sc14d9
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF
1934
DOLLAR THRIFTY AUTOMOTIVE
GROUP, INC.
(Name of Subject
Company)
DOLLAR THRIFTY AUTOMOTIVE
GROUP, INC.
(Name of Person Filing
Statement)
Common Stock, par value $0.01 per share
(Title of Class of
Securities)
256743105
(CUSIP Number of Class of
Securities)
Vicki J. Vaniman, Esq.
Executive Vice President, General Counsel and Secretary
Dollar Thrifty Automotive Group, Inc.
5330 East 31st Street
Tulsa, Oklahoma 74135
(918) 660-7700
(Name, address and telephone number of person authorized to
receive
notices and communications on behalf of the persons filing
statement)
With copies to:
Paul J. Shim, Esq.
Matthew P. Salerno, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000
o Check
the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1.
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SUBJECT
COMPANY INFORMATION
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Name and
Address
The name of the subject company is Dollar Thrifty Automotive
Group, Inc., a Delaware corporation, which we refer to as DTG or
the company. DTGs principal executive offices are located
at 5330 East 31st Street, Tulsa, Oklahoma 74135. DTGs
phone number at this address is
(918) 660-7700.
DTGs website is located at www.dtag.com. The information
on DTGs website should not be considered part of this
Schedule 14D-9.
Securities
This Solicitation/Recommendation Statement on
Schedule 14D-9,
which, together with any exhibits and annexes attached hereto,
we refer to as the
Schedule 14D-9,
relates to the common stock, par value $0.01 per share (together
with the associated preferred stock purchase rights), of DTG,
which we refer to as the DTG common stock. As of the close of
business on June 1, 2011, there were 28,949,753 shares
of DTG common stock issued and outstanding,
2,177,372 shares of DTG common stock issuable pursuant to
the exercise of outstanding stock options, 139,500 shares
of DTG common stock issuable upon conversion of performance
share and unit awards and 280,839 shares of DTG common
stock issuable upon conversion of vested and unvested restricted
stock units.
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ITEM 2.
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IDENTITY
AND BACKGROUND OF FILING PERSON
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Name and
Address
DTG is the person filing this
Schedule 14D-9.
The information about DTGs business address and business
telephone number is set forth in Item 1 above.
Tender
Offer and Share Exchange
This
Schedule 14D-9
relates to the exchange offer by HDTMS, Inc., a Delaware
corporation and a wholly owned subsidiary of Hertz Global
Holdings, Inc., a Delaware corporation, which entities we refer
to, respectively, as the offeror and Hertz, as disclosed in the
Tender Offer Statement on Schedule TO dated May 24,
2011 (together with the exhibits thereto and as amended or
supplemented from time to time, the
Schedule TO) filed by the offeror with
the Securities and Exchange Commission, which we refer to as the
SEC, to exchange each of the issued and outstanding shares of
DTG common stock for (i) $57.60 in cash, without interest
and less any required withholding taxes, and
(ii) 0.8546 shares of common stock, par value $0.01
per share, of Hertz (Hertz common stock),
which we refer to as the offer price.
The detailed terms and conditions of the offer are set forth in
the preliminary Prospectus/Offer to Exchange, dated May 24,
2011 (the Prospectus/Offer to Exchange),
filed as Exhibit (a)(4)(B) to the Schedule TO, and the
related Letter of Transmittal, filed as Exhibit (a)(1)(A) to the
Schedule TO (which, together with the Prospectus/Offer to
Exchange, as each may be amended or supplemented from time to
time, constitute, and are referred to as, the offer). According
to the Prospectus/Offer to Exchange, the offer will expire at
12:00 Midnight, New York City Time, on July 8, 2011 (the
expiration date), unless the offeror extends
the offer. The offeror has indicated that it currently has no
intention of providing a subsequent offering period but reserves
the right to do so.
The Prospectus/Offer to Exchange states that the purpose of the
offer is for Hertz to acquire control of, and ultimately the
entire equity interest in, DTG. Hertz has stated that it
intends, as soon as practicable after the consummation of the
offer, to seek to consummate a merger of DTG and the offeror (or
one of its or Hertzs subsidiaries) (such merger, the
second-step merger), pursuant to which each
then outstanding share of DTG common stock not owned by Hertz or
any of its subsidiaries or by DTG stockholders who perfect
appraisal rights under Delaware law, to the extent available,
would be converted into the right to receive the same amount of
cash and the same number of shares of Hertz common stock
delivered in respect of each outstanding share of DTG common
stock pursuant to the offer.
The foregoing summary of the offer is qualified in its entirety
by the more detailed description and explanation contained in
the offer.
The Prospectus/Offer to Exchange states that the principal
executive offices of the offeror and Hertz are located at 225
Brae Boulevard, Park Ridge, New Jersey
07656-0713,
and that the telephone number of Hertzs principal
executive offices is
(201) 307-2000.
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ITEM 3.
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PAST
CONTACTS, TRANSACTIONS, NEGOTIATIONS AND
AGREEMENTS
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Except as set forth in this
Schedule 14D-9
or in the excerpts of DTGs 2011 Definitive Proxy
Statement, dated April 26, 2011 (the 2011 Proxy
Statement) filed as Exhibit (e)(1) to this
Schedule 14D-9
and incorporated by reference into this Item 3, as of the
date of this
Schedule 14D-9,
to the knowledge of the company, there are no material
agreements, arrangements or understandings and no actual or
potential conflicts of interest between the company or its
affiliates and (i) its executive officers, directors or
affiliates, or (ii) Hertz, the offeror or their respective
executive officers, directors or affiliates.
Any information contained in the pages from the 2011 Proxy
Statement incorporated by reference herein shall be deemed
modified or superseded for purposes of this
Schedule 14D-9
to the extent that any information contained herein modifies or
supersedes such information.
Arrangements
between DTG and its Current Executive Officers and
Directors
Under DTGs current equity plan, the Second Amended and
Restated Long-Term Incentive Plan and Director Equity Plan, as
amended (the Equity Plan), incorporated by
reference as an Exhibit to this
Schedule 14D-9,
in the event of a Change in Control (as defined
under the Equity Plan and described in greater detail in
Item 8) of DTG, awards that are outstanding at the
time of a Change in Control generally will, as of such Change in
Control, become fully and immediately vested, and any awards
that are options to purchase DTG common stock (the
Option Rights) will, as of such Change in
Control, become exercisable and may be exercised for the
remaining term of the Option Rights. Performance units granted
under the Equity Plan on December 3, 2010 (the
Performance Units) will vest only if the
applicable executive officers employment is terminated by
DTG without Cause (as described more fully in
Item 8) or under circumstances that would constitute a
Qualified Termination (as described more fully in
Item 8) under the Employment Continuation Arrangements
(as described more fully in Item 8) during the
two-year period following the Change in Control and, in the case
of DTGs CEO, in an anticipatory termination preceding the
Change in Control. Restricted stock units or RSUs
granted to directors on January 26, 2011 will vest if the
applicable directors service on the DTG board of directors
terminates in connection with a Change in Control. Consummation
of the offer would constitute a Change in Control for purposes
of DTGs Equity Plan. If an executive officers
employment continues following a Change in Control of DTG, the
performance target for all outstanding Performance Units will be
deemed to have been met as of the date of the Change in Control
and the Performance Units will continue to vest upon
satisfaction of the applicable time-based vesting provisions,
subject to accelerated vesting and settlement upon a termination
of employment without Cause or a Qualified Termination.
Additional information regarding the potential payments and
benefits for DTGs directors and executive officers is set
forth below, and, for DTGs executive officers, who are
also DTGs Named Executive Officers, as defined in
Item 8, is set forth in Item 8.
There are no employment contracts with any executive officer of
DTG. DTG has entered into a change in control agreement (the
Employment Continuation Agreement) with Chief
Executive Officer Scott L. Thompson, and maintains a change in
control plan (the Employment Continuation
Plan) for senior management employees, including
DTGs executive officers other than the Chief Executive
Officer, both of which provide certain payments and benefits in
the event an executive officers employment is terminated
without Cause or under circumstances that would constitute a
Qualified Termination during the two-year period following the
Change in Control and, in the case of DTGs Chief Executive
Officer, in an anticipatory termination preceding the Change in
Control. Consummation of the offer would constitute a Change in
Control for purposes of the Employment Continuation Agreement
and the Employment Continuation Plan. Information regarding the
potential payments and benefits under the Employment
Continuation Agreement and
2
Employment Continuation Plan for DTGs executive officers,
who are also DTGs Named Executive Officers, is provided
under Item 8.
For further information with respect to these arrangements see
Item 8 and the excerpts of the 2011 Proxy Statement under
the headings: Security Ownership of Certain Beneficial
Owners, Directors, Director Nominees and Executive
Officers; Compensation of the Board of
Directors; Executive Compensation; and
Transactions With Related Persons, Promoters and Certain
Control Persons.
Indemnification and
Insurance. Section 145 of the Delaware
General Corporation Law, or the DGCL, permits DTG to indemnify
any of its directors or officers against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement, incurred in defense of any action (other than an
action by or in the right of the company) arising by reason of
the fact that he or she is or was an officer or director of DTG
if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Section 145 also permits DTG to
indemnify any such officer or director against expenses incurred
in an action by or in the right of the company if he or she
acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
company, except in respect of any matter as to which such person
is adjudged to be liable to the company, in which case court
approval must be sought for indemnification. In addition,
Section 145 permits the company to advance expenses to such
directors and officers prior to the final disposition of an
action upon the receipt of an undertaking by such director or
officer to repay such expenses if it shall ultimately be
determined that such person was not entitled to indemnification.
The statute requires indemnification of such officers and
directors against expenses to the extent they may be successful
in defending any such action. The statute provides that it is
not exclusive of other indemnification that may be granted by
DTGs bylaws, a vote of stockholders or disinterested
directors, agreement or otherwise. The statute permits purchase
of liability insurance by the registrant on behalf of officers
and directors, and DTG has purchased such insurance.
Article Eighth of the DTG certificate of incorporation
requires indemnification to the fullest extent permitted under
the DGCL, of any person who was or is a party to (or witness in)
or is threatened to be made a party to (or witness in) any
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of (i) his or
her service (or agreement to serve) as a director or officer of
DTG, or at the request of DTG, as a director, officer, trustee,
employee or agent of or in any other capacity with respect to
another corporation, partnership, joint venture, trust or other
enterprise (in any of the foregoing capacities, a
representative of the company), or (ii) any
action alleged to have been taken or omitted in such capacity.
The provisions require DTG to indemnify such person against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action, suit or proceeding if
he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of DTG, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful. DTG may indemnify to the same extent any
person who was or is a party to (or witness in) or is threatened
to be made a party to (or witness in) any such action, suit or
proceeding by reason of his or her service (or agreement to
serve) as an employee or agent of DTG, or at the request of DTG,
as a representative of the company.
The Article also states that DTG shall (in the case of any
action, suit or proceeding against a director or officer of DTG)
or may (in the case of any action, suit or proceeding against an
employee, agent or representative of the company) advance
expenses (including attorneys fees) incurred in defending
any civil, criminal, administrative or investigative action,
suit or proceeding. Such expenses shall or may be paid by DTG in
advance of the final disposition of such action, suit or
proceeding as authorized by the DTG board of directors upon
receipt of an undertaking by or on behalf of the indemnified
person to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by DTG.
Effect of
the Offer on Shares of DTG Common Stock held by Directors and
Executive Officers
Consideration Payable Pursuant to the
Offer. If the companys directors and
executive officers were to tender any shares of DTG common stock
that they beneficially own pursuant to the offer, they would
receive
3
the offer price in respect of each share of DTG common stock
tendered $57.60 in cash, without interest and less
any required withholding taxes, and 0.8546 shares of Hertz
common stock on the same terms and subject to the
same conditions as the companys other stockholders. As of
June 1, 2011, the companys directors and executive
officers, as a group, beneficially owned an aggregate of
563,018 shares of DTG common stock (excluding for this
purpose shares of DTG common stock underlying Option Rights,
which are set forth in the table below, but including shares of
DTG common stock issuable in connection with vested restricted
stock units). If the companys directors and executive
officers were to tender all such shares of DTG common stock
pursuant to the offer and all such shares of DTG common stock
were accepted for exchange, such directors and executive
officers would receive an aggregate of approximately $32,429,837
in cash and 481,155 shares of Hertz common stock, plus cash
in lieu of any fractional shares of Hertz common stock. The
total number of unvested Performance Units and Restricted Stock
Units as of June 1, 2011 is 152,387.
As of June 1, 2011, the companys directors and
executive officers, as a group, held Option Rights to purchase
an aggregate of 1,394,716 shares of DTG common stock, with
exercise prices ranging from $0.77 to $24.38 and an aggregate
weighted average exercise price of $4.38 per share, 760,959 of
which were vested and exercisable. The following table
summarizes, with respect to each DTG director and executive
officer, the positive difference in value between the offer
price and the per share exercise price (the Spread
Value) of the Option Rights. For purposes of
determining the Spread Value, the Hertz common stock component
of the offer price was converted into a cash value by reference
to the closing price for one share of Hertz common stock on
June 1, 2011.
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DTG Shares
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Total Spread Value
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DTG Shares
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Total Spread Value
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Underlying Vested
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(Vested Option
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Underlying Unvested
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(Unvested Option
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Option Rights
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Rights)
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Option Rights
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Rights)
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Name
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(#)
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($)
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(#)
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($)
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Thomas P. Capo
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0
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0
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0
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0
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Maryann N. Keller
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0
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0
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0
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0
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Hon. Edward C. Lumley
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5,000
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238,750
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0
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0
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Richard W. Neu
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0
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0
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0
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0
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John C. Pope
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5,000
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238,750
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0
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0
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Scott L. Thompson
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306,242
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20,113,594
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228,758
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15,319,831
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H. Clifford Buster III
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126,667
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8,669,290
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123,333
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8,325,210
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R. Scott Anderson
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155,388
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10,383,668
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131,666
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8,901,687
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Vicki J. Vaniman
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84,947
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5,455,882
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75,000
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5,040,300
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Rick L. Morris
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77,715
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5,119,088
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75,000
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5,040,300
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4
The following table summarizes, with respect to each DTG
director and executive officer, the aggregate cash consideration
and number of shares of Hertz common stock that would be
payable, based on the offer price, in respect of the restricted
stock units and Performance Units held by such directors and
executive officers that were unvested as of June 1, 2011.
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Unvested RSUs and
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Aggregate Cash
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Shares of Hertz
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Performance Units
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Consideration
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Common Stock
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Name
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(#)
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($)
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(#)(1)
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Thomas P. Capo
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1,866
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107,482
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1,594
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Maryann N. Keller
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1,866
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107,482
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1,594
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Hon. Edward C. Lumley
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1,866
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107,482
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1,594
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Richard W. Neu
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1,866
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107,482
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1,594
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John C. Pope
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1,866
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107,482
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1,594
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Scott L. Thompson
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95,057
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5,475,283
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81,235
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H. Clifford Buster III
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16,000
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921,600
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13,673
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R. Scott Anderson
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16,000
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921,600
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13,673
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Vicki J. Vaniman
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9,000
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518,400
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7,691
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Rick L. Morris
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7,000
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403,200
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5,982
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(1) |
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Share numbers exclude fractional shares. |
Relationship
with the Offeror and Hertz
Based solely upon disclosures by the offeror and Hertz, and as
of May 24, 2011, The Hertz Corporation, a wholly owned
subsidiary of Hertz, beneficially owned 472,699 shares of
DTG common stock, representing approximately 1.6% of the DTG
common stock outstanding as of June 1, 2011.
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ITEM 4.
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THE
SOLICITATION OR RECOMMENDATION
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Solicitation/Recommendation
After careful consideration, including a thorough review of the
terms and conditions of the offer in consultation with
DTGs financial and legal advisors, the DTG board of
directors, by unanimous vote at a meeting on June 3, 2011,
determined to recommend that DTGs stockholders NOT
tender their shares of DTG common stock pursuant to the offer,
for the reasons described in more detail below.
If you have tendered your shares of DTG common stock, you can
withdraw them. For assistance in withdrawing your shares of DTG
common stock, you can contact your broker or DTGs
information agent, Georgeson Inc., at the address and phone
number below.
Georgeson
Inc.
199 Water Street, 26th Floor
New York, New York 10038
1-866-767-8986 (toll free)
212-806-6859
(international)
Copies of press releases and communications with employees
disseminated by DTG relating to the offer are filed as Exhibits
(a)(1) through (a)(5) hereto and are incorporated herein by
reference.
Background
of the Offer
The DTG board of directors has from time to time engaged with
the senior management of DTG to review and discuss potential
strategic alternatives, and has considered ways to enhance
DTGs performance and prospects in light of competitive and
other relevant developments. These reviews and discussions have
focused on, among other things, the business environment facing
the car rental industry generally and DTG in
5
particular, as well as conditions in the automotive industry and
the debt financing markets. These reviews have also included
periodic discussions with respect to potential transactions,
including potential transactions with Hertz and Avis Budget
Group, Inc., referred to as Avis Budget, that would further its
strategic objectives and enhance stockholder value, and the
potential benefits and risks of those transactions.
In March 2007, Enterprise
Rent-a-Car
announced that it had entered into an agreement to acquire
Vanguard Car Rental, owner of the National and Alamo car rental
brands.
On April 3, 2007, DTGs then President and Chief
Executive Officer, Gary L. Paxton, and Hertzs Chairman and
Chief Executive Officer, Mark P. Frissora, had a telephone
conversation in which each expressed interest in evaluating a
potential business combination between DTG and Hertz. On
April 9, 2007, DTG and Hertz executed a confidentiality
agreement and conducted preliminary reciprocal due diligence. On
April 17, 2007, members of senior management of each of DTG
and Hertz met in person in Chicago to discuss such a
transaction, including, among other things, related antitrust
considerations and timing. Shortly after this meeting, DTG and
Hertz terminated their discussions.
In October 2007, Avis Budget submitted a non-binding indication
of interest for a possible business combination with DTG at a
price of $44.00 per share of DTG common stock, of which 58%
would be in cash and 42% would be in the form of Avis Budget
common stock. DTG, Avis Budget, J.P. Morgan Securities LLC,
formerly known as J.P. Morgan Securities Inc., and referred
to as J.P. Morgan, which was retained pursuant to an
engagement letter dated November 7, 2007, as a financial
advisor to DTG, DTGs legal counsel, Cleary Gottlieb
Steen & Hamilton LLP, referred to as Cleary, and
Avis Budgets financial and legal advisors engaged in
reciprocal due diligence and negotiations in furtherance of the
proposed transaction, as well as discussions with respect to
related antitrust considerations. On December 4, 2007, Avis
Budget advised DTG that it was revising its proposed purchase
price to $35.50 per share of DTG common stock, to consist of
$13.01 in Avis Budget stock, $18.99 in cash and shares of a new
series of Avis Budget participating preferred stock having a
value (based on the Black-Scholes valuation model) of $3.50, and
that its revised indication of interest would be subject to
further due diligence. Trading in DTG common stock closed at
$24.12 on December 4, 2007. DTG indicated to Avis Budget
that DTG would consider Avis Budgets revised indication of
interest, but that transaction certainty was also of paramount
importance, and that Avis Budgets willingness to agree to
strong divestiture commitments and meaningful reverse
termination fees to address antitrust-related concerns would be
critical factors for consideration by the DTG board of
directors. Avis Budget stated that it was willing to make
unspecified limited divestitures, but would not agree to
DTGs request for a reverse termination fee that would be
payable in the event that antitrust approval was not ultimately
obtained. In early January 2008, DTG and Avis Budget mutually
agreed to terminate their discussions.
In March 2008, Mr. Paxton contacted each of
Mr. Frissora and Ronald L. Nelson, chairman and chief
executive officer of Avis Budget, to inquire as to whether their
respective companies would be interested in
re-engaging
in discussions regarding a business combination with DTG. On
March 20, 2008, Avis Budget submitted a non-binding
indication of interest to acquire DTG for consideration
consisting of 85% Avis Budget common stock and 15% cash at a
premium of up to 5% to the market price for DTG common stock.
Trading in DTG common stock closed at $13.74 per share on that
day.
On or about March 24, 2008, following a meeting of
Hertzs board of directors during which the possibility of
a combination with DTG was discussed, Mr. Frissora had a
follow-up
conversation with Mr. Paxton in which he indicated that
Hertz would be interested in exploring such a transaction,
proposing a
20-30%
premium to the then-current price of DTG common stock and
consideration consisting of 80% Hertz common stock and 20% cash.
On March 31, 2008, Avis Budget sent DTG a
follow-up
letter reiterating the benefits of a combination of the two
businesses and emphasizing synergies of $5.00 to $10.00 per
share of DTG common stock.
The DTG board of directors met on March 31, 2008 with
members of DTGs senior management and J.P. Morgan to
discuss the responses of Hertz and Avis Budget. The DTG board of
directors met again on April 7, 2008 with members of
DTGs senior management, J.P. Morgan and Cleary. After
further discussion of
6
the responses of Hertz and Avis Budget, the DTG board of
directors approved DTGs engagement with Hertz and Avis
Budget to discuss a potential sale of DTG.
In early April 2008, Mr. Paxton and J.P. Morgan had
conversations with each of Hertz and Avis Budget, in which
Mr. Paxton indicated that DTG would be receptive to an
all-stock offer representing a
20-30%
premium to the then-current price of DTG common stock. Each of
Hertz and Avis Budget indicated a preference for a mixture of
cash and stock consideration. Also in April and May 2008, DTG
executed confidentiality agreements with four parties, including
Hertz and Avis Budget, following which DTG, Hertz and Avis
Budget began conducting reciprocal due diligence. Discussions
with the other two parties, both of which were car rental
companies based outside of the United States, were terminated by
the counterparties shortly thereafter without either party
engaging in any due diligence. One party cited general
conditions in the capital markets, which created challenges for
financing a transaction, as its reason for terminating
discussions. There has not been any subsequent contact between
DTG and these two parties regarding a potential sale of DTG. The
standstill provisions in each of the confidentiality agreements
expired in 2009. The closing price of DTG common stock on
April 11, 2008, the date on which Hertz and Avis Budget
executed their confidentiality agreements, was $14.60.
During May 2008, DTG, Hertz and Avis Budget, together with their
respective advisors, continued their reciprocal due diligence
investigations. On May 9, 2008, J.P. Morgan circulated
to each of Hertz and Avis Budget a process letter describing,
among other things, the procedures and timing to be followed in
connection with the submission of written proposals regarding a
potential transaction with DTG. While both Hertz and Avis Budget
were made aware that their interest was being solicited in the
context of a formal auction process, DTG did not disclose to
either party the number or the identities of the other parties
involved in the process.
On May 15, 2008, Hertzs board of directors met and
discussed Hertzs preliminary due diligence findings and
the advantages and risks of a transaction with DTG, as well as
the potential terms of such a transaction. One of the principal
concerns raised at this meeting was DTGs vehicle supply
agreement with Chrysler, pursuant to which DTG was then
obligated to purchase 75% of its rental vehicles from Chrysler
during a given year, up to certain targeted volumes.
On May 19, 2008, Avis Budget submitted a non-binding
indication of interest to acquire DTG for consideration
consisting entirely of Avis Budget common stock at a premium of
up to 15% to the market price for DTG common stock at the time
of signing of a merger agreement for a transaction (assuming
that the market price was undisturbed by transaction
rumors). Trading in DTG common stock closed at $15.01 on that
date. Avis Budgets indication of interest was conditioned
upon Avis Budgets satisfaction with: the amount of fleet
financing expected or required to be refinanced and the cost to
be incurred in connection therewith; the amount of synergies
available to be created by the combination; and the terms and
conditions of DTGs risk and program vehicle purchases from
Chrysler in model year 2009 and how such terms and conditions
would apply in the context of the transaction. Avis Budget
proposed retaining certain of DTGs functions and
centralizing certain of the combined companys functions in
Tulsa, Oklahoma, the location of DTGs headquarters, and
appointing two DTG representatives to the Avis Budget board of
directors upon consummation of a transaction. Avis Budget also
stated that it was open to having the consideration consist of a
combination of cash and an amount of Avis Budget common stock
equal to less than 19.9% of the Avis Budget shares then
outstanding, meaning that the transaction would not need to be
conditioned on a vote of Avis Budgets stockholders.
On May 20, 2008, Hertz submitted a non-binding indication
of interest to acquire all of the shares of DTG. Hertz stated in
the indication of interest that it was prepared to offer a price
representing a 20% premium over an unaffected market price for
DTG shares, excluding any perceived effect of an expected
transaction. The closing price of DTG common stock on
May 20, 2008 was $15.03. Hertz indicated that 80% of the
proposed merger consideration would be composed of Hertz stock
and the remaining 20% would consist of cash, and that obtaining
commitments for an expanded fleet financing facility would be a
condition to signing a definitive merger agreement. Hertz also
proposed appointing one DTG representative to the Hertz board of
directors upon consummation of a transaction. Hertz also
requested a four-week exclusivity period as a condition to
proceeding with the transaction.
7
On May 21, 2008, the DTG board of directors met to consider
the indications of interest from Avis Budget and Hertz. After
discussion, the DTG board of directors approved the continuation
of discussions with Avis Budget and Hertz regarding a potential
sale of the company.
On May 24, 2008, DTG representatives responded to
Hertzs indication of interest, expressing some
disappointment with its content but also expressing an
understanding of Hertzs preliminary due diligence
concerns, which included the vehicle supply agreement with
Chrysler and the present and future mix of Chrysler program and
risk vehicles in DTGs fleet. DTG also indicated in its
response that at least one other major domestic car rental
company was participating in its process for exploring potential
transactions. In early June 2008, after receiving DTGs
consent, Mr. Frissora and other members of Hertz senior
management, including Hertzs Chief Financial Officer,
Elyse Douglas, and Hertzs then-President of Vehicle Rental
Leasing for the Americas and Pacific, Joseph R. Nothwang, met
with Chrysler representatives to discuss Chryslers
financial condition and outlook for the future.
Also in early June 2008, DTG provided Hertz and Avis Budget with
a draft Agreement and Plan of Merger, prepared by Cleary. No
other parties were engaged in the process at that time.
On June 12, 2008, Avis Budget advised DTG that it was no
longer interested in pursuing a merger with DTG due to
challenging economic conditions and difficulties in the
financing markets. In lieu of a merger, Avis Budget proposed a
complex transaction under which DTG would license certain of its
business territories to Avis Budget while operating the rest of
its business independently. Given the legal and operational
complexities identified by DTG in connection with the structure
described by Avis Budget, DTG declined to pursue this proposal,
and the parties terminated their discussions.
Discussions between DTG and Hertz senior management continued
during July and early August 2008.
In July 2008, a party, which at the time was engaged in the car
rental business and has since ceased operations, delivered an
unsolicited indication of interest to DTG. The proposal
contemplated the acquisition of DTG common stock at a price of
$8.50 per share in cash, subject to satisfactory completion of
due diligence and receipt of necessary financing. On
July 3, 2008, trading in DTG common stock closed at $3.18
per share. At a meeting on July 24, 2008, the DTG board of
directors discussed this proposal, as well as the status of the
Hertz discussions, with DTGs management, J.P. Morgan
and Cleary. DTGs management and J.P. Morgan expressed
their view that the company making this proposal would have
difficulty obtaining the necessary financing, and otherwise did
not have the financial strength to pursue the proposed
transaction. DTG declined to pursue further discussions with
this company, which is not currently subject to any standstill
restrictions.
On August 14, 2008, Hertzs board of directors met and
again discussed a possible strategic transaction with DTG.
Hertzs board of directors decided not to pursue a
transaction at that time, due to factors including the
uncertainty of the financial markets, concerns with respect to
DTGs liquidity and concerns with respect to DTGs
vehicle supply agreement with Chrysler and Chryslers
deteriorating financial condition. The closing price of DTG
common stock on August 14, 2008 was $3.73.
On November 14, 2008, Mr. Frissora contacted Scott L.
Thompson, who had succeeded Mr. Paxton as DTGs
President and Chief Executive Officer, to suggest the
possibility of reviving discussions regarding a business
combination between DTG and Hertz. On November 18, 2008,
the DTG board of directors instructed DTG management to reengage
in merger discussions with Hertz.
On December 12, 2008, following a further decline in the
trading price of DTG common stock, Hertz submitted a revised
non-binding indication of interest to acquire all of the shares
of DTG at a price of $2.00 a share, composed of $0.50 in cash
and 0.44 shares of Hertz common stock, which represented a
premium of approximately 77% to the closing price of DTG common
stock on that date. Hertz stated in this indication of interest
that it would require the rollover of DTGs existing fleet
financing as a condition to a transaction. Hertz offered to
appoint one DTG representative to Hertzs board of
directors upon consummating a transaction. Hertz also requested
an exclusivity period to conduct diligence and negotiate a
merger agreement. The DTG board of directors met on
December 15, 2008 to consider Hertzs proposal, and
concluded that in the boards judgment, after consultation
with DTGs senior management and J.P. Morgan, the
offer was
8
inadequate. Mr. Thompson communicated the DTG board of
directors rejection of Hertzs offer in a telephone
conversation with Mr. Frissora on December 22, 2008,
citing Hertzs valuation of DTG and the proposed
contingency with respect to DTGs existing fleet financing
as DTGs two principal issues with Hertzs proposal.
The closing price of DTG common stock on that date was $1.09.
On January 19, 2009, Hertz submitted a further revised
non-binding indication of interest to acquire all of the shares
of DTG at a price of $3.50 per share, composed of $0.85 in cash
and 0.50 shares of Hertz common stock, which represented a
premium of approximately 176% to the closing price of DTG common
stock on that date. Hertz also indicated that, given the
strained debt markets and reduced liquidity in the banking
sector at such time, it would require the rollover of half of
DTGs existing fleet financing. Hertz reiterated its
request for an exclusivity period.
On January 29, 2009, the DTG board of directors met with
J.P. Morgan and Cleary to discuss Hertzs revised
proposal. After consideration of, and in view of, the risks and
challenges of remaining independent in the then highly troubled
economic and industry environments, the DTG board of directors
determined to authorize and direct Mr. Thompson to engage
Hertz in discussions with respect to its proposal. The DTG board
of directors also determined that, in its judgment, $7.50 per
share of DTG common stock would be an appropriate price to
propose to Hertz in the context of such discussions.
On February 3, 2009, DTG responded to Hertzs latest
indication of interest in a letter from Mr. Thompson,
noting that the DTG board of directors believed that an
appropriate valuation of DTG would be $7.50 per share.
Mr. Thompson also indicated that the DTG board of directors
had a strong preference for 100% stock consideration, given the
view of the DTG board of directors that both companies
stocks were significantly undervalued. Mr. Thompson
emphasized that certainty of closing a transaction was
especially important to the DTG board of directors and
management. DTG again rejected any contingency in a transaction
related to DTGs existing fleet financing and informed
Hertz that the DTG board of directors expected Hertz to bear the
burden of any conditions imposed by regulatory agencies. The
closing price of DTG common stock on that date was $1.24.
During a February 24, 2009 telephone conversation with
Mr. Thompson, Mr. Frissora indicated that Hertz might
still be willing to pursue a transaction at an offer price of
$3.50 per DTG share. After consulting with the DTG board of
directors, Mr. Thompson indicated that DTG would not be
interested in pursuing a transaction with Hertz at a price below
$5.25 to $5.50 per share. The closing price of DTG common stock
on February 24, 2009 was $0.88 per share.
On March 22, 2009, DTG held a meeting of its board of
directors at which it was decided that in light of conditions in
the financing markets and the car rental industry, any merger
transaction would be extraordinarily difficult to execute, and
that
day-to-day
business operations in light of the challenging economic and
industry environments facing the company required the full
attention of DTGs management. Following that decision, on
March 23, 2009, Mr. Thompson sent Mr. Frissora a
letter advising Hertz that DTG had concluded that a transaction
with Hertz on terms acceptable to DTG could not be accomplished
at that time. The closing price of DTG common stock on
March 23, 2009 was $1.07. In a telephone call on
March 25, 2009, Mr. Frissora informed
Mr. Thompson that Hertz had reached the same conclusion due
to uncertainties in the financial markets and the particular
challenges facing DTG at such time. Hertz and DTG therefore
determined to cease all discussions and related work with
respect to a transaction.
