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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_][ ]
Check the appropriate box:
[_][ ] Preliminary Proxy Statement
[_][ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)14a-
6(e)(2))
[X] Definitive Proxy Statement
[_][ ] Definitive Additional Materials
[_][ ] Soliciting Material Pursuant to Section(sec.) 240.14a-11(c) or Section(sec.)
240.14a-12
AUTOZONE, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------(none)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_][ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and 0-11.
(1)1) Title of each class of securities to which transaction applies:
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(2)2) Aggregate number of securities to which transaction applies:
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(3)3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4)4) Proposed maximum aggregate value of transaction:
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(5)5) Total fee paid:
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[_][ ] Fee paid previously with preliminary materials.
[_][ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1)1) Amount Previously Paid:
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(2)previously paid:
2) Form, Schedule or Registration Statement No.:
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(4)party:
4) Date Filed:
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Notes:
[LOGO OF AUTOZONE(R)][AUTOZONE(R) LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 1997
TO THE STOCKHOLDERS OF
AUTOZONE, INC.
NOTICE IS HEREBY GIVEN that17, 1998
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
AutoZone, Inc. (the "Company") will be held at the J.R. Hyde III Store Support Center, 123 South Front
Street, Memphis, Tennessee, 38103 on Thursday, December 18,
1997,17, 1998, at 10 a.m. (Central Standard Time) forAt the
following purposes:meeting, the stockholders will vote to:
1. To elect eleven directors for termsElect nine directors.
2. Approve an amendment to AutoZone's stock option plan to increase the
maximum number of one year each and until their
successors are duly elected and qualified;
2. To adopt the Amended and Restated Employee Stock Purchase Plan;shares of common stock which may be granted from
six million to 11 million.
3. To ratifyApprove the appointment of Ernst & Young LLP as independent certified public accountants for fiscal year 1998; andauditors.
4. To transactTransact other business aswhich may be properly comebrought before the meeting or
any adjournments thereof.
The Board of Directors has fixedmeeting.
If you were a stockholder at the close of business on October 22, 1997,
as the record date for determining the stockholders entitled to notice of, and
to20, 1998, you
may vote at the meeting andmeeting.
We look forward to seeing you at any adjournment thereof.
You are cordially invited to attend thisthe meeting.
By order of the Board of Directors,
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
October 29, 199730, 1998
IMPORTANT
PLEASE PROMPTLY COMPLETE, DATE, SIGN, AND RETURN THE ACCOMPANYINGENCLOSED PROXY CARD
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
TABLE OF CONTENTS
Notice of Annual Meeting..................................................Cover
The Meeting...............................................................1
About this Proxy Statement..............................................1
Information about Voting................................................1
Voting Securities.......................................................2
Quorum and Required Votes...............................................2
The Proposals.............................................................3
Proposal 1 -- Election of Directors.....................................3
Proposal 2 -- Amendment to Stock Option Plan............................6
Proposal 3 -- Approval of Independent Auditors..........................10
Other Matters...........................................................10
Other Information.........................................................11
Security Ownership of Management........................................11
Security Ownership of Certain Beneficial Owners.........................12
Compensation of Directors...............................................13
Executive Compensation..................................................14
Summary Compensation Table............................................14
Option/SAR Grants in Last Fiscal Year.................................15
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values..........................................15
Pension Plan Table....................................................15
Compensation Committee Report on Executive Compensation...............16
Stock Performance Graph...............................................18
Employment Agreements...................................................18
Certain Relationships and Related Transactions..........................19
Section 16(a) Beneficial Ownership Reporting Compliance.................19
Stockholder Proposals for 1999 Annual Meeting...........................19
Annual Report...........................................................19
AUTOZONE, INC.
123 SOUTH FRONT STREET
MEMPHIS, TENNESSEESouth Front Street
Memphis, Tennessee 38103
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 18, 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 toDecember 17, 1998
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THE MEETING
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Our Annual Meeting will be held at theAutoZone's J.R. Hyde III Store Support
Center, 123 South Front Street, Memphis, Tennessee, 38103 on December 18, 1997,beginning at 10 a.m. (Central Standard
Time)on
December 17, 1998.
ABOUT THIS PROXY STATEMENT
Our Board of Directors has sent you this Proxy Statement to solicit your vote
at the Annual Meeting. We will pay all expenses incurred in this proxy
solicitation. In addition to mailing this Proxy Statement to you, we have hired
Beacon Hill Partners to be our proxy solicitation agent for a fee of $4,500
plus expenses. We also may make additional solicitations by telephone,
facsimile, e-mail, or other forms of communication. Brokers, banks and at any adjournment thereof.others
who hold our stock for the beneficial owners will be reimbursed by us for their
expenses related to forwarding our proxy materials to the beneficial owners.
This Proxy Statement and the
accompanying proxy areis first being first mailed on October 30, 1998.
INFORMATION ABOUT VOTING
If you are a stockholder of record as of October 20, 1998, you may vote your
shares:
. By Proxy -- You can vote via the Internet, by telephone, or about October 29, 1997.
PROXY
Whenby completing,
signing and dating the enclosed proxy is executedcard and returned,returning it to us by mail.
WE ENCOURAGE YOU TO VOTE BY TELEPHONE OR INTERNET, BOTH OF WHICH ARE
CONVENIENT, COST-EFFECTIVE AND RELIABLE ALTERNATIVES TO RETURNING YOUR
PROXY CARD BY MAIL. The instructions for voting are contained on the
enclosed proxy card. The individuals named on the card, your "proxies,"
will vote your shares it representsas you indicate. If you sign your card without
indicating how you wish to vote, all of your shares will be voted atFOR all
of 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 proxynominees for director, will be voted in favor ofFOR the matters discussed
herein,amendment to the stock
option plan, will be voted FOR Ernst & Young LLP as independent auditors,
and, in the best judgment of the proxy holdertheir discretion, on any other matter that may be properly comebrought
before the stockholders for a vote. Any stockholder
executing and delivering the proxymeeting. You may revoke ityour proxy at any time priorbefore it is
voted at the meeting by sending a written notice to a vote
on a matterour Secretary (at the
address at the top of the page) that you have revoked the proxy, by
the due execution of another proxy bearingproviding a later datedated proxy, or by written notification to the Secretary of the Company. Stockholders who are
presentvoting in person at the Annual
MeetingMeeting.
. In Person -- You may revoke their proxyattend the Annual Meeting and vote in person if they so desire. Proxies reflectingperson.
If you held your shares in an account with a bank or 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 ofother entity
on the votes castrecord date, please follow the instructions given to you 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.your ballot
regarding casting your vote.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on October 10, 1997, the Company20, 1998, we had outstanding
151,446,220150,361,561 shares of
Common Stock.common stock outstanding. Each share of Common Stock entitles its
ownercommon stock is entitled to one vote upon each matter to come before the Annual Meeting.vote.
Only stockholders of record at the close of business on Wednesday,Tuesday, October 22,
1997,20,
1998, will be entitled to vote.
QUORUM AND REQUIRED VOTES
Holders of a majority of the shares of common stock outstanding must be
present in person or by proxy in order for a quorum to be present. Votes on the
proposals will be tallied as follows:
. Election of Directors -- The nine persons nominated for director receiving
the most votes will be elected.
. Amendment to stock option plan -- For approval, the plan must receive an
affirmative vote from a majority of the shares present and voting.
Abstentions will be counted as if they were votes against the plan. Broker
non-votes will not be counted as voting either for or against the plan.
. Approval of independent auditors -- For approval, the auditors must receive
an affirmative vote from a majority of the shares present and voting.
Abstentions will be counted as if they were votes against the auditors.
Broker non-votes will not be counted as voting either for or against the
auditors. However, we are not bound by a vote either for or against the
auditors. The Board of Directors and the Audit Committee will consider a
vote against the auditors by the stockholders in selecting auditors in the
future.
2
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THE PROPOSALS
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PROPOSAL 1--ELECTION OF DIRECTORS
Nine directors will be elected at the Annual Meeting to serve until the
Annual Meeting in 1999. Each of the nominees named below was elected a director
at the 1997 annual meeting. These nominees have consented to serve if elected,
but should any nominee be unavailable to serve, your proxy will vote for the
substitute nominee recommended by the Board of Directors. The nominees are:
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NOMINEE AGE POSITIONS HELD
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JOHN C. ADAMS, JR. 50 With AutoZone:
Chairman, Chief Executive . Director since 1996
Officer & Director . Chairman since March 1997
Customer Satisfaction . CEO since December 1996
. President from December 1996 to March
1997
. Vice Chairman and Chief Operating Officer
from March 1996 to December 1996
. Executive Vice President -- Distribution
from January 1995 to March 1996
. President of Miami Division of Malone &
Hyde, Inc. from 1983 to 1990
With Others:
. Owner of Nicotiana Enterprises, Inc., a
food distribution company, from 1990 to
1994
. Director of Keebler Foods Company
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ANDREW M. CLARKSON 61 With AutoZone:
Director . Director since 1986
Chairman of Finance Committee . Chairman of Finance Committee since 1995
Customer Satisfaction . Treasurer from 1990 to 1995 and from 1986
to 1988
. Secretary from 1988 to 1993
. Chief Financial Officer of Malone & Hyde,
Inc., from 1983 to 1988
With Others:
. Director of Amphenol Corporation
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N. GERRY HOUSE 51 With AutoZone:
Director . Director since 1996
Customer Satisfaction
With Others:
. Superintendent of Memphis, Tennessee,
City School System since 1992
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3
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NOMINEE AGE POSITIONS HELD
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ROBERT J. HUNT 49 With AutoZone:
Executive Vice President, Chief . Director since 1997
Financial Officer & Director . Executive Vice President and Chief
Customer Satisfaction Financial Officer since 1994
. Executive Vice President and Chief
Financial Officer for Malone & Hyde,
Inc. from 1988 to 1991
With Others:
. Executive Vice President, Chief
Financial Officer, & Director for The
Price Company from 1991 to 1993
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J.R. HYDE, III 55 With AutoZone:
Director . Director since 1986
Customer Satisfaction . Chairman from 1986 to March 1997
. Chief Executive Officer from 1986 to
December 1996
. Chairman and Chief Executive Officer of
Malone & Hyde, Inc., until 1988
With Others:
. President of Pittco, Inc., an
investment company, since 1989
. Director of FDX Corporation
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JAMES F. KEEGAN 66 With AutoZone:
Director . Director since 1991
Customer Satisfaction
With Others:
. Chairman of Adams Keegan, formerly
known as Staff Line, Inc., an employee
leasing firm, since 1997
. Managing Director of Weibel Huffman
Keegan, Inc., an investment management
firm, until 1997
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MICHAEL W. MICHELSON 47 With AutoZone:
Director . Director since 1986
Customer Satisfaction
With Others:
. Member of limited liability company
which is general partner of Kohlberg
Kravis Roberts & Co., L.P. since 1996
. General Partner of Kohlberg Kravis
Roberts & Co., L.P., prior to 1996
. General Partner of KKR Associates, L.P.
