SCHEDULE 14A
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AutoNation, Inc.
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(AutoNation LOGO)
April 12, 2002
Dear AutoNation Stockholder:
We are pleased to invite you to attend the 2002 Annual Meeting of
Stockholders of AutoNation, Inc. to be held at 9:30 a.m. Eastern Time on
Thursday, May 16, 2002, at the Parker Playhouse, 707 N.E. 8th Street, Fort
Lauderdale, Florida 33312.
The accompanying Notice of Annual Meeting and Proxy Statement describe the
specific matters to be acted upon at the meeting. We will also report on our
progress and provide an opportunity for you to ask questions of general
interest.
Whether you own a few or many shares of AutoNation stock and whether or not
you plan to attend the meeting in person, it is important that your shares be
represented at the annual meeting. WE ASK THAT YOU PLEASE CAST YOUR VOTE AS SOON
AS POSSIBLE. The Board of Directors unanimously recommends that stockholders
vote FOR each of the matters described in the Proxy Statement to be presented at
the meeting.
We look forward to seeing you on May 16th in Fort Lauderdale. Thank you.
Sincerely,
/s/ WAYNE
H. Wayne Huizenga
Chairman of the Board
AUTONATION, INC.
AUTONATION TOWER
110 S.E. SIXTH STREET
FORT LAUDERDALE, FLORIDA 33301
NOTICE OF THE 2002 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF AUTONATION, INC.:
The 2002 Annual Meeting of Stockholders of AutoNation, Inc. will be held at
the Parker Playhouse, 707 N.E. 8th Street, Fort Lauderdale, Florida on Thursday,
May 16, 2002 at 9:30 a.m. Eastern Time. At the meeting, we will consider and
vote upon the following matters:
(1) The election of twelve Directors, each for a term expiring at the next
Annual Meeting or until their successors are duly elected and
qualified;
(2) The approval of the AutoNation, Inc. Senior Executive Incentive Bonus
Plan; and
(3) Any other business that is properly presented at the meeting or any
adjournments or postponements of the meeting.
Only stockholders of record as of 5:00 p.m. on March 25, 2002, 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 meeting.
We cordially invite you to attend the Annual Meeting in person. EVEN IF YOU
PLAN TO ATTEND THE 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.
By Order of the Board of
Directors,
(JONATHAN P. FERRANDO SIG)
Jonathan P. Ferrando
Senior Vice President,
General Counsel and Secretary
April 12, 2002
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING.............. 1
PROPOSALS ON WHICH WE ARE ASKING YOU TO VOTE................ 5
Election of Directors................................... 5
Approval of the AutoNation, Inc. Senior Executive
Incentive Bonus Plan.................................. 6
Statement Regarding our Independent Public Accountant... 7
NOMINEES FOR OUR BOARD OF DIRECTORS......................... 8
BOARD GOVERNANCE............................................ 10
Audit Committee Report.................................. 12
EXECUTIVE COMPENSATION...................................... 14
Compensation and Nominating Committee Report on
Executive Compensation................................ 14
Summary Compensation Table.............................. 16
Option Grants in Last Fiscal Year....................... 17
Aggregated Option Exercises in Year Ended December 31,
2001 and Year-End Option Values....................... 17
Performance Graph....................................... 18
Compensation and Nominating Committee Interlocks and
Insider Participation................................. 19
Employment Agreements................................... 19
STOCK OWNERSHIP INFORMATION................................. 21
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 21
Security Ownership of Certain Beneficial Owners and
Management............................................ 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 24
OTHER MATTERS............................................... 25
STOCKHOLDER PROPOSALS....................................... 25
EXHIBIT A -- AutoNation, Inc. Senior Executive Incentive
Bonus Plan................................................ A-1
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AUTONATION, INC.
AutoNation Tower
110 S.E. Sixth Street
Fort Lauderdale, Florida 33301
PROXY STATEMENT
This Proxy Statement contains information relating to the solicitation of
proxies by the Board of Directors of AutoNation, Inc., for use at our 2002
Annual Meeting of Stockholders. Our annual meeting will be held at the Parker
Playhouse, 707 N.E. 8th Street, Fort Lauderdale, Florida on Thursday, May 16,
2002 at 9:30 a.m. Eastern Time.
This Proxy Statement, the Notice of the 2002 Annual Meeting, the proxy
card and our 2001 Annual Report to Stockholders were mailed to stockholders on
or about April 12, 2002.
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
WHAT IS THE PURPOSE OF OUR ANNUAL MEETING?
The purpose of our annual meeting is to:
- elect twelve Directors, each for a term expiring at
the next annual meeting or until their successors are
duly elected and qualified;
- consider and vote upon the approval of the AutoNation,
Inc. Senior Executive Incentive Bonus Plan; and
- consider any other matters properly presented at the
meeting.
In addition, senior management will report on our business and financial
performance and respond to your questions.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Only our stockholders as of 5:00 p.m. on March 25, 2002, the record date,
are entitled to receive notice of the annual meeting and to vote at the
meeting, or any postponements or adjournments of the meeting.
WHAT ARE THE VOTING RIGHTS OF AUTONATION STOCKHOLDERS?
Each stockholder is entitled to one vote on each matter properly
presented at the annual meeting for each share of common stock owned by
that stockholder on the record date. Therefore, if you owned 100 shares
of common stock as of 5:00 p.m. on March 25, 2002, you can cast 100 votes
for each matter properly presented at the annual meeting. As of 5:00 p.m.
on March 25, 2002, there were 321,199,684 shares of AutoNation common
stock issued and outstanding and entitled to vote at the meeting.
WHAT CONSTITUTES A QUORUM?
In order for us to conduct business at our annual meeting, we must have a
quorum of at least 160,599,843 shares of common stock represented at the
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 will also 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 at its discretion. Under the rules of The
New York Stock Exchange, brokerage firms have the authority to vote their
customers' unvoted shares on certain routine matters, including the
uncontested election of directors and the approval of certain management
compensation plans. If, as we presently anticipate, the agenda for our
meeting will provide only for votes for the election of our Board's
nominees for Director and approval of the AutoNation, Inc. Senior
Executive Incentive Bonus Plan, brokerage firms will have the authority
to vote all shares of our stock that they hold, even if they do not
receive specific voting instructions from their customers. However, if
other matters are properly brought before the meeting and they are not
considered routine under the applicable New York Stock Exchange rules,
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 in the name of a brokerage firm, they may be
voted by the brokerage firm (as described above) even if you do not give
the brokerage firm specific voting instructions. If you are a registered
stockholder and 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 meeting.
HOW DO I VOTE?
You can vote in any of the following ways. Please check your proxy card
or contact your broker to determine whether you will be able to vote by
telephone or via the Internet.
TO VOTE BY MAIL:
- Mark, sign and date your proxy card or vote
instruction card; and
- Return it in the enclosed envelope.
TO VOTE USING THE INTERNET:
- Have your proxy card or vote instruction card in hand;
- Log on to the Internet and visit the website address
provided on your proxy card or your vote instruction
card; and
- Follow the instructions provided.
TO VOTE BY TELEPHONE:
- Have your proxy card or vote instruction card in hand;
- Call the toll-free number listed on your proxy card if
you are a registered stockholder (that is, your shares
are held on the company's books in your name or by you
in certificate form), or call the number listed on
your vote instruction card if your shares are held in
"street name" (that is, in the name of your bank or
broker); and
- Follow the recorded instructions.
TO VOTE IN PERSON IF YOU ARE A REGISTERED STOCKHOLDER:
- Attend our annual meeting;
- Bring valid photo identification; and
- Deliver your completed proxy card or ballot in person.
TO VOTE IN PERSON IF YOU HOLD IN "STREET NAME":
- Attend our annual meeting;
- Bring valid photo identification; and
- Obtain a legal proxy from your bank or broker to vote
the shares that are held for your benefit, attach it
to your completed proxy card and deliver it in person.
2
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
25, 2002, by instructing our plan trustee, Merrill Lynch & Co., how to
vote your shares pursuant to the instruction card being mailed with this
proxy statement to plan participants. If you do not provide clear voting
instructions, Merrill Lynch will vote the shares in your account in
proportion to the way that other plan participants voted their shares.
CAN I CHANGE MY VOTE AFTER I HAVE VOTED?
Yes. If you voted by proxy card, vote instruction card or telephone or
via the Internet, you can change your vote at any time before the proxy
is exercised. To change your vote:
- Submit a later dated and signed proxy by mail;
- Recast your vote by telephone or via the Internet;
- Attend our annual meeting and vote your shares in
person in accordance with the procedures set forth in
the answer to "How do I vote?" above. The powers of
the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance
at the meeting will not by itself revoke a previously
granted proxy; or
- Submit a written notice of revocation to our
Secretary.
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 meeting must
receive the affirmative vote of a majority of the shares present and
entitled to vote at the 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 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 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 each of the nominees for Director set forth on
page 5; and
- FOR the approval of the AutoNation, Inc. Senior
Executive Incentive Bonus Plan.
HOW WILL MY PROXY HOLDERS VOTE?
The enclosed proxy card designates Mike Jackson, our Chief Executive
Officer, and Jonathan P. Ferrando, our Senior Vice President, General
Counsel & Secretary, or their duly named successors, to hold your proxy
and vote your shares. With respect to the election of Directors and the
approval of the AutoNation, Inc. Senior Executive Incentive Bonus Plan,
Messrs. Jackson and Ferrando will vote in accordance with the
instructions set forth on your duly executed proxy or vote instruction
card or as directed by you over the telephone or via the Internet. If you
sign and return your proxy card but do not provide instructions or if
your instructions are unclear, Messrs. Jackson and Ferrando intend to
vote FOR each of the nominees for Director and FOR the approval of the
AutoNation, Inc. Senior Executive Incentive Bonus Plan.
With respect to any other proposal that properly comes before the
meeting, Messrs. Jackson and Ferrando will vote as recommended by our
Board of Directors or, if no recommendation is given, in their own
discretion.
3
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 $8,500, plus reimbursement for
out-of-pocket expenses. In addition to soliciting proxies by mail,
certain of our employees may also 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.
CAN I RECEIVE MATERIALS RELATING TO FUTURE AUTONATION ANNUAL MEETINGS VIA THE
INTERNET?
Yes. In an effort to reduce our proxy solicitation costs, we intend to
make it possible for you to receive future annual meeting materials via
the Internet. We encourage you to help us reduce our costs by electing to
receive our annual meeting materials via the Internet. If you are a
registered stockholder, log on to
www.computershare.com/consent/autonation in order to register to receive
our annual meeting materials via the Internet. If you hold AutoNation
stock through a brokerage firm, bank or other nominee, you may be able to
register to receive future annual meeting materials via the Internet by
voting online and following the instructions provided. Alternatively, you
should call your broker for instructions on how to receive our future
annual meeting materials via the Internet.
If you elect to receive our future annual meeting materials via the
Internet, you will receive a proxy card in the mail or, if you choose, an
e-mail notification alerting you when our annual meeting materials are
available online. Our future proxy statements and annual reports will be
available online on the same day as such materials are filed with the
Securities and Exchange Commission. You may revoke at any time your
election to receive our future annual meeting materials via the Internet.
This Proxy Statement and our 2001 Annual Report to Stockholders also are
available on AutoNation's corporate website, which you can visit by
logging on to www.autonation.com.
CAN DIFFERENT STOCKHOLDERS SHARING THE SAME ADDRESS RECEIVE ONLY ONE ANNUAL
REPORT AND PROXY STATEMENT?
Yes. The Securities and Exchange Commission recently adopted new rules
that permit companies and intermediaries, such as a brokerage firm or a
bank, to satisfy the delivery requirements for proxy statements and
annual reports with respect to two or more security holders sharing the
same address by delivering only one proxy statement and annual report to
that address. This process, which is commonly referred to as
"householding," can effectively reduce our printing and postage costs.
Under householding, each stockholder would continue to receive a separate
proxy card or vote instruction card.
Certain of our stockholders whose shares are held in street name and who
have consented to householding will receive only one set of our annual
meeting materials per household this year. If your household received a
single set of our annual meeting materials this year, you can request to
receive additional copies of these materials by calling or writing your
brokerage firm, bank or other nominee. If you own your shares in street
name, you can request householding by calling or writing your brokerage
firm, bank or other nominee.
4
PROPOSALS ON WHICH WE ARE ASKING YOU TO VOTE
PROPOSAL 1
ELECTION OF DIRECTORS
Our Board of Directors currently consists of twelve members. With the
exception of Edward S. Lampert and William C. Crowley, each of our Directors was
elected by our stockholders at the Annual Meeting of Stockholders in 2001.
Messrs. Lampert and Crowley were appointed to serve as Directors by our Board of
Directors in January 2002. Our Board has nominated each of our current Directors
to stand for election for a new term expiring at the Annual Meeting of
Stockholders in 2003 or until their successors are duly elected and qualified.
Detailed biographical and other information on each Director is provided on
pages 8 and 9 of this Proxy Statement. Each nominee is willing and able to serve
as a Director of AutoNation.
NOMINEES FOR DIRECTOR POSITIONS AND OFFICES HELD WITH US
--------------------- ----------------------------------
H. Wayne Huizenga Chairman of the Board
Mike Jackson Chief Executive Officer and Director
Harris W. Hudson Vice Chairman of the Board
Robert J. Brown Director
J.P. Bryan Director
Rick L. Burdick Director
William C. Crowley Director
Michael G. DeGroote Director
George D. Johnson, Jr. Director
Edward S. Lampert Director
John J. Melk Director
Irene B. Rosenfeld Director
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES FOR DIRECTOR NAMED ABOVE.
5
PROPOSAL 2
APPROVAL OF THE AUTONATION, INC. SENIOR EXECUTIVE INCENTIVE BONUS PLAN
Our Board of Directors recently approved a new performance-based bonus
plan for our executive officers and other key employees, subject to the
requisite approval by our stockholders. The purpose of the AutoNation, Inc.
Senior Executive Incentive Bonus Plan (the "Plan") is to better align the
interests of our management with the interests of our stockholders by
encouraging management to achieve goals designed to increase stockholder value.
The full text of the Plan is set forth as Exhibit A to this Proxy Statement, and
you should refer to it for a complete description of the Plan. The following
summary of the key terms of the Plan is qualified by reference to the Plan.
If the requisite stockholder approval is obtained, the Plan would be
effective as of January 1, 2002 and would supersede the 1999 Senior Executive
Bonus Plan that was approved by our Board and our stockholders in 1999.
Intended Tax Treatment of Awards under the Plan. The Plan is designed to
provide for the payment of performance-based compensation that is qualified
within the meaning of Section 162(m) of the Internal Revenue Code and related
Internal Revenue Service regulations and that we may deduct for tax purposes.
Section 162(m) requires that certain material terms of a compensation plan,
including participant eligibility, the business criteria on which performance
goals are based and maximum award amounts, be approved by a company's
stockholders in order for compensation paid thereunder to be tax deductible.
Accordingly, we are submitting the Plan for the requisite approval by our
stockholders.
Administration of the Plan. The Compensation and Nominating Committee of
our Board, or such other committee or subcommittee as may be designated by our
Board, will administer the Plan (the "Committee"). The Committee shall be
comprised of two or more "outside directors" within the meaning of Section
162(m).
Selection of Participants. The Committee, in its sole discretion, shall
determine which of our executive officers or other key employees shall
participate in the Plan in any particular year. An executive officer or key
employee who is a participant for a given plan year is not guaranteed or assured
of being selected for participation in any subsequent plan year.
Establishment of Performance Targets. The Committee is 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 Plan. The Committee has the sole discretion to determine whether,
or to what extent, the established performance targets are achieved. The
performance targets may be based upon any or all of the following performance
factors or any combination thereof: (i) net income (before or after taxes); (ii)
operating income; (iii) gross margin; (iv) earnings before all or any of
interest, taxes, depreciation and/or amortization; (v) revenue; (vi) unit sales;
(vii) cash flow; (viii) return on equity; (ix) return on assets; (x) return on
capital; (xi) asset management (e.g., inventory and receivable levels); (xii)
earnings from continuing operations; (xiii) cost reduction goals or levels of
expenses, costs or liabilities; (xiv) market share; and (xv) customer
satisfaction.
The performance targets must be established while the performance
relative to the established target remains substantially uncertain within the
meaning of Section 162(m). Concurrently with the selection of performance
factors and the establishment of targets relating thereto, the Committee must
establish an objective formula or standard for calculating the maximum bonus
payable to each participant. Subject to the discretion of the Committee, the
performance measurement periods are typically the one-year periods commencing on
January 1, 2002.
As provided in the definition of "Performance Factors" in Section 2 of
the Plan, the Committee has the authority to make appropriate adjustments in
performance targets under an award to reflect the impact of extraordinary items
not reflected in such targets, such as the effect of: (1) acquisitions or
divestitures; (2) changes in accounting principles or policies; (3)
restructuring charges; (4) extraordinary or one-time gains, losses or expenses;
(5) discontinued operations; (6) capital expenditures; and (7) share repurchases
and other capitalization changes.
Awards Under the Plan. Awards under the Plan will be payable in cash,
unless otherwise determined by the Committee. Under the Plan, the maximum cash
bonus for each fiscal year may not exceed $5 million for any particular
participant. Notwithstanding this maximum, and even if the Performance Factors
are met, the Committee has sole
6
discretion, pursuant to the exercise of its "negative discretion," to decrease
the amount of any award payable or to pay no award at all. In no event may the
Committee increase at its discretion the amount of an award payable upon
attainment of the Performance Factors. Payment of any bonus under the Plan may
be deferred, subject to the Plan's terms and any other written commitment
authorized by the Committee.
Amendment of the Plan. The Plan may from time to time be altered,
amended, suspended or terminated, in whole or in part, by our Board of Directors
or the Committee, but no amendment will be effective without the requisite
stockholder approval if such approval is required to satisfy the requirements of
Section 162(m).
Other Compensation. The Plan is not exclusive. We may and do pay cash
and other bonuses and other compensation to certain named executive officers and
other officers. You are not being asked at the meeting to approve any such other
compensation. If the Plan is not approved by the requisite vote of our
stockholders, we currently contemplate that any cash bonuses for fiscal year
2002 for our named executive officers would be discretionary. Any such bonuses
would not be deductible under Section 162(m) to the extent that (when combined
with other non-exempt compensation paid with respect to 2002) they exceed the $1
million individual limit on non-exempt compensation paid to named executive
officers under Section 162(m) of the Internal Revenue Code.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AUTONATION, INC. SENIOR EXECUTIVE INCENTIVE BONUS PLAN.
STATEMENT REGARDING OUR INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP served as our independent public accountant for the
year ended December 31, 2001. Although we have been satisfied with Arthur
Andersen LLP's service as our independent public accountant, in light of recent
well-publicized events involving Arthur Andersen LLP, our Board of Directors and
Audit Committee have directed us to evaluate alternatives for engaging an
independent public accountant for the fiscal year ending December 31, 2002.
Accordingly, we recently commenced a process to seek proposals from other audit
firms to become our independent public accountant for the fiscal year ending
December 31, 2002 in the event we determine not to retain Arthur Andersen LLP as
our independent public accountant for 2002. As a result, as of the date of this
Proxy Statement, our Board of Directors and Audit Committee have not made a
final determination as to the appointment of an independent public accountant to
audit our financial statements for the year ending December 31, 2002.
Accordingly, our stockholders are not being asked to ratify the selection of an
independent public accountant at this time. We presently expect that we will ask
our stockholders at our 2003 Annual Meeting of Stockholders to ratify our
appointment of an independent public accountant to audit our financial
statements for the year ending December 31, 2003.
A representative of Arthur Andersen 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.
7
NOMINEES FOR OUR BOARD OF DIRECTORS
H. WAYNE HUIZENGA
Mr. Huizenga, age 64, has served as our Chairman of the Board since
August 1995. He also served as our Chief Executive Officer from August 1995
until October 1996, and as Co-Chief Executive Officer from October 1996 through
September 1999. Since May 1998, Mr. Huizenga has been Chairman of the Board of
Republic Services, Inc., a solid waste services company, and served as its Chief
Executive Officer from May 1998 until December 1998. Since May 2000, Mr.
Huizenga has been Vice Chairman of ZixIt Corporation, a provider of security
services and products for Internet use. Since September 1996, Mr. Huizenga has
been Chairman of the Board of Boca Resorts, Inc., an owner and operator of
luxury resort hotels and related facilities. Since August 1995, Mr. Huizenga
also has been Chairman of the Board of Extended Stay America, Inc., an operator
of extended stay lodging facilities. Mr. Huizenga served as the Vice Chairman of
Viacom Inc., a diversified entertainment and communications company, from
September 1994 until October 1995, during which time he also served as the
Chairman of the Board and Chief Executive Officer of Blockbuster Entertainment
Group, a division of Viacom. From April 1987 through September 1994, Mr.
Huizenga served as the Chairman of the Board and Chief Executive Officer of
Blockbuster Entertainment Corporation, during which time he helped build
Blockbuster from a 19-store chain to the world's largest video rental company.
In September 1994, Blockbuster merged with Viacom. In 1971, Mr. Huizenga
co-founded Waste Management, Inc., which he helped build into the world's
largest integrated solid waste services company, and he served in various
capacities, including as President, Chief Operating Officer and director, from
its inception until 1984. Mr. Huizenga owns the Miami Dolphins, as well as Pro
Player Stadium in South Florida, and is a director of NationsRent, Inc., a
national equipment rental company, and ANC Rental Corporation, a car rental
company.
MIKE JACKSON
Mr. Jackson, age 53, has served as our Chief Executive Officer and as a
Director of the Company 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.
HARRIS W. HUDSON
Mr. Hudson, age 59, has served as a Director of the Company since August
1995, and has served as our Vice Chairman since October 1996. From August 1995
until October 1996, Mr. Hudson served as our President. Since May 1998, Mr.
Hudson has served as Vice Chairman and Secretary of Republic Services. Mr.
Hudson also serves as a director of Boca Resorts and NationsRent.
ROBERT J. BROWN
Mr. Brown, age 67, has served as a Director of the Company since May
1997. Mr. Brown has served as Chairman and Chief Executive Officer of B&C
Associates, Inc., a management consulting, marketing research and public
relations firm, since 1973. Mr. Brown also serves as a director of Duke Energy
Corporation, Wachovia Corporation and Sonoco Products Company.
J.P. BRYAN
Mr. Bryan, age 62, has served as a Director of the Company since May
1991. From January 1995 until February 1998, Mr. Bryan served as President and
Chief Executive Officer of Gulf Canada Resources, Ltd., which is engaged in oil
and gas exploration and production. Since 1998, Mr. Bryan has served as Senior
Managing Director of
8
Torch Energy Advisors, Inc., an outsourcing and service provider to the oil and
gas industry. Mr. Bryan also serves on the Board of Directors of Mission
Resources Corp., an oil and gas exploration company, and ANC Rental.
RICK L. BURDICK
Mr. Burdick, age 50, has served as a Director of the Company 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 serves as a member of
the firm's Executive Committee, Chairman of the firm's Corporate and Securities
Department and Partner-In-Charge of the Washington office. Mr. Burdick also
serves as a director of Century Business Services, Inc., a provider of
outsourced business services to small and medium-sized companies in the United
States.
WILLIAM C. CROWLEY
Mr. Crowley, age 44, has served as a Director of the Company since
January 2002. Since January 1999, Mr. Crowley has been President and Chief
Operating Officer of ESL Investments, Inc., a private investment firm. Prior to
joining ESL Investments, Mr. Crowley served for 13 years with Goldman Sachs, a
leading global investment banking and securities firm, most recently as a
Managing Director in the firm's mergers and acquisitions department.
MICHAEL G. DEGROOTE
Mr. DeGroote, age 68, has served as a Director of the Company since 1991
and served as the Vice Chairman of the Board of Directors of the Company from
August 1995 until October 1996. Since April 1995, Mr. DeGroote has served as
Chairman of the Board of Century Business Services. Mr. DeGroote also served as
President and Chief Executive Officer of Century Business Services from April
1995 until October 1996 and from November 1997 until April 1999, and he served
as Chief Executive Officer from April 1999 until October 2000.
GEORGE D. JOHNSON, JR.
Mr. Johnson, Jr., age 59, has served as a Director of the Company since
November 1995. Since January 1995, Mr. Johnson has served as Chief Executive
Officer of Extended Stay America. Mr. Johnson serves as a director of Extended
Stay America, Duke Energy Corporation and Boca Resorts.
EDWARD S. LAMPERT
Mr. Lampert, age 39, has served as a Director of the Company since
January 2002. In April 1988, Mr. Lampert formed ESL Investments, Inc., a private
investment firm, and since then has managed the business and operations of ESL
Investments and its various investment partnerships. Mr. Lampert also serves on
the Board of Directors of AutoZone, Inc., a national retailer of automotive
parts and accessories.
JOHN J. MELK
Mr. Melk, age 65, has served as a Director of the Company since August
1995. Mr. Melk has been Chairman and Chief Executive Officer of H(2)O Plus,
Inc., a bath and skin care product manufacturer and retail distributor, since
1988. Mr. Melk also serves as a director of Extended Stay America. Additionally,
he is Chairman and Chief Executive Officer of Fisher Island Holdings, LLC, which
owns the development rights of Fisher Island, Florida.
IRENE B. ROSENFELD
Ms. Rosenfeld, age 48, has served as a Director of the Company since
March 1999. Ms. Rosenfeld has been President of Kraft Canada, Inc., a subsidiary
of Kraft Foods, Inc., a diversified food company, since 1996, and in May 2000
was also named Group Vice President of Kraft Foods and President of Operations,
Research & Development and Information Systems, Canada, Mexico & Puerto Rico.
Ms. Rosenfeld also serves as a Trustee of Cornell University.
Mr. Hudson is married to Mr. Huizenga's sister. Otherwise, there are no
family relationships between any of our Directors.
9
BOARD GOVERNANCE
Our business and affairs are managed under the direction of our Board of
Directors. Our Board establishes our overall corporate policies and reviews the
performance of our management in executing our business strategy and managing
our day-to-day operations. Our Directors are informed of our operations at
meetings of our Board and our Board's Committees, through reports and analyses
presented to our Board and our Board's Committees, and by discussions with our
management. Significant communications between our Directors and our management
also occur apart from meetings of our Board and our Board's Committees.
HOW MANY TIMES DID OUR BOARD MEET DURING 2001?
Our Board of Directors held seven meetings during 2001 and took one
action by unanimous written consent. During 2001, each of our Directors
attended at least 75% of the total number of meetings of our Board of
Directors and any Committees on which he or she served, except for Harris
W. Hudson, who attended five of our Board's seven meetings during the
year.
WHAT COMMITTEES HAS OUR BOARD ESTABLISHED?
