SCHEDULE 14A
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
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[ ][_] Soliciting Material Pursuant to Rule 14a-11(c)Section 240.14a-11(c) or Rule 14a-12Section 240.14a-12
AUTOZONE, INC.
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Notes:
[LOGO OF AUTOZONE]AUTOZONE(R)]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 199618, 1997
TO THE STOCKHOLDERS OF
AUTOZONE, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AutoZone,
Inc. (the "Company") will be held at the Company's principal executive
offices,J.R. Hyde, III, Store Support Center,
123 South Front Street, Memphis, Tennessee 38103 on Thursday, December 12, 1996,18,
1997, at 10 a.m. (Central Standard Time) for the following purposes:
1. To elect eleven directors for terms of one year each and until their
successors are duly elected and qualified;
2. To approveadopt the 1996Amended and Restated Employee Stock OptionPurchase Plan;
3. To ratify the appointment of Ernst & Young LLP as independent
certified public accountants for fiscal year 1997;1998; and
4. To transact other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on October 30, 1996,22, 1997,
as the record date for determining the stockholders entitled to notice of, and
to vote at, the meeting and at any adjournment thereof.
You are cordially invited to attend this meeting.
By order of the Board of Directors
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
November 8, 1996October 29, 1997
IMPORTANT
PLEASE COMPLETE, DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
AUTOZONE, INC.
123 SOUTH FRONT STREET
MEMPHIS, TENNESSEE 38103
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 199618, 1997
This Proxy Statement and the accompanying proxy are being furnished to
stockholders of AutoZone, Inc. (the "Company" or "AutoZone") in connection
with the solicitation of the enclosed proxy by the Board of Directors of
AutoZone for use at the Annual Meeting of Stockholders of the Company to be
held at the Company's principal executive offices,J.R. Hyde, III, Store Support Center, 123 South Front Street,
Memphis, Tennessee 38103 on December 12, 1996,18, 1997, at 10 a.m. (Central Standard
Time) and at any adjournment thereof. This Proxy Statement and the
accompanying proxy are being first mailed on or about November 8, 1996.October 29, 1997.
PROXY
When the enclosed proxy is executed and returned, the shares it represents
will be voted at the Annual Meeting and at any adjournment thereof as directed
by the stockholder executing the proxy, unless it is earlier revoked. If an
executed proxy gives no directions concerning any particular matter to be
acted upon at the Annual Meeting or at any adjournment thereof, the shares
represented by the proxy will be voted in favor of the matters discussed
herein, and in the best judgment of the proxyholderproxy holder on any other matter that
may properly come before the stockholders for a vote. Any stockholder
executing and delivering the proxy may revoke it at any time prior to a vote
on a matter by the due execution of another proxy bearing a later date or by
written notification to the Secretary of the Company. Stockholders who are
present in person at the Annual Meeting may revoke their proxy and vote in
person if they so desire. Proxies reflecting broker non-votes will be counted
as present for purposes of a quorum, but not be counted as either voting for
or against any proposal. Abstentions will be included in tabulations of the
votes cast on proposals presented (other than the election of Directors) in
the same manner as votes cast against such proposals.
SOLICITATION OF PROXIES
This solicitation of proxies is being made by the Board of Directors of the
Company and the solicitation expenses will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made in person or by telephone, facsimile or electronic communication
by officers of the Company. The Company expects to reimburse brokerage houses,
banks, and other fiduciaries for reasonable expenses of forwarding proxy
materials to beneficial owners.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on October 30, 1996,10, 1997, the Company had outstanding
150,298,667151,446,220 shares of Common Stock. Each share of Common Stock entitles its
owner to one vote upon each matter to come before the Annual Meeting. Only
stockholders of record at the close of business on Wednesday, October 30,
1996,22,
1997, will be entitled to vote at the Annual Meeting and at any adjournment
thereof.
The following table sets forth certain information regarding the beneficial
ownership of AutoZone's outstanding Common Stock as of October 21, 1996,10, 1997, by
(i) any person or group known by the Company to be the beneficial owner of
more than five percent of the Company's common stock, (ii) each of AutoZone's
directors, 1
(iii) each of the executive officerspersons named in the Summary Compensation Table,
and (iv) all directors and executive officers
1
of AutoZone as a group. Except as indicated by the notes to the following
table, the holders listed below have sole voting power and investment power
over the shares beneficially held by them and the beneficial ownership is
direct.
BENEFICIAL
OWNERSHIP
AS OF
OCTOBER 21, 199610, 1997
(1)
------------------------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------------- ---------- -------
KKR Associates, L.P. (2)........................................................................ 19,908,488 13.2%13.1%
9 West 57th Street
New York, NY 10019
J.R.The Equitable Companies, Inc. (3).......................... 13,224,725 8.7%
787 Seventh Avenue
New York, NY 10019
J. R. Hyde, III (3)..................................... 12,379,946 8.2%(4)........................................ 12,319,846 8.1%
123 S.South Front Street
Memphis, TN 38103
The Prudential Insurance Company of America (4)........ 9,236,278 6.1%
Prudential Plaza
Newark, NJ 07102
Provident Investment Counsel, Inc.FMR Corp. (5)................. 8,426,972 5.6%
300 North Lake Avenue
Pasadena, CA 91101
J.C............................................... 9,023,490 6.0%
82 Devonshire Street
Boston, MA 02109
John C. Adams, Jr. (6).................................... 1,187..................................... 1,597 *
Andrew M. Clarkson (7)................................. 578,320..................................... 570,320 *
N. Gerry House.........................................House............................................. 0 --
Thomas S. HanemannRobert J. Hunt (8)................................. 687,841......................................... 100,000 *
James F. Keegan (9).................................... 2,500........................................ 5,000 *
Henry R. Kravis (2) (10)............................... -- --
Robert I. MacDonnell (2) (11).......................... -- --
Michael W. Michelson (2).................................................................. -- --
John E. Moll (12)...................................... 998,448Moll............................................... 484,791 *
George R. Roberts (2) (13).............................(10)................................. -- --
Ronald A. Terry (14)...................................(11)....................................... 5,128 *
Timothy D. Vargo (15).................................. 8,415(12)...................................... 7,402 *
Robert J. Hunt (16)Lawrence E. Evans (13)..................................... 183,040 *
Shawn P. McGhee (14)....................................... 35,137 *
Thomas S. Hanemann (15).................................... 100,0007,561 *
All directors and executive officers as a group, including
those named above (other than as set
forth in relation to KKR Associates) (20(19 persons) (17).................................................. 15,052,922 10.0%(16)....................... 13,927,837 9.2%
- --------
* Less than 1%
(1) For purposes of this table, "beneficial ownership" includes any shares
which such person has the right to acquire within 60 days of October 21,
1996.10,
1997. For purposes of computing the percentage of outstanding shares held
by each person or group of persons named above on a given date, any
security which such person or persons has the right to acquire within 60
days after such date is deemed to be outstanding, but is not deemed to be
outstanding in computing the percentage ownership of any other person.
(2) Includes (i) 10,227,594 shares (6.8%) owned of record by three limited
partnershippartnerships of which KKR Associates, L.P. is the sole general partner
(the "Partnerships"), and (ii) 9,680,894 shares (6.4%(6.3%) owned of record by
KKR Associates.Associates, L.P. The Partnerships dissolved on December 31, 1996 in
accordance with the terms of the limited partnership agreements pursuant
to which the
Partnershipsthey were organized are, by their terms,(the "Limited Partnership Agreements"). The
Partnerships continue to dissolve on December
31, 1996, unless amended by all of the limited partners to extend the
term beyondbe in existence for a winding-up period after
such date. There can be no assuranceThe Limited Partnership Agreements provide that, KKR Associates will
seek such amendments, or, if sought, that they will be approved byin connection
with the limited partners. In the event of the winding updissolution and dissolutionwinding-up of the Partnerships, KKR Associates,
will haveL.P. has the sole discretion regarding the disposition of such Common Stock,the shares
owned by the Partnerships, including public or private sales of such
Common Stock,shares, the distribution of such Common Stockthe shares to the limited partners of the
Partnerships or a combination of the foregoing. KKR Associates, in its capacity as general partner of the PartnershipsL.P., may
be deemed to
2
beneficially own the shares held by the Partnerships.
Messrs. Kravis,
Roberts, MacDonnell, Michelson, Edward A. Gilhuly, Perry Golkin, James H.
Greene, Jr., Henry R. Kravis, Robert I. MacDonnell, Paul E. Raether,
Clifton S. Robbins, Scott M. Stuart, and Michael T. Tokarz, as general
partners of KKR Associates, a limited
partnership,L.P. may be deemed to share beneficial
ownership of the shares owned by KKR Associates.Associates, L.P. However, the
2
general partners of KKR Associates, L.P., disclaim beneficial ownership of
such shares, except to the extent of their interests in such partnerships.
Messrs. Kravis, Roberts MacDonnell, and Michelson are members of AutoZone's Board of Directors.
Not included in the number of shares listed areare: 120,000 shares held by Mr.
Kravis as a trustee of an irrevocable trust created by Mr. Roberts for the
benefit of Mr. Roberts's children, 120,000 shares held by Mr. Roberts as a
trustee of an irrevocable trust created by Mr. Kravis for the benefit of
Mr. Kravis's children, 120,000 shares held in an irrevocable trust created
by Mr. MacDonnell for the benefit of Mr. MacDonnell's children, 140,000
shares held in trust for the family of Mr. Raether and for which Mr.
Raether's spouse acts as co-trustee, 20,000 shares held in trust for the
family of Mr. Gilhuly and for which Mr. Gilhuly acts as co-trustee, 2,000
shares owned by Mr. Golkin, 40,000 shares owned jointly by Mr. Greene and
his wife, and 40,000 shares owned by Mr. Tokarz.
(3) All information regarding The Equitable Companies, Inc. ("Equitable") is
based upon the Schedule 13G dated February 14, 1997, filed jointly by
Equitable, on behalf of itself and its subsidiaries; AXA, which
beneficially owns a majority interest in Equitable; and the Mutuelles AXA,
as a group which beneficially own a majority interest in AXA. The shares
are held by Equitable, AXA or Mutuelles AXA either directly or through one
or more direct or indirect subsidiaries or affiliates, and of which
Equitable, AXA, Mutuelles AXA or their subsidiaries or affiliates will be
deemed to have sole power to vote or to direct the vote for 12,820,225
shares, deemed to share power to vote or to direct the vote for 320,100
shares, deemed to have sole power to dispose or to direct the disposition
of 13,125,425 shares and deemed to share power to dispose or to direct the
disposition of 9,300 shares.
(4) Includes 170,000570,000 shares which are held in trusts for which Mr. Hyde is sole trustee, 400,000 shares held in a trust for which Mr. Hyde is co-
trustee and 325,000885,000 shares held by a charitable foundation for which Mr.
Hyde is an officer and a director and forover which Mr. Hydehe shares voting
and investment
power. Does not include 2,000 shares owned by Mr. Hyde's spouse.
(4)(5) All information regarding The Prudential Insurance Company of America
("Prudential")FMR Corp. is based upon the Schedule 13G filed by Prudential dated
February 14, 1996. Prudential may have direct or indirect voting and/or
investment discretion over 9,236,278 shares1997, which are held for the
benefitis filed on behalf of FMR Corp. and its
clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or otherand affiliates. Prudential has sole voting and investment power over 856,300
shares, shares the power to vote 7,294,078 shares, and shares the
investment power over 8,379,978 shares. Prudential's filing of the
Schedule 13G should not be construed as an admission that Prudential is,
for the purposes of Section 13 or 16 of the Securities Exchange Act, the
beneficial owner of these shares.
(5) All information regarding Provident Investment Counsel, Inc.
("Provident") is based upon the Schedule 13G filed by Provident dated
February 7, 1996. Provident is a registered investment adviser and has
direct beneficial ownership of the shares listed as a result of
Provident's discretionary authority to buy, sell, and vote shares of such
common stock for its investment advisory clients. ProvidentFMR Corp. has the sole power to vote 6,486,847or
direct the vote for 601,040 shares and nosole power to vote 1,940,125 shares.
Provident has sole dispositive power for alldispose or to direct
the disposition of the9,023,490 shares.
(6) Does not include 6001,572 shares held in trusts for the benefit of Mr.
Adams'Adams's children.
(7) Includes 92,400112,400 shares held by a charitable trust for which Mr. Clarkson
is sole trustee, with respect to which Mr. Clarkson disclaims beneficial
ownership. Does not include 2,000 shares owned by members of Mr.
Clarkson's immediate family nor does it include 56,000 shares held in
trusts for the benefit of certain members of Mr. Clarkson's family, with
respect to both of which Mr. Clarkson disclaims beneficial ownership.
(8) Includes 680,0002,000 shares issuable upon exercise of stock options which are
exercisable immediately or within sixty (60) days after October 21, 1996.owned by Mr. Hunt's wife.
(9) Does not include 400,000 shares that are held in trust for a family member
of Mr. Hyde for which Mr. Keegan is a co-trustee, with respect to which
Mr. Keegan disclaims any beneficial ownership. Does not include 800 shares
owned by members of Mr. Keegan's family with respect to which Mr. Keegan
disclaims any beneficial ownership.
(10) Does not include 120,000 shares of Common Stock held by Mr. Kravis as a
trustee of an irrevocable trust created by
Mr. Roberts for the benefit of Mr. Roberts'Roberts's children, (the "Roberts Trust"). As co-trustee, Mr. Kravis
shares the authority to vote and dispose of the shares, but has no
economic interest in such shares. Does notnor does it include
another 120,000 shares of
Common Stock held in an irrevocable trust created by Mr. Kravis for the
benefit of his children with respect to which Mr. Kravis disclaims any
beneficial ownership.
(11) Does not include 120,000 shares of Common Stock held in an irrevocable
trust created by Mr. MacDonnell for the benefit of Mr. MacDonnell's
children (the "MacDonnell Trust") with respect to which Mr. MacDonnell
disclaims any beneficial ownership.
(12) Does not include 150,000 shares held by Mr. Moll's spouse with respect to
which Mr. Moll disclaims beneficial interest.
(13) Does not include 120,000 shares of Common Stock held by Mr. Roberts as a trustee of the MacDonnell Trust. As co-trustee,a trust over
which Mr. Roberts shares the
authority to vote and dispose of the shares, but has no economic interest
in such shares. Does not include 120,000 shares of Common Stock held in
the Roberts Trust with respect to whichinvestment power. Mr. Roberts disclaims any
beneficial ownership.
