AutoNation 2006 Annual Report Download - page 101

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7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option intended to constitute an Incentive Stock Option (and so designated at the time of grant) shall qualify as an Incentive Stock Option only to the
extent that the aggregate fair market value (determined at the time the Option is granted) of the stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under the Plan and all other plans of the Optionee’s employer corporation and its parent
and subsidiary corporations within the meaning of Section 422(d) of the Code) does not exceed $100,000. This limitation shall be applied by taking Options
into account in the order in which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written agreements (“Option Agreements”), to be executed by the Company and by the
Optionee, in such form or forms as the Board shall from time to time determine. Option Agreements covering Options granted from time to time or at the same
time need not contain similar provisions; provided, however, that all such Option Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option shall be not less than 100 percent of the fair market value of a share of the Stock which
shall mean the closing price of a share of the Stock on the trading day prior to the date the Option is granted (the “Option Price”); provided however, that in the
event that the Optionee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Section 422(b)(6) and 424(d) of the
Code (relating to stock ownership of more than 10 percent), the Option Price of an Option that is intended to be an Incentive Stock Option shall be not less
than 110 percent of the fair market value of a share of Stock at the time such Option is granted. Except as may be permitted under Section 17 hereof, in no
event may the exercise price of an outstanding option be reduced, whether through amendment, cancellation or replacement grants, or any other means.
10. TERM AND EXERCISE OF OPTIONS
(a) OPTION PERIOD. Each Option granted under the Plan shall terminate and all rights to purchase shares thereunder shall cease upon the expiration of
ten years from the date such Option is granted, or on such date prior thereto as may be fixed by the Board and stated in the Option Agreement relating to such
Option; provided, however, that in the event the Optionee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to stock ownership of more than 10 percent), an Option granted to such Optionee that is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of five years from the date it is granted.
(b) VESTING AND LIMITATIONS ON EXERCISE. Except as otherwise provided herein, each Option shall become exercisable with respect to 25% of
the total number of shares subject to the Option on the date that is 12 months after the date of its grant (the “Vesting
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