Our Board of Directors has established two standing Committees to assist
it in discharging its responsibilities: our Audit Committee and our
Compensation and Nominating Committee. In January 2002, our Board
dissolved our Executive Committee, which had formerly consisted of
Messrs. Huizenga, Jackson and Hudson, and generally retained for the full
Board the powers that had previously been delegated to the Executive
Committee. The following chart reflects the membership of each Committee
of our Board:
AUDIT COMPENSATION AND
NAME COMMITTEE NOMINATING COMMITTEE
---------------------------- --------- --------------------
H. Wayne Huizenga...........
Mike Jackson................
Harris W. Hudson............
Robert J. Brown.............
J.P. Bryan.................. * **
Rick L. Burdick............. *
William C. Crowley(1)....... *
Michael G. DeGroote.........
George D. Johnson, Jr....... *
Edward S. Lampert(1)........ *
John J. Melk................ *
Irene B. Rosenfeld.......... ** *
----------------------------
* Member
** Chair
(1) Appointed to the Board of Directors and Committee on January
29, 2002.
10
Audit Committee. Our Audit Committee is responsible for assisting our
Board in fulfilling its oversight responsibilities by reviewing our
financial reporting and audit processes, system of internal controls and
ethical behavior. Please refer to our Audit Committee's Report, which is
set forth on page 12, for a further description of our Audit Committee's
responsibilities and its recommendation with respect to our audited
consolidated financial statements for the year ended December 31, 2001.
Our Audit Committee consists of five Directors. Based upon the rules
adopted by The New York Stock Exchange and the standards set forth in our
Audit Committee charter, our Board has determined that each member of our
Audit Committee meets all requisite qualifications to be a member of the
Committee. Our Audit Committee held nine meetings during 2001.
Compensation and Nominating Committee. Our Compensation and Nominating
Committee sets our compensation philosophy and is responsible for
administering our compensation programs, including approving base
salaries and incentive compensation for our officers and stock option
grants pursuant to our stock option plans. Our Compensation and
Nominating Committee also identifies, evaluates and recommends to our
Board candidates for nomination and election to our Board of Directors
and for appointment to the Committees of our Board. Our Compensation and
Nominating Committee consists of four Directors who have never been
employees of AutoNation and who are not eligible to participate in any of
the Compensation and Nominating Committee-administered compensation
programs or plans. Our Compensation and Nominating Committee held six
meetings during 2001 and took one action by unanimous written consent.
Our Compensation and Nominating Committee's Report on Executive
Compensation is set forth on pages 14 and 15.
HOW ARE OUR DIRECTORS COMPENSATED?
In 2001, we paid each of our non-employee Directors, other than Mr.
DeGroote, an annual fee for service on our Board of Directors of $25,000
plus $1,000 for each Board meeting attended in excess of four annually
and for each Committee meeting attended. Our Directors also are entitled
to the use of a company vehicle in accordance with our Director Car
Policy and expense reimbursement in connection with Board and Committee
meeting attendance. Imputed income from the use of company vehicles by
our Directors under our Director Car Policy averaged approximately
$16,170 during 2001 for each of our Directors who used a company car
during 2001. Mr. DeGroote does not accept the annual Director fee and he
does not use a company vehicle under our Director Car Policy.
We want our outside Directors' compensation to be aligned with your
interests as stockholders. Accordingly, our 1995 Amended and Restated
Non-Employee Director Stock Option Plan currently provides for an initial
grant of options to purchase 50,000 shares of our stock immediately upon
the appointment of a non-employee Director to our Board. This plan also
provides for an annual grant of options to purchase 20,000 shares of our
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 this plan are fully vested and immediately exercisable.
Under this 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
New York Stock Exchange on the date immediately prior to the grant date.
In accordance with the plan, on January 2, 2002, Messrs. Brown, Bryan,
Burdick, DeGroote, Hudson, Johnson and Melk and Ms. Rosenfeld each
received an automatic grant of options to purchase 20,000 shares of our
stock at an exercise price of $12.33 per share. Upon their appointment to
our Board of Directors on January 29, 2002, Messrs. Crowley and Lampert
each received an automatic grant of options to purchase 50,000 shares of
our stock at an exercise price of $12.60 per share. Pursuant to
agreements between us and Messrs. Crowley and Lampert, the options
granted to Messrs. Crowley and Lampert may not be exercised until
November 1, 2004.
11
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 2001, the Audit Committee consisted of Irene B. Rosenfeld (Chair),
J. P. Bryan, Rick L. Burdick and John J. Melk. William C. Crowley was appointed
to the Audit Committee and joined Ms. Rosenfeld and Messrs. Bryan, Burdick and
Melk as members of the Audit Committee on January 29, 2002. A written charter
adopted by the Board of Directors governs the Audit Committee.
Our primary function is to assist the Board in fulfilling its oversight
responsibilities by reviewing AutoNation's financial reporting and audit
processes, system of internal controls and ethical behavior. Management is
responsible for the company's financial statements and the financial reporting
process, including the system of internal controls. We also monitor the
preparation by management of the company's quarterly and annual financial
statements. AutoNation's independent auditor, who we recommend to the Board, 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. We also are responsible for
reviewing the scope of audit services in conjunction with management and the
auditor and discussing with the auditor any relationships or services that may
impact the objectivity and independence of the auditor.
In fulfilling our oversight role, we met and held discussions with the
company's management and auditor. Management advised us that the company's
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
the auditor. We discussed privately with the auditor matters deemed significant
by the auditor, including those matters required to be discussed pursuant to
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
amended.
The auditor also provided us with the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and we discussed with the auditor matters
relating to their independence and considered whether their provision of
non-audit services is compatible with their independence.
Based on our review with management and the auditor of AutoNation's
audited consolidated financial statements and the auditor's 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
AutoNation's Annual Report on Form 10-K for the year ended December 31, 2001 for
filing with the Securities and Exchange Commission.
Audit Committee:
Irene B. Rosenfeld (Chair)
J. P. Bryan
Rick L. Burdick
William C. Crowley (member since
January 29, 2002)
John J. Melk
12
AUDIT FEES
During fiscal 2001, we paid the following amounts to Arthur Andersen LLP
in connection with audit and other services:
Audit Fees....................... $1,723,000
Financial Information Systems
Design and Implementation
Fees........................... --
All Other Fees:
Audit-Related Fees............. $ 523,000
Other Fees..................... 1,354,000
----------
$1,877,000
----------
Total.................. $3,600,000
==========
During fiscal 2001, we hired Arthur Andersen LLP to perform certain audit
and other services. The audit-related services referenced in the table above
include services performed in connection with certain securities offerings
completed during 2001, including our offering of senior unsecured notes in
August 2001. Other services included tax consulting, tax compliance services and
employee benefit plan audits. In these situations, our Audit Committee and our
management considered whether Arthur Andersen LLP could provide the necessary
services without effect on its independence.
13
EXECUTIVE COMPENSATION
COMPENSATION AND NOMINATING COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following statement made by our Compensation and
Nominating 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.
COMPENSATION PHILOSOPHY
The company's executive compensation program consists of three primary
elements:
- an annual base salary;
- a performance-based annual bonus; and
- periodic grants of stock options designed to align the
executive officer's interest with the interests of the
company's stockholders.
The compensation program for executive officers is designed to attract,
motivate, reward and retain highly-skilled executives who have the talent and
experience necessary to advance the company's short- and long-term interests. We
believe that this approach effectively serves AutoNation's stockholders' best
interests by tying a significant portion of incentive compensation to the
achievement of goals that are aligned with your goals. The executive officer
compensation program in 2001 was based in part on a competitive market analysis
conducted by independent compensation consultants.
We consider the anticipated tax treatment of various payments and
benefits when determining executive compensation and administer the executive
compensation program in a manner that maximizes the tax deductibility of
compensation paid to the company's executives under Internal Revenue Code
Section 162(m) to the extent practicable. We believe, however, that the
company's priority is to attract and retain highly-skilled executives to manage
the company and, in some cases, the loss of a tax deduction may be necessary to
accomplish that goal.
The following is a summary of the considerations underlying each
component of compensation paid to AutoNation's executive officers for 2001.
BASE SALARY
We approve and recommend to the Board of Directors base salaries for the
company's executive officers annually and consider such factors as: the level
and scope of our executive officer's responsibilities; compensation levels of
similarly positioned executives in comparable companies, as reflected in a
market analysis conducted by independent compensation consultants; the
performance of our particular business area or function for which the executive
officer is responsible; and certain qualitative factors reflecting the
individual performance of the executive officers. Our Compensation and
Nominating Committee attempts to set the annual base salary for each of our
executive officers at a level competitive with such salaries at comparable
companies to attract and retain a high quality management team. We believe that
the executive officers' base salaries for 2001 were set in accordance with this
policy.
INCENTIVE BONUS
In 1999, we adopted, and the company's stockholders approved, the 1999
Senior Executive Bonus Plan, which provides for a performance-based bonus
program for executives who are designated as "covered employees" under Section
162(m) of the Internal Revenue Code.
Under the terms of the 1999 Senior Executive Bonus Plan, we established
specific annual performance goals and set target awards for participants, each
of whom was selected based on the likelihood that he or she would have a
14
significant impact on our performance. Our objective was to create a direct link
between pay and performance for our senior executives. Participants selected
with respect to one particular plan year were not guaranteed or assured of
selection as to any subsequent year. We chose from any one or more of the
following factors to set the performance goals applicable to a particular
participant: (a) annual revenue; (b) controllable profits; (c) earnings per
share; (d) customer satisfaction indices; (e) net income; (f) pro forma net
income; (g) return on assets; and (h) return on sales. These performance goals
were established while actual performance relative to the target remained
substantially uncertain within the meaning of Section 162(m). At the time that
the performance goals were selected for a particular participant, we also
established an objective formula or standard for calculating the amount of the
target award. The maximum annual target award payable to any particular
participant under the plan was $2 million. We had absolute "negative discretion"
to eliminate or reduce the amount of any award under the plan. For 2001, we
established performance goals under the plan based upon the achievement of a
specified level of earnings per share for the company. After the end of the
year, we determined that the performance goal for 2001 had been achieved under
the Plan and we made awards to participants in the Plan, subject to the exercise
of negative discretion.
We also award annual performance-based incentive bonuses to other senior
officers. For 2001, we based the amount and conditions of such bonuses primarily
on the company's financial performance for the year and, to a lesser degree, the
individual performance of the senior officer during the year.
STOCK OPTIONS
We believe that awarding stock options to our executive officers will
motivate them to focus on the company's long-term performance. Under the
company's stock option guidelines, stock option grants are generally made on an
annual basis in competitive amounts. Stock option grants are also made to
executive officers upon commencing service to the company or entering into an
employment agreement with the company, subject to Compensation and Nominating
Committee approval. Accordingly, in 2001 we approved the grant of stock option
awards to each executive officer. Stock options generally vest in equal
installments over four years and have an exercise price equal to the closing
price of AutoNation common stock on the last trading day immediately preceding
the grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Our Board granted a salary adjustment for Mr. Jackson as our Chief
Executive Officer in January 2001, increasing his annual base salary to
$1,150,000. Mr. Jackson's base salary was based upon his performance and an
assessment of competitive market data of comparable companies, as described
above. In addition to his annual base salary, as described above, Mr. Jackson
was awarded a $758,331 bonus for 2001 under the 1999 Senior Executive Bonus
Plan. Receipt of $189,581 of Mr. Jackson's bonus will be deferred until February
28, 2004, subject to certain terms and conditions, including his continued
service to AutoNation until February 28, 2004 (unless Mr. Jackson's employment
is terminated by reason of death or disability, by the company "without cause"
or by Mr. Jackson for "good reason" as provided in the deferral agreement). In
July 2001, we approved an annual grant to Mr. Jackson of options to purchase
500,000 shares of stock exercisable at $11.05 per share. The options have a
ten-year term, vest over four years and are not presently exercisable.
We believe that tying a large part of our Chief Executive Officer's
compensation to the performance of the company's stock improves the company's
long-term performance by providing Mr. Jackson the incentive to grow the
company's stock price and make AutoNation more profitable in future years. We
believe that Mr. Jackson's compensation, as described above, is fair for his
services as our Chief Executive Officer.
Compensation and Nominating Committee:
J.P. Bryan (Chair)
George D. Johnson, Jr.
Edward S. Lampert (member since
January 29, 2002)
Irene B. Rosenfeld
15
SUMMARY COMPENSATION TABLE
The following tables set forth information with respect to our Chief
Executive Officer and four other most highly compensated executive officers at
December 31, 2001.
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
---------------------------------------------- OPTIONS TO
OTHER ANNUAL PURCHASE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMMON STOCK COMPENSATION
--------------------------- ---- ------ ----- --------------- ------------ ------------
H. Wayne Huizenga................... 2001 $ 500,000 $ -- $ -- 500,000 $ 4,910(2)
(Chairman of the Board) 2000 1,000,000 -- -- 500,000 7,524(2)
1999 1,000,000 -- -- 886,274(3) 9,694(2)
Mike Jackson........................ 2001 1,134,807 758,331(5) -- 500,000 4,429(6)
(Chief Executive Officer)(4) 2000 1,000,000 900,000 204,324(7) 850,000 205,831(8)
1999 250,000 250,000 27,615(9) 1,107,843(3) 77,425(10)
Michael E. Maroone.................. 2001 896,927 358,335 111,272(11) 400,000 1,689(2)
(President and Chief 2000 850,000 510,000 67,426(12) 850,000 1,620(2)
Operating Officer) 1999 783,654 321,563 -- 1,107,843(3) 1,073(2)
Craig T. Monaghan................... 2001 539,041 162,500 -- 300,000 1,697(14)
(Senior Vice President, 2000 283,846 280,000 47,059(9) 437,745(3) 93,345(15)
Chief Financial Officer)(13)
Patricia A. McKay................... 2001 398,270 91,919 -- 60,000 1,567(17)
(Senior Vice President, 2000 363,462 230,875(18) -- 107,696(3) 338(2)
Finance)(16) 1999 275,000 72,188 -- 44,314(3) 295(2)
---------------
(1) Except as disclosed below, the aggregate total value of perquisites and
other personal benefits, securities or property did not equal the
lesser of $50,000 or ten percent (10%) of the annual salary and bonus
for this officer during the fiscal year indicated.
(2) Imputed income from life insurance.
(3) Reflects adjustment to stock options in connection with the tax-free
spin-off to our stockholders of ANC Rental Corporation.
(4) Mr. Jackson began serving as our Chief Executive Officer in September
1999.
(5) Includes $189,581 as to which receipt by Mr. Jackson is deferred until
February 28, 2004, subject to certain terms and conditions.
(6) Includes $2,723 of imputed income from life insurance and $1,706 of
imputed income from an executive physical examination.
(7) Includes $115,017 of reimbursement by us for the payment of taxes in
connection with certain relocation expenses, $61,764 of imputed income
from company car usage and $27,543 of imputed income from use of our
aircraft.
(8) Includes $203,209 of relocation expenses and $2,622 of imputed income
from life insurance.
(9) Reimbursement by us for the payment of taxes in connection with certain
relocation expenses.
(10) Includes $77,122 of relocation expenses and $404 of imputed income from
life insurance.
(11) Includes $79,593 of imputed income from use of our aircraft and $31,679
of imputed income from company car usage.
(12) Includes $57,660 of imputed income from use of our aircraft and $9,766
of imputed income from company car usage.
(13) Mr. Monaghan began serving as our Senior Vice President, Chief
Financial Officer in May 2000.
(14) Includes $480 of imputed income from life insurance and $1,217 of
imputed income from an executive physical examination.
(15) Includes $93,105 of relocation expenses and $240 of imputed income from
life insurance.
(16) Ms. McKay served as our Acting Chief Financial Officer and Controller
from November 1999 until April 2000. Ms. McKay currently serves as our
Senior Vice President, Finance, a position that she has held since
November 1999.
(17) Includes $560 of imputed income from life insurance and $1,007 of
imputed income from an executive physical examination.
(18) Includes a one-time bonus of $125,000 paid during April 2000 in
recognition of Ms. McKay's service from November 1999 until April 2000
as our Acting Chief Financial Officer and Controller.
16
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME AND PRINCIPAL POSITION GRANTED FISCAL YEAR PRICE DATE(1) 5% 10%
--------------------------- ---------- ------------ -------- ---------- ---------- ----------
H. Wayne Huizenga........................ 500,000 6.3% $11.05 7/25/11 $3,474,643 $8,805,427
(Chairman of the Board)
Mike Jackson............................. 500,000 6.3 11.05 7/25/11 3,474,643 8,805,427
(Chief Executive Officer)
Michael E. Maroone....................... 400,000 5.0 11.05 7/25/11 2,779,714 7,044,342
(President and Chief Operating Officer)
Craig T. Monaghan........................ 300,000 3.8 11.05 7/25/11 2,084,786 5,283,256
(Senior Vice President, Chief Financial
Officer)
Patricia A. McKay........................ 60,000 * 11.05 7/25/11 416,957 1,056,651
(Senior Vice President, Finance)
-------------
* Less than 1%
(1) These options become exercisable in four equal annual installments
commencing on July 25, 2002 and are subject to earlier termination in
accordance with the applicable stock option plan and agreement.
AGGREGATED OPTION EXERCISES IN YEAR ENDED
DECEMBER 31, 2001 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2001 DECEMBER 31, 2001
ACQUIRED VALUE --------------------------- ---------------------------
NAME AND PRINCIPAL POSITION ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ----------- -------- ----------- ------------- ----------- -------------
H. Wayne Huizenga................... -- -- 7,369,334 875,000 $6,785,868 $2,685,625
(Chairman of the Board)
Mike Jackson........................ -- -- 766,422 1,691,421 2,114,038 5,072,412
(Chief Executive Officer)
Michael E. Maroone.................. -- -- 1,354,411 1,653,736 1,641,984 4,040,730
(President and Chief Operating
Officer)
Craig T. Monaghan................... -- -- 109,437 628,308 448,568 1,729,693
(Senior Vice President, Chief
Financial Officer)
Patricia A. McKay................... -- -- 217,691 172,970 277,449 502,058
(Senior Vice President, Finance)
17
PERFORMANCE GRAPH
The following graph and table compare the cumulative total stockholder
return on our common stock from December 31, 1996 through December 31, 2001 with
the performance of: (i) the Standard & Poor's 500 Stock Index and (ii) the
Standard & Poor's Retail (Specialty) Index. We have created these comparisons
using data supplied by Research Data Group, Inc. The comparisons reflected in
the graph and table are not intended to forecast the future performance of our
stock and may not be indicative of future performance. The graph and table
assume investments of $100 in our stock and each index on December 31, 1996, as
well as reinvestment of dividends. The distribution we made to our stockholders
on June 30, 2000 in connection with the tax-free spin-off to our stockholders of
ANC Rental Corporation is reflected in the graph and table as a reinvestment of
a cash dividend in the amount of $.69. The spin-off was completed by issuing to
each AutoNation stockholder of record as of June 16, 2000 one share of ANC
Rental common stock for each eight shares of AutoNation common stock held by
such stockholder.
(PERFORMANCE GRAPH)
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
---------------------------------------------------------------------------
AUTONATION, INC.......... $100.00 $ 74.75 $ 47.70 $ 29.66 $ 19.24 $ 39.54
S & P 500................ 100.00 133.36 171.47 207.56 188.66 166.24
S & P RETAIL
(SPECIALTY)............ 100.00 100.45 86.04 61.48 51.30 82.81
18
COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bryan and Johnson and Ms. Rosenfeld served as members of our
Compensation and Nominating Committee in 2001. Mr. Johnson has served as the
President and Chief Executive Officer of Extended Stay America, and Mr. Huizenga
has served as the Chairman of the Board of Extended Stay America, since January
1995.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mike Jackson, Michael E.
Maroone and Craig T. Monaghan. Summaries of these employment agreements and
other employment arrangements are set forth below.
Mike Jackson. In September 1999, we entered into an employment agreement
with Mr. Jackson pursuant to which he serves as our Chief Executive Officer. The
agreement, which expires September 24, 2002 (subject to earlier termination),
provided for an initial base salary of $1,000,000 per year, subject to future
increases as determined by our Compensation and Nominating Committee. In January
2001, our Compensation and Nominating Committee approved an increase in Mr.
Jackson's base salary to $1,150,000 per year. Mr. Jackson's employment agreement
also provides for his participation in the 1999 Senior Executive Bonus Plan,
with bonus eligibility and performance objectives as established by the
Compensation and Nominating Committee during the first quarter of each year.
Receipt of a portion of the bonus award payable to Mr. Jackson for 2001 under
the 1999 Senior Executive Bonus Plan was deferred until February 28, 2004,
subject to certain terms and conditions. Upon the commencement of Mr. Jackson's
employment, we granted to Mr. Jackson a sign-on bonus in the amount of $250,000
and stock options with respect to a total of 1,107,843 shares of our common
stock (adjusted to reflect the tax-free spin-off to our stockholders of ANC
Rental). All of these options vest in four equal annual installments commencing
on September 24, 2000 and have an exercise price equal to $10.61 per share and a
term expiring on September 24, 2009 (subject to earlier termination in
accordance with the applicable stock option plan and agreement). Mr. Jackson has
participated in our stock option program in each year since the commencement of
his employment and will continue to participate in this program in future years
at the discretion of our Compensation and Nominating Committee. Under the terms
of the agreement, if we terminate Mr. Jackson's employment for any reason other
than "cause," he is entitled to receive his annual base salary until September
24, 2002, as well as the pro rata portion of his annual performance bonus
applicable to the period prior to the termination of his employment.
Additionally, if we terminate Mr. Jackson's employment without "cause," all
stock options held by him will continue to vest during the 12-month period
immediately following such termination, and he shall have an additional
two-month period from the end of such 12-month period to exercise any vested
options. The agreement also provides that Mr. Jackson is entitled to certain
benefits during his employment, including limited personal use of our corporate
aircraft.
Michael E. Maroone. On August 1, 2000, we entered into an employment
agreement with Michael E. Maroone that provides for him to serve as our
President and Chief Operating Officer. The term of the employment agreement ends
on December 31, 2003. Our agreement with Mr. Maroone provided for an initial
base salary of $850,000 per year, subject to future increases as determined by
our Compensation and Nominating Committee. In January 2001, our Compensation and
Nominating Committee approved an increase in Mr. Maroone's base salary to
$900,000 per year. The employment agreement also provides for Mr. Maroone's
participation in the 1999 Senior Executive Bonus Plan, with bonus eligibility
and performance objectives as established by the Compensation and Nominating
Committee during the first quarter of each year. Upon the execution of his
employment agreement, on August 1, 2000, we granted him options to purchase
350,000 shares of our stock. All of these options vest in four equal annual
installments commencing on August 1, 2001 and have an exercise price equal to
$6.875 per share and a term expiring on August 1, 2010 (subject to earlier
termination in accordance with the applicable stock option plan and agreement).
Mr. Maroone has participated in our stock option program in each year since the
commencement of his employment and will continue to participate in this program
in future years at the discretion of our Compensation and Nominating Committee.
Under the terms of the agreement, if Mr. Maroone's employment is terminated by
us 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 the greater of one year's base salary and his then-current base
salary for the remainder of his employment term. In such circumstances, Mr.
Maroone would also be entitled to receive the pro rata portion of his annual
performance bonus
19
applicable to the period prior to the termination of his employment, provided
that the applicable performance objectives are satisfied.
Additionally, by letter to Mr. Maroone dated March 26, 1999, we confirmed
that upon the termination of Mr. Maroone's employment with us any stock options
granted to Mr. Maroone prior to March 26, 1999 would continue to vest in
accordance with their initial vesting schedule and would be exercisable through
the duration of their original ten-year terms.
Craig T. Monaghan. On April 19, 2000, we entered into an agreement with
Craig T. Monaghan by which he serves as our Senior Vice President, Chief
Financial Officer. Our agreement with Mr. Monaghan provided for Mr. Monaghan's
employment with us at an initial base salary of $450,000 per year. In January
2001, our Compensation and Nominating Committee approved an increase in Mr.
Monaghan's base salary to $550,000 per year. The agreement also provided for an
initial annual bonus of up to 50% of Mr. Monaghan's annual salary, payable upon
the achievement of certain company performance goals. Upon the commencement of
Mr. Monaghan's employment, we granted to Mr. Monaghan a sign-on bonus in the
amount of $100,000 and options to purchase a total of 387,745 shares of our
stock (adjusted to reflect the tax-free spin-off to our stockholders of ANC
Rental). These options vest in four equal annual installments commencing on May
8, 2001 and have an exercise price equal to $8.41 per share and a term expiring
on May 8, 2010 (subject to earlier termination in accordance with the applicable
stock option plan and agreement). Mr. Monaghan has participated in our stock
option program in each year since the commencement of his employment and will
continue to participate in this program in future years at the discretion of our
Compensation and Nominating Committee. Under the terms of the agreement, if Mr.
Monaghan's employment is terminated by us for any reason other than "cause," or
if he terminates his employment with us for "good reason" (as defined in the
employment agreement), he is entitled to receive an amount equivalent to
eighteen (18) months of his initial base salary of $450,000.
20
STOCK OWNERSHIP INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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, 2001, all such filing requirements
applicable to our Directors, executive officers and greater than 10% beneficial
owners were complied with.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 25, 2002
with respect to the beneficial ownership of our 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) our Chief Executive Officer and our four other
highest paid executive officers named in the Summary Compensation Table 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
25, 2002 or within sixty days thereafter. As of March 25, 2002, there were
321,199,684 shares of our common stock outstanding. References to stock options
in the footnotes to the following table reflect an adjustment made in connection
with the spin-off to our stockholders of ANC Rental Corporation with respect to
any stock options granted prior to August 1, 2000.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------------------- ----------- -------
ESL Investments, Inc.(2).................................... 76,738,300 23.9%
One Lafayette Place
Greenwich, CT 06830
Subsidiaries of FMR Corp.(3)................................ 30,456,677 9.5%
82 Devonshire Street
Boston, MA 02109
H. Wayne Huizenga(4)........................................ 17,266,482 5.3%
Mike Jackson(5)............................................. 796,422 *
Harris W. Hudson(6)......................................... 16,124,588 5.0%
Robert J. Brown(7).......................................... 197,455 *
J.P. Bryan(8)............................................... 150,785 *
Rick L. Burdick(9).......................................... 150,785 *
William C. Crowley(10)...................................... 76,738,300 23.9%
Michael G. DeGroote(11)).................................... 8,285,652 2.6%
George D. Johnson, Jr.(12).................................. 1,160,890 *
Edward S. Lampert(13)....................................... 76,738,300 23.9%
John J. Melk(14)............................................ 1,208,570 *
Irene B. Rosenfeld(15)...................................... 117,549 *
Michael E. Maroone(16)...................................... 4,980,347 1.5%
Craig T. Monaghan(17)....................................... 206,573 *
Patricia A. McKay(18)....................................... 247,292 *
All Directors and executive officers as a group (17
persons)(19).............................................. 127,773,450 38.2%
-------------
* Less than 1%
21
(1) Except as otherwise indicated, the mailing address of each person or
entity named in the table is AutoNation, Inc., AutoNation Tower, 110
S.E. 6th Street, Fort Lauderdale, Florida 33301.
(2) Shares deemed beneficially owned by ESL Investments, Inc., are owned by
a group consisting of ESL Partners, L.P., ESL Limited, ESL
Institutional Partners, L.P., ESL Investors, L.L.C., CBL Partners,
L.P., Courtesy Partners, L.P., Mr. Lampert and Mr. Crowley. The general
partner of ESL Partners, L.P., is RBS Partners, L.P. The general
partner of RBS Partners, L.P. is ESL Investments, Inc. ESL Investment
Management, LLC is the investment manager of ESL Limited. RBS
Investment Management, LLC is the general partner of ESL Institutional
Partners, L.P. ESL Investments, Inc. is the general partner of CBL
Partners, L.P. and Courtesy Partners, L.P. Mr. Lampert is the managing
member of ESL Investment Management, LLC and RBS Investment Management,
LLC, and the Chief Executive Officer of ESL Investments, Inc. Mr.
Crowley is the President and Chief Operating Officer of ESL
Investments, Inc. In their respective capacities, each of the foregoing
may be deemed to be the beneficial owner of the shares of AutoNation
common stock beneficially owned by other members of the group. ESL
Partners, L.P., is the record owner of 40,819,475 shares, ESL Limited
is the record owner of 7,922,202 shares, ESL Institutional Partners,
L.P., is the record owner of 1,443,026 shares, ESL Investors, L.L.C.,
is the record owner of 9,553,597 shares, CBL Partners, L.P., is the
record owner of 9,000,000 shares and Courtesy Partners, L.P., is the
record owner of 8,000,000 shares. Each entity has the sole power to
vote and dispose of the shares deemed beneficially owned by it.
(3) Includes: (a) 30,048,477 shares owned by Fidelity Management & Research
Company, (b) 104,200 shares owned by Fidelity Management Trust Company
and (c) 304,000 shares owned by Fidelity International Limited.
Fidelity Management & Research Company and Fidelity Management Trust
are wholly-owned subsidiaries of FMR Corp. This information is based on
an amendment to Schedule 13G filed by FMR Corp. on February 14, 2002.
FMR Corp. and Fidelity International expressly disclaim that they are
acting as a "group" for purposes of Section 13(d) under the Exchange
Act.
(4) The aggregate amount of our stock beneficially owned by Mr. Huizenga
consists of: (a) 2,929 shares owned directly, (b) 9,894,219 shares
owned by Huizenga Investments Limited Partnership, a Nevada limited
partnership controlled by Mr. Huizenga, and (c) vested options to
purchase 7,369,334 shares.
(5) The aggregate amount of our stock beneficially owned by Mr. Jackson
consists of: (a) 30,000 shares owned directly and (b) vested options to
purchase 766,422 shares.
(6) The aggregate amount of our stock beneficially owned by Mr. Hudson
consists of: (a) 14,650,279 shares beneficially owned by Harris W.
Hudson Limited Partnership, a Nevada limited partnership controlled by
Mr. Hudson, and (b) vested options to purchase 1,474,309 shares.
(7) The aggregate amount of our stock beneficially owned by Mr. Brown
consists of: (a) 200 shares owned by Mr. Brown and his wife as joint
tenants and (b) vested options to purchase 197,255 shares.
(8) The aggregate amount of our stock beneficially owned by Mr. Bryan
consists of vested options to purchase 150,785 shares.
(9) The aggregate amount of our stock beneficially owned by Mr. Burdick
consists of vested options to purchase 150,785 shares.
(10) Mr. Crowley is the President and Chief Operating Officer of ESL
Investments, Inc. All shares indicated are owned by ESL Partners, L.P.,
ESL Limited, ESL Institutional Partners, L.P., ESL Investors, L.L.C.,
CBL Partners, L.P. and Courtesy Partners, L.P. Mr. Crowley does not have
direct beneficial ownership of any shares, however, he may be deemed to
have indirect beneficial ownership of the shares owned by these
entities.
(11) The aggregate amount of our stock beneficially owned by Mr. DeGroote
consists of: (a) 8,024,083 shares owned by Westbury (Bermuda) Ltd., a
Bermuda corporation controlled by Mr. DeGroote, and (b) vested options
to purchase 261,569 shares.
22
(12) The aggregate amount of our stock beneficially owned by Mr. Johnson
consists of: (a) 899,321 shares owned by GDJ, Jr. Investments Limited
Partnership, a Nevada limited partnership controlled by Mr. Johnson, and
(b) vested options to purchase 261,569 shares.
(13) Mr. Lampert is the Chief Executive Officer of ESL Investments, Inc. All
shares indicated are owned by ESL Partners, L.P., ESL Limited, ESL
Institutional Partners, L.P., ESL Investors, L.L.C., CBL Partners, L.P.
and Courtesy Partners, L.P. Mr. Lampert does not have direct beneficial
ownership of any shares, however, he may be deemed to have indirect
beneficial ownership of the shares owned by these entities.
(14) The aggregate amount of our stock beneficially owned by Mr. Melk
consists of: (a) 122,001 shares owned directly, (b) 825,000 shares owned
by JJM Republic Limited Partnership, of which Mr. Melk is the general
partner and his three adult children are limited partners, and (c)
vested options to purchase 261,569 shares.
(15) The aggregate amount of our stock beneficially owned by Ms. Rosenfeld
consists of vested options to purchase 117,549 shares.
(16) The aggregate amount of our stock beneficially owned by Mr. Maroone
consists of: (a) 3,353,988 shares beneficially owned by Michael Maroone
Family Partnership, a Nevada limited partnership controlled by Mr.
Maroone, (b) 1,912 shares held through the AutoNation 401(k) Plan and
(c) vested options to purchase 1,624,447 shares.
(17) The aggregate amount of our stock beneficially owned by Mr. Monaghan
consists of: (a) options to purchase 206,373 shares, of which options to
purchase 109,436 shares have vested as of March 25, 2002, and (b) 200
shares held through the AutoNation 401(k) Plan.
(18) The aggregate amount of our stock beneficially owned by Ms. McKay
consists of: (a) options to purchase 245,735 shares, of which options to
purchase 238,811 shares have vested as of March 25, 2002, and (b) 1,557
shares held through the AutoNation 401(k) Plan.
(19) The aggregate amount of our stock beneficially owned by all Directors
and executive officers as a group includes: (a) 5,437 shares held
through the AutoNation 401(k) Plan and (b) options to purchase
13,227,693 shares, of which options to purchase 13,123,833 shares have
vested as of March 25, 2002.
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of agreements and transactions among certain
related parties and us. It is our policy that transactions with related parties
must be on fair and reasonable terms that are no less favorable to us than those
that would be available in an arm's length transaction with an unrelated party.
Based on our experience, we believe that all of the transactions described below
met that standard at the time the transactions were effected. The amounts
disclosed for the following transactions are estimates based on our records and
other information currently available to us.
Mr. Huizenga owns the Miami Dolphins and Pro Player Stadium, a
professional sports stadium in South Florida. In 2001, we paid an aggregate of
approximately $375,000 to the Miami Dolphins and Pro Player Stadium in exchange
for certain marketing services, including the rental of the stadium for an
off-site used vehicle sale event for our dealerships, and for the use of
executive suites and tickets to events at Pro Player Stadium. We expect to
continue these relationships with the Miami Dolphins and Pro Player Stadium
during 2002.
During 2001, we leased an executive suite at the National Car Rental
Center, a professional sports arena in Broward County, Florida that was leased
by Boca Resorts, Inc. Mr. Huizenga is the Chairman of the Board of Boca Resorts
and beneficially owns approximately 18% of Boca Resorts' outstanding stock.
Messrs. Hudson and Johnson are also directors of Boca Resorts and own
approximately 3% of Boca Resorts' outstanding common stock in the aggregate.
Under the suite lease agreement, we paid Boca Resorts approximately $128,000
during 2001, plus incidental costs. In July 2001, Boca Resorts sold the Florida
Panthers, the National Hockey League franchise that plays at the National Car
Rental Center, and transferred its interest in the arena. Boca Resorts also owns
and operates various resort hotels, including a hotel in Fort Lauderdale,
Florida, at which we have hosted from time to time meetings of our key managers.
During 2001, we paid Boca Resorts approximately $156,000 for the use of
conference facilities and lodging accommodations at its hotels in connection
with our management meetings.
During 2001, we purchased approximately $620,000 of pre-employment drug
screening services from Psychemedics Corporation. Mr. Huizenga owns
approximately 11.1% of the outstanding common stock of Psychemedics. We expect
to continue to utilize Psychemedics to perform customary pre-employment drug
screenings in 2002.
In connection with our spin-off of ANC Rental Corporation in June 2000,
we entered into a distribution agreement, a tax sharing agreement and various
lease agreements, transitional service agreements, purchase agreements and other
arrangements with ANC Rental. Messrs. Huizenga and Bryan are directors of ANC
Rental and several of our Directors own stock of ANC Rental. In November 2001,
ANC Rental filed voluntary petitions for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in Wilmington, Delaware. Due to the bankruptcy of ANC
Rental, some or all of its obligations under the agreements described below may
be extinguished or our claims against ANC Rental under such agreements may be
unenforceable. In May 2000, we agreed to lease certain space in our computer
data center to ANC Rental. ANC Rental paid us approximately $870,000 for such
space in 2001. In connection with the spin-off, we also agreed to provide
guarantees and credit enhancements for certain ANC Rental indebtedness and other
obligations, for which ANC Rental paid us a fee of approximately $915,000 during
2001. We expect to continue to provide certain credit support, although we do
not believe ANC Rental will pay us for our credit support during 2002 due to its
bankruptcy. We entered into agreements with ANC Rental pursuant to which it
agreed to purchase a certain number of its rental fleet vehicles through certain
of our dealerships. During 2001, ANC Rental purchased approximately 31,000
rental fleet vehicles through us under these agreements, generating a mark-up
fee for us of approximately $220,000. These agreements have expired and,
accordingly, we do not expect to sell to ANC Rental any vehicles during 2002.
ANC Rental also paid us approximately $8.1 million for parts purchases made
during 2001. In addition, we sold parts to ANC Rental for approximately $1.2
million during 2001 for which we do not expect to receive payment from ANC
Rental due to its bankruptcy. ANC Rental also leases space from certain of our
dealerships to operate its local car rental businesses. During 2001, ANC Rental
paid our dealerships an aggregate of approximately $460,000 under such leases.
In January 2001, we sold a jet to Republic Services, Inc. for
approximately $4.7 million, which was based on its then current net asset value
plus the agreed upon value of certain repairs performed by us immediately prior
to the sale. Messrs. Huizenga and Hudson are Chairman of the Board and Vice
Chairman of the Board and Secretary, respectively, of Republic Services. We also
sublease office space at our corporate headquarters to Republic Services. During
2001, Republic Services paid us approximately $700,000 pursuant to this lease,
which expires in February 2003.
24
We lease to NationsRent, Inc. space at our computer data center for which
NationsRent paid us approximately $150,000 in 2001. Mssrs. Huizenga and Hudson
are directors of NationsRent and Mr. Hudson owns approximately 1.8% of
NationsRent's outstanding common stock. Additionally, until December 2001, Wayne
Huizenga, Jr., the son of Mr. Huizenga, owned approximately 20.9% of
NationsRent's outstanding common stock through H. Family Investments, Inc., a
Florida corporation controlled by him. In 2001, we also subleased to NationsRent
certain office space at a monthly rental rate of approximately $61,000.
NationsRent paid us approximately $732,000 pursuant to this arrangement during
2001. In January 2002, based upon prevailing market conditions, we extended the
office sublease at a monthly rental rate of approximately $52,000. In December
2001, H. Family Investments, Inc. sold all of its NationsRent common stock. In
addition, we subleased two other office space locations to NationsRent, each of
which expired in August 2001. NationsRent paid us approximately $400,000 during
2001 for this office space. In December 2001, NationsRent filed a voluntary
petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in
Wilmington, Delaware. Due to the bankruptcy of NationsRent, some or all of
NationsRent's obligations under the foregoing agreements may be extinguished or
our claims thereunder may be unenforceable.
During March 2002, we sold approximately 100 fleet vehicles to AutoZone,
Inc. Mr. Lampert is a director of AutoZone and is Chairman, Chief Executive
Officer and controlling principal of ESL Investments, Inc., which together with
its affiliated investment partnerships owns approximately 24% of the outstanding
common stock of AutoZone. Mr. Crowley is the President and Chief Operating
Officer of ESL Investments. The vehicles were sold for an aggregate price of
approximately $1.2 million and a mark-up fee for us of approximately $22,000. We
expect to enter into similar fleet arrangements with AutoZone in the future.
During 2001, we engaged the law firm of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. for various legal services. Mr. Burdick is a partner in that law
firm. We expect this relationship to continue in 2002.
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. The accompanying form of proxy has been prepared
at the direction of our Board of Directors and is being sent to you at the
request of our Board of Directors. Messrs. Jackson and Ferrando were designated
to be your proxies by our Board of Directors.
STOCKHOLDER PROPOSALS
As more specifically provided in our bylaws, no business may be brought
before an annual meeting unless it is specified in the notice of the meeting or
is otherwise brought before the 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 year's annual meeting. Accordingly, any stockholder
proposal to be considered at the 2003 Annual Meeting of Stockholders generally
must be properly submitted to us not earlier than January 16, 2003 nor later
than February 15, 2003. Detailed information for submitting stockholder
proposals 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 and in addition to the Securities and Exchange Commission's
requirements that a stockholder must meet in order to have a stockholder
proposal included in our Proxy Statement for the 2003 Annual Meeting of
Stockholders.
Stockholders interested in submitting a proposal for inclusion in our
proxy materials for the 2003 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 December
13, 2002. No stockholder proposal was properly received for inclusion in this
Proxy Statement.
25
EXHIBIT A
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 Compensation and Nominating Committee 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, 2002.
(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
A-1
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, 2002 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) "Plan" shall mean this AutoNation, Inc. Senior Executive Incentive
Bonus Plan.
(o) "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 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.
A-2
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.
(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 2002 (or any adjournment thereof), the
Plan shall be effective as of January 1, 2002 and shall continue in effect until
all awards for Performance Periods ending on or before December 31, 2006 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 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.
A-3
(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.
(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.
A-4
CONTROL NUMBER
000000 0000000000 0 0000
AUTONATION, INC. 000000000.000 EXT
000000000.000 EXT
000000000.000 EXT
000000000.000 EXT
[BAR CODE] 000000000.000 EXT
000000000.000 EXT
MR A SAMPLE 000000000.000 EXT
DESIGNATION (IF ANY)
ADD 1 HOLDER ACCOUNT NUMBER
ADD 2
ADD 3 C 1234567890 JNT
ADD 4
ADD 5 [BAR CODE]
ADD 6
Use a black pen. Print in
CAPITAL letters inside the grey [ ] Mark this box with an X if you have made
areas as shown in this example. [A][B][C] [1][2][3] [X] changes to your name or address details above.
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ANNUAL MEETING PROXY CARD
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[A] ELECTION OF DIRECTORS PLEASE REFER TO THE REVERSE SIDE FOR INTERNET
AND TELEPHONE VOTING INSTRUCTIONS.
1. A vote FOR all nominees is recommended by the Board of Directors.
FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD
01 - H. Wayne Huizenga [ ] [ ] 05 - J.P. Bryan [ ] [ ] 09 - George D. Johnson, Jr. [ ] [ ]
02 - Mike Jackson [ ] [ ] 06 - Rick L. Burdick [ ] [ ] 10 - Edward S. Lampert [ ] [ ]
03 - Harris W. Hudson [ ] [ ] 07 - William C. Crowley [ ] [ ] 11 - John J. Meik [ ] [ ]
04 - Robert J. Brown [ ] [ ] 08 - Michael G. DeGroote [ ] [ ] 12 - Irene B. Rosenfeld [ ] [ ]
[B] A PROPOSAL TO APPROVE THE AUTONATION, INC.
SENIOR EXECUTIVE INCENTIVE BONUS PLAN.
A vote FOR is recommended by the Board of directors
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[C] AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. If acting as attorney, executor, trustee, or in any
representative capacity, sign name and title.
Signature 1 Signature 2 Date (dd/mm/yyyy)
[ ] [ ] [ ][ ] [ ][ ] [ ][ ][ ][ ]
--------------------------------- ----------------------------------- ------ ------ ------------
[ ] A643 1 UPX +
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PROXY - AUTONATION, INC.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Mike Jackson and Jonathan P. Fernando, 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 16, 2002, 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 AND FOR PROPOSAL 2 SET FORTH ON THE
OTHER SIDE. 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 Notice of the 2002 Annual
Meeting of Stockholders, the Proxy Statement and the Annual Report for the
fiscal year ended December 31, 2001 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)
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Use any touch-tone phone or the Internet to transmit your voting instructions.
Proxies granted by telephone or Internet are valid under Delaware corporation
law. To vote by phone or Internet, please follow these easy steps:
[TELEPHONE ICON] TO VOTE BY PHONE [COMPUTER MOUSE ICON] TO VOTE BY INTERNET
* Call toll free 1-888-215-9330 on a touch-tone telephone. * Log onto www.computershare.com/us/proxy, which will be
Shareholders residing outside the United States and Canada available until midnight, Eastern Time, on May 15, 2002.
must vote by Internet or mail. Telephone voting will be
available until midnight, Eastern Time, on May 15, 2002. * Use the Control Number located below. Enter the Control
Number and pound signs(#) exactly as they appear.
* Use the Control Number located below. Enter the Control
Number and pound signs(#) exactly as they appear. * Follow the instructions on the screen.
* Follow the recorded instructions.
CONTROL NUMBER
THANK YOU FOR VOTING