. Director of Amphenol Corporation,
Owens-Illinois, Inc., Owens-Illinois
Group, Inc., and Promus Corporation
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4
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NOMINEE AGE POSITIONS HELD
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RONALD A. TERRY 67 With AutoZone:
Director . Director since 1995
Customer Satisfaction
With Others:
. Chairman of First Tennessee National
Corporation from 1973 to 1995
. Chief Executive Officer of First
Tennessee National Corporation from 1973
to 1994
. Director of BellSouth Corporation and
Promus Corporation
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TIMOTHY D. VARGO 46 With AutoZone:
President, Chief Operation . Director since 1996
Officer & Director . President since March 1997
. Chief Operating Officer since December
Customer Satisfaction 1996
. Vice Chairman from March 1996 to March
1997
. Executive Vice President -- Merchandising
and Systems Technology from June 1995 to
March 1996
. Senior Vice President -- Merchandising
from March to June 1995 and from 1986 to
1992
. Director of Stores for Auto Shack
division of Malone & Hyde, Inc., from
1984 to 1986
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Note: Malone & Hyde, Inc., is the former parent company of AutoZone.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held 13 meetings in fiscal year 1998. Each director
nominated for reelection attended at least 75% of the total of the Board of
Directors and committee meetings during the fiscal year. George R. Roberts, who
is currently a director but will not stand for reelection at the annual
meeting, did not attend at least 75% of the Board meetings.
The Board of Directors has three committees: the Audit Committee, the
Compensation Committee, and the Finance Committee. The Board of Directors does
not have a nominating committee.
The Audit Committee recommends the engagement of independent auditors,
confers with our internal and external auditors regarding the adequacy of our
financial controls and fiscal policy, and directs changes to financial policies
or procedures as suggested by the auditors. During fiscal year 1998, the Audit
Committee met one time. For the fiscal year, the Audit Committee consisted of
Mr. Keegan (Chairman), Mr. Terry, and John E. Moll who was a member of the
Board of Directors and Audit Committee until his retirement in June 1998.
The Compensation Committee sets the compensation levels for all officers,
including salary and bonus levels. In addition, the Compensation Committee
administers AutoZone's stock option and stock purchase plans. The Compensation
Committee, consisting of Mr. Terry (Chairman), Mr. Keegan, and Dr. House, held
eight meetings during fiscal year 1998.
5
The Finance Committee reviews AutoZone's financing options and makes
recommendations to the full Board and management as to appropriate financing
mechanisms. During fiscal year 1998, the Finance Committee, consisting of Mr.
Clarkson (Chairman) and Mr. Michelson, held two meetings.
PROPOSAL 2--AMENDMENT TO STOCK OPTION PLAN
WHAT IS THE CURRENT STOCK OPTION PLAN?
The AutoZone, Inc. Amended and Restated 1996 Stock Option Plan allows the
Compensation Committee to grant options to purchase shares of AutoZone, Inc.,
Common Stock, $0.01 par value, at a fixed price at some point in the future.
The Compensation Committee believes that stock options are an important part of
the compensation and motivation of employees, and are necessary to attract and
retain the most qualified people. The closing price of the common stock on the
New York Stock Exchange as of October 20, 1998, was $27.1875.
WHAT IS THE AMENDMENT?
Options to purchase up to 6,000,000 shares of common stock may be granted
under the current stock option plan, and, of those, as of the end of the fiscal
year, 2,699,468 shares remained available for future grants. In order to
continue to grant stock options, we recommend that the stockholders approve an
amendment to the stock option plan to increase the maximum number of shares for
which options may be granted by five million shares. If the stockholders
approve the amendment, options to purchase up to 11 million shares may be
granted under the current stock option plan.
WHO RECEIVES STOCK OPTIONS?
All employees of AutoZone and its subsidiaries are eligible to receive stock
option grants. Historically, all levels of management have received stock
options, including store managers, area advisors, and district managers. Due to
the number of stores acquired by AutoZone in the past fiscal year, AutoZone
needs the additional shares under the option plan to continue to grant stock
options to its new managers. The Compensation Committee decides which employees
receive stock options and in what amounts.
WHEN WAS THE STOCK OPTION PLAN ADOPTED?
The stockholders adopted the 1996 Stock Option Plan at the annual
stockholders meeting in 1996.
HAS THE STOCK OPTION PLAN BEEN AMENDED PRIOR TO NOW?
In 1997, the Compensation Committee amended the stock option plan to limit
the right to decrease the exercise price of a stock option after it is granted
and to limit the number of stock options that may be granted at a discount to
the market price as of the grant date.
HOW MANY EMPLOYEES HAVE RECEIVED STOCK OPTIONS?
AutoZone had 38,526 employees at the fiscal year end, each of whom is
eligible to receive stock options. Under either the current stock option plan
or under a prior plan, over 5,000 employees have received stock options,
including all store managers.
6
This table shows how many options were received by the named executive
officers, all executive officers, and all employees, excluding the executive
officers, in the last fiscal year:
NUMBER
NAME AND POSITION OF SHARES
------------------------------------------------------------
John C. Adams, Jr. 0
Chairman & Chief Executive Officer
Timothy D. Vargo 0
President & Chief Operating Officer
Robert J. Hunt 0
Executive Vice President & Chief Financial Officer
Lawrence E. Evans 0
Executive Vice President
Gerald E. Colley 40,000
Senior Vice President
All Executive Officers 130,000
All Employees, 1,562,272
excluding Executive Officers
WHO DETERMINES WHICH EMPLOYEES RECEIVE STOCK OPTIONS AND THE TERMS OF THE
GRANT?
The Compensation Committee makes the grant of each stock option and
establishes the conditions of each stock option grant, including:
. the number of shares to be granted,
. the exercise price,
. the expiration date, and
. how long a recipient must wait to exercise the stock option.
Typically, stock options vest in increments beginning three years from the
grant date and become fully vested five to seven years after the grant date.
WHO IS ON THE COMPENSATION COMMITTEE?
The Compensation Committee must have two or more non-employee directors as
members. The current members are Ronald A. Terry, Chairman, N. Gerry House,
and James F. Keegan.
ARE THERE ANY LIMITATIONS ON STOCK OPTIONS?
. No person may be granted options to purchase more than 500,000 shares of
stock in a calendar year.
. Only 300,000 non-qualified stock options may have an exercise price less
than fair market value on the grant date, but the exercise price may not
be less than 85% of fair market value on the grant date.
. At least a year must pass after the grant date before an option may be
exercised.
7
HOW ARE STOCK OPTIONS EXERCISED?
Stock options may be exercised at any adjournment
thereof.time after the stock options have
become exercisable by delivering a notice of exercise to the Secretary with
payment of the option price and any required taxes. The followingoption price may be
paid:
. in cash,
. by a "cashless exercise," where a broker agrees to sell the stock
purchased by the exercise of an option and paying a portion of the
proceeds of the sale equal to the exercise price to us,
. in an equivalent value of common stock, if approved by the Compensation
Committee,
. by delivery of a promissory note for the purchase price, if approved by
the Compensation Committee, or
. a combination of these payment methods.
WHO CAN AMEND THE STOCK OPTION PLAN?
The stock option plan may be amended by the Compensation Committee, except
that only the stockholders may amend the stock option plan to:
. increase the number of shares available for grant under the plan,
. increase the number of shares that may be granted to one person in a year,
. modify the eligibility requirements for receiving options,
. extend the expiration date of the stock option plan, or
. make any other amendment where the law would require stockholder approval.
WHEN DOES THE STOCK OPTION PLAN EXPIRE?
The stock option plan will expire on October 21, 2006. After the expiration
date, no more options may be granted under the stock option plan, but all
options granted under the plan prior to the expiration date will continue to
be exercisable subject to the plan.
WHAT HAPPENS TO STOCK OPTIONS IN CASE OF A STOCK SPLIT OR A CORPORATE
RESTRUCTURING?
The Compensation Committee may make appropriate adjustments to the number of
options granted and the exercise price to prevent dilution or enlargement of
the benefits under stock options granted. For example, if AutoZone's stock is
split 2 for 1, the Compensation Committee will double the number of shares
granted as stock options and reduce the exercise price of each share by half.
In the event of a corporate restructuring, which may include a merger with
another company, a sale of most of our assets, or a change in control, the
Compensation Committee may direct that:
. all options be repurchased for cash equal to the value as if they were
exercised,
. no options be exercised after the event,
. the exercise date of the options be accelerated prior to the event,
. the options be assumed by a successor corporation or that other securities
be substituted in lieu of the common stock, or
. other appropriate adjustments be made in the number and type of shares
subject to options.
8
ARE THE STOCK OPTIONS TRANSFERABLE?
Options granted under the stock option plan are not transferable, except by
will or the laws of descent and distribution.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTION GRANTS AND
EXERCISES?
Two different types of stock options may be granted under the stock option
plan, incentive stock options and non-qualified stock options, each of which
has a different tax impact on both the option recipient and us.
Non-Qualified Stock Options. Federal income taxes are due from a recipient of
non-qualified stock options when the stock options are exercised. The
difference between the exercise price of the option and the fair market value
of the stock purchased on the exercise date is taxed as ordinary income.
Thereafter, the tax basis for the acquired stock is equal to the fair market
value of the stock as of the exercise date. AutoZone will take a tax deduction
equal to the amount of income realized by the option recipient on the exercise
date.
Incentive Stock Options. We have not granted incentive stock options under
the stock option plan, although they are authorized. Unlike the treatment of
non-qualified stock options, federal income taxes are not imposed upon the
exercise of incentive stock options; taxes are imposed only when the shares of
stock from exercised options are sold. If the incentive stock option recipient
does not sell the stock until after one year after the receipt of the stock and
two years after the option was granted, upon sale of the stock the difference
between the exercise price and the market value of the stock as of the date of
exercise will be treated as a capital gain, and not ordinary income. If a
recipient fails to hold the stock for the minimum required time, at the time of
the sale of the stock taxes will be assessed on the gain as ordinary income. We
will not receive a tax deduction for incentive stock options which are taxed to
a recipient as capital gains; however, we will receive a tax deduction if the
sale of the stock does not qualify for capital gains tax treatment.
To the extent that the market value of the underlying stock at the grant date
of an incentive stock option exceeds $100,000 in any year, then the excess of
the value over $100,000 will be treated as non-qualified stock options for
federal tax purposes.
In addition, the exercise of an incentive stock option may trigger liability
for the alternative minimum tax.
WHAT VOTE IS REQUIRED TO APPROVE THE AMENDMENT TO THE STOCK OPTION PLAN?
To approve the amendment to the stock option plan, a majority of the
stockholders present and voting must vote FOR the amendment. Broker non-votes
will be counted as present at the meeting for purposes of a quorum, but will
not be counted as voting either for or against the amendment. Abstentions will
be counted as voting against the amendment.
THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THAT YOU VOTE
FOR THE AMENDMENT TO THE STOCK OPTION PLAN.
9
PROPOSAL 3--APPROVAL OF INDEPENDENT AUDITORS
Ernst & Young LLP, which has been our independent auditor for the past eleven
fiscal years, has again been selected by the Audit Committee to be AutoZone's
independent auditors for fiscal year 1999. Members of Ernst & Young LLP will be
present at the Annual Meeting to make a statement if they so desire and to
answer any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS.
OTHER MATTERS
We do not know of any other matters to be presented at the Annual Meeting
other than those discussed in this proxy statement. If, however, other matters
are properly brought before the Annual Meeting, your proxy will be able to vote
those matters in their discretion.
10
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OTHER INFORMATION
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SECURITY OWNERSHIP OF MANAGEMENT
This table sets forth certain information regardingshows the beneficial ownership of AutoZone's outstanding Common Stockcommon stock as of October 10, 1997,20,
1998, by (i) any person or group known byeach director, the Company to beChief Executive Officer, the beneficial owner of
more than five percent of the Company's common stock, (ii) each of AutoZone's
directors, (iii) each of the persons named in the Summary Compensation Table,other four most highly
compensated executive officers, and (iv) all directors and executive officers 1
of AutoZone as a
group. Except as indicated byUnless stated otherwise in the notes to the following
table, the holders listedeach person named
below havehas sole voting powerauthority to vote and investment power
overinvest the shares beneficially held by themshown.
BENEFICIAL OWNERSHIP
AS OF
OCTOBER 20, 1998
--------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------------ --------
John C. Adams, Jr. /1,2/.................................... 51,552 *
Andrew M. Clarkson /3/...................................... 525,820 *
N. Gerry House.............................................. 0 --
Robert J. Hunt /2,4/........................................ 141,618 *
J.R. Hyde, III /5,6/........................................ 4,567,030 3.0%
James F. Keegan /5,7/....................................... 408,013 *
Michael W. Michelson........................................ 511,883 *
George R. Roberts /8/....................................... 2,941,247 2.0%
Ronald A. Terry............................................. 5,128 *
Timothy D. Vargo /9/........................................ 9,402 *
Lawrence E. Evans /2,10/.................................... 198,868 *
Gerald E. Colley /2,11/..................................... 10,432 *
All directors and the beneficial ownership is
direct.
BENEFICIAL
OWNERSHIP
AS OF
OCTOBER 10, 1997
(1)
------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ---------- -------
KKR Associates, L.P. (2)................................... 19,908,488 13.1%
9 West 57th Street
New York, NY 10019
The Equitable Companies, Inc. (3).......................... 13,224,725 8.7%
787 Seventh Avenue
New York, NY 10019
J. R. Hyde, III (4)........................................ 12,319,846 8.1%
123 South Front Street
Memphis, TN 38103
FMR Corp. (5).............................................. 9,023,490 6.0%
82 Devonshire Street
Boston, MA 02109
John C. Adams, Jr. (6)..................................... 1,597 *
Andrew M. Clarkson (7)..................................... 570,320 *
N. Gerry House............................................. 0 --
Robert J. Hunt (8)......................................... 100,000 *
James F. Keegan (9)........................................ 5,000 *
Michael W. Michelson (2)................................... -- --
John E. Moll............................................... 484,791 *
George R. Roberts (2) (10)................................. -- --
Ronald A. Terry (11)....................................... 5,128 *
Timothy D. Vargo (12)...................................... 7,402 *
Lawrence E. Evans (13)..................................... 183,040 *
Shawn P. McGhee (14)....................................... 35,137 *
Thomas S. Hanemann (15).................................... 7,561 *
All directors and executive officers as a group, including
those named above (19 persons) (16)....................... 13,927,837 9.2%
executive officers as a group /2/......... 9,194,253 6.1%
- --------
* Less*Less than 1%
(1) For purposes/1/Does not include 1,572 shares held in trusts for the benefit of this table, "beneficial ownership" includes anyMr. Adam's
children.
/2/Includes shares which such person has the right to acquireissuable upon exercise of stock options either immediately
or within 60 days of October 10,
1997. For purposes of computing the percentage of outstanding20, 1998, as follows: Mr. Adams: 50,000; Mr. Hunt:
37,500; Mr. Evans: 198,333, Mr. Colley: 10,001; All directors and executive
officers as a group: 511,834.
/3/Includes 134,400 shares held by each person or group of persons named above on a given date, any
securitycharitable trust for which such person or persons has the right to acquire within 60
days after such dateMr. Clarkson
is deemed to be outstanding, but is not deemed to be
outstanding in computing the percentage ownership of any other person.
(2) Includes (i) 10,227,594a trustee and shares (6.8%) owned of record by three limited
partnerships of which KKR Associates, L.P. is the sole general partner
(the "Partnerships"),investment and (ii) 9,680,894 shares (6.3%) owned of record by
KKR Associates, L.P. The Partnerships dissolved on December 31, 1996 in
accordancevoting power, with the terms of the limited partnership agreements pursuantrespect to which they were organized (the "Limited Partnership Agreements"). The
Partnerships continue to be in existence for a winding-up period after
such date. The Limited Partnership Agreements provide that, in connection
with the dissolution and winding-up of the Partnerships, KKR Associates,
L.P. has the sole discretion regarding the disposition of theMr.
Clarkson disclaims beneficial ownership. Does not include 1,000 shares owned by
the Partnerships, including public or private sales of such
shares, the distribution of the shares to the limited partners of the
Partnerships or a combination of the foregoing. KKR Associates, L.P., may
be deemed to beneficially own the shares held by the Partnerships.
Messrs. Roberts, 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, L.P. may be deemed to share beneficial
ownership of the shares owned by KKR 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. Roberts and Michelson are members of AutoZone's Board of Directors.
Not included in the number of shares listed are: 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, 140,000Clarkson's immediate family nor does it include 14,000 shares
held in trust for the familybenefit of a member of Mr. Raether and forClarkson's family, with
respect to 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,he disclaims beneficial ownership.
/4/Includes 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) Hunt's wife.
/5/Includes 570,000400,000 shares which are held in trusts for which Mr. Hyde is a
trustee and
885,000Mr. Keegan are co-trustees, and with respect to which Mr. Keegan disclaims
beneficial ownership.
/6/Includes 790,000 shares held by a charitable foundation for which Mr. Hyde
is an officer and a director and overfor which he shares investment power.and voting
power, and 170,000 shares held by a trust for the benefit of a family member
for which Mr. Hyde is sole trustee. Does not include 2,000 shares owned by Mr.
Hyde's spouse.
(5) All information regarding FMR Corp. is based upon the Schedule 13G dated
February 14, 1997, which is filed on behalf of FMR Corp. and its
subsidiaries and affiliates. FMR Corp. has the sole power to vote or
direct the vote for 601,040 shares and sole power to dispose or to direct
the disposition of 9,023,490 shares.
(6) Does not include 1,572 shares held in trusts for the benefit of Mr.
Adams's children.
(7) Includes 112,400 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 2,000 shares 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. 11
/7/Does not include 800 shares owned by membersa member of Mr. Keegan's family with
respect to which Mr. Keegan disclaims any beneficial ownership.
(10) Does not include 120,000 shares held by an irrevocable trust created by
Mr. Roberts for the benefit of Mr. Roberts's children, nor does it include
another/8/Includes 120,000 shares held by Mr. Roberts as a trustee of an irrevocable
trust; does not include 120,000 shares held in a trust over
which Mr. Roberts has investment power. Mr. Roberts disclaims any
beneficial ownershipfor the benefit of these shares.
(11) Does not include 12,558 shares owned by
members of Mr. Terry's immediateRoberts family. (12) Mr. Roberts will be a member of the Board of
Directors until the annual meeting, but has declined to stand for reelection.
/9/Does not include 4,635 shares owned by members of Mr. Vargo's immediate
family.
(13) Includes 182,667 shares issuable upon exercise of stock options which are
exercisable immediately or within 60 days after October 10, 1997. /10/Does not include 9,00010,000 shares owned by Mr. Evans's spouse,wife 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. /11/Does not include any5,000 shares owned by Mr. Colley's wife.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following entities are known by us to own more than five percent of the
outstanding common stock:
BENEFICIAL OWNERSHIP
AS OF
OCTOBER 20, 1998
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------------------ ------------- ---------
ESL Partners, L.P/1/..................................... 15,416,100 10.3%
One Lafayette Place
Greenwich, CT 06830
The Prudential Insurance Company of America/2/........... 8,098,552 5.4%
751 Broad Street
Newark, NJ 07102
W.P. Stewart & Co., Inc./3/.............................. 9,322,595 6.2%
527 Madison Avenue
New York, NY 10022
- --------
/1/All information regarding ESL Partners, L.P., is based upon the Schedule
13G dated October 7, 1998, filed on behalf of a group consisting of ESL
Partners, L.P., ESL Limited, ESL Institutional Partners, L.P. and Acres
Partners, L.P. The general partner of ESL is RBS Partners, L.P. The general
partner of RBS Partners, L.P. is ESL Investments, Inc. ESL Investment
Management, LLC, is the investment manager of ESL Limited. RBS Investment
Management, LLC, is the general partner of ESL Institutional Partners, L.P. ESL
Investments, Inc., is the general partner of Acres Partners, L.P. In their
respective capacities, each of the foregoing entities may be deemed to be the
beneficial owner of the shares of AutoZone common stock beneficially owned by
other members of the group. As of October 7, 1998, ESL Partners, Inc., was the
record owner of 9,825,139 shares, ESL Limited was the record owner of 1,576,679
shares, ESL Institutional Partners, L.P., was the record owner of 294,937
shares, and Acres Partners, L.P., was the record owner of 3,719,345 shares.
Each entity has the sole power to vote and dispose of the shares deemed
beneficially owned by KKR Associates, L.P. (see
note 2)them.
/2/All information regarding The Prudential Insurance Company of America
("Prudential") is based upon the Schedule 13G dated February 10, 1998.
Prudential has the sole power to vote and
12
direct the disposition for 659,400 shares, shares the power to vote or Mr. Hanemann (see note 15).
3
PROPOSAL 1--ELECTIONdirect
the vote for 6,700,852 shares, and shares the power to dispose of 7,439,152
shares. Prudential holds 5,000 shares for the benefit of its general account
and holds 8,093,552 shares for the benefit of its clients by its separate
accounts, externally managed accounts, registered investment companies,
subsidiaries and/or other affiliates.
/3/All information regarding W.P. Stewart & Co., Inc., is based upon the
Schedule 13G dated February 17, 1998. W.P. Stewart & Co., Inc., has the sole
power to vote and dispose of the shares deemed beneficially owned by them.
COMPENSATION OF DIRECTORS
The BoardNon-employee directors are paid an annual fee of Directors of the Company has set the number of directors at
eleven,$25,000 in quarterly
installments, plus $1,000 for each of whom was elected 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 frommeeting attended. In March 1998, the Board
of Directors adopted the Directors Compensation Plan. Under this plan, a non-
employee director may receive no more than one-half of the annual and meeting
fees immediately in September 1997.
