AutoNation 2006 Annual Report Download - page 93

to a trust for the exclusive benefit of the Optionee, one or more members of the Optionee’s Family, one or more Charitable Organizations, or any combination of
the foregoing, provided that any such transferee shall enter into a written agreement to be bound by the terms of this Agreement. For this purpose, “Family”
shall mean the ancestors, spouse, siblings, spouses of siblings, lineal descendants and spouses of lineal descendants of the Optionee. During the lifetime of an
Optionee to whom an Incentive Stock Option is granted, only such Optionee (or, in the event of legal incapacity or incompetence, the Optionee’s guardian or
legal representative) may exercise the Incentive Stock Option.
12. TERMINATION OF EMPLOYMENT OR SERVICE
(a) GENERAL. Except as otherwise provided in Section 12 (b) or 13 below or as may otherwise be provided by the Board, upon the termination of
employment or other service of an Optionee with the Company, a Subsidiary, a spin-off corporation or an Affiliate for any reason, all Options held by such
Optionee at the time of such termination shall immediately terminate and such Optionee shall have no further right to purchase shares of Stock pursuant to
such Option; provided, however, that, unless such termination is by the Company for “Cause,” all such Options, to the extent exercisable on the date of such
termination, shall remain exercisable until the earlier of (a) the expiration date of such Option as fixed by the Board pursuant to Section 10(a) and (b) the 60th
day following the date of such termination. For purposes of the foregoing, “Cause” shall mean (1) the Optionee’s conviction for commission of a felony or
other crime; (2) the commission by the Optionee of any act against the Company constituting willful misconduct, dishonesty, fraud, theft or embezzlement;
(3) the Optionee’s failure, inability or refusal to perform any of the material services, duties or responsibilities required of him by the Company, or to
materially comply with the policies or procedures established from time to time by the Company, for any reason other than his illness or physical or mental
incapacity; (4) the Optionee’s dependence, as determined in good faith by the Company, on any addictive substance, including, but not limited to, alcohol or
any illegal or narcotic drugs; (5) the destruction of or material damage to Company property caused by the Optionee’s willful or grossly negligent conduct; and
(6) the willful engaging by the Optionee in any other conduct which is demonstrably injurious to the Company or its subsidiaries, monetarily or otherwise.
Determination of Cause shall be made by the Board in its sole discretion. Notwithstanding the foregoing, if the Optionee is a party to an employment agreement
with the Company, “Cause” with respect to such Optionee shall have the meaning set forth therein.
(b) CHANGE IN OWNERSHIP OF SUBSIDIARY OR AFFILIATE. If an Optionee ceases to be an employee or an independent contractor of the Company
or any Subsidiary following a “Change in Ownership” (as defined below) (whether because of the termination of employment or service of the Optionee,
because the corporation or other entity by which the Optionee was employed or for which the Optionee was providing services as an independent contractor,
ceases to be a Subsidiary or Affiliate or otherwise) then such options shall continue to vest according to the vesting schedule unless the Board determines
otherwise. A “Change in Ownership” shall be deemed to have occurred with respect to an Optionee if (i) as a result of a merger, consolidation, reorganization,
business combination, sale, exchange or other disposition of Voting Securities (as defined in Section 4 (a)) or other transaction, the corporation or other entity
by which the Optionee is employed or for which the Optionee is providing
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