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Notice
Of Annual Meeting Of StockholdersNOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of AutoZone, Inc. at the Orpheum Theater, 203J.R. Hyde, III, Store Support Center, 123 South MainFront Street, Memphis, Tennessee, on Thursday, December 9, 1999,14, 2000, at 10 a.m. At the meeting, the stockholders will vote to:
regarding:
| • | The election of eleven directors. | |
| • | Approval of the |
| • | Approval of the appointment of Ernst |
| • | The transaction of other business which may be properly brought before the meeting. |
If you were a stockholder at the close of business on October 12, 1999,17, 2000, you may vote at the meeting.
We look forward to seeing you at the meeting.
| By order of the Board of Directors, |
| HARRY L. GOLDSMITH | |
| Secretary |
Memphis, Tennessee25, 1999
IMPORTANT
IMPORTANT
Please VOTE by proxy card, telephone, or Internet
Table
of Contents
Table of Contents
AutoZone, Inc.
Proxy Statement9, 199914, 2000
Our Annual Meeting will be held at the Orpheum Theater, 203J.R. Hyde, III, Store Support Center, 123 South MainFront Street, Memphis, Tennessee, beginning at 10 a.m. on December 9, 1999.
14, 2000.
About this Proxy Statement
Our Board of Directors has sent you this Proxy Statement to solicit your vote at the Annual Meeting. We will pay all expenses incurred in this proxy solicitation. In addition to mailing this Proxy Statement to you, we have hired Beacon Hill Partners to be our proxy solicitation agent for a fee of $4,500 plus expenses. We also may make additional solicitations in person, by telephone, facsimile, e-mail, or other forms of communication. Brokers, banks and others who hold our stock for the beneficial owners will be reimbursed by us for their expenses related to forwarding our proxy materials to the beneficial owners. This Proxy Statement is first being mailed on October 25, 1999.
27, 2000.
Information about Voting
If you were a stockholder of record as of October 12, 1999, you You may vote your shares:
shares in person or by proxy:
| • | By Proxy |
| • | In Person |
If you held your shares in an account with a bank, broker or other entity
on the record date, please follow the instructions given to you on your
ballot regarding casting your vote.
Voting Securities
At the close of business on October 12, 1999,17, 2000, we had 138,935,636116,000,313 shares of common stock outstanding. Each share of common stock is entitled to one vote. Only stockholdersHowever, AutoZone had forward purchase agreements under its common stock repurchase program covering 8,034,400 shares of recordcommon stock that are ineligible to be voted at the closemeeting. Therefore, only 107,965,913 shares of business on Tuesday,
October 12, 1999,common stock will be entitledeligible to vote.be voted at the meeting.
Quorum and Required Votes
Holders of a majority of the shares of common stock outstanding (without regard to shares under forward purchase agreements) must be present in person or by proxy in order for a quorum to be present. Votes on the proposals will be tallied as follows:
| • | Election of Directors |
| • | Approval of amendment to executive incentive compensation plan |
| • | Approval of independent |
2
PROPOSAL 1-ELECTION OF DIRECTORS1 — Election of Directors
Ten Eleven directors will be elected at the Annual Meeting to serve until the Annual Meeting in 2000.2001. Each of the nominees named below was elected a director at the 19981999 annual meeting, except for Mr. LampertMcKenna who is being
nominatedwas elected to serve on the Board of Directors forin May 2000 and Mr. Elson who was elected to the first time at this
meeting.Board in August 2000. These nominees have consented to serve if elected, but should any nominee be unavailable to serve, your proxy will vote for the substitute nominee recommended by the Board of Directors.Directors or the Board of Directors may reduce the number of directors on the Board. The nominees are:
| | | | ||
| John C. Adams, Jr. Chairman & Chief Executive Officer Customer Satisfaction |
| |||
| Andrew M. Clarkson Chairman of Finance Committee Customer Satisfaction |
| |||
| Charles M. Elson Edgar S. Woolard, Jr. Professor of Corporate Governance University of Delaware | Mr. Elson, 40, was elected a Director, Customer Satisfaction, by the Board in August 2000. He has been the Edgar S. Woolard, Jr. Professor of Corporate Governance at the University of Delaware beginning in August 2000. Prior to that time, Mr. Elson had been a Professor at the Stetson University College of Law since 1990. Mr. Elson is also a director of Nuevo Energy Company and Sunbeam Corporation. | |||
| N. Gerry House President and Chief Executive Officer Institute for Student Achievement | Dr. House, 53, has been a Director, Customer Satisfaction, |
| ||
3
| Robert J. Hunt Executive Vice President & Chief Financial Officer Customer Satisfaction |
| |||
| J.R. Hyde, III |
| Mr. Hyde,
| ||
| James F. Keegan Chairman Adams Keegan, Inc. | Mr. Keegan, 68, has been a Director, Customer Satisfaction, |
| ||
| Edward S. Lampert Chief Executive Officer | Mr. Lampert, 38, has been a Director, Customer Satisfaction, |
| ||
| W. Andrew McKenna President SciQuest.com, Inc. | Mr. McKenna, 54, was elected a Director, Customer Satisfaction, by the Board in May 2000. He has been President of SciQuest.com, Inc., a Web- based, interactive marketplace for scientific and laboratory products since January 2000. Prior to that time he held various positions with The Home Depot, Inc., including Senior Vice President-Strategic Business Development from 1997 to 1999, President, Midwest Division from 1994 to 1997, and Senior Vice President-Corporate Information Systems from 1990 to 1994. Mr. McKenna is also a director of SciQuest.com, Inc. | |||
| Michael W. Michelson Member of General Partner Kohlberg Kravis Roberts & Co. LLC | Mr. Michelson, 49, has been a Director, Customer Satisfaction, |
| ||
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| |
| |
| Timothy D. Vargo President & Chief Operating Officer Customer Satisfaction |
| |
Mr. Ronald A. Terry, currently a member of the former parent companyBoard of AutoZone.
Board Meetings and Committees
The Board of Directors held fivenine meetings in fiscal year 1999. Each incumbent
director2000. All directors attended at least 75% of the total of the Board of Directors and committee meetings during the fiscal year, except for Dr. House.year.
The Board of Directors has threefour committees: the Audit Committee, the Compensation Committee, the Finance Committee, and the FinanceNominating and Corporate Governance Committee. The Board of Directors does not have
a nominating committee.
The Audit Committee recommends the engagement of independent auditors,accountants, confers with our internal and external auditors regarding the adequacy of our financial controls and fiscal policy, and directs changes to financial policies or procedures as suggested by the auditors. The Audit Committee has a charter, which is attached to this Proxy Statement as Appendix A. AutoZone’s common stock is listed on the New York Stock Exchange and is governed by its listing standards. During fiscal year 1999,2000, the Audit Committee met twofive times. For the 19992000 fiscal year, the Audit Committee consisted of Mr. Keegan (Chairman), Mr. Terry, and Mr. Terry.Lampert (who joined the committee in December 1999). The Audit Committee meets the independence standards of section 303.01(B)(2)(a) of Regulation S-K and the standards of the New York Stock Exchange.
The Compensation Committee setsapproves the compensation levels for all senior executive officers, including salary and bonus levels. In addition, the Compensation Committee administers AutoZone'sAutoZone’s stock option and stock purchase plans. The Compensation Committee, consisting of Mr. Terry (Chairman), Dr. House, Mr. Keegan, Mr. Lampert (who joined the committee in December 1999), and Dr. House,Mr. McKenna (who joined the committee in June 2000) held four12 meetings during fiscal year 1999.2000.
The Finance Committee reviews AutoZone'sAutoZone’s financing options and makes recommendations to the full Board and management as to appropriate financing mechanisms. During fiscal year 1999,2000, the Finance Committee, consisting of Mr. Clarkson (Chairman) and Mr. Michelson, held twofive meetings.
The Nominating and Corporate Governance Committee was formed in the beginning of fiscal year 2001 and currently consists of Mr. Elson as Chairman. Mr. Elson will make recommendations to the Board for additional committee members in the future. The committee has not yet established nomination policies or procedures.
PROPOSAL 2-APPROVAL OF EXECUTIVE INCENTIVE COMPENSATION PLAN
The following is a summary of the AutoZone, Inc. 20002 — Amendment to Executive Incentive Compensation Plan. For complete details please see the plan, which is reproduced
in its entirety as Exhibit A to this proxy statement.Plan
What is the executive incentive compensation plan?
The federal tax code prohibits us from deductingreceiving a tax deduction for compensation in excess of $1 million for the chief executive officer and our other four most highly paid officers unless the compensation in excess of $1 million is based on an objective measure of performance. The AutoZone, Inc. 2000 Executive Incentive Compensation Plan is intended to qualify as a performance-based compensation plan under the federal tax code so that performance bonuses paid to our executive officers are tax deductible to AutoZone. The plan requires that the Compensation Committee establish objective
5
What is the proposed amendment?
The amendment reads as follows:
| RESOLVED, that “sales,” “sales per square foot” and comparable store sales be added as measures of objective goals under the second paragraph of section 4 of the AutoZone, Inc. 2000 Executive Incentive Compensation Plan (the “plan”), and that in that same section “operating margin” shall be deleted and “EBIT margin” substituted in lieu thereof.” | |
| FURTHER RESOLVED, that the final sentence of the fourth paragraph of section 4 of the plan be amended to read: “No individual may receive in any one fiscal year an award under the Plan of an amount greater than the lesser of (i) 200% of such individual’s base salary for that year or (ii) $2 million.” |
What are the reasons for the amendment?
The Compensation Committee believes that the addition of the goals of sales, sales per square foot and comparable store sales will give the committee additional flexibility in designing executive incentive compensation that is aligned with company goals, and the substitution of “EBIT margin” for “operating margin” is a better technical accounting description of what the goal is to measure.
Currently, the executive incentive compensation plan allows an executive officer to receive the lesser of up to 150% of salary or $2 million as a bonus. The amendment would permit bonuses under the plan to be granted up to 200% of salary (subject to the $2 million limitation). This additional authority would be used by the Compensation Committee to establish additional incremental goals under the plan that would be increasingly more difficult to attain.
Who is eligible to participate in the plan?
The executive officers, as determined by the Compensation Committee, are eligible to participate in the plan.
How are performance goals established?
Under If the amendment is adopted, then, under the plan, at the beginning of each fiscal year, the Compensation Committee must establish a goal which may be a range from a minimum to a maximum attainable bonus. The goal may be based on one or more of the following measures:
| • | Earnings |
| • | Earnings per share |
| • | Common stock price |
| • | Market share |
| • | Revenue |
| Operating or net cash flows |
| • | Pre-tax profits |
| • | Earnings before interest and taxes |
| • | Return on capital |
| • | Economic value added |
| • | Return on inventory |
6
| EBIT margin |
| • | Gross profit margin | |
| • | Sales | |
| • | Sales per square foot | |
| • | Comparable store sales |
The goal may be different for different executives. No bonus may be paid under the plan unless at least the minimum goal is attained. However, the committee may disregard for goal purposes one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, accruals for reorganization or restructuring, and any other extraordinary non-recurring items, acquisitions or divestitures and any foreign exchange gains or losses.
What
is the maximum compensation that a participant may receive under the plan?
No
participant may receive more than the lesser of 150% of the executive's
annual salary or $2 million as a bonus under the plan.
How is the bonus paid under the plan?
After the end of each fiscal year, the Compensation Committee must certify the attainment of goals if any, under the plan, if any, and direct the amount to be paid to each participant. The committee, inat its discretion, may reduce or eliminate any bonus to be paid to an executive, even if a goal was attained. The bonus may only be paid after the attainment of the goals has been certified. The bonus may be paid in cash or in whole or part in common stock, at the option of the Compensation Committee.
Does
AutoZone currently have an executive incentive compensation plan?
Currently, the AutoZone, Inc. Executive Incentive Compensation Plan is
in effect. The existing plan will expire in December 1999. Therefore, we
are proposing the new plan.
What
are the differences between the new plan and the existing plan?
The two plans are essentially similar, except that the existing plan required
the target amount to be based upon pre-tax earnings and the new plan allows
the committee more flexibility in selecting the goal measure. In addition,
the old plan had a maximum of 100% of salary which could be paid as a bonus
and the new plan will allow up to 150% of salary to be paid as a bonus.
Who
participated in the existing plan last fiscal year?
Last fiscal year, 11 AutoZone executives were granted bonuses under the
existing plan. This table shows bonuses for the named executive officers
and all executive officers as a group under the existing plan, in the last
fiscal year:
The Board of Directors recommends that you vote FOR approval of the amendment to the AutoZone, Inc. 2000 Executive Incentive Compensation Plan.
PROPOSAL 3 - APPROVAL OF INDEPENDENT AUDITORS— Approval of Independent Accountants
Ernst && Young LLP, which has been our independent auditoraccountants for the past twelvethirteen fiscal years, has again been selected by the Audit Committee to be AutoZone'sAutoZone’s independent auditorsaccountants for fiscal year 2000.2001. Members of Ernst && Young LLP will be present at the Annual Meeting to make a statement if they so desire and to answer any appropriate questions.
The Board of Directors recommends that you vote FOR approval of Ernst && YoungLLP as independent auditors.accountants.
Other Matters
We do not know of any matters to be presented at the Annual Meeting other than those discussed in this proxy statement. If, however, other matters are properly brought before the Annual Meeting, your proxyproxies will be able to vote those matters in their discretion.
7
This table shows the beneficial ownership of common stock as of October 12, 1999,17, 2000, by each director, the Chief Executive Officer, the other four most highly compensated executive officers, and all incumbent directors and executive officers as a group. Unless stated otherwise in the notes to the table, each person named below has sole authority to vote and invest the shares shown.
| Beneficial Ownership | ||||||||
| as of | ||||||||
| October 17, 2000 | ||||||||
| Name of Beneficial Owner | Shares | Percent1 | ||||||
| John C. Adams, Jr.2 | 354,297 | * | ||||||
| Andrew M. Clarkson3 | 479,020 | * | ||||||
| Charles M. Elson | 4,902 | * | ||||||
| N. Gerry House4 | 4,808 | * | ||||||
| Robert J. Hunt5 | 252,647 | * | ||||||
| J.R. Hyde, III6 | 2,067,817 | 1.9 | % | |||||
| James F. Keegan7 | 12,876 | * | ||||||
| Edward S. Lampert8 | 21,762,643 | 20.2 | % | |||||
| W. Andrew McKenna9 | 4,589 | * | ||||||
| Michael W. Michelson10 | 514,839 | * | ||||||
| Ronald A. Terry11 | 14,834 | * | ||||||
| Timothy D. Vargo12 | 263,684 | * | ||||||
| Gerald E. Colley13 | 30,492 | * | ||||||
| Stephen W. Valentine14 | 123,145 | * | ||||||
| All directors and executive officers as a group (24 persons)15 | 26,251,446 | 24.1 | % | |||||
| | |||||||
1 Calculated assuming shares under forward purchase agreements by AutoZone are not outstanding.
2Does not include 1,572 shares held in trusts for the benefit of Mr. Adam'sAdams’ children. Includes 100,000316,665 shares issuable upon exercise of stock options either immediately or within 60 days of October 12, 1999.17, 2000.
23Includes 119,400 shares held by a charitable trust for which Mr. Clarkson is a trustee and shares investment and voting power, with respect to which Mr. Clarkson disclaims beneficial ownership. Does not include 1,000 shares owned by members of Mr. Clarkson'sClarkson’s immediate family nor does it include 28,000 shares held in trust for the benefit of a member of Mr. Clarkson'sClarkson’s family, with respect to which he disclaims beneficial ownership.
34Includes 7481,608 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights.
45Includes 2,000 shares owned by Mr. Hunt'sHunt’s wife and 75,000129,166 shares which may be acquired upon exercise of stock options either immediately or within 60 days of October 12, 1999.17, 2000.
56Includes 740,000550,000 shares held by a charitable foundation for which Mr. Hyde is an officer and a director and for which he shares investment and voting power, and includes 1,5592,878 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights. Does not include 2,000 shares owned by Mr. Hyde'sHyde’s wife.
67Does not include 800 shares owned by a member of Mr. Keegan'sKeegan’s family with respect to which Mr. Keegan disclaims any beneficial ownership.
78Mr. Lampert is the Chief Executive Officer and a director of ESL Investments, Inc., a Delaware corporation. Mr. Lampert is also the managing member of ESL Investment Management, LLC, a Delaware limited liability company, and RBS Investment Management, LLC, a Delaware limited liability company.LLC. All shares indicated, other than 1,243 shares which are owned directly by Mr. Lampert, are owned by ESL Partners, L.P., a Delaware limited partnership,
ESL Limited, a Bermuda corporation, ESL Institutional Partners, L.P., a
Delaware limited partnership, Acres Partners, L.P., a Delaware limited
partnership, and Marion Partners, L.P., a Delaware limited partnership. Mr. Lampert may be deemed to have indirect beneficial ownership of the shares owned by these entities. See also footnote 13 under Security Ownership of Certain Beneficial Owners, below.
89Includes 1,600589 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights.
910Includes 50,0002,956 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights.
11 Includes 2,956 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights.
12 Includes 220,833 shares which may be acquired upon exercise of stock options either immediately or within 60 days of October 12, 1999.17, 2000. Does not include 4,635 shares owned by members of Mr. Vargo'sVargo’s immediate family.
1013Includes 5,16718,333 shares which may be acquired upon exercise of stock options either immediately or within 60 days of October 12, 1999.17, 2000. Does not include 5,000 shares owned by Mr. Colley'sColley’s wife.
1114Includes 18,666110,000 shares which may be acquired upon exercise of stock options either immediately or within 60 days of October 12, 1999.17, 2000.
1215Includes 479,5001,074,242 shares which may be acquired upon exercise of stock options either immediately or within 60 days of October 12, 1999,17, 2000, and 5,50710,398 shares which may be acquired immediately upon termination as a director by conversion of stock appreciation rights. Does not include shares deemed beneficially
owned by Mr. Lampert.
The following entities are known by us to own more than five percent of the outstanding common stock:
| Beneficial Ownership | ||||||
| Name and Address | ||||||
| of Beneficial Owner | Shares | Percent1 | ||||
| Capital Research and Management Company2 | 8,140,000 | 7.5% | ||||
| 333 South Hope Street Los Angeles, CA 90071 | ||||||
| ESL Investments, Inc.3 | 21,762,643 | 20.2% | ||||
| One Lafayette Place Greenwich, CT 06830 | ||||||
1 Calculated assuming shares under forward purchase agreements by AutoZone are not outstanding.
2All information regarding Capital Research and Management Company is based upon the Schedule 13F for the period ended June 30, 1999.2000. Capital Research and Management Company has the sole power to vote and dispose of the shares deemed beneficially owned by it.
23 All information regarding ESL Investments, Inc., is based upon the Form
4 for the period ended September 30, 1999,Schedule 13D dated October 10, 2000, filed on behalf of a group consisting of ESL Investments, Inc., ESL Partners, L.P., ESL Limited, ESL Institutional Partners, L.P., Acres Partners, L.P., Marion Partners, L.P., and Edward S. Lampert. 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 Acres Partners, L.P. Mr. Lampert is the managing
9
Compensation of Management, above.Directors
3
All information regarding FMR Corp. is based upon the Schedule 13G dated
February 1, 1999, filed on behalf of FMR Corp., Edward C. Johnson 3d and
Abigail P. Johnson, and the Schedule 13F filed by FMR Corp. for the period
ending June 30, 1999. FMR Corp. states that various persons have the right
to receive, or the power to direct the proceeds from the sale of, the shares.
No one person's interest in the shares is more than five percent of the
total outstanding common stock. Fidelity Management & Research Company,
a wholly-owned subsidiary of FMR Corp. and a registered investment advisor,
is the beneficial owner of 11,590,000 shares as the result of acting as
investment adviser to various investment companies. Edward C. Johnson 3d,
FMR Corp. through its control of Fidelity, and the funds each has sole
power to dispose of the 11,590,000 shares owned by the funds. Neither FMR
Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp. has the sole power
to vote or direct the voting of the shares owned directly by the Fidelity
Funds, which power resides with the funds' Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established
by the funds' Boards of Trustees.
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.
and a bank, is the beneficial owner of 182,304 shares as a result of its
serving as investment manager of the institutional accounts. Edward C.
Johnson 3d and FMR Corp., through its control of Fidelity Management Trust
Company, each has sole dispositive power over 182,304 shares and sole power
to vote or to direct the voting of 182,304 shares of common stock owned
by the institutional accounts.
4
All information regarding W.P. Stewart & Co., Ltd., is based upon the
Schedule 13G for the period ended December 31, 1998. W.P. Stewart &
Co., Ltd., has the sole power to vote and dispose of the shares deemed
beneficially owned by it.
Non-employee directors are paid an annual fee of $25,000 in quarterly installments, plus $1,000 for each Board meeting attended. In 1998,Under the Board of Directors
adopted theAutoZone, Inc., Second Amended and Restated Directors Compensation Plan. Under this plan,Plan, a non-employee director may receive no more than one-half of the annual and meeting fees immediately in cash, and the remainder of the fees must be taken in either common stock or the fee may be deferred in units with value equivalent to the value of shares of common stock as of the grant date (also known as "stock“stock appreciation rights"rights”).
Also inUnder the AutoZone, Inc., Second Amended and Restated Stock 1998 the Board of Directors adopted the 1998 DirectorsDirector Stock Option Plan. Under the stock option plan,Plan, on January 1 of each year, each non-employee director receives an option to purchase 1,0001,500 shares of common stock. On
December 31 of each year,stock, and each non-employee director that owns common stock worth at least five times the annual fee paid to each non-employee director on an annual basis will receive an additional option to purchase 1,0001,500 shares of common stock. In addition, each new director receives an option to purchase 3,000 shares upon election to the Board of Directors, plus a portion of the annual directors’ option grant prorated for the portion of the year actually served in office. These stock option grants are made at the fair market value as of the grant date.
Mr. Clarkson is an AutoZone employee, and for fiscal year 19992000 was paid a salary and bonus of $62,500$75,000 and received other benefits ordinarily granted to all employees.
10
EXECUTIVE
COMPENSATIONExecutive Compensation
Summary Compensation Table
This table shows the compensation paid to the Chief Executive Officer and the other four most highly paid executive officers for the past three fiscal years.
| Long Term | |||||||||||||||||||||||||
| Compensation | |||||||||||||||||||||||||
| Awards | |||||||||||||||||||||||||
| Annual Compensation | |||||||||||||||||||||||||
| Securities | |||||||||||||||||||||||||
| Name and | Other Annual | Underlying | All Other | ||||||||||||||||||||||
| Principal Position | Year | Salary | Bonus1 | Compensation2 | Options/SARs3 | Compensation4 | |||||||||||||||||||
| John C. Adams, Jr. | 2000 | 541,000 | 541,000 | 1,769 | 50,000 | 3,600 | |||||||||||||||||||
| Chairman & | 1999 | 530,400 | 265,200 | 2,400 | 0 | 3,600 | |||||||||||||||||||
| Chief Executive Officer | 1998 | 520,000 | 253,500 | — | 0 | 3,048 | |||||||||||||||||||
| Timothy D. Vargo | 2000 | 424,400 | 328,910 | 2,040 | 30,000 | 3,600 | |||||||||||||||||||
| President & | 1999 | 424,400 | 212,200 | 2,400 | 0 | 3,600 | |||||||||||||||||||
| Chief Operating Officer | 1998 | 416,000 | 202,800 | — | 0 | 3,048 | |||||||||||||||||||
| Robert J. Hunt | 2000 | 312,000 | 234,000 | 1,430 | 10,000 | 3,600 | |||||||||||||||||||
| Executive Vice President | 1999 | 306,000 | 114,750 | 2,400 | 25,000 | 3,600 | |||||||||||||||||||
| & Chief Financial Officer | 1998 | 300,000 | 117,000 | — | 0 | 3,048 | |||||||||||||||||||
| Gerald E. Colley | 2000 | 312,000 | 179,760 | — | 15,000 | 3,600 | |||||||||||||||||||
| Senior Vice President | 1999 | 305,000 | 76,250 | — | 0 | 3,343 | |||||||||||||||||||
| 1998 | 230,000 | 74,750 | 42,003 | 40,000 | 2,213 | ||||||||||||||||||||
| Stephen W. Valentine | 2000 | 268,077 | 159,981 | 1,811 | 10,000 | 3,590 | |||||||||||||||||||
| Senior Vice President | 1999 | 250,000 | 62,500 | 2,183 | 0 | 3,358 | |||||||||||||||||||
| 1998 | 215,500 | 70,047 | — | 0 | 2,332 | ||||||||||||||||||||
1 Bonuses are shown for the fiscal year earned, but paid in the following fiscal year.
2 Amounts shown for fiscal years 1999 and 2000 are 401(k) plan matching contributions. Amounts shown for Mr. Colley for 1997 and 1998 are relocation allowances.
3 All amounts shown are stock options; AutoZone did not grant SARs to executive officers in the 1997, 1998, 1999 or 19992000 fiscal years. All options were granted in accordance with the 1996 Stock Option Plan, as amended and restated in 1997 and 1998.
4 All Other Compensation consists of term life insurance provided for the benefit of the named officer's beneficiaryofficer’s beneficiary.
.11
6
Mr. Vargo was first elected Chief Operating Officer in December 1996, and
was elected President in March 1997.
7
Mr. Colley was a Vice President from June 1997 to October 1997, when he
was elected Senior Vice President.
8
Mr. Wilhite was a Vice President until October 1997 when he was elected
Senior Vice President.
Option/SAR Grants in Last Fiscal Year
This table shows the number of stock options granted to certain executive officers during the most recent fiscal year. Executive officers were not granted SARs during the 19992000 fiscal year.
| Potential Realizable | ||||||||||||||||||||||||
| Value at Assumed | ||||||||||||||||||||||||
| Number of | % of Total | Annual Rates of Stock | ||||||||||||||||||||||
| Securities | Options/SARs | Price Appreciation | ||||||||||||||||||||||
| Underlying | Granted to | Exercise | for Option Term1 | |||||||||||||||||||||
| Options/SARs | Employees | or Base | Expiration | |||||||||||||||||||||
| Granted (#)2 | in Fiscal Year | Price ($/Sh) | Date | 5%($) | 10%($) | |||||||||||||||||||
| John C. Adams, Jr. | 50,000 | 2.6 | 24 | 9/1/2009 | 754,674 | 1,912,491 | ||||||||||||||||||
| Timothy D. Vargo | 30,000 | 1.5 | 24 | 9/1/2009 | 452,804 | 1,147,495 | ||||||||||||||||||
| Robert J. Hunt | 10,000 | 0.5 | 24 | 9/1/2009 | 150,935 | 382,498 | ||||||||||||||||||
| Gerald E. Colley | 15,000 | 0.8 | 24 | 9/1/2009 | 226,402 | 573,747 | ||||||||||||||||||
| Stephen W. Valentine | 10,000 | 0.5 | 24 | 9/1/2009 | 150,935 | 382,498 | ||||||||||||||||||
1 The 5% and 10% appreciation rates have been arbitrarily set by the Securities and Exchange Commission and do not forecast actual stock price appreciation.
2 Options shown vest in one-third increments on each of the third, fourth, and fifth anniversaries after the grant date.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
This table shows stock option exercises by certain executive officers during the most recent fiscal year, and their exercisable and unexercisable stock options as of August 28, 1999.26, 2000. The fiscal year-end value of "in-the-money"“in-the-money” stock options is the difference between the exercise price of the option and the market value of the common stock (not including options with an exercise price greater than the fair market value) on August 27, 1999 (the
last trading day before the fiscal year end)26, 2000, which was $24$22 per share. Executive officers do not have SARs.
| Number of Securities | Value of Unexercised | |||||||||||||||||||||||
| Underlying Unexercised | In-the-Money | |||||||||||||||||||||||
| Options/SARs | Options/SARs | |||||||||||||||||||||||
| Shares | at FY-End (#) | at FY-End ($) | ||||||||||||||||||||||
| Acquired | Value | |||||||||||||||||||||||
| on Exercise (#) | Realized ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||
| John C. Adams, Jr. | 0 | — | 266,665 | 533,335 | 124,999 | 250,001 | ||||||||||||||||||
| Timothy D. Vargo | 0 | — | 220,833 | 409,167 | 93,750 | 187,500 | ||||||||||||||||||
| Robert J. Hunt | 0 | — | 91,666 | 143,334 | 31,249 | 62,501 | ||||||||||||||||||
| Gerald E. Colley | 5,167 | 140,478 | 5,000 | 100,000 | 0 | 0 | ||||||||||||||||||
| Stephen W. Valentine | 0 | — | 105,000 | 55,000 | 532,150 | 37,500 | ||||||||||||||||||
12
Pension Plan Table
This table shows the estimated annual benefits payable upon retirement at age 65 in 19992000 under our pension plan. Sixty monthly payments are guaranteed after retirement.
| Years of Service Credit | ||||||||||||||||||||||
| Remuneration | 15 | 20 | 25 | 30 | 35 | |||||||||||||||||
| 200,000 | 32,002 | 45,336 | 58,670 | 66,671 | 66,671 | |||||||||||||||||
| 300,000 | 45,000 | 60,000 | 75,000 | 75,000 | 75,000 | |||||||||||||||||
| 400,000 | 60,000 | 80,000 | 100,000 | 100,000 | 100,000 | |||||||||||||||||
| 500,000 | 75,000 | 100,000 | 125,000 | 125,000 | 125,000 | |||||||||||||||||
| 600,000 | 90,000 | 120,000 | 150,000 | 150,000 | 150,000 | |||||||||||||||||
| 700,000 | 105,000 | 140,000 | 175,000 | 175,000 | 175,000 | |||||||||||||||||
| 800,000 | 120,000 | 160,000 | 200,000 | 200,000 | 200,000 | |||||||||||||||||
| 900,000 | 135,000 | 180,000 | 225,000 | 225,000 | 225,000 | |||||||||||||||||
| 1,000,000 | 150,000 | 200,000 | 250,000 | 250,000 | 250,000 | |||||||||||||||||
| 1,100,000 | 165,000 | 220,000 | 275,000 | 275,000 | 275,000 | |||||||||||||||||
| 1,200,000 | 180,000 | 240,000 | 300,000 | 300,000 | 300,000 | |||||||||||||||||
| 1,300,000 | 195,000 | 260,000 | 325,000 | 325,000 | 325,000 | |||||||||||||||||
Remuneration includes salary and bonus. The benefit is based on the average monthly earnings for the consecutive five yearfive-year period during which a participant had his or her highest level of earnings. The benefits stated in the table will not be reduced by Social Security or other amounts received by a participant. Remuneration shown is assumed to be the participant's five yearparticipant’s five-year average earnings.
Neither remuneration greater than $160,000 nor years of service in excess
of 25 years is credited for benefit calculation purposes. The pension plan
was amended on January 1, 1998. The difference in the table between 25
and 30 years of service is due to the calculation of the prior plan minimum
benefit which was fixed effective December 31, 1997. A participant with
25 years of service today would have had only 23 years under the prior
plan minimum, whereas the participant with 30 years of service today would
have the full 25 years of service credit under the prior plan minimum.
The number of years of credited service certain executive officers have accrued under the pension plan as of the most recent fiscal year end are:
| Name | Years of Service | |||||
| John C. Adams, Jr. | 13 | |||||
| Timothy D. Vargo | 14 | |||||
| Robert J. Hunt | 5 | |||||
| Gerald E. Colley | 11 | |||||
| 11 | ||||||
Compensation Committee Report on Executive Compensation
The executive compensation program is designed to attract and retain executives who are key to our long-term success. In this process, we want to align an executive'sexecutive’s compensation with AutoZone'sAutoZone’s attainment of business goals and the increase in share value. The Compensation Committee reviews executive compensation annually and makes appropriate adjustments based on company performance, achievement of predetermined and individual goals, and changes in an executive'sexecutive’s duties and responsibilities. The compensation of other AutoZone employees is based on a similar philosophy.
Compensation Philosophy
Executive compensation consists of salary, bonus, and stock options.
Salary. The Committee desires that overall compensation reflect each executive'sexecutive’s performance over time. Base salaries are set at levels subjectively determined by the Compensation Committee to adequately reward and retain capable executives, including the Chief Executive Officer.
At the beginning of each fiscal year, the Compensation Committee reviews and establishes the annual salary of each officer, including the Chief Executive Officer, the Chief Operating Officer, and the Chief Financial Officer. The Committee makes an independent, subjective determination of the appropriate level of each officer's salary. The Compensation Committee
employs a compensation consultant to assist the Committee in comparing
AutoZone's compensation for its executives to that of other retailers.
However, the Committee uses this information to verify the reasonableness
of the compensation, but does not have a predetermined compensation objective.these officers’ salaries. The Committee does not use any mechanical formulations or weighting of any of the factors
13
Bonus.
Each fiscal year executive officers (including the Chief Executive Officer) are paid a bonus based on AutoZone's
attainment of increases in earnings over the prior year and the attainment of other goals as set by the Compensation Committee. A target isObjective goal targets are set at the beginning of each fiscal year and bonuses are paid upon achievement of the goal targets. An executive’s goals may be based on one or more criteria related to the executive’s performance and to the performance of the company as a percentage
of the attainment of the objectives.whole. A maximum bonus is established for each executive officer.officer as a percentage of salary. The maximum bonus attainable for the last fiscal year was 125% of salary for both the Chief Executive Officer and the Chief Operating Officer. As a general matter, as an executive'sexecutive’s level of management responsibility in the Company increases, the greater the portion of his or her potential total compensation depends on the Company'sCompany’s performance as measured by increases in earnings over the previous year. No bonus is
payable under the bonus plan unless a predetermined minimum target is achieved.
A significant portion of each officer's compensation is directly related
to the performance of the Company. Please see Proposal 2 of this Proxy
Statement for a more complete discussion of the AutoZone, Inc. 2000 Executive
Incentive Compensation Plan under which bonuses will be paid to executive
officers in future years.attaining goal objectives.
Stock Options. To align the long-term interests of management and our stockholders, the Compensation Committee awards non-qualified stock options to all levels of management, including individual store managers. StockPreviously, stock option grants arewere made by a subjective determination by the Committee, upon recommendation by the Chief Executive Officer (for grants other than those to the Chief Executive Officer), who considersconsidered the recipient'srecipient’s past performance and current responsibilities, and the number of shares previously granted to that person.
Stock
Ownership
Beginning within the 2001 fiscal year, stock options will be granted to AutoZone’s executives and managers upon initial hire and thereafter annually in accordance with guidelines established by the Committee for attainment of company goals and individual performance within a position.
Stock Ownership
Beginning the 2000 fiscal year, the Compensation Committee has implemented the AutoZone, Inc. Management Stock Ownership Plan to encourage and facilitate the ownership of AutoZone stock by senior management and members of the
Board of Directors.directors. The plan provides guidelines for stock ownership levels by senior management and directors. AutoZone will loan one-half of the necessary funds to the executive officers and new directors.senior manager or director. The borrower is at risk and signs a promissory note for the full amount borrowed. As a condition to obtaining the loan, beginning as of the bonus paid for the
2000 fiscal year, each senior executive must commit to use a set percentage of any bonus received to acquire AutoZone common stock and must fully participate in AutoZone'sAutoZone’s employee stock purchase plan.
Long-Term Incentive Plan
Beginning as of the 2001 fiscal year, the Compensation Committee has established a long-term incentive plan to place strong emphasis on the achievement of specified levels of AutoZone’s long-term performance. Under the plan, the Compensation Committee would establish three-year performance goals at the beginning of each fiscal year, with awards under the plan paid to senior executives in cash after the passage of the three-year period. We anticipate that the plan will be submitted for a vote of the stockholders at the 2001 annual meeting, prior to any award being paid under the plan to any executive.
CEO Compensation
In For the last fiscal year, John C. Adams, Jr., Chairman and Chief Executive Officer, was paid $530,400$541,000 in salary and $265,200$541,000 in bonus. Mr. Adams has
anreceived options to purchase 50,000 shares in the 2000 fiscal year which vest in one-third increments on the third, fourth and fifth anniversaries after the date of grant.
Mr. Adams announced in September 2000 that he would step aside as CEO as soon as a replacement is found. Mr. Adams’ employment agreement whichwill be amended to reflect his new position. The new employment agreement is described in the proxy statement under the section entitled "Employment
Agreements" in this Proxy Statement. Mr. Adams did not receive any stock
options during the last fiscal year.“Employment Agreements.”
14
Tax Deductions for Compensation
The federal tax code limits the amount of compensation that we may deduct in any year for the Chief Executive Officer and our other four most highly paid officers to $1 million. However, this deduction limitation does not apply to performance-based compensation as defined in the tax code. In
order for AutoZone to continue to be able to deduct any compensation which
may exceed $1 million, the Committee recommends that the stockholders adopt
the AutoZone, Inc. 2000 Executive Incentive Compensation Plan, which is
Proposal 2 in this Proxy Statement. Our compensation plans are generally designed and implemented so that they qualify for full deductibility. However, we may from time to time pay compensation to our executive officers that may not be fully deductible.
This report was unanimously adopted by the Compensation Committee and approved by the Board of Directors.
Ronald A. Terry, Chairman
Stock Performance Graph
This graph shows, from the end of fiscal year 19941995 to the end of fiscal year 1999,2000, changes in the value of $100 invested in each of AutoZone'sAutoZone’s common stock, Standard & Poor's Retail Store Composite Index, Standard
& Poor's& Poor’s 500 Composite Index, and a peer group consisting of other automotive aftermarket retailers.
| AutoZone, Inc. | Peer Group | S&P 500 Index | ||||||||||
| Aug. 95 | 100.00 | 100.00 | 100.00 | |||||||||
| Aug. 96 | 101.40 | 112.30 | 119.11 | |||||||||
| Aug. 97 | 105.12 | 115.22 | 167.49 | |||||||||
| Aug. 98 | 100.47 | 114.53 | 194.27 | |||||||||
| Aug. 99 | 89.30 | 111.20 | 258.47 | |||||||||
| Aug. 00 | 81.86 | 74.25 | 292.24 | |||||||||
[PERFORMANCE GRAPH]
In past proxy statements, we had used the Standard & Poor's Retail
Store Composite Index as a comparison index, principally because the specific
industry of other automotive aftermarket retailers had few public companies
against which to compare. We now believe that the group of public automotive
aftermarket retailers is large enough to present a valid comparison to
the value of our common stock, and will be using this peer group index
in the future. The peer group consists of CSK Auto Corporation, Discount Auto Parts, Inc., Genuine Parts Company, O'ReillyO’Reilly Automotive, Inc., and The Pep Boys-Manny, Moe && Jack.
15
Audit Committee Report
To the Board of Directors of AutoZone, Inc.:
The Audit Committee of AutoZone, Inc., has reviewed and discussed AutoZone’s audited financial statements for the year ended August 26, 2000. In addition, we have discussed with Ernst & Young LLP, AutoZone’s independent auditing firm, the matters required by Codification of Statement on Auditing Standards No. 61.
The committee also has received the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1, and we have discussed with AutoZone’s management and the auditing firm such other matters and received such assurances from them as we deemed appropriate.
As a result of our review and discussions, we have recommended to the Board of Directors the inclusion of AutoZone’s audited financial statements in the annual report for the year ended August 26, 2000, on Form 10-K.
James F. Keegan, Chairman
Employment Agreements
EMPLOYMENT
AGREEMENTSMr. Adams
In September 2000, Mr. Adams announced that he would step aside as Chief Executive Officer as soon as a replacement was found. In October 2000, Mr. Vargo, Mr. Hunt, Mr. Colley,Adams and Mr. Wilhite have eachAutoZone entered into a new five-year employment agreements.agreement which becomes effective as of the date a new CEO is elected. In the new agreement, Mr. Adams'sAdams is retained as AutoZone’s Chairman at a minimum base salary of $575,000, plus bonuses, for each year that Mr. Adams remains as Chairman. During the term of the new agreement, statesMr. Adams is prohibited from competing against AutoZone or from hiring away any AutoZone employees. Mr. Adams’ service as Chairman may be terminated by AutoZone’s Board with cause at any time and after such termination all compensation to Mr. Adams ceases. The Board may terminate Mr. Adams’ service as Chairman without cause as of the date of any annual stockholders meeting following the Board’s delivery of at least 90 days written notice of termination. In addition, the Board may terminate Mr. Adams’ service as Chairman within 90 days after the election of a new CEO. Upon termination of Mr. Adams’ services as Chairman without cause, Mr. Adams shall remain as an AutoZone employee and shall receive his base salary for the remainder of the term of the agreement, shall continue to accrue credit under AutoZone’s retirement plans for that period of time, shall receive six months administrative assistance, and other benefits granted to other AutoZone employees. In addition, if Mr. Adams’ service as Chairman is terminated without cause before August 26, 2001, he will receive a bonus for the full 2001 fiscal year. If Mr. Adams’ service as Chairman is terminated after August 26, 2001, or if Mr. Adams voluntarily resigns his position as Chairman later than two years after the effective date of the agreement, he will receive a bonus for the prorated portion of the year in which he served as Chairman. Under the Agreement, “cause” means, in the good faith determination of the Board, the employee’s willful engagement in conduct which is demonstrably or materially injurious to AutoZone, monetarily or otherwise.
Under Mr. Adams’ current agreement, which has terms and conditions similar to those in the agreements described for all other executive officers below, Mr. Adams is employed as Chairman and Chief Executive Officer,CEO, with a minimum annual salary of $530,400,$530,000 and a bonus potential of 100% of annual salary.
In addition, Mr. Vargo'sAdams receives credit for time in service with Malone & Hyde under AutoZone’s supplemental pension plan.
16
Other Executive Officers
Most of AutoZone’s executive officers have employment agreements. Mr. Vargo has an employment agreement that states that he is employed as President and Chief Operating Officer, with a minimum annual salary of $424,400 and a bonus potential of 100% of annual salary. Mr. Hunt'sHunt’s agreement states that he is employed as Executive Vice President and Chief Financial Officer, with a minimum annual salary of $306,000 and a bonus potential of 75% of annual salary. Mr. Colley'sColley’s agreement states that he is employed as Senior Vice President with a minimum annual salary of $305,000, and a bonus potential of 50% of annual salary. Mr. Wilhite'sValentine’s agreement states that he is employed as Senior Vice President with a minimum annual salary of $300,000$250,000, and a bonus potential of 50% of annual salary.
All minimum salaries and bonus are subject to increase by the Compensation Committee. TheseAll agreements continue until terminated either by either the executive or by us. If an agreement is terminated by us for cause, or by the executive for any reason, the executive will cease to be an employee, and will cease to receive salary, bonus and other benefits. If an agreement is terminated by us without cause, the executive will remain an employee for three years after the termination date and will continue to receive his then-current salary and other benefits of an employee, and will receive a prorated bonus for the fiscal year in which he was terminated, but no bonuses thereafter. If an agreement is terminated by us or by the executive for reasons other than a change in control, then the executive will be prohibited from competing against AutoZone for three years after the termination date.
"Cause" “Cause” is defined in each agreement as the willful engagement by the executive in conduct which is demonstrably or materially injurious to AutoZone, monetarily or otherwise. "Change“Change in control"control” in each agreement generally means (although more specifically defined in each agreement) either the acquisition of a majority of our voting securities by or the sale of all or substantially all of our assets to a non-affiliate of the company.
Mr. Hyde is the sole stockholder of a corporation that owns an aircraft
that was leased to us for our business at times during the 1999 fiscal
year. For fiscal year 1999, we paid the corporation that owned the aircraft
lease feesCertain Relationships and expenses totaling $207,418. In addition, we employ pilots
that operated the aircraft for Mr. Hyde's personal benefit at times during
the 1999 fiscal year. For the use of the pilots' services, Mr. Hyde paid
us $98,000. We believe that the charges for our use of the plane and the
amount that we charge Mr. Hyde for the use of the pilots are reasonable
and equivalent to the fees charged by others for the use of similar aircraft
and pilots.Related Transactions
Upon his retirement as Chairman in 1997, Mr. Hyde entered into an agreement not to compete against the CompanyAutoZone until March 2002. In fiscal year 1999,2000, under the terms of that agreement, we paid Mr. Hyde $301,377,$293,693, and provided him personal security services valued at approximately $48,351.
$54,745.
Mr. Elson is Of Counsel to Holland & Knight, a law firm which provided service to AutoZone related to one real estate matter in the 2000 fiscal year for fees not exceeding $7,000. Mr. Elson took no part in the service provided as a result of the engagement and was not consulted related to the engagement.
17
Indebtedness of Management
Effective as of the beginning of the 2000 fiscal year, the Board of Directors has adopted the AutoZone, Inc. Management Stock Ownership Plan. Under this plan, eachdirectors and executive officer is encouragedofficers are required to purchase and maintain ownership of AutoZone stock in an amount whichthat is a set multiple of histheir annual salary.salary or director’s fees. As a part of the program, we have agreed to loan each outside director and executive officer up to one-half of the funds required to purchase the stock. The notes are demand notes which mature in five years or upon termination of the officer's
employment.years. Interest accrues at a 6% annually compounded rate, which approximates
the applicable federal rate as set by the Internal Revenue Service.rate. As of October 25, 2000, AutoZone’s executive officers and directors had the datefollowing balances, each of this Proxy Statement, Mr. Adams has a principalwhich is the highest balance during the term of $402,941, Mr. Vargo has a principal balance of $848,800, Mr. Hunt has
a principal balance of $408,063, and Mr. Colley has a principal balance
of $300,000.
the loan:
| Name | Title | Indebtedness | ||||
| John C. Adams, Jr. | Chairman & CEO | $ | 784,820 | |||
| Timothy D. Vargo | President & COO | $ | 903,130 | |||
| Robert J. Hunt | Executive Vice President & CFO | $ | 433,927 | |||
| Michael B. Baird | Senior Vice President | $ | 215,318 | |||
| Bruce G. Clark | Senior Vice President & CIO | $ | 132,805 | |||
| Gerald R. Colley | Senior Vice President | $ | 318,941 | |||
| Joseph P. Fabiano | Senior Vice President | $ | 244,642 | |||
| Harry L. Goldsmith | Senior Vice President | $ | 224,281 | |||
| Michael E. Longo | Senior Vice President | $ | 257,307 | |||
| Robert D. Olson | Senior Vice President | $ | 277,348 | |||
| William C. Rhodes, III | Senior Vice President | $ | 184,972 | |||
| Stephen W. Valentine | Senior Vice President | $ | 305,015 | |||
| N. Gerry House | Director | $ | 65,582 | |||
Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Securities laws require our executive officers, directors, and owners of more than ten percent of our common stock to file reports (Forms 3, 4, and 5) with the Securities and Exchange Commission and the New York Stock Exchange relating to the number of shares of common stock that they own, and any changes in their ownership. To our knowledge, all persons required to file such forms have done so in a timely manner.
manner, other than one Form 3 filed by Mr. Valentine in 1995 which inadvertently omitted some of his holdings in AutoZone common stock and, in fiscal year 2000, one transaction by Mr. Adams and one transaction by Mr. Vargo were filed late on Forms 4.
Stockholder proposals for inclusion in the Proxy Statement for the Annual Meeting in the year 20002001 must be received by June 22, 2000. Stockholders27, 2001. In accordance with our bylaws, Stockholder proposals received after June 22, 2000,August 16, 2001, but by September 8, 2000,15, 2001, may be presented at the meeting, but will not be included in the 20002001 Proxy Statement. Any stockholder proposal received after September 8, 2000,15, 2001, will not be eligible to be presented for a vote to the stockholders in accordance with AutoZone'sour bylaws. Any proposals must be mailed to AutoZone, Inc., Attention: Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101-9842.
38101-2198.
A copy of our Annual Report is being mailed with this Proxy Statement to all stockholders of record.
| By the order of the Board of Directors, |
| HARRY L. GOLDSMITH | |
| Secretary |
Memphis, Tennessee
18
Appendix A
I. Mission/Purpose
The broad purpose of the audit committee is to assist AutoZone, Inc.’s Board of Directors (the “Board”) in fulfilling its oversight responsibilities by reviewing (1) the financial information that will be provided to the stockholders and others, (2) the development and implementation of systems of internal controls by management and the Board and (3) all audit processes.
II. Organization
The audit committee members shall not be officers or employees of AutoZone or of any of its related organizations. In addition, each member shall be independent of management and free from business relationships that might conflict with their ability to exercise independent judgment regarding AutoZone’s financial matters. Furthermore, each audit committee member shall have a minimum level of financial literacy and at least one member should possess accounting or financial expertise.
III. General Functions
A. The audit committee shall serve as an informed voice to the Board in support of AutoZone’s accounting and auditing groups in their responsibilities for control and reporting of all financial transactions.
B. The audit committee shall provide a channel of communication between the internal auditors, independent accountants, and the Board. The audit committee shall meet in private session with the internal auditors and the independent accountants to discuss the process and progress of their work.
�� C. The audit committee shall report committee actions to the Board and may make appropriate recommendations.
D. The committee shall meet quarterly and even more frequently if circumstances warrant such meetings.
IV. Specific Functions
A. The audit committee shall review annually the qualifications and fees of the independent public accountants recommended by management and recommend to the board the firm to be selected to audit the financial statements of the Company for the next fiscal year. In addition, the audit committee should review management’s plans for any significant engagements of the public accountants or its affiliates for management consulting services. The committee shall discuss with the auditors their independence from management and the Company and the matters included in the written disclosures required by the Independence Standards Board.
B. The audit committee shall, after completion of each annual audit, review with management and the external auditors, the audit report, the management letter relating to the audit report, any significant questions (resolved or unresolved) between management and the public accountants that arose during the audit or in connection with the preparation of the annual financial statements, and the cooperation afforded or limitations, if any, imposed by management in the conduct of the audit.
C. The audit committee shall review the effectiveness of AutoZone’s internal audit process and adequacy of staff and resources; review the cooperation afforded or limitations, if any, imposed by management in the conduct of the internal auditing.
A-1
EXHIBIT
A
D. The audit committee shall review the adequacy of AutoZone’s computerized information systems control and security with the independent accountant and the Vice President of Financial Planning and Control.
E. The audit committee shall review with the Vice President of Financial Planning and Control and the independent accountant the results of their examination of AutoZone’s code of conduct.
F. The audit committee shall review the legal and regulatory matters that may have a material effect on the organization’s financial statements, compliance policies and programs.
G. The audit committee shall review the quality, effectiveness and appropriateness of AutoZone’s accounting practices, particularly the degree of aggressiveness or conservatism of its accounting principles and underlying estimates.
H. The committee shall review the interim financial statements with management and the independent auditors prior to the filing of the Company’s Quarterly Report on Form 10-Q. Also, the committee shall discuss the results of the quarterly review and any other matters required to be communicated to the committee by the independent auditors under generally accepted auditing standards. The chair of the committee may represent the entire committee for the purposes of this review.
I. The committee shall review with management and the independent auditors the financial statements to be included in the Company’s Annual Report on Form 10-K (or the annual report to shareholders if distributed prior to the filing of Form 10-K), including their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. Also, the committee shall discuss the results of the annual audit and any other matters required to be communicated to the committee by the independent auditors under generally accepted auditing standards.
J. The audit committee shall review the adequacy of AutoZone’s systems of internal accounting controls, review of overall compliance with administrative policies and recommend to the Board of Directors any changes in the system of internal controls, procedures and practices which the Committee determines to be appropriate. Such controls shall be evaluated through a review of the reports issued by AutoZone’s internal auditors and the independent public accountants, which identify and describe control weaknesses. The Committee shall inquire as to whether management is taking appropriate corrective action.
K. The audit committee shall review the scope and plan for the external audit and internal audits for the year.
L. The audit committee shall review and report to the Board on compliance with the Foreign Corrupt Practices Act and the Corporation’s policies on business integrity, and ethics and conflict of interest.
M. The audit committee shall be completely accessible to the Vice President of Financial Planning and Control, the independent accountant, and management (both individually and collectively) to discuss any matters the committee or these groups believe should be discussed privately with the audit committee.
A-2
APPENDIX B
AUTOZONE, INC.
AMENDED AND RESTATED
1.
PURPOSE.Purpose
The AutoZone, Inc. 2000 Executive Incentive Compensation Plan ("Plan"(“Plan”) is designed to provide incentives and rewards to eligible employees of AutoZone, Inc. (the "Company"“Company”) and its affiliates who have significant responsibility for the success and growth of the Company and assist the Company in attracting, motivating, and retaining key employees on a competitive basis. The Plan is designed to ensure that the annual bonus paid pursuant to this Plan to eligible employees of the Company is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”). This Plan shall be ratified by the Company'sCompany’s stockholders pursuant to 26 C.F.R. §§ 1.162-27(e)(4)(vi) at the annual meeting to be held on December 9, 1999, and shall be effective for the entire 2000 fiscal year. If the stockholders do not ratify the Plan, the Plan shall not become effective.
2.
ADMINISTRATION OF THE PLAN.Administration of the Plan
The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company ("Committee"(“Committee”). The Committee shall be appointed by the Board of Directors of the Company and shall consist of at least two outside directors of the Company that satisfy the requirements of Code Section 162(m). The Committee shall have the sole discretion and authority to administer and interpret the Plan in accordance with Code Section 162(m). The Committee'sCommittee’s interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding on all parties concerned, including the Company, its stockholders and any person receiving an award under the Plan.
3.
ELIGIBILITY.Eligibility
The individuals entitled to participate in the Plan shall be the executive officers of the Company, as determined by the Committee.
4.
AWARDS.Awards
Executive officers as determined by the Committee may be granted annual incentive awards under this Plan at such times of each year as will satisfy the requirements of Code Section 162(m), provided, however, that if an individual becomes an executive officer during a year, an incentive goal for that individual shall be made for that fiscal year at the time she or he becomes an executive officer. The Committee may, in its discretion, grant annual incentive awards to non-executive officers and managers of the Company outside of this Plan.
The annual incentive award to each executive officer shall be based on the Company, a subsidiary or division, attaining one or more of the following objective goals as established by the Committee for the fiscal year:
(a) earnings
B-1
Different measures of goal attainment may be set for different plan participants. The performance goal may be a single goal or a range with a minimum goal up to a maximum goal, with corresponding increases in the incentive award up to the maximum award set by the Committee and as may be limited by this Plan. Such performance goals may disregard, at the Committee'sCommittee’s discretion, the effect of one-time charges and extraordinary events such as asset write-downs, litigation judgments or settlements, changes in tax laws, accounting principles or other laws or provisions affecting reported results, accruals for reorganization or restructuring, and any other extraordinary non-recurring items, acquisitions or divestitures and any foreign exchange gains or losses. These goals shall be established by the Committee either by written consent or as evidenced by the minutes of a meeting at such times as to qualify amounts paid under this Plan for tax deductible treatment under Code Section 162(m).
Payment of an earned award will be made in cash, or at the option of the Committee, in whole or in part in Company common stock. Upon completion of each fiscal year, the Committee shall review performance verses the established goal, and shall certify (either by written consent or as evidenced by the minutes of a meeting) the specified performance goals achieved for the fiscal year (if any), and direct which award payments are payable under the Plan, if any. No payment will be made if the minimum pre-established goals are not met. The Committee may, in its discretion, reduce or eliminate an individual'sindividual’s award that would have been otherwise paid. No individual may receive in any one fiscal year an award under the Plan of an amount greater than the lesser of (i) 150%200% of such individual'sindividual’s base salary for that year or (ii) $2 million.
5.
MISCELLANEOUS PROVISIONS.Miscellaneous Provisions
(a) The Company shall have the right to deduct all federal, state, or local taxes required by law or Company policy from any award paid.
(b) Nothing contained in this Plan grants to any person any claim or right to any payments under the Plan. Such payments shall be made at the sole discretion of the Compensation Committee.
(c) Nothing contained in this Plan or any action taken by the Committee pursuant to this Plan shall be construed as giving an individual any right to be retained in the employ of the Company.
(d) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any award under the Plan.
(e) The Plan may be amended, subject to the limits of Code Section 162(m), or terminated by the Committee at any time. However, no amendment to the Plan shall be effective without prior approval of the Company'sCompany’s stockholders which would (i) increase the maximum amount that may be paid under the Plan to any person or (ii) modify the business criteria on which performance targets are to be based under the Plan.
(f) This Plan shall terminate on the fifth anniversary after the date of ratification by the Company'sCompany’s stockholders.
B-2
AUTOZONE, INC.
Proxy
Solicited on Behalf of the Board of Directors ofthe
Company for Annual Meeting of Stockholders
| Proxy Solicited on Behalf of the Board of Directors of the Company for Annual Meeting of Stockholders | ||||||
| P R O X Y | I hereby appoint Harry L. Goldsmith and Donald R. Rawlins, and each of them, as proxies, with full power of substitution, to vote all shares of common stock of AutoZone, Inc., which I would be entitled to vote at the Annual Meeting of AutoZone, Inc., to be held at the | |||||
| Election of Directors - Nominees: | (change of | |||||
| ||||||
| (01) | ||||||
(03) (05) Robert J. Hunt, | ||||||
(08) Edward S. Lampert, | ||||||
(10) Michael W. Michelson, | ||||||
| ___________________________________ ___________________________________ ___________________________________ ___________________________________ | ||||||
![[BAR]](https://files.docoh.com/DEF 14A/0000950144-00-012666/g64686dg6468604.gif)
| You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of | ||||||
FOLD AND DETACH HERE
You are invited
to attend the
![[AutoZone Logo]](https://files.docoh.com/DEF 14A/0000950144-00-012666/g64686dg6468605.gif)
ANNUAL MEETING
OF STOCKHOLDERS
December 9, 199914, 2000
10:00 a.m.
Orpheum
TheatreJ.R. Hyde III Store Support Center203123 South MainFront Street
Memphis, Tennessee
 | Please mark your votes as in this |  |  | 4631 |
This proxy when properly executed will be voted in the manner directed below. If no direction is made, this proxy will be voted FOR the election of directors and FOR proposals 2 and 3.
| The Board of Directors recommends a vote FOR Proposals 2 and 3. | |||||||||||||||||||
| FOR | WITHHELD | FOR | AGAINST | ABSTAIN | |||||||||||||||
| 1. | Election of Directors (see reverse) |  | | 2. | Approval of amendment to executive compensation plan | | | | 4. | In the discretion of the proxies named herein, upon such other matters as may properly come before the meeting | |||||||||
| For, except vote withheld from the following nominee(s): | |||||||||||||||||||
| ______________________________________ | 3. | Approval of Independent Accountants. | | | | ||||||||||||||
| |||||||||||
| Change of Address (Phone: Please write new address on reverse side. |
| SIGNATURE(S) _____________________________________________ | | DATE _________________________ | The signer hereby revokes all proxies heretofore given by the signer to vote at the meeting or any adjournments thereof. | NOTE: | FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL | | |||||||||||||||||||||||||||||||||||||||||||||||||
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FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
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Internet and Telephone Voting
We encourage you to take advantage of these convenient new ways by whichthat you can vote your shares. You can vote your shares through the Internet or the telephone. This eliminates the need to return the proxy card.
To vote your shares through the Internet or the telephone you must use the control number printed in the box above just below the perforation. The series of numbers that appearappears in the box above must be used to access the system.
1. To vote over the Internet: •
Log
on the Internet and go to the Web site http://www.eproxyvote.com/azo
| • Log on the Internet and go to the Web site http://www.eproxyvote.com/azo |
2. To vote over the telephone:
•
On a touch-tone telephone call toll free 1-877-PRX-VOTE (1-877-779-8683)
| • On a touch-tone telephone call toll free 1-877-PRX-VOTE (1-877-779-8683) |
Your Internet or telephone vote authorizes the named proxies in the same manner as if you marked, signed, dated and returned the proxy card.
If you choose to vote your shares through the Internet or the telephone, you should not mail back your proxy card.
Your vote is important. Thank you for voting.