating the Shares under the Plan and the
Sub-Plans
without shareholder
approval.
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ARTICLE II
Meaning of Words Used
Acquisition Date
means the end of the Contribution Period (as
specified by the Committee in the invitation), at which time the Purchase Right granted under the Plan may be exercised and Shares acquired on behalf of the Participant.
Affiliate
means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control
with such first Person. For these purposes, control (including the terms controlled by and under common control with) means the possession, directly or indirectly, of the power to direct or cause the direction of
the management policies of a Person by reason of ownership of voting securities, by contract or otherwise.
Board
means the Board of
Directors of the Company or, where appropriate, a duly authorized committee of it.
Business Day
means any day on which the New York
Stock Exchange is open for the transaction of business.
Code
means the Internal Revenue Code of 1986, as amended. References to any
provision of the Code or regulation (including proposed regulation) include any successor provisions or regulations.
Committee
means
the Compensation Committee of the Board or such other committee selected by the Board to administer the Plan, including the Herc Rentals Benefits Committee.
Company
means Herc Holdings Inc., a Delaware corporation, and any successor thereto.
Compensation
means all cash remuneration paid or made available by a Participating Company to an Eligible Employee for his services, as
salary or wages or sales representative commissions and including the amount of his
pre-tax
contributions under The Herc Rentals Income Savings Plan and the Herc Rentals Custom Benefit Program (or such
programs and plans in substitution thereof), but excluding all other amounts includible in the Eligible Employees income for federal income tax purposes.
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Contribution
means the amount of
after-tax
payroll
deduction an employee has agreed to make, as set out in his application for a Purchase Right.
Contribution Period
means a period of
time specified in the invitation within an Offering, beginning on the Grant Date and ending on the Acquisition Date, or such earlier date as may be established under Article 11 (Termination of employment).
Dealing Restrictions
means restrictions imposed by statute, order, regulation or government directive, or by any code adopted by the
Company, or any US or other regulatory requirement restricting dealings in Shares.
Eligible Employee
means an employee who meets the
requirements specified in the invitation to participate in the Offering and also in Article 3 (Eligibility).
Grant Date
means a
date selected by the Committee for an Offering to commence.
Offering
means the grant of Purchase Rights to acquire Shares under the
Plan to Eligible Employees.
Parent
means a Person which is a parent corporation of the Company within the meaning of
Section 424(e) of the Code.
Participant
means a person holding a Purchase Right, including Representatives.
Participating Companies
means:
(a) any Subsidiary organized under the laws of any state of the United States of America, unless the Committee has determined a Subsidiary is
not designated to participate in the Plan; and
(b) any other Subsidiary designated by the Committee to participate in the Plan (as long as
it is not participating in any
Sub-Plan).
Person
means any natural person, firm, partnership,
limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.
Plan
means this plan known as the Herc Holdings Inc. Employee Stock Purchase Plan.
Purchase Price
means the amount payable for each
Share on the exercise of a Purchase Right calculated as described in Article 6 (Purchase Price).
Purchase Right
means a right to
acquire Shares granted under the Plan.
Representative
means the person entitled to receive the assets of a Participant under a
Participants will or the laws of intestate succession, in the case of a deceased Participant, or to act as a guardian or conservator for a Participant, in the case of a Participant who is found to be incompetent.
Securities Act
means the Securities Act of 1933, as amended.
Share
means a share of the common stock of the Company.
Sub-Plan
means any employee share purchase plan established in accordance with Article 18
(Overseas Participants).
Subsidiary
means a Person which is a subsidiary corporation of the Company within the meaning of
Section 424(f) of the Code.
Any references in the Plan to the masculine gender shall include references to the feminine gender and vice versa.
2.2 Headings.
Headings will be ignored in construing this Plan.
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ARTICLE III
Eligibility
3.1 Eligible
Employees.
