DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule
14a-101)
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934
Filed by the
Registrant
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Filed by a
Party other than the Registrant
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Check the
appropriate box:
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o Preliminary
Proxy Statement.
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o Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)).
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þ Definitive
Proxy Statement.
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o Definitive
Additional Materials.
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o Soliciting
Material Pursuant to § 240.14a-12.
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AutoNation,
Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of
Filing Fee (Check the appropriate box):
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No fee
required.
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Fee computed
on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of
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number of securities to which transaction applies:
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Per unit
price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed
maximum aggregate value of transaction:
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Fee paid
previously with preliminary materials:
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Check box if
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Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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Form,
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AUTONATION, INC.
AutoNation Tower
110 S.E. 6th Street
Fort Lauderdale, FL 33301
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March 23, 2009
Dear Fellow AutoNation Stockholder:
We are pleased to invite you to attend the 2009 Annual Meeting
of Stockholders of AutoNation, Inc. to be held at
9:00 a.m. Eastern Time on Wednesday, May 6, 2009,
at the AutoNation Tower, located at 110 S.E. 6th Street,
Fort Lauderdale, Florida 33301.
At this years Annual Meeting, the agenda includes the
annual election of directors; ratification of the selection of
our independent registered public accounting firm; and
consideration of two stockholder proposals, if properly
presented at the annual meeting. We will also report on our
progress and provide an opportunity for you to ask questions of
general interest.
The Board of Directors recommends that you vote FOR the
election of the director nominees, FOR ratification of
the selection of our independent registered public accounting
firm, and AGAINST the two stockholder proposals. Please
refer to the proxy statement for detailed information on each of
the proposals and the annual meeting. Your AutoNation
stockholder vote is important, and we ask that you please cast
your vote as soon as possible.
We look forward to seeing you on May 6, 2009 in
Fort Lauderdale. Thank you.
Sincerely,
Mike Jackson
Chairman of the Board and
Chief Executive Officer
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AUTONATION, INC.
AutoNation Tower
110 S.E. 6th Street
Fort Lauderdale, FL 33301
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NOTICE OF
THE 2009 ANNUAL MEETING OF STOCKHOLDERS
To Stockholders of AutoNation, Inc.:
The 2009 Annual Meeting of Stockholders of AutoNation, Inc. will
be held at the AutoNation Tower, located at 110 S.E.
6th Street, Fort Lauderdale, Florida 33301 on
Wednesday, May 6, 2009 at 9:00 a.m. Eastern Time
for the following purposes, as more fully described in the proxy
statement:
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(1)
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To elect eight directors, each for a term expiring at the next
Annual Meeting or until their successors are duly elected and
qualified;
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(2)
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To ratify the selection of KPMG LLP as our independent
registered public accounting firm for 2009;
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(3)
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To consider two stockholder proposals, if properly presented at
the Annual Meeting; and
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(4)
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To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements of the
Annual Meeting.
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Only stockholders of record as of 5:00 p.m. Eastern
Time on March 11, 2009, the record date, are entitled to
receive notice of the Annual Meeting and to vote at the Annual
Meeting or any adjournments or postponements of the Annual
Meeting.
We cordially invite you to attend the Annual Meeting in person.
Even if you plan to attend the Annual Meeting, we ask that
you please cast your vote as soon as possible. You may
revoke your proxy and reclaim your right to vote at any time
prior to its use. The proxy statement includes information on
what you will need to attend the Annual Meeting.
By Order of the Board of Directors,
Jonathan P. Ferrando
Executive Vice President,
General Counsel and Secretary
March 23, 2009
AUTONATION,
INC.
PROXY
STATEMENT
TABLE OF
CONTENTS
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AUTONATION, INC.
AutoNation Tower
110 S.E. 6th Street
Fort Lauderdale, FL 33301
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PROXY
STATEMENT
This Proxy Statement contains information relating to the
solicitation of proxies by the Board of Directors of AutoNation,
Inc. (AutoNation or the Company) for use
at our 2009 Annual Meeting of Stockholders. Our Annual Meeting
will be held at the AutoNation Tower, located at 110 S.E.
6th Street, Fort Lauderdale, Florida 33301 on
Wednesday, May 6, 2009 at 9:00 a.m. Eastern Time.
Only stockholders of record as of 5:00 p.m. Eastern
Time on March 11, 2009 (the Record Date) are
entitled to receive notice of the Annual Meeting and to vote at
the Annual Meeting or any adjournments or postponements of the
Annual Meeting. As of the Record Date, there were
177,059,720 shares of AutoNation common stock issued and
outstanding and entitled to vote at the Annual Meeting. We made
copies of this proxy statement available to our stockholders
beginning on March 23, 2009.
Questions
and Answers About Our Annual Meeting
What
is the purpose of our 2009 Annual Meeting?
Our 2009 Annual Meeting will be held for the following purposes:
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To elect eight directors, each for a term expiring at the next
Annual Meeting or until their successors are duly elected and
qualified;
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To ratify the selection of KPMG LLP as our independent
registered public accounting firm for 2009;
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To consider two stockholder proposals, if properly presented at
the Annual Meeting; and
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To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements of the
Annual Meeting.
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In addition, senior management will report on our business and
respond to your questions.
Why
did I receive a notice regarding the availability of proxy
materials on the Internet instead of a full set of proxy
materials?
Pursuant to the notice and access rules adopted by
the Securities and Exchange Commission (SEC), we
have elected to provide access to our proxy materials via the
Internet. A Notice of Internet Availability of Proxy Materials
(Notice) will be mailed to most of our registered
stockholders and beneficial owners. The Notice contains
instructions on how to access the proxy materials on the
Internet, how to vote, and how to request printed copies. In
addition,
1
stockholders may request to receive all future proxy materials
in printed form by mail or electronically by
e-mail by
following the instructions contained in the Notice.
How
can I attend the Annual Meeting?
You are entitled to attend the annual meeting only if you were
an AutoNation stockholder as of the Record Date or you hold a
valid proxy for the annual meeting. You should be prepared to
present photo identification for admittance. If your shares are
held by a brokerage firm, bank, or a trustee, you should provide
proof of beneficial ownership as of the Record Date, such as a
bank or brokerage account statement or other similar evidence of
ownership. Even if you plan to attend the Annual Meeting, please
cast your vote as soon as possible.
What
are the voting rights of AutoNation stockholders?
Each stockholder is entitled to one vote on each of the eight
director nominees and one vote on each other matter properly
presented at the Annual Meeting for each share of common stock
owned by that stockholder on the Record Date.
What
constitutes a quorum?
In order for us to conduct business at our Annual Meeting, we
must have a quorum of at least 88,529,861 shares of common
stock represented at the Annual Meeting, in person or by proxy,
and entitled to vote. If you submit a properly executed proxy or
vote instruction card or properly cast your vote by telephone or
via the Internet, your shares will be considered part of the
quorum, even if you abstain from voting or withhold authority to
vote as to a particular proposal. We also will consider as
present for purposes of determining whether a quorum exists any
shares represented by broker non-votes as to a
particular proposal.
What
are broker non-votes?
Broker non-votes occur when shares held by a
brokerage firm are not voted with respect to a proposal because
the firm has not received voting instructions from the
stockholder and the firm does not have the authority to vote the
shares in its discretion. Under the rules of the New York Stock
Exchange (NYSE), brokerage firms may have the
authority to vote their customers shares on certain
routine matters for which they do not receive voting
instructions, such as the election of our Boards nominees
for director and the ratification of the selection of our
independent registered public accounting firm. However, if other
matters are properly brought before the Annual Meeting and they
are not considered routine under the applicable NYSE rules, such
as the two stockholder proposals, shares held by brokerage firms
will not be voted on such non-routine matters by the brokerage
firms unless they have received voting instructions and,
accordingly, any such shares will be broker
non-votes and will not be counted with respect to such
matters.
Will
my shares be voted if I do not provide my proxy?
If your shares are held by a brokerage firm, they may be voted
by the brokerage firm in certain circumstances (as described
above), even if you do not give the brokerage firm specific
voting instructions. If you hold your shares directly in your
own name, your shares will not be voted unless you provide a
proxy or fill out a written ballot in person at the Annual
Meeting. If
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you hold shares through the AutoNation 401(k) Plan, your shares
will be voted as described below even if you do not provide
voting instructions.
How do
I vote my 401(k) shares?
If you participate in the AutoNation 401(k) Plan, you may vote
the number of shares credited to your account as of
5:00 p.m. Eastern Time on March 11, 2009, by
following the instructions provided by the Plans trustee,
Merrill Lynch & Co. (Merrill Lynch). If
you do not provide clear voting instructions, Merrill Lynch will
vote the shares in your account in the same proportion that it
votes shares for which it received valid and timely instructions.
How do
I vote?
Registered
Stockholders
If you are a registered stockholder (you hold your shares in
your own name through our transfer agent), you may vote in
person at the Annual Meeting. We will give you a ballot when you
arrive. If you do not wish to vote in person or if you will not
be attending the Annual Meeting, you may vote by proxy. You can
vote by proxy over the Internet by following the instructions
provided in the Notice, or, if you receive printed copies of the
proxy materials by mail, you can also vote by mail or telephone
by following the instructions provided on the proxy card.
Beneficial
Owners
If you are a beneficial owner of shares (your shares are held in
the name of a brokerage firm, bank, or a trustee) and you wish
to vote in person at the Annual Meeting, you must obtain a valid
proxy from the organization that holds your shares. If you do
not wish to vote in person or you will not be attending the
Annual Meeting, you may vote by proxy. You may vote by proxy
over the Internet by following the instructions provided in the
Notice, or, if you receive printed copies of the proxy materials
by mail, you can also vote by mail or telephone by following the
instructions provided on the proxy card. Please also refer to
the instructions you receive from your brokerage firm, bank, or
trustee on how to vote your shares.
Can I
change my vote after I have voted?
You may revoke your proxy and change your vote at any time
before the final vote at the meeting. You may vote again on a
later date on the Internet or by telephone (only your latest
Internet or telephone proxy submitted prior to the meeting will
be counted), or by signing and returning a new proxy card with a
later date, or by attending the meeting and voting in person.
However, your attendance at the Annual Meeting will not
automatically revoke your proxy unless you vote again at the
meeting or specifically request in writing that your prior proxy
be revoked.
What
vote is required to elect directors or take other action at the
Annual Meeting?
In order to be approved, any proposal that comes before the
Annual Meeting, including the proposal to elect directors, the
proposal to ratify the selection of our independent registered
public accounting firm, and each of the stockholder proposals,
must receive the affirmative vote of a majority of the shares
present in person or by proxy and entitled to vote at the
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Annual Meeting with respect to such proposal. If you mark your
proxy or vote instruction card withhold with respect
to any director or abstain with respect to any other
proposal, you will effectively be voting against the election of
such director or against the approval of such proposal. If your
shares are not voted by your brokerage firm or nominee with
respect to a particular proposal, or if you direct your proxy
holder not to vote all or a portion of your shares with respect
to a particular proposal, such shares will not be considered to
be present at the Annual Meeting for purposes of considering
such proposal and will not be counted.
How
does the Board recommend I vote on the proposals?
The Board recommends that you vote FOR the election of
the director nominees (see Proposal 1: Election of
Directors), FOR ratification of the selection of
our independent registered public accounting firm (see
Proposal 2: Ratification of the Selection of Our
Independent Registered Public Accounting Firm), and
AGAINST the two stockholder proposals (see
Proposal 3: Stockholder Proposal and
Proposal 4: Stockholder Proposal).
How
will the persons named as proxies vote?
If you complete and submit a proxy, the persons named as proxies
will follow your instructions. If you submit a proxy but do not
provide instructions or if your instructions are unclear, the
persons named as proxies will vote your shares as follows:
FOR the election of the director nominees, FOR
ratification of the selection of our independent registered
public accounting firm, and AGAINST each of the
stockholder proposals. With respect to any other proposal that
properly comes before the Annual Meeting, the persons named as
proxies will vote as recommended by our Board of Directors or,
if no recommendation is given, in their own discretion.
How
much did this proxy solicitation cost?
We engaged Innisfree M&A Incorporated to assist with the
solicitation of proxies for a fee not to exceed $12,000, plus
reimbursement for out-of-pocket expenses. In addition to
soliciting proxies by mail, certain of our employees also may
solicit proxies personally, by telephone, or otherwise, but such
persons will not receive any special compensation for such
services. As is customary, we will reimburse brokerage firms,
banks, fiduciaries, voting trustees, and other nominees for
forwarding the soliciting material to each beneficial owner of
stock held of record by them. We will pay the entire cost of the
solicitation.
Important
Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to be Held on May 6,
2009
Our 2008 Annual Report and this proxy statement are available at
www.edocumentview.com/AN.
4
Proposal 1:
Election of Directors
Our Board of Directors currently consists of eight members.
Except for David B. Edelson, who is standing for election for
the first time, each of our current directors was elected by our
stockholders at our Annual Meeting of Stockholders in 2008. Upon
the recommendation of the Corporate Governance and Nominating
Committee, our Board appointed Mr. Edelson as a member of
the Board effective July 30, 2008.
Upon the recommendation of the Corporate Governance and
Nominating Committee, our Board has nominated the eight persons
listed below to stand for election for a new term expiring at
the Annual Meeting of Stockholders in 2010 or until their
successors are duly elected and qualified. Each of the nominees
listed below is currently serving as a director and is willing
and able to serve as a director of AutoNation.
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Nominee
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Current Position with AutoNation
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Mike Jackson
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Chairman of the Board and Chief Executive Officer
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Rick L. Burdick
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Director
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William C. Crowley
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Director
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David B. Edelson
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Director
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Kim C. Goodman
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Director
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Robert R. Grusky
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Director
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Michael E. Maroone
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Director, President and Chief Operating Officer
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Carlos A. Migoya
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Director
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Our Board of Directors recommends a vote FOR the election of
each of the nominees listed above.
5
NOMINEES
FOR OUR BOARD OF DIRECTORS
Information concerning our directors, as of March 11, 2009,
all of whom have been nominated for election at the Annual
Meeting, is set forth below.
Mike
Jackson
Mike Jackson (age 60) has served as our Chairman of
the Board since January 2003 and as our Chief Executive Officer
and Director since September 1999. From October 1998 until
September 1999, Mr. Jackson served as Chief Executive
Officer of Mercedes-Benz USA, LLC, a North American operating
unit of DaimlerChrysler AG, a multinational automotive
manufacturing company. From April 1997 until September 1999,
Mr. Jackson also served as President of Mercedes-Benz USA.
From July 1990 until March 1997, Mr. Jackson served in
various capacities at Mercedes-Benz USA, including as Executive
Vice President immediately prior to his appointment as President
of Mercedes-Benz USA. Mr. Jackson was also the managing
partner from March 1979 to July 1990 of Euro Motorcars of
Bethesda, Maryland, a regional group that owned and operated
eleven automotive dealership franchises, including Mercedes-Benz
and other brands of automobiles.
Rick L.
Burdick
Rick L. Burdick (age 57) has served as one of our
directors since May 1991. Since 1988, Mr. Burdick has been
a partner in Akin, Gump, Strauss, Hauer & Feld,
L.L.P., a global full service law firm. Mr. Burdick is
managing partner (international) of the firm. Mr. Burdick
also serves as Lead Director of CBIZ, Inc. (formerly, Century
Business Services, Inc.), a provider of outsourced business
services to small and medium-sized companies in the United
States.
William
C. Crowley
William C. Crowley (age 51) has served as one of our
directors since January 2002. Since January 1999,
Mr. Crowley has been President and Chief Operating Officer
of ESL Investments, Inc., a private investment firm. Since March
2005, Mr. Crowley has served as a director of Sears
Holdings Corporation, a broadline retailer. Additionally, he has
served as Executive Vice President of Sears Holdings Corporation
since March 2005 and as Chief Administrative Officer of Sears
Holdings Corporation since September 2005. Mr. Crowley also
served as the Chief Financial Officer of Sears Holdings
Corporation from March 2005 until September 2006 and from
January 2007 until October 2007. Mr. Crowley has served as
a director of Sears Canada Inc. since March 2005 and as the
Chairman of the Board of Sears Canada Inc. since December 2006.
From May 2003 until March 2005, Mr. Crowley served as
director and Senior Vice President, Finance of Kmart Holding
Corporation. Prior to joining ESL Investments in 1999,
Mr. Crowley was a Managing Director at Goldman,
Sachs & Co., a leading global investment banking and
securities firm.
David B.
Edelson
David B. Edelson, (age 49), has served as one of our
directors since July 2008. Mr. Edelson is Senior Vice
President of Loews Corporation, a diversified holding company
with subsidiaries in the property-casualty insurance, offshore
drilling, natural gas transmission and storage, natural gas
exploration and production, and lodging industries. He joined
Loews in May 2005. Prior to joining Loews, Mr. Edelson was
Executive Vice President & Corporate Treasurer of
JPMorgan Chase & Co. He was named Corporate Treasurer
in April 2001 and promoted to Executive Vice President in
February 2003.
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Mr. Edelson spent the first 15 years of his career as
an investment banker, first with Goldman Sachs & Co.
and subsequently with JPMorgan Chase & Co. He has
served as a director of CNA Surety Corporation, a 62%-owned
subsidiary of CNA Financial Corporation, which is a 90%-owned
subsidiary of Loews Corporation, since February 2007 and in 2009
became its Chairman of the Board.
Kim C.
Goodman
Kim C. Goodman (age 43) has served as one of our
directors since February 2007. In September 2007,
Ms. Goodman joined American Express Company, a global
payments and travel company, as Executive Vice President,
Merchant Services North America. From September 2005 until July
2007, Ms. Goodman served as Vice President of Software and
Peripherals of Dell Inc., a worldwide supplier of technology
products and services. From September 2000 until August 2005,
Ms. Goodman served in various other capacities at Dell
Inc., including as Vice President of Public Sector Marketing and
Transactional Sales, Vice President of Dell Networking and Vice
President of Business Development. Prior to joining Dell Inc.,
Ms. Goodman was a Partner and Vice President of
Bain & Company, Inc., a strategic consulting firm.
Robert R.
Grusky
Robert R. Grusky (age 51) has served as one of our
directors since June 2006. In 2000, Mr. Grusky founded Hope
Capital Management, LLC, an investment firm for which he serves
as Managing Member. He co-founded New Mountain Capital, LLC, a
private equity and public equity firm, in 2000 and was a
Principal, Managing Director and Member of New Mountain Capital
from 2000 to 2005 and has been a Senior Advisor since then. From
1998 to 2000, Mr. Grusky served as President of RSL
Investments Corporation, the primary investment vehicle for the
Hon. Ronald S. Lauder. Prior thereto, Mr. Grusky also
served in a variety of capacities at Goldman, Sachs &
Co. in its Mergers & Acquisitions Department and
Principal Investment Area. Mr. Grusky is a director of
Strayer Education, Inc., an education services company, and
AutoZone, Inc., a specialty retailer of automotive parts.
Michael
E. Maroone
Michael E. Maroone (age 55) has served as one of our
directors since July 2005 and as our President and Chief
Operating Officer since August 1999. Following our acquisition
of the Maroone Automotive Group in January 1997,
Mr. Maroone served as President of our New Vehicle Dealer
Division. In January 1998, Mr. Maroone was named President
of our Automotive Retail Group with responsibility for our new
and used vehicle operations. Prior to joining AutoNation,
Mr. Maroone was President and Chief Executive Officer of
the Maroone Automotive Group, one of the countrys largest
privately-held automotive retail groups prior to its acquisition
by us.
Carlos A.
Migoya
Carlos A. Migoya (age 58) has served as one of our
directors since June 2006. Since December 2007, Mr. Migoya
has served as Regional President North Carolina with
Wachovia Corporation, a Wells Fargo Company. From June 2006
until December 2007, Mr. Migoya served as State CEO for the
Atlantic Region of Wachovia Corporation. In this position,
Mr. Migoya was responsible for Wachovias general
banking businesses in New Jersey, Connecticut and New York. From
1987 until 2006, Mr. Migoya served as Regional
President Dade and Monroe Counties of Wachovia
Corporation, with responsibility for Wachovias general
banking businesses in the region. Mr. Migoya has more than
34 years of experience in banking.
7
Corporate
Governance
Our business and affairs are managed under the direction of our
Board of Directors, which is AutoNations ultimate
decision-making body except with respect to those matters
reserved to our stockholders. Our Boards mission is to
maximize long-term stockholder value. Our Board establishes our
overall corporate policies, and selects and evaluates our senior
management team, which is charged with the conduct of our
business and acts as an advisor and counselor to senior
management. Our Board also oversees AutoNations business
strategy and the performance of management in executing our
business strategy and managing our day-to-day operations.
Does
AutoNation have corporate governance principles?
Yes. Our Board is committed to sound corporate governance
principles and practices. Our Boards core principles of
corporate governance are set forth in the AutoNation, Inc.
Corporate Governance Guidelines (the Guidelines),
which were adopted by the Board in March 2003 and most recently
amended as of February 12, 2009. A copy of the Guidelines
is available on AutoNations corporate website at
http://corp.autonation.com/investors/.
You also may obtain a printed copy of the Guidelines by sending
a written request to: Investor Relations, AutoNation, Inc., 110
S.E. 6th Street, Fort Lauderdale, Florida 33301. The
Guidelines, which exceed NYSE corporate governance listing
standard requirements, serve as a framework within which our
Board conducts its operations. The Corporate Governance and
Nominating Committee of our Board has been charged with
periodically reviewing the Guidelines and recommending to our
Board appropriate changes in light of applicable laws and
regulations, the governance standards identified by leading
governance authorities, and our Companys evolving needs.
Do we
have a policy regarding our Boards attendance at our
Annual Meeting of stockholders?
Yes. Our directors are expected to attend our Annual Meeting of
Stockholders. A director who is unable to attend our Annual
Meeting is expected to notify the Chairman of the Board in
advance of the Annual Meeting. Except for Mr. Edelson, who
became a member of the Board on July 30, 2008, and
Ms. Goodman, who could not attend for good reason, all of
our incumbent directors attended the 2008 Annual Meeting of
Stockholders.
How
many times did our Board meet during 2008?
Our Board of Directors held 11 meetings and took one action by
unanimous written consent during 2008. During 2008, each of our
incumbent directors attended at least 75% of the total number of
meetings of our Board of Directors and any Board committee on
which he or she served (held during the period in which such
director served).
What
Committees has our Board established?
Our Board of Directors has established three separately
designated standing committees to assist it in discharging its
responsibilities: the Audit Committee, the Compensation
Committee and the Corporate Governance and Nominating Committee.
In addition, our Board has established the Executive
Compensation Subcommittee, which is a subcommittee of the
Compensation Committee. The charters for our Board committees
are in compliance with SEC rules and the NYSEs listing
standards. Our Board Committee charters are available at
http://corp.autonation.com/investors/,
and you may obtain a printed copy of these charters by
8
sending a written request to: Investor Relations, AutoNation,
Inc., 110 S.E. 6th Street, Fort Lauderdale,
Florida 33301.
The following chart reflects the current membership of each of
our Boards committees:
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Executive
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Corporate Governance
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Audit
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Compensation
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Compensation
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and Nominating
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Name
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Committee
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Committee
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Subcommittee
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Committee
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Rick L. Burdick
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*
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*
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**
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William C. Crowley
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**
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*
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David B. Edelson
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*
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Kim C. Goodman
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*
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Robert R. Grusky
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**
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*
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Carlos A. Migoya
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*
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*
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**
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*
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Audit Committee. The Audit Committee primarily
assists our Board in fulfilling its oversight responsibilities
by reviewing our financial reporting and audit processes and our
systems of internal control over financial reporting and
disclosure controls. Among the Committees core
responsibilities are the following: (i) overseeing the
integrity of our financial statements, for which management is
responsible, and reviewing and approving the scope of the annual
audit; (ii) selecting, retaining, compensating, overseeing
and evaluating our independent registered public accounting
firm; (iii) reviewing the Companys critical
accounting policies; (iv) reviewing the Companys
quarterly and annual financial statements prior to their filing
with the SEC; (v) preparing the Audit Committee report for
inclusion in our annual proxy statement; and (vi) reviewing
with management significant financial risks or exposures and
assessing the steps management has taken to minimize, monitor
and control such risks or exposures. For a complete description
of our Audit Committees responsibilities, you should refer
to the Audit Committee Charter, which is available at
http://corp.autonation.com/investors/.
The Audit Committee currently consists of four directors. Our
Board has determined that the Audit Committee members have the
requisite independence and other qualifications for audit
committee membership under SEC rules, NYSE listing standards,
our Audit Committee Charter, and the independence standards set
forth in the Guidelines (as discussed below). Our Board also has
determined that each of Mr. Grusky and Mr. Edelson is
an audit committee financial expert within the
meaning of Item 407(d)(5) of
Regulation S-K
under the Securities Exchange Act of 1934, as amended (the
Exchange Act). See Nominees for our Board of
Directors under Proposal 1: Election of
Directors for a description of the business experience of
each of Mr. Grusky and Mr. Edelson. The Audit
Committee held 11 meetings and took no actions by unanimous
written consent during 2008. The Audit Committee Report for
fiscal 2008, which contains a description of the Audit
Committees responsibilities and its recommendation with
respect to our audited consolidated financial statements for the
year ended December 31, 2008, is set forth below under
Audit Committee Report.
Compensation Committee. The Compensation Committee
primarily assists our Board in fulfilling its compensation and
management development and succession planning oversight
responsibilities by, among other things: (i) reviewing our
director compensation program;
9
(ii) reviewing and approving the compensation of our chief
executive officer and other senior executive officers and,
except as expressly delegated to the Executive Compensation
Subcommittee, setting annual and long-term performance goals for
these individuals; (iii) reviewing and approving the
compensation of all of our corporate officers; and
(iv) reviewing the Companys program for management
development and succession planning. The Committee reviews
executive compensation at its meetings throughout the year and
sets executive compensation. The Committee also reviews director
compensation annually. As part of its review of executive
compensation, the Committee reviews the compensation
arrangements at other retail companies. The Committee reviews
the data at a high level in order to evaluate and confirm
whether our executive compensation is within a reasonably
competitive range. The Committee, however, does not set
executive compensation at a set target percentile based on the
data. See Compensation Discussion and Analysis
Setting Compensation Levels of Executive Officers.
Additionally, our Chief Executive Officer reviews the
performance of each named executive officer and makes
recommendations to the Committee with respect to compensation
adjustments for such officers. However, the Committee determines
in its sole discretion whether to make any adjustments to the
compensation paid to such executive officers. The Committee did
not engage a compensation consultant to advise the Committee
with respect to executive or director compensation for 2008.
Our Board has determined that the Compensation Committee members
have the requisite independence for Compensation Committee
membership under NYSE listing standards and the independence
standards set forth in the Guidelines. The Compensation
Committee held five meetings and took one action by unanimous
written consent during 2008. For more information on the
responsibilities and activities of the Compensation Committee,
including the Committees processes for determining
executive compensation, see Compensation Discussion and
Analysis, Compensation Committee and Executive
Compensation Subcommittee Report and Executive
Compensation below, as well as the Compensation
Committees charter which is available at
http://corp.autonation.com/investors/.
Executive Compensation Subcommittee. The Executive
Compensation Subcommittee is a subcommittee of the Compensation
Committee. The Subcommittee assists the Board and the
Compensation Committee in fulfilling their compensation
oversight responsibilities by performing the following duties:
(i) reviewing and approving performance-based compensation
of executive officers as contemplated under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the
Code), including bonuses and stock-based awards;
(ii) administering the AutoNation, Inc. Senior Executive
Incentive Bonus Plan, including establishing performance goals
and certifying whether such goals are attained as contemplated
under Section 162(m) of the Code; and
(iii) administering our equity compensation plans,
including approving stock-based awards. Our Board has determined
that each member of the Subcommittee qualifies as a
non-employee director within the meaning of
Rule 16b-3
under the Exchange Act, and as an outside director
under Section 162(m) of the Code. The Executive
Compensation Subcommittee held five meetings and took one action
by unanimous written consent during 2008. Our Executive
Compensation Subcommittees charter is available at
http://corp.autonation.com/investors/.
Corporate Governance and Nominating Committee. On
May 7, 2008, the Board combined our Corporate Governance
Committee and our Nominating Subcommittee to form the Corporate
Governance and Nominating Committee. The Corporate Governance
and Nominating Committee assists our Board in fulfilling its
oversight responsibilities by performing the
10
following duties: (i) periodically reviewing the corporate
governance principles and practices set forth in the Guidelines,
in comparison to the governance standards identified by leading
governance authorities and our evolving needs, and making
recommendations to the Board with respect to any appropriate
amendment to the Guidelines; (ii) leading annual
evaluations of Board and Board committee performance;
(iii) assessing periodically our Boards needs in
terms of skills and qualifications and recommending to our Board
candidates for nomination and election to our Board;
(iv) reviewing Board candidates recommended by our
stockholders; and (v) recommending to our Board assignments
to committees. Our Board has determined that each Corporate
Governance and Nominating Committee member is independent under
NYSE listing standards and the independence standards set forth
in the Guidelines. Between January 1, 2008 and May 7,
2008, the Corporate Governance Committee held two meetings and
took no actions by unanimous written consent, and the Nominating
Subcommittee held two meetings and took no actions by unanimous
written consent. Between May 8, 2008 and December 31,
2008, the Corporate Governance and Nominating Committee held two
meetings and took no actions by unanimous written consent. Our
Corporate Governance and Nominating Committees charter is
available at
http://corp.autonation.com/investors/.
Is a
majority of our Board independent under our director
independence standards and applicable New York Stock Exchange
rules?
Yes. Under our Corporate Governance Guidelines, our Board has
committed that a substantial majority of our directors be
independent. Our Board has adopted director independence
standards to assist it in determining whether a director is
independent. The full text of our director independence
standards is set forth in the AutoNation, Inc. Corporate
Governance Guidelines, which is available at
http://corp.autonation.com/investors/.
In accordance with the NYSE listing standards, our Board
affirmatively determines the independence of each director and
nominee for election as a director in accordance with the NYSE
listing standards and our independence standards. Based on these
standards, the Board determined that each of the following
non-employee directors is independent and has no material
relationship with the Company, except as a director and
stockholder of the Company: Rick L. Burdick, William C. Crowley,
David B. Edelson, Kim C. Goodman, Robert R. Grusky and Carlos A.
Migoya. The Board also determined that Robert J. Brown, who
served for part of 2008, was independent and had no material
relationship with the Company, except as a director and
stockholder of the Company.
In making these determinations, our Board considered the
relationships described under Does the Board have a
written policy with regard to related party
transactions? below. In addition, the Board considered
the following relationships: (1) with respect to
Mr. Burdick, our use of the law firm of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. for certain legal
services (which use was discontinued as of January 1,
2008); (2) with respect to Mr. Brown, our banking
relationship with Wachovia Corporation and its affiliates;
(3) with respect to Mr. Crowley, ESL Investments,
Inc.s significant ownership stake in AutoNation, Inc.;
(4) with respect to Mr. Edelson, our payment of
certain insurance premiums to a subsidiary of CNA Financial
Corporation, which is a 90%-owned subsidiary of Loews
Corporation (Loews), and our use of a hotel owned by
Loews Hotel Holdings Corporation, a wholly-owned subsidiary of
Loews; (5) with respect to Ms. Goodman, our payment of
credit card fees to American Express; (6) with respect to
Mr. Grusky, his minority investment in ESL Partners, L.P.;
and (7) with respect to Mr. Migoya, our banking
relationship with Wachovia Corporation, Wells Fargo &
11
Co. and their affiliates. In each case, the relationships did
not violate our independence standards or the NYSE listing
standards, and the Board concluded that such relationships would
not impact the independence of our non-employee directors.
Do our
independent directors meet at regularly scheduled sessions
without management present?
Yes. Our independent directors (each director other than
Messrs. Jackson and Maroone) meet in regularly scheduled
sessions without management of our Company present. The
presiding director for each executive session is rotated among
the chairs of our Board committees. In 2008, our independent
directors held four executive sessions without management of our
Company present.
Can
our stockholders and interested parties communicate with our
directors?
Yes. To communicate with our Board, any Board committee, any
individual director, any group of directors (such as our
independent directors), or our presiding director, our
stockholders or interested parties should send written
correspondence to AutoNation, Inc. Board of Directors,
c/o Corporate
Secretary, AutoNation, Inc., 110 S.E. 6th Street,
29th Floor, Fort Lauderdale, Florida 33301. You may
also ask questions at the Annual Meeting of Stockholders.
How
does the Corporate Governance and Nominating Committee identify
and evaluate nominees for director?
Potential candidates may come to the attention of the Corporate
Governance and Nominating Committee through recommendations made
by current directors, stockholders, executive or director search
firms retained by the Corporate Governance and Nominating
Committee, or other persons. All of our nominees for director,
whether or not recommended by a stockholder, will be selected on
the basis of, among other things, broad experience, wisdom,
integrity, ability to make independent analytical inquiries,
understanding of our business environment, and willingness and
ability to devote adequate time to our Boards duties, all
in the context of the needs of our Board at that point in time
as assessed by our Corporate Governance and Nominating Committee
and with the objective of ensuring diversity in the background,
experience, and viewpoints of our Board members. Our Corporate
Governance and Nominating Committee is responsible for assessing
the appropriate balance of skills and characteristics required
of our Board members.
Does
the Corporate Governance and Nominating Committee have a policy
with regard to the consideration of any director candidates
recommended by our stockholders?
Yes. The Corporate Governance and Nominating Committee has a
policy pursuant to which it considers director candidates
recommended by our stockholders. As described above, all
director candidates recommended by our stockholders are
considered for selection to the Board on the same basis as if
such candidates were recommended by one or more of our directors
or other sources. To recommend a director candidate for
consideration by our Corporate Governance and Nominating
Committee, a stockholder must submit the recommendation in
writing to our Corporate Secretary not later than one hundred
twenty (120) calendar days prior to the anniversary date of
our proxy statement distributed to our stockholders in
connection with our most recent annual meeting of stockholders,
and the recommendation must provide the following information:
(i) the name of the stockholder making the recommendation;
(ii) the
12
name of the candidate; (iii) the candidates resume or
a listing of his or her qualifications to be a director;
(iv) the proposed candidates written consent to being
named as a nominee and to serving as one of our directors if
elected; and (v) a description of all relationships,
arrangements, or understandings, if any, between the proposed
candidate and the recommending stockholder and between the
proposed candidate and us so that the candidates
independence may be assessed. The stockholder or the director
candidate also must provide any additional information requested
by our Corporate Governance and Nominating Committee to assist
the Committee in appropriately evaluating the candidate.
Does
AutoNation have a code of ethics?
Yes. In order to clearly set forth our commitment to conduct our
operations in accordance with our high standards of business
ethics and applicable laws and regulations, we have a
Company-wide Business Ethics Program, which includes a Code of
Business Ethics applicable to all of our employees. We also
maintain a
24-hour
Alert-Line for employees to report any Company policy violations
under our Business Ethics Program. In addition, our Board has
adopted the Code of Ethics for Senior Officers and the Code of
Business Ethics for the Board of Directors. Copies of these
codes are available at
http://corp.autonation.com/investors/,
and you may obtain a printed copy of these codes by sending a
written request to: Investor Relations, AutoNation, Inc., 110
S.E. 6th Street, Fort Lauderdale, Florida 33301. These
codes comply with NYSE listing standards.
Does
the Board have a written policy with regard to related party
transactions?
Yes. Our Boards written policy requires that transactions
with related parties must be entered into in good faith on fair
and reasonable terms that are no less favorable to us than those
that would be available in a comparable transaction in
arms-length dealings with an unrelated third party. Based
on our experience, we believe that each of the transactions
described below complied with our Boards policy at the
time the transaction was effected. Our Board, by a vote of the
disinterested directors, must approve all related party
transactions valued over $500,000, while our Audit Committee
must approve all related party transactions valued between
$100,000 and $500,000 and review with management all other
related party transactions. The following is a summary of
related party transactions since January 1, 2008.
We enter into commercial transactions with Sears Holdings
Corporation and its affiliates (collectively,
Sears), which are related to ESL Investments, Inc.,
in the ordinary course of business. As of March 11, 2009,
ESL Investments, Inc., together with its investment affiliates
(collectively, ESL), beneficially owns approximately
45% of the outstanding shares of our common stock, and
Mr. Crowley, one of our directors, is the President and
Chief Operating Officer of ESL Investments, Inc. In 2008, we
paid Sears approximately $375,000 primarily for automotive parts
and accessories, and Sears paid us approximately $15,000
primarily for automotive parts, accessories and services. ESL
owns approximately 53% of the outstanding common stock of Sears
(based on publicly available data as of March 11, 2009),
and Edward S. Lampert, the Chairman, Chief Executive Officer and
controlling principal of ESL Investments, Inc., serves as the
Chairman of the Board of Directors of Sears. Additionally,
Mr. Crowley serves as a director, Executive Vice President
and Chief Administrative Officer of Sears, and as the Chairman
of the Board of Sears Canada Inc.
13
We also enter into commercial transactions with AutoZone, Inc.
(AutoZone) in the ordinary course of business. ESL
owns approximately 41% of the outstanding common stock of
AutoZone (based on publicly available data as of March 11,
2009), and Messrs. Crowley and Grusky, two of our
directors, serve as directors of AutoZone. In 2008, we paid
AutoZone approximately $13,000 primarily for automotive parts
and accessories, and AutoZone paid us approximately $560,000
primarily for automotive parts and accessories.
In January 2009, our Board authorized and approved letter
agreements with certain automotive manufacturers in order to,
among other things, eliminate any potential adverse consequences
under our framework agreements with those manufacturers in the
event that ESL acquires 50% or more of our common stock. The
letter agreements with American Honda Motor Co., Inc.
(Honda) and Toyota Motor Sales, U.S.A., Inc.
(Toyota) also contain governance-related and other
provisions as described below. Also a party to both the Honda
and Toyota Agreements is ESL, our largest stockholder.
Under the terms of the Honda Agreement, Honda has agreed not to
assert its right to purchase our Honda and Acura franchises
and/or
similar remedies under the manufacturer framework agreement
between Honda and the Company in the event that ESL acquires 50%
or more of our common stock. If ESL acquires more than 50% of
our common stock, ESL has agreed to vote all shares in excess of
50% in the same proportion as all non-ESL-owned shares are
voted. In addition, we have agreed to ensure that a majority of
our Board is independent of both the Company and ESL under
existing NYSE listing standards. Furthermore, the Honda
Agreement provides that Hondas consent does not apply to a
going private transaction under
Rule 13e-3
of the Exchange Act. The terms and conditions of the Honda
Agreement will only apply at such time and for so long as ESL
owns more than 50% of our common stock.
Under the terms of the Toyota Agreement, Toyota has agreed not
to assert its right to purchase our Toyota and Lexus franchises
and/or
similar remedies under the manufacturer framework agreement
between Toyota and the Company in the event that ESL acquires
50% or more of our common stock. If ESL acquires more than 50%
of our common stock, ESL has agreed to vote all shares in excess
of 50% in the same proportion as all non-ESL-owned shares are
voted. Furthermore, we have agreed that a majority of our Board
will be independent from both the Company and from ESL under
existing NYSE listing standards. We have also agreed not to
merge, consolidate, or combine with any entity owned or
controlled by ESL unless Toyota consents thereto. In addition,
the Toyota Agreement provides that in the event that we appoint
a Chief Operating Officer who, in the good faith judgment of our
Board, does not have sufficient breadth and depth of experience,
a relevant, successful automotive track record, and extensive
successful automotive experience, ESL shall be required to
divest its shares in excess of 50% within nine months or its
voting interest will be limited to 25%, and if ESL does not
divest such shares within 18 months, it will lose all
voting rights until it divests such shares. The terms and
conditions of the Toyota Agreement will only apply at such time
and for so long as ESL owns more than 50% of our common stock
and will terminate on December 31, 2009 with respect to
future stock acquisitions by ESL, provided that ESL may seek
successive annual one-year extensions, and Toyota may not
unreasonably withhold or delay its consent thereto.
In connection with the Toyota and Honda agreements described
above, in January 2009, our Board authorized and approved a
separate letter agreement between the Company and ESL in which
ESL has agreed to vote shares of our common stock owned by ESL
in excess of 45% in
14
the same proportion as all non-ESL-owned shares are voted. The
ESL Agreement expires on January 28, 2010, unless extended
by mutual agreement of the parties.
We have also entered into separate letter agreements with
certain other manufacturers that eliminate any potential adverse
consequences under our framework agreements with those
manufacturers in the event that ESL acquires 50% or more of our
common stock. ESL is not a party to any of those agreements.
Director
Compensation
Each of our non-employee directors receives the following annual
fees for service on our Board:
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$25,000, plus $1,000 for each Board meeting attended in excess
of four annually (the annual fee is prorated based on the number
of months served during the year);
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$1,000 for each committee meeting attended;
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The Chair of our Audit Committee also receives an annual fee of
$10,000 and, effective January 1, 2009, each member of our
Audit Committee also receives an annual fee of $5,000 in
recognition of the additional time commitment and
responsibilities associated with Audit Committee service;
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Our directors also are entitled to receipt of an annual vehicle
allowance of $22,500 in accordance with our Director Vehicle
Allowance Program; and
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Expense reimbursement in connection with Board and committee
meeting attendance.
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Additionally, our AutoNation, Inc. 2007 Non-Employee Director
Stock Option Plan (the 2007 Non-Employee Director
Plan) provides for an initial grant of stock options to
purchase 50,000 shares of our stock immediately upon the
appointment of a non-employee director to our Board. The 2007
Non-Employee Director Plan also provides for an annual grant of
options to purchase 20,000 shares of our common stock at
the beginning of each fiscal year to each non-employee director
serving on the Board at such date. Unless otherwise provided,
all options granted under the 2007 Non-Employee Director Plan
are fully vested and immediately exercisable. Under the 2007
Non-Employee Director Plan, each grant of options to a
non-employee director remains exercisable for a term of ten
years from the grant date so long as the director remains a
member of the Board. The options are exercisable at a price per
share equal to the closing price per share of our stock on the
NYSE on the date immediately prior to the grant date.
In accordance with the terms of the 2007 Non-Employee Director
Plan, on January 2, 2008, Messrs. Brown (a former
director), Burdick, Crowley, Grusky and Migoya and
Ms. Goodman were each automatically granted an option to
purchase 20,000 shares of our common stock at an exercise
price equal to $15.66 per share, the closing price per share of
Company common stock on December 31, 2007. In connection
with his appointment to the Board, on July 30, 2008,
Mr. Edelson was automatically granted an option to purchase
50,000 shares of our common stock at an exercise price per
share of $10.43, the closing price per share of Company common
stock on July 29, 2008. The table below sets forth
compensation paid to our non-employee directors during fiscal
2008.
15
DIRECTOR
COMPENSATION IN FISCAL 2008
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Fees Earned or Paid
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All Other
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in Cash
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Option Awards
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Compensation
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Total
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Name
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($)
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($)(1)
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($)(2)
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($)
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Robert J.
Brown(3)
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21,417
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100,694(4)
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22,500
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144,611
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Rick L. Burdick
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36,000
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100,694(4)
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22,500
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159,194
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William C. Crowley
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40,000
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100,694(4)
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22,500
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163,194
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David B.
Edelson(5)
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11,417
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186,833(6)
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198,250
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Kim C. Goodman
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43,000
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100,694(4)
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22,500
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166,194
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Robert R. Grusky
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55,000
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100,694(4)
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22,500
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178,194
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Carlos A. Migoya
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49,000
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100,694(4)
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22,500
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172,194
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(1)
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As of December 31, 2008, each
of our non-employee directors held the following number of
options: Rick L. Burdick 184,314; William C.
Crowley 170,000; David B. Edelson
50,000; Kim C. Goodman 90,000; Robert R.
Grusky 90,000; Carlos A. Migoya 90,000.
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(2)
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Represents amounts provided in
accordance with the Director Vehicle Allowance Program.
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(3)
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Mr. Brown retired from the
Board on May 7, 2008. Fees were prorated based on months
served.
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(4)
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The grant date fair value of this
option award is $5.03 per share calculated in accordance with
FAS 123R.
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(5)
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Mr. Edelson was appointed to
the Board on July 30, 2008.
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(6)
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The grant date fair value of this
option award is $3.74 per share calculated in accordance with
FAS 123R.
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DIRECTOR
STOCK OWNERSHIP GUIDELINES
The Board believes that directors should be stockholders and
have a financial stake in the Company. Toward this end, the
Board expects that each director will invest at least $100,000
in the Companys common stock within five years of first
becoming a director (prior to February 12, 2009, our
Guidelines provided that each director should own shares
of the Companys common stock having a market value of at
least $100,000 in light of market volatility
impacting our stock price, our Guidelines were amended to
require each director to invest at least $100,000 in
our common stock). Exceptions to this requirement may only be
made by the Board under compelling mitigating circumstances. The
following table sets forth information regarding investments
made by our directors in our common stock as of March 11,
2009.
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Name
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Number of Shares Owned
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|
Amount Deemed Invested
|
|
|
Progress
|
Rick L. Burdick
|
|
|
|
7,500(1)
|
|
|
|
|
$142,500(2)
|
|
|
|
|
Achieved
|
|
William C. Crowley
|
|
|
|
79,854,240(1),
(3)
|
|
|
|
|
$788,959,891(4)
|
|
|
|
|
Achieved
|
|
David B. Edelson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
Kim C. Goodman
|
|
|
|
4,375(1)
|
|
|
|
|
$39,098(6)
|
|
|
|
|
39%(7)
|
|
Robert R. Grusky
|
|
|
|
5,200(1)
|
|
|
|
|
$71,027(6)
|
|
|
|
|
71%(8)
|
|
Carlos A. Migoya
|
|
|
|
7,000(1)
|
|
|
|
|
$122,500(9)
|
|
|
|
|
Achieved
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Based on filings with the SEC.
|
16
|
|
|
(2)
|
|
Based on the closing price per
share of our common stock on the day the shares were acquired in
connection with the exercise of an option.
|
|
(3)
|
|
Based on shares held by ESL as of
March 11, 2009 (based on publicly available data), less
190,000 options held by Mr. Crowley. Mr. Crowley is
the President and Chief Operating Officer of ESL Investments,
Inc. Mr. Crowley may be deemed to have indirect beneficial
ownership of the shares beneficially owned by ESL.
Mr. Crowley disclaims beneficial ownership of all shares of
ESL, except the 2,406 shares held by Tynan, LLC.
|
|
(4)
|
|
The Amount Deemed
Invested for Mr. Crowley is based on the closing
price per share of our common stock on December 31, 2008
($9.88). The Company does not have the purchase price data, and
such data is not publicly available, with respect to all shares
purchased by ESL. Although this does not represent the actual
amount paid for the shares, it has been determined that
Mr. Crowley clearly meets the director stock ownership
guidelines.
|
|
(5)
|
|
Mr. Edelson has until July
2013 to meet the above investment requirement.
|
|
(6)
|
|
Based on the purchase price paid
for the shares, as reported with the SEC.
|
|
(7)
|
|
Ms. Goodman has until February
2012 to meet the above investment requirement.
|
|
(8)
|
|
Mr. Grusky has until June 2011
to meet the above investment requirement.
|
|
(9)
|
|
With respect to 1,000 shares
that Mr. Migoya held on the date he became a director,
based on the closing price per share of our common stock on such
date. For all other shares held by Mr. Migoya, based on the
purchase price paid for the shares, as reported with the SEC.
|
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of
March 11, 2009 with respect to the beneficial ownership of
our common stock by (1) each person who is known by us to
be a beneficial owner of more than 5% of our stock outstanding,
(2) each of our directors, (3) each of our named
executive officers, and (4) all of our current directors
and executive officers as a group. Share amounts and percentages
include shares of our stock that may be acquired by such
individual, entity or group upon exercise of all options
exercisable on March 11, 2009 or within sixty days
thereafter. At March 11, 2009, we had
177,059,720 shares of our common stock outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
Vested Options
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
(and those
|
|
|
Shares of Common Stock
|
|
|
|
Stock
|
|
|
|
exercisable
|
|
|
Beneficially Owned
|
Name of Beneficial
Owner
|
|
|
Owned
|
|
|
|
within 60 days)
|
|
|
Number
|
|
|
Percent
|
ESL Investments,
Inc.(1)
|
|
|
|
79,854,240
|
|
|
|
|
190,000
|
|
|
80,044,240
|
|
|
45%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cascade Investment, L.L.C. and Bill & Melinda Gates
Foundation
Trust(2)
|
|
|
|
21,657,788
|
|
|
|
|
|
|
|
21,657,788
|
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mike
Jackson(3)
|
|
|
|
315,000
|
|
|
|
|
1,427,798
|
|
|
1,742,798
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rick L. Burdick
|
|
|
|
7,500
|
|
|
|
|
182,157
|
|
|
189,657
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C.
Crowley(4)
|
|
|
|
79,854,240
|
|
|
|
|
190,000
|
|
|
80,044,240
|
|
|
45%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David B. Edelson
|
|
|
|
|
|
|
|
|
70,000
|
|
|
70,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kim C. Goodman
|
|
|
|
4,375
|
|
|
|
|
110,000
|
|
|
114,375
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert R.
Grusky(5)
|
|
|
|
5,200
|
|
|
|
|
110,000
|
|
|
115,200
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos A. Migoya
|
|
|
|
7,000
|
|
|
|
|
110,000
|
|
|
117,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E.
Maroone(6)
|
|
|
|
2,498,159
|
|
|
|
|
2,669,673
|
|
|
5,167,832
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short
|
|
|
|
1,563
|
|
|
|
|
141,373
|
|
|
142,936
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P.
Ferrando(7)
|
|
|
|
29,767
|
|
|
|
|
513,673
|
|
|
543,440
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P.
Westfall(8)
|
|
|
|
1,773
|
|
|
|
|
167,598
|
|
|
169,371
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and current executive officers as a group
(11 persons) (9)
|
|
|
|
82,724,577
|
|
|
|
|
5,692,272
|
|
|
88,416,849
|
|
|
48%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
*
|
|
Less than 1%.
|
|
(1)
|
|
Based on a Schedule 13D/A
filed with the SEC on January 29, 2009 and a Form 4
filed with the SEC on February 6, 2009, the aggregate
amount of our common stock beneficially owned by ESL
Investments, Inc. includes: (i) 58,849,041 shares held
by ESL Partners, L.P., (ii) 12,421,794 shares held in
an account established by the investment member of ESL
Investors, L.L.C., (iii) 2,455,251 shares held by RBS
Partners, L.P., (iv) 221,701 shares held by ESL
Institutional Partners, L.P., (v) 5,712,083 shares
held by CBL Partners, L.P., (vi) 61,964 shares held by
ESL Investment Management, L.P., (vii) 2,406 shares
held by Tynan, LLC, (viii) vested options to purchase
190,000 shares of the Companys common stock held by
Mr. Crowley, and (ix) 130,000 shares held
directly by Edward S. Lampert. The address of ESL Investments,
Inc. is 200 Greenwich Avenue, Greenwich, CT 06830. Please refer
to Corporate Governance Does the Board have
a written policy with regard to related party
transactions? for a description of certain letter
agreements by and among the Company, ESL, and certain automotive
manufacturers and a voting agreement between the Company and ESL.
|
|
(2)
|
|
Based on a Schedule 13D/A
filed with the SEC on February 6, 2009, Cascade Investment,
L.L.C. beneficially owns 11,365,688 shares of our common
stock, and the Bill & Melinda Gates Foundation Trust
beneficially owns 10,292,100 shares of our common stock.
All shares of common stock beneficially owned by Cascade
Investment, L.L.C. may be deemed to be beneficially owned by
William H. Gates III. All shares of common stock beneficially
owned by the Bill & Melinda Gates Foundation Trust may
be deemed to be beneficially owned by William H. Gates III
and Melinda French Gates as Co-Trustees of the Trust. The
address of Cascade Investment, L.L.C. is 2365 Carillon Point,
Kirkland, WA 98033, and the address of the Bill &
Melinda Gates Foundation Trust is 1551 Eastlake Avenue E.,
Seattle, WA 98102.
|
|
(3)
|
|
The aggregate amount of our common
stock beneficially owned by Mr. Jackson consists of:
(a) 315,000 shares, all of which are pledged as
security, and (b) vested options to purchase
1,427,798 shares. All of the shares and options are owned
by a trust of which Mr. Jackson is the sole trustee and
beneficiary.
|
|
(4)
|
|
Mr. Crowley is the President
and Chief Operating Officer of ESL Investments, Inc.
Mr. Crowley may be deemed to have indirect beneficial
ownership of the shares beneficially owned by ESL Investments,
Inc. and has vested options to purchase 190,000 shares.
Mr. Crowley disclaims beneficial ownership of all shares of
ESL Investments, Inc., except the 2,406 shares held by
Tynan, LLC.
|
|
(5)
|
|
Mr. Grusky also has indirect
ownership of share of common stock through his investment in ESL
Partners, L.P. Mr. Grusky disclaims beneficial ownership of
these shares.
|
|
(6)
|
|
The aggregate amount of our common
stock beneficially owned by Mr. Maroone consists of:
(a) 249,265 shares held directly,
(b) 2,247,357 shares beneficially owned by Michael
Maroone Family Partnership, a Nevada limited partnership
controlled by Mr. Maroone, of which 1,451,646 shares
are pledged as security, (c) vested options to purchase
2,669,673 shares, and (d) 1,537 shares held
through the AutoNation 401(k) Plan.
|
|
(7)
|
|
The aggregate amount of our common
stock beneficially owned by Mr. Ferrando consists of:
(a) 28,000 shares owned by Mr. Ferrando and his
wife as tenants by the entirety with rights of survivorship,
(b) vested options to purchase 513,673 shares, and
(c) 1,767 shares held through the AutoNation 401(k)
Plan.
|
|
(8)
|
|
The aggregate amount of our common
stock beneficially owned by Mr. Westfall consists of:
(a) vested options to purchase 167,598 shares and
(b) 1,773 shares held through the AutoNation 401(k)
Plan.
|
|
(9)
|
|
The aggregate amount of our common
stock beneficially owned by all directors and current executive
officers as a group includes: (a) vested options to
purchase 5,692,272 shares and (b) 5,077 shares
held through the AutoNation 401(k) Plan.
|
Section 16(a)
Beneficial
Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires that our directors, executive officers and
persons who beneficially own 10% or more of our stock file with
the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of our stock and
our other equity securities. To our knowledge, based solely on a
review of the copies of such reports furnished to us and written
representations that no other reports were required, during the
year ended December 31, 2008, our directors, executive
officers and greater than 10% beneficial owners complied with
all such applicable filing requirements.
18
Compensation
Discussion and Analysis
Overview
Our compensation programs are administered by the Compensation
Committee (the Committee) and the Executive
Compensation Subcommittee (the Subcommittee) of the
Committee. The Committee primarily assists the Board in
fulfilling its oversight responsibilities by, among other
things: (i) reviewing our director compensation program;
(ii) reviewing and approving the compensation of our chief
executive officer (CEO) and other senior executive
officers and, except as expressly delegated to the Subcommittee,
setting annual and long-term performance goals for these
individuals and reviewing the performance of these individuals;
and (iii) reviewing and approving the compensation of all
of our corporate officers.
The Subcommittee assists the Board and the Committee in
fulfilling their responsibilities by performing the following
duties: (i) reviewing and approving performance-based
compensation of executive officers as contemplated under
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), including bonuses and
stock-based awards; (ii) administering the AutoNation, Inc.
Senior Executive Incentive Bonus Plan, including establishing
performance goals and certifying whether such goals are attained
as contemplated under Section 162(m) of the Code; and
(iii) administering our equity compensation plans,
including approving stock-based awards.
From January 1, 2008 until May 7, 2008, the Committee
consisted of William C. Crowley (Chair), Robert J. Brown and
Carlos A. Migoya, and the Subcommittee consisted of
Mr. Migoya (Chair) and Mr. Brown. From May 7,
2008 until December 31, 2008, the Committee consisted of
William C. Crowley (Chair), Rick L. Burdick, Kim C. Goodman and
Carlos A. Migoya, and the Subcommittee consisted of
Mr. Migoya (Chair) and Kim C. Goodman. Since
January 1, 2009, the Committee has consisted of William C.
Crowley (Chair), Rick L. Burdick and Carlos A. Migoya, and the
Subcommittee has consisted of Mr. Migoya (Chair) and Rick
L. Burdick.
For the fiscal year ended December 31, 2008, our
named executive officers were: Mike Jackson, our
Chairman and Chief Executive Officer; Michael E. Maroone, our
President and Chief Operating Officer; Michael J. Short, our
Executive Vice President and Chief Financial Officer; Jonathan
P. Ferrando, our Executive Vice President, General Counsel and
Secretary; and Kevin P. Westfall, our Senior Vice President,
Sales.
Compensation
Philosophy and Objectives
The Committees fundamental philosophy is to closely link
executive compensation with the achievement of Company
performance goals and to create an owner-oriented,
pay-for-performance culture. The Committees objectives in
administering our compensation program for executive officers
are to ensure that we are able to attract and retain
highly-skilled executives and to provide a compensation program
that incentivizes management to optimize business performance,
deploy capital productively and increase long-term stockholder
value. The Committee also believes that overall compensation
should be fair for the services rendered and that the
compensation structure should be transparent, which is why the
key components of executive compensation are limited to a base
salary, an annual performance bonus based solely on the
achievement of financial targets and stock-based awards.
19
Setting
Compensation Levels of Executive Officers
The Committee reviews executive compensation at its meetings
throughout the year and sets executive compensation based
primarily on our financial and operating performance and on
executive managements performance in developing and
executing the Companys business strategy, managing the
Companys day-to-day business operations, optimizing the
Companys business performance and productivity of its
business operations, and creating stockholder value. The
Committee also considers the scope of an executives duties
and responsibilities and individual executive performance. Our
Chief Executive Officer reviews the performance of each named
executive officer and makes recommendations to the Committee
with respect to compensation adjustments for such officers.
However, the Committee determines in its sole discretion whether
to make any adjustments to the compensation paid to such
executive officers.
As part of its review of executive compensation, the Committee
reviews the executive compensation arrangements at peer group
companies. Our peer group includes comparable specialty retail
companies based on specific financial measures, including, but
not limited to, revenue, total assets, market capitalization,
and net income. For 2008, our peer group consisted of the
following companies: AutoZone, Inc., Best Buy Co., Inc., Circuit
City Stores, Inc., Foot Locker, Inc., The Gap, Inc., Kohls
Corporation, Limited Brands, Inc., Macys, Inc., Office
Depot, Inc., RadioShack Corporation, Ross Stores, Inc., Saks
Incorporated, Staples, Inc., and The TJX Companies, Inc. The
Committees practice has been to make changes to our peer
group when in the Committees judgment comparison to a
company is no longer appropriate. For 2007, our peer group
consisted of the companies listed above as well as CVS Caremark
Corporation (using fiscal 2006 data), which was removed for 2008
because the merger of CVS Corporation and Caremark Rx, Inc.
made a comparison to CVS Caremark Corporation, given its size
following the merger, no longer appropriate. The Committee
reviews the executive compensation benchmark data at a high
level in order to evaluate and confirm whether our executive
compensation is within a reasonably competitive range. The
Committee, however, does not set executive compensation at a set
target percentile within the peer group. Instead, the Committee
focuses on providing compensation that is fair for the services
rendered and transparent, closely linking executive compensation
with the achievement of Company performance goals, and creating
an owner-oriented, pay-for-performance culture, where the
interests of our executive officers are aligned with the
long-term interests of our stockholders.
The Committee has no pre-established target for the allocation
between either cash and non-cash or short-term and long-term
incentive compensation. However, pursuant to the
Committees pay-for-performance philosophy, a significant
portion of each executive officers total compensation is
allocated to incentive compensation in the form of an annual
performance-based bonus and non-cash compensation in the form of
stock-based awards, which are designed to incentivize management
to build long-term stockholder value for the Company over time
and to align executives and stockholders interests.
The Committee reviews and considers total compensation in
setting each element of compensation for our named executive
officers.
2008
Executive Compensation Elements
The key elements of our executive compensation program for the
year ended December 31, 2008 were:
base salary;
20
annual incentive bonus; and
stock-based awards.
Executive officers are also entitled to limited perquisites and
other benefits as outlined below. The following is a summary of
the considerations underlying each component of compensation
paid to our named executive officers for 2008.
Base
Salary
We provide our named executive officers and other officers with
a base salary to compensate them for services rendered during
the fiscal year. The Committee reviews and, as appropriate,
adjusts the base salaries for our named executive officers. The
factors that the Committee considers in setting salaries include
the scope of job responsibilities, individual contributions to
our success, Company-wide performance and market compensation.
However, the Committee does not as a practice grant annual base
salary adjustments for executive officers, and it did not grant
any base salary adjustments during 2008 for any of the named
executive officers, except for Mr. Short, who received a
$36,000 increase in February 2008, and Mr. Westfall, who
received a $14,040 increase to his base salary in February 2008.
Annual
Incentive Bonus
A core component of our compensation program is the AutoNation
Operating Performance Plan (the AOP), the annual
bonus program in which bonus-eligible, corporate-level employees
participate. The AOP is designed to incentivize management to
continually improve our operating performance and to use capital
to maximize returns. The Subcommittee structured the AOP for
2008 to reward participants upon the achievement of specified
levels of adjusted operating income per basic share and adjusted
operating income as a percentage of gross margin. Bonus awards
under the AOP were payable on a sliding scale based on our
actual achievement relative to the predetermined goals, with the
possibility that bonuses earned could exceed or be less than the
targeted payout level. The following table sets forth the 2008
bonus metrics under the AOP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
2008 Bonus Metrics
|
|
|
Weight
|
|
|
Payout Level
|
|
|
Payout Level
|
|
|
Payout Level
|
Adjusted Operating Income Per Basic Share
|
|
|
75%
|
|
|
$2.79(1)
|
|
|
$3.28
|
|
|
³ $3.94(2)
|
Adjusted Operating Income as a Percent of Gross Margin
|
|
|
25%
|
|
|
20.5%(3)
|
|
|
21.5%
|
|
|
N/A(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
25% of target payout level.
|
|
(2)
|
|
200% of target payout level.
|
|
(3)
|
|
81.25% of target payout level.
|
|
(4)
|
|
Each 0.1 percentage point
change in this performance metric represented a plus or minus
1.875% payout versus target.
|
In calculating the level of our performance under the AOP,
operating income per basic share is adjusted to reflect a
capital charge for acquisitions and the repurchase of shares of
our common stock, as well as to exclude the effect of certain
extraordinary or other items. Certain other adjustments are made
as well to ensure operating performance is measured to
incentivize management appropriately (for example, floorplan
interest expense is charged against operating income to ensure
management manages this expense; on a generally accepted
accounting principles basis, floorplan interest expense is not
included in operating income). The capital charge is designed to
encourage more productive uses
21
of capital and to discourage less productive uses of capital.
The adjusted operating income as a percentage of gross margin
metric is designed to incentivize management to increase
variability in our expense structure and to increase the
productivity of our operations so that bottom-line profitability
and stockholder value are maximized.
Each year, the Subcommittee, in its sole discretion, determines
which of our named executive officers or other key employees
will participate in the AutoNation, Inc. Senior Executive
Incentive Bonus Plan (the Executive Incentive Plan).
The Executive Incentive Plan is designed to create a direct link
between pay and performance for our named executive officers and
to ensure that annual cash performance bonuses payable to
executive officers of the Company are tax-deductible by the
Company pursuant to Section 162(m) of the Code.
Historically, the Subcommittee has selected only those officers
who were likely to receive annual compensation in excess of
$1 million. Our executive officers may participate in
either the AOP or the Executive Incentive Plan, but not both.
The Subcommittee is also responsible for identifying annual
performance factors and establishing specific
performance targets with respect thereto that must be met in
order for annual bonuses to be paid under the Executive
Incentive Plan. The Subcommittee retains absolute negative
discretion to eliminate or reduce the amount of any award
under the Executive Incentive Plan and to make all
determinations under the Executive Incentive Plan.
In February 2008, the Subcommittee established an incentive
bonus program for 2008 for certain of our named executive
officers under the Executive Incentive Plan. For 2008, the
Subcommittee selected Mike Jackson, Michael E. Maroone, Michael
J. Short and Jonathan P. Ferrando to participate in the
Executive Incentive Plan. Under the terms of the Executive
Incentive Plan, the Subcommittee set specific annual performance
goals and established an objective formula for calculating the
amount of the target awards for participants. The 2008 bonus
metrics that the Subcommittee established under the Executive
Incentive Plan were the same as those that the Committee
established for 2008 under the AOP for all other corporate bonus
plan participants, including Mr. Westfall. The Subcommittee
believes that symmetry between the AOP and the Executive
Incentive Plan assures that all participants are appropriately
aligned to achieve our objectives. One hundred percent of the
target award for each participant in the Executive Incentive
Plan was based upon achievement of the predetermined performance
goals. Bonus awards under the Executive Incentive Plan were
payable based on a sliding scale based on the Companys
actual achievement relative to the predetermined goals, with the
possibility that bonuses earned may exceed or be less than the
targeted payout level. The Subcommittee had absolute
negative discretion to eliminate or reduce the
amount of any award under the Executive Incentive Plan.
The following table sets forth the 2008 threshold and target
awards reflected as a percentage of salary for each of the
participants under the Executive Incentive Plan and for
Mr. Westfall under the AOP.
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Threshold
|
|
|
2008 Target
|
|
|
|
Participant
|
|
|
(% of Salary)
|
|
|
(% of Salary)
|
|
|
2008 Maximum
|
Mike Jackson
|
|
|
25%
|
|
|
1331/3%
|
|
|
(1), (2)
|
Michael E. Maroone
|
|
|
18.75%
|
|
|
100%
|
|
|
(1), (2)
|
Michael J. Short
|
|
|
14.06%
|
|
|
75%
|
|
|
(1), (2)
|
Jonathan P. Ferrando
|
|
|
14.06%
|
|
|
75%
|
|
|
(1), (2)
|
Kevin P. Westfall
|
|
|
8.44%
|
|
|
45%
|
|
|
(1), (3)
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
(1)
|
|
The maximum payout level for the
adjusted operating income per basic share metric was 200% versus
target.
|
|
(2)
|
|
While there was no maximum for the
adjusted operating income as a percentage of gross margin
metric, the maximum amount payable to any one participant in any
one year is $5,000,000 under the Executive Incentive Plan. Each
0.1 percentage point change in this performance metric
represented a plus or minus 1.875% payout.
|
|
(3)
|
|
No maximum for the adjusted
operating income as a percentage of gross margin metric. Each
0.1 percentage point change in this performance metric
represented a plus or minus 1.875% payout.
|
For 2008, the performance goals were not met at the level
necessary to achieve a bonus payout, and, as a result, the
Subcommittee awarded no bonuses to Messrs. Jackson,
Maroone, Short and Ferrando under the Executive Incentive Plan,
and to other corporate bonus plan participants, including
Mr. Westfall, under the AOP. The Executive Incentive Plan
was the only bonus program in which our named executive officers
participated in 2008, other than Mr. Westfall who
participated in the AOP only. As part of our retention efforts
with respect to Mr. Jackson, a portion of the 2008 target
bonus for Mr. Jackson under the Executive Incentive Plan
(equal to
331/3%
of his base salary) would have been payable to him on a deferred
basis in 2010 (without interest), subject to certain terms and
conditions.
In February 2009, the Subcommittee selected the 2009
participants under the Executive Incentive Plan, established
specific objective annual performance goals for 2009, and set
target awards for the 2009 participants in the Executive
Incentive Plan. For 2009, the Subcommittee selected
Messrs. Jackson, Maroone, Short and Ferrando to participate
in the Executive Incentive Plan. The performance goals that the
Subcommittee established for 2009 under the Executive Incentive
Plan are based upon the achievement of specified levels of
adjusted operating income per basic share (minus a net charge
for capital deployed for acquisitions or share repurchases and
certain extraordinary or other items) and adjusted operating
income as a percentage of gross margin for the Company during
2009. The performance goals established under the Executive
Incentive Plan for 2009 also constitute the performance goals
that have been established for bonus-eligible corporate
employees of the Company under the AOP to ensure that the
corporate management team is fully aligned. Bonus awards will be
payable based on a sliding scale based on our actual achievement
relative to the predetermined goals, with the possibility that
bonuses earned may exceed or be less than the targeted level.
The Subcommittee will have absolute negative
discretion to eliminate or reduce the amount of any award
under the Executive Incentive Plan.
The following table sets forth the 2009 threshold and target
awards reflected as a percentage of salary for each of the
participants under the Executive Incentive Plan and for
Mr. Westfall under the AOP.
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Threshold
|
|
|
2009 Target
|
|
|
|
Participant
|
|
|
(% of Salary)
|
|
|
(% of Salary)
|
|
|
2009 Maximum
|
Mike Jackson
|
|
|
20%
|
|
|
1331/3%
|
|
|
(1), (2)
|
Michael E. Maroone
|
|
|
15%
|
|
|
100%
|
|
|
(1), (2)
|
Michael J. Short
|
|
|
11.25%
|
|
|
75%
|
|
|
(1), (2)
|
Jonathan P. Ferrando
|
|
|
11.25%
|
|
|
75%
|
|
|
(1), (2)
|
Kevin P. Westfall
|
|
|
6.75%
|
|
|
45%
|
|
|
(1), (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The maximum payout level for the
adjusted operating income per basic share metric is 200%.
|
|
(2)
|
|
While there is no maximum for the
adjusted operating income as a percentage of gross margin
metric, the maximum amount payable to any one participant in any
one year is $5,000,000 under the Executive Incentive Plan. Each
0.1 percentage point change in this performance metric
represents a plus or minus 1.875% payout.
|
|
(3)
|
|
No maximum for the adjusted
operating income as a percentage of gross margin metric. Each
0.1 percentage point change in this performance metric
represents a plus or minus 1.875% payout.
|
23
Stock-Based
Awards
In order to align the long-term interests of management and our
stockholders, the Subcommittee grants stock-based awards to our
named executive officers. The Committee believes that
stock-based awards motivate our named executive officers to
focus on optimizing our long-term business performance and
stockholder value and create an owner-oriented culture. For
2008, the Subcommittee administered our equity compensation
plans and approved all stock-based awards under the AutoNation,
Inc. 2008 Employee Equity and Incentive Plan (the 2008
Plan), which was approved by our stockholders at the 2008
Annual Meeting of Stockholders.
Stock-based awards are approved on an annual basis in amounts
determined by the Subcommittee, while carefully considering the
cost to us and our stockholders, including common stock
dilution. For 2008, the sum of all stock-based awards granted to
AutoNation employees represented potential share issuances equal
to approximately 0.78% of our outstanding shares of common stock
(0.67% relating to stock options and 0.11% relating to
restricted stock).
In 2008, the Subcommittee approved two types of stock-based
awards: stock options and restricted stock. Except for
Messrs. Jackson, Maroone, Short and Ferrando, who received
stock options only, other employees eligible for stock-based
awards received either a mix of stock options and restricted
stock or restricted stock only. The restricted stock awards had
the effect of lowering the total number of shares of common
stock used for stock-based awards in 2008 as compared to 2007.
The 2008 stock option and restricted stock awards were made to
all stock option-eligible and restricted stock-eligible
employees at the same time. Additionally, the 2008 stock option
awards were made to all stock option-eligible employees on the
same terms (other than the number of options granted, which
varies primarily by position and based on individual
performance), and the 2008 restricted stock awards were made to
all restricted stock-eligible employees on the same terms (other
than the number of restricted shares granted, which varies
primarily by position and based on individual performance).
Stock
Options
Prior to 2009, the Subcommittees practice had been to
approve annual stock option awards during our third fiscal
quarter at meetings of the Subcommittee (or predecessor
committees responsible for option grants at the time) with an
effective grant date after the public release of the
Companys second-quarter earnings. Additionally, the terms
of the annual stock option awards provided that stock options
would vest in equal installments over four years commencing with
the first anniversary of the grant date and expire ten years
after the grant date.
Consistent with past practice, the 2008 stock option awards were
approved by the Subcommittee at its regularly scheduled meeting
on July 30, 2008 with an effective grant date of
July 30, 2008 (which was after the public release of our
second-quarter earnings). Also consistent with past practice,
the 2008 stock option awards vest in equal installments over
four years commencing with the first anniversary of the grant
date and expire ten years after the grant date. The exercise
price, as specified under the 2008 Plan, was $10.17 per share,
which was the closing price of the Companys common stock
on the grant date.
For 2009, the Subcommittee modified its practice by approving
the annual stock option awards to our named executive officers
and other employees at is regularly scheduled meeting on
February 11,
24
2009 and granting the awards in four equal increments over the
year, subject to continuous employment through each grant date.
One-fourth of each stock option award that was approved on
February 11, 2009, was granted on March 2, 2009, and
an additional one-fourth of each such stock option award will be
granted on the first NYSE trading day of each of June,
September, and December 2009. The options granted on
March 2, 2009 have an exercise price equal to the closing
price per share on the grant date ($9.92), and each subsequent
option grant will have an exercise price equal to the closing
price of our common stock on the applicable grant date in
accordance with the 2008 Plan. The 2009 stock option awards vest
in equal installments over four years commencing on June 1,
2010 and expire on March 2, 2019.
Since the Subcommittee approved the annual stock option awards
in February, the exercise price for each of the four grants
comprising an annual stock option award is based on the closing
price of our common stock on a date subsequent to the approval
of such award. The Subcommittee believes that this practice is
fair and reasonable to the award recipients, the Company, and
its stockholders since it minimizes the impact that any
particular event could have on the exercise price of stock
options, particularly during times of market volatility. The
Subcommittee adopted this practice for all stock option-eligible
employees of the Company and in 2009 awarded stock options to
all stock option-eligible employees on the same terms (other
than the number of options granted, which varies primarily by
position and based on individual performance).
Restricted
Stock
In 2008, the Subcommittee approved restricted stock awards to
certain employees under the 2008 Plan at the same time that it
approved the 2008 stock option awards discussed above
(July 30, 2008). Except for Mr. Westfall, none of the
named executive officers received restricted stock awards in
2008. The 2008 restricted stock awards vest in four equal annual
installments commencing on the first anniversary of the grant
date. All holders of restricted stock have the right to vote and
receive dividends on the shares of restricted stock.
In February 2009, the Subcommittee approved restricted stock
awards to certain employees, including Mr. Westfall but
excluding all other named executive officers, at the same time
that it approved the 2009 stock option awards discussed above
(February 11, 2009). These shares of restricted stock were
granted on March 2, 2009 and will vest in equal
installments over four years commencing on June 1, 2010.
The 2009 restricted stock awards were made to all restricted
stock-eligible employees of the Company on the same terms (other
than the number of restricted shares granted, which varies
primarily by position and based on individual performance).
Perquisites
and Other Benefits
Our compensation program for named executive officers also
includes limited perquisites and other benefits, including
participation in the Companys life and health insurance
and similar benefit programs (including our AutoNation 401(k)
Plan and our AutoNation Deferred Compensation Plan) on the same
general terms as other participants in these programs,
participation in Company car programs entitling the executives
to vehicle use or a vehicle allowance, use of an
on-site
fitness facility and, pursuant to their employment agreements,
limited personal use of corporate aircraft for each of
Messrs. Jackson and Maroone. The employment agreements with
each of Messrs. Jackson and Maroone, respectively, provide
for personal use of corporate aircraft of up to 70 hours
per year.
25
Employment
Agreements with Executive Officers
We have entered into an employment agreement with each of Mike
Jackson and Michael E. Maroone and an Employment Letter with
Michael J. Short. The Committee believes that entering into the
employment agreements with Messrs. Jackson and Maroone and
the employment letter with Mr. Short furthered our efforts
to attract and retain such executives. For a summary of the
material terms of Messrs. Jacksons, Maroones
and Shorts employment arrangements, please see
Executive Compensation Employment
Agreements below.
Severance
Policy and Agreements for Post-Termination Payments
We have a policy governing severance and change in control
agreements with the Companys named executive officers,
which is set forth in our Corporate Governance Guidelines.
Generally, the policy provides that we will not enter into any
severance agreements with senior executives that provide
specified benefits in an amount exceeding 299% of the sum of
such executives base salary plus bonus unless such
severance agreement has been submitted to a stockholder vote.
Further, unless such severance agreement has been submitted to a
stockholder vote, we will not enter into a severance agreement
that provides for the payment of specified benefits to an
executive triggered by (i) a change in control of our
Company that is approved by stockholders but not completed, or
(ii) a completed change in control of the Company in which
the named executive officer remains employed in a substantially
similar capacity by the successor entity.
We have entered into stock option agreements with all of our
named executive officers, as well employment agreements with
Mike Jackson and Mike Maroone that provide for payments or
benefits to such persons at, following, or in connection with,
termination under certain circumstances. In December 2006, we
entered into an employment letter with Mike Short that provided
for a severance payment in the event of a termination other than
for cause, death or disability on or prior to
January 15, 2009. We have not entered into any change in
control agreements with any of our named executive officers. The
payment or benefits provisions contained in the stock option
agreements and the employment agreements are designed to promote
stability and continuity of senior management. A description of
the applicable payments under such agreements for the named
executive officers is provided under Executive
Compensation Potential Payments Upon Termination or
Change in Control.
Company
Policy on Internal Revenue Code Section 162(m) Limits on
Deductibility of Compensation
Section 162(m) of the Code generally disallows a tax
deduction to public corporations for compensation over
$1,000,000 paid for any fiscal year to the corporations
CEO and four other most highly compensated executive officers as
of the end of any fiscal year. However, the statute exempts
qualifying performance-based compensation from the deduction
limit if certain requirements are met.
The Committee administers the executive compensation program in
general, and our Executive Incentive Plan in particular, in a
manner that maximizes the tax deductibility of compensation paid
to the Companys executives under Section 162(m) of
the Code to the extent practicable. The Committee believes,
however, that our priority is to attract and retain
highly-skilled executives to manage our Company and, in some
cases, the loss of a tax deduction may be necessary to
accomplish that goal. Accordingly, the Committee has from time
to time approved elements of compensation for certain officers
that are not fully deductible, and the Committee reserves the
right to do so in the future in appropriate circumstances. For
2008, the compensation of our named executive officers was fully
26
deductible under Section 162(m), except with respect to an
amount equal to $150,000 of our Chief Executive Officers
base salary and certain portions of other elements of
non-performance-based compensation for the Companys Chief
Executive Officer and President and Chief Operating Officer.
Executive
Stock Ownership Guidelines
In order to further align the long-term interests of management
and stockholders and to ensure an owner-oriented culture, the
Committee believes that our senior executive officers should
have a significant financial stake in our Company. Accordingly,
in February 2006, the Board of Directors adopted a policy
setting forth its expectation that the Chief Executive Officer
and the President and Chief Operating Officer will attain
ownership of our common stock with a fair market value of not
less than four times his or her annual base compensation, and
each Executive Vice President will attain ownership of
AutoNations common stock with a fair market value of not
less than two times his or her annual base compensation, in each
case within five years of such person first becoming an
executive officer or the adoption of this policy
(February 7, 2006).
Exceptions to this requirement may only be made by the Board of
Directors under compelling mitigating circumstances. The
Committee believes these ownership guidelines are an important
tool in aligning the interests of our senior executive officers
with the long term interests of our stockholders. As of
December 31, 2008, our senior executive officers had met
their guidelines or were making progress toward their guidelines
as set forth in the chart below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership as of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership
|
|
|
|
|
Name
|
|
|
Number of
Shares(1)
|
|
|
Dollar Value of
Shares(2)
|
|
|
Requirement
|
|
|
Progress
|
|
Mike Jackson
|
|
|
|
315,000
|
|
|
|
|
$3,112,200
|
|
|
|
|
$4,600,000
|
|
|
|
|
Achieved(
|
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone
|
|
|
|
2,498,159
|
|
|
|
|
$24,681,811
|
|
|
|
|
$4,000,000
|
|
|
|
|
Achieved
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short
|
|
|
|
1,563
|
|
|
|
|
$15,442
|
|
|
|
|
$1,122,000
|
|
|
|
|
1%(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P. Ferrando
|
|
|
|
29,767
|
|
|
|
|
$294,098
|
|
|
|
|
$1,122,000
|
|
|
|
|
26%(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The number of shares includes
common stock beneficially owned by each executive (excluding
stock options), including shares held through the AutoNation
401(k) Plan.
|
|
(2)
|
|
The value of the shares is based on
the closing price of a share of our common stock on the New York
Stock Exchange as of December 31, 2008 ($9.88).
|
|
(3)
|
|
As reported in the proxy statement
for the 2008 Annual Meeting of Stockholders, Mr. Jackson
had attained ownership of common stock of $4,932,900 as of
December 31, 2007 and has continued to own all such shares.
|
|
(4)
|
|
Mr. Short has until January
2012 to meet the above ownership requirement.
|
|
(5)
|
|
Mr. Ferrando has until
February 2011 to meet the above ownership requirement.
|
Conclusion
The Committee believes that our compensation programs are
designed and administered in a manner consistent with the
Committees philosophy as described above. The Committee
also believes that the programs appropriately reward executive
performance and align the interests of the Companys named
executive officers and key employees with the long-term
interests of stockholders, while also enabling the Company to
attract and retain talented executives. The Committee will
continue to evolve and administer our compensation program in a
manner that the Committee believes will be in the best interests
of our stockholders.
27
Compensation
Committee and
Executive Compensation Subcommittee Report
The following statement made by our Compensation Committee
and Executive Compensation Subcommittee does not constitute
soliciting material and should not be deemed filed or
incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that we specifically
incorporate such statement by reference.
The Compensation Committee and Executive Compensation
Subcommittee of the Company have reviewed and discussed with
management the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
and, based on such review and discussions, the Compensation
Committee and Executive Compensation Subcommittee recommended to
the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement and incorporated by reference
into the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
Compensation Committee:
William C. Crowley (Chair)
Rick L. Burdick
Carlos A. Migoya
Executive Compensation Subcommittee:
Carlos A. Migoya (Chair)
Rick L. Burdick
28
Executive
Compensation
SUMMARY
COMPENSATION TABLE
The following table shows compensation earned by our Chief
Executive Officer, our Chief Financial Officer, and each of our
three other most highly compensated executive officers at
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Value and Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
Incentive Plan
|
|
|
qualified Deferred
|
|
|
All Other
|
|
|
|
Name and Principal
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Option
|
|
|
Compensation
|
|
|
Compensation Earnings
|
|
|
Compensation
|
|
|
Total
|
Position
|
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
Awards
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)(3)
|
|
|
($)(1)
|
Mike Jackson (Chairman and Chief Executive Officer)
|
|
|
2008
|
|
|
1,150,000
|
|
|
|
|
|
|
|
|
2,044,351(4)
|
|
|
|
|
|
|
|
|
198,446(5)
|
|
|
3,392,797(4)
|
|
|
2007
|
|
|
1,150,000
|
|
|
|
|
|
|
|
|
3,525,434(4)
|
|
|
|
|
|
|
|
|
187,036
|
|
|
4,862,470(4)
|
|
|
2006
|
|
|
1,150,000
|
|
|
|
|
|
|
|
|
4,058,469(4)
|
|
|
1,116,420
|
|
|
|
|
|
197,921
|
|
|
6,522,810(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone (President and Chief Operating Officer)
|
|
|
2008
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
3,520,636(6)
|
|
|
|
|
|
|
|
|
270,758(7)
|
|
|
4,791,394(6)
|
|
|
2007
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
2,403,494(6)
|
|
|
|
|
|
|
|
|
274,027
|
|
|
3,677,521(6)
|
|
|
2006
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
1,780,332(6)
|
|
|
728,100
|
|
|
|
|
|
338,603
|
|
|
3,847,035(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short (Executive Vice President and Chief Financial
Officer) (8)
|
|
|
2008
|
|
|
560,051
|
|
|
|
|
|
|
|
|
881,475
|
|
|
|
|
|
|
|
|
20,454(9)
|
|
|
1,461,980
|
|
|
2007
|
|
|
502,789
|
|
|
|
|
|
|
|
|
570,410
|
|
|
|
|
|
|
|
|
379,846
|
|
|
1,453,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P. Ferrando (Executive Vice President, General Counsel
and Secretary)
|
|
|
2008
|
|
|
561,000
|
|
|
|
|
|
|
|
|
1,287,951
|
|
|
|
|
|
|
|
|
20,528(10)
|
|
|
1,869,479
|
|
|
2007
|
|
|
561,000
|
|
|
|
|
|
|
|
|
1,196,941
|
|
|
|
|
|
|
|
|
24,250
|
|
|
1,782,191
|
|
|
2006
|
|
|
561,000
|
|
|
|
|
|
|
|
|
954,463
|
|
|
245,078
|
|
|
|
|
|
19,818
|
|
|
1,780,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Westfall (Senior Vice President, Sales)
|
|
|
2008
|
|
|
483,696
|
|
|
|
|
|
9,939
|
|
|
487,587(11)
|
|
|
|
|
|
|
|
|
21,174(12)
|
|
|
1,002,396(11)
|
|
|
2007
|
|
|
465,992
|
|
|
|
|
|
|
|
|
502,861(11)
|
|
|
|
|
|
|
|
|
21,119
|
|
|
989,972(11)
|
|
|
2006
|
|
|
450,000
|
|
|
|
|
|
|
|
|
425,733
|
|
|
147,440
|
|
|
|
|
|
16,999
|
|
|
1,040,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts reported in the
Stock Awards and Option Awards columns
(which are included in the amounts reported in the
Total column) reflect stock-based compensation
expense (which, in the case of option awards, include
compensation expense associated with option awards granted in
prior years) recognized for financial statement reporting
purposes for 2008, 2007 or 2006, as the case may be, in
accordance with Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment
(FAS 123R), except as otherwise noted in the
following paragraph. Accordingly, the amounts reported in the
Stock Awards and Option Awards columns
do not represent the fair value of stock or option awards that
were granted in 2008, 2007 or 2006, as the case may be. For
detailed information regarding stock-based awards granted in
2008 to our named executive officers, see Grants of
Plan-Based Awards in Fiscal 2008 below. In accordance with
SEC rules, the amounts reported in the Stock Awards
and Option Awards columns exclude the impact of
estimated forfeitures related to service-based vesting
conditions. For a description of the assumptions used in the
calculation of these amounts, see Note 10 to our
consolidated financial statements included in our Annual Report
on
Form 10-K
for the year ended December 31, 2008.
|
|
|
|
|
Our equity compensation plans
contain provisions that provide for vesting of stock-based
awards upon retirement. Accordingly, the related compensation
expense for stock-based awards granted subsequent to our
adoption of FAS 123R on January 1, 2006 must be recognized
over the shorter of the stated vesting period or the period
until employees become retirement-eligible. During the second
quarter of 2008, we corrected our expense attribution method for
stock-based awards to reflect this requirement. The amounts
reported in the Option Awards column (and, as a
result, the amounts reported in the Total column)
have been revised to reflect amounts that should have been
recorded in 2007 and 2006 in accordance with this requirement.
The actual expense recorded in the Companys financial
statements for 2008 included the correction for both 2007 and
2006.
|
|
|
(2)
|
|
Non-equity incentive plan
compensation earned during 2006 was paid on February 15,
2007. No non-equity incentive plan compensation was earned in
2007 or 2008.
|
|
|
(3)
|
|
The amounts reported for personal
usage by Mr. Jackson and Mr. Maroone of corporate
aircraft are calculated based on the aggregate incremental cost
to the Company. The incremental cost to the Company of personal
usage of corporate aircraft by our executives is calculated
based on the direct operating costs to the Company, including
fuel costs, crew fees and travel expenses, trip-related repairs
and maintenance, ground transportation, landing fees and other
direct operating costs. The amounts reported
|
29
|
|
|
|
|
for personal usage of cars are
based on imputed income attributable to each named executive
officer calculated in accordance with Treasury Regulations,
which amounts we believe are equal to or greater than our
incremental costs thereof. In addition to the perquisites and
other benefits identified in the footnotes below, our named
executive officers also are eligible to use our
on-site
fitness facility, and from time to time, use our tickets for
sporting and entertainment events for personal purposes, and
receive occasional secretarial support with respect to personal
matters.
|
|
(4)
|
|
For Mr. Jackson, the expense
recognized with respect to option awards for financial statement
reporting purposes under FAS 123R was $5,482,327 in 2008
(of which $3,437,976 relates to 2007 and 2006), $2,096,651 in
2007 and $2,049,276 in 2006. See footnote 1, in particular the
second paragraph, above.
|
|
(5)
|
|
Includes $12,575 for imputed income
from group term life insurance, $137,710 for personal usage of
corporate aircraft, $25,660 for personal company car usage, and
$22,500 as vehicle allowance for service on the Board of
Directors.
|
|
(6)
|
|
For Mr. Maroone, the expense
recognized with respect to option awards for financial statement
reporting purposes under FAS 123R was $4,386,377 in 2008
(of which $865,741 relates to 2007 and 2006), $1,677,833 in 2007
and $1,640,252 in 2006. See footnote 1, in particular the second
paragraph, above.
|
|
(7)
|
|
Includes imputed income from group
term life insurance, $199,988 for personal usage of corporate
aircraft, $35,573 for personal company car usage, $22,500 as
vehicle allowance for service on the Board of Directors, and a
$4,000 matching contribution to Mr. Maroones
non-qualified deferred compensation account.
|
|
(8)
|
|
Mr. Short was hired on
January 15, 2007 and therefore did not have earnings in
2006.
|
|
(9)
|
|
Includes imputed income from group
term life insurance, $15,600 as a vehicle allowance, and a
Company paid executive health examination.
|
|
(10)
|
|
Includes imputed income from group
term life insurance, $15,600 as a vehicle allowance and a $4,000
matching contribution to Mr. Ferrandos non-qualified
deferred compensation account.
|
|
(11)
|
|
For Mr. Westfall, the expense
recognized with respect to option awards for financial statement
reporting purposes under FAS 123R was $496,167 in 2008 (of
which $8,580 relates to 2007 and 2006), $494,281 in 2007 and
$425,733 in 2006. See footnote 1, in particular the second
paragraph, above.
|
|
(12)
|
|
Includes imputed income from group
term life insurance and $15,600 for a vehicle allowance, and a
$4,000 matching contribution to Mr. Westfalls
non-qualified deferred compensation account.
|
GRANTS OF
PLAN-BASED AWARDS IN FISCAL 2008
The Executive Incentive Plan was approved by the Board in
February 2007 and by our stockholders in May 2007. For 2008, the
Executive Compensation Subcommittee selected Mike Jackson,
Michael E. Maroone, Michael J. Short, and Jonathan P. Ferrando
to participate in the Executive Incentive Plan. Under the terms
of the Executive Incentive Plan, the Subcommittee set specific
annual performance goals (while actual performance relative to
the target remained substantially uncertain within the meaning
of Section 162(m) of the Code) and established an objective
formula for calculating the amount of the target awards for the
participants. Bonus awards were payable based on a sliding scale
based on our actual achievement relative to the predetermined
goals, with the possibility that bonuses earned may exceed or be
less than the targeted level. The Subcommittee had absolute
negative discretion to eliminate or reduce the
amount of any award under the Executive Incentive Plan. The
target incentive award, as a percentage of base salary, assigned
to our select named executive officers for 2008 were: Mike
Jackson
1331/3%;
Michael E. Maroone 100%; Michael J.
Short 75%; and Jonathan P. Ferrando 75%.
The performance goals that the Subcommittee established for 2008
under the Executive Incentive Plan for the executives named
above adjusted operating income per basic share (75%
weight) of $3.28 and adjusted operating income as a percentage
of gross margin (25% weight) of 21.5% were the same
as those the Committee established for 2008 under the AOP for
all other corporate bonus plan participants, including
Mr. Westfall, who was eligible to receive a target award as
a percentage of his base salary of 45%. One hundred percent of
the target award for each participant in the Executive Incentive
Plan was based upon achievement of the predetermined performance
goals.
30
For 2008, the performance goals were not met at the level
necessary to achieve a bonus payout, and, as a result, the
Subcommittee awarded no bonuses to Messrs. Jackson,
Maroone, Short, and Ferrando under the Executive Incentive Plan,
or to other corporate bonus plan participants, including
Mr. Westfall, under the AOP. The Executive Incentive Plan
was the only bonus program in which our named executive officers
participated in 2008, other than Mr. Westfall who
participated in the AOP only. As part of our retention efforts
with respect to Mr. Jackson, a portion of the target bonus
for Mr. Jackson in 2008 under the Executive Incentive Plan
(equal to
331/3%
of his base salary) would have been payable to him on a deferred
basis in 2010 (without interest), subject to certain terms and
conditions.
The following table sets forth certain information with respect
to grants of awards to the named executive officers of the
Company under our non-equity incentive plans and equity
compensation plans during 2008. The grants include the 2008
annual stock option awards, cash incentive plan awards, and a
restricted stock award to Mr. Westfall. We have not granted
other stock or long-term cash incentive awards to our named
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts under
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan
Awards(1)
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number of
|
|
|
or Base
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Stock and
|
|
|
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Option
|
Name
|
|
|
Award Type
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
(#)(3)
|
|
|
(#)(3)
|
|
|
($/sh)
|
|
|
Awards(4)
|
Mike Jackson
|
|
|
Annual Option
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271,067
|
|
|
10.17
|
|
|
1,230,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
287,500
|
|
|
1,533,333
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone
|
|
|
Annual Option
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,946
|
|
|
10.17
|
|
|
984,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
187,500
|
|
|
1,000,000
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short
|
|
|
Annual Option
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,012
|
|
|
10.17
|
|
|
740,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
78,891
|
|
|
420,750
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P. Ferrando
|
|
|
Annual Option
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,012
|
|
|
10.17
|
|
|
740,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
78,891
|
|
|
420,750
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Westfall
|
|
|
Annual Option
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,292
|
|
|
10.17
|
|
|
73,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual RS
|
|
|
7/30/08
|
|
|
|
|
|
|
|
|
|
|
|
5,431
|
|
|
|
|
|
|
|
|
55,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash
|
|
|
|
|
|
40,672
|
|
|
216,918
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
As disclosed above, these targets
relate to the AOP and Executive Incentive Plan for 2008. No
bonuses were awarded under these plans.
|
|
|
(2)
|
|
$5,000,000 is the maximum allowable
bonus under the Executive Incentive Plan.
|
|
|
(3)
|
|
Awards made under the AutoNation,
Inc. 2008 Employee Equity and Incentive Plan.
|
|
|
(4)
|
|
Based on a FAS 123R value of
$4.54 per share for options granted on July 30, 2008, and
the closing price per share of our common stock on July 30,
2008 ($10.17) for shares of restricted stock granted to Kevin P.
Westfall on July 30, 2008.
|
31
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2008
The following table sets forth certain information regarding
equity-based awards held by our named executive officers as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or Units
|
|
|
Shares or Units
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
of Stock That
|
|
|
of Stock That
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Expiration
|
|
|
Have Not Vested
|
|
|
Have Not Vested
|
Name
|
|
|
Grant
Date(1)
|
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)(2)
|
Mike
Jackson(3)
|
|
|
8/5/2002
|
|
|
400,000
|
|
|
|
|
|
12.25
|
|
|
8/5/2012
|
|
|
|
|
|
|
|
|
|
7/28/2003
|
|
|
321,000
|
|
|
|
|
|
17.00
|
|
|
7/28/2013
|
|
|
|
|
|
|
|
|
|
7/27/2004
|
|
|
292,000
|
|
|
|
|
|
16.77
|
|
|
7/27/2014
|
|
|
|
|
|
|
|
|
|
8/1/2005
|
|
|
219,000
|
|
|
73,000
|
|
|
21.59
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
127,000
|
|
|
127,000
|
|
|
20.08
|
|
|
7/31/2016
|
|
|
|
|
|
|
|
|
|
7/30/2007
|
|
|
68,798
|
|
|
206,397
|
|
|
19.21
|
|
|
7/30/2017
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
271,067
|
|
|
10.17
|
|
|
7/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone
|
|
|
1/6/1999
|
|
|
830,882
|
|
|
|
|
|
14.39
|
|
|
1/6/2009
|
|
|
|
|
|
|
|
|
|
7/29/1999
|
|
|
276,961
|
|
|
|
|
|
13.26
|
|
|
7/29/2009
|
|
|
|
|
|
|
|
|
|
8/1/2000
|
|
|
350,000
|
|
|
|
|
|
6.88
|
|
|
8/1/2010
|
|
|
|
|
|
|
|
|
|
8/1/2000
|
|
|
500,000
|
|
|
|
|
|
6.88
|
|
|
8/1/2010
|
|
|
|
|
|
|
|
|
|
7/25/2001
|
|
|
400,000
|
|
|
|
|
|
11.05
|
|
|
7/25/2011
|
|
|
|
|
|
|
|
|
|
8/5/2002
|
|
|
320,000
|
|
|
|
|
|
12.25
|
|
|
8/5/2012
|
|
|
|
|
|
|
|
|
|
7/28/2003
|
|
|
257,000
|
|
|
|
|
|
17.00
|
|
|
7/28/2013
|
|
|
|
|
|
|
|
|
|
7/27/2004
|
|
|
233,800
|
|
|
|
|
|
16.77
|
|
|
7/27/2014
|
|
|
|
|
|
|
|
|
|
8/1/2005
|
|
|
175,350
|
|
|
58,450
|
|
|
21.59
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
101,500
|
|
|
101,500
|
|
|
20.08
|
|
|
7/31/2016
|
|
|
|
|
|
|
|
|
|
7/30/2007
|
|
|
55,062
|
|
|
165,188
|
|
|
19.21
|
|
|
7/30/2017
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
216,946
|
|
|
10.17
|
|
|
7/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short
|
|
|
1/15/2007
|
|
|
50,000
|
|
|
150,000
|
|
|
21.56
|
|
|
1/15/2017
|
|
|
|
|
|
|
|
|
|
7/30/2007
|
|
|
41,373
|
|
|
124,121
|
|
|
19.21
|
|
|
7/30/2017
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
163,012
|
|
|
10.17
|
|
|
7/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P. Ferrando
|
|
|
7/28/2003
|
|
|
77,200
|
|
|
|
|
|
17.00
|
|
|
7/28/2013
|
|
|
|
|
|
|
|
|
|
7/27/2004
|
|
|
175,600
|
|
|
|
|
|
16.77
|
|
|
7/27/2014
|
|
|
|
|
|
|
|
|
|
8/1/2005
|
|
|
131,700
|
|
|
43,900
|
|
|
21.59
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
87,800
|
|
|
87,800
|
|
|
20.08
|
|
|
7/31/2016
|
|
|
|
|
|
|
|
|
|
7/30/2007
|
|
|
41,373
|
|
|
124,121
|
|
|
19.21
|
|
|
7/30/2017
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
163,012
|
|
|
10.17
|
|
|
7/30/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Westfall
|
|
|
7/28/2003
|
|
|
28,950
|
|
|
|
|
|
17.00
|
|
|
7/28/2013
|
|
|
|
|
|
|
|
|
|
7/27/2004
|
|
|
35,100
|
|
|
|
|
|
16.77
|
|
|
7/27/2014
|
|
|
|
|
|
|
|
|
|
8/1/2005
|
|
|
39,487
|
|
|
13,163
|
|
|
21.59
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
9/7/2005
|
|
|
18,750
|
|
|
6,250
|
|
|
20.94
|
|
|
9/7/2015
|
|
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
32,906
|
|
|
32,907
|
|
|
20.08
|
|
|
7/31/2016
|
|
|
|
|
|
|
|
|
|
7/30/2007
|
|
|
12,405
|
|
|
37,215
|
|
|
19.21
|
|
|
7/30/2017
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
16,292
|
|
|
10.17
|
|
|
7/30/2018
|
|
|
|
|
|
|
|
|
|
7/30/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,431
|
|
|
53,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Stock-based awards vest 25% per
year over four years on the anniversary of the applicable grant
date.
|
|
|
(2)
|
|
Based on the closing price per
share of our common stock on December 31, 2008 ($9.88).
|
|
|
(3)
|
|
All of Mr. Jacksons
options have been transferred other than for value to a personal
trust.
|
32
OPTION
EXERCISES AND STOCK VESTED IN FISCAL 2008
The following table sets forth certain information regarding
stock option exercises and vesting of restricted stock during
2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on Exercise
|
|
|
Exercise
|
|
|
Acquired on Vesting
|
|
|
Vesting
|
Name
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
Mike Jackson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan P. Ferrando
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Westfall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
COMPENSATION PLANS
The following table provides information as of December 31,
2008 regarding equity compensation plans approved and not
approved by stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C)
|
|
|
|
|
(A)
|
|
|
|
(B)
|
|
|
|
Number of Securities Remaining
|
|
|
|
|
Number of Securities to
|
|
|
|
Weighted-Average
|
|
|
|
Available for Future Issuance Under
|
|
|
|
|
be Issued Upon Exercise
|
|
|
|
Exercise Price of
|
|
|
|
Equity Compensation Plans
|
|
|
|
|
of Outstanding Options,
|
|
|
|
Outstanding Options,
|
|
|
|
(Excluding Securities Reflected in
|
|
Plan
Category
|
|
|
Warrants and Rights
|
|
|
|
Warrants and Rights
|
|
|
|
Column A)
|
|
Equity Compensation Plans
Approved by Security Holders
|
|
|
|
14,609,148
|
|
|
|
|
$16.01
|
|
|
|
|
12,299,056(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans
Not Approved by Security Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
14,609,148
|
|
|
|
|
$16.01
|
|
|
|
|
12,299,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amount includes
10,645,824 million shares available under the AutoNation,
Inc. 2008 Employee Equity and Incentive Plan (the 2008
Plan). As of December 31, 2008, a maximum of
1,819,451 shares may be awarded as awards, other than
options or stock appreciation rights, that are settled in shares
under the 2008 Plan.
|
NON-QUALIFIED
DEFERRED COMPENSATION IN FISCAL 2008
The AutoNation Deferred Compensation Plan (DCP)
affords a select group of management and highly compensated
employees the opportunity to defer up to 75% of base salary and
90% of annual bonus
and/or
commissions on a pre-tax basis. In 2008, we also provided a 50%
matching contribution, with vesting, up to the first $8,000
deferred to the DCP for certain participants including our named
executive officers. Participants eligible for a matching
contribution under the DCP were not eligible for the matching
contribution in the AutoNation 401(k) plan. Effective
January 1, 2009, we suspended matching contributions for
both the DCP and the AutoNation 401(k) plan in light of the
current economic conditions. Earnings on deferrals are based on
deemed investments in funds, selected for inclusion
in the DCP by us, investing in equity instruments or debt
securities. The DCP
33
provides daily processing of account transactions including
participant deemed investment election changes. Additionally,
the DCP provides for payment of vested deferrals and earnings
upon separation from service, death, and disability as well as
upon specified in-service payment dates selected by the
participants. Participants may elect to receive payments upon
specified in-service dates or upon separation from service in
the form of lump sum payments or annual installments up to
10 years. Specified in-service date payments may be paid in
a lump sum or in up to five annual installments. The DCP is
intended to meet the requirements of Section 409A of the
Code and other relevant provisions thereunder and related
Treasury regulations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
AutoNation
|
|
|
Earnings (Loss)
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
in Last Fiscal
|
|
|
Withdrawals/
|
|
|
Balance at Last
|
|
|
|
Last Fiscal Year
|
|
|
Last Fiscal Year
|
|
|
Year
|
|
|
Distributions
|
|
|
Fiscal Year-End
|
Name
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
($)(4)
|
Mike
Jackson(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Maroone
|
|
|
196,154
|
|
|
4,000
|
|
|
(142,245)
|
|
|
|
|
|
258,125
|
Michael J. Short
|
|
|
10,000
|
|
|
|
|
|
(2,484)
|
|
|
|
|
|
7,516
|
Jonathan P. Ferrando
|
|
|
10,000
|
|
|
4,000
|
|
|
(15,265)
|
|
|
25,486
|
|
|
30,562
|
Kevin P. Westfall
|
|
|
69,201
|
|
|
4,000
|
|
|
(71,910)
|
|
|
|
|
|
129,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts included as part of
Salary for 2008 in the Summary Compensation
Table.
|
|
(2)
|
|
Matching contributions made in 2008
were based upon 2007 executive contributions, and are included
as part of All Other Compensation for 2008 in the
Summary Compensation Table.
|
|
(3)
|
|
Amounts not included in the
Summary Compensation Table.
|
|
(4)
|
|
Amounts, other than
(1) contributions reported in the Executive
Contributions in Last Fiscal Year and AutoNation
Contributions in Last Fiscal Year columns and
(2) gains or losses not required to be reported in the
Summary Compensation Table, have been previously
reported as compensation to our named executive officers in the
Summary Compensation Table included in our prior
proxy statements.
|
|
(5)
|
|
Mr. Jackson did not
participate in the DCP.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below reflect the amount of compensation that would
have been payable to each of our named executive officers under
any contract, agreement, plan or arrangement with us that
provides for payment(s) to such executive in the event of
termination of such executives employment or a change in
control of the Company, in each case assuming the termination or
change in control occurred effective as of December 31,
2008, the last business day of our most recent fiscal year. The
amount of compensation payable to each named executive officer
upon termination for cause, voluntary
termination (or voluntary termination for good
reason and voluntary termination without good
reason), death or disability,
retirement, involuntary termination without
cause, and change in control, as applicable,
is shown below. We have prepared the tables based on the
following general assumptions, and the tables should be
considered in conjunction with the assumptions and the
disclosures below the tables.
34
General
Assumptions
Stock-Based
Awards
In certain cases upon a termination or change in control, the
vesting of unvested stock options and shares of restricted stock
is accelerated. To determine the value of unvested stock options
that would accelerate in such cases, we calculated the
difference between (1) the exercise price of the unvested
stock options that would accelerate and (2) the closing
price per share of our common stock on December 31, 2008,
which was $9.88. To determine the market value of unvested
shares of restricted stock that would accelerate in such cases,
we multiplied (x) the number of unvested shares of
restricted stock that would accelerate by (y) $9.88.
As of December 31, 2008, all unvested stock options held by
our named executive officers had an exercise price higher than
$9.88. Accordingly, even though in certain cases unvested stock
options held by our named executive officers would accelerate as
discussed below, no value is attributed to such acceleration.
Since vested stock options are already exercisable upon
termination (except in the case of a termination for
cause), no value is attributable in the tables to
the extension of the exercise period for such vested options.
Benefits
Messrs. Jackson and Maroone are eligible for health and
welfare benefits, including disability and life insurance, in
connection with certain termination events, and in such events
the tables below reflect our expense in connection with such
executives elections.
Change in
Control
We have not entered into any change in control
agreements with any of our named executive officers. However,
under our equity compensation plans, in the event of a
change in control (as defined in our equity
compensation plans and related agreements), all outstanding
stock options held by such executive shall become immediately
exercisable in full and, unless waived in advance of such change
in control by our Board, such executive shall have the right to
require us to pay, in cancellation of options, an amount equal
to the product of (i) the excess of (a) the fair
market value per share of the stock over (b) the option
price times (ii) the number of shares of stock specified by
such executive in a written notice to us. Additionally, in such
case, all unvested shares of restricted stock shall immediately
vest.
Restrictive
Covenant Agreements
Our named executive officers have entered into restrictive
covenants and other obligations as contained in various
stock-based award agreements, confidentiality,
non-solicitation/no-hire and non-compete agreements, and other
similar agreements with us in connection with employment or the
grant of stock-based awards. Generally, these restrictive
covenants provide a restriction of one (1) year in which
the named executive officer may not perform certain activities
within specified geographic regions. The competitive activities
include generally (i) participating or owning an interest
in an entity engaged in the auto business (as defined in the
applicable agreement) or any other business of the type and
character engaged by us, (ii) employing any person that was
employed by us within the prior six (6) months or seeking
to induce any such person to leave his or her employment,
(iii) soliciting any customer to patronize any business in
competition with our business, or (iv) requesting or
advising our
35
customers or vendors to withdraw, curtail, or cancel their
business with us. In certain cases, the receipt of
post-termination payments by our named executive officers is
conditioned upon their compliance with these restrictive
covenants.
Receipt
of Benefits
To the extent required in order to comply with Section 409A
of the Code, certain payments that would otherwise be made
during the six-month period immediately following the
executives termination of employment may instead be paid
on the first business day after the date that is six months
following the executives separation from
service within the meaning of Section 409A.
Description
of Triggering Events
(1) Under our employment agreements with each of
Messrs. Jackson and Maroone, termination for
cause generally shall mean termination because of
(i) the executives breach of any of his covenants
contained in the applicable employment agreement, (ii) the
executives failure or refusal to perform the duties and
responsibilities required to be performed by the executive under
the terms of the applicable employment agreement, (iii) the
executives willfully engaging in illegal conduct or gross
misconduct in the performance of his duties hereunder (provided,
that no act or failure to act shall be deemed
willful if done, or omitted to be done, in good
faith and with the reasonable belief that such action or
omission was in our best interest), (iv) the
executives commission of an act of fraud or dishonesty
affecting us or the commission of an act constituting a felony,
or (v) the executives violation of our policies in
any material respect.
(2) Under our equity compensation plans, termination for
cause generally shall mean termination because of
(i) the executives conviction for commission of a
felony or other crime, (ii) the commission by the executive
of any act against us constituting willful misconduct,
dishonesty, fraud, theft or embezzlement, (iii) the
executives failure, inability or refusal to perform any of
the material services, duties or responsibilities required of
him by us or to materially comply with the policies or
procedures established from time to time by us, for any reason
other than his illness or physical or mental incapacity,
(iv) the executives dependence, as determined in good
faith by us, on any addictive substance, including, but not
limited to, alcohol or any illegal or narcotic drugs,
(v) the destruction of or material damage to our property
caused by the executives willful or grossly negligent
conduct, and (vi) the willful engaging by the executive in
any other conduct which is demonstrably injurious to us or our
subsidiaries, monetarily or otherwise.
(3) Under our employment agreements with each of
Messrs. Jackson and Maroone, termination by
Messrs. Jackson or Maroone for good reason
generally shall mean the occurrence of (i) a material
change by us in the executives duties or responsibilities
which would cause executives position to become of
materially and substantially less responsibility and importance
than those associated with his duties or responsibilities as of
the date of the applicable employment agreement, or (ii) a
material breach of the applicable employment agreement by us,
which breach is not cured within ten days after written notice
is received by us.
(4) Retirement (as defined in our equity compensation
plans) generally shall mean the named executive officers
termination of employment or other service from us or a
subsidiary of ours after attainment of age 55 and
completion of at least six years of service with us or a
subsidiary of ours (disregarding any service with an entity
prior to becoming a subsidiary or after ceasing to be a
subsidiary).
36
(5) Change in Control (as defined in our equity
compensation plans) generally shall mean if any person shall
(i) acquire direct or indirect beneficial ownership of more
than 50% of the total combined voting power with respect to the
election of directors of our issued and outstanding stock
(except that no change in control shall be deemed to have
occurred if the persons who were our stockholders immediately
before such acquisition own all or substantially all of the
voting stock or other interests of such person immediately after
such transaction), or (ii) have the power (whether as a
result of stock ownership, revocable or irrevocable proxies,
contract or otherwise) or ability to elect or cause the election
of directors consisting at the time of such election of a
majority of the board. The stock option and restricted stock
award agreements for the 2009 annual stock-based awards provide
that neither (A) the acquisition by ESL of either
(x) direct or indirect beneficial ownership of 50% or more
of our common stock or (y) direct or indirect beneficial
ownership of more than 50% of total combined voting power with
respect to the election of directors of our outstanding common
stock nor (B) ESL having the power to (whether as a result
of stock ownership, revocable or irrevocable proxies, contract
or otherwise) or ability to elect or cause the election of
directors consisting at the time of such election of a majority
of the Board, shall constitute a Change in Control with respect
to any stock-based award under any AutoNation equity
compensation plan.
Mike
Jackson
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Voluntary
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Voluntary
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Involuntary
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Termination
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Termination
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Termination
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Termination
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for Good
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Without Good
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Death or
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Without
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Change in
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Mike
Jackson
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for Cause
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Reason
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Reason
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Disability
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Retirement
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Cause
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Control
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Cash Severance
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$1,150,000
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$1,150,000
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Deferred Bonus
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Acceleration of Unvested Stock Options
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Post-Separation Health Care
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$20,005
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$20,005
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Termination
for Cause
If we terminate Mr. Jacksons employment for
cause, he is not entitled to any payments triggered
by the termination, and options held by Mr. Jackson on the
date of termination, whether vested or unvested, will be
cancelled.
Voluntary
Termination for Good Reason
If Mr. Jackson terminates his employment with us for
good reason, as long as Mr. Jackson is in
compliance with the restrictive covenants and confidentiality
provision of his employment agreement and signs a reasonable and
mutually acceptable severance agreement (including a release and
a covenant of reasonable cooperation), he will be entitled to
receive an amount equal to: (i) the sum of his then-current
annual base salary plus annual bonus awarded to him in the
calendar year prior to such termination of his employment, as
well as (ii) the pro-rata portion (based on the portion of
the calendar year actually served by Mr. Jackson) of his
annual bonus to which he would have been entitled had his
employment not been terminated, to the extent applicable
performance targets are met. Payment of the amount due under
clause (i) above would be made by us (by lump sum or
otherwise) within 30 days following the termination, and
payment of the amount due under clause (ii) above would be
made by us (in lump sum) at the same time as year 2008 annual
bonuses would have been paid to our bonus-eligible employees.
(Since the assumed date of termination is year-end under our
37
Executive Incentive Plan, payment of the amount due under clause
(ii) (which was $0 for 2008) is reflected under the
Non-Equity Incentive Plan Compensation column in the
Summary Compensation Table, not Cash
Severance in the table above.) Mr. Jackson and his
dependents also will be entitled to continue to participate in
our group health and welfare benefit plans for a period of
18 months following the termination at the same cost to
Mr. Jackson as provided to him prior to termination (or we
will procure and pay for comparable benefits during such time
period). Moreover, all vested stock options held by
Mr. Jackson will survive and be exercisable for the
remainder of their initial ten-year term, and all unvested stock
options held by him will immediately vest on such termination
and will survive and be exercisable for one year following such
termination.
Voluntary
Termination Without Good Reason
If Mr. Jackson terminates his employment with us without
good reason, he is not entitled to any payments
triggered by the termination. Since Mr. Jackson is eligible
for retirement (as defined in our equity
compensation plans), he would be entitled to the benefit
described in the Retirement paragraph below.
Termination
Due to Death or Disability
If Mr. Jacksons employment is terminated due to death
or disability (as defined in our equity compensation plans), all
options held by Mr. Jackson at the time of termination
shall become immediately vested and exercisable in full and
shall remain exercisable until the earlier of the expiration
date of the option or the third anniversary of the date of
termination.
Retirement
In the event of Mr. Jacksons retirement, all options
held by Mr. Jackson at the time of termination shall become
immediately vested and exercisable in full and shall remain
exercisable until the earlier of the expiration date of the
option or the third anniversary of the date of termination.
Involuntary
Termination Without Cause
If we terminate Mr. Jacksons employment without
cause, as long as Mr. Jackson is in compliance
with the restrictive covenants and confidentiality provision of
his employment agreement and signs a reasonable and mutually
acceptable severance agreement (including a release and a
covenant of reasonable cooperation), he will be entitled to
receive the same payments and other benefits as described in the
Voluntary Termination for Good Reason paragraph
above.
Material
Conditions and Obligations
Mr. Jackson will be subject to the restrictive covenant
agreements described under Executive
Compensation Potential Payments Upon Termination or
Change in Control General Assumptions
Restrictive Covenant Agreements.
38
Michael
E. Maroone
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Voluntary
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Voluntary
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Involuntary
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Termination
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Termination
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Termination
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Michael E.
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Termination
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for Good
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Without Good
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Death or
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Without
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Change in
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Maroone
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for Cause
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Reason
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Reason
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Disability
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Retirement
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Cause
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Control
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Cash Severance
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$1,000,000
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$1,000,000
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Acceleration of Unvested Stock Options
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Post-separation Health Care
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$18,367
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$18,367
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Termination
for Cause
If we terminate Mr. Maroones employment for
cause, he is not entitled to any payments triggered
by the termination, and options held by Mr. Maroone on the
date of termination, whether vested or unvested, will be
cancelled.
Voluntary
Termination for Good Reason
If Mr. Maroone terminates his employment with us for
good reason, as long as Mr. Maroone is in
compliance with the restrictive covenants and confidentiality
provision of his employment agreement and signs a reasonable and
mutually acceptable severance agreement (including a release and
a covenant of reasonable cooperation), he will be entitled to
receive an amount equal to: (i) the sum of his then-current
annual base salary plus annual bonus awarded to him in the
calendar year prior to such termination of his employment, as
well as (ii) the pro-rata portion (based on the portion of
the calendar year actually served by Mr. Maroone) of his
annual bonus to which he would have been entitled had his
employment not been terminated, to the extent applicable
performance targets are met. Payment of the amount due under
clause (i) above will be made by us (by lump sum or
otherwise) within 30 days following the termination, and
payment of the amount due under clause (ii) above will be
made by us (in lump sum) at the same time as year 2008 annual
bonuses would have been paid to our bonus-eligible employees.
(Since the assumed date of termination is year-end under our
Executive Incentive Plan, payment of the amount due under clause
(ii) (which was $0 for 2008) is reflected under the
Non-Equity Incentive Plan Compensation column in the
Summary Compensation Table, not Cash
Severance in the table above.) Also, Mr. Maroone and
his dependents will also be entitled to continue to participate
in our group health and welfare benefit plans for a period of
18 months following the termination at the same cost to
Mr. Maroone as provided to him prior to termination (or we
will procure and pay for comparable benefits during such time
period). Moreover, all vested stock options held by
Mr. Maroone will survive and be exercisable for the
remainder of their initial ten-year term, and all unvested stock
options held by him will immediately vest on such termination
and will survive and be exercisable for one year following such
termination.
Voluntary
Termination Without Good Reason
If Mr. Maroone terminates his employment with us without
good reason, he is not entitled to any payments
triggered by the termination. Since Mr. Maroone is eligible
for retirement (as defined in our equity
compensation plans), he would be entitled to the benefit
described in the Retirement paragraph below.
39
Termination
Due to Death or Disability
If we terminate Mr. Maroones employment due to death
or disability (as defined in our equity compensation plans), all
options held by Mr. Maroone at the time of termination
shall become immediately vested and exercisable in full and
shall remain exercisable until the earlier of the expiration
date of the option or the third anniversary of the date of
termination.
Retirement
In the event of Mr. Maroones retirement, all options
held by Mr. Maroone at the time of termination shall become
immediately vested and exercisable in full and shall remain
exercisable until the earlier of the expiration date of the
option or the third anniversary of the date of termination.
Involuntary
Termination Without Cause
If we terminate Mr. Maroones employment without
cause, as long as Mr. Maroone is in compliance
with the restrictive covenants and the confidentiality provision
of his employment agreement and signs a reasonable and mutually
acceptable severance agreement (including a release and a
covenant of reasonable cooperation), he will be entitled to
receive the same payments and other benefits as described in the
Voluntary Termination for Good Reason paragraph
above.
Material
Conditions and Obligations
Mr. Maroone will be subject to the restrictive covenant
agreements described under Executive
Compensation Potential Payments Upon Termination or
Change in Control General Assumptions
Restrictive Covenant Agreements.
Michael
J. Short
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Involuntary
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Termination
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Michael J.
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Termination
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Voluntary
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Death or
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Without
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Change in
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Short
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for Cause
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Termination
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Disability
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Retirement
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Cause
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Control
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Cash Severance
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$841,500
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Acceleration of Unvested Stock Options
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Post-Separation Health Care
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Jonathan
P. Ferrando
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Involuntary
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Termination
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Jonathan P.
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Termination
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Voluntary
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Death or
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Without
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Change in
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Ferrando
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for Cause
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Termination
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Disability
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Retirement
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Cause
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Control
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Cash Severance
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Acceleration of
Unvested Stock
Options
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Post-Separation
Health Care
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40
Kevin P.
Westfall
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Involuntary
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Termination
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|
Kevin P.
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Termination
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Voluntary
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Death or
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Without
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Change in
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Westfall
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for Cause
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Termination
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Disability
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Retirement
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Cause
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Control
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Cash Severance
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Acceleration of Unvested Stock Options and Shares of Restricted
Stock
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$53,658
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Post-Separation Health Care
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|
Termination
for Cause
If we terminate Messrs. Shorts, Ferrandos, or
Westfalls employment for cause, they are not
entitled to any payments triggered by the termination and
options held by such executive on the date of termination,
whether vested or unvested, will be cancelled.
Voluntary
Termination
If Messrs. Short, Ferrando, or Westfall voluntarily
terminate their employment for any reason, they are not entitled
to any payments triggered by the termination and options held by
such executive, to the extent exercisable on the date of
termination, shall remain exercisable until the earlier of the
expiration date of the options or sixty (60) days following
the date of termination.
Termination
Due to Death or Disability
If Messrs. Shorts, Ferrandos, or
Westfalls employment is terminated because of death or
disability (as defined in our equity compensation plans), they
are not entitled to any payments triggered by the termination,
and options held by such executive at the time of termination
shall become immediately vested and exercisable in full and
shall remain exercisable until the earlier of the expiration
date of the option or the third anniversary of the date of
termination.
Retirement
In the event of Messrs. Shorts, Ferrandos, or
Westfalls retirement, they will be entitled to receive the
same payments and other benefits as described under the section
Voluntary Termination above.
Involuntary
Termination Without Cause
If we terminate Messrs. Ferrandos or Westfalls
employment without cause, they are not entitled to
any payments triggered by the termination, and options held by
them, to the extent exercisable on the date of termination,
shall remain exercisable until the earlier of the expiration
date of the options or 60 days following the date of the
termination. Mr. Shorts employment letter dated
December 27, 2006, provides that in the event of a
termination on or prior to January 15, 2009 for any reason
other than cause, death, or disability, he is
entitled to receive an amount equivalent to 18 months of
his annual base salary, less applicable withholdings. If
Mr. Shorts employment is terminated without
cause in the future, he will not be entitled to any
payments triggered by the termination, and any options held
41
by him, to the extent exercisable on the date of termination,
will remain exercisable until the earlier of the expiration date
of the options or 60 days following the date of termination.
Material
Conditions and Obligations
Messrs. Short, Ferrando and Westfall will be subject to the
restrictive covenant agreements described under Executive
Compensation Potential Payments Upon Termination or
Change in Control General Assumptions
Restrictive Covenant Agreements.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2008, Messrs. Brown, Burdick, Crowley, and Migoya
and Ms. Goodman served on our Compensation Committee.
Please refer to Corporate Governance Does
the Board have a written policy with regard to related party
transactions? above for a description of certain
transactions we entered into since January 1, 2008 in which
Mr. Crowley may have an indirect material interest. None of
our Compensation Committee members has ever been an officer or
employee of AutoNation or any of our subsidiaries and none of
our executive officers has served on the compensation committee
or board of directors of any company, one of whose executive
officers served on our Board or our Compensation Committee.
EMPLOYMENT
AGREEMENTS
We have entered into employment agreements with Mike Jackson and
Michael E. Maroone and an employment letter with Michael J.
Short. Summaries of these employment agreements and other
employment arrangements are set forth below.
Mike Jackson. On July 25, 2007, we entered into an
employment agreement with Mr. Jackson pursuant to which he
serves as our Chairman and Chief Executive Officer. The
agreement, which expires on September 24, 2010 (subject to
earlier termination in certain circumstances), effectively
extends Mr. Jacksons prior employment agreement and
provides for a continuation of his base salary of $1,150,000 per
year, subject to future increases as determined by the
Compensation Committee (or the Executive Compensation
Subcommittee, as applicable). Mr. Jacksons employment
agreement also provides for his participation in the AutoNation,
Inc. Senior Executive Incentive Bonus Plan, with bonus
eligibility (which shall be no less than
1331/3%
of his base salary) and performance objectives as established by
the Executive Compensation Subcommittee during the first quarter
of each year. A portion of the bonus awards under the
AutoNation, Inc. Senior Executive Incentive Bonus Plan are
payable to Mr. Jackson on a deferred basis (without
interest), subject to certain terms and conditions. The
agreement provides that Mr. Jackson will participate in our
stock option program during each year of his employment at the
discretion of the Executive Compensation Subcommittee. Under the
terms of the agreement, if we terminate Mr. Jacksons
employment for any reason other than cause, or if he
terminates his employment with us for good reason
(each as defined in the employment agreement), he is entitled to
receive an amount equal to the sum of his then-current annual
base salary plus annual bonus awarded to him in the calendar
year prior to such termination of his employment, as well as the
pro rata portion of his annual bonus to which he would have been
entitled had his employment not been terminated, to the extent
applicable performance targets are met. Additionally, if we
terminate Mr. Jacksons employment without cause or if
he terminates employment for good reason, all vested stock
options held by him will survive and be exercisable for the
remainder of their initial ten-year term and all unvested stock
options held by him will immediately vest on such termination
and will survive and be exercisable for one year following such
termination. The agreement also contains non-competition
covenants and provides that Mr. Jackson is entitled to
certain benefits during his employment, including limited
personal use of our corporate aircraft.
42
Michael E. Maroone. On July 25, 2007, we entered
into an employment agreement with Michael E. Maroone pursuant to
which he serves as our President and Chief Operating Officer.
The agreement, which expires on December 31, 2010 (subject
to earlier termination in certain circumstances), effectively
extends Mr. Maroones prior employment agreement and
provides for a continuation of his base salary of $1,000,000 per
year, subject to future increases as determined by the
Compensation Committee (or the Executive Compensation
Subcommittee, as applicable). The employment agreement also
provides for Mr. Maroones participation in the
AutoNation, Inc. Senior Executive Incentive Bonus Plan, with
bonus eligibility (which shall be no less than 100% of his base
salary) and performance objectives as established by the
Executive Compensation Subcommittee during the first quarter of
each year. The agreement provides that Mr. Maroone will
participate in our stock option program during each year of his
employment at the discretion of the Executive Compensation
Subcommittee. Under the terms of the agreement, if we terminate
Mr. Maroones employment for any reason other than
cause, or if he terminates his employment with us
for good reason (each as defined in the employment
agreement), he is entitled to receive an amount equivalent to
his then-current annual base salary plus annual bonus awarded to
him in the calendar year prior to such termination of his
employment. In such circumstances, Mr. Maroone would also
be entitled to receive the pro rata portion of his annual
performance bonus applicable to the period prior to the
termination of his employment, provided that the applicable
performance targets are met. Additionally, if we terminate
Mr. Maroones employment without cause or if he
terminates employment for good reason, all vested stock options
held by him will survive and be exercisable for the remainder of
their initial ten-year term and all unvested stock options held
by him will immediately vest on such termination and will
survive and be exercisable for one year following such
termination. The agreement also contains non-competition
covenants and provides that Mr. Maroone is entitled to
certain benefits during his employment, including limited
personal use of our corporate aircraft.
Michael J. Short. On December 27, 2006, we entered
into an employment letter with Michael J. Short pursuant to
which he serves as our Executive Vice President and Chief
Financial Officer. Our letter with Mr. Short provides for
Mr. Shorts employment with us at an annual base
salary of $525,000. Pursuant to the letter, on January 15,
2007, his start date with us, he received 200,000 options to
purchase shares of our common stock at an exercise price of
$21.56 per share, the closing price of our common stock on
Friday, January 12, 2007, the trading day preceding the
grant date. Mr. Shorts employment letter dated
December 27, 2006, provides that in the event of a
termination on or prior to January 15, 2009 for any reason
other than cause, death, or disability, he is
entitled to receive an amount equivalent to 18 months of
his annual base salary, less applicable withholdings. In
February 2008, the Committee increased Mr. Shorts
base salary by $36,000 to $561,000.
43
Audit
Committee Report
The following statement made by our Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that we specifically
incorporate such statement by reference.
During 2008, the Audit Committee consisted of Robert R. Grusky
(Chair), Carlos A. Migoya, Robert J. Brown (until May 7,
2008), and Kim C. Goodman. On February 5, 2008, Robert J.
Brown informed the Board of Directors that he planned to retire
from the Board and that therefore he would not stand for
re-election to the Board at the 2008 Annual Meeting.
Mr. Brown continued to serve on the Audit Committee until
the date of the 2008 Annual Meeting. Effective January 1,
2009, the Board appointed David B. Edelson as a member of the
Audit Committee.
The charter under which the Audit Committee operates is
available at
http://corp.autonation.com/investors/.
The Board has determined that each Audit Committee member has
the requisite independence and other qualifications for audit
committee membership under SEC rules, the listing standards of
the New York Stock Exchange, our Audit Committee Charter and the
independence standards set forth in our Corporate Governance
Guidelines. The Board has also determined that each of
Mr. Grusky and Mr. Edelson is an audit committee
financial expert as defined under Item 407(d)(5) of
Regulation S-K
under the Securities Exchange Act of 1934, as amended.
Our primary function is to assist the Board in fulfilling its
oversight responsibilities by reviewing AutoNations
financial reporting, audit processes, systems of internal
control over financial reporting, and disclosure controls.
Management is responsible for the Companys financial
statements and the financial reporting process, including the
system of internal control over financial reporting. We also
monitor the preparation by management of the Companys
quarterly and annual financial statements. KPMG LLP,
AutoNations independent registered public accounting firm,
is accountable to us and is responsible for expressing an
opinion as to whether the consolidated financial statements
present fairly, in all material respects, the financial
position, results of operations, and cash flows of AutoNation in
conformity with generally accepted accounting principles in the
United States. KPMG LLP also is responsible for auditing and
reporting on internal control over financial reporting. We are
solely responsible for selecting and reviewing the performance
of AutoNations independent registered public accounting
firm and, if we deem appropriate in our sole discretion,
terminating and replacing the independent registered public
accounting firm. We also are responsible for reviewing and
approving the terms of the annual engagement of
AutoNations independent registered public accounting firm,
including the scope of audit and non-audit services to be
provided by the independent registered public accounting firm
and the fees to be paid for such services, and discussing with
the independent registered public accounting firm any
relationships or services that may impact the objectivity and
independence of the independent registered public accounting
firm.
In fulfilling our oversight role, we met and held discussions,
both together and separately, with the Companys management
and KPMG LLP. Management advised us that the Companys
consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and we reviewed
and discussed the consolidated financial statements and key
accounting and reporting issues with management and KPMG LLP,
both together and separately, in advance of the public release
of operating results and filing of annual or quarterly reports
with the Securities and Exchange Commission. We discussed with
KPMG LLP matters deemed significant by KPMG LLP, including
44
those matters required to be discussed pursuant to Statement on
Auditing Standards No. 61, Communication with Audit
Committees, as amended, and reviewed a letter from KPMG LLP
disclosing such matters.
KPMG LLP also provided us with the written disclosures and the
letter required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communications with the Audit Committee
concerning independence, and we discussed with KPMG LLP matters
relating to their independence and considered whether their
provision of certain non-audit services is compatible with
maintaining their independence. In the letter, KPMG LLP
confirmed its independence, and we determined that the KPMG
LLPs provision of non-audit services to AutoNation is
compatible with maintaining their independence. We also reviewed
a report by KPMG LLP describing the firms internal
quality-control procedures and any material issues raised in the
most recent internal quality-control review or external peer
review or inspection performed by the Public Company Accounting
Oversight Board.
Based on our review with management and KPMG LLP of
AutoNations audited consolidated financial statements and
the KPMG LLPs report on such financial statements, and
based on the discussions and written disclosures described above
and our business judgment, we recommended to the Board of
Directors that the audited consolidated financial statements be
included in AutoNations Annual Report on
Form 10-K
for the year ended December 31, 2008 for filing with the
Securities and Exchange Commission.
Audit Committee:
Robert R. Grusky (Chair)
David B. Edelson
Kim C. Goodman
Carlos A. Migoya
45
Independent
Registered Public Accounting Firm
AUDIT FEES
The following table sets forth: (i) the aggregate fees
billed for professional services rendered by KPMG LLP for the
audits of our financial statements and internal control over
financial reporting for years 2008 and 2007; and (ii) the
aggregate fees billed in 2008 and 2007 by KPMG for our use of
KPMGs on-line technical research service:
|
|
|
|
|
|
|
|
|
Fee Category
|
|
2007
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
2,761,400
|
|
|
$
|
2,664,400
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
|
2,762,900
|
|
|
|
2,665,900
|
|
|
|
|
|
|
|
|
|
|
Ratio of Tax and All Other Fees to Audit and
Audit-Related Fees
|
|
|
0.00:1
|
|
|
|
0.00:1
|
|
Percentage of Aggregate Fees which were Audit
or Audit Related
|
|
|
100%
|
|
|
|
100%
|
|
PRE-APPROVAL
OF AUDIT AND NON-AUDIT SERVICES
Our Audit Committees policies require pre-approval of all
audit and permissible non-audit services provided by our
independent registered public accounting firm other than
services permitted under the de minimus exception under
applicable Securities and Exchange Commission rules (which are
approved by our Audit Committee prior to our independent
registered public accounting firms completion of its
annual audit). Under our Audit Committees policies,
pre-approval generally is detailed as to the particular service
or category of services and is subject to a specific budget.
Under our Audit Committees policies, all tax planning
services and services that do not constitute audit,
audit-related, or tax-compliance services are subject to a
formal bidding process and may not be provided by our
independent registered public accounting firm unless our Audit
Committee concludes that such services may be provided most
effectively or economically by our independent registered public
accounting firm and that the independence of our registered
public accounting firm would not be affected adversely by the
provision of such services. Our Audit Committee has delegated to
its Chair the authority to approve, within guidelines and limits
established by the Committee, specific services to be provided
by our independent registered public accounting firm and the
fees to be paid. Any such approval must be reported to the Audit
Committee at the next scheduled meeting. As required by
Section 10A of the Exchange Act, our Audit Committee
pre-approved all audit and non-audit services provided by our
independent registered public accounting firm during 2008, and
the fees paid for such services.
46
Proposal 2:
Ratification of the Selection
of Our Independent Registered Public Accounting Firm
The Audit Committee of our Board of Directors has selected KPMG
LLP as our independent registered public accounting firm for the
year ending December 31, 2009. KPMG LLP has served us in
this capacity since May 6, 2003. If the selection of KPMG
LLP as our independent registered public accounting firm is not
ratified by our stockholders, the Audit Committee will
re-evaluate its selection, taking into consideration the
stockholder vote on the ratification. However, the Audit
Committee is solely responsible for selecting and terminating
our independent registered public accounting firm, and may do so
at any time at its discretion. A representative of KPMG LLP is
expected to attend the Annual Meeting and be available to
respond to appropriate questions. The representative also will
be afforded an opportunity to make a statement, if he or she
desires to do so.
Our Board of Directors recommends a vote FOR the ratification
of the selection of KPMG LLP as our independent registered
public accounting firm for us and our subsidiaries for the year
ending December 31, 2009.
47
Proposal 3:
Stockholder Proposal
The stockholder proposal set forth below was submitted to the
Company by John Chevedden, 2215 Nelson Avenue,
No. 205, Redondo Beach, California 90278, a purported owner
of at least 750 shares of our common stock.
Mr. Cheveddens proposal is printed below verbatim,
and we have not endeavored to correct any erroneous statements
or typographical errors contained therein. Mr. Chevedden
has advised the Company that he intends to present the following
resolution at our Annual Meeting. However, it should be noted
that although Mr. Chevedden has attempted to make, or made,
stockholder proposals to the Company every year since 2001, he
has never personally attended an annual meeting to present one
of his proposals. The Company is not responsible for the
contents of this proposal or the supporting statement. Our Board
has recommended a vote against the proposal for the reasons set
forth following the proposal.
3
Special Shareowner Meetings
RESOLVED, Shareowners ask our board to take the steps necessary
to amend our bylaws and each appropriate governing document to
give holders of 10% of our outstanding common stock (or the
lowest percentage allowed by law above 10%) the power to call
special shareowner meetings. This includes that such bylaw
and/or
charter text will not have any exception or exclusion conditions
(to the fullest extent permitted by state law) that apply only
to shareowners but not to management
and/or the
board.
Statement
of John Chevedden
Special meetings allow shareowners to vote on important matters,
such as electing new directors, that can arise between annual
meetings. If shareowners cannot call special meetings,
management may become insulated and investor returns may suffer.
Shareowners should have the ability to call a special meeting
when a matter is sufficiently important to merit prompt
consideration.
This proposal topic is believed to have received majority
support from independent AutoNation shareholders in 2007.
Fidelity and Vanguard supported a shareholder right to call a
special meeting. Governance ratings services, including The
Corporate Library and Governance Metrics International, took
special meeting rights into consideration when assigning company
ratings.
This proposal topic also won impressive support at the following
companies based on 2008 yes and no votes:
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International Business Machines (IBM)
|
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56
|
%
|
|
Emil Rossi (Sponsor)
|
Merck (MRK)
|
|
|
57
|
%
|
|
William Steiner
|
Kimberly-Clark (KMB)
|
|
|
61
|
%
|
|
Chris Rossi
|
Occidental Petroleum (OXY)
|
|
|
66
|
%
|
|
Emil Rossi
|
FirstEnergy Corp. (FE)
|
|
|
67
|
%
|
|
Chris Rossi
|
Marathon Oil (MRO)
|
|
|
69
|
%
|
|
Nick Rossi
|
The merits of this Special Shareowner Meetings proposal should
also be considered in the context of the need for further
improvements in our companys corporate governance and in
individual director performance. In 2008 the following
governance and performance issues were identified:
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Our nomination committee was made up of only one person,
Principal Shareholder William Crowley/ESL Investments, Inc.
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48
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William Crowley was also 50% of our executive pay committee.
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William Crowley received our greatest withheld (no) votes.
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The amount of our CEOs All Other Compensation
questioned our boards ability to ensure that the executive
pay process was sufficiently performance-related according to
The Corporate Library www.thecorporatelibrary.com, an
independent investment research firm.
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|
Our companys current ownership profile acted as an
inherently strong deterrent to hostile takeover according to The
Corporate Library.
|
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Insiders held 37% of our stock.
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Yet our management had resorted to spending unnecessary money to
influence shareholder votes.
|
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We did not have an Independent Chairman or even a Lead
Director - Independence concerns.
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We had no shareholder right to Cumulative voting.
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Our 2008 annual meeting was less than
15-minutes.
|
|
|
The editorial practices in the 2007 and 2008 annual meeting
proxy lead to the question of whether it was professionally
proofread.
|
The above concerns shows there is need for improvement. Please
encourage our board to respond positively to this proposal:
Special
Shareowner Meetings -
Yes on 3
Our Board
of Directors recommends a vote AGAINST this stockholder
proposal.
Under our by-laws, a special meeting of stockholders may be
called at any time by the Board of Directors. This by-law
provision conforms to the requirements of the Delaware General
Corporation Law, and is an appropriate corporate governance
provision because it
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enables the orderly conduct of our business,
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affords the Board of Directors ample notice and opportunity to
respond to proposals, and
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allows our directors, according to their fiduciary obligations,
to exercise their business judgment to determine when it is in
the best interests of stockholders to convene a special meeting.
|
The Board does not believe it is appropriate to enable holders
of only ten percent (a small minority of stockholders) of our
common stock to have an unlimited ability to call special
meetings for any purpose at any time. Enabling the holders of
only ten percent of the Companys outstanding stock to call
special meetings could subject the Company and the Board to
disruption from stockholder activists or special interest groups
with an agenda not in the best interests of the Company or
long-term stockholders. Additionally, special meetings could
impose substantial administrative and financial burdens on the
Company and could significantly disrupt the conduct of the
Companys business.
For a Company with as many stockholders as AutoNation, a special
meeting of stockholders is a very expensive and time-consuming
affair because of the legal costs in preparing required
disclosure documents, and printing and mailing costs.
Additionally, preparing for stockholder meetings requires
significant time and attention of the Board of Directors,
members of senior management and significant employees,
diverting their attention away from performing their primary
function which is
49
to operate the business of the Company in the best interests of
our stockholders. Calling special meetings of stockholders is
not a matter to be taken lightly, and special meetings should be
extraordinary events that only occur when either fiduciary
obligations or strategic concerns require that the matters to be
addressed cannot wait until the next annual meeting.
Because each director is elected annually, our directors are
already accountable to the Companys stockholders. The
Board also believes that the current timing and process set
forth in our by-laws to allow stockholders to submit a proposal
and bring a matter to an annual meeting for a vote is an
effective means for stockholders to voice their concerns, as
well as an efficient use of the Companys resources. The
timing and process to submit a proposal for the 2010 annual
meeting is described on page 53 of this proxy statement.
Furthermore, our by-laws permit stockholders to act by written
consent at any time in lieu of a meeting.
At the 2007 Annual Meeting of Stockholders, Mr. Chevedden
presented a similar stockholder proposal which was soundly
rejected by stockholders with approximately 67% of the shares
that voted voting against it. At the 2008 Annual Meeting of
Stockholders, Mr. Chevedden presented a stockholder
proposal to give any holder of our common stock the ability to
call a special meeting and that proposal was soundly rejected by
stockholders with approximately 82% of the shares that voted
voting against it.
We also note that Mr. Chevedden, a purported owner of
at least 750 shares of our common stock and a
stockholder proponent that sends out stockholder proposals to a
large number of companies every year, has been sending
stockholder proposals to the Company since 2001, none of which
have received a majority stockholder vote. Instead, each time
one of his stockholder proposals has been presented at an annual
meeting of AutoNation stockholders, our stockholders have
soundly rejected it. Further, at each of the last three annual
meetings of AutoNation stockholders, rather than presenting the
stockholder proposal himself, a representative of the
International Association of Machinists and Aerospace Workers
(the Machinists) presented the stockholder proposal
from Mr. Chevedden on his behalf. It is not clear to us
what the nature of Mr. Cheveddens relationship is
with the Machinists or what his or the Machinists
motivations are in making stockholder proposals, but we do know
that the Machinists have been attempting to organize automotive
dealership service technicians, including some of ours, for many
years. While we do not ascribe improper motivations to
Mr. Chevedden or the Machinists, we do not believe it is
appropriate to make stockholder proposals based on personal or
special interests such as a desire to organize
Company employees or grievances against the Company
that are not shared by stockholders at large.
For the foregoing reasons, your Board of Directors recommends
a vote AGAINST this stockholder proposal.
50
Proposal 4:
Stockholder Proposal
The proposal set forth below was submitted to the Company by the
International Brotherhood of Electrical Workers Pension
Benefit Fund (referred to as the Fund), 900 Seventh
Street, NW, Washington, D.C. 2001, a purported owner of
more than $2,000 in market value of our common
stock. The Funds proposal is printed below verbatim, and
we have not endeavored to correct any erroneous statements or
typographical errors contained therein. The Fund has advised the
Company that it intends to present the following resolution at
our Annual Meeting. The Company is not responsible for the
contents of this proposal or the supporting statement. Our Board
has recommended a vote against the proposal for the reasons set
forth following the proposal.
RESOLVED: The shareholders of AutoNation Incorporated
(Company) urge the Board of Directors to amend the
Companys by laws, effective upon the expiration of current
employment contracts, to require that an independent
director as defined by the rules of the New York
Stock Exchange (NYSE) be its Chairman of
the Board of Directors. The amended by laws should specify
(a) how to select a new independent chairman if a current
chairman ceases to be independent during the time between annual
meetings of shareholders, and (b) that compliance is
excused if no independent director is available and willing to
serve as chairman.
SUPPORTING
STATEMENT
The wave of corporate scandals at such companies as Enron,
WorldCom and Tyco resulted in renewed emphasis on the importance
of independent directors. For example, both the NYSE and the
NASDAQ have adopted new rules that would require corporations
that wish to be traded on them to have a majority of independent
directors.
Unfortunately, having a majority of independent directors alone
is clearly not enough to prevent the type of scandals that have
afflicted Enron, WorldCom and Tyco. All of these corporations
had a majority of independent directors on their boards when the
scandals occurred.
All of these corporations also had a Chairman of the Board who
was also an insider, usually the Chief Executive Officer
(CEO), or a former CEO, or some other officer. We
believe that no matter how many independent directors there are
on a board, that board is less likely to protect shareholder
interests by providing independent oversight of the officers if
the Chairman of that board is also the CEO, former CEO or some
other officer or insider of the company.
We also believe that it is worth noting that many of the
companies that were embroiled in the financial turmoil stemming
from the recent crisis in the subprime mortgage market (Bank of
America, Bear Stearns, Citigroup, Countrywide, Lehman Brothers,
Merrill Lynch, Morgan Stanley, Wachovia and Washington Mutual)
did not have an independent Chairman of the Board of Directors.
We respectfully urge the board of our Company to change its
corporate governance structure by having an independent director
serve as its Chairman.
Our Board
of Directors recommends a vote AGAINST this stockholder
proposal.
Under our by-laws, the Board has the flexibility to determine
whether it is in the best interests of our stockholders and the
Company to separate or combine the roles of the Chairman of the
Board and Chief Executive Officer at any point in time. This
proposal would remove this flexibility and
51
narrow the governance arrangements that the Board may consider,
which could be contrary to the best interests of our
stockholders. The Board believes that it should be permitted to
use its business judgment to decide who is the best person to
serve as Chairman of the Board, based on what is in the best
interests of AutoNation at a given point in time, taking into
account, among other things, the composition of the Board and
the issues facing AutoNation.
Our Board is stockholder-oriented 47% of our
outstanding shares of common stock are held by our directors or
entities related to our directors and focused on the
best interests of our stockholders. Furthermore, we have adopted
strong and effective corporate governance policies and
procedures to promote the effective and independent governance
of the Company. For example, our independent directors meet in
executive session. Seventy-five percent of our directors are
independent under NYSE listing standards and
AutoNations corporate governance guidelines. Additionally,
the Audit Committee, the Compensation Committee, the Executive
Compensation Subcommittee, and the Corporate Governance and
Nominating Committee are each comprised solely of independent
directors.
For the foregoing reasons, your Board of Directors recommends
a vote AGAINST this stockholder proposal.
52
Other
Matters
We are not aware of any other matters that will be properly
brought before the Annual Meeting. However, if any additional
matters are properly brought before the Annual Meeting,
Messrs. Jackson and Ferrando will vote as recommended by
our Board of Directors or, if no recommendation is given, in
accordance with their judgment. Messrs. Jackson and
Ferrando were designated to be your proxies by our Board of
Directors.
Stockholder
Proposals for Next Years Annual Meeting
As more specifically provided in our by-laws, no business may be
brought before an Annual Meeting unless it is specified in the
notice of the Annual Meeting or is otherwise brought before the
Annual Meeting by or at the direction of our Board of Directors
or by a stockholder entitled to vote who has delivered proper
notice to us not less than 90 days nor more than
120 days prior to the first anniversary of the preceding
years Annual Meeting. Accordingly, any stockholder
proposal to be considered at the 2009 Annual Meeting of
Stockholders, including nominations of persons for election to
our Board, generally must be properly submitted to us not
earlier than January 6, 2010 nor later than
February 5, 2010. Detailed information for submitting
stockholder proposals or nominations of director candidates will
be provided upon written request to the Secretary of AutoNation,
Inc., 110 S.E. 6th Street, Fort Lauderdale, Florida
33301. These requirements are separate from the Securities and
Exchange Commissions requirements that a stockholder must
meet in order to have a stockholder proposal included in our
Proxy Statement for the 2010 Annual Meeting of Stockholders.
Stockholders interested in submitting a proposal for inclusion
in our proxy materials for the 2010 Annual Meeting of
Stockholders may do so by following the procedures set forth in
Rule 14a-8
under the Securities Exchange Act of 1934, as amended. To be
eligible for inclusion in such proxy materials, stockholder
proposals must be received by our Secretary not later than
November 23, 2009.
Householding;
Availability of Annual Report and Proxy Statement
The SEC permits companies and intermediaries, such as a
brokerage firm or a bank, to satisfy the delivery requirements
for Notices and proxy materials with respect to two or more
stockholders sharing the same address by delivering only one
Notice or set of proxy materials to that address. This process,
which is commonly referred to as householding, can
effectively reduce our printing and postage costs.
Certain of our stockholders whose shares are held in street name
and who have consented to householding will receive only one
Notice or set of proxy materials per household. If you would
like to receive a separate Notice or set of proxy materials in
the future, or if your household is currently receiving multiple
copies of the same items and you would like to receive only a
single copy at your address in the future, please contact
Householding Department by mail at 51 Mercedes Way, Edgewood, NY
11717 or by telephone at
1-800-542-1061
and indicate your name, the name of each of your brokerage firms
or banks where your shares are held, and your account numbers.
If you would like to receive an additional copy of our 2008
Annual Report or this proxy statement, please contact our
Investor Relations by mail at Investor Relations, AutoNation,
Inc., 110 S.E. 6th Street, Fort Lauderdale, FL 33301
or by telephone at
(954) 769-7339.
Please note, however, that if you wish to receive a paper proxy
card or other proxy materials for the purpose of the Annual
Meeting, you should follow the instructions included in the
Notice of Internet Availability of Proxy Materials.
53
Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7
days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined
below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted
by the Internet or telephone must be received by 1:00 a.m., Eastern Time, on May 6, 2009. Vote by
Internet Log on to the Internet and go to www.envisionreports.com/an Follow the steps outlined
on the secured website. Vote by telephone Call toll free 1-800-652-VOTE (8683) within the United
States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the
call. Follow the instructions provided by the recorded message. Using a black ink pen, mark your
votes with an X as shown in this example. Please do not write outside the designated areas. IF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals The Board of Directors recommends a vote FOR
all the nominees listed below. 1. Election of Directors: 01 Mike Jackson 02 Rick L. Burdick
03 William C. Crowley 04 David B. Edelson 05 Kim C. Goodman 06 Robert R. Grusky 07 -
Michael E. Maroone 08 Carlos A. Migoya + Mark here to vote FOR all nominees For All EXCEPT -
To withhold a vote for one or more nominees, mark the box to the left and the 01 02 03 04
05 06 07 08 corresponding numbered box(es) to the right. Mark here to WITHHOLD vote from all
nominees The Board of Directors recommends a vote FOR Proposal 2. The Board of Directors
recommends a vote AGAINST Proposals 3 and 4. For Against Abstain For Against Abstain 2.
Ratification of the selection of KPMG LLP as the Companys 3. Adoption of stockholder proposal
regarding special meetings. independent registered public accounting firm for 2009. 4. Adoption of
stockholder proposal regarding an independent Board chairman. B Non-Voting Items Change of Address
Please print new address below. C Authorized Signatures This section must be completed for your
vote to be counted. Date and Sign Below `Please sign exactly as name(s) appears hereon. Joint
owners should each sign. When signing as attorney, executor, administrator, corporate officer,
trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) Please print date
below. Signature 1 Please keep signature within the box. Signature 2 Please keep signature
within the box. |
2009 Annual Meeting of AutoNation, Inc. Stockholders Wednesday, May 6, 2009, 9:00 A.M. Eastern Time
AutoNation Tower 110 S.E. 6th Street Fort Lauderdale, Florida 33301 Upon arrival, please present
this admission ticket and photo identification at the registration desk. 3 IF YOU HAVE NOT VOTED
VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN
THE ENCLOSED ENVELOPE. 3 Proxy AutoNation, Inc. This proxy is solicited on behalf of the Board of
Directors Mike Jackson and Jonathan P. Ferrando, each with power of substitution, are hereby
authorized to vote all shares of common stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of AutoNation, Inc. to be held on May 6,
2009, or any postponements or adjournments thereof, as indicated on the reverse side. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR, FOR THE
RATIFICATION OF THE SELECTION OF KPMG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2009, AGAINST THE ADOPTION OF THE STOCKHOLDER PROPOSAL REGARDING SPECIAL MEETINGS, AND AGAINST THE
ADOPTION OF THE STOCKHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIRMAN. As to any other
matter, the proxy holders shall vote as recommended by our Board of Directors or, if no
recommendation is given, in their own discretion. The undersigned hereby acknowledges receipt of
the Proxy Statement and the Annual Report for the fiscal year ended December 31, 2008 furnished
herewith. PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
POSTAGE-PAID ENVELOPE. (Continued and to be signed on reverse side) |