FORM OF AUTONATION, INC. STOCK OPTION AGREEMENT
Exhibit 10.4
THIS STOCK OPTION AGREEMENT (this “Agreement”) is entered into as of , by and between
AUTONATION, INC., a Delaware corporation (together with its subsidiaries and affiliates, the
“Company”), and the designated Company associate (“Optionee”) who accepts the award of the Option
(as defined below) made hereby, and agrees to be bound by this Agreement, through ▇▇▇▇▇▇▇ ▇▇▇▇▇’▇
Benefits OnLine System (the “BOL System”). If Optionee does not accept the Option on the BOL
System by , the Option (including any portion that has not yet been granted) shall be
forfeited and terminate immediately.
RECITALS
A. The Company has established the AutoNation, Inc. 2008 Employee Equity and Incentive Plan
(the “Plan”) in order to provide incentive to valued employees of the Company; and
B. The Executive Compensation Subcommittee (the “Subcommittee”) of the Board of Directors (the
“Board”) of the Company has approved the grant to Optionee of a non-qualified employee stock option
to purchase from the Company shares of the Company’s common stock, par value $0.01 per share
(“Common Stock”), on the terms and conditions set forth in this Agreement.
TERMS OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:
1. Definitions. Schedule 1 sets forth a Glossary of terms that are used
herein. All capitalized terms used but not defined in this Agreement shall have the meanings given
to them in the Glossary or the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein and in the
Plan, Optionee shall be granted under the Plan the right and option (the “Option”) to purchase from
the Company all or any part of the number of shares of Common Stock set forth for Optionee in the
award letter dated from the Company to Optionee. One-quarter (1/4) of the Option is
hereby granted as of at the exercise price of $ per share. Except as otherwise
provided herein or in the Plan, an additional one-quarter (1/4) of the Option shall be granted to
the Optionee on the first trading day of the New York Stock Exchange (“NYSE”), or the principal
exchange upon which the Common Stock is listed, of each of June, September and December ,
with an exercise price equal to the fair market value of a share of Common Stock on such grant date
(which shall mean the closing price of a share of the Common Stock on such grant date as reported
on the principal nationally recognized stock exchange on which the Common Stock is traded on such
date), subject to continuous employment by Optionee with the
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Company from the date hereof until such date and, except as otherwise provided by the
Subcommittee, subject to Optionee remaining at the same job grade level from the date hereof until
such date. The Option shall not be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
3. Term. The term of the Option shall commence with respect to the number of shares
of Common Stock subject to the portion of the Option granted on the respective dates on which each
portion of the Option is granted in accordance with Section 2 of this Agreement and shall, in each
case, expire ten (10) years from the date of this Agreement, subject to the terms and conditions
set forth herein and in the Plan, as may be amended from time to time.
4. Vesting. Except as otherwise provided herein or in the Plan, each separately
granted portion of the Option shall vest in four equal annual installments, 25% on June 1, ,
25% on June 1, , 25% on June 1, , and 25% on June 1, , subject to continuous
employment by Optionee with the Company from the date hereof until such date. The Optionee agrees
that, notwithstanding anything herein to the contrary or the terms of the Plan or any other Company
plan and so long as the terms and conditions set forth in the Consents are applicable (or such
terms and conditions have been waived, modified or eliminated with the approval of the Board),
neither (A) the acquisition by ESL of either (x) direct or indirect beneficial ownership of 50% or
more of the Common Stock or (y) direct or indirect beneficial ownership of more than 50% of the
total combined voting power with respect to the election of directors of the issued and outstanding
stock of the Company nor (B) ESL having 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, shall constitute a
Change in Control with respect to the Option granted pursuant to this Agreement or constitute a
“change in control” with respect to any other stock option or restricted shares of common stock of
the Company held by Optionee as of the date hereof or granted to Optionee in the future under the
Plan or any other Company plan; provided, however, that the following events shall
constitute a Change in Control for purposes of this Agreement and constitute a “change in control”
with respect to any other stock option or restricted shares of common stock of the Company held by
Optionee as of the date hereof or granted to Optionee in the future under the Plan or any other
Company plan: (i) a transaction in which the Company is acquired by or merges, consolidates or
combines with, or is merged, consolidated or combined with, ESL or any entity controlled by ESL; or
(ii) a “Rule 13e-3 transaction” with ESL, as such term is defined in Rule 13e-3 of the Securities
Exchange Act of 1934. Any portion of the Option may be exercised only to purchase whole shares of
Common Stock, and in no case may a fraction of a share be purchased. If any fractional share of
Common Stock would be deliverable upon exercise, such fraction shall be rounded down to the nearest
whole number.
5. Termination of Option if Employment is Terminated Due to a Change in Ownership of
Subsidiary or Affiliate or Spin-Off. For the purpose of clarification, if Optionee ceases to
be an employee of the Company or any Subsidiary or Affiliate of the Company following a Change in
Ownership or Spin-Off of the Subsidiary, Affiliate or business unit by which Optionee is employed
(whether because of the termination of employment of Optionee or because the corporation or other
entity by which Optionee was employed ceases to be a
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Subsidiary or Affiliate of the Company or otherwise), then the Option (including any portion
thereof that has not yet been granted) shall immediately terminate.
6. Optionee Bound by Terms of Plan. Optionee hereby acknowledges receipt of a copy of
the Plan and agrees to be bound by all of the terms, conditions and provisions thereof (including,
without limitation, the termination of the Option in the event of a termination of the Optionee’s
employment with the Company for Cause). For the purpose of clarification, the Optionee hereby
acknowledges that in the event of a termination of the Optionee’s employment with the Company for
Cause at a time when the Optionee is eligible for Retirement (as such term is defined in the Plan),
both the Option (including any portion thereof that has not yet been granted) and any other stock
options to acquire shares of Company stock previously granted to the Optionee shall be forfeited
and terminate immediately.
7. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida, without regard to its principles of conflict of laws. The
parties agree that any action, suit or proceeding arising out of or relative to this Agreement or
the relationship of Optionee and the Company shall be instituted only in the State or federal
courts located in Broward County in the State of Florida, and each party waives any objection that
such party may now or hereafter have to such venue or jurisdiction in any action, suit or
proceeding brought in any State or federal court located in Broward County, Florida. Optionee
affirms that he or she has sufficient contact with Florida such that Optionee would reasonably
anticipate being hailed into said courts in Florida regarding this Agreement or any other contract
or issues arising between the parties hereto. Any and all service of process and any other notice
in any such action, suit or proceeding shall be effective against Optionee if given by mail
(registered or certified where possible, return receipt requested), postage prepaid, mailed to
Optionee at the address set forth in the Company’s records, or shall be effective against the
Company if given in accordance with Paragraph 10 hereof.
8. No Right to Continued Employment. Nothing contained in this Agreement shall confer
on Optionee the right to continue in the employment of the Company or otherwise shall impede the
Company’s ability to terminate Optionee’s employment.
9. Severability. The invalidity or enforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
10. Notices. All notices, requests, demands, claims and other communications by
Optionee with respect to the Option shall be in writing and shall be deemed given if delivered by
certified or registered mail (first class postage prepaid), guaranteed overnight delivery or
facsimile transmission if such transmission is confirmed by delivery by certified or registered
mail (first class postage prepaid) or guaranteed overnight delivery, to the following address (or
to such other addresses or telecopy numbers which the Company shall designate in writing to
Optionee from time to time):
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| AutoNation, Inc. ▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Compensation and Equity Analyst Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ |
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with a copy to:
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AutoNation, Inc. ▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: General Counsel Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ (no copy required for notice of Option exercise) |
11. Binding Effect. This Agreement shall not constitute a binding obligation of the
Company or the Optionee unless it is accepted by Optionee on the BOL System by ___. Subject to
the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company and to Optionee’s heirs, legatees,
distributees and personal representatives. No handmarked or interlineated modifications shall
constitute a part of this Agreement.
12. Method of Option Exercise. To the extent permitted by the Company, the Option may
be exercised by electronic submission of an exercise order on the BOL System in accordance with the
instructions set forth thereon or otherwise in accordance with Section 9(d) of the Plan.
13. Conflict with Terms of Plan. In the event that any provision of this Agreement
conflicts with any provision of the Plan and cannot reasonably be interpreted to be a clarification
of such provision of the Plan or an exercise of the authority granted to the Plan’s administrator
pursuant to the Plan, the provision of the Plan shall govern and be controlling. For the purpose
of clarification, Paragraphs 4 and 5 hereof and the last sentence of Paragraph 6 hereof shall
govern notwithstanding any provisions of the Plan.
14. Integration. Except for the provisions relating to stock options contained in
that certain Restrictive Covenants and Confidentiality Agreement of even date herewith by and
between the Company and Optionee, this Agreement supersedes all prior agreements and understandings
between the Company and Optionee relating to the grant of the Option, whether oral or
otherwise.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
first above written.
| By: | AUTONATION, INC. | OPTIONEE: |
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Title: |
By accepting the Option on the BOL System,
Optionee agrees to be bound by the terms
of this Stock Option Agreement and agrees
that the Option is subject to the terms
and conditions set forth herein. |
SCHEDULE 1
GLOSSARY
GLOSSARY
The terms below shall have the following meanings when used throughout the Agreement. Capitalized
terms that are used but not defined in the Agreement or this Glossary shall have the meanings given
to them in the Plan.
“Affiliate” shall mean a Subsidiary or any other entity of which on the relevant date
at least a majority of the Voting Securities are at the time owned directly or indirectly by
the Company or any Subsidiary.
“Cause” shall have the meaning given to it in the Plan.
“Change in Ownership” A Change in Ownership shall be deemed to have occurred with
respect to an Optionee if (i) as a result of a merger, consolidation, reorganization,
business combination, sale, exchange or other disposition of Voting Securities or other
transaction, the corporation or other entity by which Optionee is employed ceases to be a
Subsidiary or Affiliate of the Company and, immediately after such transaction, the persons
who were stockholders of the Company immediately before such transaction do not own at least
a majority of the Voting Securities of such corporation or other entity, or (ii) there is a
sale or other disposition of all or substantially all of the assets of the trade, business,
corporation or other entity by which Optionee is employed and, immediately after such
transaction, the Company or the persons who were stockholders of the Company immediately
before such transaction do not own at least a majority of the Voting Securities of a
corporation or other entity that acquires such assets or engages in such trade or business.
Notwithstanding the foregoing, a Change in Ownership shall not include a Change in Control
(as defined in the Plan) of the Company.
“Consents” shall mean the Honda Consent and the Toyota Consent, collectively.
“ESL” shall mean ESL Investments, Inc. and any person, entity or group that directly,
or indirectly through one or more intermediaries, controls, or is controlled by, or is under
common control with, ESL Investments, Inc. (for the avoidance of doubt, other than the
Company and its subsidiaries).
“Honda Consent” shall mean that certain letter agreement, dated as of January 28, 2009,
among American Honda Motor Co., Inc., the Company and the ESL Parties (as defined in the
Honda Consent).
“Spin-Off” A Spin-Off shall be deemed to have occurred with respect to an Optionee if
the corporation or other entity by which Optionee was employed, or the entity that succeeds
to the business unit or trade by which Optionee was employed, is not a Subsidiary or
Affiliate of the Company following a pro rata distribution or dividend of its
capital stock to the persons who were stockholders of the Company immediately before
such transaction and, immediately after such transaction, such corporation or other entity
has a class of Voting Securities that is traded publicly on a national securities exchange.
“Subsidiary” shall have the meaning given to it in Section 424(f) of the Internal
Revenue Code of 1986, as amended.
“Toyota Consent” shall mean that certain letter agreement, dated as of January 28,
2009, among Toyota Motor Sales, U.S.A., Inc., the Company and ESL.
“Voting Securities” shall mean securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other persons
performing similar functions.