A person will be eligible to participate if he:
(a) is employed for the purposes of Section 423(b)(4) of the Code by a
Participating Company, including officers and directors, on the Grant Date; and
(b) (i) has such qualifying period (if any) of continuous
service (not exceeding two years prior to the Grant Date), (ii) has such qualifying (if any) minimum number of customarily scheduled hours of work (not exceeding twenty), and/or (iii) such qualifying (if any) minimum number of months
customarily worked per calendar year (not exceeding five), in each case as the Committee may from time to time determine.
3.2
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Restrictions on eligibility
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A person will not be eligible for the grant of any Purchase
Rights if, immediately after the grant of a Purchase Right, the person owns stock possessing 5 percent or more of the total combined voting power or value of all classes of shares of the Company or any Subsidiary. For the purpose of this
Section 3.2, (i) the rules of Section 424(d) of the Code apply in determining the share ownership of any employee and the Shares which he may acquire under all outstanding Purchase Rights, and (ii) Purchase Rights will be treated as
stock owned by the person.
ARTICLE IV
Invitations
4.1 Operation.
The Committee has discretion to decide whether the Plan will be operated. When the Committee operates the Plan it must invite all Eligible Employees to apply to participate. The invitation will continue to have effect in respect of subsequent
Offerings under the Plan such that a Participant who has withdrawn from an Offering under Section 10.4 (Withdrawal from an Offering) may
re-apply
to join the Plan under Section 5.1 (Form of
application) provided he continues to be an Eligible Employee.
4.2
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Time when invitations may be made.
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(a) Invitations may be made at any such time as the
Committee determines, subject to any Dealing Restrictions.
(b) If the Committee cannot make the invitation due to Dealing Restrictions,
the Committee may make the invitations at any time after the lifting of such restrictions.
4.3 Form of invitation.
The invitation will specify:
(a) the Grant Date;
(b) the
requirements a person must satisfy in order to be eligible to participate;
(c) the Purchase Price or how it is to be calculated;
(d) the length of the Offering, which must not exceed 27 months beginning with the Grant Date;
(e) how applications must be submitted and the closing date for applying to join the Offering;
(f) the maximum number, if any, of Shares over which Purchase Rights may be granted:
(i) individually;
(ii) for the
Offering;
(iii) taken in conjunction with Offerings under the Sub-Plans; or
(iv) for a specific Contribution Period;
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(g) the maximum and minimum permitted Contribution which can be specified in a currency or as a
percentage of the Participants Compensation;
(h) when and how frequently the payroll deductions will be made;
(i) the Acquisition Date at the end of the Offering when the Shares will be acquired; and
(j) any other terms, consistent with the terms of this Plan.
The invitation and Offering must comply with the requirements of Section 423(b)(5) of the Code.
4.4 Limit on participation.
(a) No
person may be granted a Purchase Right which permits his rights to purchase Shares under all plans of the Company, any Subsidiary or Parent of the Company that are qualified under Section 423 of the Code to exceed US$25,000 of the Fair Market
Value of such Shares, determined at the time the Purchase Right is granted, for each calendar year in which such Purchase Right is outstanding at any time.
(b) To the extent necessary to comply with this requirement, the Committee may:
(c) cause a Participants Contributions to be decreased in respect of any Offering; or
(d) take other actions it considers necessary to ensure compliance with Section 423 of the Code.
ARTICLE V
Applying to join the Plan
5.1
Form of application.
An application for a Purchase Right will be made in writing, or electronically, in a form specified by the Committee and will require the Eligible Employee to state:
(a) the Contribution he wishes to make;
(b) that his proposed Contribution, when added to any contributions he makes under any other stock purchase plans of the Company, its
Subsidiaries or its Parent, will not exceed the maximum permitted under Section 423 of the Code.
An application in the form determined by the
Committee which is improperly completed or late may be rejected.
5.2 Subsequent Offerings.
Unless the Participant withdraws from an Offering under
Section 10.4 (Withdrawal from an Offering), the Participants application is deemed to apply in respect of any subsequent Offerings if they are made available by the Company.
5.3 Incorporation of terms.
The terms of each Offering will include, through incorporation by reference, the provisions of this Plan.
ARTICLE VI
Purchase Price
6.1 Setting the
price.
The Committee will determine the Purchase Price (or the method by which it shall be determined) at the beginning of the Offering. The Purchase Price must not be less than 85 percent of the Fair Market Value of a Share at the
Acquisition Date.
6.2 Fair Market Value
.
Fair Market Value
on any particular day means the closing selling
price for a Share on the New York Stock Exchange on such day, as reported in
The Wall Street Journal
or such other recognized source as the Committee determines. If no selling price is reported for a particular date, Fair Market
Value will be the closing selling price for a Share on the closest preceding Business Day for which such selling price is provided unless otherwise determined by the Committee. If the Shares are listed on any
B-7
established stock exchange of a national market system (but they are not listed on the New York Stock Exchange), their Fair Market Value shall be the closing selling price for the
Shares, as quoted on such exchange (or the exchange with the greatest volume of trading in Shares) or system on the date of such determination, as reported in
The Wall Street Journal
or such other recognized source as the Committee
determines. If Shares are no longer listed on an established market, Fair Market Value of a Share will be determined in good faith by the Committee.
ARTICLE VII
Grant of Purchase Right
7.1
Grant
. Unless there has been scaling down as described in Article 9 (Scaling Down), or the Committee decides not to proceed with an Offering, for example, because there are not enough Shares, the Committee must, on the Grant Date, grant to
each Eligible Employee who has submitted and not withdrawn a valid application a Purchase Right to acquire, at the Purchase Price, the number of Shares that can be purchased based on the amount of Contributions he will make during the Offering. The
Committee will not grant a Purchase Right to anyone who is not an Eligible Employee on the Grant Date. If the Committee tries to do so, the grant will be void.
7.2 Correction.
Any grant of a Purchase Right in excess of the limit in Article 8 (Shares available for the Plan) or Section 4.4 (Limit on
participation) may be adjusted in any way so as to not exceed those limits.
7.3 Transferability.
Purchase Rights are not transferable by the
Participant otherwise than by will or the laws of descent and distribution, and shall only be exercisable during the Participants lifetime by the Participant.
ARTICLE VIII
Shares available for the Plan
8.1 Limit required by IRS rules.
Shares that may be issued or sold pursuant to Purchase Rights granted under the Plan and any
Sub-Plan
shall not exceed in the aggregate 933,333 Shares of the Company. This number is subject to the provisions of Section 14.3 (Change in the securities of the Company) relating to adjustments upon changes
in capitalization.
8.2 Exclusions.
Where a Purchase Right is terminated or lapses without being exercised, these Shares are ignored when
calculating the limits in this Article 8.
8.3 Types of Shares.
The Shares subject to the Plan may be Shares that have been authorized but
unissued, Shares that have been bought, or treasury shares.
ARTICLE IX
Scaling down
9.1 Method.
If
valid applications are received for a total number of Shares in excess of any maximum number specified in the invitation under Section 4.3 (Form of invitation), Section 4.4 (Limit on participation) or any limit under Article 8 (Shares
available for the Plan) the Committee will scale down applications by choosing one or more of the following methods:
(a) reducing the
proposed Contributions by the same proportion to an amount not less than the minimum specified in the invitation; or
(b) reducing the
proposed Contributions to a maximum amount chosen by the Committee, which must not be less than the minimum specified in the invitation; or
(c) using other methods, but these must treat Eligible Employees fairly.
9.2 Insufficient Shares.
If, having scaled down as described in Section 9.1 (Method), the number of Shares available is insufficient to enable
Purchase Rights to be granted to all Eligible Employees making valid applications, the Committee may decide not to grant any Purchase Rights.
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ARTICLE X
Payroll deductions
10.1 Start
and end.
