Ex-10.18 Senior Executive Incentive Bonus Plan



 





Exhibit 10.18




AUTONATION, INC.




SENIOR EXECUTIVE INCENTIVE BONUS PLAN




1.      Purpose. The purpose of the AutoNation, Inc. Senior Executive Incentive Bonus Plan is
to align the interests of Company management with those of the shareholders of the Company by
encouraging management to achieve goals intended to increase shareholder value.



2.      Definitions. The following terms, as used herein, shall have the following meanings:



     (a) “Award” shall mean an incentive compensation award, granted pursuant to the Plan, which is
contingent upon the attainment of Performance Factors with respect to a Performance Period.



     (b) “Board” shall mean the Board of Directors of the Company.



     (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.



     (d) “Committee” shall mean the Executive Compensation Subcommittee of the Board or such other
committee or subcommittee as may be appointed by the Board to administer the Plan in accordance
with Section 3 of the Plan.



     (e) “Common Stock” shall mean the common stock of the Company, par value $.01 per share.



     (f) “Company” shall mean AutoNation, Inc., a Delaware corporation, or any successor
corporation.



     (g) “Disability” shall mean permanent disability as determined pursuant to the long-term
disability plan or policy of the Company or its Subsidiaries in effect at the time of such
disability and applicable to a Participant.



     (h) “Effective Date” shall mean January 1, 2007.



     (i) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



     (j) “Executive Officer” shall mean an officer of the Company or its Subsidiaries who is an
“executive officer” within the meaning of Rule 3b-7 promulgated under the Exchange Act.



     (k) “Participant” shall mean an Executive Officer or other key employee who is, pursuant to
Section 4 of the Plan, selected to participate herein.



     (l) “Performance Factors” shall mean the criteria and objectives, determined by the Committee,
which must be met during the applicable Performance Period as a condition of the Participant’s
receipt of payment with respect to an Award. Performance Factors may include any or all of the
following or any combination thereof: net income (before or after taxes); operating income; gross
margin; earnings before all or any of interest, taxes, depreciation and/or amortization (“EBIT”,
“EBITA” or “EBITDA”); revenue; unit sales; cash flow; return on equity; return on assets; return on
capital; asset management (e.g., inventory and receivable levels);



 









 







earnings from continuing operations; cost reduction goals or levels of expenses, costs or
liabilities; market share; customer satisfaction or any increase or decrease of one or more of the
foregoing over a specified period. Such Performance Factors may relate to the performance of the
Company, a Subsidiary, any portion of the business (including one or more stores or franchises),
product line or any combination thereof and may be expressed on an aggregate, per share
(outstanding or fully diluted) or per unit basis. Where applicable, the Performance Factors may be
expressed in terms of attaining a specified level of the particular criteria, the attainment of a
percentage increase or decrease in the particular criteria, or may be applied to the performance of
the Company, a Subsidiary, any portion of the business (including one or more stores or
franchises), product line, or any combination thereof, relative to a market index, a group of other
companies (or their subsidiaries, any portion of their businesses (including one or more stores or
franchises) or product lines), or a combination thereof, all as determined by the Committee.
Performance Factors may include a threshold level of performance below which no payment shall be
made, levels of performance below the target level but above the threshold level at which specified
percentages of the Award shall be paid, a target level of performance at which the full Award shall
be paid, levels of performance above the target level but below the maximum level at which
specified multiples of the Award shall be paid, and a maximum level of performance above which no
additional payment shall be made. Performance Factors may also specify that payments for levels of
performances between specified levels will be interpolated. The Committee shall have the sole
discretion to determine whether, or to what extent, Performance Factors are achieved; provided,
however, that the Committee shall have the authority to make appropriate adjustments in Performance
Factors under an Award to reflect the impact of extraordinary items not reflected in such goals.
For purposes of the Plan, extraordinary items shall be defined as (1) any profit or loss
attributable to acquisitions or dispositions of stock or assets, (2) any changes in accounting
standards or treatments that may be required or permitted by the Financial Accounting Standards
Board or adopted by the Company or its Subsidiaries after the goal is established, (3) all items of
gain, loss or expense for the year related to restructuring charges for the Company or its
Subsidiaries, (4) all items of gain, loss or expense for the year determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to the disposal of a segment of a
business, (5) all items of gain, loss or expense for the year related to discontinued operations
that do not qualify as a segment of a business as defined in APB Opinion No. 30 (or successor
literature), (6) the impact of capital expenditures, (7) the impact of share repurchases and other
changes in the number of outstanding shares, and (8) such other items as may be prescribed by
Section 162(m) of the Code and the Treasury Regulations thereunder as may be in effect from time to
time, and any amendments, revisions or successor provisions and any changes thereto.



     (m) “Performance Period” shall mean the twelve-month periods commencing on January 1, 2007 and
each January 1 thereafter, or such other periods as the Committee shall determine; provided
that a Performance Period for a Participant who becomes employed by the Company or its Subsidiaries
following the commencement of a Performance Period may be a shorter period that commences with the
date of the commencement of such employment.



     (n) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries or affiliates, (iii) an



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underwriter temporarily holding securities pursuant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company.



     (o) “Plan” shall mean this AutoNation, Inc. Senior Executive Incentive Bonus Plan.



     (p) “Subsidiary” shall mean any company, partnership, limited liability company, business or
entity (other than the Company) of which at least 50% of the combined voting power of its voting
securities is, or the operations and management are, directly or indirectly controlled by the
Company.



3.      Administration. The Plan shall be administered by a Committee or Subcommittee (in
either case, hereinafter referred to as a “Committee”) of the Board. The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the express provisions of
the Plan, to administer the Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the terms, conditions,
restrictions and performance criteria, including Performance Factors, relating to any Award; to
determine whether, to what extent, and under what circumstances an Award may be settled, cancelled,
forfeited, or surrendered; to make adjustments in the Performance Factors in recognition of unusual
or non-recurring events affecting the Company or its Subsidiaries or the financial statements of
the Company or its Subsidiaries, or in response to changes in applicable laws, regulations or
accounting principles; to construe and interpret the Plan and any Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and provisions of
Awards; and to make all other determinations deemed necessary or advisable for the administration
of the Plan.



     The Committee shall consist of two or more persons each of whom shall be an “outside director”
within the meaning of Section 162(m) of the Code. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons, including the Company
and the Participant (or any person claiming any rights under the Plan from or through any
Participant).



     Subject to Section 162(m) of the Code or as otherwise required for compliance with other
applicable law, the Committee may delegate all or any part of its authority under the Plan to an
employee, employees or committee of employees.



4.      Eligibility. Awards may be granted to Participants in the sole discretion of the
Committee. In determining the persons to whom Awards shall be granted and the Performance Factors
relating to each Award, the Committee shall take into account such factors as the Committee shall
deem relevant in connection with accomplishing the purposes of the Plan.



5.      Terms of Awards. Awards granted pursuant to the Plan shall be communicated to
Participants in such form as the Committee shall from time to time approve and the terms and
conditions of such Awards shall be set forth therein.



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     (a) In General. On or prior to the date on which 25% of a Performance Period has
elapsed, the Committee shall specify in writing, by resolution of the Committee or other
appropriate action, the Participants for such Performance Period and the Performance Factors
applicable to each Award for each Participant with respect to such Performance Period. Unless
otherwise provided by the Committee in connection with specified terminations of employment,
payment in respect of Awards shall be made only if and to the extent the Performance Factors with
respect to such Performance Period are attained.



     (b) Special Provisions Regarding Awards. Notwithstanding anything to the contrary
contained herein, in no event shall payment in respect of Awards granted hereunder exceed
$5,000,000 to any one Participant in any one year. The Committee may at its discretion decrease
the amount of an Award payable upon attainment of the specified Performance Factors, but in no
event may the Committee increase at its discretion the amount of an Award payable upon attainment
of the specified Performance Factors.



     (c) Time and Form of Payment. Unless otherwise determined by the Committee, all
payments in respect of Awards granted under this Plan shall be made in cash within ninety (90) days
after the end of the Performance Period.



6.      Term. Subject to the approval of the Plan by the holders of a majority of the Common
Stock represented and voting on the proposal at the annual meeting of Company stockholders to be
held in 2007 (or any adjournment thereof), the Plan shall be effective as of January 1, 2007 and
shall continue in effect until all awards for Performance Periods ending on or before December 31,
2011 have been paid, unless earlier terminated as provided below.



7.      General Provisions.



     (a) Compliance with Legal Requirements. The Plan and the granting and payment of
Awards, and the other obligations of the Company under the Plan shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as may be required.



     (b) Nontransferability. Awards shall not be transferable by a Participant except upon
the Participant’s death following the end of the Performance Period but prior to the date payment
is made, in which case the Award shall be transferable in accordance with any beneficiary
designation made by the Participant in accordance with Section 7(k) below or, in the
absence thereof, by will or the laws of descent and distribution.



     (c) No Right To Continued Employment. Nothing in the Plan or in any Award granted
pursuant hereto shall confer upon any Participant the right to continue in the employ of the
Company or any of its Subsidiaries or to be entitled to any remuneration or benefits not set forth
in the Plan or to interfere with or limit in any way whatever rights otherwise exist of the Company
or its Subsidiaries to terminate such Participant’s employment or change such Participant’s
remuneration.



     (d) Withholding Taxes. Where a Participant or other person is entitled to receive a
payment pursuant to an Award hereunder, the Company shall have the right either to deduct from



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the payment, or to require the Participant or such other person to pay to the Company prior to
delivery of such payment, an amount sufficient to satisfy any federal, state, local or other
withholding tax requirements related thereto.



     (e) Amendment and Termination of the Plan. The Board or the Committee may at any time
and from time to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided that no amendment that requires stockholder approval in order for the Plan to
continue to comply with Code Section 162(m) shall be effective unless the same shall be approved by
the requisite vote of the stockholders of the Company. Notwithstanding the foregoing, no amendment
shall affect adversely any of the rights of any Participant under any Award following the end of
the Performance Period to which such Award relates, provided that the exercise of the Committee’s
discretion pursuant to Section 5(b) to reduce the amount of an Award shall not be deemed an
amendment of the Plan.



     (f) Participant Rights. No Participant shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment for Participants.



     (g) Termination of Employment.




	 	(i)	 	Unless otherwise provided by the Committee, except as set forth
in subparagraph (ii) of this subsection (g), a Participant must
be actively employed by the Company or its Subsidiaries at the end of the
Performance Period (although such Participant need not be actively employed on
the date of payment of the related Award) in order to be eligible to receive
payment in respect of such Award.	 
	 
	 	(ii)	 	Unless otherwise provided by the Committee, if a Participant’s
employment is terminated as result of death, Disability or voluntary retirement
with the consent of the Company prior to the end of the Performance Period,
such Participant shall receive a pro rata portion of the Award that he or she
would have received with respect to the applicable Performance Period, which
shall be payable at the time payment is made to other Participants in respect
of such Performance Period.	 





     (h) Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general creditor of the Company.



     (i) Governing Law. The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Delaware without giving effect to the conflict
of laws principles thereof.



     (j) Effective Date. The Plan shall take effect upon its adoption by the Board;
provided, however, that the Plan shall be subject to the requisite approval of the
stockholders of the Company in order to comply with Section 162(m) of the Code. In the absence of
such approval, the Plan (and any Awards made pursuant to the Plan prior to the date of such
approval) shall be null and void.



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     (k) Beneficiary. A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or
revoke such designation. If no designated beneficiary survives the Participant and an Award is
payable to the Participant’s beneficiary pursuant to Section 7(b), the executor or
administrator of the Participant’s estate shall be deemed to be the grantee’s beneficiary.



     (l) Interpretation. The Plan is designed and intended to comply, to the extent
applicable, with Section 162(m) of the Code, and all provisions hereof shall be construed in a
manner to so comply.




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