3
(14)ownership of these shares.
(11) Does not include 12,558 shares owned by members of Mr. Terry's immediate
family.
(15)(12) Does not include 4,635 shares owned by members of Mr. Vargo's immediate
family.
(16)(13) Includes 2,000 shares owned by Mr. Hunt's wife.
(17) Includes 984,668182,667 shares issuable upon exercise of stock options which are
exercisable immediately or within sixty (60)60 days after October 21, 1996.10, 1997. Does not
include 9,000 shares owned by Mr. Evans's spouse, with respect to which
Mr. Evans disclaims beneficial ownership.
(14) Includes 33,335 shares issuable upon exercise of stock options which are
exercisable immediately or within 60 days after October 10, 1997.
(15) Mr. Hanemann retired as President of the Company in November 1996 and
resigned as a director in September 1997.
(16) Includes 426,004 shares issuable upon exercise of stock options which are
exercisable immediately or within 60 days after October 10, 1997. Does not
include any shares deemed beneficially owned by KKR Associates, L.P. (see
note 2) or Mr. Hanemann (see note 15).
3
PROPOSAL 1--ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of thirteen members,the Company has set the number of directors at
eleven, each of whom iswas elected to serve for a one year term at the 1996 Annual
Meeting, except for Mr. Hunt who was elected by the directors to replace Mr.
Hanemann after his retirement from the Board of one year.Directors in September 1997.
Eleven directors will be elected at the Annual Meeting to serve until the
Annual Meeting in 1997.
Henry R. Kravis and Robert I. MacDonnell, both current directors of the
Company, have decided not to stand for re-election.1998. Proxies representing shares of Common Stock held on
the Record Date that are returned duly executed will be voted, unless
otherwise specified, in favor of the eleven nominees for the Board of
Directors named below. All nominees are members of the present
Board of Directors and were elected as directors at the 1995 Annual Meeting,
except for Messrs. Adams and Vargo, who were elected on March 2, 1996, and Dr.
House, who was elected to the Board on August 7, 1996. All nominees have consented to serve if elected, but
should any nominee be unavailable to serve (which event is not anticipated)
the persons named in the proxy intend to vote for such substitute nominee as
the Board of Directors may recommend. The nominees shall be elected by a
plurality of the votes cast in the election by the holders of the Common Stock
represented and entitled to vote at the Annual Meeting, assuming the existence
of a quorum.
Biographical and other information for each nominee, each of whom is an
incumbent director, is set forth below:
J.C.JOHN C. ADAMS, JR., 48--VICE CHAIRMAN,49--CHAIRMAN, CHIEF OPERATINGEXECUTIVE OFFICER, AND DIRECTOR
J.C.John C. Adams, Jr., has been a director since 1996. Mr. Adams was elected
Chairman and Chief Executive Officer in March 1997, had been President and
Chief Executive Officer since December 1996, and had been Vice Chairman and
Chief Operating Officer and a
director insince March 1996. Previously, he was Executive Vice
President--
DistributionPresident--Distribution since 1995. From 1990 to 1994, Mr. Adams was a co-ownerco-
owner of Nicotiana Enterprises, Inc., a company primarily engaged in food
distribution. From 1983 to 1990, Mr. Adams was President of the Miami Division
of Malone & Hyde, Inc. ("Malone & Hyde") the former parent company of
AutoZone.
The
Company anticipates that Mr. Adams will be elected President and Chief
Operating Officer upon Mr. Hanemann's retirement on December 12, 1996.
ANDREW M. CLARKSON, 59--DIRECTOR60--DIRECTOR
Andrew M. Clarkson has been a director since 1986 and is employed by the
Company as Chairman of the Finance Committee. Mr. Clarkson had been Vice
President and Treasurer of the Company in 1986, Senior Vice President and
Treasurer of the Company from 1986 to 1988, was Secretary from 1988 to 1993
and was Treasurer from 1990 to 1995. Previously Mr. Clarkson was Chief
Financial Officer of Malone & Hyde from 1983 to 1988. THOMAS S. HANEMANN, 59--PRESIDENT AND DIRECTOR
Thomas S. HanemannMr. Clarkson is also a
director of Amphenol Corporation.
N. GERRY HOUSE, 50--DIRECTOR
N. Gerry House has been a director and President since 1994. He had
previously been Executive Vice President--Stores and Distribution between 1992
and 1994, and had been Senior Vice President--Stores of AutoZone since 1986.
Previously, Mr. Hanemann was President of Ike's and Super D, drug store
divisions of Malone & Hyde. Mr. Hanemann has been employed by AutoZone or
Malone & Hyde since 1974. Mr. Hanemann has expressed his intention to retire
as President of the Company as of December 12, 1996.
N. GERRY HOUSE, 49--DIRECTOR
N. Gerry House was elected to the Board of Directors on August 7, 1996. Dr. House has been
Superintendent of the Memphis, Tennessee, City Schools since 1992. Prior to
that time Dr. Houseshe was Superintendent of the Chapel Hill-
CarrboroHill-Carrboro School System in
North Carolina.
ROBERT J. HUNT, 48--EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
DIRECTOR
Robert J. Hunt was elected a director in September 1997, and has been
Executive Vice President and Chief Financial Officer since 1994. Prior to that
time, Mr. Hunt was Executive Vice President, Chief Financial Officer, and a
Director of Price Company from 1991 to 1993. Mr. Hunt had been employed by
Malone & Hyde from 1984 to 1991, where he was Executive Vice President and
Chief Financial Officer from 1988 to 1991.
J.R. HYDE, III, 53--CHAIRMAN54--DIRECTOR AND FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
J.R. Hyde, III, has been a director since 1986. He had been Chairman of the
Board of Directors and Chief Executive Officer since 1986.from the Company's
incorporation in 1986 until his retirement as Chief Executive Officer in
December 1996 and his retirement as Chairman in March 1997. Previously, Mr.
Hyde was Chief Executive Officer of Malone & Hyde. Mr. Hyde hashad been employed
by AutoZone or Malone & Hyde since 1965. Mr. Hyde is also a director of
Federal Express Corp.Corporation.
4
JAMES F. KEEGAN, 64--DIRECTOR65--DIRECTOR
James F. Keegan has been a director since 1991. Mr. Keegan hasis currently the
Chairman of Staff Line, Inc. Mr. Keegan had been a managing director of Weibel
Huffman Keegan, Inc., an investment management firm, locatedduring the past five
years, until his retirement in Memphis, Tennessee, since 1991. Previously, Mr. Keegan served
as Senior Vice President of National Bank of Commerce and as President and
Chief Executive Officer of Commerce Investment Corporation, a broker/dealer
subsidiary of National Bank of Commerce.August 1997.
MICHAEL W. MICHELSON, 45--DIRECTOR46--DIRECTOR
Michael W. Michelson has been a director since 1986. Mr. Michelson has been
a General Partnermember of the limited liability company which is the general partner of
Kohlberg Kravis Roberts & Co., L.P., since January 1996. Prior to that time he
was a general partner of Kohlberg Kravis Roberts & Co., L.P. Mr. Michelson is
also a general partner of KKR during the last five years.Associates, L.P. Mr. Michelson is also a
director of Fred Meyer, Inc.,Amphenol Corporation, Doubletree Corporation, Owens-Illinois,
Inc., Owens-Illinois Group,
Inc., Red Lion Hotels, Inc., Red Lion Properties, Inc., and Union Texas Petroleum Holdings, Inc.
JOHN E. MOLL, 62--DIRECTOR63--DIRECTOR
John E. Moll has been a director since June 1992 and from 1986 until 1988.
Mr. Moll wasis the former President and Chief Operating Officer for Fleming
Companies, Inc., from 1990 until his retirement in 1992, and was Executive Vice President
of Fleming Companies, Inc., from 1988 to 1989.1992. Previously, Mr. Moll was
Executive Vice President--Wholesale Foods of Malone and Hyde.
GEORGE R. ROBERTS, 53--DIRECTOR54--DIRECTOR
George R. Roberts has been a director since 1986. Mr. Roberts has beenis a General Partnerfounding
partner of Kohlberg Kravis Roberts & Co., L.P. and, effective January 1996, he
became a managing member of the limited liability company which is the general
partner of Kohlberg Kravis Roberts & Co., L.P. Mr. Roberts is also a general
partner of KKR during the last five years.Associates, L.P. Mr. Roberts is also a director of Borden,
Inc., Duracell International,Bruno's, Inc., Evenflow & Spalding Holdings Corporation, Flagstar
Companies, Inc., Flagstar Corporation, IDEX Corporation, K-III Communications
Corporation, Neway Anchorlok International,KinderCare Learning Center, Inc., KSL Recreation Group, Inc.,
Merit Behavioral Care Corporation, Newsquest Capital, PLC, Owens-Illinois,
Inc., Owens-
IllinoisOwens-Illinois Group, Inc., Red Lion Hotels, Inc., Red Lion Properties,Randall's Food Markets, Inc., Safeway Inc.,
Union Texas Petroleum Holdings, Inc., Walter Industries, Inc.,
and World Color Press, Inc.
RONALD A. TERRY, 65--DIRECTOR66--DIRECTOR
Ronald A. Terry has beenwas elected a Director sincein 1995. Mr. Terry was the Chairman
of First Tennessee National Corporation, a bank holding company, and of First
Tennessee Bank National Association, a national bank, from 1973 until his
retirement in January 1996,1995, and had been Chief Executive Officer until 1994. Mr. Terry
is also a director of BellSouth Corporation and Promus Hotels Corporation.
TIMOTHY D. VARGO, 44--VICE CHAIRMAN45--PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR
Timothy D. Vargo has been a director since 1996 and was elected President
and Chief Operating Officer in March 1997. Previously, Mr. Vargo had been Vice
Chairman and a director in March 1996.
Previously, he wasChief Operating Officer since 1996, Executive Vice President--MerchandisingPresident--
Merchandising and Systems Technology since 1995 and had been Senior Vice
President--Merchandising sincein 1995. Previously, Mr. Vargo was Senior Vice President--Merchandising for
AutoZonePresident--
Merchandising from 1986 to 1992 and Director of Stores for AutoZone from 1984 to 1986.
Mr. Roberts and Mr. Kravis are first cousins. Mr. MacDonnell and Mr. Roberts
are brothers-in-law. Messrs. Kravis and MacDonnell have decided not to stand
for re-election.
The Company's Board of Directors held nineeight meetings in fiscal year 1996.
Except for Messrs. Kravis, MacDonnell, and Roberts,1997.
Other than Dr. House, each director attended at least 75% of the total number
of Board of Directors and Committee meetings during the fiscal year. The Board
of Directors has established standing Audit, Compensation and Finance
Committees. The Board of Directors does not have a nominating committee.
As directed by the Board, the Audit Committee recommends independent
auditors to be employed by the Company, confers with the auditors regarding
their audit of the Company, reviews the auditors' fees and other terms of
their engagement, considers the adequacy of internal financial controls and
the results of fiscal policies and financial management of the Company, meets
with the Company's internal auditors, reviews the auditors' examination
results, and recommends changes in financial policies or procedures as
suggested by the auditors. During fiscal year 1996,1997, the Audit Committee,
consisting of Messrs.Mr. Keegan (Chairman), Mr. Moll and Mr. Terry, held two
meetings.
5
The Compensation Committee reviews new and modified executive salary and
incentive compensation programs and stock option plans, direct and indirect
compensation matters, and management's compensation actions for executive
officers and other key personnel. During fiscal year 19961997 the Compensation
Committee, consisting of Messrs.Mr. Terry (Chairman), Mr. Keegan, MacDonnell, and Michelson,Dr. House, held
seveneleven meetings.
The Finance Committee reviews financing options for AutoZonethe Company and makes
recommendations to management and AutoZone'sthe Board of Directors as to appropriate
financing mechanisms. During fiscal year 1997, the Finance Committee,
consisting of Mr. Clarkson is the sole member of the
Finance Committee.(Chairman) and Mr. Michelson, held one meeting.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to (i) the Company's
current Chief Executive Officer, (ii) the Company's former Chief Executive
Officer, (iii) the Company's former President, and (iv) its other four most
highly paid executive officers, for the fiscal years ended August 30, 1997,
August 31, 1996, and August 26, 1995, and August 27, 1994.1995.
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------------------------------------- --------------------- ALL OTHER
NAME AND OTHER ANNUAL SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(1) COMPENSATION ($)(2) COMPENSATION($)(3) OPTIONS/SARS (#)(4)(3) ($)(5)(4)
------------------ ---- ----------------------- ------------ ------------------------------------- --------------------- ------------
John C. Adams, Jr. (5).. 1997 413,952 199,268 -- 350,000 2,032
Chairman and Chief 1996 292,788 92,859 -- 200,000 2,219
Executive Officer 1995 134,269 67,135 -- 200,000 1,625
J.R. Hyde, III (6)......III.......... 1997 276,849 159,925 55,104 0 1,812,561
Former Chairman and 1996 634,675 404,755 94,048 0 5,544
Chairman and Chief Executive Officer 1995 601,650 451,238 0-- 0 5,561
Executive Officer 1994 581,300 581,300 0 0 6,354
J.C. Adams, Jr.(6)...... 1996 292,788 92,859 0 200,000 2,219
Vice Chairman and Chief 1995 134,269 67,135 0 200,000 1,625
Operating Officer
Timothy D. Vargo (7)(6).... 1997 356,859 170,973 -- 250,000 2,032
President and Chief 1996 291,282 92,583 0-- 150,000 2,442
Vice ChairmanOperating Officer 1995 84,808 63,606 0-- 200,000 507
Thomas S. Hanemann...... 1997 378,525 0 -- 0 571,772
Former President 1996 374,567 238,875 0-- 0 5,833
President
1995 350,000 262,500 0-- 0 8,104
1994 315,292 315,292Lawrence E. Evans....... 1997 208,000 76,160 -- 50,000 1,805
Executive Vice 1996 203,846 65,000 -- 0 200,000 8,7892,958
President 1995 130,000 97,500 -- 0 4,044
Robert J. Hunt (8)......Hunt.......... 1997 261,769 96,223 -- 50,000 2,032
Executive Vice 1996 249,711 79,625 14,257 0 2,878
Executive VicePresident and Chief 1995 144,231 81,130 51,910 150,000 1,343
Financial Officer
Shawn P. McGhee......... 1997 280,769 103,115 -- 75,000 2,029
Executive Vice 1996 209,423 66,656 -- 100,000 772
President 1995 120,769 85,269 -- 70,000 2,831
- --------
(1) Salary for 1996 fiscal year was paid over 53 weeks. Salary for all other
years shown is paid over a 52 week fiscal year.
(2) Bonuses are shown in the fiscal year in which earned although paid in the
following fiscal year.
(3)(2) Other Annual Compensation stated consists principally of amounts paid toto: Mr. Hyde in
1997 and 1996 for personal security services, and Mr. Hunt in 1996 for
reimbursement of tax expenses and in 1995 for relocation allowances paid in 1995.
(4)allowances.
(3) All options arein 1997 were granted pursuant to the Company's 1996 Stock
Option Plan. Options granted in 1996 and 1995 were granted pursuant to the
Company's Amended and Restated Stock Option Plan. The number of options has been adjusted for a 2-for-1
stock split in April 1994. AutoZone did not grant
SARs in the 1994, 1995, and 1996 or 1997 fiscal years.
(5)6
(4) All Other Compensation for fiscal year 19961997 consists of term life
insurance provided for the benefit of the named executive's designated
beneficiary. Amounts deemed received bybeneficiary, except as otherwise stated. For Mr. Hyde, the named executiveamount stated
includes $1,230 for term life insurance, $1,455,133 to be paid in
installments and $344,867 as a resultthe Company's estimated cost of participation inproviding
security for Mr. Hyde from March 18, 1997, the Employee Stock Purchase Plan are included for fiscal
years 1994 and 1995, but have been omitted for fiscal year 1996date of his retirement as
Chairman, until March 18, 2002, pursuant to the regulationsagreement described in the
section entitled "Employment Agreements and Agreements with Former
Officers," and $11,331 as a director's fee prorated from his retirement as
Chairman to the end of the Securitiesfiscal year, which is the same amount paid to
other directors that are not executive officers of the Company. For Mr.
Hanemann, the amount stated includes a $50,000 lump sum paid and Exchange Commission.
(6)$500,000
to be paid in equal installments over the next two fiscal years pursuant
to the agreement described under "Employment Agreements and Agreements
with Former Officers," and $21,772 paid as a director's fee prorated from
his retirement as President to the end of the fiscal year, which is the
same amount paid to other directors that are not executive officers of the
Company.
(5) Mr. Adams was employed bybecame an employee of the Company as an Executive Vice President in November 1994, and was promoted to Vice Chairman and Chief Operating
Officer in March 1996. Accordingly, the amounts listed1994. Therefore,
salary shown for fiscal year 1995 areis for a partial fiscal year.
6
(7)(6) Mr. Vargo was employed bybecame an employee of the Company as a Senior Vice President in February 1995, was promoted to Executive Vice President in June 1995, and
was promoted to Vice Chairman in March 1996. Accordingly, the amounts
listed1995. Therefore,
salary shown for fiscal year 1995 areis for a partial fiscal year.
(8)(7) Mr. Hunt was employed bybecame an employee of the Company as an Executive Vice President in DecemberNovember 1994. Accordingly, the amounts listedTherefore,
salary shown for fiscal year 1995 areis for a partial fiscal yearyear.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the named executive officers during the fiscal year ended August 31, 1996,30, 1997,
pursuant to the Company's Amended and Restated1996 Stock Option Plan. The Company did not grant
SARs in the 19961997 fiscal year.
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL
% OF REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS/SARS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS/SARS EMPLOYEES OR BASE FOR OPTION TERM (2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#)(1) YEAR ($/SH)(1) DATE 5% ($) 10% ($)
---- ------------ ------------ --------- ---------- ---------- ----------
John C. Adams, Jr. ..... 200,000 7.4% 20.125 1/8/07 2,531,301 6,414,813
100,000 3.7% 22.875 6/7/07 1,438,596 3,645,686
50,000 1.9% 23.00 6/11/07 723,229 1,832,804
J.R. Hyde, III.......... 0 -- -- -- -- --
J.C. Adams, Jr.......... 200,000 12.3 27.25 03/06/06 3,427,472 8,685,894
Timothy D. Vargo........ 150,000 9.2 27.25 03/06/06 2,570,604 6,514,4205.5% 20.125 1/8/07 1,898,476 4,811,110
75,000 2.8% 22.875 6/7/07 1,078,947 2,734,264
25,000 0.9% 23.00 6/11/07 361,614 916,402
Thomas S. Hanemann...... 0 -- -- -- -- --
Lawrence E. Evans....... 50,000 1.9% 20.125 1/8/07 632,825 1,603,703
Robert J. Hunt.......... 0 -- -- -- -- --50,000 1.9% 20.125 1/8/07 632,825 1,603,703
Shawn P. McGhee......... 50,000 1.9% 20.125 1/8/07 632,825 1,603,703
25,000 0.9% 23.5625 7/2/07 370,458 938,814
- --------
(1) All options vest and are exercisable in one-quarterone-third increments on each of
the third, fourth, fifth, sixth and seventhfifth years, respectively, after the date of grant.
The exercise price of all options is the fair market value of the
Company's stock at the time of the grant.
(2) These amounts represent assumed rates of appreciation for the market value
of the Company's stock from the date of the grant until the end of the
option period at rates arbitrarily set by the Securities and Exchange
Commission. They are not intended to forecast possible future appreciation
in the Company's stock and any actual gains on exercise of options are
dependent on the future performance of the Company's stock.
7
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table shows the stock option exercises by the named executive
officers during the fiscal year ended August 31, 1996.30, 1997. In addition, this table
includes the number of exercisable and non-exercisableunexercisable stock options held by
each of the named executives as of August 31, 1996.30, 1997. The fiscal year-end value
of "in-the-money" stock options is the difference between the exercise price
of the option and the fair market value of the Company's common stock (not
including options with an exercise price greater than the fair market value)
on August 30, 199629, 1997 (the last trading day before the fiscal year end) which was
$27.25$28.25 per share. AutoZone has never granted SARs.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------
John C. Adams, Jr....... 0 -- 0 750,000 0 3,250,000
J.R. Hyde, III.......... 0 -- 0 0 0 0
0
J.C. Adams, Jr.......... 0 0 0 400,000 0 425,000
Timothy D. Vargo........ 0 -- 0 600,000 0 350,000 0 425,0002,528,125
Thomas S. Hanemann...... 200,000 3,991,500 480,000 100,000 12,419,800 0
0 653,334 226,666 16,740,045 482,255Lawrence E. Evans....... 2,000 48,000 142,667 163,333 2,706,171 849,579
Robert J. Hunt.......... 20,000 486,700 0 150,000-- 0 318,750200,000 0 875,000
Shawn P. McGhee......... 0 -- 20,001 291,667 347,401 1,100,109
- --------
(1) "Value Realized" is the difference between the fair market value of the
underlying shares on the exercise date and the exercise price of the
option.
7
PENSION PLAN TABLE
The following table shows the estimated annual benefits payable upon
retirement at age 65 and the payment of a single-life annuity to a participant
with 60 monthly payments guaranteed.
YEARS OF SERVICE
------------------------------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
$100,000 $25,894 $34,525 $43,157 $43,157 $43,157$25,731 $34,308 $42,885 $42,885 $42,885
120,000 31,594 42,125 52,657 52,657 52,65731,431 41,908 52,385 52,385 52,385
140,000 37,294 49,725 62,157 62,157 62,15737,131 49,508 61,885 61,885 61,885
160,000 40,144 53,525 66,907 66,907 66,90742,831 57,108 71,385 71,385 71,385
180,000 40,144 53,525 66,907 66,907 66,90742,831 57,108 71,385 71,385 71,385
Remuneration includes Salary and Bonus as set forth in the Summary
Compensation Table. A participant's benefit is based on such person'sthe average monthly
earnings for the consecutive five year period during which the participant had
his or her highest level of earnings. The benefits stated in the table are the
benefits to be received by a participant and will not be reduced by Social
Security or other amounts received by a participant. RemunerationNeither remuneration
greater than $150,000 is not credited for benefit calculation
purposes. Years$160,000 nor years of service in excess of 25 years are not consideredis credited
for benefit calculation purposes.
The following are the current years of credited service under the Pension
Plan for the named executive officers in the Summary Compensation Table: John
C. Adams, Jr.--2; J.R. Hyde, III--25 (maximum); J.C. Adams, Jr.--1; Timothy D. Vargo--10;Vargo--11; Thomas
S. Hanemann--21; andHanemann--22; Lawrence E. Evans--11, Robert J. Hunt--1.Hunt--2, and Shawn P.
McGhee--9.
8
EMPLOYMENT AGREEMENTS AND AGREEMENTS WITH FORMER OFFICERS
Upon his retirement as Chairman of the Company on March 18, 1997, the
Company and Mr. Hyde entered into an agreement as subsequently amended in
which Mr. Hyde agreed not to compete with the Company through March 18, 2002,
in consideration of the Company agreeing (i) to pay Mr. Hyde a prorated bonus
for the 1997 fiscal year for the period beginning September 1, 1996, to March
18, 1997, (ii) to pay Mr. Hyde the total sum of $1,455,133 in installments
beginning on March 18, 1997, and ending on March 18, 2002, (iii) to provide
health and dental insurance from March 18, 1997, to March 18, 2002, as if Mr.
Hyde remained employed by the Company, and (iv) to continue to provide
personal security services through March 18, 2002.
Upon his retirement as President of the Company on November 8, 1996, the
Company and Mr. Hanemann entered into an agreement in which Mr. Hanemann
remains an employee of the Company and he agrees not to compete with the
Company through August 26, 1999, in consideration of the Company agreeing (i)
to pay Mr. Hanemann the full bonus for the 1996 fiscal year, (ii) to pay Mr.
Hanemann a lump-sum payment of $50,000, (iii) to continue to pay Mr. Hanemann
his current salary through the 1997 fiscal year ended August 30, 1997, and
(iv) to pay Mr. Hanemann a salary of $250,000 for each of the 1998 and 1999
fiscal years. The Company and Mr. Hanemann agreed to terminate options to
purchase 100,000 shares of common stock granted to Mr. Hanemann in the 1994
fiscal year. Mr. Hanemann will retain all other benefits as offered other
employees of the Company until August 28, 1999.
In fiscal year 1997, the Company entered into an agreement with Mr. Adams in
which the Company agreed to employ Mr. Adams as Chairman and Chief Executive
Officer of the Company for a period of five years. The Company agreed to pay
Mr. Adams a salary of $500,000 per year, subject to increases as determined by
the Compensation Committee, and a bonus of up to 75% of his salary in
accordance with the policies and procedures established by the Compensation
Committee. In addition, the Compensation Committee reserves the right to pay
additional compensation as it may deem appropriate. The Company may terminate
the agreement without cause at any time, in which case for a period of three
years thereafter Mr. Adams shall remain an employee of the Company, continue
to receive his then current salary and all benefits available to the Company's
employees, but no bonus shall be payable. The agreement may be terminated with
cause by the Company or voluntarily by Mr. Adams at any time, in which case
Mr. Adams shall cease to receive salary, bonus and other benefits. Upon
termination of the Agreement by AutoZone with or without cause, or by Mr.
Adams for reasons other than a change in control of the Company, Mr. Adams
will be prohibited from competing with the Company for a period of three years
from the termination date.
In fiscal year 1997, the Company entered into agreements with Messrs. Vargo,
Hunt and McGhee (individually an "Executive") in which the Company agreed to
employ each Executive for a period of five years in their current capacity
with the Company. The Company agreed to pay minimum annual salaries as
follows: Mr. Vargo, $400,000; Mr. Hunt, $285,000; Mr. McGhee, $300,000, each
of which is subject to increases as determined by the Compensation Committee.
Further, each Executive is entitled to receive a bonus each year in accordance
with the policies and procedures established by the Compensation Committee.
The amount of each bonus is based on a percentage of the annual salary of each
Executive. The bonus percentage established for Mr. Vargo is 75%, and for
Messrs. Hunt and McGhee, 60%. In addition, the Compensation Committee reserves
the right to pay additional compensation as it may deem appropriate. The
Company may terminate the agreements without cause at any time, in which case
for a period of three years the Executive shall be an employee of the Company,
continue to receive his then current salary and he will receive all benefits
available to the Company's employees, but no bonus shall be payable. The
agreement may be terminated with cause by the Company or voluntarily by the
Executive at any time, in which case the Executive shall cease to receive
salary, bonus and other benefits. Upon termination of an Agreement by AutoZone
with or without cause, or by the Executive for reasons other than a change in
control of the Company (or a change in management, in the case of the
agreement with Mr. McGhee), the Executive will be prohibited from competing
with the Company for a period of three years from the termination date.
9
"Cause" is defined in each agreement discussed above as meaning the willful
engagement by the Executive in conduct which is demonstrably or materially
injurious to AutoZone, monetarily or otherwise. "Change in control" in each
agreement is defined as (a) the acquisition after the date hereof, in one or
more transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")), by
any person or entity or any group of persons or entities who constitute a
group (as defined in Section 13(d)(3) under the Exchange Act) of any
securities such that as a result of such acquisition such person, entity or
group beneficially owns the Company's then outstanding voting securities
representing 51% or more of the total combined voting power entitled to vote
on a regular basis for a majority of the Board of Directors of the Company, or
(b) the sale of all or substantially all of the assets of the Company
(including, without limitation, by way of merger, consolidation, lease or
transfer) in a transaction where the Company or the beneficial owners (as
defined in Rule 13d-3(a)(1) under the Exchange Act) of capital stock of the
Company do not receive (i) voting securities representing a majority of the
total combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls the
acquiring entity or (ii) securities representing a majority of the total
combined equity interest in the acquiring entity, if other than a corporation;
provided however, that a change in control shall not be deemed to occur upon
the transfer, sale or disposition of shares of capital stock of the Company to
any person or persons who are affiliates of the Company on the date of the
agreement. "Change in management" is defined in Mr. McGhee's agreement as a
change in the current Chief Executive Officer or Chief Operating Officer.
COMPENSATION OF DIRECTORS
Directors of the Company who do not serve as executive officers receive an
annual fee of $25,000. Members of the Committees of the Board of Directors who
do not serve as executive officers receive $1,000 for each Committee meeting
attended in person.
Messrs. Kravis, MacDonnell, Michelson, and Roberts are each a general
partner of KKR. During 1996, KKR received $271,666 for management, consulting,
and financial services provided to the Company. Such services included advice
and assistance concerning the operation, planning, and financing of the
Company. The services ended as of the end of the 1996 fiscal year. This
arrangement is also discussed under "Compensation Committee Interlocks and
Insider Participation."