Contributions will be deducted from payroll on each pay date during an Offering (unless terminated early in accordance with the terms of this Plan) or such other dates as the Committee may decide. All Contributions are made on an
after-tax
basis.
10.2 Suspending Contributions.
A Participant may request to suspend making Contributions at any
time prior to the Acquisition Date by notifying the Company in the form and manner designated by the Company. On the Acquisition Date the Participants Purchase Right will be exercised and Shares purchased to the extent of the Contributions
made until the suspension date, unless a Participant withdraws from the Offering in accordance with Section 10.4 (Withdrawal from an Offering). Any suspension under this Section 10.2 will take effect no later than the first pay date
following ten (10) business days from the Companys receipt of the change form and shall be effective for the entire duration of the Offering in which it is made (but not for any succeeding Offering), unless the Committee determines
otherwise. A Participant shall not be permitted to make up any missed Contributions as a result of suspension under this Section 10.2 or otherwise.
10.3 Changing Contributions.
During an Offering, a Participant may request to increase or decrease the rate of his Contributions for the remaining part
of the Offering and any succeeding Offerings, by completing or filing with the Company a change form authorizing a change in the Contribution. The new rate of Contribution will take effect no later than the first pay date following ten
(10) business days from the Companys receipt of the change form. A Participant is permitted to change his Contributions once per Offering.
10.4 Withdrawal from an Offering.
A Participant may request to withdraw from an Offering at any time prior to the Acquisition Date by notifying the
Company in the form and manner designated by the Company. The request will take effect no later than ten (10) business days following the Companys receipt of the request. For the avoidance of doubt, the Company is not obliged to process a
request to withdraw from an Offering if the request is submitted later than ten (10) days prior to an Acquisition Date. If not processed prior to the relevant Acquisition Date, the request will take effect in respect of the next Offering.
All of the Participants Contributions credited to his account will be paid to him no later than 30 days after receipt of his notice
of withdrawal and his Purchase Right for the current Offering will be automatically terminated. No further Contributions for the purchase of Shares will be permitted or made during the Offering.
A Participants withdrawal from an Offering will not have any effect upon his eligibility to participate in the next Offering.
10.5 Continued participation.
If so specified on the application, the Participant will continue to participate in successive Offerings unless
terminated as provided in this Article 10.
10.6 The account
. The Contributions will be credited to a bookkeeping account for the Participant
and may be deposited with the general funds of the Company or the Participating Company or, if the Committee so decides, with a banking institution or custodian as designated by the Committee. Except as otherwise provided by the Committee, interest
shall not be credited to accounts established under the Plan.
10.7 Compliance with Section 423.
A Participants Contributions will, at
any time, be decreased to the extent necessary to comply with Section 423(b)(8) of the Code and Section 4.4 (Limit on participation). Contributions shall recommence at the rate provided in the Participants application at the
beginning of the first Contribution Period which is scheduled to end in the following calendar year, unless otherwise withdrawn by the Participant under Section 10.4 (Withdrawal from an Offering) or changed under Section 10.3 (Changing
Contributions).
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10.8 Approved leave of absence.
During an approved leave of absence, a Participant may continue to
participate in the Plan but may elect to suspend Contributions in accordance with Section 10.2 during such leave period.
For the
purposes of this Section 10.8,
approved leave of absence
means an employees leave of absence (for example, military leave, maternity leave or sick leave) with the prior approval of an authorized person of his employer,
during which period the employees employment relationship is treated as continuing for the purposes of the Plan.
However, if the
period of leave exceeds 90 days and the individuals right to
re-employment
is not guaranteed either by statute or by contract, the employment relationship is deemed to terminate for the purposes of
the Plan on the first day immediately following such
90-day
period.
ARTICLE XI
Termination of employment
11.1
General rule on termination and death
. A Purchase Right lapses immediately if a Participant dies or ceases to be employed by a Participating Company (for example, if he resigns). The Contributions credited to his account will be returned to him
or his Representative, as appropriate, without interest, no later than 30 days following the termination of employment and his Purchase Right will be automatically terminated.