Eleven directors willcash, and the remainder of the fees must be elected attaken in either
common stock or the Annual Meetingfee may be deferred in units with value equivalent to serve until the
Annual Meeting in 1998. Proxies representingvalue of shares of Common Stock held on
the Record Date that are returned duly executed will be voted, unless
otherwise specified, in favorcommon stock as of the eleven nominees forgrant date (also known as "stock
appreciation rights").
Also in March 1998, the Board of Directors named below. All nominees have consentedadopted the 1998 Directors Stock
Option Plan. Under the stock option plan, each non-employee director was
automatically granted an option to serve if elected, but
should any nominee be unavailablepurchase 1,000 shares of common stock on the
plan's adoption date. On January 1 of each year, each non-employee director
will receive an additional option to serve (which event is not anticipated)purchase 1,000 shares of common stock. On
December 31 of each year, each non-employee director that owns common stock
worth at least five times the persons named inannual fee paid to each non-employee director on
an annual basis will receive an additional option to purchase 1,000 shares of
common stock. These stock option grants are made at the proxy intend to vote for such substitute nomineefair market value 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:
JOHN C. ADAMS, JR., 49--CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND DIRECTOR
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 since March 1996. Previously, he was Executive Vice
President--Distribution since 1995. From 1990 to 1994, Mr. Adams was a co-
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.
ANDREW M. CLARKSON, 60--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.grant date.
Mr. Clarkson is also a
director of Amphenol Corporation.
N. GERRY HOUSE, 50--DIRECTOR
N. Gerry House has been a director since 1996. Dr. House has been
Superintendent of the Memphis, Tennessee, City Schools since 1992. Prior to
that time she was Superintendent of the Chapel Hill-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,an AutoZone employee, 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, 54--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 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 had been employed
by AutoZone or Malone & Hyde since 1965. Mr. Hyde is also a director of
Federal Express Corporation.
4
JAMES F. KEEGAN, 65--DIRECTOR
James F. Keegan has been a director since 1991. Mr. Keegan is currently the
Chairman of Staff Line, Inc. Mr. Keegan had been a managing director of Weibel
Huffman Keegan, Inc., an investment management firm, during the past five
years, until his retirement in August 1997.
MICHAEL W. MICHELSON, 46--DIRECTOR
Michael W. Michelson has been a director since 1986. Mr. Michelson has been
a member 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 Associates, L.P. Mr. Michelson is also a
director of Amphenol Corporation, Doubletree Corporation, Owens-Illinois,
Inc., Owens-Illinois Group, Inc., and Union Texas Petroleum Holdings, Inc.
JOHN E. MOLL, 63--DIRECTOR
John E. Moll has been a director since June 1992 and from 1986 until 1988.
Mr. Moll is the former President and Chief Operating Officer for Fleming
Companies, Inc., until his retirement in 1992. Previously, Mr. Moll was
Executive Vice President--Wholesale Foods of Malone and Hyde.
GEORGE R. ROBERTS, 54--DIRECTOR
George R. Roberts has been a director since 1986. Mr. Roberts is a founding
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 Associates, L.P. Mr. Roberts is also a director of Borden,
Inc., Bruno's, Inc., Evenflow & Spalding Holdings Corporation, Flagstar
Companies, Inc., Flagstar Corporation, IDEX Corporation, K-III Communications
Corporation, KinderCare Learning Center, Inc., KSL Recreation Group, Inc.,
Merit Behavioral Care Corporation, Newsquest Capital, PLC, Owens-Illinois,
Inc., Owens-Illinois Group, Inc., Randall's Food Markets, Inc., Safeway Inc.,
Union Texas Petroleum Holdings, Inc., and World Color Press, Inc.
RONALD A. TERRY, 66--DIRECTOR
Ronald A. Terry was elected a Director in 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 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, 45--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 Chief Operating Officer since 1996, Executive Vice President--
Merchandising and Systems Technology since 1995 and had been Senior Vice
President--Merchandising in 1995. Mr. Vargo was Senior Vice President--
Merchandising from 1986 to 1992 and Director of Stores from 1984 to 1986.
The Company's Board of Directors held eight meetings in fiscal year 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 have1998 was paid 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 1997, the Audit Committee,
consisting of Mr. Keegan (Chairman), Mr. Moll and Mr. Terry, held two
meetings.
5
The Compensation Committee reviews new and modified executive
salary and incentive compensation programsbonus of $66,250 and stock option plans, direct and indirect
compensation matters, and management's compensation actions for executive
officers andreceived other key personnel. During fiscal year 1997 the Compensation
Committee, consisting of Mr. Terry (Chairman), Mr. Keegan, and Dr. House, held
eleven meetings.
The Finance Committee reviews financing options for the Company and makes
recommendationsbenefits ordinarily granted to
management and the Board of Directors as to appropriate
financing mechanisms. During fiscal year 1997, the Finance Committee,
consisting of Mr. Clarkson (Chairman) and Mr. Michelson, held one meeting.all employees.
13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The followingThis table sets forthshows the compensation paid to (i) the Company's
current Chief Executive Officer (ii)and the Company's former Chief Executive
Officer, (iii) the Company's former President, and (iv) its
other four most highly paid executive officers for the past three fiscal years ended August 30, 1997,
August 31, 1996, and August 26, 1995.years.
LONG TERM
COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- --------------------- ALL OTHER----------------------------------------------- -------------------
SECURITIES
NAME AND OTHER ANNUAL SECURITIES UNDERLYING COMPENSATIONALL OTHER
PRINCIPAL POSITION YEAR SALARY ($SALARY($) BONUS ($BONUS($)(1) COMPENSATION ($/1/ COMPENSATION($)(2)/2/ OPTIONS/SARS (#)(3) ($)(4)
------------------ ---- ---------- ------------ ------------------- --------------------- ------------SARs(#)/3/ COMPENSATION/4/
- -----------------------------------------------------------------------------------------------------------
John C. Adams, Jr. (5)../5/ 1998 520,000 253,500 -- 0 3,048
Chairman & Chief 1997 413,952 199,268 -- 350,000 2,032
Chairman and ChiefExecutive Officer 1996 292,788 92,859 -- 200,000 2,219
Executive Officer 1995 134,269 67,135 -- 200,000 1,625
J.R. Hyde, 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
Chief Executive Officer 1995 601,650 451,238Timothy D. Vargo/6/ 1998 416,000 202,800 -- 0 5,561
Timothy D. Vargo (6)....3,048
President & Chief 1997 356,859 170,973 -- 250,000 2,032
President and ChiefOperating Officer 1996 291,282 92,583 -- 150,000 2,442
Operating Officer 1995 84,808 63,606 -- 200,000 507
Thomas S. Hanemann...... 1997 378,525 0Lawrence E. Evans 1998 216,250 84,338 -- 0 571,772
Former President 1996 374,567 238,875 -- 0 5,833
1995 350,000 262,500 -- 0 8,104
Lawrence E. Evans.......2,482
Executive Vice 1997 208,000 76,160 -- 50,000 1,805
Executive VicePresident 1996 203,846 65,000 -- 0 2,958
President 1995 130,000 97,500Robert J. Hunt 1998 300,000 117,000 -- 0 4,044
Robert J. Hunt..........3,048
Executive Vice 1997 261,769 96,223 -- 50,000 2,032
Executive VicePresident & Chief 1996 249,711 79,625 14,257 0 2,878
President and Chief 1995 144,231 81,130 51,910 150,000 1,343
Financial Officer
Shawn P. McGhee.........Gerald E. Colley/7/ 1998 230,000 74,750 42,003 40,000 2,213
Senior Vice President 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 2,831110,676 30,989 18,448 50,000 2,122
- --------
(1) /1/Bonuses are shown infor the fiscal year in which earned, althoughbut paid in the following
fiscal year.
(2) Other Annual Compensation stated consists of amounts paid to: Mr. Hyde in
1997 and 1996/2/Amounts shown are: tax reimbursement for personal security services, and Mr. Hunt in 1996, and relocation
expenses for reimbursement of tax expensesMr. Colley in 1997 and 1998.
/3/All amounts shown are stock options; AutoZone did not grant SARs to
executive officers in 1995 for relocation allowances.
(3)the 1996, 1997 or 1998 fiscal years. All options granted
in 1997 and 1998 were granted pursuant toin accordance with the Company's 1996 Stock Option Plan. OptionsPlan, as
amended and restated in 1997. All options granted in 1996 and 1995 were granted pursuant toin
accordance with the
Company's Amended and Restated Stock Option Plan.
AutoZone did not grant
SARs in the 1995, 1996 or 1997 fiscal years.
6
(4) /4/All Other Compensation for fiscal year 1997 consists of term life insurance provided for the
benefit of the named executive's designated
beneficiary, except as otherwise stated. For officer's beneficiary.
/5/Mr. Hyde, the amount stated
includes $1,230 for term life insurance, $1,455,133 to be paid in
installmentsAdams was Executive Vice President-Distribution until March 1996, Vice
Chairman and $344,867 as the Company's estimated cost of providing
security for Mr. HydeChief Operating Officer from March 18,1996 to December 1996, was
President from December 1996 to March 1997, the date of his retirement aswas first elected Chief Executive
Officer in December 1996, and was first elected Chairman in March 1997.
/6/Mr. Vargo was Executive Vice President-Merchandising and Systems
Technology
until March 18, 2002, pursuant1996, was Vice Chairman from March 1996 to the agreement describedMarch 1997, was first
elected Chief Operating Officer in the
section entitled "Employment AgreementsDecember 1996, and Agreements with Former
Officers,"was first elected
President in March 1997.
/7/Mr. Colley was Vice President-Stores from June 1997 to October 1997, and
$11,331 as a director's fee prorated from his retirement as
Chairman to the end of the fiscal 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 $500,000
to be paidwas first elected Senior Vice President-Stores in equal installments over the next two fiscal years pursuant
to the agreement described under "Employment Agreements and Agreements
with Former Officers," and $21,772 paid as a director's fee prorated from
his retirement as President to the end of the fiscal year, which is the
same amount paid to other directors that are not executive officers of the
Company.
(5) Mr. Adams became an employee of the Company in November 1994. Therefore,
salary shown for fiscal year 1995 is for a partial year.
(6) Mr. Vargo became an employee of the Company in February 1995. Therefore,
salary shown for fiscal year 1995 is for a partial year.
(7) Mr. Hunt became an employee of the Company in November 1994. Therefore,
salary shown for fiscal year 1995 is for a partial year.October 1997.
14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The followingThis table provides information regardingshows the number stock options granted to the namedcertain executive
officers during the most recent fiscal year ended August 30, 1997,
pursuant toyear. Executive officers were not
granted SARs during the Company's 1996 Stock Option Plan. The Company did not grant
SARs in the 19971998 fiscal year.
INDIVIDUAL GRANTS
----------------------------------------------
POTENTIAL
% OF REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS/SARS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS/SARS EMPLOYEES OR BASE FOR OPTION TERM (2)TERM/1/
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#)(1) YEAR ($/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 -- -- -- -- --
Timothy D. Vargo........ 150,000 5.5% 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......Vargo 0 -- -- -- -- --
Lawrence E. Evans....... 50,000 1.9% 20.125 1/8/07 632,825 1,603,703Evans 0 -- -- -- -- --
Robert J. Hunt.......... 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/Hunt 0 -- -- -- -- --
Gerald E. Colley/2/07 370,458 938,814 40,000 2.4 31.375 10/22/2007 789,263 2,000,147
- --------
(1) All options/1/The 5% and 10% appreciation rates have been arbitrarily set by the
Securities and Exchange Commission and do not forecast actual stock price
appreciation.
/2/Options shown vest and are exercisable in one-third increments on each of the third, fourth
and fifth years, respectively,anniversaries 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
date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The followingThis table shows the stock option exercises by the namedcertain executive officers during
the most recent fiscal year, ended August 30, 1997. In addition, this table
includes the number ofand their exercisable and unexercisable stock
options held by
each of the named executives as of August 30, 1997.29, 1998. 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 29, 199728, 1998 (the last trading
day before the fiscal year end) which was $28.25$27 per share. AutoZone has never grantedExecutive officers do
not have SARs.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------- ----------------------------------------------------------------------------------------------------
John C. Adams, Jr.......Jr. 0 -- 0 750,000 0 3,250,000
J.R. Hyde, III.......... 0 -- 0 0 0 02,362,500
Timothy D. Vargo........Vargo 0 -- 0 600,000 0 2,528,125
Thomas S. Hanemann...... 200,000 3,991,500 480,000 100,000 12,419,800 01,815,625
Lawrence E. Evans....... 2,000 48,000 142,667 163,333 2,706,171 849,579Evans 16,000 543,563 171,666 118,334 2,337,666 437,085
Robert J. Hunt..........Hunt 0 -- 0 200,000 0 875,000
Shawn P. McGhee.........625,000
Gerald E. Colley 0 -- 20,001 291,667 347,401 1,100,10910,001 90,000 256,797 96,250
- --------
(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.
PENSION PLAN TABLE
The followingThis table shows the estimated annual benefits payable upon retirement at age
65 and the payment of a single-life annuity to a participant
with 60in 1998 under our pension plan. Sixty monthly payments guaranteed.
YEARS OF SERVICE
---------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
$100,000 $25,731 $34,308 $42,885 $42,885 $42,885
120,000 31,431 41,908 52,385 52,385 52,385
140,000 37,131 49,508 61,885 61,885 61,885
160,000 42,831 57,108 71,385 71,385 71,385
180,000 42,831 57,108 71,385 71,385 71,385
are guaranteed after
retirement.
YEARS OF SERVICE
---------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
$100,000 $23,854 $32,374 $40,893 $42,597 $42,597
120,000 29,174 39,594 50,013 52,097 52,097
140,000 34,494 46,814 59,133 61,597 61,597
160,000 37,686 51,146 64,605 67,297 67,297
180,000 37,686 51,146 64,605 67,297 67,297
15
Remuneration includes Salarysalary and Bonus as set forth in the Summary
Compensation Table. A participant'sbonus. The benefit is based on the average
monthly earnings for the consecutive five year period during which thea
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. Remuneration shown is assumed to be the participant's five year
average earnings.
Neither remuneration greater than $160,000 nor years of service in excess of
25 years is credited for benefit calculation purposes. The following arepension plan was
amended on January 1, 1998. The difference in the currenttable between 25 and 30 years
of service is due to the calculation of the prior plan minimum benefit which
was fixed effective December 31, 1997. A participant with 25 years of service
today would have had only 24 years under the prior plan minimum, whereas the
participant with 30 years of service today would have the full 25 years of
service credit under the prior plan minimum.
The number of years of credited service certain executive officers have
accrued under the Pension
Plan forpension plan as of the named executive officers in the Summary Compensation Table:most recent fiscal year end are:
YEARS OF
NAME SERVICE
---- --------
John C. Adams, Jr.--2; J.R. Hyde, III--25 (maximum);Jr. 3
Timothy D. Vargo--11; Thomas
S. Hanemann--22;Vargo 12
Lawrence E. Evans--11,Evans 12
Robert J. 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.3
Gerald E. Colley 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors ("Committee") is
composed of N. Gerry House, James F. Keegan, and Ronald A. Terry, each of whom
is a non-employee director of the 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
officers of the Company. The goal of the executive compensation program is to
reward executives for their performance and enhancement of stockholder value.
The Company's executive compensation program is designed to attract and retain
executives who are key to theour long-term success of the Company andsuccess. In this process, we want to
align an executive's compensation with theAutoZone's 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 officers.
Executive compensation consists of (1) salary, (2) annual performance
incentives, and (3) long-term incentives. TheCompensation Committee reviews executive
compensation annually and makes appropriate adjustments based on (i) Companycompany
performance, (ii) achievement of predetermined and individual goals, and (iii) changes in
an executive's duties and responsibilities. Salary.The compensation of other AutoZone
employees is based on a similar philosophy.
COMPENSATION PHILOSOPHY
Executive compensation consists of three components: salary, bonus and stock
options.
SALARY. The Committee desires that overall compensation reflect theeach
executive's performance of each individual executive over time. Base salaries are set at levels subjectively
determined by the Compensation Committee to adequately reward and retain
capable executives, including the Chief Executive Officer.
The
Committee considers the importance of and skills required in a particular
executive position in establishing salary.
At the beginning of each fiscal year, the Compensation Committee reviews and
establishes the annual salary of each officer, including the Chief Executive
Officer. The Committee makes an independent, subjective determination of the
10
appropriate level of each officer's salary. The Compensation Committee employs
a compensation consultant to assist the Committee in comparing AutoZone's
compensation for its executives to that of other retailers. However, the
committee uses this information to verify the reasonableness of the
compensation, but does not have a predetermined compensation objective. The
Committee does not use any mechanical formulations or weighting of any of the
factors considered.
Annual Performance Incentives. The Company has established an annual bonus
plan for16
BONUS. Each fiscal year executive officers that isare paid a bonus based on
theAutoZone's attainment by the Company of
targeted increases in earnings which areover the prior year. A target is
set at the beginning of each fiscal year. Underyear and bonuses are paid as a percentage
of the bonus plan, aattainment of the target. A maximum bonus is established for each
executive officer, which may equal up to aofficer. The maximum bonus attainable for the last fiscal year was
75% of 100% of an executive's salary depending onfor both the position of the executiveChief Executive Officer and the achievement of certain
profit goals set by the Committee.Chief Operating
Officer. As a general matter, as an executive's level of management
responsibility in the Company increases, the greater the portion of his or her
potential total compensation depends on the Company's performance as measured
by increases in earnings over the previous year. No bonus is payable under the
bonus plan unless a predetermined minimum increase in earnings is achieved. It is the Committee's desire that aA
significant portion of each officer's compensation beis directly related to the
performance of the Company.
Long Term Incentives. In an effort to properlySTOCK OPTIONS. To align the long-term interests of the Company's management and our
stockholders, the Compensation Committee has a history of
awardingawards non-qualified stock options to
all levels of management, including individual store managers. The 1996 Stock Option Plan ("Option Plan") under
which the Company may award non-qualified or incentive stock options, gives
employees 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 Option Plan enables the Company to attract and
retain the highest quality managers. Under the Option Plan, the Committee is
responsible for establishing who is 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 recipientgrants are made by a subjective determination by the Committee, upon
recommendation by the Chief Executive Officer (for grants other than those to
the Chief Executive Officer), who considers the person'srecipient's past performance
and current responsibilities, and the number of shares previously granted to
that person. For a more in-depth discussion of the stock option plan, see
Proposal 2 on page 6 of this Proxy Statement.
CEO Compensation. AtCOMPENSATION
In the beginning oflast fiscal year, 1997, Mr. Hyde was the
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.John C. 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 electedJr., Chairman and Chief Executive
Officer was paid $520,000 in salary and his salary was
increased$253,500 in June 1997 to $500,000 to reflect his increased responsibilities.
During the fiscal year, the Committee awardedbonus. 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 forhas 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 certain other executive officers of the Companyagreement which areis described inunder the section entitled "Employment
Agreements and Agreements with Former
Officers."
11
Section 162(m)Agreements" on page 18 of this Proxy Statement. Mr. Adams did not receive any
stock options during the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code of 1986 places a limit of $1,000,000 onlast fiscal year.
TAX DEDUCTIONS FOR COMPENSATION
The federal tax code limits to $1 million the amount of compensation that we
may be deducted by the Companydeduct in any one fiscal year with respect tofor the Chief Executive Officer and theour other four most
highly compensated individuals
who are executive officers as of the end of the fiscal year.paid officers. However, this deduction limitation does not apply to
certain "performance based"
compensation. The Committee intends to generally design and implementperformance based compensation as defined in the tax code. Our
compensation plans are generally designed and implemented so that they qualify
for full deductibility in accordance with
Section 162(m).deductibility. However, the Companywe may from time to time pay other
compensation to
itsour executive officers that may not be fully deductible.
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.
This report was unanimously adopted by the Compensation Committee and
approved by the Board of Directors.
Ronald A. Terry, Chairman
N. Gerry House
James F. Keegan
17
STOCK PERFORMANCE GRAPH
The followingThis graph shows, from the end of fiscal year 19921993 to the end of fiscal year
1997,1998, changes in the value of $100 invested in (i)each of the Company's common stock, (ii)Common
Stock, 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AUTOZONE, INC., S&P 500 INDEX AND S&P RETAIL STORE COMPOSITE
PERFORMANCE GRAPH[GRAPH APPEARS HEREHERE]
Measurement Period AUTOZONE, S&P S&P RETAIL
(Fiscal Year Covered) INC. 500 INDEX STORE COMPOSITE
- --------------------- --------- --------- ---------------Aug. 93 Aug. 94 Aug. 95 Aug. 96 Aug. 97 Aug. 98
------- ------- ------- ------- ------- -------
Measurement Pt- Aug. 92
AutoZone, Inc. $100.00 $91.87 $102.88 $104.31 $108.14 $103.35
S&P 500 Index $100.00 $100.52 $105.47 $126.74 $163.13 $190.33
S&P Retail Store Composite $100.00 FYE Aug. 93 $178.63 $114.24 $110.87
FYE Aug. 94 $164.11 $120.45 $111.45
FYE Aug. 95 $183.77 $146.57 $116.93
FYE Aug. 96 $186.33 $174.90 $140.51
FYE Aug. 97 $193.17 $246.00 $180.86$105.44 $128.30 $153.10 $215.33 $313.83
12EMPLOYMENT AGREEMENTS
In 1997, certain executive officers entered into five year employment
agreements with AutoZone. Mr. Adams was retained as Chairman and Chief
Executive Officer, with a minimum annual salary of $500,000, and a bonus
potential of 75% of annual salary. Mr. Vargo was retained as President and
Chief Operating Officer, with a minimum annual salary of $400,000 and a bonus
potential of 75% of annual salary. Mr. Hunt was retained as Executive Vice
President and Chief Financial Officer, with a minimum annual salary of $285,000
and a bonus potential of 60% of annual salary.
If an agreement is terminated by AutoZone for cause, or by an executive for
any reason, the executive will cease to be an employee, and will cease to
receive salary, bonus and other benefits. If an agreement is terminated by
AutoZone without cause, the executive will remain an employee for three years
after the termination date and will continue to receive his then-current salary
and other benefits of an employee, but will receive no bonus. If an agreement
is terminated by AutoZone or by the executive for reasons other than a change
in control, then the executive will be prohibited from competing against
AutoZone for three years after the termination date.
"Cause" is defined in each agreement as the willful engagement by the
executive in conduct which is demonstrably or materially injurious to AutoZone,
monetarily or otherwise. "Change in control" in each agreement generally means
(although more specifically defined in each agreement)
18
either the acquisition of a majority of our voting securities by or the sale of
all or substantially all of our assets to a non-affiliate of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Hyde is the sole stockholder of a corporation that owns an aircraft that
was leased to the Companyus for Companyour business at times during the 19971998 fiscal year. For
the use of that aircraft in fiscal year 1997,1998, we paid the Company paidcorporation that owned the aircraft lease fees
and expenses to the corporation totaling $106,973.$280,974. In addition, we employ pilots who are employees of AutoZonethat operated the
aircraft for Mr. Hyde's personal benefit at times during the 19971998 fiscal year.
For the use of the pilots' services, Mr. Hyde paid AutoZoneus $96,000. AutoZone believesWe believe that
the charges for our use of the plane and the amount that we charge Mr. Hyde 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.
Upon his retirement as Chairman in 1997, Mr. Hyde entered into an agreement
not to compete against the Company until March 2002. In fiscal year 1998, under
the terms of that agreement, we paid Mr. Hyde $289,102, and provided him
personal security services valued at approximately $50,551.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company'slaws require our executive officers, and directors, and persons who beneficially
ownowners of more
than ten percent of the Company'sour common stock to file reports of
their beneficial ownership (Forms 3, 4, and 5) with
the Securities and Exchange Commission and the New York Stock Exchange. Executive officers,
directors,Exchange relating
to the number of shares of common stock that they own, and greater-than-ten percent holders areany changes in their
ownership. To our knowledge, all persons required to furnish the
Company with copies of thefile such 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 received during fiscal year 1997,
and Forms 5 and any amendments received 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 werehave done
so in a timely manner, except that Timothy D. Vargo, currently President and Chief Operating Officer, was
late filingJames F. Keegan, a Form 5 covering one transaction for the 1996 fiscal year and
Thomas S. Hanemann, former President and a former director, was late filing
a Form 4 covering one transaction for the 19971998 fiscal year.
PROPOSAL 2--ADOPTION OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
On October 21, 1997,STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals for inclusion in the Board of Directors approved the Amended and
Restated Employee Stock Purchase 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 this1999 Proxy Statement as Exhibit A,
and the following summary of the Plan is subject to and is qualifiedmust be
received by the
terms and conditions of the Plan.
The price of AutoZone Common Stock as quoted on the New York Stock Exchange
as of the close of business on October 10, 1997, was $32 1/16.
Summary of the Plan. All employees of the Company and its domestic
subsidiaries,July 2, 1999. Stockholders proposals received 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 employeesJuly 2, 1999,
but by September 18, 1999, 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 shares 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 administered 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 extended 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 the Plan via electronic
communication, (iii) conform the Plan to amendments in regulations related to
Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"), (iv) limit
the grant of options to employees of the Company and its domestic subsidiaries
only, and (v) extend the termination date of the Plan to December 31, 2002.
Any further amendments to the Plan may be approved by the Board of
Directors, except that stockholder approval would be required to (i) increase
the number of shares available for issuance under the Plan, (ii) decrease the
price at which the common stock would be sold 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, or the Exchange Act.
The following table shows the benefit that each of the named executive
officers received during fiscal year 1997 as a result of participation in the
Plan. The benefit to each named executive is the difference between the
purchase price and the fair 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 one 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 the shares will be
taxable to the employee as ordinary income (with no corresponding deduction to
the Company) to the extent of the lesser of: (i) 15% of the fair market value
of the shares on the date the option was granted or (ii) the amount by which
the fair market value of the shares on the date of the sale, other disposition
or death exceeds the purchase price. Any additional gain is treated as capital
gain. However, if an employee disposes of the stock purchased under the Plan
prior to the later of two years after the granting of the option or one year
from the date of the exercise of the option to purchase the stock
("Disqualifying Disposition"), then the excess of the fair market value of the
shares at the date of exercise over the actual price paid for such shares will
be taxable as ordinary income to the employee. The Company may not deduct the
difference between the consideration paid for the shares of common stock and
the fair market value of the stock under the Plan unless the employee makes a
Disqualifying Disposition of the common stock.
Vote Required. The affirmative vote of a majority of the shares entitled to
vote at the Annual Meeting is required to approve the Amended and Restated
Employee Stock Purchase Plan.
14
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT AND RESTATEMENT OF THE EMPLOYEE STOCK PURCHASE 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 ten 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 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.
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 thanmeeting, but will not be
included in the election of directors 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 authority1999 Proxy Statement. Any stockholder proposal submitted after
September 18, 1999, will not be eligible to be presented for a vote to the
persons named therein to
actstockholders in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals to be presented at the fiscal year 1998 annual meeting
of stockholders must be received by the Company by July 2, 1998, to be
considered by the Board of Directors for inclusion in the 1998 Proxy
Statement.AutoZone's bylaws. Any proposals must be mailed
to AutoZone, Inc., to the attention of
theAttention: Secretary, Post Office Box 2198, Dept. 8074,
Memphis, Tennessee 38101-
9842.38101-9842.
ANNUAL REPORT
The Company'sA copy of our Annual Report to Stockholders containing audited financial
statements for the year ended August 30, 1997, is being mailed with this Proxy Statement to all
stockholders of record.
By the order of the Board of
Directors,
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
October 29, 1997
1530, 1998
19
EXHIBITAPPENDIX A
AUTOZONE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF STOCKHOLDERS
P I hereby appoint Harry L. Goldsmith and Donald R. Rawlins, and each of
them, as proxies, with full power of substitution, to vote all shares of
R common stock of AutoZone, Inc., which I would be entitled to vote at the
Annual Meeting of AutoZone, Inc., to be held at the J.R. Hyde III Store
O Support Center, 123 South Front Street, Memphis, Tennessee, on Thursday,
December 17, 1998, at 10 a.m., and at any adjournments, on items 1, 2 and
X 3, as I have specified and such other matters as may come before the
meeting.
Y
Election of Directors, Nominees: (change of address)
(1) John C. Adams, Jr., (2) Andrew M. Clarkson, ------------------------------
(3) N. Gerry House, (4) Robert J. Hunt,
(5) J.R. Hyde, III, (6) James F. Keegan, ------------------------------
(7) Michael W. Michelson, (8) Ronald A. Terry,
and (9) 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.
- -------------------------------------------------------------------------------
[MAP to meeting location] You are invited
to attend the
[AUTOZONE(R) logo]
ANNUAL MEETING
OF STOCKHOLDERS
December 17, 1998
10:00 a.m.
123 South Front Street
Memphis, Tennessee
38103-3607
[X] Please mark your votes as in this example. 4631
This proxy when properly executed will be voted in the manner directed
below. If no direction is made, this proxy will be voted FOR the election of
directors and FOR proposals 2 and 3.
The Board of Directors recommends a vote FOR proposals 2 and 3.
FOR WITHHELD
1. Election
of Directors [ ] [ ]
For, except vote withheld from the following nominee(s):
_____________________________
FOR AGAINST ABSTAIN
2. Approval of amendment
to stock option 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.
[ ] Change of Address
(Phone: )
Please write new address
on reverse side.
Signature(s) _____________________________________ Date ______________
NOTE: Please sign exactly as name appears hereon. The signer hereby
Joint owners should each sign. When signing as revokes all proxies
attorney, executor, administrator, trustee or heretofore given
guardian, please give full title. by the signer to vote
at the meeting or any
adjournments thereof.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL.
Internet and Telephone Voting
We encourage you to take advantage of these convenient new ways by which
you can vote your shares. You can vote your shares through the Internet or the
telephone. This eliminates the need to return the proxy card.
To vote your shares through the Internet or the telephone you must use
the control number printed in the box above just below the perforation. The
series of numbers that appears in the box above must be used to access the
system.
1. To vote over the Internet:
. Log on the Internet and go to the Web site HTTP://WWW.VOTE-BY-
NET.COM
2. To vote over the telephone:
. On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
Your Internet or telephone vote authorizes the named proxies in the same
manner as if you marked, signed, dated and returned the proxy card.
If you choose to vote your shares through he Internet or the telephone,
there is no need for your to mail back your proxy card.
Your vote is important. Thank you for voting.
APPENDIX B
AUTOZONE, INC.
SECOND
AMENDED AND RESTATED
EMPLOYEE1996 STOCK PURCHASEOPTION PLAN
AUTOZONE, INC.AutoZone, Inc., a corporation organized under the laws of the State of
Delaware,Nevada, by resolution of itsthe Board of Directors of the Company (the "Board") on
March 29, 1991, adopted
the Employee Stock Purchase Plan (the "Plan"). The Plan wasOctober 21, 1996, and as approved by the stockholders of the Company on
March 29, 1991.December 12, 1996, adopted this AutoZone, Inc. 1996 Stock Option Plan (the
"Plan").
The Plan was amended byCompensation Committee of the Board of Directors of the Company by
resolution adopt the Amended and Restated 1996 Stock Option Plan effective as
of October 21, 1997.
Further, by resolution of the Compensation Committee on June 18, 1991, to conform the Plan to amendmentsOctober 20, 1998,
and as presented to the regulations related to the Securities Exchange Act of 1934, as amended. Onstockholders on December 21, 1991,17, 1998, the Plan was assumed by AutoZone, Inc., a Nevada
corporation, after its reincorporation. The Plan was amended
byto increase the Boardnumber of Directors on March 2, 1996, and October 21, 1996, to extendshares available for grant under 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 thethis Plan are as follows:
(1) To assist employeesfurther the growth, development and financial success of the Company
by providing additional incentives to certain of its executive and other key
employees who have been or will be given responsibility for the management or
administration of a Parent or Subsidiarythe Company's business affairs, by assisting them to become
owners of capital stock of the Company in acquiring a stock ownership interest inand thus to benefit directly from its
growth, development and financial success.
(2) To enable the Company pursuant
to a plan which is intended to qualify as an "employee stock purchase plan"
under Section 423obtain and retain the services of the Internal Revenue Codetype of
1986, as amended.
(2) To helpprofessional, technical and managerial employees provide for their future security andconsidered essential to encourage
them to remain in the
employmentlong-range success of the Company orby providing and offering them an opportunity
to become owners of a Parent or
Subsidiarycapital stock of the Company.
1. DEFINITIONSARTICLE I
Definitions
Whenever any of the following terms are used in thethis 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:
(a)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--Board
"Board" shall mean the Board of Directors of the Company.
(b)Section 1.4--Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
(c)Section 1.5--Committee
"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 mean the common stock of the Company, par value $.01
per share, and any equity security of the Company issued or authorized to administerbe
issued in the Plan pursuantfuture, but excluding any preferred stock and any warrants,
options or other rights to paragraph 12.
(d)purchase Common Stock. Debt securities of the
Company convertible into Common Stock shall be deemed equity securities of the
Company.
Section 1.7--Company
"Company" shall mean AutoZone, Inc., a Nevada corporation.
(e) "Date of Exercise" In addition, "Company" shall mean with respectany
corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options, outstanding under the Plan, in a transaction to
any Option (i) the
March 31which Section 424(a) of the Plan YearCode 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 consolidation in which the Option was granted (inCompany is not the casesurviving
entity, except for a transaction the principal purpose of an Option granted on January 1), (ii)which is to change
the June 30 of the Plan YearState in which the Option was granted (inCompany is incorporated, form a holding company or
effect a similar reorganization as to form whereupon this Plan and all Awards
are assumed by the casesuccessor entity;
(b) the sale, transfer, exchange or other disposition of an Option granted on April 1), (iii)
the September 30all or
substantially all of the Plan Yearassets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger in which the Option was granted (inCompany is the case of an Option granted on July 1), (iv) the December 31 of the Plan Yearsurviving entity but in
which the Option was granted (in the case of an Option granted on
October 1) or (v) such other day, as may be determined by the Committee, of
the Plan 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 and those
of any present or future Parent or Subsidiary of the Company incorporated
under the laws of a state of the United States of America (i) who has
completed six months of employment; and (ii) who does not, immediately
after the Option is granted, own stock (as defined by Sections 423(b)(3)
and 424(d) of the Code)securities possessing fivemore than fifty percent or more(50%) of the total combined
voting power of the Company's outstanding securities are transferred or valueissued
to a person or persons different from those who held such securities
immediately prior to such merger.
Section 1.9--Director
"Director" shall mean a member of all classesthe Board.
Section 1.10--Employee
"Employee" shall mean any employee (as defined in accordance with Section
3401(c) of stockthe 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.
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
Parent or 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.
(i) "Form"Section 1.22--Securities Act
"Securities Act" 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 sharesSecurities Act of the Company's Stock.
(k) "Option Period" shall mean with 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 Company"1933, as amended.
Section 1.23--Subsidiary
"Subsidiary" shall mean any corporation other than the
Company, in an unbroken chain of
corporations endingbeginning with the Company if
at the time of the granting of the Option each of the corporations other than
the Companylast corporation in the unbroken chain then 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.
(n) "Participant" shall mean an Eligible Employee who has complied with
the provisionsSection 1.24--Termination of paragraph 3(b).
(o) "Plan"Employment
"Termination of Employment" shall mean the AutoZone, Inc. Amendedtime when the employee-
employer relationship between an Grantee and Restated Employeethe 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 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, 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 Purchase Plan.
(p) "Plan Year"Options, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer relationship shall meanconstitute a Termination of
Employment if, and to the calendar year beginning on January 1extent 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 ending on December 31.
(q) "Stock"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 meanbe Common Stock,
initially shares of the Company's common stock.
(r) "Subsidiarystock, $.01 par value. The aggregate
number of such shares which may be issued upon exercise of Options under the
Plan shall not exceed 11,000,000. 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) of the Company"Code, the number
of shares subject to Options which are canceled continue to be counted against
the Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, subject to the limits of Section 3.4(d), the
transaction is treated as a cancellation 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 Sections 2.1 and
3.4(d). 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 mean any corporation other thanbe 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 payment of the exercise price thereof, may again
be awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned if such action would cause an unbroken chainIncentive Stock Option to
fail to qualify as an incentive stock option under Section 422 of corporations beginningthe Code.
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 of the granting of theIncentive Stock Option each of the corporations other
than the last corporation in the unbroken chainis granted, owns stock
possessing 50%
orrepresenting 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 unless 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 corporationsplan of the
Company) and in such chain.
2. STOCK SUBJECT TO THE PLANits opinion should be granted Options; and
(ii) Subject to the provisionsAward Limit, determine the number of paragraph 9 (relatingshares to adjustment upon
changesbe
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 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
purposesSection 162(m)(4)(C) of the Plan.
3. GRANT OF OPTIONS
(a) General Statement. FollowingCode; and
(iv) Determine the effective dateterms 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 PlanCode shall include, but not be limited to, such terms 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 daysconditions as may be determinednecessary 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. Subject to Section 3.4(d), 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. The termCommittee to disqualify such Option from treatment as an "incentive stock
option" under Section 422 of the Code.
(d) Notwithstanding any other provision of this Plan, in no event may
Options to purchase more than 300,000 shares of Common Stock be granted under
this Plan at a lower price on a per share basis than the per share price of any
Options (i) deemed canceled and regranted or (ii) required to be surrendered as
a condition of the grant of new Options, determined on a cumulative basis for
all Grantees in the aggregate.
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 for three monthsevidenced by a written Option agreement which shall
be executed by the Grantee 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)authorized Officers of the Plan Year inCompany and which
shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan. Option is granted or foragreements evidencing Incentive Stock Options
shall contain such other term
or Date of Exerciseterms and conditions as may be determined bynecessary to meet the
Committee. The numberapplicable provisions of sharesSection 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
(a) Subject to subsection 4.2(b), the price per share of the shares
subject to each Option shall be set by the 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 PriceCommittee; provided, however, that
such price shall be no less than eighty- five percent (85%) of the Stock.
(b) Election To Participate; Payroll Deduction Authorization. An Eligible
Employee may participateFair Market
Value of the underlying shares 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 Plan only by payroll deduction. Each Eligible
Employee who electscase of
Incentive Stock Options and Options intended to participatequalify as performance-based
compensation as described in the Plan shall deliver to
A-2
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,
the properly completed Form whereby the Eligible Employee gives noticeSection 162(m)(4)(C) of the election to participate in the Plan as of the next following Date of Grant,
and whichCode, such price shall designate a stated dollar amount, in $5.00 increments, of
Eligible Compensation to be withheld on each payday. The stated dollar amount
may
not be less than $5.00100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted; and may not exceed(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 than 10% of the Eligible
Compensation. In addition, at the discretiontotal combined voting power of the Committee exercised
uniformly as to all
Eligible 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 employeeclasses of 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 Parentshare of Common Stock on the date the
Option is granted.
(b) Options to purchase no more than 300,000 shares of Common Stock may
be granted under this Plan at a price lower than 100% of the Fair Market Value
of the underlying shares on the date of grant, determined on a cumulative basis
for all Grantees in the aggregate..
(c) Except within the limits provided in Section 3.4(d), the price of an
Option, once established by the Committee as of the grant date, may not be
lowered.
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, or Subsidiaryfive (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
stock of the Company which is intended to qualify underor any Subsidiary or parent corporation thereof (within
the meaning of Section 423422 of the Code). Except as limited by requirements of
Section 422 of the Code at a rate which exceeds $25,000and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in fair market valueconnection with any Termination of Employment of the Stock
(determined atGrantee, or
amend any other term or condition of such Option relating to such a
termination.
Section 4.4--Option Vesting
(a) Except as the timeCommittee may otherwise provide, no Option may be
exercised in whole or in part during the optionfirst year after such Option is
granted) for each calendar yeargranted unless the Option is being granted in modification or substitution 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.
(b) Subject 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 such option grantedtime after grant of an Option, the Committee may, in its
sole and absolute discretion and subject to such Participantwhatever terms and conditions it
selects, accelerate the period during which an Option vests.
(c) No portion of an Option which is outstandingunexercisable at any time.
4. EXERCISE OF OPTIONS
(a) General Statement. Each Participant automatically willTermination of
Employment shall thereafter become exercisable, except as may be deemed to have
exercisedotherwise
provided by the Committee either in the Option on each Dateagreement or by action of Exercise tothe
Committee following the grant of the Option.
(d) To the extent that the balance
thenaggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are exercisable
for the first time 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 Participant'spreceding
sentence shall be applied by taking Options into account underin the Plan is sufficient to purchase atorder 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 Pricewith 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 ofand the
Stock subject toCommittee may require that, by 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 Stock (the
"Option Price") to be paid by each Participant on each exerciseterms of the Option, a partial exercise be
with respect to a minimum number of shares.
Section 5.2--Manner of Exercise
All or a portion of an exercisable Option shall be an amount equaldeemed exercised upon
delivery to the lesser of (y) 85%Secretary of the fair market value ofCompany or his designee:
(a) A written notice complying with 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
given 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 sale occurred; or (ii) if such Stock is not traded on an
exchange but is quoted on NASDAQ or a successor 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 exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the Stock on such date as determined in good faith by the Committee; or
(iv) if the Stock is not publicly traded, the fair market valueapplicable rules established by the
Committee actingstating that 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 representations and documents as the Committee, in good faith.
(c) Delivery of Share Certificates. Upon the proper completion and
submissionits absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the proper FormSecurities 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 payment to the Company of the Company will deliver to such
Participant a certificate issued in Participant's nameexercise price and any
applicable taxes for the number of
shares of the Stock with respect to which the Option, wasor portion
thereof, is exercised and for
whichor through the delivery of a notice that the Grantee has
placed a market sell order with a broker approved by the Company with respect
to shares of Common Stock then issuable upon exercise of the Option, Priceand that
the broker has been paid.directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the Option exercise price and any
applicable taxes. However, the Committee may, in its discretion, allow payment,
in whole 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 on the date of delivery equal to the aggregate exercise price of the
Option 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 than such rate as shall then preclude the imputation of interest under the
Code) and payable upon such terms as may be prescribed by the Committee or the
Board; or (iii) allow payment through any combination of the foregoing. In the
eventcase of a promissory note, the Committee may also prescribe the form 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 from the
Company when or where such loan or other extension of credit is required to
obtain fromprohibited by
law.
Section 5.3--Rights as Stockholders
Grantees shall not be, nor have any commissionof the rights or agency authority to issue any such certificate,
the Company will seek to obtain such authority. The inabilityprivileges of,
stockholders 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 issued by the Company to obtainsuch 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. Vacancies 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 of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the agreements pursuant to which
Options are granted and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent herewith and to
interpret, amend or revoke any such commission or agency authority which counsel for the
Company deems necessary for the lawful issuancerules. Any such interpretations and rules
in regard to Incentive Stock Options shall be consistent with provisions of
any such certificate shall
relieve the Company from liability to any Participant except to return the
amountSection 422 of the balanceCode. 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 accountsole discretion of the Committee.
Section 6.3--Majority Rule; Unanimous Written Consent
The Committee shall act by a majority of its members in cash.
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5. WITHDRAWAL FROM THE PLAN
(a) General Statement. Any Participant may withdraw fromattendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
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 at any
time. A Participant who wishes to withdraw from the Plan must deliver to the
Company a notice of withdrawal in a Form preparedshall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company as soon as practicable following receiptand its Officers and
Directors shall be entitled to rely upon the advice, opinions or valuations of
a Participant's noticeany 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 withdrawal, will refundthe
Committee or the Board shall be personally liable for any action, determination
or interpretation made in good faith with respect to the ParticipantPlan or the amountAwards,
and all members of the balance inCommittee and 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 Option under the PlanBoard shall terminate.
(b) Participation Following Withdrawal. A Participant who withdraws from the
Plan may participate again in the Plan on the next January 1, April 1, July 1,
or October 1 immediately following the date of withdrawal, or on such other
days as may be determinedfully protected by the
Committee.
6. TERMINATION OF EMPLOYMENT
(a) Termination of EmploymentCompany in respect to any such action, determination or interpretation.
ARTICLE VII
Other Than By RetirementProvisions
Section 7.1--Options Not Transferable
Options may not be sold, pledged, assigned, or Death. If the
employment of a Participant terminatestransferred in any manner
other than by retirementwill or death,
participation in the Plan automatically shall terminate aslaws of the date of the
termination of employment. As soon as practicable afterdescent and distribution, unless and until
such a Participant's
termination of employment, the Company will refund the amount of the balance
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 earlier or later with the consent of the Company, may by
written notice to the Company request payment of the balance in the account
under the Plan, in which event the Company shall make such payment as soon as
practicable after receiving such notice; upon receipt of such notice, the
Participant's interest in the Plan and any Option under the Plan shall
terminate. If the Company does not receive such notice prior to the next Date
of Exercise, such Participant's Option will be deemed toOptions have been exercised, onand the shares underlying such Date of Exercise.
(c) Termination By Death. If the employment of a Participant is terminated
by Participant's death, the executor of the Participant's will or the
administrator of the 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 Option under the Plan shall
terminate. If the Company does not receive such notice prior to the next Date
of Exercise, the Participant's Option shall be deemed toOptions have
been exercised
onissued, and all restrictions applicable to such Date of Exercise.
7. RESTRICTION UPON ASSIGNMENTshares have lapsed. No
Option or interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of any Participantthe Grantee or any successorhis successors in interest noror
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; provided, however, that nothingeffect
except as otherwise permitted in this paragraph 7 shall prevent transfersSection 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 Plan 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 byunder the then applicable laws of descent
and distribution.
Except as provided in paragraph 6(c), an Option maySection 7.3--Conditions to Issuance of Stock Certificates
The Company shall not be exercisedrequired to issue or deliver any extent except by the Participant. The Committee may
require the Participant to give the Company prompt notice of any disposition
ofcertificate or
certificates for shares of stock acquired bypurchased upon the exercise of anany Option
within two years fromprior to fulfillment of all of the date of granting such Option or one year after the transferfollowing conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such Participant.class of stock is then listed;
(b) The completion of any registration or other qualification of such shares
under any state or federal law or 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) 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 require thatestablish from time to time for reasons of
administrative convenience; and
(e) The receipt by the certificates evidencingCompany of full payment for such shares, acquired by exerciseincluding
payment 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 sharesany applicable withholding tax.
Section 7.4--Amendment, Suspension or Termination of the Stock subjectPlan
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 an Option, a Participant
shall not be deemedtime by the Board or the Committee. However, to be a stockholderthe extent
required by Sections 422 or 162(m) of the Company, and shall not have anyCode, without approval of the
rightsCompany's stockholders given within 12 months before or privileges of a stockholder. A Participant shall haveafter the rights and privileges of a stockholderaction by the
Committee or Board, no action of the Company when, but not until, an
Option is exercised.
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9. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION
WheneverCommittee or Board may increase any change is madelimit
imposed in Section 2.1 on the Stock or to Options outstandingmaximum number of shares which may be issued
under the Plan, by reasonmodify the Award Limit, materially modify the eligibility
requirements of stock dividendSection 3.1, or by reason of division, combination or
reclassification of shares, appropriate action will be taken byextend the Committee
to adjust accordinglylimit imposed in this Section 7.4 on
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 theperiod during which 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 trust or other restriction and may be used for any corporate purpose. No interest will be paid to any
Participantgranted or credited to any account under the Plan with respect to such
funds.
11. AMENDMENT OF THE PLAN
The Committee may amend suspend or terminate the Plan at any time and from
time to time; 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 1974, as amended, or the rules thereunder; and provided
further, that approval by the vote of the holders of more than 50% of the
outstanding shares of the Company's Stock entitled to vote shall be required
to amend the Plan (i) to increase the number of shares of Stock available
under the Plan, (ii) to decrease the Option Price below a price computed in
the manner stated in paragraph 4(b), (iii) to materially alter the
requirements for eligibility to participate in the Plan, or (iv) to modify the Plan in a
manner requiring stockholder approval under Sections 422 or 162(m) of the Code,
or 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 Board.
(b) Duties And Powers of Committee. It shall be the dutyand no action of the Committee to
conductor Board may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or rule.
Neither the general administrationamendment, suspension nor termination of the Plan in accordance with its
provisions. The Committee shall, havewithout
the power to interpret the Plan and the
Options and to adopt such rules for the administration, interpretation and
applicationconsent of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. The Board shall have no right to exercise anyholder of the Option, alter or impair any rights or
duties of the Committeeobligations 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 such 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.
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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 dissolutionOption theretofore granted unless the 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 STOCKHOLDERSOption agreement
itself expressly so provides. No Option may be granted during any period of
suspension ornor after termination of the Plan, and in no event may any Option be
granted under this Plan on or after October 21, 2006. No amendment, suspension
or termination of this Plan shall, without the Plan after December 31, 2002, unless extended by the Board of Directorsconsent of the Company. TheGrantees alter or
impair any rights or obligations under any Option theretofore granted or
awarded, unless the Option agreement otherwise expressly so provides.
Section 7.5--Approval of Plan will be submitted for the approval of the Company's
stockholders within 12 months after the date of the Board of Directors'
initial adoption of the Plan.by Stockholders
The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Section 423Sections 162(m) and 422 of the Code.
16. EFFECT UPON OTHER PLANSThis 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 Plans
The adoption of thethis Plan shall not affect any other compensation or
incentive plans in effect for the Company or a Parent or Subsidiary of the
Company.Employers. Nothing in this Plan shall be
construed to limit the right of the Company or a Parent or Subsidiary of the CompanyEmployers (a) to establish any other forms
of incentives or compensation for employees of the Company or a Parent
or Subsidiary of the CompanyEmployers 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.
17. RULE 16b-3 RESTRICTIONS UPON DISPOSITIONS OF STOCKSection 7.7--Conformity to Securities Laws
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 thereunder, including, without limitation,
Rule 16b-3.and
the Internal Revenue Service. 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.
18. NOTICES
Any noticeSection 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 Committee's sole discretion, affects the Common Stock such that
an adjustment is determined by the Committee to be givenappropriate in order to
prevent dilution or enlargement of the benefits intended to be made available
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 prior 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.
(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 paid to the Company, and (ii)
the Option shall terminate and any unexercised portion of such Option (whether
or not vested) shall be addressedforfeited, if (a) a Termination of Employment occurs
prior to a specified date, 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 harmful to the interests of the Company, in careas
further defined by the Committee.
Section 7.12--Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of its Secretary or any designeethis Plan, this Plan, and any
noticeOption granted to be givenany individual who is then subject to a ParticipantSection 16, shall be
addressedsubject to Participant's last
address as reflectedany additional limitations set forth in any applicable exemptive
rule under Section 16 of the Company's records and may be given either in
writing or via electronic communicationExchange Act (including any amendment to Rule 16b-
3) that are requirements for the application of such exemptive rule. To the
extent permitted by law. By a
notice given pursuantapplicable law, the Plan and Options granted hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of this paragraph, either partyPlan,
any Option intended to qualify as performance-based compensation as described
in Section 162(m)(4)(C) 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, and this Plan shall be deemed
amended to the extent necessary to conform to such requirements.
Section 7.13--Compliance with Laws
This Plan, the granting and vesting of Options 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, hereafter designate
a different addressin the opinion of counsel for noticesthe Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to be given. Any notice which is required to
be given to a Participantsuch restriction, and the person acquiring such securities shall, if
the Participant is then deceased, be given
to the Participant's personal representative if such representative has
previously informed the Company of the representative status and address by
notice under this paragraph. Any notice shall have been deemed duly given when
receivedrequested by the Company, or when sentprovide such assurances and representations to a Participant by the
Company as the Company may deem necessary or desirable to Participant's last known mailing address or delivered to an electronic mailbox
accessible by Participant asassure compliance
with all applicable legal requirements. To the extent permitted by law.
19. TITLESapplicable
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--Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
Section 7.15--Governing Law
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the Plan.
A-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, to vote all
R shares of common stock of AutoZone, Inc., which the undersigned would be
entitled to vote at the Annual Meeting of AutoZone, Inc., to be held at the
O J.R. Hyde, III, Store Support Center, 123 South Front Street, Memphis,
Tennessee, on Thursday, December 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 the meeting.
Y
Election of (change of address/comments)
Directors, Nominees:
John C. Adams, Jr., Andrew M. Clarkson, _______________________________
N. Gerry House, Robert J. Hunt, J.R.
Hyde, III, James F. Keegan, Michael W. _______________________________
Michelson, John E. 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.
YOU ARE INVITED
TO ATTEND THE
[LOGO OF AUTOZONE]
ANNUAL MEETING
OF STOCKHOLDERS
DECEMBER 18, 1997
10:00 A.M.
123 SOUTH FRONT STREET
MEMPHIS, TENNESSEE
38103-3607
[MAP APPEARS 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
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 discretioninternal laws of the proxies named herein, upon such other matters as
may properly come beforeState of Nevada without regard to
the meeting.
_________________________
- --------------------------------------------------------------------------------
SIGNATURE(S) ___________________________ DATE________ The signer hereby revokes
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS all proxies heretofore
HEREON. JOINT OWNERS SHOULD EACH SIGN. given by the signer to
WHEN SIGNING AS ATTORNEY, EXECUTOR, vote at the meeting or
ADMINISTRATOR, TRUSTEE OR GUARDIAN, any adjournmentsconflicts of laws rules thereof.
PLEASE GIVE FULL TITLE AS SUCH.
IMPORTANT: PLEASE VOTE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED