Out of the park…

August 15, 2006

hertz.jpegRental car company Hertz (HTZ), which is getting ready to launch a $1 billion IPO, filed a Q yesterday which included this employment contract with newly named CEO Mark Frissora. When the company announced the hiring of Frissora last month from Tenneco (TEN) it conveniently omitted many of the details of his package.

Talk about an upgrade! In addition to increased salary and bonus over his package at Tenneco, Frissora will be getting truckloads of options — over 1 million at the bargain-basement pre-IPO price of $5.68 a share. But that’s really just the beginning of the options parade. There’s also 200,000 matching options, 500,000 supplemental options, and another 800,000 curiously-named "home-run" options. Indeed, a quick search of SEC filings shows that this type of option is unusually rare, appearing at only four other companies ever*. Clearly, the compensation consultant who thought up that term deserves an extra little prize for being so creative!

But wait…there’s more. Frissora will also receive $4 million in cash — money that the contract describes as a signing/replacement bonus "to address the certain forfeitures that executive will face upon termination of his employment with his prior employer". A little digging through Tenneco’s filings (particularly this Form 4) shows that Frissora is forfeiting some 195,000 in restricted Tenneco shares worth about $4 million at today’s prices. However, the restricted shares don’t fully vest until the end of next year and who knows where Tenneco’s stock price would be then? Of course, that doesn’t matter for Frissora — Hertz is upgrading him to cold, hard cash.

*An earlier version of this post stated that this was the first time that this language had appeared in a filing. That statement was based on a quick search of filings. A subsequent more comprehensive search turned up four additional examples since 2000. I apologize for the error.

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