11.2 Beneficiary designation.
Notwithstanding Section 11.1, the Company may allow Participants to designate a beneficiary to receive the
Contributions credited to the Participant and any Shares issued pursuant to the Plan which are held by a custodian on behalf of the Participant in the event of the Participants death, in accordance with such rules as it shall establish from
time to time.
ARTICLE XII
Exercise of Purchase Right
12.1
Exercise.
Unless a Participant withdraws from the Plan as provided in Section 10.4 (Withdrawal from an Offering), his Purchase Right will be exercised automatically on each Acquisition Date, and the maximum number of whole Shares subject to
the Purchase Right will be purchased at the applicable Purchase Price with the accumulated Contributions in his account. The Purchase Right cannot be exercised in part. Any surplus in the account which is insufficient to purchase a whole Share will
be either paid directly to the Participant in cash or carried forward, in either case pursuant to rules established from time to time. However, there are some conditions and exceptions to this general rule on exercise; these are set out in
Sections 12.2 (Contributions) and 12.3 (Registration compliance).
12.2 Contributions.
A Participant may exercise his Purchase Right only
using funds equal to or less than the Contributions for the applicable Offering. A Participant can only use Contributions made before the Acquisition Date applicable to the Purchase Right.
12.3 Registration compliance.
No Purchase Right may be exercised unless the Shares to be issued or transferred upon exercise are covered by an
effective registration statement pursuant to the Securities Act or are eligible for an exemption from the registration requirements, and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other
laws applicable to the Plan.
If, on an Acquisition Date during any Offering, the Shares are not registered or exempt or the Plan is not in
such compliance, no Purchase Rights granted under the Plan or any Offering shall be exercised on the Acquisition Date. The Acquisition Date will be delayed until the Shares are subject to such an effective registration statement or exempt, and the
Plan is in such compliance. The Acquisition Date will in no event be more than 27 months from the Grant Date.
If, on the Acquisition
Date under any Offering, as delayed to the maximum extent permissible, the Shares are not registered or exempt and the Plan is not in such compliance, no Purchase Rights will be exercised, and all Contributions accumulated during the Offering
(reduced to the extent, if any, such deductions have been used to acquire Shares) will be distributed to the Participants with any interest (if applicable).
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12.4 Lapse
. A Purchase Right will lapse and automatically terminate on the earliest of the dates specified
below:
(a) the date on which the person ceases to be an employee of a Participating Company;
(b) as soon as administratively practicable after the date on which the Participant gives notice under Section 10.4 (Withdrawal from an
Offering) that he intends to withdraw from the Plan; and
(c) as provided in Section 14.1 (Change in Control).
ARTICLE XIII
Acquisition of Shares
13.1
Issue or transfer.
The Shares may be issued to a Participant or transferred to a custodian on behalf of the Participant. Subject to Section 12.3 (Registration compliance):
(a) Shares to be issued to a Participant following the exercise of a Purchase Right must be issued within 30 days of the Acquisition Date;
and
(b) if Shares are to be transferred to a custodian following the exercise of a Purchase Right, the Committee must effect this transfer
within 30 days of the Acquisition Date.
13.2 Rights.
Shares issued to a Participant on exercise of a Purchase Right rank equally in all
respects with the Shares in issue on the date of issue. They are not entitled to any rights attaching to Shares by reference to a record date preceding the date of issue.
Where Shares are to be transferred to a custodian on the exercise of a Purchase Right, Participants are entitled to all rights attaching to the
Shares by reference to a record date after the transfer date. They are not entitled to any rights before that date.
13.3 Certificate of incorporation
and bylaws.
Any Shares acquired on the exercise of Purchase Rights are subject to the certificate of incorporation and bylaws of the Company in effect from time to time.
13.4 Listing .
If and so long as the Shares are listed on the New York Stock Exchange or on any other stock exchange where Shares are traded, the
Company must apply for listing of any Shares issued pursuant to the Plan prior to or as soon as practicable after their issuance.
ARTICLE XIV
Corporate events
14.1 Change in
Control.
Upon the occurrence of a Change in Control (as defined below), the Participants accumulated Contributions and any interest (if applicable) will be returned to the Participant as soon as practicable, the Purchase Rights will be
cancelled and the Offering will terminate. If a Change in Control is pending, the Committee may delay the commencement of an Offering.
14.2
Liquidation or dissolution of the Company.
If the Company passes a resolution for its liquidation or dissolution, any Offering shall terminate and Purchase Rights will be cancelled as at that date. Any Contributions and interest (if applicable),
will be returned to the Participant as soon as practicable.
14.3 Change in the securities of the Company.
If any change is made in the Shares of
the Company (including by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, change in corporate structure or other transaction), the Committee shall make an equitable and
proportionate anti-dilution adjustment to offset any resultant change in the
pre-share
price of the Shares. Such mandatory adjustment may include a change in the type(s), class(es) and the maximum number of
Shares subject to the Plan pursuant to Article 8 (Shares available for the Plan), and shall adjust the type(s), class(es) number of Shares and purchase limits of each outstanding Purchase Right and the Purchase Price in any manner equitable to
the Participants; this may include retrospective adjustments. If making such an adjustment, the Committee may consider any consideration received by the Company in the transaction. Adjustments may only be made if consistent with the applicable rules
under Sections 423 and 424 of the Code. The Company may notify the Participant of any adjustment made under this Section 14.3.
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14.4 Terms used.
For the purpose of this Article and Section 15.10:
Acquiring Company
means a person who obtains control of the Company.
Change in Control
means the first to occur of the following events after the adoption of the Plan:
(a) the acquisition by any Person, entity or group (as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of 50% or more of the combined voting power of the Companys then outstanding voting securities, other than any such acquisition by the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its
Subsidiaries, or any Affiliates of any of the foregoing;
(b) the merger, consolidation or other similar transaction involving the Company,
as a result of which persons who were stockholders of the Company immediately prior to such merger, consolidation, or other similar transaction do not, immediately thereafter, own, directly or indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors of the merged or consolidated company;
(c) within any
24-month
period, the persons who were directors of the Company at the beginning of such period (the
Incumbent Directors
) shall cease to constitute at least a majority of the Board, provided that
any director elected or nominated for election to the Board by a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this clause 14.4(c); or
(d) the sale, transfer or other disposition of all or substantially all of the assets of the Company to one or more persons or entities that
are not, immediately prior to such sale, transfer or other disposition, Affiliates of the Company.
ARTICLE XV
General
15.1 Notices.
(a) Any notice or other document which has to be given to an Eligible Employee or Participant under or in connection with the Plan may be:
(i) delivered or mailed to him at his address according to the records of his employing company, or
(ii) sent by e-mail or fax to any e-mail address or fax number which, according to the records of his employing company, is used by him, or
(iii) in either case such other address which the Company considers appropriate.
(b) Any notice or other document which has to be given to the Company or other appointed agent under or in connection with the Plan may be
delivered or mailed to it at such place as the Committee or its duly appointed agent may from time to time decide and notify to Participants or sent by e-mail or fax to any e-mail address or fax number notified by the Committee or its duly appointed
agent to the sender.
(c) Notices mailed will be deemed to have been given on the earlier of the date of actual receipt and the seventh day
after the mailing date.
(d) Notices sent by
e-mail
or fax, in the absence of evidence of
non-delivery,
will be deemed to have been received on the day after sending.
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15.2 Documents sent to shareholders.
The Company may send to Participants copies of any documents or
notices normally sent to the holders of its Shares.
15.3 Costs.
The Company or a Participating Company (as appropriate) will pay the costs of
establishing and administering the Plan. The Company may require each other Participating Company to reimburse the Company for any costs incurred in connection with the grant of Purchase Rights to, or exercise of Purchase Rights by, employees of
that Participating Company.
15.4 Terms of employment.
(a) For the purposes of this Section 15.4,
Employe
e means any employee of the Company or any Subsidiary or associated
company of the Company.
(b) This Section 15.4 applies during an Employees employment and after the termination of an
Employees employment, whether or not the termination is lawful.
(c) Nothing in this Plan or the operation of the Plan forms part of
any contract of employment of an Employee. The rights and obligations arising from the employment relationship between the Employee and the Participating Company are separate from, and are not affected by, the Plan. Participation in the Plan does
not create any right to, or expectation of, continued employment.
(d) Subject to Section 4.1, no Employee has a right to participate
in the Plan. Participation in the Plan or the grant of Purchase Rights on a particular basis in any year does not create any right to or expectation of participation in the Plan or the grant of Purchase Rights on the same basis, or at all, in any
future year.
(e) The terms of the Plan do not entitle the Employee to the exercise of any discretion by the Company, a Participating
Company or the Committee in his favor.
(f) No Employee will have a claim or right of action in respect of any decision, omission or
exercise of discretion, not relating to an existing Purchase Right, which may operate to the disadvantage of the Employee.
(g) No Employee
has any right to compensation for any loss in relation to the Plan, including any loss in relation to:
(i) any loss or reduction of rights
or expectations under the Plan in any circumstances (including lawful or unlawful termination of employment);
(ii) any exercise of
discretion or a decision made in relation to a Purchase Right or to the Plan, or any failure to exercise discretion or make a decision; or
(iii) the operation, suspension, termination or amendment of the Plan.
(h) Participation in the Plan is permitted only on the basis that the Participant accepts all the provisions of this Plan, including this
Section 15.4. By participating in the Plan, an Employee waives all rights under the Plan, other than the rights expressly granted herein or in any invitation to participate in accordance with the express terms of this Plan in consideration for,
and as a condition of, the grant of a Purchase Right under the Plan.
(i) Nothing in this Plan confers any benefit, right or expectation on
a person who is not an Employee. No such third party has any rights to enforce any term of this Plan. This does not affect any other right or remedy of a third party which may exist.
(j) Benefits under this Plan shall not be taken into account for the purpose of determining any benefits under any benefit plan unless such
plan (or arrangement) specifically provides otherwise.
15.5 Corporate actions.
The existence of any Purchase Right shall not affect in any way the
right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Companys capital structure or preferred or prior preference stock ahead of or convertible
into, or otherwise affecting, the Shares or the rights of them, or the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
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15.6 Employee trust.
The Company and any Subsidiary may provide money to the trustee of any trust or any
other person to enable the trust or him to acquire Shares for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by law.
15.7 Withholding.
Unless the Participant discharges the liability himself, the Company or a Participating Company, the trustee of any trust or other
third party administrator may withhold any amount and make any arrangements as it considers necessary to meet any tax withholding obligation of the Company in respect of Purchase Rights. These arrangements include the sale of any Shares on behalf of
a Participant.
15.8 Data privacy.
By participating in the Plan the Participant consents to the holding and processing of personal data provided by
the Participant to the Company, any Subsidiary or associated company trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to:
(a) administering and maintaining Participant records;
(b) providing information to an associated company, trustees of any trust, registrars, brokers or other third party administrators of the Plan;
(c) providing information to future purchasers of the Company or the business in which the Participant works; and
(d) transferring information about the Participant to a country or territory outside the United States of America that may not provide the same
statutory protection for the information as the Participants home country.
15.9 Legal compliance.
If in the opinion of counsel for the
Company, it is necessary or desirable in order to comply with applicable laws or regulations relating to securities or exchange control, the Company may:
(a) require the Participant to provide confirmation of compliance with such local laws and regulations, without which the Purchase Right may
lapse; and/or
(b) upon the exercise of the Purchase Right, substitute cash equal to the value of any spread (less any tax and social
security contributions) for any Shares.
15.10 Crediting Service.
In the event of the adoption of the Plan by an Acquiring Company, the merger or
consolidation of another company with a Participating Company, or the acquisition by the Company of another company, the Committee shall determine the extent, if any, to which employees affected by the event shall be credited under the Plan with
service rendered to his employer prior to the event.
ARTICLE XVI
Administration
16.1
Committees powers.
The Committee will administer the Plan. Subject to the provisions of the Plan, the Committee has the power:
(a) to determine when and how Purchase Rights to acquire Shares will be granted and the provisions of each Offering of such Purchase Rights;
(b) to convert, when necessary, any value denominated in US dollars and cents to an equivalent currency based on a currency exchange rate
that it selects for such purpose;
(c) to designate from time to time which Subsidiaries shall become Participating Companies;
(d) to construe and interpret the Plan and Purchase Rights granted under the Plan, and to establish, amend and revoke rules and regulations for
the administration of the Plan. The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan; and
B-14
(e) generally, to exercise such powers and to perform such acts as it deems necessary or
expedient to promote the best interests of the Company and other Participating Companies and to carry out the intent that the Plan be treated as an employee stock purchase plan within the meaning of Section 423 of the Code.
16.2 Committees decision final and binding.
All determinations of the Committee are final and binding on Employees, Participants and any other
party claiming a right or a benefit under the Plan or in connection with any Offering.
16.3 Indemnification of Committee.
To the extent permitted
by law, the Company shall indemnify the members of the Committee from all claims for liability, loss or damage (including payment of expenses in connection with the defense again such claim) arising from any act or failure to act under the Plan,
provided any such member shall give the Company an opportunity, at its own expense, to handle and defend such claims. This shall not include actions which could be held to include criminal liability under applicable law. The provisions of this
Section 16.3 shall survive the termination of the Plan under Article 17.
ARTICLE XVII
Changing the Plan and Termination
17.1 Changing the Plan.
The Committee may at any time change the Plan in any way. The Company shall obtain stockholder approval of such amendments in
such a manner and to such a degree as required and to the extent necessary to comply with Section 423 of the Code (or any other applicable law).
17.2 Notice.
The Committee may give written notice of any changes made to any Participant affected.
17.3 Termination of the Plan.
The Committee may terminate the Plan at any time and for any reason. However, Purchase Rights granted before such
termination will continue to be valid and exercisable as described in the terms of this Plan.
ARTICLE XVIII
Overseas Participants
18.1
Establishing plans.
The Committee may establish plans to operate overseas either by scheduling
sub-plans
to the Plan, or adopting separate plans in accordance with the authority given by shareholders
(together
Sub-Plans
). This includes:
(a) designating from time to time which
Subsidiaries will participate in a particular
Sub-Plan;
(b) determining procedures for Eligible
Employees to enroll in or withdraw from a
Sub-Plan,
setting or changing payroll deduction percentages, and obtaining necessary tax withholdings; and
(c) allocating the available Shares under the Plan to the
Sub-Plans
for particular offerings.
18.2 Overseas laws.
If, in the opinion of the Committee, local laws or regulations cause participation in the Plan to become unduly onerous for the
Company, a Participating Company or a Participant, the relevant Purchase Right will not be exercised and all Contributions accumulated during the Offering (reduced to the extent, if any, such deductions have been used to acquire Shares) will be
distributed to the Participant with any interest (if applicable). No right to compensation for loss of benefit will arise as a result of such an event.
ARTICLE XIX
Governing Law
The laws of the
state of Delaware (without regard to its conflicts of laws rules) govern the Plan and all Purchase Rights and their construction. The courts of the state of Delaware have
non-exclusive
jurisdiction in respect
of disputes arising under or in connection with the Plan or any Purchase Right.
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HERC HOLDINGS INC.
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27500 RIVERVIEW CENTER BLVD.
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BONITA SPRINGS, FLORIDA 34134
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