ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Stock
and Asset Purchase Agreement
On November 25, 2020,
Hertz Global Holdings, Inc., a Delaware corporation (the “Company”), Donlen Corporation, an Illinois corporation
(the “Seller”), and certain of the Seller’s subsidiaries (together with the Seller, the “Selling
Entities”) entered into a Stock and Asset Purchase Agreement (the “SAPA”) with Freedom Acquirer LLC
(the “Buyer”), a Delaware limited liability company and affiliate of Athene Holding Ltd. (“Athene”),
pursuant to which the Selling Entities have agreed to sell to the Buyer (the “Sale”) substantially all of the
assets of the Selling Entities including the Selling Entities’ non-Debtor subsidiaries (the “Purchased Assets”),
and the Buyer has agreed to assume certain indebtedness of the Selling Entities related to the Purchased Assets. The Purchased
Assets comprise the Company’s Donlen vehicle leasing and fleet management solutions business (the “Business”).
The following description
is a summary of the material terms of the SAPA.
At the Closing (as
defined below), the Buyer will pay the Seller $825 million in cash, subject to adjustments based on the level of assumed indebtedness,
working capital and fleet equity. The purchase price is fully backstopped by equity and debt commitments from affiliates of Athene.
Within three
business days of the execution of the SAPA, the Buyer is required to make a good faith deposit of US$82.5 million into a
deposit escrow, which amount will either (i) be credited to the purchase price payable at the Closing and released to the
Selling Entities, (ii) be released to the Selling Entities upon the termination of the SAPA in certain circumstances in which
the Buyer has breached the SAPA, or (iii) be released to the Buyer if the Purchase Agreement is terminated for other
reasons.
As previously disclosed,
on May 22, 2020 (the “Petition Date”), the Company, The Hertz Corporation (“THC”) and certain
of their direct and indirect subsidiaries in the United States and Canada including the Selling Entities (collectively, the “Debtors”)
filed voluntary petitions for relief under chapter 11 of title 11 (“Chapter 11”) of the United States Code
in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), thereby commencing
Chapter 11 cases (the “Chapter 11 Cases”) for the Debtors. The cases are being jointly administered under the
caption In re The Hertz Corporation, et al., Case No. 20-11218 MFW. The Sale transaction is structured as an asset sale under Section 363 of the bankruptcy code and, as such, is subject to
the approval of the Bankruptcy Court. In addition, the consummation of the Sale is subject to the performance of each party’s
obligations under the SAPA, the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act and certain other conditions precedent as specified in the SAPA.
The SAPA contains customary
representations, warranties and covenants of the parties thereto. The Selling Entities have also made various customary covenants
in the SAPA, including, among others, an agreement to operate the Business in the ordinary course of business consistent with past
practice (taking into account the commencement of the Chapter 11 Cases and the fact the Business will be operated in bankruptcy)
and to use commercially reasonable efforts to preserve the Business and the Purchased Assets, in each case, subject to certain
exceptions, between the execution of the SAPA and the closing date of the SAPA (the “Closing”). None of the
representations, warranties or pre-Closing covenants contained in the SAPA survive the Closing nor does the SAPA provide for indemnification
for any breach of such representations, warranties or covenants.
The SAPA may be
terminated under various circumstances set forth therein, including by either party if (i) a final non-appealable legal
restraint prohibiting the transaction is in effect, (ii) subject to complying with the restrictions set forth in the SAPA
regarding (a) bid procedures and conduct of the auction, (b) the solicitation, discussion and negotiation of competing bids,
and (c) the entry into agreements with respect to an alternative transaction, the Company, its controlled affiliates or any
Selling Entity enters into a binding contract for an alternative transaction for the sale of the Purchased Assets with a
person other than the Buyer or its affiliates or (iii) if the Closing has not occurred as of May 25, 2021. The Buyer may
terminate the SAPA in certain specified circumstances set forth therein, which include if (i) the Selling Entities breach
their representations, warranties or covenants in a manner that would prevent the satisfaction of certain conditions to
Closing, (ii) certain bankruptcy milestones are not satisfied (including the failure to obtain an order of the Bankruptcy
Court approving the Sale within 85 days of the execution of the SAPA, subject to a ten (10) day cure period) and (iii) the
Selling Entities take certain other specified actions inconsistent with consummating the Sale transaction. The Company may
also terminate the SAPA in certain specified circumstances which include if (i) the Buyer breaches its representations,
warranties or covenants in a manner that would prevent the satisfaction of certain conditions to Closing or fails to close
the Sale transaction when it is required to do so or (ii) prior to the earlier of the entry of the Bankruptcy Court order
authorizing the consummation of the Sale or ninety-five (95) days from the date of the SAPA, the Company delivers written
notice to the Buyer in its sole discretion (the “Discretionary
Option”) for any or no reason, subject to payment of the option fee described below.
The SAPA requires
the Selling Entities to reimburse the Buyer for certain expenses incurred by the Buyer up to a $15,000,000 cap if the SAPA is
terminated in specific circumstances, excluding a termination arising from the Buyer’s breach of the SAPA. If the
Seller exercises its Discretionary Option, at the time of termination it must pay the expense reimbursement and an option fee
in the amount of $15,000,000, less any amount that the Buyer’s expenses exceed $10,000,000. Additionally, if the SAPA
is terminated in certain other specified circumstances, including because the Selling Entities enter into a binding contract
for an alternative transaction, following consummation of such alternative transaction, the Selling Entities must pay the
Buyer a break-up fee in the amount of $24,750,000, less any amount by which the Buyer’s expenses exceed $7,500,000. If
Seller exercises its Discretionary Option and the Company or any of its affiliates enters into an agreement with respect to
an alternative transaction within three months following the exercise, following the consummation of the alternative
transaction, the Selling Entities must pay a fee equal to the amount by which the sum of the break-up fee and expense
reimbursement exceed the amount paid by the Seller in respect of the Discretionary Option.
The Debtors have
filed a motion with the Bankruptcy Court, which the Bankruptcy Court will hear on December 16, 2020, seeking the Bankruptcy
Court’s order approving, among other things, bidding procedures for the conduct of an auction (the “Bidding
Procedures Order”) to ensure that the Debtors have obtained the highest and best offer possible for the
Purchased Assets. Until the date that is eighty-five (85) days following the date of the SAPA or, if no qualified bids are
received by the bid deadline set forth in the Bidding Procedures Order, the bid deadline set forth in the Bidding Procedures
Order, the Selling Entities may, and intend to, solicit offers to purchase the Purchased Assets from other parties.
The foregoing summary
of the SAPA has been included to provide investors and security holders with information regarding the terms of the SAPA and is
qualified in its entirety by the terms and conditions of the SAPA, a copy of which is attached hereto as Exhibit 10.1 and which
is incorporated herein by reference. It is not intended to provide any other factual information about the Selling Entities, the
Buyer, or their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the SAPA have
been made solely for the purpose of such agreement and as of specific dates, for the benefit of the parties to the SAPA. In addition,
such representations, warranties and covenants (i) may have been qualified by confidential disclosures exchanged between the parties,
(ii) are subject to materiality qualifications contained in the SAPA which may differ from what may be viewed as material by investors,
and (iii) have been included in the SAPA for the purpose of allocating risk between the contracting parties rather than establishing
matters of facts. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations
of actual facts or circumstances, and the subject matter of representations and warranties may change after the date as of which
such representations or warranties were made. Moreover, information concerning the subject matter of the representations, warranties
and covenants may change after the date of the SAPA, which subsequent information may or may not be fully reflected in the Company’s
public disclosures.
Docket 925 and other documents related
to the Chapter 11 Cases are available on a separate website administered by the Debtors’ claims agent, Prime Clerk, at https://restructuring.primeclerk.com/hertz.
Series 2020-1 Rental Car Asset Backed Notes Issuance
On November 25, 2020,
Hertz Vehicle Interim Financing LLC (“HVIF”), a wholly-owned, special purpose subsidiary of The Hertz Corporation
(“Hertz”) issued $4.0 billion aggregate principal amount of Series 2020-1 Rental Car Asset Backed Notes, Class
A and Class B (the "Series 2020-1 Notes"), to unaffiliated third parties under the Series 2020-1 Supplement, dated
November 25, 2020, among HVIF, Hertz (a wholly-owned subsidiary of the Company), Deutsche Bank AG, New York Branch, as administrative
agent, Apollo Capital Management, L.P., as controlling party, the certain noteholders from time to time party thereto and The
Bank of New York Mellon Trust Company, N.A. (“BONYM”) as trustee (the “Series 2020-1 Supplement
”), to the Base Indenture, dated as of November 25, 2020, between HVIF and BONYM, as trustee (the “Base Indenture”).
Hertz also entered into (1) the Master Motor Vehicle Operating Lease and Servicing Agreement (HVIF) on November 25, 2020, among
HVIF, as the lessor, Hertz, as a lessee, servicer and guarantor, DTG Operations, Inc., a wholly-owned subsidiary of Hertz, as
a lessee, and the permitted lessees from time to time party thereto (the “HVIF Lease”), pursuant to which HVIF,
as lessor, will lease vehicles to the lessees thereunder, and (2) the HVIF Administration Agreement on November 25, 2020, among
Hertz, as HVIF administrator, HVIF and BONYM, as trustee (the “HVIF Administration Agreement”), pursuant to
which Hertz, as administrator, will provide certain services to HVIF and to take certain actions on behalf of HVIF, including
performing or otherwise satisfying any action, determination, calculation, direction, instruction, notice, delivery or other performance
obligation, in each case, permitted or required by HVIF pursuant to the Base Indenture.
The expected maturities of the Series 2020-1
Notes are November 2021. The Series 2020-1 Notes are comprised of approximately $3.5 billion aggregate principal amount of Series
2020-1 3.00% Class A Notes and $500.0 million aggregate principal amount of Series 2020-1 3.75% Class B Notes. The Class B Notes
are subordinated to the Class A Notes.
The net proceeds from the sale of the Series
2020-1 Notes generally are expected to be used by Hertz to acquire vehicles for its U.S. rental car fleet.
The foregoing
descriptions of the Series 2020-1 Notes and the HVIF Lease are qualified in their entirety by reference to the complete terms
and conditions of the Series 2020-1 Supplement, the Base Indenture, the HVIF Lease and the HVIF Administration Agreement,
copies of which are attached hereto as Exhibits 4.1, 4.2, 4.3 and 4.4 and which are incorporated by reference herein.