In April 2009, Hertz acquired Advantage Rent A Car, referred to
as Advantage.
On April 30, 2009, Chrysler filed a voluntary petition for
reorganization relief under Chapter 11 of the
U.S. Bankruptcy Code. On August 4, 2009, DTG and
Chrysler executed a new vehicle supply agreement that
substantially reduced DTGs vehicle purchase commitments to
Chrysler and allowed for greater flexibility and diversification
of DTGs fleet. The closing price of DTG common stock on
April 30, 2009 was $3.76 and the closing price of DTG
common stock on August 4, 2009 was $17.53. In 2009, DTG
also entered into a long-term vehicle supply agreement with Ford
Motor Company and began working closely with General Motors and
Nissan to help diversify the fleet and mitigate loss exposure to
any one auto manufacturer.
9
On July 23, 2009, at a meeting of the governance committee,
at which all of the DTG directors were present, the board of
directors, together with members of DTGs management and
representatives of Cleary, considered DTGs existing
stockholder rights agreement, or poison pill, which was
scheduled to expire on August 3, 2009. Representatives of
Cleary reviewed with the DTG board of directors the history of
DTGs stockholder rights plan, the purposes of a
stockholder rights plan and the terms of a draft stockholder
rights plan that the DTG board of directors could put on
the shelf for adoption at a later date, if necessary or
appropriate. After consideration, the DTG board of directors
determined to let the poison pill expire.
On August 26, 2009, at a meeting of the DTG board of
directors, after extensive discussion with members of DTGs
management and representatives of Cleary, the DTG board of
directors determined to put a draft stockholder rights plan
on the shelf for consideration at a later date.
On December 4, 2009, following a discussion among Hertz
senior management and representatives of Hertzs majority
stockholders, Mr. Frissora called Mr. Thompson to
explore whether DTG might be interested in restarting discussion
of a potential business combination given recent improvements in
the financial markets. After a discussion with the DTG board of
directors, Mr. Thompson communicated to Mr. Frissora
on December 7, 2009 that the DTG board of directors was
open to such a discussion. The closing price of DTG common stock
on December 7, 2009 was $21.76.
DTG and Hertz executed a new confidentiality agreement on
December 10, 2009. Hertz subsequently requested that its
advisors provide assistance in connection with the potential
transaction: Barclays Capital Inc., referred to as Barclays and
Bank of America Merrill Lynch, referred to as BofA Merrill
Lynch, as financial advisors, Debevoise & Plimpton
LLP, referred to as Debevoise, as legal and co-regulatory
counsel, and Jones Day, as co-regulatory counsel.
On December 21, 2009, members of DTG and Hertz senior
management held a telephone conference to discuss high-level due
diligence matters. At the conclusion of that call,
Mr. Thompson requested a written indication of interest
from Hertz.
On December 22, 2009, Hertz submitted a new non-binding
indication of interest to acquire all of the shares of DTG at a
price of $30.00 per share, consisting of $15.00 in cash and
$15.00 in Hertz common stock. Hertz also requested a
45-day
exclusivity period to conduct diligence and negotiate a merger
agreement. On December 23, 2009, Mr. Thompson reported
to Mr. Frissora that the DTG board of directors would meet
to consider Hertzs latest indication of interest and would
respond during the first week of 2010. The closing price of DTG
common stock on that date was $26.90.
On December 29, 2009, DTG engaged Goldman,
Sachs & Co., referred to as Goldman Sachs, as a
financial advisor and re-engaged J.P. Morgan as a financial
advisor. The J.P. Morgan engagement letter executed at that
time superseded DTGs prior engagement letter with
J.P. Morgan. DTG engaged both Goldman Sachs and
J.P. Morgan because DTGs senior management believed
that it would be valuable to have advice from two well-respected
financial advisors.
On December 30, 2009, the DTG board of directors met to
discuss Hertzs indication of interest. At the meeting,
representatives of Cleary reviewed the fiduciary obligations of
the directors in connection with the consideration of a
strategic opportunity such as that proposed by Hertz, including
the Revlon duties that may arise in such a
situation. The DTG board of directors also received a
presentation from DTGs financial advisors of their
preliminary financial analysis. The materials provided to the
DTG board of directors also included a summary of the historic
standalone capital structures, including debt, of Hertz and Avis
Budget. Following discussion with DTGs financial advisors,
the DTG board of directors determined that it would be
preferable if a substantial portion of the merger consideration
in a transaction with Hertz were in the form of cash in light of
the risk of a double dip recession, the continued volatility in
the equity markets and the lengthy period of time that would
likely be required to close any transaction. As before,
transaction certainty was of paramount importance to the board
of directors, and the directors reviewed with representatives of
Cleary the regulatory issues that might arise in connection with
a transaction with Hertz. The DTG board of directors also
discussed other potential transaction partners, including Avis
Budget, and the financing and regulatory issues that might arise
in a potential business combination with such parties. However,
the members
10
of the board of directors were concerned that Hertz would not
participate in an auction and that other potential bidders,
including Avis Budget, would face difficulty given the
unfavorable lending market for highly leveraged companies. In
this regard, the DTG board of directors also considered
DTGs history of numerous unsuccessful efforts to sell the
company.
On December 31, 2009, DTG responded to Hertzs
indication of interest in a letter that highlighted several
areas for further discussion. DTG indicated that it would be
willing to continue negotiations if, among other things,
Hertzs proposed value to DTG stockholders was at
least in the mid-thirties per share, a range established
by the DTG board of directors in its judgment after consultation
with DTGs financial advisors and senior management. While
DTG stated a preference for all-cash consideration, it also
indicated a willingness to receive Hertz common stock, subject
to appropriate representation on Hertzs board of
directors. DTG informed Hertz that, aside from price, the most
important issue to the DTG board of directors was transaction
certainty, particularly as it related to receipt of required
antitrust approvals. DTG also requested additional detail with
regard to Hertzs plans for the integration of the
companies. The closing price of DTG common stock on that date
was $25.61.
On January 7, 2010, at the request of Hertz and DTG, the
parties respective financial advisors met to discuss
certain financial aspects of a potential transaction, during
which representatives of Barclays requested discussions with DTG
management regarding DTGs business and potential
transaction synergies. On January 18, 2010, senior
management of DTG and Hertz met to discuss the proposed
transaction, including potential synergies related to
information technology, fleet management and flexibility in cash
management and financing. DTG management also provided
additional information regarding DTGs business, including
its revenue sources and the mix, mileage, depreciation and
disposition of its fleet. Throughout January 2010, at the
request of Hertz and DTG, the parties respective financial
advisors continued discussions regarding financial aspects of a
potential transaction.
During January and February 2010, Messrs. Thompson and
Frissora communicated several times regarding a potential
transaction, including the status of their respective
companies and advisors due diligence efforts. In the
course of these discussions, Mr. Frissora noted certain
provisions in Hertzs publicly available debt agreements
that would limit Hertzs flexibility after consummating an
all cash transaction, and further noted that these issues would
not be alleviated by the availability to Hertz of DTGs
cash reserves following a merger. After confirming the existence
of such provisions, Mr. Thompson suggested that this issue
could be addressed by having DTG pay an extraordinary dividend
from its cash reserves immediately prior to the merger as part
of the transaction.
On January 25, 2010, Hertz submitted a new non-binding
indication of interest to acquire all of the shares of DTG
common stock at a price of $35.00 per share, consisting of
$21.00 in cash and $14.00 in Hertz common stock. That indication
of interest also reiterated Hertzs request for a
45-day
exclusivity period to conduct diligence and negotiate a merger
agreement. The trading price of DTG common stock closed at
$24.22 on that date.
On January 25 and 26, 2010, Messrs. Thompson and Frissora
held a series of telephone calls discussing Hertzs new
indication of interest. In these calls, Mr. Thompson
focused on certainty of completion of the transaction, potential
adjustments to the stock component of the merger consideration,
and DTG representation on Hertzs board of directors.
On January 27, 2010, the DTG board of directors met to
discuss, among other things, Hertzs new indication of
interest. At the meeting, the board of directors received
presentations from DTGs senior management, DTGs
financial advisors and Cleary with respect to Hertzs
proposal. Mr. Thompson updated the DTG board of directors
on the operations and risk management of DTG, including the
current rate environment, fleet costs, vehicle funding and the
general outlook for 2010. The board of directors also discussed
whether other potentially interested parties, particularly Avis
Budget and certain European-based car rental companies, should
also be contacted. In this regard, the board discussed with
DTGs financial advisors the ability of Avis Budget to
raise sufficient financing to make a competitive cash bid in
light of its capital structure and the state of the debt
financing markets at the time, as well as the impact the state
of such markets might have on the ability of private equity
buyers to effect an acquisition of DTG. The DTG board of
11
directors discussed the likelihood that, in light of the state
of the financing markets, Avis Budget would need to offer a
significant portion of any merger consideration in the form of
Avis Budget common stock, and that this would likely cause any
transaction with Avis Budget to require the approval of Avis
Budgets stockholders under the rules of the New York Stock
Exchange. The board of directors further discussed with
representatives of Cleary the relative antitrust-related risks
associated with a combination with Avis Budget, as compared with
such risks arising from a combination with Hertz, including the
risk that Avis Budgets ownership of the Budget leisure car
rental brand would invite additional regulatory scrutiny. The
DTG board of directors also discussed the fact that rental car
companies from Europe would not be able to gain the benefit of
synergies that a
U.S.-based
purchaser would likely be able to recognize and thus would have
difficulty in offering a competitive price for DTG. The board of
directors also noted that in light of DTGs extensive
history of failed merger efforts, rumors of new merger-related
discussions could be highly disruptive and demoralizing for the
companys employees. The board of directors recognized that
the risk of such rumors would be increased to the extent that
DTG actively inquired as to the level of interest of other
parties. In discussion with representatives of Cleary, the DTG
board of directors also considered that appropriate deal
protection provisions that would typically be contained in a
merger agreement, such as termination fees, should not preclude
another interested bidder from making a bid after the signing of
a definitive transaction agreement. Based on all of these
considerations, the DTG board of directors determined not to
contact other parties at that time and authorized DTGs
management to execute a limited
45-day
exclusivity agreement (provided that it could be terminated at
an earlier date by DTG in certain circumstances) and to engage
in due diligence and negotiations with Hertz.
On February 1, 2010, Mr. Thompson telephoned
Mr. Frissora to report that the DTG board of directors had
authorized DTGs management to enter into an exclusivity
agreement with Hertz. Mr. Thompson noted that the DTG board
of directors continued to be focused on deal certainty and that
a key element of the exclusivity period must be addressing the
board of directors concerns with respect to deal certainty.
On February 3, 2010, DTG and Hertz signed an exclusivity
agreement, in which DTG agreed not to solicit, discuss or
authorize an acquisition transaction with any third party prior
to March 17, 2010, subject to an early termination right on
or after March 3, 2010 if, in DTGs good faith
judgment, the discussions between the parties were unlikely to
result in a definitive agreement. On February 3, 2010,
trading in DTG common stock closed at $25.17.
During the week of February 8, 2010, DTG and Hertz began
exchanging materials (including granting the other party access
to an electronic data room) and conducting reciprocal due
diligence investigations. On February 10, 2010,
Mr. Thompson met in person in Chicago with
Mr. Frissora and certain members of the Hertz board of
directors to discuss a potential transaction. On
February 11, 2010, DTG management conducted a management
presentation in Chicago for Hertz management, providing an
overview of the DTG business and responding to due diligence
questions posed by Hertz management. The closing price of DTG
common stock on that date was $26.96.
On February 12, 2010, Cleary delivered a draft merger
agreement to Debevoise. During the weeks of February 15 and
February 22, 2010, DTG and Hertz continued their respective
due diligence efforts. On February 24, 2010, Debevoise
delivered a revised draft of the merger agreement to Cleary,
reflecting Hertzs comments. This draft contained an
extensive list of closing conditions, including conditions
relating to minimum cash amounts and minimum earnings before
interest, taxes, depreciation and amortization, referred to as
EBITDA, of DTG, as well as, the procurement of third party
consents, and the absence of any regulatory challenge to the
transaction.
On February 15 and February 24, 2010, the DTG board of
directors met to discuss the status of the potential transaction
with Hertz.
On March 1 and 3, 2010, representatives of Debevoise and Cleary
had telephonic discussions concerning the draft merger agreement
provisions relating to the parties obligations to obtain
regulatory approvals and the proposed closing conditions in
Hertzs revised draft of the merger agreement. On
March 2, 2010, Debevoise communicated to Cleary that Hertz
would be prepared to commit to divest (if required to obtain
12
clearance under the HSR Act) business locations and business
lines that produced, in the aggregate, less than
$100-150 million in gross revenues and $10-15 million
in EBITDA, in each case for calendar year 2009.
On March 3, 2010, in light of the issues raised by
Hertzs comments on the merger agreement relating to
transaction certainty, DTG decided to terminate discussions with
Hertz, and J.P. Morgan, at Mr. Thompsons
instruction, informed Barclays of that decision.
On March 5, 2010, the DTG board of directors met and
discussed the recent developments concerning the negotiation of
the merger agreement. The board of directors directed DTG
management to suspend Hertzs due diligence access and not
to engage in further discussions unless and until Hertz revised
its positions in a manner more consistent with DTGs
objective of transaction certainty. On the same day, first DTG,
and then Hertz, suspended their respective due diligence
investigations and the other partys access to its
electronic data room. The closing price of DTG common stock on
that date was $31.77.
On March 8 and March 11, 2010, Messrs. Thompson and
Frissora held telephonic discussions in which Mr. Frissora
responded to concerns raised by Mr. Thompson regarding
provisions in the revised draft merger agreement related to
transaction certainty, including the allocation of risk
associated with procuring necessary regulatory approvals and
also certain closing conditions sought by Hertz relating to
DTGs financial condition.
On March 12, 2010, Debevoise sent Cleary a further revised
draft of the merger agreement, intended to reflect the March 8
and March 11 discussions between Messrs. Thompson and
Frissora, including, among other things, the addition of a
reverse termination fee payable by Hertz to DTG if certain
regulatory approvals were not obtained prior to the merger
agreements termination date and the conditions to the
consummation of the proposed transaction were otherwise
fulfilled, and the deletion of certain closing conditions
relating to DTGs financial condition that had been
objected to by Mr. Thompson on behalf of DTG. The
termination fee (payable by DTG under certain circumstances) and
reverse termination fee (payable by Hertz under certain
circumstances) proposed by Hertz were each in the amount of 4.5%
of transaction equity value.
On March 16, 2010, Cleary sent Debevoise a proposal for a
revised transaction structure designed to accommodate DTGs
desire that the transaction be treated as a tax-free
reorganization while preserving Hertzs desire that
DTGs existing medium term notes remain outstanding
notwithstanding the proposed transaction. During this period,
however, due diligence remained suspended, pending the outcome
of a meeting of the DTG board of directors to assess progress in
addressing DTGs concerns with respect to the terms of the
proposed merger agreement.
On March 17, 2010, Cleary sent Debevoise a revised draft of
the merger agreement and on March 19, 2010, representatives
of Cleary and Debevoise held a conference call to discuss
various provisions of the draft merger agreement as well as
Clearys proposed structure. The discussion of the draft
merger agreement addressed, among other things, the
representations and warranties to be made by the parties,
limitations on the parties conduct of business between
signing of the merger agreement and closing of the proposed
transaction, other covenants, including a provision requiring
DTG to make a special cash dividend to its stockholders
immediately prior to the merger, restrictions on DTGs
pursuing alternative business combinations, obligations relating
to regulatory approvals, conditions to closing, and various
provisions relating to termination and termination fees payable
by DTG under certain circumstances (which DTG proposed to be
equal to 3% of transaction equity value), reverse termination
fees payable by Hertz under certain circumstances if Hertz
failed to obtain certain regulatory approvals (which DTG
proposed to be equal to 5% of transaction equity value) and
expense reimbursement (which Hertz proposed to be
$5 million for each party). On March 20, 2010,
Debevoise sent Cleary a revised draft of the merger agreement
intended to reflect the results of the March 19 discussions
noting, among other things, that the issue of termination fees,
reverse termination fees and expense reimbursement remained
unresolved.
On March 21, 2010, senior management of DTG and Hertz held
a conference call to discuss alternative transaction structures
that were intended by DTG and its legal and financial advisors
to allow the merger to be treated as a tax-free reorganization
while not triggering a default under DTGs medium term note
agreements, as well as proposed merger agreement limitations on
the conduct of DTGs business between signing of the merger
agreement and closing of the proposed transaction.
13
On March 22, 2010, representatives of Cleary communicated
to representatives of Jones Day, DTGs proposal that Hertz
commit to divest business locations or business lines that
produced aggregate gross revenues in an amount up to
$400 million in 2009 if necessary to obtain antitrust
regulatory approvals.
On March 25, 2010, the DTG board of directors met to
discuss the status of the discussions with Hertz. At the
meeting, representatives of Cleary again reviewed with the board
of directors their fiduciary duties in connection with a
potential sale of DTG. Representatives of Cleary reported to the
board of directors on the status of the merger agreement
negotiations with Hertz, and described the alternative
transaction structure earlier discussed with Debevoise. The
members of the board of directors also discussed: the
companys long-term growth rate, the historical volatility
of the companys financial results, the companys
ability to retain its senior management on a long-term basis and
the position and the long-term competitive challenges facing the
industry and the company; DTGs financial advisors
analyses relating to the proposed merger with Hertz; and the
status of discussions with respect to the proposed transaction.
The board of directors also discussed DTGs anticipated
financial results for the first quarter of 2010, which were
expected to be more favorable than those projected by Wall
Street analysts. The board of directors considered whether to
suspend further discussions with Hertz regarding transaction
valuation until after the impact of the earnings announcement on
the companys stock price was known. In addition, the DTG
board of directors again considered the possibility of
contacting Avis Budget. Members of the board of directors noted
that: no determination had been made to sell DTG; given the
extensive history of prior failed discussions with Hertz and the
rapidly growing spread between the trading prices of the
companies shares, there could be no assurance that the
present discussions would result in any definitive merger
agreement with Hertz; given its financial circumstances, Avis
Budget would likely require substantial financing
and/or the
approval of its stockholders in order to effect a transaction
with DTG at a price competitive with the Hertz proposal, and
such contingencies would present undesirable transaction risk
for DTG and its stockholders; and the terms of the merger
agreement then under discussion with Hertz would not preclude
Avis Budget from making a proposal after the signing of the
agreement if it desired to do so. At the conclusion of the
meeting, the board of directors authorized and directed
Mr. Thompson to continue negotiations and due diligence
with Hertz with a target date for the signing of the merger
agreement to occur after the announcement of both
companies earnings for the first quarter of 2010.
On March 26, 2010, Mr. Thompson reported to
Mr. Frissora that the DTG board of directors was satisfied
with the progress that had been made on the proposed terms for a
transaction and that, accordingly, it was prepared to reengage
in the mutual due diligence needed to complete a transaction.
Mr. Thompson also emphasized that transaction certainty
remained DTGs primary issue and that DTG was not
interested in a transaction with Hertz that did not include a
premium to the market price. Also on March 26, at the
request of Hertz and DTG, the respective financial advisors of
DTG and Hertz held a conference call to discuss financial
considerations with respect to the proposed transaction, and,
separately, representatives of Cleary and Debevoise held a
conference call to discuss the draft merger agreement and
transaction structure. The closing price of DTG common stock on
that date was $33.90.
On April 4, 2010, senior management of DTG and Hertz held a
conference call, which continued their discussion on operating
covenants that would limit DTGs conduct of business in the
period between the signing of a merger agreement and closing of
the proposed transaction. On April 8, Cleary delivered to
Debevoise a revised draft of the operating covenants from the
prior draft of the merger agreement, providing for such
limitations. Also, on April 8, 2010, at the request of
Hertz and DTG, DTGs financial advisors held a conference
call with Barclays to discuss financial terms of the potential
transaction between Hertz and DTG. Mr. Thompson instructed
DTGs financial advisors to propose, among other things, a
price of $44.96 per share of DTG common stock (a 25% premium to
that days closing price for shares of DTG common stock) in
a 50% cash / 50% Hertz common stock consideration mix,
to be effected as a tax-free reorganization. The closing price
of DTG common stock on April 8, 2010 was $35.97.
On April 9, 2010, Hertz suspended the due diligence process
and on April 12, 2010, the Hertz board of directors held a
special telephonic meeting at which it rejected the oral
proposal put forward by DTGs investment bankers on April 8
and instructed Hertz management to cease negotiations with DTG.
That same day, Mr. Frissora sent a letter to
Mr. Thompson informing him of this determination, but
inviting Mr. Thompson to contact him with ideas to restart
a transaction process.
14
On April 12, 2010, Mr. Nelson of Avis Budget contacted
J.P. Morgan to inquire about whether Mr. Thompson
would accept a call from him. Mr. Nelson did not specify
the reason he wanted to call Mr. Thompson. Following such
contact from Mr. Nelson, J.P. Morgan conveyed
Mr. Nelsons inquiry to Mr. Thompson and Thomas
Capo, the then non-executive chairman of the DTG board of
directors. While he initially considered the possibility that
Mr. Nelson requested the meeting for the purpose of
discussing a potential bid for DTG, Mr. Thompsons
understanding regarding Avis Budgets interest and ability
to effect such a transaction, the previously announced
prospective changes in the senior management of Avis Budget and
the ambiguity surrounding the stated purpose of the meeting, as
well as reports received by Mr. Thompson to the effect that
Avis Budget had made inquiries concerning his personal
background, all led Mr. Thompson to conclude that the
purpose of the meeting was of a personal nature, rather than to
discuss a business combination transaction.
On April 14, 2010, representatives of J.P. Morgan
proposed that Mr. Frissora and another member of the Hertz
board of directors meet in Chicago with Mr. Thompson and a
member of the DTG board of directors for the purpose of
reconciling the outstanding issues between the companies. This
meeting was scheduled for April 16, 2010.
On April 15, 2010, Hertz senior management held a
conference call with several members of the Hertz board of
directors, at which management and representatives of
Hertzs legal and financial advisors summarized the open
issues in the negotiations with DTG.
On April 16, 2010, Messrs. Thompson and Frissora,
along with members of Hertz senior management, Mr. Capo,
members of DTG senior management, and David Wasserman, a member
of the Hertz board of directors, together with representatives
of Hertzs and DTGs respective financial advisors,
met in Chicago to discuss the proposed transaction. Initially at
this meeting, representatives of DTG, based on their prior
consultation with DTGs financial advisors and board of
directors, informed Hertz and its representatives that DTG was
only interested in a purchase price in excess of $40 per share
of DTG common stock, with a 50% cash / 50% Hertz stock
consideration mix in a tax-free reorganization structure. Hertz
countered with an offer of $38 per share of DTG common stock and
an 80% cash / 20% Hertz stock consideration mix. DTG
then countered with an offer of $42 per share of DTG common
stock and an 80% cash / 20% Hertz stock consideration
mix, which Hertz was unwilling to offer. Hertz management
advised the DTG representatives that DTGs proposal was
unacceptable to Hertz, and that Hertz was terminating its
discussions with DTG. The closing price of DTG common stock on
April 16, 2010 was $34.63. DTG instructed DTGs
financial advisors and Cleary to terminate all work in
connection with the prospective transaction, and terminated
Hertzs access to DTGs electronic data room.
Also on April 16, 2010, J.P. Morgan contacted
Mr. Nelson of Avis Budget to advise that Mr. Thompson
would accept his call.
On April 19, 2010, Mr. Nelson invited
Mr. Thompson to meet for dinner, stating that he was going
to be visiting Tulsa to review Avis Budgets Tulsa
operation center. Although Mr. Thompson did not know the
purpose of Mr. Nelsons invitation and continued to
believe it was of a personal nature, he agreed to meet with
Mr. Nelson and Robert Salerno, chief operating officer of
Avis Budget, on April 28, 2010. Mr. Thompson advised
Mr. Capo shortly thereafter (and subsequently, the other
members of the DTG board of directors) of Mr. Nelsons
invitation. After the announcement of the execution of the
merger agreement by and between DTG, Hertz and HDTMS Inc., dated
April 25, 2010, which we refer to as the 2010 Merger
Agreement, Mr. Thompson canceled this meeting based on his
view that such a meeting with an industry competitor at that
time would have been inappropriate.
On April 21, 2010, Mr. Frissora telephoned
Mr. Thompson and proposed a revised best and
final offer by Hertz, which Mr. Frissora had
previously discussed with a member of the Hertz board of
directors and later that day communicated by
e-mail to
the Hertz board of directors, to acquire DTG at a price of $40
per share, with an 80% cash / 20% Hertz stock
consideration mix, which would make the merger ineligible for
tax-free reorganization treatment. Mr. Frissora
communicated that the offer was subject to DTGs agreement
to certain other terms, including a specified level of
divestitures that Hertz would be required to accept in order to
secure regulatory approval for the transaction, the termination
date of the 2010 Merger Agreement, and the amount of
15
the fees to be payable upon termination of the 2010 Merger
Agreement under certain circumstances by DTG and Hertz,
respectively. Mr. Frissora also stated that Hertzs
proposal was also contingent upon the parties execution of
a definitive 2010 Merger Agreement no later than April 25,
2010 and public announcement of a transaction no later than the
morning of April 26, 2010, on which date Hertz was
scheduled to announce its financial results for the first
quarter of 2010. Mr. Frissora subsequently confirmed
Hertzs offer by
e-mail to
Mr. Thompson. The closing price of DTG common stock on
April 21, 2010 was $37.22.
On April 22, 2010, the DTG board of directors met to
consider the revised Hertz proposal. After discussion with
DTGs management, DTGs financial advisors and Cleary,
the board of directors concluded that, in its view, it was
unlikely that Hertz would increase its offer of $40 per DTG
share by more than a de minimis amount. In addition, although
the DTG board of directors had earlier considered suspending
further discussions on transaction valuation until after the
announcement of DTGs and Hertzs first quarter
financial results, Hertz made clear that its current offer was
contingent on the execution of a definitive transaction
agreement prior to April 26, 2010, the day Hertz planned to
announce its first quarter financial results (which had been
previously shared with DTG) and prior to the date DTG had
planned to announce its first quarter financial results (which
had been previously shared with Hertz). The DTG board of
directors believed that the current proposal was Hertzs
best and final offer, and that Hertz would finally terminate
discussions with DTG if the offer was not agreed to by
Hertzs stated deadline. The DTG board of directors
considered the possibility of accelerating the announcement of
DTGs own financial results to be contemporaneous with
Hertzs announcement, but concluded that such a step would
not be practicable. The DTG board of directors then directed DTG
management to finalize a definitive merger agreement with Hertz
substantially on the proposed terms.
After further negotiations, on April 22, 2010,
Messrs. Frissora and Thompson agreed to recommend to their
respective boards of directors a transaction between the
companies at a price of $41 per share of DTG common stock in an
80% cash / 20% Hertz stock consideration mix and on
the other terms proposed by Mr. Frissora on April 21.
The proposed merger consideration of $41 per share of DTG common
stock, together with the proposed resolution of the remaining
issues raised in Mr. Frissoras April 21 proposal
(including termination and reverse termination fees in an amount
equal to 3.5% of transaction value, plus $5 million in
expense reimbursement and provisions on the treatment of
required divestitures) were set out in a letter delivered by DTG
to Hertz on April 22, 2010. After receipt of this letter,
Hertz representatives, including Debevoise and Jones Day, and
representatives of Cleary held conference calls to discuss
issues not addressed by the communications between
Messrs. Thompson and Frissora, and finalized the specified
level of required divestitures, which was ultimately included in
the 2010 Merger Agreement.
On April 23, 2010, members of Hertz senior management,
members of DTG senior management and representatives of
Debevoise and Cleary held a conference call to discuss the
operating covenants that would limit the conduct of DTGs
business between signing of a merger agreement and the closing
of the proposed transaction. Also on April 23, Cleary
delivered to Debevoise a revised draft of the merger agreement.
The closing price of DTG common stock on April 23, 2010 was
$38.85.
Hertz, DTG and their respective representatives continued to
discuss the terms of a proposed transaction from April 24
through April 25, 2010. The issues discussed included,
among others, the circumstances and procedures under which the
DTG board of directors could consider a competing transaction
proposal, the requirement that immediately prior to the closing
of the proposed transaction DTG pay a $200 million special
cash dividend to its stockholders and, if the transaction closes
prior to January 31, 2011, the obligation to repay its
secured credit facility from cash on hand, and the identity of
the DTG representative who would be appointed to the Hertz board
of directors at closing of the proposed transaction. Based on
these discussions, representatives of Debevoise and Cleary
completed the negotiation of the terms of a definitive merger
agreement on April 25, 2010.
In the afternoon of April 25, 2010, the DTG board of
directors held a special telephonic meeting to consider the
terms of the proposed transaction. At the meeting,
representatives of Cleary reviewed with the board of directors
their fiduciary duties in connection with the proposed
transaction and the key terms of the 2010 Merger Agreement.
DTGs management discussed DTGs anticipated ability
to pay the special dividend
16
with the board of directors. DTGs financial advisors made
a presentation regarding their financial analyses of the
transaction (related written materials having been provided in
advance of the meeting to each member of the board), and
delivered the oral opinions of their respective firms, which
were subsequently confirmed by written opinions that, as of such
date, and based upon and subject to the factors and assumptions
set forth in the opinions, the total amount of cash and stock
consideration, consisting of the merger consideration and
special dividend per share amount, was fair, from a financial
point of view, to DTGs stockholders. Following discussion,
the DTG board of directors unanimously approved the proposed
2010 Merger Agreement and the transactions contemplated thereby,
including the special dividend, recommended that DTGs
stockholders approve the 2010 Merger Agreement, and directed the
company to enter into the 2010 Merger Agreement.
Also in the afternoon of April 25, 2010, the Hertz board of
directors held a special telephonic meeting to consider the
terms of the proposed transaction. At the meeting,
Mr. Frissora provided an overview of the proposed
transaction and reviewed its strategic rationale. Barclays
reviewed with the Hertz board of directors the financial terms
of the proposed merger and Debevoise summarized the terms of the
draft 2010 Merger Agreement. Following discussion, the Hertz
board of directors unanimously approved the proposed merger and
authorized Hertz to enter into the 2010 Merger Agreement.
Thereafter, the 2010 Merger Agreement was executed, and Hertz
and DTG issued a joint press release announcing the transaction.
On the morning of May 3, 2010, Mr. Capo and
Mr. Thompson received a letter from Mr. Nelson of Avis
Budget, the text of which follows:
Dear Scott and Tom,
I was very surprised by your April 26 announcement that you had
signed a definitive agreement to be acquired by Hertz for
approximately $41 per share, of which only about $34 is being
funded by Hertz itself. This is particularly true given that, on
April 19, a mere week before the Hertz announcement, Scott
and I agreed to meet for dinner on April 28 to discuss a
transaction between our companies, which you cancelled after the
Hertz announcement.
As you know, we at Avis Budget have on several occasions in the
past expressed interest in entering into a transaction with
Dollar Thrifty, yet at no stage over the last several months did
you or your financial advisor engage us in any discussions about
a transaction or offer to provide us with information so that we
might submit a bid. I spoke with your financial advisor in early
April to reiterate our interest in a potential transaction
between our companies and to try to arrange a meeting, yet
neither they nor you engaged us in any substantive discussions
or communicated your interest in Dollar Thrifty being acquired
in the near term. It is hard to understand how your failure to
engage in discussions with an interested strategic buyer, who
you know also would be able to achieve significant synergies as
a result of a combination, can be consistent with the fiduciary
duties that you and your board carry to seek the best possible
deal for your shareholders.
This failure is all the more surprising given that, at the time
you signed a definitive agreement to be acquired at virtually no
premium, you clearly had knowledge that published earnings
estimates for Dollar Thrifty were well below the updated
guidance that you were going to provide as part of your
first-quarter earnings announcement after the signing. Given
that the Hertz offer is primarily cash, your shareholders, in
addition to being offered virtually no premium to a stock price
that did not reflect favorable non-public information, would
have little opportunity to participate in the substantial upside
associated with your improving results, the combination-related
synergies or the substantial upside we all see as the industry
recovers from its recent lows.
Now that we and our advisors have had access to the terms of the
merger agreement, we are astonished that you have compounded
these shortcomings by agreeing to aggressive
lock-up
provisions, such as unlimited recurring matching rights plus an
unusually high
break-up fee
(more than 5.25% of the true transaction value, as described by
your own financial advisor), as a deterrent to competing bids
that could only serve to increase the value being offered to
your shareholders. Given the complete failure to
17
conduct a pre-signing market-check of the virtually no-premium
deal with Hertz, such preclusive defensive measures are clearly
not supportable in this situation.
We would like to make a substantially higher offer to acquire
Dollar Thrifty, especially in light of your recent performance
and the potential synergies associated with an acquisition of
Dollar Thrifty by Avis Budget. We are confident that the
antitrust analysis and clearance timetable for an Avis
Budget/Dollar Thrifty transaction are comparable to those
associated with a Hertz/Dollar Thrifty transaction. We request
access to legal, financial and business due diligence
information relating to Dollar Thrifty, including access to
management, so that we can formulate and submit such an offer.
In that regard, we would be prepared to sign an appropriate
non-disclosure agreement. We also request that the egregious
provisions of the merger agreement be eliminated so that a level
playing field can be created.
We look forward to the opportunity to engage in productive
discussions with the board of directors of Dollar Thrifty to
allow its shareholders the opportunity they deserve to realize
the full value of their investments in Dollar Thrifty.
Sincerely,
Avis Budget issued a press release containing the text of such
letter contemporaneously with its transmission to DTG. Within
hours after receipt of the Avis Budget letter, the DTG board of
directors convened by telephone to discuss Avis Budgets
inquiry. After consultation with J.P. Morgan, Goldman Sachs
and Cleary, the board determined that the Avis Budget letter
would reasonably be expected to result in a superior
proposal under the terms of the 2010 Merger Agreement, and
that the failure to engage with Avis Budget would be
inconsistent with the directors fiduciary duties under
Delaware law. The DTG board of directors further instructed DTG
management to offer Avis Budget the opportunity to conduct due
diligence, subject to execution of a confidentiality agreement
meeting the requirements of the 2010 Merger Agreement with Hertz.
On May 4, 2010, Mr. Thompson responded to
Mr. Nelson in a letter, the text of which follows:
Dear Ron:
Our Board of Directors has received and reviewed your letter of
May 3, 2010. Needless to say, I was surprised to learn of
its existence on CNBC before even receiving it. I was also
disappointed to read its numerous factual inaccuracies.
Nevertheless, we are prepared to consider a substantially
higher offer (as described by you) from Avis Budget to
acquire our company. Please be advised that in evaluating
whether your proposal constitutes a superior proposal, our board
of directors will need to consider, among other things, the
following:
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The form or forms of consideration (i.e., cash, Avis Budget
stock or blend thereof) that would comprise your substantially
higher offer and, to the extent of any cash component, the
anticipated sources of financing therefor;
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What specific divestiture or other commitments Avis Budget would
make towards procurement of antitrust regulatory approvals;
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Whether the approval of Avis Budget stockholders would be
required in connection with your proposed transaction and, if
so, what protections would be offered to Dollar Thrifty against
the possibility that such approval would not be
obtained; and
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Expected timing of consummation.
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18
We are also prepared to provide you and your representatives
with reasonable access to management and documented information
in order to enable you to arrive at a definitive merger
proposal. Please let us know of your specific requests in this
regard.
As a condition precedent to engaging in discussions or
furnishing information to Avis Budget, we will require that Avis
Budget execute a confidentiality agreement in the form
accompanying this letter. Please sign and return it to us at
your earliest convenience.
Very truly yours,
/s/ Scott L. Thompson
On May 6, 2010, Avis Budget executed the confidentiality
agreement proposed by DTG, and on May 7, 2010, Avis Budget
and DTG commenced reciprocal due diligence.
On May 13, 2010, Avis Budget announced that it had filed a
notification under the HSR Act with the Antitrust Division of
the U.S. Department of Justice (the DOJ)
or the Federal Trade Commission (the FTC)
relating to the potential acquisition of DTG by Avis Budget.
On May 14, 2010, Hertz and DTG each filed the requisite
notification and report forms under the HSR Act with the FTC and
the DOJ. On May 21, 2010, Hertz and DTG each filed the
requisite Competition Act (Canada) notification forms with the
Canadian Commissioner of Competition under the Competition Act
(Canada).
On June 9, 2010, the DTG board of directors held a board
meeting. At the meeting, representatives of Cleary reviewed with
the board of directors their fiduciary duties in connection with
the pending acquisition of the company. The board and
representatives of Cleary also discussed the status of the
antitrust review of Hertzs and Avis Budgets
notification and report forms filed under the HSR Act for an
acquisition of DTG, and various alternative scenarios in
connection with potential actions on the part of Avis Budget.
Also at the meeting, DTGs financial advisors discussed the
state of the leveraged finance markets and Avis Budgets
ability to procure the financing necessary to make a superior
proposal under the terms of the 2010 Merger Agreement. They also
discussed Hertzs financial ability to match a superior
offer by Avis Budget.
On June 14, 2010, Hertz and DTG received a second request
from the FTC.
On June 15, 2010, Avis Budget announced it had received a
second request from the FTC.
In late June 2010, representatives of Avis Budget contacted
representatives of DTG to advise them that, although Avis Budget
had not yet made any proposal to acquire DTG, Avis Budget
remained interested in a transaction with DTG and expected to
make an acquisition proposal.
As a result of a query by the SEC staff regarding the 20
business day broker search period required by
Rule 14a-13
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act), on July 16,
2010, the DTG board of directors rescheduled the special meeting
of DTG stockholders with respect to the merger to occur on
September 16, 2010 (from the previously scheduled date of
August 18, 2010), and reset the record date for the special
meeting to August 13, 2010 (from the previously scheduled
date of July 16, 2010).
On July 27, 2010, Hertz won regulatory approval from the
Canadian Competition Commissioner when the Canadian Competition
Commissioner issued a no-action comfort letter to Hertz in
respect of the merger.
19
On the afternoon of July 28, 2010, Mr. Capo and
Mr. Thompson received a letter from Mr. Nelson of Avis
Budget, the text of which follows:
Dear Scott and Tom,
We appreciate having had the opportunity to conduct our due
diligence review of Dollar Thrifty. We continue to believe that
a combination with Avis Budget presents a compelling opportunity
for our respective stakeholders and the prospect for your
shareholders to obtain the highest value for their investment.
While we continue to believe that the onerous
lock-up
provisions in your existing merger agreement should be removed,
we are prepared to put forward an offer today for Dollar Thrifty
that clearly constitutes a Superior Proposal under that merger
agreement.
Our offer is for $46.50 per share of Dollar Thrifty common stock
consisting of $39.25 in cash (which would include the proceeds
of a pre-closing special dividend to be paid by Dollar Thrifty
consistent with the Hertz proposal) and 0.6543 shares of
Avis Budget stock (currently valued at $7.25). The cash portion
of our offer will be funded through a combination of available
cash and fully committed financing. We have received consents
from the requisite percentage of lenders in our principal
corporate credit facility to amend the terms of that facility to
permit the completion of the proposed transaction, including its
financing. The stock portion of our offer does not require
approval of the Avis Budget shareholders and will afford Dollar
Thrifty shareholders the opportunity to participate in the
combination-related synergies and benefit from the continued
positive trends in our industry. Our offer is not subject to any
financing or due diligence contingencies and has the unanimous
support of the Avis Budget Board of Directors.
We are prepared to enter into a merger agreement that contains
substantially the same terms as the Hertz merger agreement, but
which includes removing the matching rights, eliminating the
break-up
fees, and increasing the commitment to secure antitrust
approvals. A copy of the draft merger agreement that we are
prepared to sign is being provided to your counsel. These
changes to the merger agreement provide a level playing field
and address certainty of closing. In short, we believe that the
higher purchase price we are offering, combined with the terms
of our proposed merger agreement, makes our offer a superior one
from the perspective of Dollar Thrifty and its shareholders.
Given our willingness to enter into a merger agreement with
these terms, Hertz should be required to agree to accept these
provisions as a condition to Dollar Thrifty permitting Hertz to
continue to make offers for the company. The Dollar Thrifty
Board has the right and obligation to require acceptance by
Hertz of these provisions in connection with any further
consideration of offers from Hertz.
We look forward to moving forward on this transaction that
allows your shareholders the opportunity they deserve to realize
the highest value for their investment.
Sincerely,
/s/ Ronald L. Nelson
Avis Budget issued a press release containing the text of such
letter contemporaneously with its transmission to DTG. Later
that day, Avis Budgets legal counsel, Kirkland &
Ellis LLP, provided a proposed merger agreement to Cleary.
On July 28, 2010, Mr. Thompson sent Mr. Frissora
an e-mail
notifying him of the Avis Budget bid.
On July 29, 2010, Avis Budget provided to DTG a draft
commitment letter for financing related to the offer, and filed
its proposed form of merger agreement with the SEC.
20
On July 30, 2010, the DTG board of directors met to discuss
Avis Budgets offer. At the meeting, representatives of
Cleary reviewed the fiduciary duties of the DTG board of
directors as well as DTGs contractual obligations under
the 2010 Merger Agreement in connection with considering the
Avis Budget proposal. The DTG board of directors also received a
presentation from DTGs financial advisors of their
preliminary financial analysis of the Avis Budget offer. The DTG
board of directors discussed, among other things, the offering
price, the degree of certainty relating to Avis Budgets
financing for the offer and the antitrust risks attendant to the
offer. In particular, the DTG board of directors considered the
significance of the absence of a reverse termination fee in the
Avis Budget proposal. After consultation with DTGs
financial advisors and Cleary, the board determined that further
consideration was required, instructed the financial advisors
and Cleary to seek additional information from Avis
Budgets representatives, and agreed to reconvene on
August 2, 2010.
On August 2, 2010, the DTG board of directors met to
continue discussion of Avis Budgets offer.
Mr. Thompson and DTGs advisors reported that, based
on their respective conversations with Mr. Nelson and Avis
Budgets representatives, Avis Budget was firmly unwilling
to include a reverse termination fee in its proposal.
Representatives of Cleary provided a report with respect to the
antitrust regulatory aspects of the Avis Budget proposal, and
DTGs financial advisors made another presentation of their
preliminary financial analysis of Avis Budgets offer. In
consultation with DTGs financial advisors and Cleary, the
board then discussed whether the Avis Budget offer satisfied the
criteria of a superior proposal under the 2010
Merger Agreement.
At the direction of the DTG board of directors, on
August 3, 2010, Mr. Thompson spoke with
Mr. Nelson by telephone to advise him of the forthcoming
transmission of a written response to Avis Budgets
proposal and later that day DTG sent a letter to Mr. Nelson
(which was subsequently published in a press release),
containing the following text:
Dear Ron:
Thank you for your interest in our company; we were pleased to
receive your letter dated July 28, 2010. Our Board of
Directors has received and carefully reviewed your letter, and I
would like to give you some observations based on their review.
Under the terms of our merger agreement with Hertz, in order for
Dollar Thrifty to pursue a transaction with Avis Budget, our
Board must make a determination that the Avis Budget proposal
constitutes a Superior Proposal within the meaning
of that agreement. This, in turn, requires our Board to make the
following three findings with respect to the transaction
proposed by Avis Budget:
1. It is more favorable, from a financial point of view, to
our stockholders than the Hertz merger;
2. It is supported by financing that is fully committed or
reasonably likely to be obtained; and
3. It is reasonably expected to be consummated on a timely
basis.
We believe that your proposal would clearly satisfy the first of
these requirements. Furthermore, we think that the draft
financing commitment letters that you have furnished, when
finalized in the manner described by your advisors, will provide
a reasonable basis for concluding that the second requirement
can be satisfied. However, we do not have sufficient information
to establish satisfaction of the third prong of the requirements.
As you are aware, our respective advisors have had numerous
discussions with respect to the antitrust risks attendant to a
merger of our companies. Your legal advisors have stated clearly
their position, based on their econometric and other analyses,
that the divestitures to which you have committed in your
proposal are sufficient to remediate any competitive issues. But
citing our inability to enter into a joint defense agreement
with you as well as our contractual obligations to cooperate
with Hertz, your advisors have been unwilling to disclose
details of their data and analyses beyond their general approach
to the issues.
21
More problematic is Avis Budgets unwillingness to provide
a reverse termination fee. As we have stated on several
occasions, our Board accords substantial weight to the extent to
which Avis Budget is willing to share the risk of the ultimate
regulatory outcome. This is especially true where Avis Budget is
unable to provide compelling objective evidence in favor of its
antitrust position. Indeed, Avis Budgets unwillingness to
offer a meaningful reverse termination fee can only represent to
us, to the market and to any objective observer a lack of
confidence by Avis Budget in its position. As you know,
transaction certainty has consistently been a key criterion for
Dollar Thrifty in evaluating possible transactions. We feel
strongly that in order to merit favorable consideration by our
Board, the relative magnitude of the reverse termination fee
should be at least consistent with that of the Hertz
transaction. Obviously, a fee of greater magnitude would
demonstrate even greater confidence in your ability to procure
antitrust approvals, as well as your willingness to take steps
beyond your stated divestiture commitment to do so.
Your advisors have suggested that there is a natural trade-off
between the transaction consideration and deal certainty.
Unfortunately, the Superior Proposal determination
simply does not work in that way. Each of the three prongs must
be met, and a higher price cannot compensate for a deficiency in
deal certainty. But even if we could blend the factors as you
suggest, Avis Budgets unwillingness to provide a reverse
termination fee, coupled with your disinclination to provide
analytical data supporting your antitrust position, leaves us
incapable of making such an assessment.
We stand ready to review and consider any modifications you may
wish to make to your proposal (or any additional supporting
information) to address these concerns.
Please do not hesitate to let us know if there are any questions.
Very truly yours,
/s/ Scott L. Thompson
On August 3, 2010, Mr. Thompson called
Mr. Frissora to inform him of DTGs response to Avis
Budgets bid.
On August 5, 2010, the DTG board of directors met to
receive a transaction update. DTGs financial advisors made
a presentation regarding the second quarter earnings performance
and third quarter stock performance to date reported by each of
Avis Budget and Hertz. Mr. Thompson described his
conversation with Mr. Nelson and the board discussed
stockholder reactions to DTGs response to the Avis Budget
proposal.
On August 31, 2010, Hertz provided Institutional
Shareholder Services/RiskMetrics Group with a presentation
outlining Hertzs analysis of the antitrust risks posed by
the transactions contemplated by the 2010 Merger Agreement as
opposed to potential alternative transactions with Avis Budget.
On August 31, 2010, DTG issued a press release providing an
update on its 2010 guidance and 2011 projections. As part of
that update, DTG noted that its previously announced revenue
guidance remained unchanged, but that projected Corporate
Adjusted EBITDA for 2010 and 2011 was expected to increase over
previously announced guidance. DTG noted that it expected
Corporate Adjusted EBITDA, excluding merger-related expenses, to
be within a range of $240 million to $260 million for
the full year of 2010, an increase of $40 million from the
DTGs previously announced guidance range, with
approximately half of the increase attributable to changes in
expectations for fleet costs. Adjusting the previously disclosed
projections to give effect only to the change in the 2011 fleet
cost discussed in the press release, Corporate Adjusted EBITDA
would range from $186 million to $198 million for 2011.
22
On September 2, 2010, Avis Budget issued a press release
announcing that it was increasing the cash portion of its offer
from $39.25 to $40.75 per share of DTG common stock. The stock
portion of its offer remained unchanged. The text of Avis
Budgets press release follows:
Avis Budget is increasing the cash portion of its offer from
$39.25 to $40.75 per share (which would include the proceeds of
a pre-closing special dividend to be paid by Dollar Thrifty
consistent with our previous proposal). Our revised offer of
$40.75 in cash and 0.6543 shares of Avis Budget stock,
represents a premium of more than 22% over the Hertz Global
Holdings, Inc. (NYSE:HTZ) offer.
The Avis Budget offer is clearly superior to the Hertz offer in
the two ways that matter we are offering a
substantially higher price and a more meaningful divestiture
commitment.
Contrary to certain Dollar Thrifty and Hertz statements, a
reverse termination fee has nothing to do with certainty of
closing. Economic compensation for failing to close does not
impact whether a deal is reasonably likely to close. The Hertz
deal is no more likely to be approved by the FTC simply because
Hertz agreed in the context of a negotiated deal to pay a fee to
Dollar Thrifty if it is not approved.
Both deals raise complex and similar antitrust issues and face
comparable divestiture analyses. Hertz resorts to antitrust as a
scare tactic and a smoke screen a last-ditch effort
to deflect attention from its clearly inferior offer
but Hertz is wrong on the process and wrong on the facts.
Although outcomes of governmental reviews cannot be predicted
with certainty, both companies are cooperating with an ongoing
FTC review. Both companies have similar airport revenue shares
and derive more than half of their revenues from leisure
travelers although, significantly, Hertz has higher
leisure renter revenues than Avis and Budget combined.
Both companies compete with Dollar Thrifty. In fact, Hertz
uses its exclusive relationship with AAA to generate more than
$500 million of annual revenues at low price
points typically lower than Dollar and Thrifty
rates targeted to compete directly with Dollar,
Thrifty and other value brands. Through the value-oriented AAA
relationship brand, Hertz competes aggressively and
successfully with other value brands and generates revenues that
are comparable to Thriftys U.S. corporate location
revenues.
Furthermore, nothing blocks any of the market participants from
renting cars to value and leisure oriented customers as there
are no barriers to entry (with the exception of the Hertz
exclusive agreement with AAA, which covers 50 million
members). Pricing can be adjusted in seconds on each
companys respective corporate websites and the related
travel oriented websites.
Hertzs Dollar Thrifty Transaction Update,
filed on August 31, 2010, does not change any of this.
Hertzs analysis conveniently ignores the many
hundreds of millions of dollars Hertz makes through low-priced
rentals under its AAA discount program and through its
share-leading position in low-priced rentals through Hotwire,
Priceline and other channels. In its Update, Hertz
cherry- picks data and time periods, and uses deeply flawed
modeling, to present baseless and inflated divestiture numbers
for an Avis Budget transaction. Proper economic analysis shows
that Hertz and Avis Budget are comparably competitive with
Dollar Thrifty. And Hertz invents new industry segmentation,
artificially grouping Dollar and Thrifty together with Budget to
try to manufacture an antitrust issue, knowing full well that
Budget and Alamo are positioned as mid-tier brands while Dollar,
Thrifty and Enterprise on all relevant
metrics are in a value segment that falls below the
mid-tier.
Avis Budget is fully committed to completing the acquisition of
Dollar Thrifty. Avis Budget has already spent millions of
dollars, and devoted substantial time and resources, in pursuit
of this transaction, despite Dollar Thrifty not yet having
signed an agreement with Avis Budget. Avis Budget has been
cooperating with antitrust authorities, and has submitted over a
million pages of documents and vast quantities of data to the
FTC in response to the FTCs Second Request with the
intention of completing its response very shortly.
In addition, the exclusion of a reverse termination fee from our
offer is entirely consistent with the Hertz transactions
reciprocity approach that sets the reverse termination fee to be
exactly equal to the
break-up fee
payable by Dollar Thrifty in the event it accepts a superior
proposal. A fair and level playing
23
field should be created that would allow Dollar Thrifty
shareholders the benefit of a competitive sale
process a process that, to date, they have been
denied. To that end, we have removed the traditional
break-up fee
that would operate in our favor fairness and the
Hertz reciprocity approach dictate that the reverse termination
fee also be eliminated.
Nonetheless, it appears that the clearly inferior Hertz offer
will be put to a vote of Dollar Thrifty shareholders with the
support of the Dollar Thrifty Board of Directors. The Hertz
offer significantly undervalues Dollar Thrifty in
fact, the current value of the Hertz offer represents a discount
to the Dollar Thrifty share price prior to the Hertz deal
announcement. And since that announcement, the stand-alone value
of Dollar Thrifty has, no doubt, only increased as a result of
Dollar Thriftys strong financial results and repeatedly
increased earnings projections. Our offer properly delivers that
premium to the Dollar Thrifty shareholders rather than allowing
it to be diverted to Hertz.
We remain ready to deliver on the revised premium offer that we
are announcing today. Moreover, we will increase our offer to
Dollar Thrifty shareholders by the amount of any reduction in
the Dollar Thrifty
break-up fee
payable or paid to Hertz.
Our message is clear: We are confident that the Dollar Thrifty
shareholders will prefer the premium Avis Budget offer to the
Hertz offer. As such, in the event that the Hertz transaction is
rejected by the Dollar Thrifty shareholders at the
September 16, 2010 special meeting, we will commit to sign
the merger agreement we previously delivered to Dollar Thrifty
(together with the disclosure schedules previously delivered to
us) at any time within five days of that September 16 special
meeting.
Citigroup and Morgan Stanley & Co. Incorporated
are acting as financial advisors to Avis Budget Group, and
Kirkland & Ellis LLP and Arnold & Porter LLP
are acting as legal counsel.
On September 3, 2010, Mr. Frissora called
Mr. Thompson to ask DTG to postpone its special meeting to
permit DTG stockholders to make a more informed decision based
upon potential developments in the FTCs review of the
transactions contemplated by the 2010 Merger Agreement and a
potential alternate transaction with Avis Budget.
Mr. Thompson responded that while he would raise
Mr. Frissoras request with the DTG board of
directors, he believed such a postponement was not necessary and
that Hertz should consider an increase in the merger
consideration to reflect what Mr. Thompson maintained was a
material increase in the value of DTGs business since the
execution of the 2010 Merger Agreement and, thereby, to increase
the likelihood of approval of the merger by DTGs
stockholders.
On September 3, 2010, the DTG board of directors met to
discuss the revised Avis Budget proposal as embodied in its
September 2, 2010 press release. At the meeting, DTGs
financial advisors presented their preliminary financial
analyses of the Avis Budget proposal, and representatives of
Cleary, discussed with the board the status of the FTCs
antitrust review of each of the merger and the proposed Avis
Budget combination. The DTG board of directors then discussed
the revised terms proposed by Avis Budget in its press release,
noting that Avis Budget had not changed in any respect its
position with regard to the allocation of antitrust regulatory
risk. As a result, the DTG board of directors concluded that
there was no basis on which to revisit its prior determination
that it could not conclude that the Avis Budget proposal
reasonably could be expected to be consummated on a timely
basis, as required to be considered a superior
proposal under the 2010 Merger Agreement. The DTG board of
directors also discussed Mr. Frissoras request to
delay the special stockholder meeting, and determined not to
make any change in the meeting date at that time.
On September 7 and 8, 2010, Hertzs board of directors met,
together with its advisors, including representatives from
Barclays, Deutsche Bank Securities Inc., BofA Merrill Lynch, D.
F. King & Co., Inc. and Debevoise to discuss whether
to propose to DTG an increase in the merger agreement
consideration and, if so, on what terms. On September 8,
the Hertz board of directors approved the amendment, which
provided for a $10.80 increase in the cash merger consideration
to be paid per share of DTG common stock in the merger and
authorized Hertz to propose the amendment to DTG.
On September 8, 2010, the Delaware Court of Chancery
rejected a motion made by the plaintiff class in the
then-pending Delaware state court action for a preliminary
injunction that would have prevented DTG from holding a
stockholder vote on the proposed merger.
24
On September 8, 2010, Mr. Frissora called
Mr. Thompson to communicate Hertzs proposed $10.80
increase in the cash merger consideration to an amount that,
when taken together with the 0.6366 of a share of Hertz common
stock and the special dividend per share amount, would have a
value of $50.00 per share of DTG common stock, based on the
closing price of the Hertz common stock on September 10,
2010. Mr. Frissora stated that this offer was
non-negotiable and final. Mr. Frissora also said that in
conjunction with announcing the increase, Hertz would publicly
disclose that it is actively taking steps to sell its Advantage
business in order to procure timely antitrust approval for the
merger. At the request of Hertz, representatives of Barclays
called representatives of J.P. Morgan, and representatives
of Debevoise called representatives of Cleary, in each case to
confirm Hertzs proposed increase in the cash merger
consideration, and Debevoise subsequently forwarded to Cleary a
draft of an amendment to the 2010 Merger Agreement reflecting
the increase.
On September 9, 2010, Mr. Thompson contacted
Mr. Frissora by
e-mail
seeking confirmatory due diligence information, including
confirmation of average analyst expectations/estimates for Hertz
for 2010 and 2011. Mr. Frissora responded to
Mr. Thompson that Hertz management believed Hertz was on
track to meet average analyst expectations/estimates for Hertz
for 2010 and 2011.
On September 10, 2010, the DTG board of directors met to
consider the offer by Hertz to increase the cash portion of the
merger consideration. At the meeting, DTGs financial
advisors made a presentation regarding their financial analyses
of the transaction contemplated by the Hertz amendment proposal
and delivered to the board the oral opinions of their respective
firms, which were subsequently confirmed in writing, that, as of
such date, and based upon and subject to the factors and
assumptions set forth in the opinions, the total amount of cash
and stock consideration, consisting of the revised merger
consideration and special dividend per share amount, was fair,
from a financial point of view, to DTGs stockholders. The
DTG board of directors then discussed the Hertz amendment
proposal, as well as the status of the FTCs antitrust
review of the merger and the Avis Budget proposal, views
expressed to DTG management by certain of DTGs
stockholders with respect to the merger and the Avis Budget
proposal, and the likelihood that Hertz would be willing to
increase the merger consideration further. At the conclusion of
such discussion, the DTG board of directors unanimously approved
the proposed amendment to the 2010 Merger Agreement, recommended
that DTGs stockholders approve the 2010 Merger Agreement,
as amended, and directed DTGs officers to enter into the
amendment. The DTG board of directors also unanimously approved
postponing the date of the special meeting of DTGs
stockholders from September 16, 2010 to September 30,
2010, in order to provide DTG stockholders additional time in
which to consider the amended merger terms.
On September 10, 2010, Mr. Thompson called
Mr. Frissora and informed him that the DTG board of
directors had approved Hertzs revised offer and authorized
DTG to enter into the amendment.
On September 10, 2010, Hertz, HDTMS, Inc. and DTG executed
the amendment to the 2010 Merger Agreement. On
September 13, 2010, Hertz and DTG issued a joint press
release announcing the amendment and the postponement of the
special meeting.
On September 23, 2010, Avis Budget announced that it was
increasing the cash portion of its offer from $40.75 to $45.79
per share (which would include a pre-closing special dividend to
be paid by DTG, equal to the special dividend per share amount
agreed between DTG and Hertz in the 2010 merger agreement,
consistent with Avis Budgets previous proposal). Avis
Budget further expressed a willingness to pay a higher price in
the absence of the
break-up fee
agreed between Hertz and DTG.
On September 24, 2010, Hertz affirmed that its offer to
acquire DTG at a purchase price equivalent to $50.25 (based on
the then-current value of Hertz stock and including the special
dividend per share amount) was Hertzs best and final
offer. The closing price of DTG common stock on
September 24, 2010 was $51.03.
25
On September 27, 2010, Mr. Capo and Mr. Thompson
received a letter from Mr. Nelson, the text of which
follows:
Dear Scott and Tom,
We believe that the Board of Directors of Dollar Thrifty should
have declared our recent offer to be a superior proposal, and do
not agree with the Boards purported reasons for not doing
so.
We believe that Dollar Thrifty shareholders deserve to receive
the highest value for their investment, and the latest
best and final offer from Hertz is not the highest
value available to your shareholders. Based on our current
analysis, the price being offered by Hertz provides double digit
accretion in earnings to Hertz, while our higher offer would
afford Dollar Thrifty shareholders an opportunity to participate
in a larger share of the value to be created through a business
combination.
We recognize that antitrust approval is a hurdle for an Avis
Budget-Dollar Thrifty deal, but the reality is that there are
significant remaining antitrust hurdles for the Hertz deal as
well.
While we have been consistent in our message on antitrust from
the outset, Hertzs characterization of its antitrust
posture has been changing, for the worse, from the first
announcement of the transaction. In April 2010, Hertz officials
confidently predicted that the deal should be completed no
later than the early part of the fourth
quarter in other words, within the next few
weeks or so (The New York Times Dealbook, Hertz Aims to Push
Forward with Dollar Thrifty, April 26, 2010). Then, Mark
Frissora said he was really pleased with the pace of
the FTC review and that the FTC review was on a quick
look which means the time for a second review is
less than what it would normally be (Hertz Second Quarter
2010 Earnings Call, August 4, 2010). Now, Hertz is saying
that neither Hertz nor Dollar Thrifty has substantially complied
with the Second Request, and that the FTC review is not likely
to be completed until the end of the year. Avis Budget, in
contrast, has substantially completed its response to its Second
Request.
Hertzs statements on required remedies have been equally
inconsistent. Hertz had initially suggested that no divestiture
of Advantage would be required to obtain antitrust
clearance on its First Quarter 2010 Earnings Call,
Mr. Frissora indicated that [i]ts just an issue
that there may be a few airports that may be carved out, maybe
not. Now, after more than four months of antitrust review,
Hertz has confirmed that there is no agreement of any kind with
the FTC on remedies, the divestiture of Advantage is required at
a minimum, and more actions may be necessary in order to obtain
clearance. In fact, the data make clear that if the FTC compels
divestitures at airports at which the number of serving firms is
reduced from four to three and the combined Hertz-Dollar Thrifty
share exceeds 35%, then the revenues that Hertz will be required
to divest will far exceed the amount it has committed to in its
merger agreement. Advantage, after all, is located at just a
scant few of those airports.
This highlights why it makes no sense for Dollar Thrifty to hold
a shareholder meeting on September 30 while the FTCs
evaluation of both the Hertz deal and the Avis Budget deal
continues and the outcome of such evaluation will not be known
for many months.
In the context of the antitrust issues associated with the sale
of Dollar Thrifty to either Hertz or Avis Budget, we are
prepared to make the following two concrete proposals:
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If the shareholder vote on a Hertz-Dollar Thrifty deal is
delayed until December 30, Avis Budget will
commit even without an agreement with
you to continue to diligently pursue antitrust
clearance for its transaction through the end of the year. The
best way to assure that the highest value is provided to Dollar
Thrifty shareholders is to hold the shareholder vote on December
30 and let the FTC complete its review and render its findings.
If Hertz is confident that its antitrust posture is so much
better than ours, we do not see why Hertz would have any
objection to delaying the shareholder vote.
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Alternatively, if you are unable or unwilling to delay the
shareholder vote, in the event the Hertz-Dollar Thrifty deal is
not approved at the September 30 meeting, we will commit to
commence an exchange offer at our recent offer price no later
than 10 business days after the shareholder
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26
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meeting. Such offer will be subject only to the terms and
conditions in the merger agreement previously provided to you
(as adjusted for an exchange offer structure and to address a
technical modification of a credit agreement) and the Dollar
Thrifty disclosure schedules previously delivered to us, and we
will keep such offer open until the end of the year while we
continue to pursue antitrust clearance.
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Our willingness to agree to commence an exchange offer
underscores our commitment to acquire Dollar Thrifty and, at the
same time, will not require Dollar Thrifty to pay a breakup fee
to Hertz if such fee is ever appropriate to be
paid until either the recommendation of our offer by
the Dollar Thrifty board or the successful completion of the
offer.
If the shareholder meeting is delayed or the Hertz deal is
rejected by Dollar Thrifty shareholders, we believe shareholders
will continue to have two bidders for Dollar Thrifty. We believe
it is not credible that Hertz has made its best and final
offer given the favorable economics in this deal for Hertz
and the fact that it insisted on continuing to have matching
rights against any competing acquisition proposal in its most
recent merger agreement that supposedly represented its final
bid. On the other hand, if the meeting proceeds on September 30
and the Dollar Thrifty shareholders approve the Hertz deal, that
in effect would end the bidding and all that would be left is an
inferior offer with regulatory uncertainties. Clearly, if the
FTC decides to approve both deals, the Avis Budget proposal
offers superior value and is the best deal for the Dollar
Thrifty shareholders.
We hope that you will give us the opportunity to move forward on
a transaction that will create significant value for our
respective shareholders.
Sincerely,
/s/ Ronald L. Nelson
Avis Budget issued a press release containing the text of the
letter contemporaneously with its transmission to DTG. On the
same day, the DTG board of directors met to discuss the letter.