Mr. Clarkson is chairman of the Finance Committee and an employee of the
Company, where he advises the Company on treasury matters and long-term
strategic planning. Mr. Clarkson was paid salary and bonus for the 1996 fiscal
year of $51,305, in addition to the other benefits ordinarily received by
employees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors ("Committee") is
composed of N. Gerry House, James F. Keegan, Michael W. Michelson, and Robert I. MacDonnell.
These persons are allRonald A. Terry, each of whom
is a non-employee directorsdirector of the Company and Mr. Michelson
and Mr. MacDonnell are general partners of KKR Associates which controls a
significant portion of the outstanding shares of the Company (see "Voting
Securities and Security Ownership of Certain Beneficial Owners and
Management").Company.
The Committee reviews and approves executive compensation, establishes
target profit goals, makes grants of long-term incentives, and determines the
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company. The goal of the executive compensation program is to
reward executives for their performance and enhancement of stockholder value.
8
The Company's executive compensation program is designed to attract and
retain executives who are key to the long-term success of the Company and
align compensation with the attainment of the Company's business goals and the
increase in share value. The Company utilizes the same philosophy as the
Committee in establishing compensation for employees other than executive
officers.
Executive compensation consists of (1) base salary, (2) annual performance
incentives, and (3) long-term incentives. The Committee reviews executive
compensation annually and makes appropriate adjustments based on (i) Company
performance, (ii) achievement of predetermined goals, and (iii) changes in an
executive's duties and responsibilities.
Base
Salary. The Committee desires that overall compensation reflect the
performance of each individual executive over time. Base salaries are set at
levels subjectively determined by the Committee to adequately reward and
retain capable executives, including the Chief Executive Officer. The
Committee considers the importance of and skills required in a particular
executive position in establishing base salary.
At the beginning of each fiscal year, the Committee reviews and establishes
the annual salary recommendations made under the direction of each officer, including the Chief Executive Officer for
all executive officers.Officer. The
Committee makes an independent, subjective determination of the
appropriateness10
appropriate level of each recommendation and may accept
such recommendation as made or may increase or decrease such recommendation as
theofficer's salary. The Committee deems appropriate. Neither the Company in making
recommendations, nor the Committee in approving base salary usesdoes not use any
mechanical formulations or weighting of any of the factors considered.
Mr. Hyde received a base salary of $634,675 in fiscal year 1996 which
represents a 5.5% increase over fiscal year 1995, while the Company's net
income increased 20% in 1996 over fiscal 1995 net income.
Annual Performance Incentives. The Company has established the Executive
Incentive Compensation Plan (the "Plan"), which is an annual bonus
plan for executive officers that is based on the attainment by the Company of
targeted increases in pretax earnings.earnings, which are set at the beginning of each fiscal
year. Under the Plan,bonus plan, a maximum bonus is established for each executive
officer. As a general matter, as an executive's level of
management responsibility in the Company increases, a greater portion of his
or her potential total compensation depends on the Company's performance as
measured by increases in pretax profit over the previous year. This bonusofficer, which may equal up to a maximum of 100% of an executive's base salary
depending on the position of the executive and the achievement of certain
profit goals set by the Committee. UnderAs a general matter, as an executive's
level of management responsibility in the Plan, no executive officer may receiveCompany increases, the greater the
portion of his or her potential total compensation depends on the Company's
performance as measured by increases in any one
fiscal year an award greater thanearnings over the lesser of 100% of such individual's base
salary for that year or $2 million.previous year. No
bonus is payable under the Planbonus plan unless a predetermined minimum increase
in pretax earnings is achieved. It is the Committee's desire that a significant
portion of each officer's compensation be directly related to the performance
of the Company.
In fiscal year 1996, Mr. Hyde received a bonus under the Plan of $404,755.
Long Term Incentives. In an effort to properly align the long-term interests
of the Company's management and stockholders, the Committee has a history of
awarding non-qualified stock options to all levels of management, including
individual store managers. In the past, the Company's Amended and RestatedThe 1996 Stock Option Plan ("FormerOption Plan") under
which the Company couldmay award non-qualified or incentive stock options, and non-qualified stock options, had providedgives
employees with the opportunity to acquire an equity interest in the Company and to
participate in appreciation of the value of the Company's common stock. The
Committee believes that the FormerOption Plan was important in enablingenables the Company to attract and
retain the highest quality managers. Under the FormerOption Plan, the Committee wasis
responsible for establishing who wasis granted options, the term of the options,
requisite conditions for exercise, and the number of options to be granted.
Stock option awards granted to any recipient are made by a subjective
determination by the Committee, upon recommendation by the Chief Executive
Officer, who considers the manager'sperson's past performance and current
responsibilities, and the number of shares previously granted to that person.
9
In October 1996,CEO Compensation. At the Boardbeginning of Directors adopted the 1996 Stock Option Plan
("1996 Plan"), subject to the approval of the stockholders at the 1996 annual
meeting (see Proposal 2 in this Proxy Statement). The Committee believes that
the 1996 Plan will provide a vehicle to continue the Company's policy of
assuring that employees have an appropriate equity interest in the Company.
Under the 1996 Plan, the Committee can make grants of incentive stock options
and non-qualified stock options. The Committee will be responsible for
establishing who will be granted awards, the number of shares to be awarded in
options, and the terms and conditions of such grants.fiscal year 1997, Mr. Hyde was lastthe
Company's Chairman and Chief Executive Officer. The Committee established a
salary for Mr. Hyde of $641,381, which was a 3% increase over Mr. Hyde's
salary for fiscal year 1996 (after eliminating the 53rd week of fiscal year
1996). In determining the increase in salary, the Committee made a subjective
review of the Chief Executive Officer's performance compared to the Company's
performance in the prior year. Upon Mr. Hyde's retirement as Chief Executive
Officer on December 12, 1996, the Committee reduced Mr. Hyde's salary to
$370,000, to reflect his reduction in responsibilities. Upon Mr. Hyde's
retirement as Chairman in March 1997, the Company entered into a non-compete
agreement with Mr. Hyde which is described in the section entitled "Employment
Agreements and Agreements with Former Officers."
At the beginning of the 1997 fiscal year, Mr. Adams was Vice Chairman and
Chief Operating Officer with a salary of $367,000. On December 12, 1996, Mr.
Adams was elected President and Chief Executive Officer and his salary was
increased to $400,000 to reflect his increase in duties. In March 1997, Mr.
Adams was elected Chairman and Chief Executive Officer and his salary was
increased in June 1997 to $500,000 to reflect his increased responsibilities.
During the fiscal year, the Committee awarded Mr. Adams options to purchase
up to 350,000 shares of the Company's common stock at a price equal to the
market value of the stock on the date of each of the option grants. The
options do not begin to vest until the passage of three years from the grant
date, and vest in one-third increments at one year intervals thereafter. The
option grants were made to encourage Mr. Adams to remain at the Company for an
extended period of time and to provide a strong incentive for him to increase
the value of the Company during his employment. Reflecting Mr. Hyde's high
percentage ownership of the Company's common stock, Mr. Hyde had not received
stock options since prior to the Company's initial public offering in 1991.
In fiscal year 1997, the Company entered into employment agreements with Mr.
Adams and has not received any additional grants since that time.certain other executive officers of the Company which are described
in the section entitled "Employment Agreements and Agreements with Former
Officers."
11
Section 162(m). of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code of 1996, as
amended,1986 places a limit of $1,000,000 on the amount of compensation
that may be deducted by the Company in any one fiscal year with respect to the
Chief Executive Officer and the other four most highly compensated individuals
who are executive officers as of the end of the fiscal year. However, this
deduction limitlimitation does not apply to certain "performance based"
compensation. The Committee intends to generally design and implement
compensation plans that qualify for full deductibility in accordance with
Section 162(m). However, the Company may from time to time pay other
compensation to its executive officers that may not be deductible. The Committee generally intends that all
stock options granted under the 1996 Plan will qualify as "performance based"
compensation.
Summary. The Committee has established compensation for executive officers
that links a large portion of each officer's compensation to the profit
performance of the Company and the long term appreciation of the stock price
and in so doing has rewarded executive officers for performance and enhancement
of stockholder value.
TheThis report was unanimously adopted by the Compensation Committee also believes thatand
approved by the 1996
Stock Option Plan will continue to fulfill the Company's goalBoard of rewarding the
officers and employees of the Company while simultaneously ensuring that the
interests of the officers and employees are more closely aligned with those of
the Company's stockholders.Directors.
Ronald A. Terry, Chairman
N. Gerry House
James F. Keegan
Robert I. MacDonnell
Michael W. Michelson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Messrs. Keegan, Michelson, and
MacDonnell. Messrs. Michelson and MacDonnell are also general partners of KKR.
During 1996, KKR received $271,666 for management, consulting, and financial
services provided to the Company. Such services included advice and assistance
concerning the operation, planning, and financing of the Company. The services
ended as of the end of the 1996 fiscal year.
Mr. Hyde was a member of the Board of Directors and of the Human Resources
Committee of First Tennessee National Corporation, which determines executive
compensation, until April 1996. Mr. Terry retired as Chairman of First
Tennessee National Corporation, a bank holding company, and its wholly-owned
subsidiary First Tennessee Bank National Association, a national bank ("Bank")
in January 1996. The Company uses the services of Bank for retail banking
services, including demand deposit accounts, credit card processing, trust
services, and financing. For fiscal year 1996, the Company paid Bank
approximately $5,379,000 in fees and $409,000 in interest on debt. The Company
believes that all fees charged by and paid to Bank for services performed, and
all interest charged by and paid to Bank for financing, are reasonable and no
greater than those fees and interest rates generally commercially available
from other sources.
10
STOCK PERFORMANCE GRAPH
The following graph shows, sincefrom the end of fiscal year 1991,1992 to the end of
fiscal year 1997, changes in the value of $100 invested in (i) the Company's
common stock, (ii) Standard & Poor's Retail Store Composite Index, and (iii)
Standard & Poor's 500 Composite Index.
The Stock Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference the Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference and shall not otherwise be deemed filed under such
Acts.filed.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AUTOZONE, INC., S&P 500 INDEX AND S&P RETAIL STORE COMPOSITE INDEX
PERFORMANCE GRAPH APPEARS HERE
Measurement Period AUTOZONE, S&P S&P RETAIL
STORE
(Fiscal Year Covered) INC. 500 INDEX STORE COMPOSITE
INDEX
- ------------------- ------------------------------- --------- ------------------------- ---------------
Measurement Pt- 08/91Aug. 92 $100.00 $100.00 $100.00
FYE 08/92 $143.56 $108.13 $104.77Aug. 93 $178.63 $114.24 $110.87
FYE 08/93 $256.44 $123.53 $116.16Aug. 94 $164.11 $120.45 $111.45
FYE 08/94 $235.59 $130.25 $116.76Aug. 95 $183.77 $146.57 $116.93
FYE 08/95 $263.82 $158.49 $122.50Aug. 96 $186.33 $174.90 $140.51
FYE 08/96 $267.50 $189.12 $147.22Aug. 97 $193.17 $246.00 $180.86
In previous years' Proxy Statements, the Company had used the S&P Retail-
Specialty Index as a comparison. In August 1996, Standard & Poor's
reconstructed its retail indices and the S&P Retail-Specialty Index, as
previously composed, no longer exists and is therefore no longer available for
comparison. The Company has substituted the S&P Retail Store Composite Index
for all years.12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Hyde is the sole stockholder of a corporation that owns an aircraft that
was leased to the Company for Company business at times during the 19961997 fiscal
year. For the use of that aircraft in fiscal year 1996,1997, the Company paid lease
fees and expenses to the corporation totaling $241,885.$106,973. In addition, pilots
who are employees of AutoZone operated suchthe aircraft for Mr. Hyde's personal
benefit at times during the 19961997 fiscal year. For the use of such pilot'sthe pilots'
services, Mr. Hyde paid AutoZone $96,000. AutoZone believes that the charges
for the use of the plane by AutoZone and for the pilots used by Mr. Hyde are
reasonable and equivalent to the fees charged by others for the use of similar
aircraft and pilots.
11
Mr. Terry retired as Chairman of First Tennessee National Corporation, a
bank holding company, and its wholly-owned subsidiary First Tennessee Bank
National Association, a national bank ("Bank") in January 1996. The Company
uses the services of Bank for retail banking services, including demand
deposit accounts, credit card processing, trust services, and financing. For
fiscal year 1996, the Company paid Bank approximately $5,379,000 in fees and
$409,000 in interest on debt. The Company believes that all fees charged by
and paid to Bank for services performed, and all interest charged by and paid
to Bank for financing, are reasonable and no greater than those fees and
interest rates generally commercially available from other sources.
See also the discussion under the heading "Compensation Interlocks and
Insider Participation" regarding certain services rendered to the Company by
KKR.
SECTION 16(A)16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who beneficially
own more than ten percent of a registered class of the Company's equity securitiescommon stock to file reports of
their beneficial ownership (Forms 3, 4, and 5) of Common Stock with the Securities and
Exchange Commission and the New York Stock Exchange. Officers,Executive officers,
directors, and greater-than-ten percent holders are required to furnish the
Company with copies of all suchthe forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of Forms 3 and 4 and any amendments thereto received by it during fiscal year 1996,1997,
and Forms 5 and any amendments thereto received by it with respect to fiscal year 1996, or
written representations that no reports were required, all filings applicable
to its officers, directors, greater-than-ten percent beneficial owners and
other persons subject to Section 16 of the Exchange Act were timely, except
that Stephen W. ValentineTimothy D. Vargo, currently President and Chief Operating Officer, was
late filing a Form 3 after
his election as Senior Vice5 covering one transaction for the 1996 fiscal year and
Thomas S. Hanemann, former President and Mr. Adamsa former director, was late filing an
amendment to hisa
Form 3 showing indirect ownership of the Company's common
stock held4 covering one transaction for the benefit of his immediate family1997 fiscal year.
PROPOSAL 2--APPROVAL2--ADOPTION OF 1996THE AMENDED AND RESTATED EMPLOYEE STOCK OPTIONPURCHASE PLAN
On October 21, 1996,1997, the Board of Directors approved the 1996Amended and
Restated Employee Stock OptionPurchase Plan ("Plan"),. As the Plan has no more shares
available for distribution under the Plan, the Board of Directors recommends
that the stockholders adopt the Plan as amended to continue the Company's
tradition of encouraging equity ownership among all of its employees. The
proposed text of the Plan is attached to this Proxy Statement as Exhibit A,
and the following summary of the Plan is subject to stockholder approval, which would reserve 6,000,000
sharesand is qualified by the
terms and conditions of Common Stock that may be awarded as stock options under the Plan.
