AutoNation (AN)

 

The Executive Incentive Bonus Plan was approved by the Board in February 2007 and by our stockholders in May 2007. For 2007, the Executive Compensation Subcommittee selected Mike Jackson, Chairman and Chief Executive Officer, Michael E. Maroone, Director, President and Chief Operating Officer, Michael J. Short, Executive Vice President and Chief Financial Officer, and Jonathan P. Ferrando, Executive Vice President, General Counsel and Secretary, to participate in the Executive Incentive Bonus Plan. Under the terms of the Executive Incentive Bonus 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 Bonus Plan. The target incentive award, as a percentage of base salary, assigned to our select named executive officers for 2007 were: Mike Jackson — 1331/3%; Michael E. Maroone — 100%; Michael J. Short — 60%; and Jonathan P. Ferrando — 60%.

 

The performance goals that the Subcommittee established for 2007 under the Executive Incentive Bonus Plan for the executives named above — adjusted operating income per share (75% weight) of $3.28 and adjusted operating income as a percentage of gross profit (25% weight) of 23.0% — were the same as those the Committee established for 2007 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 Bonus Plan was based upon achievement of the predetermined performance goals.

 

For 2007, 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 Bonus Plan, or to other corporate bonus plan participants, including Mr. Westfall, under the AOP. The Executive Incentive Bonus Plan was the only bonus program in which our named executive officers participated in 2007 (other than Mr. Westfall who participated in the AOP only). For 2007, Mr. McAllister was not eligible to receive a target award under the Executive Incentive Bonus Plan or the AOP. However, in December 2006, the Committee approved a $100,000 retention bonus for Mr. McAllister which was paid in April 2007. As part of our retention efforts with respect to Mr. Jackson, a portion of the target bonus for Mr. Jackson in 2008 and 2009 (to the extent earned) under the Executive Incentive Bonus Plan (equal to 331/3% of his base salary) will be 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 2007. The grants include the 2007 cash incentive bonus plan awards and annual stock option grants. We have not granted restricted stock or other stock or long-term cash incentive awards.

 

The Executive Incentive Bonus Plan was approved by the Board and the stockholders of the Company in 2002. For 2006, the Executive Compensation Subcommittee (the “Subcommittee”) of the Compensation Committee (the “Committee”) of the Board of Directors selected Mike Jackson, Chairman and CEO, Michael E. Maroone, Director, President and Chief Operating Officer, Craig T. Monaghan, Executive Vice President and Chief Financial Officer, and Jonathan P. Ferrando, Executive Vice President, General Counsel and Secretary, to participate in the Executive Incentive Bonus Plan. Under the terms of the Executive Incentive Bonus Plan, the Subcommittee set specific annual performance goals (actual performance relative to the target remains 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 participants. The Subcommittee had absolute “negative discretion” to eliminate or reduce the amount of any award under the Executive Incentive Bonus Plan. The target incentive award, as a percentage of base salary, assigned to our select named executive officers are: Mike Jackson 1331/3%; Michael E. Maroone 100%; Craig T. Monaghan 60%; and, Jonathan P. Ferrando 60%.

 

The performance goals that the Subcommittee established for 2006 under the Executive Incentive Bonus Plan for the executives named above — operating income per share (75% weight) and operating income as a percentage of gross profit (25% weight) — were the same as those the Committee established for 2006 under the AOP for all other corporate bonus plan participants, including Messrs. Westfall and McAllister, who were eligible to receive a target award as a percentage of their base salary of 45% and 40%, respectively. The Subcommittee believes this symmetry assures that all participants are appropriately aligned to achieve our objectives. One hundred percent of the final bonus payment for each participant in the Executive Incentive Bonus Plan is based upon achievement against the predetermined performance goals. Assuming exceptional performance by the Company, the named executive officers may be eligible to receive Awards in excess of their respective target inventive awards. However, in no event shall payment in respect of Awards granted hereunder exceed $5,000,000 to any one participant in any one year.

 

After the end of the year, the Subcommittee calculated the level of our actual performance against the goals set for 2006 (after reflecting the capital charges and other adjustments noted in the “Compensation Discussion and Analysis”) and made corresponding bonus awards to Messrs. Jackson, Maroone and Ferrando under the Executive Incentive Bonus Plan and to other corporate bonus plan participants under the AOP. Mr. Monaghan resigned from his employment with us effective August 31, 2006 and, therefore, he did not receive any pay-out under the Executive Incentive Bonus Plan for the fiscal year ended December 31, 2006 or any severance or other payments triggered by a separation from service.

 

The Executive Incentive Bonus Plan was the only bonus program in which our named executive officers participated in 2006 (other than Messrs. McAllister and 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 under the Executive Incentive Bonus Plan (equal to 331/3% of his base salary) are payable to him on a deferred basis (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 stock option plans during 2006. The grants include the 2006 cash incentive bonus plan awards and annual stock option grants. We do not grant restricted stock or other stock awards, and we do not have long-term cash incentive plans.