Following the meeting of the DTG board of directors, and at the
direction of the DTG board of directors, Mr. Thompson
contacted Mr. Frissora and informed him that DTG would not
postpone the special meeting. Also on September 27, 2010,
the DTG board of directors publicly reaffirmed its
recommendation that holders of DTG common stock vote to approve
the 2010 Merger Agreement, acknowledging that the Avis Budget
proposal offered greater consideration per share of DTG common
stock, but stating that Avis Budget did not demonstrate to the
DTG board of directors satisfaction that its proposed
transaction could be completed in a timely manner and that it
would adequately protect DTG stockholders in the event that Avis
Budget is unable to obtain required regulatory approvals.
On September 29, 2010, Hertz announced that if the DTG
stockholders did not approve the 2010 Merger Agreement at the
special meeting on September 30, 2010, Hertz would
immediately terminate the 2010 Merger Agreement, end all efforts
to acquire DTG, stop the process of selling its Advantage
business and withdraw its antitrust application from the FTC.
Avis Budget thereafter announced that if DTG stockholders did
not approve the Hertz merger at the DTG special meeting on
September 30, 2010, Avis Budget would (i) continue to
actively pursue the acquisition of DTG, including commencing an
exchange offer no later than 10 business days after the meeting;
(ii) continue to actively pursue antitrust clearance;
(iii) commit to sign the merger agreement previously
provided, with an additional provision to assure that Hertz
honors the commitments made in its statement; and
(iv) agree to pay a $20 million reverse termination
fee in the merger agreement with DTG. The closing price of DTG
common stock on September 29, 2010 was $50.10.
On September 30, 2010, prior to the commencement of the
special meeting of DTG stockholders, representatives of DTG
indicated to representatives of Hertz that DTG would be willing
to postpone the meeting until December 2010 if Hertz were to
reduce the amount of its termination fee and waive its right to
27
match competing offers. The Hertz representatives declined the
offer, noting that Hertz was not inclined to continue pursuing
the divestiture of Advantage without having first obtained the
approval of the DTG stockholders. Thereafter, at the special
meeting of DTG stockholders, holders of a majority of the
outstanding shares of DTG common stock failed to vote in favor
of the proposal to adopt the 2010 Merger Agreement, with 54% of
the outstanding shares of DTG common stock opposed to the
adoption of the 2010 Merger Agreement. The closing price of DTG
common stock on September 30, 2010 was $50.14.
On October 1, 2010, Hertz terminated the 2010 Merger
Agreement. Also, on October 1, 2010, Hertz withdrew its
application under the HSR Act with the FTC and DOJ. The closing
price of DTG common stock on October 1, 2010 was $49.86.
On October 5, 2010, Avis Budget and DTG issued a joint
press release announcing their agreement to cooperate on
obtaining antitrust clearance for Avis Budgets proposed
acquisition of DTG and that, at the request of the DTG board of
directors, Avis Budget would not be commencing an exchange offer
at that time.
On November 2, 2010, DTG issued a press release announcing
its results for the third quarter ended September 30, 2010
and providing an update on its 2010 guidance. DTG announced that
its Corporate Adjusted EBITDA for the quarter, excluding
$11.9 million of merger-related expenses, was
$93.7 million, a 71% increase from $54.7 million for
the third quarter of 2009. DTG noted that it expected fourth
quarter 2010 rental revenue to increase by 2 to
4 percent compared to the fourth quarter of 2009 and that
it expected fourth quarter 2010 depreciation per unit per month
to be within a range of $295 to $305. DTG also reaffirmed its
previously announced guidance that it expected full-year 2010
Corporate Adjusted EBITDA (excluding merger-related expenses) to
be within a range of $240 million to $260 million and
that it expected 2011 fleet cost to be within a range of $300 to
$310 per month.
On November 9, 2010, Mr. Thompson sent a letter to
Mr. Nelson expressing the view that antitrust uncertainty
remained a concern. He inquired whether Avis Budget planned to
extend its commitment to explore a transaction through the end
of the first quarter of 2011, otherwise DTG would need to
consider its cooperation with respect to antitrust matters.
Mr. Nelson responded by letter the same day, stating that
Avis Budget planned to continue its efforts into the first
quarter of 2011, and that it would refrain from commencing an
exchange offer at the present time.
On January 11, 2011, DTG and Avis Budget issued a joint
press release providing an update regarding their cooperation
efforts on antitrust matters. The press release noted that Avis
Budget and DTG had presented to the FTC their jointly held view
that a combination of DTG and Avis Budget would not reduce
competition in the rental car industry, that both parties
believed that substantial progress had been made in the
discussions with the FTC and that both DTG and Avis Budget had
notified the FTC of their intention to certify substantial
compliance with its second requests on a timetable that would
require an official decision from the FTC by the end of March or
early April. The press release also noted that the FTCs
position with respect to the competitive issues regarding a DTG
and Avis Budget combination remained uncertain and that there
could be no assurance that any agreement regarding a business
combination between DTG and Avis Budget could be reached.
On February 17, 2011, Avis Budget announced that it had
certified substantial compliance with the FTCs second
request relating to Avis Budgets proposed acquisition of
DTG.
On February 24, 2011, DTG issued a press release announcing
its results for the full year and fourth quarter ended
December 31, 2010 and providing initial 2011 guidance. DTG
announced that full year 2010 Corporate Adjusted EBITDA,
excluding merger-related expenses during 2010, was
$258.3 million, an increase of approximately
160 percent compared to the full year of 2009. DTG noted
that it expected 2011 rental revenue to increase by 2 to
4 percent compared to 2010, and that it expected 2011
depreciation per unit per month to be within the previously
announced range of $300 to $310. DTG also announced that it
expected full-year 2011 Corporate Adjusted EBITDA (excluding
merger-related expenses) to be within a range of
$175 million to $200 million. Also in this press
release, DTG announced that it had certified substantial
compliance with the FTCs second request relating to Avis
Budgets proposed acquisition of DTG. The closing price of
DTG common stock on February 24, 2011 was $52.78.
28
According to the Prospectus/Offer to Exchange, in February 2011,
Hertz retained Cravath, Swaine & Moore LLP, which we
refer to as Cravath, as legal counsel, and Lazard,
Frères & Co. LLC, which we refer to as Lazard, as
a financial advisor.
On March 22, 2011, DTG issued a press release announcing an
update to its full-year 2011 guidance and also provided
preliminary guidance for the first quarter ended March 31,
2011. DTG noted that based on changes in fleet cost
expectations, it was revising its estimate of Corporate Adjusted
EBITDA (excluding merger-related expenses) for the full year of
2011 to be within a range of $235 million to
$260 million, an increase of $60 million, or
approximately 30%, from the companys previously announced
guidance range of $175 million to $200 million. DTG
also noted that it expected 2011 depreciation per unit per month
to be $240 to $250, compared to the previously announced range
of $300 to $310 due to favorable conditions in the used car
market. DTG also announced that Corporate Adjusted EBITDA
(excluding merger-related expenses) for the first quarter of
2011 was expected to range from $25 million to
$30 million, compared to $51.1 million (excluding
merger-related expenses of $1.7 million) in the first
quarter of 2010. DTG noted that the decrease was due to a
decrease in gains on sales of vehicles from $25.7 million
in the first quarter of 2010, to approximately $7 million
in the first quarter of 2011, primarily due to the disposition
of approximately 7,300 fewer vehicles compared to the prior year
period. The closing price of DTG common stock on March 22,
2011 was $59.26.
On May 5, 2011, DTG issued a press release announcing its
results for the first quarter ended March 31, 2011 and
updating its March 2011 guidance. DTG announced that Corporate
Adjusted EBITDA for the first quarter of 2011 was
$36.3 million, compared to $49.4 million in the first
quarter of 2010. DTGs release stated that first quarter
2011 Corporate Adjusted EBITDA was negatively impacted by a
$1.8 million increase in merger-related expenses and a
reduction in gains on risk vehicle sales of $17.8 million,
each as compared to first quarter 2010. DTG reaffirmed its
previously announced expectation that 2011 rental revenue
would increase by 2 to 4 percent compared to 2010 and
announced that it expected full-year 2011 depreciation per unit
per month to now range from $230 to $240 compared to the
previously announced range of $240 to $250. DTG also announced
that it expected full-year 2011 Corporate Adjusted EBITDA
(excluding merger-related expenses) to be within a range of
$260 million to $285 million compared to its
previously announced range of $235 million to
$260 million. The closing price of DTG common stock on
May 5, 2011 was $69.85.
On May 8, 2011, Mr. Frissora informed
Mr. Thompson over the phone that Hertz intended to announce
a cash/stock exchange offer for DTG common stock the next day.
Mr. Frissora discussed the Hertz proposal and Hertzs
commitment to the proposed transaction. Mr. Frissora also
explained to Mr. Thompson that Hertz is seeking a
cooperative transaction and requested that DTG cooperate with
Hertz regarding antitrust matters.
On May 9, 2011, Hertz filed its registration statement on
Form S-4
with the SEC and filed a press release announcing its intent to
commence an exchange offer at a price per share of DTG common
stock of (i) $57.60 in cash, without interest and less any
required withholding taxes, and (ii) 0.8546 shares of
Hertz common stock, and to consummate a second-step merger
following completion of the proposed exchange offer. On the same
day, Mr. Frissora sent a letter to Mr. Thompson, the
text of which follows:
Dear Scott:
As we discussed yesterday, Hertz is moving forward with an
exchange offer for all outstanding shares of Dollar Thrifty
Automotive Group, Inc. Hertz is offering Dollar Thrifty
shareholders $72.00 per share (based on Hertzs closing
stock price on May 6, 2011), consisting of $57.60 in cash
and 0.8546 shares of Hertz. We believe that Hertzs
offer represents a compelling opportunity for your shareholders
to realize superior value in the near term with a very high
degree of closing certainty.
Hertz is looking forward to proceeding on a consensual basis
with the support of the Dollar Thrifty Board of Directors and
management team. Our exchange offer is intended to provide
Dollar Thriftys shareholders with a firm offer on an
accelerated timetable in order to position Hertz and Dollar
Thrifty to close a deal and deliver value to Dollar
Thriftys shareholders as soon as possible.
29
We believe we have made a superior offer that reflects Dollar
Thriftys improved recent performance and outlook for 2011.
Specifically, our offer provides:
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a 26% premium and 18% premium to Dollar Thriftys
90-day and
60-day
average share price, respectively;
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a 7.6x multiple of Dollar Thriftys LTM EBITDA for the
period ended March 31, 2011; and
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a 24% premium to the value of the entirely hypothetical price
announced by Avis Budget Group, Inc. over seven months ago of
$45.79 in cash and 0.6543 shares of Avis Budget stock,
based on the closing stock prices for Hertz and Avis Budget on
May 6, 2011. These are substantial premiums, especially
after taking into account the significant takeover speculation
premium already included in Dollar Thriftys current stock
price.
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Our offer delivers a high degree of closing certainty. We
are engaged in discussions with the Federal Trade Commission and
have started a process for the divestiture of our Advantage
brand. We are highly confident that we will obtain FTC clearance
for the transaction and are committed to a fast path forward. In
contrast, Dollar Thriftys shareholders do not have any
offer from Avis Budget, and it has become clear that Avis Budget
is either unwilling or unable to close on an offer even if it
made one because of serious antitrust obstacles.
Our offer is not subject to any financing condition or
contingency.
This transaction is the highest priority for Hertz and has the
unanimous support of our Board of Directors and management team.
I am available to speak with you at any time, and I encourage
you to have your financial and legal advisors meet with Mark
McMaster at Lazard and Scott Barshay at Cravath, two of our
principal advisors. We look forward to working with you and your
team to advance the best interests of our respective
shareholders, employees and customers.
Sincerely,
/s/ Mark P. Frissora
Chairman of the Board and Chief Executive Officer
Hertz Global Holdings, Inc.
On May 9, 2011, representatives of Cleary spoke with
representatives of Cravath by telephone. In this conversation,
the Cravath representatives reiterated Hertzs intention to
pursue a cooperative transaction with DTG and that the primary
reasons for pursuing an exchange offer at this time were to
demonstrate their seriousness to DTG stockholders and the FTC.
The Cravath representatives also reiterated Hertzs request
that DTG cooperate with Hertz regarding antitrust matters.
During the course of this conversation, the Cleary
representatives explained that DTGs willingness to
cooperate with Hertz regarding antitrust matters may be
conditioned upon Hertzs waiver of its right to receive a
termination fee under the 2010 Merger Agreement in the event
that DTG enters into an agreement with respect to, or
consummates, a business combination with any party other than
Hertz prior to the one-year anniversary of the termination of
the 2010 Merger Agreement. The representatives of Cravath
responded that they did not believe Hertz would be willing to
agree to such a waiver.
On May 9, 2011, DTG issued a press release announcing that
the DTG board of directors would review and consider
Hertzs offer and related statements in accordance with its
fiduciary duties to DTG stockholders and that DTG stockholders
are advised to take no action pending the DTG board of
directors review of the exchange offer. The closing price
of DTG common stock on May 9, 2011 was $79.27.
Also on May 9, 2011, a stockholder of DTG that had
previously filed a Schedule 13G in respect of DTG common
stock filed a statement on Schedule 13D. According to this
stockholders Schedule 13D, the stockholder
beneficially owned 4,961,983 shares, or approximately
17.2%, of the outstanding DTG common stock and intends to
engage in discussions with management and other stockholders of
the company and
30
other relevant parties with regard to the appropriate price and
structure of a potential transaction with Hertz or other
strategic alternatives that may maximize shareholder
value. Based on a Form 13F filed by this stockholder
on May 16, 2011, such stockholder also owned
15,856,975 shares, or approximately 3.8%, of the
outstanding Hertz common stock as of March 31, 2011.
On May 10, 2011, the DTG board of directors, together with
members of DTGs management and the companys outside
legal and financial advisors, held a telephonic meeting to
consider the terms of Hertzs proposed exchange offer. At
the meeting, representatives of Cleary reviewed the Hertz offer
and related legal matters with the DTG board of directors. The
DTG board of directors discussed the proposed exchange offer,
including, among other topics, the offer price in light of
DTGs then-current trading price and the uncertainty
surrounding antitrust regulatory clearance and other potential
strategic options. DTGs financial advisors reviewed
certain financial metrics relevant to the exchange offer with
the DTG board of directors. The DTG board of directors then
discussed several matters, including (i) Hertzs
request that DTG cooperate with respect to antitrust matters;
(ii) Hertzs right to collect a termination fee under
the 2010 Merger Agreement under certain circumstances;
(iii) the status and anticipated timing of an antitrust
clearance process for each of Avis Budget and Hertz;
(iv) possible recommendations to stockholders regarding the
Hertz offer and (v) the possibility of adopting a
stockholder rights plan or poison pill to ensure
that the DTG board of directors and stockholders have a full and
fair opportunity to consider any proposals and alternatives
thereto, without the undue influence that may result if one or
more holders are permitted to accumulate significant positions
in the DTG common stock. During the course of this discussion,
the DTG board of directors discussed whether DTGs
cooperation with Hertzs efforts to obtain antitrust
clearance should be made expressly subject to Hertzs
waiver of its right to receive a termination fee under the 2010
Merger Agreement, and determined that it would be in the best
interests of DTG stockholders for DTG to cooperate with Hertz
regardless of whether Hertz waived such right. The DTG board of
directors instructed the Cleary representatives to proceed
accordingly with their counterparts at Cravath. The DTG board of
directors also instructed the Cleary representatives to prepare
an updated draft of the stockholder rights plan that the DTG
board of directors had previously considered in August 2009. On
May 10, 2011, the closing price of DTG common stock was
$81.96.
On May 11, 2011, a representative of Cleary spoke by
telephone with a representative of Cravath and formally
requested that Hertz waive its right to receive a termination
fee under the 2010 Merger Agreement in exchange for DTGs
cooperation on antitrust clearance matters. The representative
of Cravath responded that Hertz was absolutely unwilling to
waive its rights to the termination fee under the 2010 Merger
Agreement. Following further discussion of the matter, the
Cleary representative informed the Cravath representative that
DTG would cooperate with Hertz on antitrust matters
notwithstanding Hertzs refusal to waive its right to a
termination fee, in accordance with the determinations of the
DTG board of directors on May 10, 2011.
On May 12, 2011, DTG issued a press release announcing that
DTG agreed to cooperate with Hertz with respect to Hertzs
efforts to pursue regulatory clearance of its proposed
acquisition of DTG. On May 12, 2011, the closing price of
DTG common stock was $83.01.
On May 18, 2011, the DTG board of directors, joined by
members of DTGs management and the companys outside
legal and financial advisors, held a telephonic meeting to
consider further a stockholder rights plan. In considering the
stockholder rights plan, representatives of Cleary presented to
the DTG board of directors a review of the DTG board of
directors fiduciary duties to the DTG stockholders and
recent Delaware case law regarding such plans. Following
consideration and discussion with DTGs financial and legal
advisors, the DTG board of directors determined by unanimous
vote to adopt the Rights Agreement between DTG and Computershare
Trust Company, N.A., as rights agent, dated May 18,
2011. The DTG board of directors continued to discuss the
regulatory uncertainty relating to antitrust approvals, and the
importance of further developments in the antitrust approvals
process. The DTG board of directors determined to continue
consideration of a recommendation following the commencement by
Hertz of the exchange offer. Later that day, DTG issued a press
release announcing the entry by the company into the Rights
Agreement. On May 18, 2011, the closing price of DTG common
stock was $80.60.
31
On May 27, 2011, the DTG board of directors, together with
members of DTGs management and the companys outside
legal and financial advisors, held a telephonic meeting to
further consider the terms of Hertzs proposed exchange
offer and a potential response by the DTG board of directors to
the proposed exchange offer. At the meeting, representatives
from Cleary discussed certain legal issues, and DTGs
financial advisors reviewed certain financial parameters
relevant to the exchange offer with the DTG board of directors.
The DTG board of directors then discussed several matters,
including the status and anticipated timing of the antitrust
regulatory clearance for each of Avis Budget and Hertz, and
possible response by the DTG board of directors to the Hertz
offer. On May 27, 2011, the closing price of DTG common
stock was $82.90.
On June 3, 2011, the DTG board of directors, joined by
members of DTGs management and DTGs outside legal
and financial advisors, held a telephonic meeting. At the
meeting, representatives of Cleary reviewed a draft of this
Schedule 14D-9
and certain related legal matters with the DTG board of
directors. The DTG board of directors discussed the draft
Schedule 14D-9,
asked questions of DTGs management and Cleary, and
determined to recommend that DTGs stockholders NOT tender
their shares of DTG common stock pursuant to the offer at this
time. The closing price of DTG common stock on June 3, 2011
was $83.74.
Reasons
for Recommendation
In reaching the conclusions and in making the unanimous
recommendation that DTGs stockholders NOT tender their
shares of DTG common stock pursuant to the offer at this time,
the DTG board of directors carefully and thoroughly considered
the terms and conditions of the offer and their fiduciary duties
to DTG stockholders under applicable law, consulted with
management of the company and DTGs financial and legal
advisors, and took into account numerous factors, including but
not limited to those discussed below. In connection with
developments as to the matters discussed below, the DTG board of
directors will continue to consult with its advisors regarding
potential and appropriate next steps that will best serve the
interests of the company and its stockholders.
The timing and terms of antitrust regulatory clearance of any
proposed transaction with Hertz or Avis Budget remains
uncertain.
The offer is subject to a number of conditions, including that
the waiting periods applicable to the offer and second-step
merger under the HSR Act and the no-close period (including any
extensions thereof) applicable to the offer and the second-step
merger under the Competition Act (Canada) shall have, in each
case, expired or been waived or terminated.
On October 1, 2010, Hertz withdrew its application under
the HSR Act with the FTC and the DOJ, and as of the date of this
Schedule 14D-9,
DTG is not aware of any filing by Hertz of a notification and
report form under the HSR Act in respect of the offer. Although
DTG believes that a combination of DTG with either Hertz or Avis
Budget would not reduce competition in the rental car industry
and that both transactions are capable of obtaining antitrust
clearance, DTG believes that antitrust regulatory clearance of
either transaction under the HSR Act could require a further
review process, and there can be no assurance as to the ultimate
receipt of clearance under the HSR Act
and/or the
timing and terms thereof, and there can be no assurance that
either Hertz or Avis Budget will be willing to accept HSR
clearance on the terms that the FTC may seek to impose, as
further discussed below.
According to the Prospectus/Offer to Exchange, Hertzs
no-action letter from the Canadian Competition Commissioner was
scheduled to expire on May 21, 2011. However, on
May 18, 2011, the Canadian Competition Commissioner granted
Hertzs request to extend the expiration date to
August 21, 2011. However, as the Prospectus/Offer to
Exchange acknowledges, there can be no assurance that the
Canadian Competition Commissioners no-action letter will
be extended following that date.
Accordingly, the DTG board of directors believes that the
pending antitrust regulatory review process introduces an
element of uncertainty to the offer, or any other transaction
with Hertz or Avis Budget, as well as the benefits that DTG
stockholders can expect to realize from any such transactions as
stockholders in the combined enterprise. The DTG board of
directors also noted that the offer price is: below the closing
price of DTG common stock of $79.27 on May 9, 2011, the day
that Hertz announced the offer; below the closing price of DTG
common stock of $80.21 on May 24, 2011, the day that Hertz
commenced the offer; and below the closing price of DTG common
stock of $82.01 on June 1, 2011, the last practicable
trading day prior to
32
the filing of this
Schedule 14D-9.
The DTG board of directors will, consistent with its fiduciary
duties to DTG stockholders, consider further developments that
arise during the pending antitrust regulatory review process and
update its recommendation to stockholders if the situation
warrants.
Hertzs proposal to divest its Advantage brand may not
be sufficient to obtain antitrust regulatory clearance, and any
additional remedies required by the FTC in connection with such
clearance may adversely impact DTG stockholders who, according
to the Prospectus/Offer to Exchange, would own 5.6% of the
combined company following closing of the second-step merger.
According to the Prospectus/Offer to Exchange, Hertz has
commenced a process for the divestiture of its Advantage brand.
There can be no assurance that Hertz will be able to identify a
buyer for its Advantage brand that is acceptable to the FTC or
that the divestiture of the Advantage brand will be sufficient
to obtain antitrust regulatory clearance under the HSR Act. The
FTC may seek additional remedies that Hertz may be unwilling to
accept, or that if accepted, may have a material adverse impact
on DTG stockholders as stockholders in the combined entity.
Hertz is currently under no obligation to DTG or its
stockholders to make any concessions in order to obtain
antitrust clearance and the DTG board of directors believes that
DTG stockholders should refrain from taking any action in
respect of the offer until FTC clearance is obtained or until
the DTG board of directors determines that there is sufficient
clarity regarding the antitrust regulatory review process. The
DTG board of directors, will, consistent with its fiduciary
duties to DTG stockholders, consider further developments that
arise in this regard.
Other parties may make competing proposals with respect to an
acquisition of DTG.
As noted above, Hertzs offer is below the closing price of
DTG common stock of $79.27 on May 9, 2011, the day that
Hertz announced the offer; below the closing price of DTG common
stock of $80.21 on May 24, 2011, the day that Hertz
commenced the offer; and below the closing price of DTG common
stock of $82.01 on June 1, 2011, the last practicable
trading day prior to the filing of this
Schedule 14D-9.
Consequently, the DTG board of directors believes that it is
likely that Hertz will increase its offer price
and/or that
another party will make a competing proposal to acquire DTG.
Avis Budget has expressed on numerous occasions its interest in
acquiring DTG, most notably in response to the 2010 Merger
Agreement. Since May 3, 2010, Avis Budget has been pursuing
an acquisition of DTG. As disclosed above under
Item 4 Background of the Offer, prior to
the termination of the 2010 Merger Agreement, Avis Budget made
several proposals to the DTG board of directors regarding an
acquisition of DTG. Although the DTG board of directors was
unable to conclude that any Avis proposal constituted a
superior proposal under the 2010 Merger Agreement,
Avis Budget continued to pursue an acquisition of DTG even after
termination of the 2010 Merger Agreement. On October 5,
2010, DTG and Avis Budget announced an agreement to cooperate
with each other in Avis Budgets efforts to obtain
antitrust regulatory clearance with respect to its proposed
purchase of DTG common stock and DTG and Avis Budget continue to
cooperate in this respect. However, as of the date of this
Schedule 14D-9,
Avis Budget does not have antitrust regulatory clearance for its
proposed acquisition of DTG, which could require a further
review process, and there can be no assurance as to the ultimate
receipt of clearance
and/or the
timing and terms thereof. Although there can be no assurance
that Avis Budget will make a revised proposal (or that any other
party will make a proposal) in response to the offer or that any
such proposal would be superior to the offer or otherwise in the
best interests of DTGs stockholders, the DTG board of
directors believes that it is likely that Avis Budget will make
a revised proposal in response to the offer, the timing and
terms of which may depend in part on the timing and outcome of
Avis Budgets discussions with the FTC. The DTG board of
directors believes that any revised proposal from Avis Budget
(or any proposal from any other party) would be a material
consideration for the DTG board of directors and DTG
stockholders in evaluating the offer. Accordingly, the DTG board
of directors believes that it is in DTGs
stockholders best interest to await further clarity on the
Hertz and Avis Budget antitrust regulatory review process to
determine whether Avis Budget will submit a revised proposal (or
any other party will submit a proposal), and if so to assess the
terms and conditions (including the proposed purchase price) of
such a proposal as compared to the offer, or any enhanced offer
that Hertz may make, whether in response to a revised proposal
or otherwise. The DTG board of directors, will, consistent with
its fiduciary duties to DTG stockholders, consider further
developments that arise in connection with Avis Budgets
continued pursuit (and any other partys pursuit) of an
acquisition of DTG.
33
Intent to
Tender
To DTGs knowledge, after making reasonable inquiry, none
of DTGs directors, executive officers, affiliates or
subsidiaries currently intends to tender or cause to be tendered
for purchase pursuant to the offer any shares of DTG common
stock held of record or beneficially owned by such director,
executive officer, affiliate or subsidiary.
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ITEM 5.
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PERSONS/ASSETS,
RETAINED, EMPLOYED, COMPENSATED OR USED.
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DTG has retained J.P. Morgan Securities LLC (J.P.
Morgan) and Goldman, Sachs & Co.
(Goldman Sachs) in connection with, among
other things, DTGs analysis and consideration of, and
response to, the offer. DTG has retained both financial advisors
pursuant to letter agreements, and both financial advisors will
be paid customary fees for such services. J.P. Morgan will
receive a fee of up to $16 million based upon the per share
purchase price at the closing of a merger or acquisition
transaction; at the offer price and based on the closing price
of Hertz common stock on June 1, 2011,
J.P. Morgans fee would be approximately
$12 million. J.P. Morgan may receive an additional fee
of up to $2 million at DTGs sole discretion based
upon its assessment of J.P. Morgans performance of
its services to the company. If any transaction negotiations
result in a termination fee, DTG has agreed to pay
J.P. Morgan a fee in the amount of 10% of any such
termination fee, less any expenses incurred by DTG in connection
with the transaction, including any expense reimbursement of
J.P. Morgan. Goldman Sachs will receive a fee of up to
$14 million based upon the per share purchase price at the
closing of a merger or acquisition transaction; at the offer
price and based on the closing price of Hertz common stock on
June 1, 2011, Goldman Sachs fee would be
approximately $10 million. Goldman Sachs may receive an
additional fee of up to $2 million at DTGs sole
discretion based upon its assessment of Goldman Sachs
performance of its services to the company. If any transaction
negotiations result in a termination fee, DTG has agreed to pay
Goldman Sachs a fee in the amount of 10% of any such termination
fee, less any expenses incurred by DTG in connection with the
transaction, except any expense reimbursement to Goldman Sachs.
Both J.P. Morgan and Goldman Sachs will be reimbursed for
their respective reasonable
out-of-pocket
expenses, not to exceed $100,000 without the consent of DTG,
such consent not to be unreasonably withheld (except, in the
case of Goldman Sachs, consent shall not be required for fees
and disbursements of its legal counsel), and will be indemnified
against certain liabilities relating to or arising out of the
engagement.
DTG expects to engage Georgeson Inc.
(Georgeson) to assist it in connection with
DTGs communications with its stockholders in connection
with the offer. DTG expects to pay customary compensation to
Georgeson for such services. In addition, DTG expects to
reimburse Georgeson for its reasonable
out-of-pocket
expenses and to indemnify it and certain related persons against
certain liabilities relating to or arising out of the engagement.
DTG has also retained Sard Verbinnen &
Co. (Sard Verbinnen) as its public
relations advisor in connection with the offer. DTG has agreed
to pay customary compensation to Sard Verbinnen for such
services. In addition, DTG has agreed to reimburse Sard
Verbinnen for its reasonable
out-of-pocket
expenses and to indemnify it against certain liabilities
relating to or arising out of the engagement.
Except as set forth above, neither DTG nor any person acting on
its behalf has or currently intends to employ, retain or
compensate any person to make solicitations or recommendations
to the stockholders of DTG on its behalf with respect to the
offer.
34
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ITEM 6.
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INTEREST
IN SECURITIES OF THE SUBJECT COMPANY
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No transactions with respect to DTG common stock have been
effected by DTG or, to DTGs knowledge after making
reasonable inquiry, by any of its executive officers, directors,
affiliates or subsidiaries during the past 60 days, except
as described below:
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Date of
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Number of
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Name
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Transaction
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Nature of Transaction
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Shares*
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Price/share
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John C. Pope
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05/09/11
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Acquisition of
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5,000
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$
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23.90
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Shares on Option exercise
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Hon. Edward C. Lumley
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05/17/11
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Acquisition of
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5,000
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$
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23.90
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Shares on Option exercise
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Scott L. Thompson(1)
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05/13/11
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Vesting and
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5,805
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$
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81.90
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Net-Settlement of RSUs
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Scott L. Thompson(2)
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05/23/11
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Vesting and
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1,966
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$
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80.27
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Net-Settlement of RSUs
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(1) |
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On May 13, 2011, Mr. Thompson vested in 10,000
restricted stock units. DTG withheld 4,195 shares to cover
withholding taxes and issued Mr. Thompson 5,805 shares. |
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(2) |
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On May 23, 2011, Mr. Thompson vested in 3,387
restricted stock units. DTG withheld 1,421 shares to cover
withholding taxes and issued Mr. Thompson 1,966 shares. |
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ITEM 7.
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PURPOSES
OF THE TRANSACTION AND PLANS OR PROPOSALS
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DTG routinely maintains contact with other participants in its
industry, including Hertz and Avis Budget, regarding a wide
range of business transactions. It has not ceased, and has no
intention of ceasing, such activity as a result of the offer.
DTGs policy has been, and continues to be, not to disclose
the existence or content of any such discussions with third
parties (except as may be required by law) as any such
disclosure could jeopardize any future negotiations that DTG may
conduct.
Except as described in the preceding paragraph or otherwise set
forth in this
Schedule 14D-9
(including in the Exhibits to this
Schedule 14D-9)
or as incorporated in this
Schedule 14D-9
by reference, DTG is not currently undertaking or engaged in any
negotiations in response to the offer that relate to, or would
result in, (i) a tender offer for, or other acquisition of,
DTG common stock by DTG, any of its subsidiaries or any other
person, (ii) any extraordinary transaction, such as a
merger, reorganization or liquidation, involving DTG or any of
its subsidiaries, (iii) any purchase, sale or transfer of a
material amount of assets of DTG or any of its subsidiaries or
(iv) any material change in the present dividend rate or
policy, or indebtedness or capitalization, of DTG.
Except as described above or otherwise set forth in this
Schedule 14D-9
(including in the Exhibits to this
Schedule 14D-9)
or as incorporated in this
Schedule 14D-9
by reference, there are no transactions, resolutions of the DTG
board of directors, agreements in principle or signed contracts
in response to the offer that relate to, or would result in, one
or more of the events referred to in the preceding paragraph.
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ITEM 8.
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ADDITIONAL
INFORMATION
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U.S.
Antitrust Clearance
Under the HSR Act, Hertz is required to file a Notification and
Report Form with the FTC and DOJ (together, the
antitrust agencies) relating to its proposed
acquisition of DTG. In its Prospectus/Offer to Exchange, the
offeror stated that Hertz plans to file a Notification and
Report Form with respect to the offer with the antitrust
agencies and to request early termination of the HSR Act waiting
period.
DTG will be required to submit a responsive Notification and
Report Form with the antitrust agencies by the fifteenth day
following Hertzs filing of its Notification and Report
Form.
35
Under the provisions of the HSR Act applicable to the offer, the
acquisition of DTG voting securities pursuant to the offer may
be consummated following the expiration of a
30-day
waiting period following the filing by Hertz of its Notification
and Report Form with respect to the offer. However, the FTC or
DOJ may extend the initial waiting period by issuing a Request
for Additional Information and Documentary Material (a
Second Request). In such an event, the
statutory waiting period would extend until 30 days after
Hertz has substantially complied with the Second Request, unless
it is earlier terminated by the applicable reviewing antitrust
agency.
At any time before or after the offerors acquisition of
DTG common stock pursuant to the offer, the DOJ or the FTC could
take such action under the antitrust laws as either deems
necessary or desirable in the public interest, including seeking
to enjoin the purchase of DTG common stock pursuant to the
offer, or seeking the divestiture of DTG common stock acquired
by Hertz or the divestiture of substantial assets of DTG or its
subsidiaries or Hertz or its subsidiaries. State attorneys
general and private parties may also bring legal action under
the antitrust laws. There can be no assurance that a challenge
to the offer on antitrust grounds will not be made, or, if such
a challenge is made, the result thereof.
If any waiting period under the HSR Act applicable to the offer
has not expired or been terminated prior to the expiration date
of the offer, or if the FTC, the DOJ, a state attorney general,
or a private party obtains an order enjoining the purchase of
DTG common stock, then Hertz will not be obligated to proceed
with the offer or the purchase of any DTG common stock not
previously purchased pursuant to the offer. Additionally, Hertz
may terminate the offer if any action, proceeding, injunction,
order or decree becomes applicable to Hertz that seeks to
restrain or prohibit the exercise by Hertz of its full rights of
ownership or operation of all or a portion of Hertzs
business or assets or those of DTG.
Canadian
Antitrust Clearance
The offer is also subject to review pursuant to the Competition
Act (Canada). Under the Competition Act (Canada), the offer may
not be completed until certain information has been provided to
the Canadian Competition Commissioner, and a required waiting
period has expired or been terminated, provided there is no
order in effect prohibiting completion at the relevant time. In
connection with the 2010 Merger Agreement, Hertz provided such
information to the Canadian Competition Commissioner and the
required waiting period under the Competition Act (Canada)
expired on June 21, 2010. On July 27, 2010, the
Canadian Competition Commissioner issued a no-action letter
stating that she did not intend to challenge the proposed
transaction. Under the Competition Act (Canada), the transaction
may be completed within one year of the date that Hertz provided
the required information to the Canadian Competition
Commissioner in connection with the 2010 Merger Agreement, or
such longer period as the Canadian Competition Commissioner may
specify. As the one-year period following Hertzs
submission of the required information to the Canadian
Competition Commissioner in connection with the 2010 Merger
Agreement. According to the Prospectus/Offer to Exchange,
Hertzs no-action letter from the Canadian Competition
Commissioner was scheduled to expire on May 21, 2011,
however, on May 18, 2011, the Canadian Competition
Commissioner granted Hertzs request to extend the
expiration date to August 21, 2011. However, as the
Prospectus/Offer to Exchange acknowledges, there can be no
assurance that the Canadian Competition Commissioners
no-action letter will be extended following that date.
In connection with an unsolicited transaction, the waiting
period is 30 calendar days after the day on which the offeror
submits the prescribed information, provided that, before the
expiry of this period, the Canadian Competition Commissioner has
not issued a request for additional information
(Supplementary Information Request). In the
event that the Canadian Competition Commissioner issues a
Supplementary Information Request, the transaction cannot be
completed until 30 calendar days after the offeror complies with
such Supplementary Information Request, provided that there is
no order in effect prohibiting completion at the relevant time.
A transaction may be completed before the end of the applicable
waiting period if the Canadian Competition Commissioner notifies
the parties that she does not, at such time, intend to challenge
the transaction.
36
At any time before a merger (as such term is defined
under the Competition Act (Canada)) is completed, even where the
applicable waiting period has expired or been terminated, the
Canadian Competition Commissioner may apply to the Competition
Tribunal for an interim order forbidding any person named in the
application from doing any act or thing where it appears to the
Competition Tribunal that such act or thing may constitute or be
directed toward the completion or implementation of a proposed
merger. The Competition Tribunal may issue an interim order
where the Canadian Competition Commissioner requires more time
to complete her inquiry and the Tribunal finds that, in the
absence of an interim order, a party to the proposed merger or
another person is likely to take an action that would
substantially impair the ability of the Competition Tribunal to
remedy the effect of the proposed merger on competition because
that action would be difficult to reverse.
Other
Regulatory Approvals
One of DTGs subsidiaries is a risk retention group
domiciled in the State of Vermont and generally is regulated by
the Vermont Department of Banking, Insurance,
Securities & Health Care Administration (the
Vermont Department of Banking). The insurance
laws and regulations of the State of Vermont require that prior
to the direct or indirect acquisition of control of a risk
retention group, the person acquiring such control must obtain
the written approval of the Commissioner of the Vermont
Department of Banking. Hertz has disclosed in its
Prospectus/Offer to Exchange that, to the extent legally
required, Hertz expects to request the Vermont Department of
Banking to confirm that the approval it granted in 2010 to
Hertzs indirect acquisition of control of DTGs risk
retention group remains effective and applicable to the offer
and second-step merger.
Information
about Golden Parachute Compensation
Messrs. Scott L. Thompson, H. Clifford Buster III, R. Scott
Anderson, and Rick L. Morris and Ms. Vicki J. Vaniman are
DTGs named executive officers (the Named
Executive Officers). As required by SEC rules, the
following table presents the calculated value of all
compensation that is based upon or otherwise relates to the
offer and would potentially be paid or provided to the Named
Executive Officers in connection with the consummation of the
offer. It assumes that the offer consummation date is
July 8, 2011, which is the expiration date according to the
Prospectus/Offer to Exchange. The amounts disclosed in the
following table also assume that each Named Executive
Officers employment is terminated by DTG without Cause (as
defined below) or by the Named Executive Officer in a Qualified
Termination (as defined below) on the expiration date, and that
he or she is therefore entitled to receive certain severance
payments and benefits, even though these amounts may not become
payable to each Named Executive Officer in connection with the
offer. A narrative discussion explaining the arrangements
covering the Named Executive Officers follows the table.
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Pension/
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Perquisites/
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Tax
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Cash
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Equity
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NQDC
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Benefits
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Reimbursement
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Other
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Total
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Name
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)
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($)
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Scott L. Thompson,
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6,956,354
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25,589,175
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0
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112,497
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5,290,292
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0
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37,948,318
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Chief Executive Officer,
President and Director
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H. Clifford Buster III,
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2,575,516
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10,977,189
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0
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72,176
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0
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0
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13,624,881
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Senior Executive Vice
President and Chief
Financial Officer
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R. Scott Anderson,
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2,645,829
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11,644,379
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0
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72,762
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0
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0
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14,362,970
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Senior Executive Vice
President, Global Operations
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Vicki J. Vaniman,
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1,613,820
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6,593,274
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0
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68,861
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0
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0
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8,275,955
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Executive Vice President
and General Counsel
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Rick L. Morris,
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1,435,892
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6,429,602
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0
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84,581
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0
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0
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7,950,075
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Executive Vice President
and Chief Information Officer
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37
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(1) |
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These amounts include the following, as determined pursuant to
the Employment Continuation Arrangements and detailed in the
narrative discussion following this table: (a) lump-sum
payments equivalent to two and one-half times (or three times
base salary in Mr. Thompsons case) each Named
Executive Officers base pay as explained in
greater detail in the narrative discussion below:
Mr. Thompson, $2,400,000; Mr. Buster, $1,062,500;
Mr. Anderson, $1,062,500; Ms. Vaniman, $750,000;
Mr. Morris, $625,000; (b) lump-sum payments equivalent
to two and one-half times (or three times in
Mr. Thompsons case) the incentive pay for
each Named Executive Officer: Mr. Thompson, $3,600,000;
Mr. Buster, $1,125,000; Mr. Anderson, $1,195,313;
Ms. Vaniman, $641,250; Mr. Morris, $625,000;
(c) lump-sum payments equivalent to the prorated portion of
annual bonus payable in the year of termination of employment
determined at the greater of the actual or target incentive
compensation amount, prorated for the year of termination:
Mr. Thompson, $905,500; Mr. Buster, $361,000;
Mr. Anderson, $361,000; Ms. Vaniman, $203,500;
Mr. Morris, $170,000; and (d) accrued vacation:
Mr. Thompson, $50,854; Mr. Buster, $27,016;
Mr. Anderson $27,016; Ms. Vaniman, $19,070;
Mr. Morris $15,892. Amounts disclosed in this column would
be payable only if DTG terminates the Named Executive
Officers employment without Cause or he or she has a
Qualified Termination during the Employment Continuation Period.
Amounts are generally paid in a lump-sum, subject to a six-month
delay to the extent required by certain provisions of
Section 409A of the Code. |
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(2) |
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These amounts represent the market value of DTG shares
underlying Performance Units and Restricted Stock Units
(RSUs), and the intrinsic value of Option
Rights that, in each case, are anticipated to be unvested and
outstanding as of the expiration date. Pursuant to the
instructions to Item 402(t) of
Regulation S-K,
amounts were calculated using a price per share of DTG common
stock of $81.836, which is the average closing market price of
DTG common stock from May 10 through May 16, 2011, the five
business days following the first public announcement of the
transaction on May 9, 2011, but do not reflect the amounts
that would be payable to Named Executive Officers if the offer
were actually consummated. |
All Option Rights and RSUs vest automatically on a Change in
Control, and all Performance Units vest only if DTG terminates a
Named Executive Officers employment without Cause or he or
she has a Qualified Termination during the Employment
Continuation Period. Option Rights that vest remain exercisable
for the remaining term of the grant. If a Named Executive
Officers employment continues following a Change in
Control of DTG, the performance target for all outstanding
Performance Units will be deemed to have been met as of the date
of the Change in Control and the Performance Units will continue
to vest upon satisfaction of the time-based vesting provisions
applicable to the Performance Units in accordance with their
terms, subject to accelerated vesting and settlement upon a
termination without Cause or Qualified Termination during the
Employment Continuation Period. The outstanding equity awards
included for each Named Executive Officer in the table are as
follows: Mr. Thompson, 228,758 Options, 50,057 RSUs and
45,000 Performance Units; Mr. Buster, 123,333 Options and
16,000 Performance Units; Mr. Anderson, 131,666 Options and
16,000 Performance Units; Ms. Vaniman, 75,000 Options and
9,000 Performance Units; and Mr. Morris, 75,000 Options and
7,000 Performance Units. For each of the Named Executive
Officers, the amounts included in the column that are
attributable to awards that vest solely as a result of a Change
in Control are: Mr. Thompson, $4,096,465 in RSUs and
$17,810,090 in Option Rights; Mr. Buster, $9,667,813 in
Option Rights; Mr. Anderson, $10,335,003 in Option Rights;
Ms. Vaniman, $5,856,750 in Option Rights; and
Mr. Morris, $5,856,750 in Option Rights. For each of the
Named Executive Officers, the amounts included in the column
that are attributable to awards that vest only if there is a
termination without Cause or Qualified Termination during the
Employment Continuation Period are Performance Units with the
following values: Mr. Thompson, $3,682,620;
Mr. Buster, $1,309,376; Mr. Anderson, $1,309,376;
Ms. Vaniman, $736,524; and Mr. Morris, $572,852.
As noted above, the amounts included in the equity column were
calculated based on an average trading price of DTGs
common stock pursuant to instructions to Item 402(t) of
Regulation S-K
but do not reflect the amounts that would be payable to Named
Executive Officers if the offer were actually consummated. The
following chart sets forth the amounts that would be payable in
respect of these awards determined based on the offer price as
described in the Prospectus/Offer to Exchange. For purposes of
these
38
calculations, the stock component of the offer price was
converted into a cash value by reference to the closing price
for one share of Hertz common stock on June 1, 2011. This
was then added to the per share cash component of the offer
price.
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Equity
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Name
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($)
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Scott L. Thompson
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22,064,125
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H. Clifford Buster III
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9,460,410
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R. Scott Anderson
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10,036,887
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Vicki J. Vaniman
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5,678,850
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Rick L. Morris
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5,536,950
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(3) |
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The Named Executive Officers are not entitled to any pension or
non-qualified deferred compensation benefit enhancements in
connection with a Change in Control or related termination of
employment. Pursuant to previous deferral elections, all accrued
non-qualified deferred compensation will be paid out on a Change
in Control. |
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(4) |
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These amounts represent the value of: (a) health and life
benefits continuation for two and one-half years (three years in
Mr. Thompsons case): Mr. Thompson, $48,697;
Mr. Buster, $28,176 ; Mr. Anderson, $28,762;
Ms. Vaniman, $24,861; Mr. Morris, $40,581;
(b) outplacement benefits of up to $20,000 (up to $35,000
in Mr. Thompsons case) for the one year following the
termination date; and (c) a vehicle allowance for two and
one-half years valued at $24,000 (three years in
Mr. Thompsons case, valued at $28,800). These
benefits are only paid or provided if DTG terminates the Named
Executive Officers employment without Cause or he or she
has a Qualified Termination during the Employment Continuation
Period. |
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(5) |
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This amount represents the approximate value of a tax
gross-up for
Mr. Thompson, calculated as if his employment were
terminated without Cause or in a Qualified Termination during
the Employment Continuation Period, using a price per share of
DTG common stock of $81.836. At an offer price of $70.95,
Mr. Thompson would be entitled to a tax
gross-up of
approximately $4,915,051. No other Named Executive Officer is
entitled to a tax
gross-up.
Instead, Named Executive Officers, other than Mr. Thompson,
have agreed to cut back any parachute payments to
the extent that the payment of such benefits would be subject to
taxes, interest or penalties under Section 280G of the Code
(defined below), if and only if such reduction would result in a
net after-tax benefit for the Named Executive Officer. If
Mr. Thompsons employment continues following a Change
in Control, Mr. Thompson would be entitled to the following
approximate gross up amounts: $2,012,079 at a price per share of
DTG common stock of $81.836 and $1,636,838 at an offer price of
$70.95. |
Narrative
Discussion of Change in Control Arrangements
There are no employment contracts or non-compete agreements with
any officer, including any Named Executive Officer. As noted in
Item 3, DTG has entered into an Employment Continuation
agreement with its Chief Executive Officer Scott L. Thompson,
and maintains an Employment Continuation Plan in which the Named
Executive Officers other than the Chief Executive Officer
participate. Both the Employment Continuation Agreement and the
Employment Continuation Plan (collectively, the
Employment Continuation Arrangements) are
double-trigger arrangements. As a general matter and
except as noted below, this means that the applicable Named
Executive Officer would receive payments and benefits pursuant
to the Employment Continuation Arrangements only if the Named
Executive Officers employment is terminated by DTG without
Cause (as defined below), or the Named Executive Officer
terminates his or her employment with DTG for certain specified
circumstances (as defined further below, a Qualified
Termination), during the period beginning on the date
a Change in Control occurs and ending two years following the
occurrence of the Change in Control and, in the case of
Mr. Thompson, it also covers an anticipatory termination
preceding a Change in Control (the Employment
Continuation Period). The Employment Continuation
Arrangements generally renew automatically for additional
one-year terms on an annual basis unless, not later than
September 30 of any year, DTG provides a notice of non-renewal.
No amendment, modification, change or termination which
adversely affects the rights of any Named Executive Officer in
the Employment Continuation Plan will be effective if it would
take effect following the commencement of any action by or
discussion
39
with a third person that ultimately results in a Change in
Control. Once a Change in Control occurs, the Employment
Continuation Period cannot be terminated without the consent of
the affected NEO.
Under the Employment Continuation Arrangements, a Change in
Control of DTG is generally deemed to occur upon the happening
of any of the following events:
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DTG is merged, consolidated or reorganized into another
corporation or other legal person, unless, in each case,
immediately following such merger, consolidation or
reorganization, the stock entitled to vote generally in the
election of the DTG board of directors (the Voting
Stock) outstanding immediately prior to such merger,
consolidation or reorganization continues to represent (either
by remaining outstanding or by being converted into Voting Stock
of the surviving entity or any parent thereof), more than 60% of
the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such merger,
consolidation or reorganization (including, without limitation,
an entity which as a result of such merger, consolidation or
reorganization owns DTG or all or substantially all of
DTGs assets either directly or through one or more
subsidiaries);
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DTG sells or otherwise transfers all or substantially all of its
assets to another corporation or other legal person, unless, in
each case, immediately following such sale or transfer, the
Voting Stock of DTG outstanding immediately prior to such sale
or transfer continues to represent (either by remaining
outstanding or by being converted into Voting Stock of the
surviving entity or any parent thereof), more than 60% of the
combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such sale or transfer
(including, without limitation, an entity which as a result of
such transaction owns DTG or all or substantially all of
DTGs assets either directly or through one or more
subsidiaries);
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the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 35% or more or the
combined voting power of the Voting Stock of DTG then
outstanding after giving effect to such acquisition; or
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individuals who, as of December 9, 2008, constitute the DTG
board of directors (the Incumbent Board) cease for
any reason to constitute at least a majority of the DTG board of
directors; provided, however, that any individual becoming a
director subsequent to December 9, 2009 whose election or
nomination for election by DTGs stockholders, was approved
by a vote of at least two-thirds of the directors then
comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of DTG in which such person is
named as a nominee for director, without objection to such
nomination) shall be deemed to be or have been a member of the
Incumbent Board.
|
Notwithstanding this, a Change in Control will not be deemed to
occur unless the events that have occurred would also constitute
a Change in the Ownership or Effective Control of a
Corporation or in the Ownership of a Substantial Portion of the
Assets of a Corporation under Treasury Department Final
Regulation 1.409A-3(j)(5),
or any successor regulation thereto. Change in Control is
defined in a similar way in the Equity Plan.
Consummation of the offer would constitute a Change in Control
under the Employment Continuation Arrangements and the Equity
Plan.
Under the Employment Continuation Arrangements, Cause generally
means the commission of any of the following by the Named
Executive Officer prior to termination of employment, and, in
each case, only if it shall have been materially harmful to the
company, as determined by at least two-thirds of the DTG board
of directors in good faith:
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a criminal violation involving fraud, embezzlement or theft in
connection with his or her duties or in the course of his
employment with DTG or any subsidiary;
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intentional wrongful damage to property of DTG or any
subsidiary; or
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40
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intentional wrongful disclosure of secret processes or
confidential information of the company or any subsidiary.
|
Under the Employment Continuation Arrangements, a Named
Executive Officer will be eligible for severance payments and
benefits if he or she terminates his employment with DTG
following the occurrence of any of the following events (a
Qualified Termination):
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a failure to re-elect or maintain the Named Executive Officer in
the same office or position with the company;
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a significant adverse change in the Named Executive
Officers authority, power and responsibilities;
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material reduction in pay;
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reduction, termination or denial of employee benefits;
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the Named Executive Officer determines that a change in
DTGs business has made him or her unable to substantially
carry out his or her responsibilities;
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DTG is liquidated, dissolved, merged, consolidated or
reorganized or all of its assets are transferred unless the
successor entity assumed all of the duties and obligations of
DTG under the Employment Continuation Agreement; a failure to
require a successor entity to assume all of the duties and
obligations of DTG under the Employment Continuation Plan would
be a material breach of such arrangement;
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DTG or the Named Executive Officers work location is
relocated in excess of 50 miles from the location prior to
the Change in Control or, in the case of Mr. Thompson,
requires him to travel at least 20% more than the average number
of days of travel required during the three full years prior to
the Change in Control without his consent; or
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DTG or its successor materially breaches the Employment
Continuation Agreement or Employment Continuation Plan, as
applicable.
|
DTG has a
10-day
period within which to remedy certain defaults under the
Employment Continuation Agreement and a
30-day
period under the Employment Continuation Plan, and certain
additional notice periods apply under the Employment
Continuation Plan. It is also considered a Qualified Termination
for Mr. Thompson if he terminates his employment for any
reason during the thirty day period following the first
anniversary of a Change in Control or has an anticipatory
termination in connection with a Change in Control.
In the event of a termination of employment by DTG without Cause
or a Qualified Termination by the applicable Named Executive
Officer during the Employment Continuation Period (including,
for the CEO, if the termination occurs prior to the Change in
Control but following the commencement of any action by or
discussion with a third person that ultimately results in a
Change in Control), the applicable Named Executive Officer will
receive:
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a lump-sum payment equivalent to two and one-half times (or
three times base salary in Mr. Thompsons case) each
Named Executive Officers current base pay;
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a lump-sum payment equivalent to two and one-half times (or
three times in Mr. Thompsons case) the
incentive pay (determined as the greatest of
(i) the average of the annual bonus payment made during the
last two fiscal years prior to the Change in Control,
(ii) the amount of the annual bonus payment made in the
fiscal year immediately preceding the fiscal year in which the
Change in Control occurs, or (iii) the target bonus
opportunity for the fiscal year in which the Change in Control
occurs);
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a lump-sum payment equivalent to the prorated portion of annual
bonus payable in the year of termination of employment
(determined at the greater of the actual or target incentive
compensation amount, prorated for the year of termination, which
for 2011 would be the projected payout under the 2011 Executive
Incentive Compensation Plan);
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41
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a lump-sum payment equivalent to the accrued
obligations, which equal earned and unpaid salary and
vacation through the termination date and earned and unpaid
bonus for any year prior to the year of termination;
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health and life benefits continuation for two and one-half years
(three years in Mr. Thompsons case);
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outplacement benefits of up to $20,000 (up to $35,000 in
Mr. Thompsons case) for the one year following the
termination date; and
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a vehicle allowance for two and one-half years valued at $24,000
(three years in Mr. Thompsons case, with a value of
$28,800).
|
In addition, all unvested Option Rights will vest immediately
and remain exercisable for the term of the grant. Unvested
Performance Units and Restricted Stock Units will also
immediately vest and become non-forfeitable.
The Employment Continuation Arrangements provide for the
performance of DTGs obligations to be secured by amounts
deposited or to be deposited in trust pursuant to certain trust
agreements to which DTG will be a party. Upon the earlier to
occur of (i) a Change in Control or (ii) a declaration
by the DTG board of directors that a Change in Control is
imminent, DTG shall promptly, to the extent it has not
previously done so, transfer to the trustees the balance of the
payments to be made to the Named Executive Officers in
connection with the Change in Control.
If any of the severance payments, accelerated vesting and
lapsing restrictions payable in connection with a Change in
Control would constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and be subject to excise tax or any interest
or penalties payable with respect to such excise tax, then the
Named Executive Officers (other than
Mr. Thompsons) benefits would be reduced to such
lesser extent that would result in no portion of such benefits
being subject to such taxes, interest or penalties if and only
if such reduction would result in a net after-tax benefit for
the Named Executive Officer. Mr. Thompson will receive the
benefit of a tax
gross-up.
Prior to receiving the benefits described in the Employment
Continuation Arrangements, each Named Executive Officer is
required to sign a release of claims. In addition, the benefits
are conditioned upon the Named Executive Officer not soliciting
DTG employees during the continuation of benefits period, and
being subject to confidentiality obligations with regards to
confidential or proprietary information of DTG.
Pursuant to elections previously made under DTGs
nonqualified deferred compensation arrangements, the Named
Executive Officers would also be entitled to payment of their
accrued account values on consummation of the offer. There are
no enhancements to these arrangements as a result of the
consummation of the offer.
Litigation
Class action complaints relating to the 2010 Merger Agreement
and the transactions contemplated therein with Hertz are pending
in Oklahoma state court and Delaware Chancery Court against DTG,
its directors, and Hertz. These complaints were filed by various
plaintiffs, for themselves and on behalf of the companys
stockholders, excluding defendants and their affiliates, and
challenge the now terminated merger transaction, including the
termination fee agreed to in the 2010 Merger Agreement. The
cases and their current status are as follows:
(1) Henzel v. Dollar Thrifty Automotive Group,
Inc., et al. (Consolidated Case
No. CJ-2010-02761,
Dist. Ct. Tulsa County, Oklahoma) The hearing on the
companys motion for reconsideration of the companys
motion to dismiss was set for September 28, 2010, but the
parties agreed that it would not go forward on that day. This
case has not been dismissed but is currently inactive; and
(2) In Re: Dollar Thrifty Shareholder Litigation
(Consolidated Case
No. 5458-VCS,
Delaware Court of Chancery) By Order dated
August 25, 2010, the Court certified a class consisting of
any and all record and beneficial holders of [DTG] common
stock, their respective successors in interest, successors,
predecessors in interest, predecessors, representatives,
trustees, executors, administrators, heirs, assigns or
transferees, immediate and remote, and any person or entity
acting for or on behalf of, or claiming under, any of them, and
each of them, together with
42
their predecessors and successors and assigns, who held [DTG]
common stock at any time between and including April 25,
2010 and the date of the consummation or termination of a merger
between [DTG] and Hertz, but excluding defendants and their
respective affiliates, including any and all of their respective
successors in interest, representatives, trustees, executors,
administrators, heirs, transferees (immediate and remote), and
any person or entity acting for or on behalf of, or claiming
under any of them, and each of them. The Court denied
plaintiffs motion for preliminary injunction on
September 8, 2010. The plaintiffs served a subpoena on Avis
Budget on September 27, 2010, and they have by consent
adjourned the time to respond. There has been no response to the
subpoena to date. On May 10, 2011, plaintiffs counsel
sent a letter to the companys counsel demanding that
DTGs board of directors rescind, cancel, or extract from
Hertz an agreement not to enforce the termination fee agreed to
in the 2010 Merger Agreement.
While DTG believes these claims are without merit and intends to
defend against them vigorously, given the inherent uncertainties
of litigation, the ultimate outcome of these matters cannot be
predicted at this time, nor can the amount of ultimate loss, if
any, be reasonably estimated.
Various other legal actions, claims and governmental inquiries
and proceedings have been in the past, or may be in the future,
asserted or instituted against DTG, including other purported
class actions or proceedings relating to the terminated Hertz
transaction or a potential transaction with Hertz or Avis
Budget, and some that may demand large monetary damages or other
relief which could result in significant expenditures.
Stockholder
Rights Agreement
On May 18, 2011, after careful consideration and
consultation with DTGs financial and legal advisors, the
DTG board of directors, by unanimous vote of the directors
determined that it is in the best interests of the company and
its stockholders to adopt the Rights Agreement, dated as of
May 18, 2011, between the company and Computershare
Trust Company, N.A., as rights agent, which we refer to as
the Rights Plan, and which is similar to rights agreements
adopted by many other public companies as well as the Rights
Plan that DTG had in place from August 1998 through August 2009.
The Rights Plan was adopted to deter any attempt to obtain
control of the company in a manner or on terms that are not in
the best interests of the company and all stockholders and to
ensure that the DTG board of directors and DTG stockholders have
a full and fair opportunity to consider any proposals and
alternatives thereto, without the undue influence that may
result if one or more holders are permitted to accumulate
significant positions in DTG common stock.
Delaware
Business Combinations Statute
DTG is subject to the provisions of Section 203 of the
DGCL, which imposes certain restrictions upon business
combinations involving DTG. The following description is not
complete and is qualified in its entirety by reference to the
provisions of Section 203 of the DGCL. In general,
Section 203 of the DGCL prevents a Delaware corporation
such as DTG from engaging in a business combination
(which is defined to include a variety of transactions,
including mergers such as the second-step merger proposed by
Hertz) with an interested stockholder for a period
of three years following the time such person became an
interested stockholder unless (1) prior to the acquisition
date the board of directors of the corporation approved either
the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;
(2) upon consummation of the transaction which resulted in
the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the voting
stock outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (3) at or
subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the
affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
For purposes of Section 203 of the DGCL, the term
interested stockholder generally means any person
(other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) that (1) is
43
the owner of 15% or more of the outstanding voting stock of the
corporation, or (2) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested
stockholder; and the affiliates and associates of such person.
A Delaware corporation may elect not to be covered by
Section 203 of the DGCL in its original certificate of
incorporation or through an amendment to its certificate of
incorporation or bylaws approved by its stockholders. An
amendment electing not to be governed by Section 203 of the
DGCL is not effective until 12 months after the adoption of
such amendment and does not apply to any business combination
between a Delaware corporation and any person who became an
interested stockholder of such corporation on or prior to such
adoption.
Neither DTGs certificate of incorporation nor bylaws
exclude DTG from the coverage of Section 203 of the DGCL.
Unless Hertzs acquisition of 15% or more of the DTG common
stock is approved by the DTG board of directors before the offer
closes, Section 203 of the DGCL will prohibit consummation
of the second-step merger (or any other business combination
with Hertz) for a period of three years following consummation
of the offer unless each such business combination (including
the second-step merger) is approved by the DTG board of
directors and holders of
662/3%
of the DTG common stock, excluding Hertz, or unless Hertz
acquires at least 85% of the DTG common stock in the offer
(excluding any subsequent offering period). The provisions of
Section 203 of the DGCL would be satisfied if, prior to the
consummation of the offer, the DTG board of directors approves
the offer. According to the Prospectus/Offer to Exchange, it is
a condition for the offer that the DTG board of directors shall
have approved the offer and second-step merger under
Section 203 of the DGCL, or Hertz shall be satisfied, in
its sole discretion, that Section 203 of the DGCL is
inapplicable to the offer and second-step merger The foregoing
description is not complete and is qualified in its entirety by
reference to Section 203 of the DGCL and the
Prospectus/Offer to Exchange.
Other
State Takeover Laws
A number of states have adopted laws which purport, to varying
degrees, to apply to attempts to acquire corporations that are
incorporated in, or which have substantial assets, stockholders,
principal executive offices or principal places of business or
whose business operations otherwise have substantial economic
effects in, such states. DTG, directly or through subsidiaries,
conducts business in a number of states throughout the United
States, some of which have enacted such laws. The
Prospectus/Offer to Exchange states that Hertz has not yet
complied with any such laws, and does not know whether any of
these laws will, by their terms, apply to the offer, second-step
merger or any other business combination between DTG and Hertz
or its affiliates.
Appraisal
Rights
Holders of DTG common stock do not have appraisal rights as a
result of the offer. However, according to the Prospectus/Offer
to Exchange, if the second-step merger proposed by Hertz in its
Prospectus/Offer to Exchange is consummated (including if
consummated as a short-form merger), DTG
stockholders will have certain rights pursuant to
Section 262 of the DGCL to dissent and demand appraisal of
their DTG common stock. Stockholders who do not tender their
shares in the offer, continue to hold shares at the time of the
consummation of the second-step merger, neither vote in favor of
the second-step merger nor consent thereto in writing and
otherwise comply with the applicable statutory procedures under
Section 262 of the DGCL will be entitled to receive a
judicial determination of the fair value of their shares
(exclusive of any element of value arising from the
accomplishment or expectation of the offer and second-step
merger) and to receive payment of such fair value (all such
shares, collectively, the Dissenting Shares).
Any such judicial determination of the fair value of the
Dissenting Shares could be based upon considerations other than
or in addition to the consideration paid in the offer and the
market value of the shares, and the value so determined could be
higher or lower than, or the same as, the consideration per
share paid pursuant to the offer or the consideration paid in
such a merger. The foregoing description is not complete and is
qualified in its entirety by reference to Section 262 of
the DGCL and the Prospectus/Offer to Exchange.
Delaware
Law
The proposed second-step merger would need to comply with
various applicable procedural and substantive requirements of
Delaware law, though if the offeror acquires at least 90% of the
outstanding shares
44
of DTG common stock, the offeror and its affiliates may be able
to consummate a short-form merger that would avoid the
application of certain substantive and procedural protections
generally available to stockholders of a Delaware corporation.
Several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a corporation
involved in a merger has a fiduciary duty to the other
stockholders that requires the merger to be fair to such other
stockholders. Hertz would be a controlling stockholder if the
holders of at least a majority of the DTG common stock accept
the offer and their shares are purchased by Hertz pursuant to
the offer. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other
things, the type and amount of consideration to be received by
the stockholders and whether there were fair dealings among the
parties.
Cautionary
Statement Regarding Forward-Looking Statements
This
Schedule 14D-9,
and the documents incorporated herein by reference, contain
forward-looking statements about DTG and its
prospects and plans. You should not place undue reliance on
these statements. Representatives of DTG may also make
forward-looking statements. Forward-looking statements include
information concerning DTGs possible or assumed future
results of operations, including descriptions of DTGs
business strategies. These statements may use such words as
may, will, expect,
believe, intend, should,
could, would, anticipate,
estimate, forecast, seek,
feel, project, plan and
similar expressions. These statements are based on expectations
and beliefs at the time such statements were made; however, any
such statement may be influenced by factors that could cause
actual outcomes and results to be materially different from
those projected or anticipated. As you read and consider this
prospectus/offer to exchange, you should understand that these
statements are not guarantees of performance or results. These
statements do not guarantee future performance and DTG assumes
no obligation to update them. Risks, uncertainties and
assumptions include the possibility that (1) Hertz or Avis
Budget may be unable to obtain required regulatory approvals or
may be required to accept conditions that could reduce the
anticipated benefits of their respective proposed transactions
as a condition to obtaining regulatory approvals; (2) DTG
stockholders may not tender a sufficient number of shares into
the Hertz offer or Hertz may otherwise be unable to consummate
the offer or any transaction with DTG; (3) there is no
assurance that Avis Budget will enter into a merger agreement
with DTG or that any transaction with Avis Budget will be
consummated; (4) the length of time necessary to consummate
a transaction with either Hertz or Avis Budget may be longer
than anticipated; (5) problems may arise in successfully
integrating the businesses of Hertz and DTG or Avis Budget and
DTG and Hertz or Avis Budget may not realize its anticipated
synergies and other benefits following their respective proposed
transaction; (6) either proposed transaction may involve
unexpected costs; and (7) the Avis Budget, Hertz and DTG
businesses may suffer as a result of uncertainty surrounding the
proposed transactions. Additional risks, uncertainties and
assumptions affecting the businesses of each of Avis Budget, DTG
and Hertz can be found in their respective filings with the SEC.
Because forward-looking statements involve risks and
uncertainties, actual results and events may differ materially
from results and events currently expected by Avis Budget, Hertz
and DTG. DTG assumes no obligation and expressly disclaims any
duty to update the information contained herein except as
required by law.
The following exhibits are filed herewith or incorporated herein
by reference:
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Press release issued by DTG, dated May 9, 2011
(incorporated herein by reference to the
Form 8-K
filed with the SEC on May 9, 2011).
|
(a)(2)
|
|
Communication with employees of DTG, dated May 9, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 9, 2011).
|
(a)(3)
|
|
Press release issued by DTG, dated May 12, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 13, 2011).
|
(a)(4)
|
|
Communication with employees of DTG, dated May 13, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 13, 2011).
|
(a)(5)
|
|
Press release issued by DTG, dated June 6, 2011 (attached
hereto).
|
45
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(1)
|
|
Excerpts from DTG Definitive Proxy Statement on
Schedule 14A relating to the 2011 Annual Meeting of
Shareholders, filed with the Securities and Exchange Commission
on April 26, 2011 (attached hereto as Annex A).
|
(e)(2)
|
|
Second Amended and Restated Long-Term Incentive Plan and
Director Equity Plan, dated as of December 9, 2008 (filed
as exhibit 10.212 with DTGs
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009), as amended effective on March 16, 2009
(filed as exhibit 10.221 with DTGs
Form 8-K
filed May 20, 2009) and effective on March 31,
2009 (filed as exhibit 10.219 with DTGs
Form 10-Q
for the quarterly period ended March 31, 2009, filed
May 6, 2009) (incorporated herein by reference to
Exhibit 10.235 to
Form 10-Q
for the quarterly period ended March 31, 2010, filed
May 5, 2010).
|
(e)(3)
|
|
First Amendment to Second Amended and Restated Employment
Continuation Plan for Key Employees of Dollar Thrifty Automotive
Group, Inc., dated as of March 24, 2010 (incorporated
herein by reference to Exhibit 10.234 to
Form 10-Q
for the quarterly period ended March 31, 2010, filed
May 5, 2010).
|
(e)(4)
|
|
Second Amended and Restated Employment Continuation Plan for Key
Employees of Dollar Thrifty Automotive Group, Inc., dated as of
December 9, 2008 (incorporated herein by reference to
Exhibit 10.204 of
Form 8-K,
filed December 15, 2008).
|
(e)(5)
|
|
Employment Continuation Agreement, dated December 9, 2008
between the company and Scott L. Thompson (incorporated herein
by reference to Exhibit 10.205 to
Form 8-K
filed December 15, 2008).
|
(e)(6)
|
|
Dollar Thrifty Automotive Group, Inc. Summary of Non-employee
Directors Compensation effective December 1, 2010
(incorporated herein by reference to Exhibit 10.241 to
Form 10-K
filed February 28, 2011).
|
(e)(7)
|
|
Form of Restricted Stock Units Grant Agreement between Dollar
Thrifty Automotive Group, Inc. and the applicable director
(incorporated herein by reference to Exhibit 10.231 to
Form 10-K,
filed March 4, 2010).
|
(e)(8)
|
|
Form of Restricted Stock Units Grant Agreement between the
company and the applicable employee (incorporated herein by
reference to Exhibit 10.224 to
Form 10-Q
for the quarterly period ended June 30, 2009, filed
August 6, 2009).
|
(e)(9)
|
|
Form of Performance Units Grant Agreement between the company
and the applicable employee (incorporated herein by reference to
Exhibit 10.237 to
Form 8-K
filed December 9, 2010).
|
(e)(10)
|
|
Form of Stock Option Grant Agreement between the company and the
applicable employee (incorporated herein by reference to
Exhibit 10.160 to
Form 8-K,
filed February 6, 2008).
|
(e)(11)
|
|
2009 Deferred Compensation Plan effective January 1, 2009
(incorporated herein by reference to Exhibit 10.214 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(12)
|
|
Amended and Restated Deferred Compensation Plan dated
December 9, 2008 (incorporated herein by reference to
Exhibit 10.211 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(13)
|
|
Form of Directors Deferred Compensation Election between
the company and the applicable director (incorporated herein by
reference to Exhibit 10.229 to
Form 10-K
for the fiscal year ended December 31, 2009, filed
March 4, 2010).
|
(e)(14)
|
|
Form of Directors Deferred Compensation Election between the
company and the applicable director (incorporated herein by
reference to Exhibit 10.240 to
Form 10-K
for the fiscal year ended December 31, 2010, filed
February 28, 2011).
|
(e)(15)
|
|
Form of Indemnification Agreement between the company and the
applicable employee (incorporated herein by reference to
Exhibit 10.217 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(16)
|
|
Indemnification Agreement dated as of May 23, 2008 between
Dollar Thrifty Automotive Group, Inc. and Scott L. Thompson,
Senior Executive Vice President and Chief Financial Officer
(incorporated herein by reference to Exhibit 10.191 to
Form 8-K,
filed May 28, 2008).
|
46
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(17)
|
|
Indemnification Agreement dated as of March 22, 2006
between Dollar Thrifty Automotive Group, Inc. and Richard W.
Neu, non-employee director (incorporated herein by reference to
Exhibit 10.106 to
Form 8-K,
filed March 27, 2006).
|
(e)(18)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Vicki J. Vaniman,
Executive Vice President and General Counsel (incorporated
herein by reference to Exhibit 10.70 to
Form 8-K,
filed May 25, 2005).
|
(e)(19)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and R. Scott Anderson,
Senior Executive Vice President (incorporated herein by
reference to Exhibit 10.67 to
Form 8-K,
filed May 25, 2005).
|
(e)(20)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and John C. Pope,
non-employee director (incorporated herein by reference to
Exhibit 10.61 to
Form 8-K,
filed May 25, 2005).
|
(e)(21)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Edward C. Lumley,
non-employee director (incorporated herein by reference to
Exhibit 10.60 to
Form 8-K,
filed May 25, 2005).
|
(e)(22)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Maryann N. Keller,
non-employee director (incorporated herein by reference to
Exhibit 10.59 to
Form 8-K,
filed May 25, 2005).
|
(e)(23)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Thomas P. Capo,
non-employee director (incorporated herein by reference to
Exhibit 10.58 to
Form 8-K,
filed May 25, 2005).
|
(e)(24)
|
|
Dollar Thrifty Automotive Group, Inc. 2011 Executive Incentive
Compensation Plan (incorporated herein by reference to
Exhibit 10.242 to
Form 10-K
filed February 28, 2011).
|
(e)(25)
|
|
Rights Agreement, dated as of May 18, 2011 between DTG and
Computershare Trust Company, N.A., which includes the Form
of Right Certificate as Exhibit A and the Certificate of
Designation of Series A Junior Participating Preferred
Stock as Exhibit C (incorporated herein by reference to
Exhibit 1 to
Form 8-A,
filed May 18, 2011).
|
(g)
|
|
Not applicable
|
47
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
(Registrant)
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|
|
|
|
June 6, 2011
|
|
By:
|
|
/s/ H. Clifford Buster III
|
|
|
|
|
|
|
|
|
|
H. Clifford Buster III
Senior Executive Vice President, Chief Financial
Officer and Principal Financial Officer
|
48
EXHIBIT INDEX
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)
|
|
Press release issued by DTG, dated May 9, 2011
(incorporated herein by reference to the
Form 8-K
filed with the SEC on May 9, 2011).
|
(a)(2)
|
|
Communication with employees of DTG, dated May 9, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 9, 2011).
|
(a)(3)
|
|
Press release issued by DTG, dated May 12, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 13, 2011).
|
(a)(4)
|
|
Communication with employees of DTG, dated May 13, 2011
(incorporated herein by reference to the Form 425 filed
with the SEC on May 13, 2011).
|
(a)(5)
|
|
Press release issued by DTG, dated June 6, 2011 (attached
hereto).
|
(e)(1)
|
|
Excerpts from DTG Definitive Proxy Statement on
Schedule 14A relating to the 2011 Annual Meeting of
Shareholders, filed with the Securities and Exchange Commission
on April 26, 2011 (attached hereto as Annex A).
|
(e)(2)
|
|
Second Amended and Restated Long-Term Incentive Plan and
Director Equity Plan, dated as of December 9, 2008 (filed
as exhibit 10.212 with DTGs
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009), as amended effective on March 16, 2009
(filed as exhibit 10.221 with DTGs
Form 8-K
filed May 20, 2009) and effective on March 31,
2009 (filed as exhibit 10.219 with DTGs
Form 10-Q
for the quarterly period ended March 31, 2009, filed
May 6, 2009) (incorporated herein by reference to
Exhibit 10.235 to
Form 10-Q
for the quarterly period ended March 31, 2010, filed
May 5, 2010).
|
(e)(3)
|
|
First Amendment to Second Amended and Restated Employment
Continuation Plan for Key Employees of Dollar Thrifty Automotive
Group, Inc., dated as of March 24, 2010 (incorporated
herein by reference to Exhibit 10.234 to
Form 10-Q
for the quarterly period ended March 31, 2010, filed
May 5, 2010).
|
(e)(4)
|
|
Second Amended and Restated Employment Continuation Plan for Key
Employees of Dollar Thrifty Automotive Group, Inc., dated as of
December 9, 2008 (incorporated herein by reference to
Exhibit 10.204 of
Form 8-K,
filed December 15, 2008).
|
(e)(5)
|
|
Employment Continuation Agreement, dated December 9, 2008
between the company and Scott L. Thompson (incorporated herein
by reference to Exhibit 10.205 to
Form 8-K
filed December 15, 2008).
|
(e)(6)
|
|
Dollar Thrifty Automotive Group, Inc. Summary of Non-employee
Directors Compensation effective December 1, 2010
(incorporated herein by reference to Exhibit 10.241 to
Form 10-K
filed February 28, 2011).
|
(e)(7)
|
|
Form of Restricted Stock Units Grant Agreement between Dollar
Thrifty Automotive Group, Inc. and the applicable director
(incorporated herein by reference to Exhibit 10.231 to
Form 10-K,
filed March 4, 2010).
|
(e)(8)
|
|
Form of Restricted Stock Units Grant Agreement between the
company and the applicable employee (incorporated herein by
reference to Exhibit 10.224 to
Form 10-Q
for the quarterly period ended June 30, 2009, filed
August 6, 2009).
|
(e)(9)
|
|
Form of Performance Units Grant Agreement between the company
and the applicable employee (incorporated herein by reference to
Exhibit 10.237 to
Form 8-K
filed December 9, 2010).
|
(e)(10)
|
|
Form of Stock Option Grant Agreement between the company and the
applicable employee (incorporated herein by reference to
Exhibit 10.160 to
Form 8-K,
filed February 6, 2008).
|
(e)(11)
|
|
2009 Deferred Compensation Plan effective January 1, 2009
(incorporated herein by reference to Exhibit 10.214 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(12)
|
|
Amended and Restated Deferred Compensation Plan dated
December 9, 2008 (incorporated herein by reference to
Exhibit 10.211 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(13)
|
|
Form of Directors Deferred Compensation Election between
the company and the applicable director (incorporated herein by
reference to Exhibit 10.229 to
Form 10-K
for the fiscal year ended December 31, 2009, filed
March 4, 2010).
|
49
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(14)
|
|
Form of Directors Deferred Compensation Election between the
company and the applicable director (incorporated herein by
reference to Exhibit 10.240 to
Form 10-K
for the fiscal year ended December 31, 2010, filed
February 28, 2011).
|
(e)(15)
|
|
Form of Indemnification Agreement between the company and the
applicable employee (incorporated herein by reference to
Exhibit 10.217 to
Form 10-K
for the fiscal year ended December 31, 2008, filed
March 3, 2009).
|
(e)(16)
|
|
Indemnification Agreement dated as of May 23, 2008 between
Dollar Thrifty Automotive Group, Inc. and Scott L. Thompson,
Senior Executive Vice President and Chief Financial Officer
(incorporated herein by reference to Exhibit 10.191 to
Form 8-K,
filed May 28, 2008).
|
(e)(17)
|
|
Indemnification Agreement dated as of March 22, 2006
between Dollar Thrifty Automotive Group, Inc. and Richard W.
Neu, non-employee director (incorporated herein by reference to
Exhibit 10.106 to
Form 8-K,
filed March 27, 2006).
|
(e)(18)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Vicki J. Vaniman,
Executive Vice President and General Counsel (incorporated
herein by reference to Exhibit 10.70 to
Form 8-K,
filed May 25, 2005).
|
(e)(19)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and R. Scott Anderson,
Senior Executive Vice President (incorporated herein by
reference to Exhibit 10.67 to
Form 8-K,
filed May 25, 2005).
|
(e)(20)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and John C. Pope,
non-employee director (incorporated herein by reference to
Exhibit 10.61 to
Form 8-K,
filed May 25, 2005).
|
(e)(21)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Edward C. Lumley,
non-employee director (incorporated herein by reference to
Exhibit 10.60 to
Form 8-K,
filed May 25, 2005).
|
(e)(22)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Maryann N. Keller,
non-employee director (incorporated herein by reference to
Exhibit 10.59 to
Form 8-K,
filed May 25, 2005).
|
(e)(23)
|
|
Indemnification Agreement dated as of May 20, 2005 between
Dollar Thrifty Automotive Group, Inc. and Thomas P. Capo,
non-employee director (incorporated herein by reference to
Exhibit 10.58 to
Form 8-K,
filed May 25, 2005).
|
(e)(24)
|
|
Dollar Thrifty Automotive Group, Inc. 2011 Executive Incentive
Compensation Plan (incorporated herein by reference to
Exhibit 10.242 to
Form 10-K
filed February 28, 2011).
|
(e)(25)
|
|
Rights Agreement, dated as of May 18, 2011 between DTG and
Computershare Trust Company, N.A., which includes the Form
of Right Certificate as Exhibit A and the Certificate of
Designation of Series A Junior Participating Preferred
Stock as Exhibit C (incorporated herein by reference to
Exhibit 1 to
Form 8-A,
filed May 18, 2011).
|
(g)
|
|
Not applicable
|
50
Annex A
Excerpts
from Dollar Thrifty Automotive Group, Inc.
Definitive Proxy Statement on Schedule 14A relating to the
2011 Annual
Meeting of the Stockholders as filed with the Securities and
Exchange
Commission on April 26, 2011.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE
OFFICERS
Certain
Beneficial Owners
The following table sets forth certain information as of
April 11, 2011, with respect to each person known by DTG to
beneficially own more than 5% of the outstanding shares of DTG
common stock (Shares):
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
Percent of
|
Name and Address of Beneficial Owner
|
|
Beneficial Ownership
|
|
Class(1)
|
|
York Capital Management Global Advisors, LLC
767 Fifth Avenue, 17th Floor
New York, New York 10153
|
|
|
4,173,642
|
(2)
|
|
|
14.43
|
%
|
PAR Investment Partners, L.P.
PAR Group, L.P.
PAR Capital Management, Inc.
One International Place, Suite 2401
Boston, Massachusetts 02110
|
|
|
2,191,800
|
(3)
|
|
|
7.58
|
%
|
BlackRock, Inc.
40 East 52nd Street
New York, New York 10022
|
|
|
2,048,239
|
(4)
|
|
|
7.08
|
%
|
Westchester Capital Management, LLC
Westchester Capital Management, Inc.
100 Summit Drive
Valhalla, New York 10595
|
|
|
2,028,131
|
(5)
|
|
|
7.01
|
%
|
|
|
|
(1) |
|
Based on 28,929,182 Shares outstanding as of April 11,
2011. |
|
(2) |
|
As reported in a Schedule 13G dated April 11, 2011,
York Capital Management Global Advisors, LLC has sole voting and
dispositive power in respect of all of the reported Shares and
shared voting and dispositive power in respect of none of the
reported Shares. |
|
(3) |
|
As reported in a Schedule 13G dated July 14, 2010, PAR
Investment Partners, L.P., PAR Group, L.P. and PAR Capital
Management, Inc. have sole voting and dispositive power in
respect of all of the reported Shares and shared voting and
dispositive power in respect of none of the reported Shares. |
|
(4) |
|
As reported in Schedule 13G dated February 4, 2011,
BlackRock, Inc., a parent holding company, has sole voting and
dispositive power in respect of all the reported Shares and
shared voting and dispositive power in respect of none of the
reported Shares. |
|
(5) |
|
As reported in a Schedule 13G dated February 14, 2011
filed jointly by Westchester Capital Management, LLC
(Westchester LLC), Westchester Capital Management,
Inc. (Westchester Inc.), The Merger Fund, The Merger
Fund VL, the Dunham Monthly Distribution Fund
(DMDF) and Green & Smith Investment
Management L.L.C. (Green & Smith and,
together with the other named entities, the Reporting
Companies) and Messrs. Roy Behren, Michael T. Shannon
and Frederick W. Green (the Principals). According
to the Schedule 13G, Westchester LLC and Westchester Inc.
may each be deemed to beneficially own 2,028,131 Shares,
consisting of (i) 1,990,731 Shares held by The Merger
Fund, (ii) 7,400 Shares held by The Merger
Fund VL and (iii) 30,000 Shares held by the DMDF.
Westchester LLC is the investment advisor of The Merger Fund and
The Merger Fund VL, and the
sub-advisor
of the DMDF. Westchester Inc also held those positions with
respect to such Reporting Companies until December 31,
2010. Green & Smith may be deemed to beneficially own
50,111 Shares held by GS Master Trust, for which it serves
as |
A-1
|
|
|
|
|
investment advisor. Each of the Principals may also be deemed to
beneficially own all of the foregoing Shares by virtue of their
shared voting and dispositive power with respect thereto with
the applicable Reporting Companies. Each of Messrs. Behren
and Shannon are Co-President of Westchester LLC and Co-Manager
and members of Green & Smith. Until December 31,
2010, Mr. Green was President of Westchester Inc. and a
Manager of Green & Smith. |
Directors,
Director Nominees and Executive Officers
The following table sets forth certain information as of
April 11, 2011 with respect to the number of Shares owned
by (a) each director nominee of DTG, (b) each named
executive officer of DTG and (c) all current directors and
named executive officers of DTG as a group.
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
Percent of
|
Name of Beneficial Owner
|
|
Beneficial Ownership(1)
|
|
Class(2)
|
|
Thomas P. Capo
|
|
|
70,510
|
(3)
|
|
Less than 1%
|
Maryann N. Keller
|
|
|
66,011
|
(4)
|
|
Less than 1%
|
Hon. Edward C. Lumley
|
|
|
60,828
|
(5)
|
|
Less than 1%
|
Richard W. Neu
|
|
|
38,351
|
(6)
|
|
Less than 1%
|
John C. Pope
|
|
|
83,013
|
(7)
|
|
Less than 1%
|
Scott L. Thompson
|
|
|
434,433
|
(8)
|
|
1.5%
|
H. Clifford Buster III
|
|
|
136,010
|
(9)
|
|
Less than 1%
|
R. Scott Anderson
|
|
|
225,260
|
(10)
|
|
Less than 1%
|
Vicki J. Vaniman
|
|
|
127,166
|
(11)
|
|
Less than 1%
|
Rick L. Morris
|
|
|
88,012
|
(12)
|
|
Less than 1%
|
All directors and named executive officers as a group
|
|
|
1,329,594
|
|
|
4.6%
|
|
|
|
(1) |
|
The SEC deems a person to have beneficial ownership of all
shares that such person has the right to acquire within
60 days. Accordingly, Shares subject to vested options as
well as options exercisable within 60 days are included in
this column. Restricted Stock Units that are to be settled in
stock or may be settled in cash or stock at the option of the
holder are only included in this column if they vest within
60 days. Restricted Stock Units that have been granted but
not included in this column are identified below. |
|
(2) |
|
Based on 28,929,182 Shares outstanding as of April 11,
2011. |
|
(3) |
|
Consists of (i) 66,950 Shares subject to a deferral
agreement between DTG and Mr. Capo and
(ii) 3,560 shares owned by Mr. Capo. Not included
are 1,866 Restricted Stock Units that vest on December 31,
2011. |
|
(4) |
|
Consists of 66,011 Shares subject to a deferral agreement
between DTG and Ms. Keller. Not included are 1,866
Restricted Stock Units that vest on December 31, 2011. |
|
(5) |
|
Consists of (i) 50,828 Shares owned by Mr. Lumley
and (ii) 10,000 Shares subject to options. Not
included are 1,866 Restricted Stock Units that vest on
December 31, 2011. |
|
(6) |
|
Consists of 38,351 Shares subject to a deferral agreement
between DTG and Mr. Neu. Not included are 1,866 Restricted
Stock Units that vest on December 31, 2011. |
|
(7) |
|
Consists of (i) 32,203 Shares owned by Mr. Pope,
(ii) 40,810 Shares subject to a deferral agreement
between DTG and Mr. Pope and (iii) 10,000 Shares
subject to options. Not included are 1,866 Restricted Stock
Units that vest on December 31, 2011. |
|
(8) |
|
Consists of (i) 114,804 Shares owned by
Mr. Thompson, (ii) 13,387 Restricted Stock Units and
(iii) 306,242 Shares subject to options. Not included
are (a) 3,387 Restricted Stock Units that vest on
May 22, 2012, (b) 16,670 Restricted Stock Units that
vest on October 13, 2011, (c) 30,000 Restricted Stock
Units that vest on May 13, 2012,
(d) 12,925 Shares subject to options that vest on
May 22, 2012, (e) 65,833 Shares subject to
options that vest on October 31, 2011 and
(f) 150,000 Shares subject to options that vest on
May 13, 2012. |
A-2
|
|
|
(9) |
|
Consists of (i) 9,343 Shares owned by Mr. Buster
and (ii) 126,667 Shares subject to options. Not
included are (a) 33,333 Shares subject to options that
vest on October 31, 2011 and (b) 90,000 Shares
subject to options that vest on May 13, 2012. |
|
(10) |
|
Consists of (i) 26,325 Shares owned by
Mr. Anderson, (ii) 43,337 Shares owned by the
trust of Mr. Andersons spouse,
(iii) 211 Shares held in DTGs 401(k) plan and
(iv) 155,387 Shares subject to options. Not included
are (a) 41,667 Shares subject to options that vest on
October 31, 2011 and (b) 90,000 Shares subject to
options that vest on May 13, 2012. |
|
(11) |
|
Consists of (i) 15,082 Shares owed by
Ms. Vaniman, (ii) 4,522 Shares owned by
Ms. Vanimans trust, (iii) 21,734 Shares
subject to a deferral agreement between DTG and
Ms. Vaniman, (iv) 881 Shares held in DTGs
401(k) plan and (v) 84,947 Shares subject to options. Not
included are (a) 15,000 Shares subject to options that
vest on October 31, 2011 and (b) 60,000 Shares
subject to options that vest on May 13, 2012. |
|
(12) |
|
Consists of (i) 10,297 Shares owned by Mr. Morris
and (ii) 77,715 Shares subject to options. Not
included are (a) 15,000 Shares subject to options that
vest on October 31, 2011 and (b) 60,000 Shares
subject to options that vest on May 13, 2012. |
COMPENSATION
OF THE BOARD OF DIRECTORS
Compensation
Board Compensation has historically consisted of a combination
of cash, equity grants and vehicle privileges. In 2010, director
compensation was modified to reflect current market practice,
including the elimination of meeting fees and the vehicles
provided to the directors for their personal use.
Board
Meeting Fees, Committee Meeting Fees and Retainers
Beginning in 2010, the annual compensation program for
independent directors provides that for each fiscal year of
service, each independent director will receive an annual
retainer of $60,000 in the form of cash, paid in quarterly
installments of $15,000 each, and $90,000 in the form of equity
compensation, discussed below. The Company did not pay separate
meetings fees but continued to pay additional fees to the
committee chairs as follows: The Governance Committee chair was
paid an annual retainer of $5,000, in quarterly cash
installments of $1,250. The Human Resources and Compensation
Committee chair was paid an annual retainer of $7,500, in
quarterly cash installments of $1,875. The Audit Committee chair
was paid an annual retainer of $10,000, in quarterly cash
installments of $2,500. Mr. Capo was the non-executive
Chairman of the Board from January 1, 2010 to
November 29, 2010. Mr. Capos compensation for
services rendered as Chairman was $137,500 for the fiscal year
ended December 31, 2010.
Effective December 1, 2010, the compensation for
independent directors in 2011 will remain as it was in 2010 with
the exception of the retainer for the Chairman of the Board,
which is $100,000 annually, paid quarterly in arrears.
Directors were permitted to elect in advance to defer all or any
portion of their compensation that was to be paid in Common
Stock.
Restricted
Stock Grants
On January 27, 2010, each independent director was granted
3,560 Restricted Stock Units under the Plan having an aggregate
grant date fair value of $90,000. The number of Restricted Stock
Units granted was calculated on the basis of the closing price
per Share on the day of the grant ($25.28). The Restricted Stock
Units vested on December 31, 2010. Beginning in 2011, each
independent director will receive a retainer in the form of
Restricted Stock Units with a grant date fair value of $90,000
in addition to the cash retainer discussed above. Accordingly,
on January 26, 2011, each independent director was granted
1,866 Restricted Stock Units having an aggregate grant date fair
value of $90,000 and which will vest on December 31, 2011.
Effective January 2010, Restricted Stock Units will be settled
exclusively in Common Stock.
A-3
Other
Effective January 1, 2010, the benefit of providing one
vehicle for personal use to each independent director while
serving as a director was eliminated. DTG will continue its
policy of furnishing rental cars for short-term use for product
and service evaluation to each director. Following a change in
control of DTG or retirement from the Board with five or more
years of service, each director is permitted the use of rental
cars for product and service evaluation for the life of the
director.
No
Employee Director Compensation or Benefits
DTG does not pay compensation or provide benefits for service to
any director solely in such capacity who is also an officer or
employee of the Company, except that Mr. Thompson, as a
director, is entitled to the use of rental cars for product and
service evaluation for life if he retires from the Board with
five or more years of service or following a change in control
of DTG.
Director
Compensation Table
The following table provides certain summary information
concerning compensation of the independent directors for the
fiscal year ended December 31, 2010:
2010
DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
Paid in Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)(1)
|
|
(d)(2)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Thomas P. Capo
|
|
|
197,500
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287,500
|
|
Maryann N. Keller
|
|
|
60,833
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,833
|
|
Hon. Edward C. Lumley
|
|
|
67,500
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,500
|
|
Richard W. Neu
|
|
|
77,500
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,500
|
|
John C. Pope
|
|
|
65,000
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,000
|
|
|
|
|
(1) |
|
The amount shown in column (c) for each director reflects
the grant date fair value attributable to the Restricted Stock
Unit awards (3,560 Restricted Stock Units for each independent
director in accordance with Accounting Standards Codification
Topic 718, Compensation Stock
Compensation (ASC 718)). The grant date
fair value was determined as of the grant date of
January 27, 2010, based on a closing Share price of $25.28. |
|
(2) |
|
Since May 2002, no independent director has been awarded Option
Rights. As of December 31, 2010, the amount of outstanding
Option Rights that are fully vested but not yet exercised by the
current directors were as follows: (a) Mr. Lumley,
10,000, and (b) Mr. Pope, 10,000. |
Stock
Ownership Guidelines
The Companys current stock ownership guidelines require
each independent director of DTG to hold at least
20,000 Shares. Directors are generally given five years
from commencing service on the Board to meet the stock ownership
guidelines. All of the current independent directors meet or
exceed these guidelines.
A-4
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
2010
Overview
Despite lingering economic uncertainty in 2010, management
shifted its focus on stabilization during 2009 to a strategy of
maximizing profitability and cash flow. The objectives of this
shift were to further strengthen the balance sheet, enhance
liquidity and position the Company for future success and growth
in a recovering economic environment.
While management was focused on the execution of this
stand-alone business plan, it faced the additional challenge of
delivering on this plan while attempting to minimize the
distractions to its personnel and operations resulting from the
execution in April of a merger agreement with Hertz Global
Holdings, Inc. Throughout the first nine months of 2010 until
the failure of the stockholder vote to approve the merger in
September, management was required to devote significant time
and resources to merger-related activities, while keeping the
business running as a profitable stand-alone entity. This
required a significant emphasis on retaining and engaging key
employees in light of the uncertainty caused by the potential
merger.
As discussed in Managements Discussion and Analysis
of Financial Condition and Results of Operations in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, management
successfully executed on its stand-alone business plan for 2010,
maximizing profitability and further strengthening the balance
sheet through continued focus on cost control and operating
efficiencies. The Company generated corporate earnings before
interest, taxes, depreciation and amortization
(Corporate Adjusted EBITDA) of
$235.7 million in 2010. Excluding $22.6 million of
expenses related to a proposed merger, the Company delivered the
highest level of Corporate Adjusted EBITDA in its history,
totaling $258.3 million in 2010, a $158.9 million
improvement from the $99.4 million reported in 2009. There
was also significant growth in Corporate Adjusted EBITDA over
the last three years as shown by the chart below:
The Company was able to successfully mitigate personnel
distractions and disruptions to its operations related to the
proposed merger by keeping employees informed of developments,
implementing retention tools and ensuring that everyones
focus remained on product delivery and customer service during
the period of uncertainty. The Company favorably resolved fleet
financing issues in 2010, completing over $1 billion of new
financing to support the Companys rental business, and
ended 2010 with profitable operations, abundant liquidity and a
share price that had improved from $25.61 on December 31,
2009 to $47.26 on December 31,
A-5
2010, an increase of approximately 85%. In a study by Bespoke
Investment Group LLC of Harrison, New York, DTG was named
as having the second best performing shares in the Russell 3000
Index over the past two years.
The Human Resources and Compensation Committees actions
during 2010 with respect to executive pay reflected these
circumstances and results. Given the ongoing uncertainty in the
economy and the fact that the Company had only recently
completed the first phase of its turnaround plan in 2009, the
Human Resources and Compensation Committee chose not to increase
base pay for its named executive officers for 2010. In addition,
the Human Resources and Compensation Committee did not issue
equity as a component of managements compensation plans
for 2010, taking into account the retention value and alignment
of interests with stockholders provided by equity grants made in
2009.
The Companys annual cash incentive plan for 2010 was
designed to provide additional incentive compensation in the
event the Company was able to exceed certain financial targets,
with such performance incentives capped at a pre-determined
level. Because the Company significantly exceeded the financial
targets under the annual incentive plan for 2010, management
(including the named executive officers) was paid incentive
awards at the maximum amounts determined under the plan.
The Human Resources and Compensation Committee believes that the
compensation actions in 2010, taken in conjunction with the 2009
actions with respect to equity incentives to reward and retain
management, were appropriate in light of existing business
conditions.
Objectives
of Compensation Program
The Human Resources and Compensation Committee is guided by the
following key objectives in determining the compensation of the
Companys named executive officers:
Competitive
Pay
Compensation should reflect the competitive marketplace so that
the Company can attract, retain and motivate high-caliber
executives.
Accountability
for Business Performance
Compensation should be tied largely to overall Company financial
and operating performance, so that executives are held
accountable through their compensation for achievement of
Company financial and operating results.
Accountability
for Individual Performance
Compensation should also be tied to the individuals
performance to encourage and reflect individual contributions to
the Companys performance.
Alignment
with Stockholder Interests
Compensation should reflect DTGs Common Stock performance
through equity-based incentives, such as Performance Shares,
Performance Units, Restricted Stock, Restricted Stock Units and
Option Rights, to align the interests of executives with those
of DTGs stockholders.
Design
and Risk Mitigation
DTGs executive compensation program is designed to clearly
and fairly relate pay to performance, with the objective of
creating long-term stockholder value. DTGs executive
compensation program is also designed to match pay practices
with corporate goals. Each year, the Human Resources and
Compensation Committee establishes annual cash incentive award
levels and considers the grant of long-term equity incentive
compensation awards under the Second Amended and Restated
Long-Term Incentive Plan and Director Equity Plans
A-6
(as amended, the Plan). At the end of each
year, the Human Resources and Compensation Committee conducts a
full review of the elements of compensation and compares those
elements to DTGs key objectives.
A primary objective of DTGs executive compensation program
is to encourage and reward performance by the executives,
including the named executive officers, that meets or exceeds
DTGs financial and operational performance goals, without
encouraging the taking of excessive risks that could be
detrimental to the interests of DTGs stockholders.
Further, the Company strives to develop overall compensation
packages that include a variety of short- and long-term awards,
as well as a balanced mix of cash and equity incentives.
Performance targets for our performance-based awards, whether
cash or equity, are established to encourage the executives,
including the named executive officers, to maximize DTGs
performance over the long-term, as opposed to focusing on
short-term profits.
The Human Resources and Compensation Committee believes that its
compensation decisions are aligned with these objectives and
that risks arising from the compensation programs, if any, would
not be reasonably likely to have a material adverse affect on
the Company.
Participants
in Compensation Decisions
The following table identifies the various individuals and
groups who participate in decision making for DTGs
executive compensation program and their duties in 2010 in
connection with such participation.
|
|
|
|
|
Participant
|
|
|
|
Duties
|
|
Human Resources and Compensation Committee
|
|
|
|
Reviewed the performance of the Chief Executive Officer, the
other named executive officers and other select members of the
executive group
|
|
|
|
|
|
|
|
|
|
Approved the compensation of the Chief Executive Officer after
consultation with other independent directors
|
|
|
|
|
|
|
|
|
|
Made all decisions regarding cash and equity award plans for
executives after consultation with other independent directors
|
|
|
|
|
|
|
|
|
|
Consulted with Towers Watson, its independent compensation
consultant, as a part of all compensation reviews
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
Contributed to the review process of select members of the
executive group
|
|
|
|
|
|
Towers Watson external consultant to the Human
Resources and Compensation Committee
|
|
|
|
Worked directly for the Human Resources and Compensation
Committee
|
|
|
|
|
|
|
|
|
|
Reviewed all presentation materials developed by or at the
request of DTG management for presentation to the Human
Resources and Compensation Committee
|
|
|
|
|
|
|
|
|
|
Consulted with, asked questions of and provided comments to DTG
management, managements external compensation consultant,
and the Human Resources and Compensation Committee regarding all
compensation plans, presentations, proposed actions, documents
and related materials
|
A-7
|
|
|
|
|
Participant
|
|
|
|
Duties
|
|
Frederic W. Cook & Co., Inc. external
consultant to DTG management
|
|
|
|
Engaged by management to conduct a review of total compensation
for the officers of the Company
|
|
|
|
|
|
Senior Vice President, Human Resources
|
|
|
|
Prepared recommendations for executive compensation for review
by Towers Watson and the Human Resources and Compensation
Committee
|
|
|
|
|
|
|
|
|
|
Worked with Frederic W. Cook & Co., Inc. to prepare
recommendations for total executive compensation
|
Comparative
Data and Benchmarking
Due to the Companys operating environment discussed under
the heading of 2010 Overview, the Human Resources
and Compensation Committee did not engage in external
benchmarking with respect to any element of executive
compensation for 2010. The Committee also determined that the
salaries and target annual incentive opportunities for the named
executive officers would not be adjusted for 2010.
As discussed below under 2011 Compensation
Decisions, during the last quarter of 2010, management
engaged Frederic W. Cook & Co., Inc. to collect
compensation data from which to benchmark executive compensation
for the fiscal year beginning January 1, 2011 and to
provide recommendations to the Human Resources and Compensation
Committee for salary adjustments, annual incentive opportunities
and equity awards.
Internal
Pay Equity
Compensation opportunities for the named executive officers are
targeted at the median market range and are also based on
individual performance over time, overall financial results and
job duties and responsibilities. Accordingly, Mr. Thompson
has the highest compensation among the named executive officers.
Messrs. Buster, Anderson and Morris and Ms. Vaniman,
each an Executive Vice President, have similar compensation
opportunities according to their responsibilities. Our Human
Resources and Compensation Committee believes that this similar
compensation opportunity among our Executive Vice Presidents
encourages their collaboration, support and team effort, and is
consistent with the Companys overall compensation
philosophy.
General
Information Regarding Elements of Compensation
The Companys executive compensation objectives are
achieved through five elements: base salary, cash incentive
compensation, long-term incentive compensation, retirement
benefits and from time to time other compensation (including
perquisites). In 2010, DTG used these elements of compensation
to create an overall executive compensation program that
included no salary increases, a short-term incentive opportunity
in the form of cash incentive compensation and long-term
incentives in the form of outstanding Option Rights and
Performance Units. The outstanding Option Rights, which vest
over a three-year period, were granted in 2009 as a strategic
long-term compensation element designed to reward and retain
management through 2010 and further into 2011. The Performance
Units were granted in 2008 and designed to incent multi-year
operational and financial results over the period of 2008 to
2010. No new grants of Option Rights or Performance Units were
made for 2010. DTG believes the use of these various
compensation elements provides the proper balance between short-
and long-term performance equity and cash compensation,
financial and market metrics, and corporate and individual
results. Overall, the pay package is intended to ultimately lead
to a strong alignment of the long-term interests of officers
with the long-term interests of stockholders. There is no
pre-defined allocation of value between short- and long-term pay
or between cash and equity compensation, but decisions are made
with a focus on the majority of compensation being long term and
performance based.
A-8
Discussion
of Elements of Compensation
Base
Salary
As previously discussed, no market salary data were requested or
reviewed by the Human Resources and Compensation Committee for
2010, and the base salaries of the named executive officers were
not increased in 2010.
2010 Cash
Incentive Compensation
For 2010, DTG established a cash incentive plan for executives
(the Cash Incentive Plan), including the
named executive officers, based on the Companys Corporate
Adjusted EBITDA. The Cash Incentive Plan set $99.4 million,
the level attained in 2009, as the minimum Corporate Adjusted
EBITDA to be achieved in 2010 prior to any payment under the
Cash Incentive Plan. The Cash Incentive Plan also set a target
Corporate Adjusted EBITDA level of $110 million, which, if
achieved, would result in 100% payout of the target award, and
set a cap that limited the awards to 150% of the target award
regardless of the actual growth of Corporate Adjusted EBITDA.
Corporate Adjusted EBITDA is the primary measurement used to
determine the maximum amount of the annual bonus awards for each
named executive officer under the Cash Incentive Plan. However,
the Human Resources and Compensation Committee reserves the
right to adjust any award in its sole discretion. Cash incentive
compensation is allocated to executive participants in the Plan
based on their job responsibilities and may be adjusted to
reflect individual performance, if appropriate. The target award
levels also differ by participant based on their job
responsibilities. In 2010, the Human Resources and Compensation
Committee did not consider or make any adjustments to any award,
and awards were determined based solely on the level of
achievement of the Corporate Adjusted EBITDA target. In
addition, the Cash Incentive Plan permits the Company to recover
awards if a participant engages in certain conduct detrimental
to the Company, including competing with DTG, solicitation of
employees for other employment, disclosure of confidential
information, any conduct that results in termination for cause,
any conduct determined to be harmful to the DTG and any conduct
that causes a restatement of any financial statements or
financial results of DTG.
The Cash Incentive Plan resulted in the payment to the named
executive officers of the maximum payment potential of the
target award based on Corporate Adjusted EBITDA, excluding
merger-related expenses, of $258.3 million, which exceeded
the target Corporate Adjusted EBITDA by approximately
$148 million.
Corporate Adjusted EBITDA is not defined under GAAP and should
not be considered as an alternative measure of the
Companys net income, operating performance, cash flow or
liquidity. The Company believes Corporate Adjusted EBITDA is
important as it provides investors with a supplemental measure
of the Companys liquidity by adjusting earnings to exclude
non-cash items. Corporate Adjusted EBITDA amounts may not be
comparable to similar measures disclosed by other companies. For
a further discussion of Corporate Adjusted EBITDA and a
reconciliation of Corporate Adjusted EBITDA to the most directly
comparable GAAP financial measure, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Use of Non-GAAP Measures For
Measuring Results in DTGs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
Long-Term
Incentive Compensation
DTG provides the named executive officers with long-term
incentive compensation pursuant to the Plan. The Plan is
intended to primarily provide equity-based incentives to
executives of the Company to ensure that managements
interests are aligned with the interests of the Companys
stockholders. DTG adopted the Plan to encourage participants to
focus on long-term Company performance and to provide an
opportunity for executive officers and certain designated key
employees to increase their stake in the Company through grants
of equity and equity-based compensation. Pursuant to the Plan,
the Human Resources and Compensation Committee has the
discretion to grant Option Rights, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares,
Performance Units and other equity and equity-based awards.
A-9
1. Options and Restricted Stock Units
During 2009, the Human Resources and Compensation Committee
deemed it essential that the interests of management be aligned
with the interests of DTG stockholders and that it was necessary
to take actions to ensure the continuity of the then
newly-retained management team during the challenging period the
Company was facing. Therefore, in May 2009, the Company made a
special grant of Option Rights to the executives of the Company,
including the named executive officers, with vesting to occur
over three years. These awards were granted to provide greater
incentive to create value for all stockholders, recognize the
management transition and provide incentive for the
newly-retained management team to remain in place through the
restructuring process. In addition to Option Rights,
Mr. Thompson was awarded Restricted Stock Units in 2009,
which vest over three years. The Restricted Stock Units were
granted to recognize limitations on the number of Option Rights
that could be provided to Mr. Thompson under the terms of
the Plan. As these special grants (a) were designed to
provide greater incentive to create value for all stockholders;
(b) vested over a three-year period; and, (c) were in
amounts greater than prior grants, no additional Option Rights
were granted in 2010.
2. Performance Units
In 2008, a target number of Performance Units were granted under
the Plan to executives including the named executive officers,
relating to a three-year performance period
(Performance Period) of
2008-2010.
Two management objectives were used to determine the number of
Performance Units ultimately earned for the
2008-2010
Performance Period: (i) DTGs total stockholder return
(TSR) performance compared to companies
included in the Russell 2000 Index during the Performance
Period; and (ii) the increase in customer retention as
measured by an internal customer retention index
(CRI) metric. Mr. Buster received a
pro-rated award in 2010 because he was not employed on the 2008
grant date. The management objectives are calculated as follows:
(a) The TSR award (a market-based condition) is determined
by comparing DTGs TSR results to the TSR results for
certain companies which are in and remain in the Russell 2000
Index during the Performance Period. The TSR for each company is
calculated by using the average stock price for all trading days
during the month of December 2010, plus any dividends paid
during the Performance Period, and then dividing by the average
stock price for all trading days during the month of December
2007. The Performance Units earned are computed according to the
payout schedule below using the Companys performance
relative to the range of performance among the Russell
2000 companies.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
Maximum
|
|
Percentile
|
|
|
20
|
th
|
|
|
35
|
th
|
|
|
50
|
th
|
|
|
65
|
th
|
|
|
80
|
th
|
Award Earned (% of Target)
|
|
|
0
|
%
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
|
|
200
|
%
|
If the TSR performance equals the 20th percentile or less,
then the payout will be 0% of target. Likewise, if the TSR
performance equals the 80th percentile or better, the
payment will be 200% of target.
(b) The CRI goal is to increase the number of customers
that are very likely to rent from the Company from the 2007 base
year CRI of 54% as determined by survey data collected by a
third-party vendor. The Performance Units earned under the CRI
calculation are an adjustment to those earned under the TSR
calculation and are determined according to the payout schedule
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
|
Target
|
|
|
|
Maximum
|
|
CRI %
|
|
|
46
|
%
|
|
|
50
|
%
|
|
|
54
|
%
|
|
|
|
|
|
|
62
|
%
|
Award Adjustment (% of Target)
|
|
|
90
|
%
|
|
|
95
|
%
|
|
|
100
|
%
|
|
|
105
|
%
|
|
|
110
|
%
|
If the CRI performance equals 46% or less, then the adjustment
factor is 90%. Likewise, if CRI performance equals 62% or
better, the adjustment factor is 110%.
Awards were conditioned on positive TSR over the Performance
Period and achievement of aggregate Corporate Adjusted EBITDA in
excess of $300 million over the Performance Period.
A-10
If the TSR calculation results in a payout of greater than 0%,
then the award percentages for TSR are subject to the applicable
CRI award adjustment to set the final adjustment factor. The
final adjustment factor is then applied to the target grant of
Performance Units to arrive at the actual number of Shares
issued. For the
2008-2010
Performance Period, the TSR calculation resulted in the maximum
payout of 200%. Accordingly, although it improved significantly
over the Performance Period to 63%, the CRI was not used as an
adjustment factor because the awards were in all cases capped at
200% of target.
Because TSR was at the 94th percentile for the
2008-2010
Performance Period, 200% of the established Target Performance
Units were awarded to the executives in the Plan, including
Mr. Thompson (18,900 Shares), Mr. Buster
(8,640 Shares), Mr. Anderson (11,962 Shares),
Mr. Morris (7,656 Shares), and Ms. Vaniman
(14,832 Shares).
Pay
versus Performance Discussion
As discussed in Executive Compensation
Objectives of Compensation Program above, key objectives
of our executive compensation program include motivating our
executives to achieve financial and operating results including
increased profitability and stockholder returns, and attracting
and retaining high caliber executives. Accordingly, in addition
to paying fixed compensation in the form of a market-based
salary, we provide our named executive officers with variable
short- and long-term compensation opportunities that are based
on DTGs performance. Our Cash Incentive Plan rewards
executives on increased Corporate Adjusted EBITDA, while awards
under our Long-Term Incentive Compensation Plan rewards
executives on long-term Company performance and TSR, typically
over a three-year Performance Period. Stock Options and
Performance Units link the amount our executives earn to the
performance of the Common Stock.
In 2010, DTGs performance was strong, with Corporate
Adjusted EBITDA (excluding merger-related expenses) increasing
by $158.9 million, or 159.7%, from December 31, 2009
to December 31, 2010. In addition, over the
2008-2010
Performance Period the Company achieved aggregate Corporate
Adjusted EBITDA of $355.4 million (excluding merger-related
expenses), and the price of the Common Stock increased from a
low of $0.64 on October 10, 2008 to $47.26 on
December 31, 2010. As a result of this exceptional
performance, our named executive officers received the maximum
potential award under our annual Cash Incentive Plan, and the
Performance Units granted pursuant to the Plan for the
2008-2010
Performance Period paid out at the maximum potential award. We
believe these payouts demonstrate a link between strong Company
performance and the variable compensation opportunities for our
named executive officers.
Supplemental
Retirement
Effective January 1, 2009, DTG adopted a deferred
compensation plan (the Deferred Compensation
Plan) to (i) replace certain existing deferred
compensation arrangements that had not been funded since 2006
and (ii) provide a more streamlined approach, with lower
administrative costs, that permits the Companys
executives, including the named executive officers, to
participate in a common deferred compensation plan. The Deferred
Compensation Plan is intended to provide an equitable program
for retirement income and retention for executives of the
Company, including the named executive officers, and provides
for an aggregate annual contribution by the Company in respect
of each participant of an amount equal to 15% of the
executives base salary, contributed in quarterly
installments. All contributions by the Company are immediately
100% vested. Each participant is also permitted, on an annual
basis, to contribute to the Deferred Compensation Plan.
DTG has established a single non-qualified trust to provide a
source of payment for benefits under the Deferred Compensation
Plan. Separate accounts are maintained for each participant of
the Deferred Compensation Plan and the Bank of Oklahoma, N.A.,
is the trustee.
The Deferred Compensation Plan remained in place during 2010 and
continues for 2011.
A-11
Change
in Control Arrangements
There are no employment contracts or non-compete agreements with
any officer, including the named executive officers. DTG has
entered into a change in control agreement with
Mr. Thompson (the Employment Continuation
Agreement), as well as a change in control plan for
other executive officers, including the other named executive
officers (the Employment Continuation Plan).
The Employment Continuation Agreement and the Employment
Continuation Plan are designed to promote stability and
continuity of executives in the event of a transition in
corporate control. Information regarding applicable payments
under such Employment Continuation Agreement and Employment
Continuation Plan for the named executive officers is provided
below under the heading Potential Payments Upon
Termination or Change in Control. The Company believes
these agreements are in line with market practice and provide
value to the stockholders.
2011
Compensation Decisions
As briefly discussed above, during the last quarter of 2010,
management engaged Frederic W. Cook & Co., Inc.
(FWC) to conduct a study of benchmark compensation
levels and practices for our senior executive team, including
the named executive officers. In addition, FWC was asked to
provide recommendations to the Human Resources and Compensation
Committee for salary adjustments and equity awards for 2011.
Management worked with FWC to identify appropriate market
benchmarks for each named executive officer. The benchmark pay
sources included a comparator group of publicly traded peers,
which was developed by FWC with input from management, and
third-party compensation surveys. The Human Resources and
Compensation Committees independent consultant, Towers
Watson, reviewed the methodology used by FWC to develop the
compensation benchmarks and provided advice to the Human
Resources and Compensation Committee regarding the
reasonableness of the studys results.
FWC identified the following 14 companies as the comparator
group:
|
|
|
Alexander & Baldwin, Inc.
|
|
Hertz Global Holdings, Inc.
|
AMERCO
|
|
Kirby Corp.
|
Asbury Automotive Group, Inc.
|
|
Lithia Motors, Inc.
|
Avis Budget Group, Inc.
|
|
Old Dominion Freight Line, Inc.
|
CarMax, Inc.
|
|
The Pep Boys Manny, Moe & Jack
|
Genesee & Wyoming, Inc.
|
|
Ryder System, Inc.
|
Group 1 Automotive, Inc.
|
|
Werner Enterprises, Inc.
|
The comparator companies include direct competitors to DTG
(i.e., car rental and automotive retailers) and other
comparably-sized companies in the same Global Industry
Classification Standard Group classification as DTG. DTG
Management also reviewed general industry pay statistics from
the following third-party executive pay surveys: 2010 Mercer
Executive Benchmark Survey (utilizing 108 companies with
revenues of $1 billion to $2.5 billion), 2010 Towers
Watson U.S. CDB Survey (utilizing 170 companies with
revenues of $1 billion to $3 billion), 2010/11 Towers
Watson Top Management Survey (utilizing 919 companies with
data regressed to revenues of $1.5 billion) and 2010 FWC
Survey of Long-Term Incentives (utilizing 57 companies for
comparison of plans).
Based on DTGs relative size and recent performance versus
the benchmark data sources, FWC advised the Human Resources and
Compensation Committee that target total compensation
opportunities in the median market range would be appropriate.
The Human Resources and Compensation Committee considered
FWCs study and recommendations, together with the advice
of Towers Watson, its independent consultant, in making certain
determinations regarding 2011. The Human Resources and
Compensation Committee also considered the Companys
performance since Mr. Thompson became CEO in October of
2008. In particular, the Human Resources and Compensation
Committee considered the significant increase in the price of
the Common Stock and the growth in Corporate Adjusted EBITDA
during this period, and managements success in executing
its 2010 business plan despite the uncertainty and disruption
caused by the potential merger, as discussed above in 2010
Overview.
A-12
Based on these factors, the Human Resources and Compensation
Committee determined that it would target total compensation
opportunities (base salary, target short-term incentive and
long-term incentive fair values) for its named executive
officers at the market median for 2011. Accordingly, the Human
Resources and Compensation Committee approved the following base
salaries for its named executive officers, positioning the named
executive officers at the market median: Mr. Thompson,
$800,000; Mr. Buster, $425,000; Mr. Anderson,
$425,000; Ms. Vaniman, $300,000; and Mr. Morris,
$250,000.
At the end of 2010, the Human Resources and Compensation
Committee also approved the grant of Performance Units to the
named executive officers. These awards are contingent on the
achievement of a specified level of Corporate Adjusted EBITDA in
2011; if the specified level is not achieved, the awards will be
forfeited. If the Company achieves the specified level of
Corporate Adjusted EBITDA in 2011, 25% of the Performance Units
will vest on December 31, 2012 and the remaining 75% will
vest on December 31, 2013, in each case subject to the
applicable named executive officers continued employment
with the Company through the vesting date. The Performance Units
granted to each of the named executive officers, subject to
achievement of the Corporate Adjusted EBITDA performance
measure, are as follows: Mr. Thompson (45,000 units);
Mr. Buster (16,000 units); Mr. Anderson
(16,000 units); Ms. Vaniman (9,000 units) and
Mr. Morris (7,000 units).
Impact
of Accounting and Tax Treatment on Compensation
Accounting
Treatment
The Human Resources and Compensation Committee is aware of the
accounting treatment accorded to DTGs compensation
program. However, the treatment has not been a significant
factor in such compensation program or in the decisions of the
Human Resources and Compensation Committee concerning the amount
or type of compensation.
Section 162(m)
of the Internal Revenue Code
Pursuant to Section 162(m) of the Internal Revenue Code of
1986 (the Code), publicly-held corporations
are prohibited from deducting compensation paid to the named
executive officers except the Chief Financial Officer, as of the
end of the fiscal year, in excess of $1 million, unless the
compensation is performance-based. Generally, it is
the Human Resources and Compensation Committees policy
that the long-term incentive compensation paid to executive
officers qualifies for deductibility to the extent not
inconsistent with DTGs fundamental compensation policies.
In furtherance of this policy, the Company has in the past
requested that the stockholders re-approve the performance
measures that may be used under the Plan in future years to
satisfy the performance-based compensation requirements of
Section 162(m) of the Code.
With respect to the Cash Incentive Plan, in prior years the
Company determined that its need for flexibility in designing an
effective compensation plan to meet our objectives and to
respond quickly to marketplace needs has outweighed its need to
maximize the deductibility of its annual compensation. The Human
Resources and Compensation Committee will review this policy
from time to time.
Common
Stock Ownership Guidelines
DTG maintains Common Stock ownership guidelines to more closely
align the interests of executives, including the named executive
officers, with those of stockholders, ranging from one half of
the annual base salary for the most junior executives to five
times the annual base salary for the Chief Executive Officer if
he or she is also serving as a director. Generally, each
executive has five years from the later of (i) the date of
hire and (ii) the date of promotion within which to attain
the ownership guidelines set for his or her position.
As of the date of this Proxy Statement, each named executive
officer is in compliance with the Common Stock ownership
guidelines.
A-13
Summary
Compensation Table
The following table provides certain summary information
concerning compensation of DTGs Chief Executive Officer
and each of the other named executive officers of DTG for the
fiscal year ended December 31, 2010.
2010
SUMMARY COMPENSATION TABLE
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)(1)
|
|
(f)(1)
|
|
(g)(2)
|
|
(h)
|
|
(i)(3)
|
|
(j)
|
|
Scott L. Thompson,
|
|
|
2010
|
|
|
|
550,000
|
|
|
|
|
|
|
|
2,120,850
|
|
|
|
|
|
|
|
825,000
|
|
|
|
|
|
|
|
157,625
|
|
|
|
3,653,475
|
|
Chief Executive Officer,
|
|
|
2009
|
|
|
|
550,000
|
|
|
|
|
|
|
|
222,000
|
|
|
|
741,405
|
|
|
|
825,000
|
|
|
|
|
|
|
|
125,084
|
|
|
|
2,463,489
|
|
President and Director
|
|
|
2008
|
|
|
|
241,731
|
|
|
|
|
|
|
|
370,040
|
|
|
|
383,088
|
|
|
|
|
|
|
|
|
|
|
|
68,920
|
|
|
|
1,063,779
|
|
H. Clifford Buster III,
|
|
|
2010
|
|
|
|
300,000
|
|
|
|
|
|
|
|
962,693
|
|
|
|
|
|
|
|
337,500
|
|
|
|
|
|
|
|
93,144
|
|
|
|
1,693,337
|
|
Senior Executive Vice President
|
|
|
2009
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
444,843
|
|
|
|
337,500
|
|
|
|
|
|
|
|
82,506
|
|
|
|
1,164,849
|
|
and Chief Financial Officer
|
|
|
2008
|
|
|
|
50,769
|
|
|
|
|
|
|
|
|
|
|
|
41,430
|
|
|
|
|
|
|
|
|
|
|
|
10,141
|
|
|
|
102,340
|
|
R. Scott Anderson,
|
|
|
2010
|
|
|
|
425,000
|
|
|
|
|
|
|
|
754,080
|
|
|
|
|
|
|
|
478,125
|
|
|
|
|
|
|
|
125,070
|
|
|
|
1,782,275
|
|
Senior Executive Vice President,
|
|
|
2009
|
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
444,843
|
|
|
|
478,125
|
|
|
|
|
|
|
|
83,897
|
|
|
|
1,431,865
|
|
Global Operations
|
|
|
2008
|
|
|
|
379,082
|
|
|
|
|
|
|
|
45,817
|
|
|
|
183,728
|
|
|
|
|
|
|
|
|
|
|
|
38,292
|
|
|
|
746,919
|
|
Vicki J. Vaniman,
|
|
|
2010
|
|
|
|
285,000
|
|
|
|
|
|
|
|
424,170
|
|
|
|
|
|
|
|
256,500
|
|
|
|
|
|
|
|
88,980
|
|
|
|
1,054,650
|
|
Executive Vice President and
|
|
|
2009
|
|
|
|
285,000
|
|
|
|
|
|
|
|
|
|
|
|
296,562
|
|
|
|
256,500
|
|
|
|
|
|
|
|
61,060
|
|
|
|
899,122
|
|
General Counsel
|
|
|
2008
|
|
|
|
272,885
|
|
|
|
|
|
|
|
180,802
|
|
|
|
170,158
|
|
|
|
|
|
|
|
|
|
|
|
35,423
|
|
|
|
659,268
|
|
Rick L. Morris,
|
|
|
2010
|
|
|
|
250,000
|
|
|
|
|
|
|
|
329,910
|
|
|
|
|
|
|
|
225,000
|
|
|
|
|
|
|
|
79,806
|
|
|
|
884,716
|
|
Executive Vice President and
|
|
|
2009
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
296,562
|
|
|
|
225,000
|
|
|
|
|
|
|
|
56,181
|
|
|
|
827,743
|
|
Chief Information Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount shown in column (e), with respect to Performance
Units and Restricted Stock Units, and column (f), with respect
to Option Rights, for each named executive officer reflects the
grant date fair value in accordance with ASC 718 for awards
pursuant to the Plan. The December 3, 2010 grant date fair
value of the Performance Units to the named executive officers
is based on a performance condition only. For Mr. Buster,
the amounts shown in column (e) for 2010 includes a portion
related to the
2008-2010
Performance Period based on the October 8, 2010 grant date
stock price of $48.29. |
|
(2) |
|
The Companys non-equity incentive plan, the Cash Incentive
Plan, as shown in column (g) is a cash incentive
compensation plan that pays out based on the level of Corporate
Adjusted EBITDA achieved for the year. Awards are allocated
based on established target levels and the Human Resources and
Compensation Committee has the discretion, along with input from
management, to adjust the awards based on individual
performance. The maximum limitation on the award payment is 150%
of the target as a percentage of base pay. The Company exceeded
the maximum target of Corporate Adjusted EBITDA in 2010, and
therefore incentive compensation was paid to the named executive
officers at the highest level as described in the 2010 Executive
Compensation Plan (150% of target) and no discretionary
adjustments were made to the awards. |
|
(3) |
|
The amount shown in column (i) includes the following: |
|
|
|
(a) |
|
for each named executive officer, the Companys
contribution to the 401(k) plan and the Deferred Compensation
Plan. The amounts attributable to the Companys
contributions for the Deferred Compensation Plan for each named
executive officer are as follows: Mr. Thompson, $82,500;
Mr. Buster, $45,000; Mr. Anderson, $63,750;
Ms. Vaniman, $42,750; and Mr. Morris, $37,500. |
|
(b) |
|
for each named executive officer, the aggregate incremental cost
to the Company for the following benefits: (i) supplemental
executive life insurance, (ii) supplemental long-term
disability insurance premiums, (iii) health club dues
reimbursement; and (iv) vehicle allowance. No amount
attributable to each such perquisite or benefit for each named
executive officer exceeds the greater of $25,000 and 10% of the
total amount of perquisites for such named executive officer. |
|
(c) |
|
a pay out of Paid Time Off (PTO) due to the change
in the PTO plan of the Company, effective January 1, 2010. |
A-14
Grants of
Plan-Based Awards
The following table provides certain summary information
concerning grants of plan-based awards to the named executive
officers for the fiscal year ended December 31, 2010.
2010
GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise or
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Base Price
|
|
Fair Value
|
|
|
|
|
Estimated Future Payouts Under Non-
|
|
Estimated Future Payouts Under
|
|
Shares of
|
|
Securities
|
|
of Option
|
|
of Stock
|
|
|
|
|
Equity Incentive Plan Awards(1)
|
|
Equity Incentive Plan Awards
|
|
Stock or
|
|
Underlying
|
|
or Stock
|
|
and Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
($)(2)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
Scott L. Thompson
|
|
|
|
|
|
$
|
137,500
|
|
|
$
|
550,000
|
|
|
$
|
825,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
$
|
47.13
|
|
|
$
|
2,120,850
|
|
H. Clifford Buster III
|
|
|
|
|
|
$
|
56,250
|
|
|
$
|
225,000
|
|
|
$
|
337,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
10/8/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,320
|
|
|
|
|
|
|
$
|
48.29
|
|
|
$
|
208,613
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
|
|
|
$
|
47.13
|
|
|
$
|
754,080
|
|
R. Scott Anderson
|
|
|
|
|
|
$
|
79,688
|
|
|
$
|
318,750
|
|
|
$
|
478,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
|
|
|
$
|
47.13
|
|
|
$
|
754,080
|
|
Vicki J. Vaniman
|
|
|
|
|
|
$
|
42,750
|
|
|
$
|
171,000
|
|
|
$
|
256,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
$
|
47.13
|
|
|
$
|
424,170
|
|
Rick L. Morris
|
|
|
|
|
|
$
|
37,500
|
|
|
$
|
150,000
|
|
|
$
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
|
$
|
47.13
|
|
|
$
|
329,910
|
|
|
|
|
(1) |
|
The Cash Incentive Plan provided for target payouts as follows:
(a) 100% of base salary (Mr. Thompson); (b) 75%
of base salary (Messrs. Buster and Anderson); and
(c) 60% of base salary (Mr. Morris and
Ms. Vaniman). There was a threshold amount of 25% of the
target payment and a maximum limitation on the award payment of
150% of the target payout. The maximum amounts are included in
column (g) of the Summary Compensation Table. For more
information on the Cash Incentive Plan, see Compensation
Discussion and Analysis Discussion of Elements of
Compensation 2010 Cash Incentive Compensation. |
|
(2) |
|
The amounts shown in column (l) represent the aggregate
grant date fair value computed in accordance with ASC 718. |
A-15
Outstanding
Equity Awards at Fiscal Year-End
The following table provides certain summary information
concerning the outstanding equity awards of the named executive
officers for the fiscal year ended December 31, 2010.
OUTSTANDING
EQUITY AWARDS AT 2010 FISCAL YEAR END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market or
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Payout
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Shares,
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Units, or
|
|
|
|
|
Number of Securities
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Other
|
|
Other
|
|
|
|
|
Underlying
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
Rights that
|
|
Rights that
|
|
|
Grant
|
|
Unexercised Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
|
Have Not
|
Name
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
Vested ($)
|
|
Vested (#)
|
|
Vested ($)
|
(a)(1)
|
|
|
|
(b) (2)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)(3)
|
|
(j)
|
|
Scott L. Thompson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option(a)
|
|
|
5/23/08
|
|
|
|
0
|
|
|
|
35,800
|
|
|
|
|
|
|
$
|
13.98
|
|
|
|
5/22/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option(b)
|
|
|
5/23/08
|
|
|
|
25,850
|
|
|
|
25,850
|
|
|
|
|
|
|
$
|
13.98
|
|
|
|
5/22/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option(c)
|
|
|
10/13/08
|
|
|
|
131,667
|
|
|
|
65,833
|
|
|
|
|
|
|
$
|
0.97
|
|
|
|
10/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option(d)
|
|
|
5/14/09
|
|
|
|
50,000
|
|
|
|
200,000
|
|
|
|
|
|
|
$
|
4.44
|
|
|
|
5/13/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units(b)
|
|
|
5/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,774
|
|
|
$
|
320,139
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units(c)
|
|
|
10/13/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,670
|
|
|
$
|
787,824
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units(d)
|
|
|
5/14/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
1,890,400
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
5/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,900
|
|
|
$
|
893,214
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
$
|
2,126,700
|
|
H. Clifford Buster III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(c)
|
|
|
10/21/08
|
|
|
|
66,667
|
|
|
|
33,333
|
|
|
|
|
|
|
$
|
0.77
|
|
|
|
10/20/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(d)
|
|
|
5/14/09
|
|
|
|
30,000
|
|
|
|
120,000
|
|
|
|
|
|
|
$
|
4.44
|
|
|
|
5/13/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
10/8/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,640
|
|
|
$
|
408,326
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
$
|
756,160
|
|
R. Scott Anderson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(a)
|
|
|
1/31/08
|
|
|
|
0
|
|
|
|
12,054
|
|
|
|
|
|
|
$
|
24.38
|
|
|
|
1/30/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(c)
|
|
|
10/13/08
|
|
|
|
83,334
|
|
|
|
41,666
|
|
|
|
|
|
|
$
|
0.97
|
|
|
|
10/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(d)
|
|
|
5/14/09
|
|
|
|
30,000
|
|
|
|
120,000
|
|
|
|
|
|
|
$
|
4.44
|
|
|
|
5/13/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
1/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,962
|
|
|
$
|
565,324
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
$
|
756,160
|
|
Vicki J. Vaniman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(a)
|
|
|
1/31/08
|
|
|
|
0
|
|
|
|
14,947
|
|
|
|
|
|
|
$
|
24.38
|
|
|
|
1/30/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(c)
|
|
|
10/13/08
|
|
|
|
30,000
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
0.97
|
|
|
|
10/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(d)
|
|
|
5/14/09
|
|
|
|
20,000
|
|
|
|
80,000
|
|
|
|
|
|
|
$
|
4.44
|
|
|
|
5/13/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
1/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,832
|
|
|
$
|
700,960
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
$
|
425,340
|
|
Rick L. Morris
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(a)
|
|
|
1/31/08
|
|
|
|
0
|
|
|
|
7,715
|
|
|
|
|
|
|
$
|
24.38
|
|
|
|
1/30/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(c)
|
|
|
10/13/08
|
|
|
|
30,000
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
0.97
|
|
|
|
10/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(d)
|
|
|
5/14/09
|
|
|
|
20,000
|
|
|
|
80,000
|
|
|
|
|
|
|
$
|
4.44
|
|
|
|
5/13/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
1/31/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,656
|
|
|
$
|
361,822
|
|
Performance Units
|
|
|
12/3/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
$
|
330,820
|
|
|
|
|
(1) |
|
The vesting schedules for the Stock Option Rights and Restricted
Stock Units awards shown in column (a), identified by grant
date, is as follows: |
|
|
|
(a) |
|
Stock Option Rights with grant dates of May 23, 2008 and
January 31, 2008 vest in full on May 22, 2011 and
January 31, 2011, respectively. |
|
(b) |
|
Stock Option Rights and Restricted Stock Units granted to
Mr. Thompson on May 23, 2008 vest in four equal annual
installments beginning on May 22, 2009. |
A-16
|
|
|
(c) |
|
Stock Option Rights with grant dates of October 13, 2008
and October 21, 2008, and Restricted Stock Units with a
grant date of October 13, 2008 vest in three equal annual
installments beginning on October 31, 2009 (for the Stock
Option Rights) and October 13, 2009 (for the Restricted
Stock Units). |
|
(d) |
|
Stock Option Rights with a grant date of May 14, 2009 and
Restricted Stock Units with a grant date of May 14, 2009
vest 20% on each of May 13, 2010 and May 13, 2011, and
the remaining 60% vest on May 13, 2012. |
|
|
|
(2) |
|
All Stock Option Rights listed in column (b) are fully
vested. These Stock Option Rights expire 10 years from the
respective grant date. |
|
(3) |
|
Performance Units granted to executives for the
2008-2010
Performance Period are subject to adjustment based on
performance against certain management objectives. The
Performance Units vest immediately upon approval by the Human
Resources and Compensation Committee following completion of the
Performance Period. Performance Units granted for the
2008-2010
Performance Period were paid on March 2, 2011 at 200% of
target based on the performance during the
2008-2010
Performance Period. Performance Units granted on
December 3, 2010 as shown in column (i) above will be
adjusted following a one-year performance period of 2011 and, if
the specified Corporate Adjusted EBITDA has been met for 2011,
will be paid in 2012 and 2013 based on the continued employment
of the named executive officers with the Company at the time of
the payment. |
Option
Exercises and Stock Vested
The following table provides certain summary information
concerning the exercise of non-qualified Option Rights and
vesting of Performance Units and Restricted Stock Units awards
made under the Plan for each of the named executive officers for
the fiscal year ended December 31, 2010.
2010
OPTION EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Acquired on
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized on
|
|
|
Exercise
|
|
Exercise
|
|
Acquired on Vesting
|
|
Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)(1)
|
|
Scott L. Thompson
|
|
-0-
|
|
-0-
|
|
10,000
|
|
494,200
|
|
|
|
|
|
|
3,388
|
|
155,645
|
|
|
|
|
|
|
16,665
|
|
810,752
|
H. Clifford Buster III
|
|
-0-
|
|
-0-
|
|
-0-
|
|
-0-
|
R. Scott Anderson
|
|
25,800
|
|
1,325,346
|
|
7,325
|
|
225,024
|
Vicki J. Vaniman
|
|
-0-
|
|
-0-
|
|
5,027
|
|
154,429
|
Rick L. Morris
|
|
-0-
|
|
-0-
|
|
3,232
|
|
99,287
|
|
|
|
(1) |
|
The value shown in column (e) is computed by multiplying
the number of Shares by the closing price per Share on the date
of vesting. Mr. Thompsons 10,000 shares vested
on May 13, 2010 at the closing share price of $49.42, his
3,388 Shares vested on May 22, 2010 at a closing Share
price on May 24, 2010 of $45.94 and his 16,665 Shares
vested on October 13, 2010 at a closing Share price of
$48.65. Messrs. Andersons and Morriss and
Ms. Vanimans Shares of 7,325, 3,232 and 5,027,
respectively, vested on March 4, 2010 at a closing Share
price of $30.72. |
A-17
Nonqualified
Deferred Compensation
The following table provides certain summary information
concerning nonqualified deferred compensation of the named
executive officers of DTG during the fiscal year ended
December 31, 2010.
2010
NONQUALIFIED DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Earnings/
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Losses in
|
|
Withdrawals/
|
|
Balance
|
|
|
Last FY
|
|
Last FY
|
|
Last FY
|
|
Distributions
|
|
at Last FYE
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)(1)
|
|
(d)(2)
|
|
(e)
|
|
(f)
|
|
Scott L. Thompson
|
|
|
-0-
|
|
|
|
82,500
|
|
|
|
21,771
|
|
|
|
-0-
|
|
|
|
196,733
|
|
H. Clifford Buster III
|
|
|
-0-
|
|
|
|
45,000
|
|
|
|
9,610
|
|
|
|
-0-
|
|
|
|
99,656
|
|
R. Scott Anderson
|
|
|
-0-
|
|
|
|
63,750
|
|
|
|
14,650
|
|
|
|
-0-
|
|
|
|
151,146
|
|
Vicki J. Vaniman
|
|
|
-0-
|
|
|
|
42,750
|
|
|
|
482,007
|
|
|
|
-0-
|
|
|
|
1,129,525
|
|
Rick L. Morris
|
|
|
-0-
|
|
|
|
37,500
|
|
|
|
71
|
|
|
|
-0-
|
|
|
|
81,014
|
|
|
|
|
(1) |
|
The amount shown in column (c) for each named executive
officer is also reported as compensation to such named executive
officer in column (i) of the Summary Compensation Table.
These contributions were made pursuant to the Deferred
Compensation Plan. |
|
(2) |
|
The total amount shown in column (d) for each named
executive officer is the aggregate earnings during the last
fiscal year, and reflects the increase in the value of the
Common Stock in the participants deferred compensation
account during 2010 and/or market rate of interest, and is not
shown as compensation to such named executive officers in any
column of the Summary Compensation Table. |
For more information on the Deferred Compensation Plan and its
predecessor plans, see Compensation Discussion and
Analysis Discussion of Elements of
Compensation Supplemental Retirement Benefits.
Potential
Payments Upon Termination or Change in Control
Introduction
The tables set forth below provide certain summary information
concerning the amount of compensation that would be payable to
each of the named executive officers upon a termination of
employment or upon a change in control of DTG. The amounts in
the tables assume that such termination or change in control was
effective as of December 31, 2010, and therefore include
amounts earned through such date and are estimates of the
amounts which would be paid out to each executive. None of the
named executive officers have any agreement that provides, nor
do any of the named executive officers participate in a plan
that provides for the payment of any severance or provision of
any benefit continuation in the event of a termination of
employment other than a termination of employment that follows a
change in control of DTG.
The amounts listed below under severance and
benefit continuation (other than amounts relating to
a change in control) are those that may be provided, in the sole
discretion of the Company, to the executive pursuant to general
severance guidelines (the Severance
Guidelines) established by the Company and applicable
to all employees generally. Any payments to be made pursuant to
the Deferred Compensation Plan and its predecessor plans are
payable in accordance with their terms and are not referenced
below. For more information, see the 2010 Nonqualified
Deferred Compensation Table above and the description of
such plan in Compensation Discussion and
Analysis Discussion of Elements of
Compensation Supplemental Retirement Benefits
section above. Mr. Thompson is party to the Employment
Continuation Agreement and the other named executive officers
participate in the Employment Continuation Plan (together, the
Employment Continuation Arrangements), both
of which provide certain payments and benefits in the event of a
change in control or a termination of employment thereafter. The
actual payments to be made, and value of benefits to be
provided, can only be determined at the time of such
executives separation from DTG. The actual severance and
benefits received under each scenario are discussed in the
narrative preceding each table.
A-18
Payments
Made Upon Involuntary Termination With Cause or Voluntary
Termination (Other Than Retirement)
In general, no payments are made (other than payments required
by law, such as accrued vacation) and no benefits are provided,
and all outstanding Option Rights, as well as any outstanding
Performance Units or Restricted Stock Units, are forfeited. In
the absence of a change in control of the Company,
cause means misconduct of the named executive
officer that is willful or involves gross negligence, as
determined by DTG.
Payments
Made Upon Involuntary Termination Without Cause or Due to a
Reduction in Force
The Severance Guidelines provide that in the event of an
involuntary termination without cause, the Company, with the
approval of the Human Resources and Compensation Committee, has
the discretion to provide the named executive officers with
(i) a minimum of 26 weeks of salary plus a prorated
bonus pursuant to the annual Cash Incentive Plan,
(ii) continuation of health benefits during the period of
salary continuation and (iii) continuation of the vehicle
allowance for the period of salary continuation. The table below
utilizes a one-year severance for salary and the actual bonus
amount paid to the named executive officers for 2010. In no
event do the Severance Guidelines or any other guidelines,
agreements or policies entitle the named executive officers to
such payments and benefits. In general, unvested Option Rights
are forfeited and vested Option Rights are exercisable until the
earlier of six months after termination and the expiration date
of the Options Rights. Target Performance Units will be prorated
(based on the days employed by the Company during the
Performance Period and at the current accounting accrual rate at
the time of termination) and paid by March 15 of the year
following the Performance Period and based on actual Company
performance during the Performance Period. Restricted Stock
Units are also prorated based on days of service with the
exception of the May 14, 2009 grant to Mr. Thompson,
which provides that the Restricted Stock Units will be forfeited
to the extent not vested. Notwithstanding the foregoing, in the
event the termination is in connection with a reduction in
force, the vested Option Rights may be exercised (if prior to
the stated expiration date) for a period equal to the greater of
(a) six months after termination and (b) two times the
number of weeks of salary for the period of salary continuation,
but not to exceed one year.
INVOLUNTARY
TERMINATION WITHOUT CAUSE OR DUE TO REDUCTION IN FORCE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
Restricted
|
|
|
|
|
|
|
|
|
Benefits
|
|
Shares or
|
|
Stock &
|
|
Accrued
|
|
|
Name
|
|
Severance
|
|
Continuation
|
|
Units
|
|
Options
|
|
Vacation
|
|
Total ($)
|
(a)
|
|
(b)(1)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Scott L. Thompson
|
|
$
|
1,375,000
|
|
|
$
|
25,832
|
|
|
$
|
|
|
|
$
|
790,803
|
|
|
$
|
67,692
|
|
|
$
|
2,259,327
|
|
H. Clifford Buster III
|
|
$
|
637,500
|
|
|
$
|
20,870
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,923
|
|
|
$
|
695,293
|
|
R. Scott Anderson
|
|
$
|
903,125
|
|
|
$
|
21,105
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
52,308
|
|
|
$
|
976,538
|
|
Vicki J. Vaniman
|
|
$
|
541,500
|
|
|
$
|
19,544
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
35,077
|
|
|
$
|
596,121
|
|
Rick L. Morris
|
|
$
|
475,000
|
|
|
$
|
25,832
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,769
|
|
|
$
|
531,601
|
|
|
|
|
(1) |
|
The amounts in column (b) for each named executive officer
include one year of base salary and the actual incentive
compensation earned. |
Payments
Made Upon Retirement, Death or Disability
In general, no severance payments are made, and no benefits are
provided, upon a termination of employment as the result of the
named executive officers retirement, death or disability.
In the case of retirement, Option Rights continue to vest in
accordance with the option grant agreements, and vested Option
Rights are exercisable for up to three years from the retirement
date, but in no event shall any Option Right be exercisable
after the expiration date. Restricted Stock Units will be
prorated as of the date of retirement, and the remaining
unvested Restricted Stock Units are forfeited (with the
exception of the May 14, 2009 Restricted Stock Unit grant,
which will continue to vest in accordance with the terms of the
grant). All Performance
A-19
Units will be prorated based on the accounting accrual rate at
the time of retirement if retirement occurs prior to the
completion of the Performance Period and will vest in full if
retirement occurs following the Performance Period. In the event
of death or disability, unvested Option Rights are forfeited,
and vested Option Rights are exercisable for up to six months
from the date of death or disability, provided that in no event
shall any Option Right be exercisable after the expiration date.
Performance Units, if the termination occurs prior to the
completion of the Performance Period, will be prorated (based on
the days employed during the Performance Period and at the
current accounting accrual rate at the time of termination), and
paid by March 15 of the year following termination. Restricted
Stock Units are also prorated based on days of employment with
the exception of the May 14, 2009 grant to
Mr. Thompson, which provides that the Restricted Stock
Units will continue to vest as scheduled, pursuant to the grant
agreement.
Retirement for the grants relating to
the
2008-2010
Performance Period is defined as the named executive
officers voluntary termination of employment if, as of the
date of termination, he or she is (a) age 61 or older
with five or more years of service with the Company or
(b) has 20 or more years of service with the Company. For
the purposes of the Performance Units Grant Agreement dated
December 3, 2010, Retirement is defined
as the voluntary termination of employment by a named executive
officer if, as of the date of such termination, he or she is
age 62 or older with at least five years of service with
the Company.
PAYMENTS
MADE UPON RETIREMENT, DEATH OR DISABILITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
Restricted
|
|
|
|
|
|
|
|
|
Benefits
|
|
Shares or
|
|
Stock &
|
|
Accrued
|
|
Total
|
Name
|
|
Severance
|
|
Continuation
|
|
Units
|
|
Options
|
|
Vacation
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Scott L. Thompson
|
|
$
|
|
|
|
$
|
|
|
|
$
|
893,214
|
|
|
$
|
790,803
|
|
|
$
|
67,692
|
|
|
$
|
1,751,709
|
|
H. Clifford Buster III
|
|
$
|
|
|
|
$
|
|
|
|
$
|
408,326
|
|
|
$
|
|
|
|
$
|
36,923
|
|
|
$
|
445,249
|
|
R. Scott Anderson
|
|
$
|
|
|
|
$
|
|
|
|
$
|
565,324
|
|
|
$
|
|
|
|
$
|
52,308
|
|
|
$
|
617,632
|
|
Vicki J. Vaniman
|
|
$
|
|
|
|
$
|
|
|
|
$
|
700,960
|
|
|
$
|
|
|
|
$
|
35,077
|
|
|
$
|
736,037
|
|
Rick L. Morris
|
|
$
|
|
|
|
$
|
|
|
|
$
|
361,822
|
|
|
$
|
|
|
|
$
|
30,769
|
|
|
$
|
392,591
|
|
Payments
Made Upon a Change in Control
DTG has entered into an Employment Continuation Agreement with
Mr. Thompson and an Employment Continuation Plan in which
Messrs. Anderson, Buster and Morris and Ms. Vaniman
(the Participating NEOs) are participants.
The following is a description of the payments and benefits
provided pursuant to the Employment Continuation arrangements in
the event of a change in control and in the event the
executives employment is terminated within the two-year
period immediately following a change in control. Where
provided, prorata bonuses are determined based upon
the greater of actual performance and target payout within the
meaning of the applicable bonus plan, and continuation of
benefits means the perquisites, benefits and service
credits for benefits provided under any retirement, deferred
compensation, income and welfare benefit policies, plans and
arrangements in which the employee is entitled to participate.
Generally, a change in control of DTG is deemed to occur upon
the happening of any of the following events:
1. DTG is merged, consolidated or reorganized into another
corporation or other legal person, unless, in each case,
immediately following such merger, consolidation or
reorganization, the stock entitled to vote generally in the
election of the Board (the Voting Stock) of
DTG outstanding immediately prior to such merger, consolidation
or reorganization continues to represent (either by remaining
outstanding or by being converted into Voting Stock of the
surviving entity or any parent thereof), more than 60% of the
combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such merger, consolidation or
reorganization (including, without limitation, an entity which
as a result of such merger, consolidation or reorganization owns
DTG or all or substantially all of DTGs assets either
directly or through one or more subsidiaries);
A-20
2. DTG sells or otherwise transfers all or substantially
all of its assets to another corporation or other legal person,
unless, in each case, immediately following such sale or
transfer, the Voting Stock of DTG outstanding immediately prior
to such sale or transfer continues to represent (either by
remaining outstanding or by being converted into Voting Stock of
the surviving entity or any parent thereof), more than 60% of
the combined voting power of the then outstanding shares of
Voting Stock of the entity resulting from such sale or transfer
(including, without limitation, an entity which as a result of
such transaction owns DTG or all or substantially all of
DTGs assets either directly or through one or more
subsidiaries);
3. The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 35% or more or the
combined voting power of the Voting Stock of DTG then
outstanding after giving effect to such acquisition; or
4. Individuals who, as of December 9, 2008, constitute
the Board (the Incumbent Board) cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to December 9, 2009 whose election or
nomination for election by DTGs stockholders, was approved
by a vote of at least two-thirds of the directors then
comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of DTG in which such person is
named as a nominee for director, without objection to such
nomination) shall be deemed to be or have been a member of the
Incumbent Board.
Notwithstanding the foregoing, a change in control shall not be
deemed to occur unless the events that have occurred would also
constitute a Change in the Ownership or Effective Control
of a Corporation or in the Ownership of a Substantial Portion of
the Assets of a Corporation under Treasury Department
Final
Regulation 1.409A-3(j)(5),
or any successor regulation thereto.
Involuntary
Termination Without Cause or for Good Reason
In the event of an involuntary termination without cause or for
good reason on the date of or within the two years immediately
following the occurrence of a change in control, the named
executive officer will receive (a) a severance payment
equal to three times base salary (Mr. Thompson) or two and
one-half times base salary (the Participating NEOs), plus
(b) three times (Mr. Thompson) or two and one-half
times (the Participating NEOs) the greater of (i) the
average of the annual incentive payment made during the last two
fiscal years, (ii) the amount of the annual incentive
payment made in the fiscal year immediately preceding the fiscal
year in which the change in control occurs, and (iii) the
target bonus opportunity for the fiscal year in which the change
in control occurs, plus (c) the greater of the actual or
target incentive compensation amount, prorated for the year of
termination and (d) benefit continuation for three years
(Mr. Thompson) or two and one-half years (the Participating
NEOs). All Option Rights are immediately vested and exercisable
for the term of the grant. Performance Units and Restricted
Stock Units will also immediately vest and become
non-forfeitable.
In addition, the named executive officers will be provided with
outplacement benefits of up to $35,000 for Mr. Thompson and
up to $20,000 for each of the Participating NEOs. The named
executive officers will also be entitled to a vehicle allowance
for three years (Mr. Thompson) or two and one-half years
(the Participating NEOs) in accordance with the policies and
procedures of DTG, and Mr. Thompson will receive the
benefit of a
tax-gross up.
The Employment Continuation arrangements define
cause as: (i) a criminal violation
involving fraud, embezzlement or theft in connection with the
employees duties or in the course of employment with the
Company; (ii) intentional wrongful damage to property of
the Company; or (iii) intentional wrongful disclosure of
secret processes or confidential information of the Company and,
in each case, such shall have been materially harmful to the
Company. Good reason exists if (a) there is a failure to
re-elect or maintain the executive in the same office or
position with the Company, (b) there is a significant
adverse change in the named executive officers authority,
power and responsibilities, (c) there is a material
reduction in pay, (d) there is a reduction, termination or
denial of employee benefits, (e) the named executive
officer determines that a
A-21
change in DTGs business has made him or her unable to
substantially carry out his or her responsibilities,
(f) the successor entity is liquidated, dissolved, merged,
consolidated or reorganized or all of its assets are transferred
unless the successor entity assumed all of the duties and
obligations of DTG under the Employment Continuation Agreement,
(g) DTG or the named executive officers work location
is relocated in excess of 50 miles from the location prior
to the change in control or in the case of Mr. Thompson,
requires him to travel at least 20% more than the average number
of days of travel required during the three full years prior to
the change in control without his consent, or (h) DTG or
its successor materially breaches the Employment Continuation
Agreement or Employment Continuation Plan, as applicable. With
respect to items (a) (h), DTG has a
10-day
period within which to remedy the default under the Employment
Continuation Agreement and a
30-day
period under the Employment Continuation Plan.
In addition, Mr. Thompson may terminate employment with DTG
for any reason, or without reason, during the
30-day
period immediately following the one year anniversary of the
occurrence of the change in control and still receive all of the
payments that he would have received in the event of an
involuntary termination without cause due to a change in control
of DTG.
INVOLUNTARY
TERMINATION WITH CHANGE IN CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
Stock &
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
Units
|
|
Options
|
|
Accrued
|
|
Outplacement
|
|
|
|
Total
|
Name
|
|
Severance(1)
|
|
Continuation
|
|
(2)
|
|
(3)
|
|
Vacation
|
|
Services
|
|
Gross-Up
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
Scott L. Thompson
|
|
$
|
4,125,000
|
|
|
$
|
77,497
|
|
|
$
|
3,019,914
|
|
|
$
|
16,661,485
|
|
|
$
|
67,692
|
|
|
$
|
35,000
|
|
|
$
|
3,954,862
|
|
|
$
|
27,941,450
|
|
H. Clifford Buster III
|
|
$
|
1,650,000
|
|
|
$
|
52,176
|
|
|
$
|
1,164,486
|
|
|
$
|
6,688,051
|
|
|
$
|
36,923
|
|
|
$
|
20,000
|
|
|
$
|
|
|
|
$
|
9,611,636
|
|
R. Scott Anderson
|
|
$
|
2,337,500
|
|
|
$
|
52,762
|
|
|
$
|
1,321,484
|
|
|
$
|
7,342,915
|
|
|
$
|
52,308
|
|
|
$
|
20,000
|
|
|
$
|
|
|
|
$
|
11,126,969
|
|
Vicki J. Vaniman
|
|
$
|
1,396,500
|
|
|
$
|
48,860
|
|
|
$
|
1,126,300
|
|
|
$
|
4,461,937
|
|
|
$
|
35,077
|
|
|
$
|
20,000
|
|
|
$
|
|
|
|
$
|
7,088,674
|
|
Rick L. Morris
|
|
$
|
1,225,000
|
|
|
$
|
64,581
|
|
|
$
|
692,643
|
|
|
$
|
4,296,469
|
|
|
$
|
30,769
|
|
|
$
|
20,000
|
|
|
$
|
|
|
|
$
|
6,329,462
|
|
|
|
|
(1) |
|
The amounts in column (b) for each named executive officer
include three times base salary (Mr. Thompson) or two and
one-half times base salary (the Participating NEOs) plus three
times (Mr. Thompson) or two and one-half times (the
Participating NEOs) the target incentive compensation
opportunity for the year 2010, plus the actual incentive
compensation for the year 2010, as the change in control date is
assumed to be December 31, 2010. |
|
(2) |
|
The amounts in column (d) for the named executive officers
include 200% of the target award for the Performance Unit Plan
covering the
2008-2010
Performance Period, as provided for in such plan and the granted
awards under the December 3, 2010 Performance Units Grant
Agreement, as provided for in such agreement. |
|
(3) |
|
The amounts in column (e) for the named executive officers
include the value of the outstanding and unvested Option Rights
and Restricted Stock Units. |
Continued
Employment
In the event the named executive officers employment
continues following a change in control of DTG, the named
executive officer will receive, as of the date of the change in
control, a prorated portion of the outstanding target
Performance Units for the
2008-2010
Performance Period, and the one-year Performance Period for the
Performance Units granted in December 2010 will be deemed to
have been completed and all management objectives deemed to have
been met, and the Performance Units will continue to vest in
accordance with the terms of that grant agreement.
Mr. Thompson will also receive the unvested portion of the
Restricted Stock Unit grant dated May 23, 2008 (with
reinstatement rights of the forfeited portion of the awards
should a termination of employment occur within two years
following the change in control). All outstanding non-qualified
Option Rights shall immediately vest and remain exercisable
until the applicable
A-22
expiration date. The Restricted Stock Units granted to
Mr. Thompson, other than those granted on May 23, 2008
discussed above, will immediately vest and become
non-forfeitable.
CHANGE IN
CONTROL CONTINUED EMPLOYMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
Stock &
|
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
Units
|
|
Options
|
|
Accrued
|
|
Outplacement
|
|
Total
|
Name
|
|
Severance
|
|
Continuation
|
|
(1)
|
|
(2)
|
|
Vacation
|
|
Services
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Scott L. Thompson
|
|
$
|
|
|
|
$
|
|
|
|
$
|
893,214
|
|
|
$
|
16,550,106
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,443,320
|
|
H. Clifford Buster III
|
|
$
|
|
|
|
$
|
|
|
|
$
|
408,326
|
|
|
$
|
6,688,051
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,096,377
|
|
R. Scott Anderson
|
|
$
|
|
|
|
$
|
|
|
|
$
|
565,324
|
|
|
$
|
7,342,915
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,908,239
|
|
Vicki J. Vaniman
|
|
$
|
|
|
|
$
|
|
|
|
$
|
700,960
|
|
|
$
|
4,461,937
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,162,897
|
|
Rick L. Morris
|
|
$
|
|
|
|
$
|
|
|
|
$
|
361,822
|
|
|
$
|
4,296,469
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,658,291
|
|
|
|
|
(1) |
|
The amounts in column (d) for the named executive officers
include 200% of the target award for the Performance Unit Grant
Plan covering the
2008-2010
Performance Period, as provided for in such plan. |
|
(2) |
|
The amounts in column (e) include the full vesting of all
outstanding and unvested Option Rights and Restricted Stock
Units with the exception of the May 23, 2008 grant of
Restricted Stock Units to Mr. Thompson. These Restricted
Stock Units are included in column (e) on a pro rata basis
based on the days of employment from May 23, 2008 through
the date of the change in control (with reinstatement rights of
the forfeited units if employment is terminated within two years
of the change in control). |
Other
Terms
Pursuant to the Employment Continuation arrangements, each named
executive officer covenants and agrees not to disclose any
confidential or proprietary information of DTG or its
subsidiaries, or, without DTGs consent, directly or
indirectly, attempt to influence, persuade or induce, or assist
any other person in so influencing, persuading or inducing, any
employee of DTG or its subsidiaries to give up, or not to
commence, employment or a business relationship with DTG or its
subsidiaries. In addition, each named executive officer is
required to execute a release, the form of which is contained in
the Employment Continuation arrangements in order to receive any
benefits under the Employment Continuation arrangements.
Upon death or disability of a named executive officer, he or she
is not entitled to any severance compensation or benefits under
the Employment Continuation arrangements.
Equity
Compensation Plan Information
The following table sets forth certain information for the
fiscal year ended December 31, 2010 with respect to the
Plan under which the Common Stock of the Company is authorized
for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available for
|
|
|
Number of Securities to
|
|
Weighted-Average
|
|
Future Issuance Under
|
|
|
be Issued Upon Exercise
|
|
Exercise Price of
|
|
Equity Compensation
|
|
|
of Outstanding Options,
|
|
Outstanding Options,
|
|
Plans (Excluding
|
Plan Category
|
|
Warrants and Rights
|
|
Warrants and Rights
|
|
Securities in Column (a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
2,276,564
|
|
|
$
|
5.73
|
|
|
|
348,058
|
|
Equity compensation plans not approved by security holders
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Total
|
|
|
2,276,564
|
|
|
$
|
5.73
|
|
|
|
348,058
|
(1)
|
A-23
|
|
|
(1) |
|
At December 31, 2010, total Common Stock authorized for
issuance was 2,909,728 Shares, which included 2,276,564
unexercised Option Rights, and 285,106 Performance Units,
assuming a maximum payout for all nonvested Performance Units.
The Performance Units ultimately issued will likely differ due
to achievement of performance targets (refer to
Item 8 Note 13 of Notes to Consolidated
Financial Statements as set forth in DTGs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010). The remaining
Common Stock available for future issuance at December 31,
2010 is 348,058 Shares. |
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
DTG has established policies and procedures as part of its
overall corporate compliance policies for the review and
approval, ratification or disapproval of related party
transactions. Related parties include directors, director
nominees, executive officers, beneficial owners of more than 5%
of the Shares and their respective immediate family members.
Transactions subject to review include any business or
commercial transaction, arrangement or relationship. The
Governance Committee is authorized to review and determine
whether any related party transaction should be approved or
ratified. In making this determination, the Governance Committee
considers whether the transaction is fair and reasonable to the
Company and consistent with the best interests of the Company
and its stockholders. If the Governance Committee determines not
to approve or ratify a related party transaction, the matter may
be referred to legal counsel for review and consultation
regarding possible further action, including termination of the
transaction on a prospective basis, rescission of the
transaction or modification of the transaction in a manner that
would permit it to be ratified and approved by the Governance
Committee. There have been no related party transactions since
January 1, 2010.
A-24