The existing Amended and Restated Stock Option Plan ("Former Plan") which was
adopted on February 11, 1987, expires on February 11, 1997. The Board of
Directors believes that in order to continue to provide an incentive to secure
and retain employees of outstanding ability and to provide added incentives to
those employees responsible for the success of the Company, the Company should
continue its policy of assuring equity ownership of the Company for all levels
of management. Over 2,900 employees of the Company (including over 1,400 store
managers) have been granted stock options under the Former Plan. As of August
31, 1996, the Company had 26,800 employees, all of whom would be eligible to
receive option grants. The closing price of the Company'sAutoZone Common Stock as quoted on the New York Stock Exchange
as of the close of business on October 21, 1996,10, 1997, was $27.75 per share.$32 1/16.
Summary of the Plan. All employees of the Company and its domestic
subsidiaries, after at least six months of service, are eligible to
participate in the Plan. At August 30, 1997, the Company and its subsidiaries
had approximately 28,400 employees, all of whom are eligible to participate in
the Plan after six weeks of employment, and 6,472 employees were participating
in the Plan. Participating employees may contribute up to the lesser of $4,000
or 10% of their yearly earnings, including bonuses, to the Plan via payroll
deduction to purchase the Company's common stock at 85% of the lower of the
market value of the Company's common stock at the beginning or the ending of
each calendar quarter. Holders of 5% or more of the Company's common stock are
not eligible to participate in the Plan.
Under the Plan as amended, the Company would be authorized to issue up to
3,000,000 shares of common stock under the Plan. The following descriptionshares issued may either
be authorized but unissued shares or shares purchased by the Company for
issuance under the Plan. In the past, the Company has repurchased shares
previously issued under the Plan from employees at the fair market value of
the shares at the date of repurchase.
13
The Plan is only a summaryadministered by the Compensation Committee, which has the power
to interpret the Plan and to adopt such rules for the administration,
interpretation and application of the Plan.
The Plan will terminate on December 31, 2002, unless it is reproducedextended by the
Board of Directors.
Amendments. The proposed amendments principally (i) increase the number of
shares available under the Plan from 1,200,000 to 3,000,000, (ii) permit the
Company and its employees to initiate transactions in its entirety as Exhibit Athe Plan via electronic
communication, (iii) conform the Plan to this Proxy Statement. Reference is
madeamendments in regulations related to
Exhibit A for a full description of all terms and conditionsSection 16 of the Plan andSecurities Exchange Act of 1934 ("Exchange Act"), (iv) limit
the description below is qualified in its entirety by referencegrant of options to
the Plan itself.
Summary of the Plan. Under the Plan, key employees of the Company and its domestic subsidiaries
only, and any limited partnership of which(v) extend the Company or any of its
subsidiaries is the general partner, will be eligible to receive awards of stock
options. Subject to the termstermination date of the Plan to December 31, 2002.
Any further amendments to the Compensation Committee will have
sole discretionPlan may be approved by the Board of
Directors, except that stockholder approval would be required to determine(i) increase
the conditionsnumber of each award including whether such
awards shallshares available for issuance under the Plan, (ii) decrease the
price at which the common stock would be considered incentive stock optionssold under the Plan, (iii) materially
alter the requirements for eligibility to participate in the Plan, or (iv)
modify the Plan in a manner requiring stockholder approval under the Internal
Revenue Code of 1986, as amended, (the "Code") or non-qualified stock options, the numberExchange Act.
The following table shows the benefit that each of sharesthe named executive
officers received during fiscal year 1997 as a result of participation in the
Plan. The benefit to be granted,each named executive is the exercisedifference between the
purchase price the expiration date, and the vesting schedule. No person may be grantedfair market value of the shares on the date purchased.
DOLLAR NUMBER OF
NAME AND POSITION VALUE ($) SHARES (#)
----------------- --------- ---------
John C. Adams, Jr. ................................... 754 182
J.R. Hyde, III (1).................................... -- --
Timothy D. Vargo...................................... 705 209
Thomas S. Hanemann.................................... 0 0
Lawrence E. Evans..................................... 709 210
Robert J. Hunt........................................ 0 0
Shawn P. McGhee....................................... 705 209
Executive Officers as a Group......................... 5,104 1,479
Non-Executive Officer Employee Group.................. 1,207,684 306,662
- --------
(1) Mr. Hyde was not eligible to participate in the Plan when he was an
employee as he is a holder of 5% or more of the outstanding common stock
of the Company.
Federal Income Tax Consequences. The Plan is intended to meet the
requirements of an "employee stock purchase plan" under section 423 of the
Internal Revenue Code of 1986, as amended. Employees do not recognize taxable
income upon grant of an option to purchase or upon the exercise of the option
to purchase the discounted shares of common stock. In general, if shares are
held for more than 500,000one year after they are purchased and for more than two
years from the date the option is granted or if the employee dies while owning
the shares, gain on the sale or other disposition of Common Stock in any one calendar year, and in
12
the case of a grant of incentive stock options,shares will be
taxable to the employee as ordinary income (with no corresponding deduction to
the Company) to the extent thatof the aggregatelesser of: (i) 15% of the fair market value
of stock asthe shares on the date the option was granted or (ii) the amount by which
the fair market value of the date of grant with respect to
which incentive stock options are exercisable for the first time by any
optionee during any calendar year exceeds $100,000, such options shall be
treated as options which are not incentive stock options. Options will not be
transferable except by will or the laws of descent and distribution.
The Plan is neither a qualified pension, profit sharing or stock bonus plan
under Section 401(a) of the Code nor an "employee benefit plan" subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Stock Options. The Committee may grant options to purchase Common Stock of
the Company at a price not less than 85% of the market valueshares on the date of the award, provided that (i) such price shall be no less thansale, other disposition
or death exceeds the par valuepurchase price. Any additional gain is treated as capital
gain. However, if an employee disposes of the stock (ii) inpurchased under the case of incentive stock options and options intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
such price shall not be less than 100% of the fair market value, and (iii) in
the case of incentive stock options granted to a person then owning more than
10% of the total combined voting power of all classes of stock of the Company,
any subsidiary or parent corporation, such price shall be not less than 110%
of the fair market value. Stock options may be exercised by the grantees at
any time after vesting and before the expiration of the options by written
noticePlan
prior to the Company andlater of two years after the paymentgranting of the option price and any required
taxes. The option price and taxes may be paid in cash at the time of exercise
or by the delivery of a notice that the optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the option and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the option exercise price, or at the discretion of the
Committee, by the delivery of Common Stock in value equivalent to the option
price, or by delivery of a promissory note bearing interest and payable upon
such terms and conditions as may be prescribed by the Committee, or any
combination of the foregoing.
No option may vest prior to the passage of one year
from the date of grant.
All incentive stock options granted under the Plan must expire on or before
the passage of ten years from the date of grant. The term of all non-qualified
stock options is determined by the Committee in its discretion. Upon
termination of employment no portion of an option which is unexercisable shall
become exercisable unless otherwise provided by the Committee.
Other Provisions. In the event that the Committee, in its sole discretion,
determines that any corporate transaction (including, but not limited to any
dividend, recapitalization, reclassification, stock split, merger, spin-off or
disposition or all or substantially all of the Company's assets) affects the
common stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits
intended to be made available under the Plan or with respect to any option
grant, then the Committee shall, in a manner that it deems equitable, adjust
any or all of the (i) number or kind of shares of stock with respect to such
options that may be granted under the Plan, (ii) the number and kind of shares
of stock subject to outstanding options, or (iii) the grant or exercise price
with respect to any option. Further, in the event of any corporate transaction
involving a merger in which the Company is not the surviving entity, a sale or
disposition of all or substantially all of the assets of the Company, or any
reverse merger in which the Company is the surviving entity, but in which
securities possessing more than 50% of the total combined voting power of the
Company's outstanding securities are transferred or issued to a person
different from those who held such securities immediately prior to such
merger, or other non-recurring or unusual event affecting the Company, or the
financial statement of the Company, or any subsidiary or affiliate, the
Committee may, in its discretion in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, or to facilitate such transactions or events, the Committee may in its
discretion, (A) repurchase for cash from any grantee all options granted in an
amount that could have been attained upon the exercise of such option,
(B) provide that any such option may not be exercised after such transaction
or event, (C) provide that all such options may be exercised prior to such
transaction or event, notwithstanding the period of exercisability established
in the option agreement, (D) provide that such option shall be assumed by or
substituted for any securities of any successor corporation, or parent or
subsidiary thereof, with appropriate adjustments as to purchase the number and kind of
shares and prices, or (E) make adjustments in the number and type of shares
subject to options.
13
The Plan may be amended by the Committee at its discretion except that,
without the consent of the stockholders, the Committee may not amend the Plan
to increase the number of shares available to be awarded under the Plan,
increase the number of shares that may be optioned to any one person in a
calendar year, materially modify the eligibility requirements to receive
options, extend the expiration date of the Plan, or otherwise modify or amend
the Plan where applicable law or regulation (including provisions requiring
qualification under Sections 422 or 162(m) of the Code) would require such
modification or amendment to be approved by the stockholders.
The Plan will expire on October 21, 2006. After the expiration date, no
further options may be granted under the Plan. All options granted under the
Plan prior to the expiration date will continue to operate under the Plan.
Federal Income Tax Consequences. Generally, no tax is imposed on an optionee
upon the grant of a non-qualified stock
option. Upon the exercise of a non-
qualified stock option, the optionee will realize ordinary income for federal
income tax purposes in an amount equal to("Disqualifying Disposition"), then the excess of the fair market value of the
shares purchasedat the date of exercise over the option price.actual price paid for such shares will
be taxable as ordinary income to the employee. The tax basisCompany may not deduct the
difference between the consideration paid for the shares of common stock so
acquired will beand
the fair market value of the stock onunder the date of exercisePlan unless the employee makes a
Disqualifying Disposition of the option. At the time of the exercise, the Company is entitled to an income
tax deduction equal to the amount of income recognized by the optionee.
However, to the extent total non-performance compensation in one year realized
by an optionee after exercise of option exceeds one million dollars, if the
Plan or the grant fails to satisfy the requirements of Section 162(m) of the
Code, the Company may not be able to claim such income tax deduction for the
amount in excess of one million dollars.
An optionee does not generally realize federal taxable income upon either
the grant or the exercise of an incentive stock option. If the optionee does
not dispose of the stock acquired within one year after its receipt and two
years after the option was granted, the gain or loss realized on the
subsequent disposition of the stock will be treated as capital gain or loss.
If the stock is disposed of prior to that time, the optionee will realize
ordinary income in an amount equal to the excess of the sale price of the
stock over the option price.common stock.
Vote Required. The Company is generally not entitled to an
income tax deduction with respect to the grant or exercise of an incentive
stock option or the disposition of the option stock by the optionee. However,
if the optionee disposes of the option stock prior to the required holding
period, a deduction is available to the Company to the extent of the income
realized by the optionee on the date of the early disposition. In addition,
the exercise of an incentive stock option may, depending on the number of
stock options exercised and the optionee's individual income tax situation,
trigger liability for the alternative minimum tax.
Approval by Stockholders. Stockholder approval of the Plan is required (i)
under Section 162(m) of the Code to have the Plan qualify as an incentive
compensation plan, (ii) under Section 422 of the Code for any options so
designated to qualify as incentive stock options, and (iii) under the rules of
the New York Stock Exchange, Inc., for listing the shares of Common Stock
reserved under the Plan. Approval of Proposal 2 requires the affirmative vote
of the holders of a majority of the Company's outstanding shares of Common
Stock represented at and entitled to
vote at the meeting. Broker non-votes
will be counted as present atAnnual Meeting is required to approve the meeting for quorum purposes, but will not be
counted as voting either for or against the proposal. Abstentions will be
counted the same as a vote against theAmended and Restated
Employee Stock Purchase Plan.
14
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 2 TO
RATIFYTHE PROPOSED
AMENDMENT AND ADOPTRESTATEMENT OF THE 1996EMPLOYEE STOCK OPTIONPURCHASE PLAN.
PROPOSAL 3--RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, acting on the recommendation of its Audit Committee,
has selected the firm of Ernst & Young LLP, which has served as independent
auditors for the past nineten fiscal years, to conduct an audit, in accordance
with generally accepted auditing standards, of the Company's financial
statements for the 52-week fiscal year ending August 30, 1997.29, 1998. AutoZone
expects representatives of that firm to be present at the Annual Meeting to
respond to appropriate questions and to make a statement, if they so desire.
This selection is being submitted for ratification at the meeting.
14
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy at the meeting and entitled to
vote is required for such ratification. If not ratified, the Board will
reconsider the selection upon recommendation of the Audit Committee, although
the Board of Directors will not be required to select different independent
auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
OTHER MATTERS
The Board of Directors is not presently aware of any matters to be presented
at the Annual Meeting other than the election of directors ratification and
approval of the 1996 Stock Option Plan, and the
ratification of Ernst & Young LLP as the Company's independent auditors. If,
however, other matters are properly brought before the Annual Meeting, the
enclosed proxy gives discretionary authority to the persons named therein to
act in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS FOR 19971998 ANNUAL MEETING
Stockholder proposals to be presented at the fiscal year 19971998 annual meeting
of stockholders must be received by the Company by July 17, 1997,2, 1998, to be
considered by the Board of Directors for inclusion in the 19971998 Proxy
Statement. Any proposals must be mailed to AutoZone, Inc., to the attention of
the Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101-
9842.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended August 31, 1996,30, 1997, is being mailed herewithwith this Proxy
Statement to all stockholders of record.
By the order of the Board of
Directors
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
November 8, 1996October 29, 1997
15
EXHIBIT A
AUTOZONE, INC.
1996AMENDED AND RESTATED
EMPLOYEE STOCK OPTIONPURCHASE PLAN
AutoZone, Inc.AUTOZONE, INC., a corporation organized under the laws of the State of
Nevada,Delaware, by resolution of theits Board of Directors ofon March 29, 1991, adopted
the Company (the "Board")
on October 21, 1996, adopted this AutoZone, Inc. 1996Employee Stock OptionPurchase Plan (the "Plan"). The Plan was approved by the
stockholders of the Company on March 29, 1991. The Plan was amended by the
Board of Directors on June 18, 1991, to conform the Plan to amendments to the
regulations related to the Securities Exchange Act of 1934, as amended. On
December 21, 1991, the Plan was assumed by AutoZone, Inc., a Nevada
corporation, after its reincorporation. The Plan was amended by the Board of
Directors on March 2, 1996, and October 21, 1996, to extend the expiration
date of the Plan. On October 21, 1997, the Board of Directors adopted this
Amended and Restated Stock Option Plan.
The purposes of thisthe Plan are as follows:
(1) To further the growth, development and financial successassist employees of the Company by providing additional incentives to certainor of its executive and
other key employees who have beena Parent or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of capital stockSubsidiary of
the Company and thusin acquiring a stock ownership interest in the Company pursuant
to benefit directly from its growth, development and financial success.a plan which is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended.
(2) To enablehelp employees provide for their future security and to encourage
them to remain in the Company to obtain and retain the services of the type
of professional, technical and managerial employees considered essential to
the long-range successemployment of the Company by providing and offering them an
opportunity to become ownersor of capital stocka Parent or
Subsidiary of the Company.
ARTICLE I
Definitions1. DEFINITIONS
Whenever any of the following terms are used in thisthe Plan with the first
letter or letters capitalized, they shall have the meaning specified below
unless the context clearly indicates to the contrary. The masculine pronoun
shall include the feminine and neuter and the singular shall include the
plural where the context so indicates.
Section 1.1--Affiliate
"Affiliate" shall mean any Subsidiary and any limited partnership of which
the Company or any Subsidiary is the general partner.
Section 1.2--Award Limit
"Award Limit" shall mean 500,000 shares of Common Stock.
Section 1.3--Boardindicates:
(a) "Board" shall mean the Board of Directors of the Company.
Section 1.4--Code(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5--Committee(c) "Committee" shall mean the Compensation Committee or another committee of the Board
appointed as provided in Section 6.1.
Section 1.6--Common Stock
"Common Stock" shall meanto administer the common stock of the Company, par value $.01
per share, and any equity security of the Company issued or authorizedPlan pursuant to be
issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock. Debt securities of the
Company convertible into Common Stock shall be deemed equity securities of the
Company.
A-1
Section 1.7--Companyparagraph 12.
(d) "Company" shall mean AutoZone, Inc. In addition, "Company", a Nevada corporation.
(e) "Date of Exercise" shall mean with respect to any corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options, outstanding underOption (i) the
March 31 of the Plan in a transaction to
which Section 424(a) of the Code applies.
Section 1.8--Corporate Transaction
"Corporate Transaction" shall mean any of the following stockholder-approved
transactions to which the Company is a party:
(a) a merger or consolidationYear in which the Company is notOption was granted (in the surviving
entity, except for a transactioncase of
an Option granted on January 1), (ii) the principal purposeJune 30 of which is to
change the StatePlan Year in which
the Company is incorporated, form a holding
companyOption was granted (in the case of an Option granted on April 1), (iii)
the September 30 of the Plan Year in which the Option was granted (in the
case of an Option granted on July 1), (iv) the December 31 of the Plan Year
in which the Option was granted (in the case of an Option granted on
October 1) or effect a similar reorganization(v) such other day, as to form whereupon this Plan
and all Awards are assumedmay be determined by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially allCommittee, of
the assetsPlan Year in which the Option was granted.
(f) "Date of Grant" shall mean the date upon which an Option is granted,
as set forth in paragraph 3(a).
(g) "Eligible Compensation" shall mean (i) the Eligible Employee's rate
of pay for the immediately preceding calendar year based on the wages, tips
and other compensation as reported on Form W-2 issued by the Company, if
the Eligible Employee's Form W-2 issued by the Company reports wages, tips,
and other compensation for the full preceding calendar year, otherwise (ii)
the Eligible Employee's annualized current rate of pay on the Date of
Grant.
A-1
(h) "Eligible Employee" shall mean an employee of the Company in complete liquidationand those
of any present or dissolutionfuture Parent or Subsidiary of the Company inincorporated
under the laws of a transactionstate of the United States of America (i) who has
completed six months of employment; and (ii) who does not, coveredimmediately
after the Option is granted, own stock (as defined by Sections 423(b)(3)
and 424(d) of the exceptions
to clause (a), above;Code) possessing five percent or (c) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power or value of all classes of stock of the Company or of
a Parent or Subsidiary of the Company.
(i) "Form" shall mean either a paper form or a form on electronic media,
prepared by the Company.
(j) "Option" shall mean an option granted under the Plan to an Eligible
Employee to purchase shares of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
Section 1.9--Director
"Director"Stock.
(k) "Option Period" shall mean a memberwith respect to any Option the period
beginning upon the Date of Grant and ending upon the Date of Exercise.
(l) "Option Price" has the meaning set forth in paragraph 4(b).
(m) "Parent of the Board.
Section 1.10--Employee
"Employee" shall mean any employee (as defined in accordance with Section
3401(c) of the Code) of the Employer, whether such employee is so employed at
the time this Plan is adopted or becomes so employed subsequent to the
adoption of this Plan.
Section 1.11--Employer
"Employer" shall mean the Company or an Affiliate, whichever at the time
employs the Employee.
Section 1.12--Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
Section 1.13--Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given date shall be
(i) the closing price of a share of Common Stock on the principal exchange on
which shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred; or (ii) if Common Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if Common Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the Fair Market Value of a
share of Common Stock as established by the Committee acting in good faith.
A-2
Section 1.14--Incentive Stock Option
"Incentive Stock Option" shall mean an Option that qualifies under Section
422 of the Code and which is designated as an Incentive Stock Option by the
Committee.
Section 1.15--Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not designated as an
Incentive Stock Option and which is designated as a Non-Qualified Option by
the Committee.
Section 1.16--Officer
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Exchange Act, as such Rule may be amended in the future.
Section 1.17--Option
"Option" shall mean a stock option granted under Article III of this Plan.
An Option granted under this Plan, as determined by the Committee, shall
either be an Incentive Stock Option or a Non-Qualified Option, provided,
however that options granted to Employees of an Affiliate which is not a
Subsidiary shall be Non-Qualified Options.
Section 1.18--Grantee
"Grantee" shall mean an Employee to whom an Option is granted under this
Plan.
Section 1.19--Plan
"Plan" shall mean this 1996 Stock Option Plan of AutoZone, Inc.
Section 1.20--Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
Section 1.21--Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.22--Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.23--Subsidiary
"Subsidiary"Company" shall mean any corporation, other than the
Company, in an unbroken chain of corporations beginningending with the Company if,
at the time of the granting of the Option each of the corporations other
than the last
corporation in the unbroken chain thenCompany owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
Section 1.24--Termination(n) "Participant" shall mean an Eligible Employee who has complied with
the provisions of Employment
"Termination of Employment"paragraph 3(b).
(o) "Plan" shall mean the time whenAutoZone, Inc. Amended and Restated Employee
Stock Purchase Plan.
(p) "Plan Year" shall mean the employee-employer
relationship between an Granteecalendar year beginning on January 1 and
the Employer is terminated for any reason,
with or without cause, including, but not by way of limitation, a termination
by resignation, discharge, death, or retirement, but excluding (i)
terminations where there is a simultaneous reemployment or continuing
employment of an Grantee by the Employer; (ii) at the
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discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship; and (iii) at the discretion
of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Employer with the former
Employee. The Committee, in its absolute discretion,ending on December 31.
(q) "Stock" shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that, with respect to Incentive Stock Options, a leave of
absence, change in status from an employee to an independent contractor or
other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. However, notwithstanding any provision of this
Plan, the Employer has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
Shares Subject to Plan
Section 2.1--Shares Subject to Plan
(a) The shares of stock subject to Awards shall be Common Stock, initiallymean shares of the Company's common stock, $.01 par value. The aggregate number of
such shares which may be issued upon exercise of Options under the Plan shall
not exceed 6,000,000. The shares of Common Stock issuable under the Plan upon
exercise of such Options may be either previously authorized but unissued
shares or treasury shares.
(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any calendar year shall not exceed the
Award Limit. To the extent required by Section 162(m)stock.
(r) "Subsidiary of the Code,Company" shall mean any corporation other than the
numberCompany in an unbroken chain of shares subject to Options which are canceled continue to be counted againstcorporations beginning with the Award Limit andCompany if,
after grantat the time of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellationgranting of the Option, and a grant of a new Option and both the Option deemed to be canceled
and the Option deemed to be granted are counted against the Award Limit.
Section 2.2--Add-back of Options
If any Option expires or is canceled without having been fully exercised or
vested, the number of shares subject to such Option, but as to which such
Option was not exercised or vested prior to its expiration or cancellation,
may again be awarded hereunder, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Options which are adjusted pursuant to
Section 7.8 and become exercisable with respect to shares of stock of another
corporation, shall be considered canceled and may again be awarded hereunder,
subject to the limitations of Section 2.1. Shares of Common Stock which are
delivered by the Grantee or withheld by the Company upon the exercise or
vesting of any Option, in paymenteach of the exercise price thereof, may again be
awarded hereunder, subject tocorporations other
than the limitations of Section 2.1. Notwithstandinglast corporation in the provisions of this Section 2.2, no shares of Common Stock may again be
optioned if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the Code.
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ARTICLE III
Granting of Options
Section 3.1--Eligibility
Any key Employee selected by the Committee pursuant to Section 3.4(a)(i)
shall be eligible to be granted an Option, provided, however, that an Employee
of an Affiliate which is not a Subsidiary shall be eligible to be granted Non-
Qualified Options only.
Section 3.2--Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted to any person who is not an
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company or a Subsidiary.
Section 3.3--Disqualification for Stock Ownership
No person may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted,unbroken chain owns stock representingpossessing 50%
or more than ten percent (10%) of the total combined voting power of all classes of stock in one
of the Company or any then existing Subsidiary or parent
corporation unlessother corporations in such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
Section 3.4--Granting of Options
(a) The Committee shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are key employees (including Employees who
have previously received Options under this Plan, or any other plan of the
Company) and in its opinion should be granted Options; and
(ii)chain.
2. STOCK SUBJECT TO THE PLAN
Subject to the Award Limit, determineprovisions of paragraph 9 (relating to adjustment upon
changes in the Stock), the Stock which may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate 3,000,000 shares, and may be
unissued shares or reacquired shares or shares bought on the market for
purposes of the Plan.
3. GRANT OF OPTIONS
(a) General Statement. Following the effective date of the Plan and
continuing while the Plan remains in force, the Company may offer Options
under the Plan to all Eligible Employees. These Options may be granted four
times each Plan Year on the January 1, the April 1, the July 1, or the October
1 of each Plan Year, or on such other days as may be determined by the
Committee. The term of each Option shall be for three months and shall end on
the March 31 (with respect to a January 1 Date of Grant), the June 30 (with
respect to an April 1 Date of Grant), the September 30 (with respect to a July
1 Date of Grant), or the December 31 (with respect to an October 1 Date of
Grant) of the Plan Year in which the Option is granted or for such other term
or Date of Exercise as may be determined by the Committee. The number of
shares to be
subject to such Options granted to such selected Employees; and
(iii) Determine whether such Options are to be Incentive Stock Options or
Non-Qualified Options and whether such Options are to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent with
the Plan; provided, however, that the terms and conditions of such Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m)(4)(C) of the Code.
(b) Upon the selection of an Employee to be granted an Option, the Committee
shall instruct the Secretary to issue such Option and may impose such
conditions on the grant of such Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition
of the grant of an Option to an Employee that the Employee surrender for
cancellation some or all of the unexercised Options which have been previously
granted to him under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an exercise price lower (or higher)
than the exercise price of the surrendered Option, may cover the same (or a
lesser or greater) number of shares as the surrendered Option, may contain
such other terms as the Committee deems appropriate and shall be exercisable
in accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of the surrendered Option.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such Option from treatment as an "incentive stock
option" under Section 422 of the Code.
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Section 3.5--Consideration
Except as the Committee may otherwise determine, in consideration of the
granting of an Option, the Grantee shall agree, in the written Option
agreement, to remain in the employ of the Company, or any Affiliate, for a
period of at least one year (or such shorter period as may be fixed in the
Option agreement or by action of the Committee following grant of the Option)
after the Option is granted. Nothing in this Plan or in any Option agreement
hereunder shall confer upon any Grantee any right to continue in the employ of
his respective Employer, or shall interfere with or restrict in any way the
rights of each respective Employer, which are hereby expressly reserved, to
discharge any Grantee at any time for any reason whatsoever, with or without
cause.
ARTICLE IV
Terms of Options
Section 4.1--Option Agreement
Each Option shall be evidenced by a written Option agreement which shall be
executed by the Grantee and authorized Officers of the Company and which shall
contain such terms and conditions as the Committee shall determine, consistent
with the Plan. Option agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code. Stock Option agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the
Code.
Section 4.2--Option Price
The price per share of the shares subject to each Option shall be setthe whole number quotient
of (i) the aggregate payroll deductions authorized by each Participant in
accordance with subparagraph (b) for the Option Period divided by (ii) the
Option Price of the Stock.
(b) Election To Participate; Payroll Deduction Authorization. An Eligible
Employee may participate in the Plan only by payroll deduction. Each Eligible
Employee who elects to participate in the Plan shall deliver to
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the Company during the calendar month next preceding either a January 1 Date
of Grant, an April 1 Date of Grant, a July 1 Date of Grant, or an October 1
Date of Grant, or on such other days as may be determined by the Committee; provided, however, that such price shall be no less than eighty-
five percent (85%)Committee,
the properly completed Form whereby the Eligible Employee gives notice of the
Fair Market Valueelection to participate in the Plan as of the underlying sharesnext following Date of Grant,
and which shall designate a stated dollar amount, in $5.00 increments, of
Eligible Compensation to be withheld on the
date of grant; further provided that (i) such price shall be no less than the
par value of a share of Common Stock, unless otherwise permitted by applicable
state law, (ii) in the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shalleach payday. The stated dollar amount
may not be less than 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted;$5.00 and (iii) in the
case of Incentive Stock Options granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more thanmay not exceed 10% of the total combined
voting powerEligible
Compensation. In addition, at the discretion of the Committee exercised
uniformly as to all classes ofEligible Employees at any particular time, an Eligible
Employee who participates in the Plan may also elect to have an amount
withheld from any bonus. Notwithstanding the foregoing, the maximum cumulative
amount an Eligible Employee may have withheld through payroll deduction and
from any bonus shall not exceed $4,000 per Plan Year.
(c) Changes in Payroll Authorization. The payroll deduction authorization
referred to in subparagraph (b) may only be changed during the enrollment
period described in subparagraph (b) and may not be changed during the Option
Period, except as provided in paragraph 5.
(d) $25,000 Limitation. Notwithstanding anything to the contrary contained
herein, no Participant shall be permitted to purchase Stock under the Plan or
under any other employee stock purchase plan of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code)
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
Section 4.3--Option Term
The term of an Option shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term
shall not be more than ten (10) years from the date the Incentive Stock Option
is granted,Parent or
five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stockSubsidiary of the Company or any Subsidiary or parent corporation thereof (within
the meaning ofwhich is intended to qualify under Section 422 of the Code). Except as limited by requirements of
Section 422423 of
the Code, and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Optionat a rate which exceeds $25,000 in connection with any Termination of Employmentfair market value of the Grantee, or
amendStock
(determined at the time the option is granted) for each calendar year in which
any other term or condition of such Option relatingoption granted to such a
termination.
Section 4.4--Option VestingParticipant is outstanding at any time.
4. EXERCISE OF OPTIONS
(a) Except as the Committee may otherwise provide, no Option mayGeneral Statement. Each Participant automatically will be deemed to have
exercised in whole or in part during the first year after such Option is
granted unless the Option is being granted in modification or substitutionon each Date of a previously granted Option, in which case the one year period shall be
measured from the date of the grant of the previously granted Option.
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(b) SubjectExercise to the provisions of Sections 4.4(a) and 4.4(d), the period
during which the right to exercise an Option in whole or in part vests in the
Grantee shall be set by the Committee and the Committee may determine that an
Option may not be exercised in whole or in part for a specified period after
it is granted. At any time after grant of an Option, the Committee may, in its
sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option vests.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Option agreement or by action of the
Committee following the grant of the Option.
(d) To the extent that the aggregate Fair Market Value of stock with respectbalance
then in the Participant's account under the Plan is sufficient to which "incentive stock options" (withinpurchase at
the meaning of Section 422Option Price whole shares of the Code, but without regardStock subject to Section 422(d)the Option. The excess
balance, if any, in Participant's account shall remain in the account and be
available for the purchase of Stock on the following Date of Exercise,
provided that no withdrawal from the Plan or termination of employment has
occurred under paragraphs 5 or 6.
(b) Option Price Defined. The option price per share of the Code) are exercisable for
the first timeStock (the
"Option Price") to be paid by a Grantee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(d), the Fair Market Value
of stock shall be determined as of the time the Option with respect to such
stock is granted.
ARTICLE V
Exercise of Options
Section 5.1--Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee may require that, by the termseach Participant on each exercise of the Option
shall be an amount equal to the lesser of (y) 85% of the fair market value of
the Stock on the Date of Grant or (z) 85% of the fair market value of the
Stock on the Date of Exercise. The fair market value of the Stock as of a
partial exercise be
with respect togiven date shall be: (i) the closing price of the Stock on the principal
exchange on which the Stock is then trading, if any, on such date, or, if the
Stock was not traded on such date, then on the next preceding trading day
during which a minimum number of shares.
Section 5.2--Manner of Exercise
Allsale occurred; or (ii) if such Stock is not traded on an
exchange but is quoted on NASDAQ or a portion ofsuccessor quotation system, (1) the last
sales price (if the Stock is then listed as a National Market Issue under the
NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Stock on such
date as reported by NASDAQ or such successor quotation system; or (iii) if
such Stock is not publicly traded on an exercisable Option shall be deemed exercised upon
delivery toexchange and not quoted on NASDAQ or a
successor quotation system, the Secretary ofmean between the Companyclosing bid and asked prices
for the Stock on such date as determined in good faith by the Committee; or
his designee:
(a) A written notice complying with(iv) if the applicable rulesStock is not publicly traded, the fair market value established by
the Committee stating thatacting in good faith.
(c) Delivery of Share Certificates. Upon the Option, or a portion thereof, is exercised.
The notice shall be signed by the Grantee or other person then entitled to
exercise the Option or such portion;
(b) Such representationsproper completion and
documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisionssubmission of the Securities Act, the Code, and any other
federal or state laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option or portion thereof shall be by any
person or persons other than the Grantee, appropriate proof of the right of
such person or persons to exercise the Option or portion thereof; and
(d) Full cash paymentproper Form to the Company, the Company will deliver to such
Participant a certificate issued in Participant's name for the number of
shares of the exercise price and any
applicable taxes for the sharesStock with respect to which the Option or
portion thereof, iswas exercised or throughand for
which the delivery of a notice thatOption Price has been paid. In the Grantee has placed a market sell order with a broker approved byevent the Company with respectis required to
shares of Common Stock then issuable upon exerciseobtain from any commission or agency authority to issue any such certificate,
the Company will seek to obtain such authority. The inability of the Option, and thatCompany
to obtain from any such commission or agency authority which counsel for the
broker has been directedCompany deems necessary for the lawful issuance of any such certificate shall
relieve the Company from liability to pay a sufficient
portionany Participant except to return the
amount of the net proceeds ofbalance in the saleaccount in cash.
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5. WITHDRAWAL FROM THE PLAN
(a) General Statement. Any Participant may withdraw from the Plan at any
time. A Participant who wishes to withdraw from the Plan must deliver to the
Company a notice of withdrawal in satisfactiona Form prepared by the Company. The Company,
as soon as practicable following receipt of a Participant's notice of
withdrawal, will refund to the Participant the amount of the Option exercise pricebalance in the
account under the Plan. Upon receipt of a Participant's notice of withdrawal
from the Plan, automatically and without any further act on the part of the
Participant, the payroll deduction authorization, any interest in the Plan,
and any applicable taxes. However,Option under the CommitteePlan shall terminate.
(b) Participation Following Withdrawal. A Participant who withdraws from the
Plan may participate again in its discretion, allow payment, in wholethe Plan on the next January 1, April 1, July 1,
or in part, through (i) the
delivery of shares of Common Stock owned by the Grantee, duly endorsed for
transfer to the Company with a Fair Market Value onOctober 1 immediately following the date of delivery
equal to the aggregate exercise price of
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the Optionwithdrawal, or exercised portion thereof; (ii) allow payment, in whole or in
part, through the delivery of a full recourse promissory note bearing
interest (at no less thanon such rate as shall then preclude the imputation
of interest under the Code) and payable upon such termsother
days as may be prescribeddetermined by the CommitteeCommittee.
6. TERMINATION OF EMPLOYMENT
(a) Termination of Employment Other Than By Retirement or Death. If the
Board;employment of a Participant terminates other than by retirement or (iii) allow payment through
any combinationdeath,
participation in the Plan automatically shall terminate as of the foregoing. Indate of the
casetermination of employment. As soon as practicable after such a promissory note, the
Committee may also prescribe the formParticipant's
termination of such note and the security to be
given for such note. The Option may not be exercised, however, by delivery
of a promissory note or by a loan fromemployment, the Company when or where such loan
or other extension of credit is prohibited by law.
Section 5.3--Rights as Stockholders
Grantees shall not be, nor have anywill refund the amount of the rightsbalance
in that account under the Plan. Upon a Participant's termination of
employment, any interest in the Plan and any Option under the Plan shall
terminate.
(b) Termination by Retirement. A Participant who retires on a normal
retirement date, or privileges of,
stockholdersearlier or later with the consent of the Company, in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issuedmay by the Company to such Grantees.
Section 5.4--Transfer Restrictions
The Committee, in its absolute discretion, may impose such restrictions on
the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate. Any such restrictions shall be set forth in the
respective Option agreement and may be referred to on the certificates
evidencing such shares. Without limiting the generality of the foregoing, the
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of stock acquired by exercise of an Incentive Stock
Option within two years from the date of granting such Option or one year
after the transfer of such shares to such Employee. The Committee may direct
that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE VI
Administration
Section 6.1--Compensation Committee
The Committee shall consist solely of two or more Directors, appointed by
and holding office at the pleasure of the Board, each of whom is both a "non-
employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at
any time by delivering
written notice to the Board. VacanciesCompany request payment of the balance in the Committee
shall be filled by the Board.
Section 6.2--Duties and Powers of the Committee
It shall be the duty of the Committee to conduct the general administration
ofaccount
under the Plan, in accordance with its provisions. The Committeewhich event the Company shall havemake such payment as soon as
practicable after receiving such notice; upon receipt of such notice, the
power to interpretParticipant's interest in the Plan and any Option under the agreements pursuantPlan shall
terminate. If the Company does not receive such notice prior to which Options are
granted andthe next Date
of Exercise, such Participant's Option will be deemed to adopthave been exercised
on such rules forDate of Exercise.
(c) Termination By Death. If the administration, interpretation and
applicationemployment of a Participant is terminated
by Participant's death, the executor of the Plan as are consistent herewith and to interpret, amend or
revoke any such rules. Any such interpretations and rules in regard to
Incentive Stock Options shall be consistent with provisions of Section 422 of
the Code. Any grant under this Plan need not be the same with respect to each
Grantee. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under this
Plan except with respect to matters which under Rule 16b-3 or Section 162(m)
of the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
Section 6.3--Majority Rule; Unanimous Written Consent
The Committee shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
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Section 6.4--Professional Assistance; Good Faith Actions
All expenses and liabilities which members of the Committee incur in
connection with the administration of this Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers and
Directors shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee or Board in good faith shall be final and binding upon
all Grantees, the Company and all other interested persons. No members of the
Committee or the Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Awards, and all members of the Committee and the Board shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
ARTICLE VII
Other Provisions
Section 7.1--Options Not Transferable
Options may not be sold, pledged, assigned, or transferred in any manner
other than byParticipant's will or the
lawsadministrator of descentthe Participant's estate by written notice to the Company may
request payment of the balance in the Participant's account under the Plan, in
which event the Company shall make such payment without any interest thereon
as soon as practicable after receiving such notice. Upon receipt of such
notice, the Participant's interest in the Plan and distribution, unless and untilOption under the Plan shall
terminate. If the Company does not receive such Optionsnotice prior to the next Date
of Exercise, the Participant's Option shall be deemed to have been exercised
and the shares underlyingon such Options have
been issued, and all restrictions applicable to such shares have lapsed.Date of Exercise.
7. RESTRICTION UPON ASSIGNMENT
No Option or interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Granteeany Participant or his successorsany successor in
interest, ornor shall any Option be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means,
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall be
null and void and of no effect except as otherwise permittedeffect; provided, however, that nothing in this
Section 7.1.
Section 7.2--Eligibility to Exercise
Only a Grantee may exercise an Option granted under the Plan during the
Grantee's lifetime. After the death of the Grantee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable under
the Planparagraph 7 shall prevent transfers by will or the applicable Option agreement or other agreement, be exercised by the Grantee's personal representative, or by any person empowered to do so
under the deceased Grantee's will or under the then applicable laws of
descent and distribution. Section 7.3--Conditions to Issuance of Stock Certificates
The Company shallExcept as provided in paragraph 6(c), an Option may
not be requiredexercised to issue or deliver any certificate or
certificates forextent except by the Participant. The Committee may
require the Participant to give the Company prompt notice of any disposition
of shares of stock purchased upon theacquired by exercise of anyan Option prior to fulfillmentwithin two years from the
date of all ofgranting such Option or one year after the following conditions:
(a) The admissiontransfer of such shares to
listing on all stock exchanges on
which such classParticipant. The Committee may require that the certificates evidencing
shares acquired by exercise of an Option refer to such requirement to give
prompt notice of disposition.
8. NO RIGHTS OF STOCKHOLDER UNTIL OPTION IS EXERCISED
With respect to shares of the Stock subject to an Option, a Participant
shall not be deemed to be a stockholder of the Company, and shall not have any
of the rights or privileges of a stockholder. A Participant shall have the
rights and privileges of a stockholder of the Company when, but not until, an
Option is exercised.
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9. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION
Whenever any change is made in the Stock or to Options outstanding under the
Plan, by reason of stock is then listed;
(b) The completiondividend or by reason of division, combination or
reclassification of shares, appropriate action will be taken by the Committee
to adjust accordingly the number of shares of the Stock subject to the Plan
and the number and the Option Price of shares of the Stock subject to the
Options outstanding under the Plan.
10. USE OF FUNDS; NO INTEREST PAID
All funds received or held by the Company under the Plan will be included in
the general funds of the Company free of any registrationtrust or other qualification of such
shares underrestriction and
may be used for any statecorporate purpose. No interest will be paid to any
Participant or federal law orcredited to any account under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
deem necessary or advisable;
(c)Plan with respect to such
funds.
11. AMENDMENT OF THE PLAN
The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establishamend, suspend or terminate the Plan at any time and from
time to time for reasonstime; provided, however, that the provisions in paragraphs 1(e), 1(h),
3(a), 3(d), and 4(b) may not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of administrative convenience;1974, as amended, or the rules thereunder; and (e) The receiptprovided
further, that approval by the Company of full payment for such shares, including
payment of any applicable withholding tax.
A-9
Section 7.4--Amendment, Suspension or Terminationvote of the Plan
Except as otherwise provided in this Section 7.4, the Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, to the extent
required by Sections 422 or 162(m)holders of more than 50% of the
Code, without approvaloutstanding shares of the Company's stockholders given within 12 months before or afterStock entitled to vote shall be required
to amend the action byPlan (i) to increase the Committee or Board, no action of the Committee or Board may increase any
limit imposed in Section 2.1 on the maximum number of shares which may be
issuedof Stock available
under the Plan, modify(ii) to decrease the Award Limit,Option Price below a price computed in
the manner stated in paragraph 4(b), (iii) to materially modifyalter the
requirements for eligibility requirements of Section 3.1,to participate in the Plan, or extend the limit imposed in this
Section 7.4 on the period during which Options may be granted or amend or(iv) to modify the
Plan in a manner requiring stockholder approval under Sections 422the Code or 162(m)Securities
Exchange Act of 1934 ("Exchange Act").
12. ADMINISTRATION BY COMMITTEE; RULES AND REGULATIONS
(a) Administration. The Plan shall be administered by the Compensation
Committee of the Code, and no actionBoard.
(b) Duties And Powers of Committee. It shall be the duty of the Committee or Board may be taken
that would otherwise require stockholder approval as a matter of applicable
law, regulation or rule. Neitherto
conduct the amendment, suspension nor terminationgeneral administration of the Plan in accordance with its
provisions. The Committee shall withouthave the consentpower to interpret the Plan and the
Options and to adopt such rules for the administration, interpretation and
application of the holderPlan as are consistent therewith and to interpret, amend or
revoke any such rules. The Board shall have no right to exercise any of the
Option, alter or
impair any rights or obligationsduties of the Committee under the Plan.
(c) Majority Rule. The Committee shall act by a majority of its members in
office. The Committee may act either by vote at a meeting or by a memorandum
or other written instrument signed by a majority of the Committee.
(d) Professional Assistance; Good Faith Actions. The Committee may employ
attorneys, consultants, accountants, appraisers, brokers or other persons. The
Committee, the Company and its officers and directors shall be entitled to
rely upon the advice, opinions or valuations of any Option theretofore grantedsuch persons. All actions
taken and all interpretations and determinations made by the Committee in good
faith shall be final and binding upon all Participants, the Company and all
other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Options, and all members of the Committee shall be
fully protected by the Company in respect to any such action, determination or
interpretation.
13. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including any
Eligible Employee or Participant) the right to remain in the employ of the
Company or a Parent or Subsidiary of the Company or to affect the right of the
Company or a Parent or Subsidiary of the Company to terminate the employment
of any person (including any Eligible Employee or Participant) at any time
with or without cause.
A-5
14. MERGER, ACQUISITION OR LIQUIDATION OF THE COMPANY
In the event of the merger or consolidation of the Company into another
corporation, the acquisition by another corporation of all or substantially
all of the Company's assets or 80% or more of the Company's then outstanding
voting stock or the liquidation or dissolution of the Company, the Date of
Exercise with respect to outstanding Options shall be the business day
immediately preceding the effective date of such merger, consolidation,
acquisition, liquidation or dissolution unless the Option agreement itself expressly so provides.Committee shall, in its
sole discretion, provide for the assumption or substitution of such Options in
manner complying with Section 424(a) of the Code.
15. TERM; APPROVAL BY STOCKHOLDERS
No Option may be granted during any period of suspension noror after
termination of the Plan, and in no event may any Option be granted under thisthe
Plan on or after October 21, 2006. No
amendment, suspension or terminationDecember 31, 2002, unless extended by the Board of this Plan shall, without the consentDirectors of the
Grantees alter or impair any rights or obligations under any Option
theretofore granted or awarded, unlessCompany. The Plan will be submitted for the Option agreement otherwise
expressly so provides.
Section 7.5--Approvalapproval of Plan by Stockholdersthe Company's
stockholders within 12 months after the date of the Board of Directors'
initial adoption of the Plan. The Company shall take such actions with respect
to the Plan as may be necessary to satisfy the requirements of Sections 162(m) and 422Section 423 of
the Code.
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of this
Plan. Options may not be granted under the Plan prior to such stockholder
approval.
Section 7.6--Effect of Plan Upon Other Compensation Plans16. EFFECT UPON OTHER PLANS
The adoption of thisthe Plan shall not affect any other compensation or
incentive plans in effect for the Employers.Company or a Parent or Subsidiary of the
Company. Nothing in this Plan shall be construed to limit the right of the
EmployersCompany or a Parent or Subsidiary of the Company (a) to establish any other
forms of incentives or compensation for employees of the EmployersCompany or a Parent
or Subsidiary of the Company or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including,
but not by way of limitation, the grant or assumption of options in connection
with the acquisition, by purchase, lease, merger, consolidation or otherwise,
of the business, stock or assets of any corporation, firm or association.
Section 7.7--Conformity to Securities Laws17. RULE 16b-3 RESTRICTIONS UPON DISPOSITIONS OF STOCK
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act the Code, and any and all regulations and rules promulgated by the
Securities and Exchange Commission and the
Internal Revenue Service.thereunder, including, without limitation,
Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and Options shall be granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
Section 7.8--Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events
(a) Subject to Section 7.8(d), in event that the Committee determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer, exchange or other disposition of all or substantially all of
the assets of the Company (including, but not limited to, a Corporate
Transaction), or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the
A-10
Committee's sole discretion, affects the Common Stock such that an adjustment
is determined by the Committee18. NOTICES
Any notice to be appropriate in order to prevent dilution
or enlargement of the benefits intended to be made availablegiven under the Plan or
with respect to an Option, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other securities or
property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Section 7.8(d), in the event of any Corporate Transaction or
other transaction or event described in Section 7.8(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any affiliate, or
of changes in applicable laws, regulations, or accounting principles, the
Committee in its discretion is hereby authorized to take any one or more of
the following actions whenever the Committee determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to any Option under this Plan, to facilitate such transactions or
events, or to give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may provide, either by the terms of the Option agreement or by action taken priorPlan to the occurrence of such
transaction or event and either automatically or upon the Grantee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
option, or award or realization of the Grantee's rights had such Option
been currently exercisable or payable or fully vested or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its sole and absolute discretion, the Committee may provide,
either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after
such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such option shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option agreement or by action taken prior to the
occurrence of such transaction or event, that upon such event, such Option
be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; or
(v) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may make adjustments in the number
and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding Options that may be granted in the future.
(c) Subject to Section 7.8(d) and 7.12, the Committee may, in its
discretion, include such further provisions and limitations in any Option
agreement or stock certificate, as it may deem equitable and in the best
interests of the Company.
A-11
(d) With respect to Options intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in this
Section 7.8 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such Option to fail to so qualify under
Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability under
Section 16 of the Exchange Act or violate the exemptive conditions of Rule
16b-3 unless the Committee determines that the Option is not to comply with
such exemptive conditions.
(e) The number of shares of Common Stock subject to any Option shall always
be rounded to the nearest whole number.
Section 7.9--Tax Withholding
The Company shall be
entitled to require payment in cash or deduction from
other compensation payable to each Grantee of any sums required by federal,
state or local tax laws to be withheld with respect to the issuance, vesting
or exercise of any Option. The Committee may in its discretion and in
satisfaction of the foregoing requirement allow such Grantee to elect to have
the Company withhold shares of Common Stock otherwise issuable under such
Option (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld.
Section 7.10--Loans
The Committee may, in its discretion, extend one or more loans to Employees
in connection with the exercise of an Option granted under this Plan. The
terms and conditions of any such loan shall be set by the Committee.
Section 7.11--Forfeiture Provisions
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee shall have the right (to
the extent consistent with the applicable exemptive conditions of Rule 16b-3)
to provide, in the terms of an Option made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds,
gains or other economic benefit actually or constructively received by the
recipient upon any receipt or exercise of the Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paidaddressed to the Company and (ii) the Option shall terminatein care of its Secretary or any designee and any
unexercised portion of
such Option (whether or not vested)notice to be given to a Participant shall be forfeited, if (a) a Termination
of Employment occurs prioraddressed to a specified date,Participant's last
address as reflected in the Company's records and may be given either in
writing or within a specified time
period following receipt or exercise of the Option, or (b) the recipient at
any time, or during a specified time period, engages in any activity in
competition with the Company, or which is adverse, contrary or harmfulvia electronic communication to the
interests of the Company, as further defined by the Committee.
Section 7.12--Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of this Plan, this Plan, and any Option
granted to any individual who is then subject to Section 16, shall be subject
to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that
are requirements for the application of such exemptive rule. To the extent permitted by applicable law,law. By a
notice given pursuant to this paragraph, either party may hereafter designate
a different address for notices to be given. Any notice which is required to
be given to a Participant shall, if the Plan and Options granted hereunder shallParticipant is then deceased, be deemed amendedgiven
to the extent necessary to conform toParticipant's personal representative if such applicable exemptive
rule. Furthermore, notwithstanding any other provision of this Plan, any
Option intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C)representative has
previously informed the Company of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment
to Section 162(m) of the Code) or any regulations or rulings issued thereunder
that are requirements for qualification as performance-based compensation as
described in Section 162(m)(4)(C) of the Code,representative status and this Plan shall be deemed
amended to the extent necessary to conform to such requirements.
A-12
Section 7.13--Compliance with Laws
This Plan, the granting and vesting of Optionsaddress by
notice under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money under
this Plan or under Options granted hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith.paragraph. Any securities delivered under this Plannotice shall be subject to such restriction, and the person acquiring such securities
shall, if requestedhave been deemed duly given when
received by the Company provide such assurances and
representationsor when sent to a Participant by the Company as the Company may deem necessaryto
Participant's last known mailing address or desirabledelivered to assure compliance with all applicable legal requirements. To the extentan electronic mailbox
accessible by Participant as permitted by applicable law, the Plan, Options granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
or regulations.
Section 7.14--Titleslaw.
19. TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of thisthe Plan.
Section 7.15--Governing Law
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the internal laws of the State of Nevada without regard to
the conflicts of laws rules thereof.
A-13A-6
AUTOZONE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Harry L. Goldsmith and Donald R. Rawlins,
and each of them, as proxies, with full power of substitution, R to vote all
R shares of common stock of AutoZone, Inc., which the undersigned would be
entitled to vote at the Annual Meeting of O AutoZone, Inc., to be held at the
Company's principal executive
offices,O J.R. Hyde, III, Store Support Center, 123 South Front Street, Memphis,
Tennessee, on Thursday, X December 12, 1996,18, 1997, at 10 a.m., and at any and all
X adjournments thereof, on items 1, 2 and 3, as specified herein and such
other matters as may come before Y the meeting.
Y
Election of
Directors, Nominees: (change of address/comments)
J.C.Directors, Nominees:
John C. Adams, Jr., ----------------------------------------------
Andrew M. Clarkson, ----------------------------------------------
Thomas S. Hanemann, ----------------------------------------------_______________________________
N. Gerry House, Robert J. Hunt, J.R. ----------------------------------------------
Hyde, III, James F. (If you have written in the above space, please
Keegan, Michael W. mark the corresponding box on the reverse side_______________________________
Michelson, John E. of this card) Moll, George R.
Roberts, Ronald A. Terry, and Timothy D. _______________________________
Vargo.
_______________________________
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card)
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 DIRECTOR'S RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
FOLD AND DETACH HERE
[MAP OF LOCATION You are invited
OF STOCKHOLDERS to attend the
MEETING]YOU ARE INVITED
TO ATTEND THE
[LOGO OF AUTOZONE]
ANNUAL MEETING
OF STOCKHOLDERS
December 12, 1996DECEMBER 18, 1997
10:00 a.m.A.M.
123 South Front Street
Memphis, TennesseeSOUTH FRONT STREET
MEMPHIS, TENNESSEE
38103-3607
[X] Please mark your | 2797
votes as in this |__
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. 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 [_] [_] 2. Approval of 1996 [_] [_] [_] 4. In the discretion
Directors Stock Option Plan. of the proxies
(see reverse) named herein,
3. Approval of [_] [_] [_] upon such other
For, except vote withheld from the Independent Auditors. matters as may
following nominee(s): properly come
before the
meeting.
- -----------------------------------
---------------------------------------
SPECIAL ACTION
---------------------------------------
Comments/Change of Address [_]
Discontinue Annual Report
Mailing for this Account [_]
Will Attend Annual Meeting [_]
SIGNATURE(S) ____________________________________________________________ DATE __________ The signer hereby revokes all proxies
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD heretofore given by the signer to vote
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, at said meeting or any adjournments
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. thereof.
FOLD AND DETACH HERE
IMPORTANT: PLEASE VOTE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED
AUTOZONE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Harry L. Goldsmith and Donald R.
Rawlins, and each of them, as proxies, with full power of substitution,
R to vote all shares of common stock of AutoZone, Inc., which the
undersigned would be entitled to vote at the Annual Meeting of
O AutoZone, Inc., to be held at the Company's principal executive
offices, 123 South Front Street, Memphis, Tennessee, on Thursday,
X December 12, 1996, and at any and all adjournments thereof, on items 1,
2 and 3, as specified herein and such other matters as may come before
Y the meeting.
Election of
Directors, Nominees: (change of address/comments)
J.C. Adams, Jr., ----------------------------------------------
Andrew M. Clarkson, ----------------------------------------------
Thomas S. Hanemann, ----------------------------------------------
N. Gerry House, J.R. ----------------------------------------------
Hyde, III, James F. (If you have written in the above space, please
Keegan, Michael W. mark the corresponding box on the reverse side
Michelson, John E. of this card)
Moll, George R.
Roberts, Ronald A.
Terry, and Timothy D.
Vargo.
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 DIRECTOR'S RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
FOLD AND DETACH HERE
[MAP OF LOCATION You are invited
OF STOCKHOLDERS to attend the
MEETING]
[LOGO OF AUTOZONE]
ANNUAL MEETING
OF STOCKHOLDERS
December 12, 1996
10:00 a.m.
123 South Front Street
Memphis, Tennessee
38103-3607APPEARS HERE]
[X] Please mark your | 4631
votes as in this |__
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. 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 [_] [_] 2. Approval of 1996 [_] [_] [_] 4. In the discretion
Directors Stock Option Plan. of the proxies
(see reverse) named herein,
3. Approval of [_] [_] [_] upon such other
For, except vote withheld from the Independent Auditors. matters as may
following nominee(s): properly come
before the
meeting.
- -----------------------------------
---------------------------------------
SPECIAL ACTION
---------------------------------------
Comments/Change of Address [_]
Discontinue Annual Report
Mailing for this Account [_]
Will Attend Annual Meeting [_]
SIGNATURE(S) ____________________________________________________________ DATE __________- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [_] [_]
Directors
(see reverse)
For, except vote withheld from the following nominee(s):
FOR AGAINST ABSTAIN
2. Approval of Amended and Restated [_] [_] [_]
Employee Stock Purchase Plan.
3. Approval of Independent Auditors. [_] [_] [_]
4. In the discretion of the proxies named herein, upon such other matters as
may properly come before the meeting.
_________________________
- --------------------------------------------------------------------------------
SIGNATURE(S) ___________________________ DATE________ The signer hereby revokes
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS all proxies
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD heretofore
HEREON. JOINT OWNERS SHOULD EACH SIGN. given by the signer to vote
EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, vote at the meeting or
ADMINISTRATOR, at said meeting or any adjournments TRUSTEE OR GUARDIAN, any adjournments thereof.
PLEASE GIVE FULL TITLE AS SUCH. thereof.
FOLD AND DETACH HERE
IMPORTANT: PLEASE VOTE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED