or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.
Each grantOur Board has also adopted a Code of stock optionsBusiness Conduct (the “Code of Conduct”) that applies to the Company’s directors, officers and employees. The Code of Conduct prohibits directors and executive officers andfrom engaging in activities that create conflicts of interest, taking corporate opportunities for personal use or competing with the Company, among other employees pursuantthings. Additionally, our Corporate Governance Principles require each director who is faced with an issue that presents, or may give the appearance of presenting, a conflict of interest to disclose that fact to the Stock Option Plan is governed byChairman of the terms of a Stock Option Agreement entered into between the CompanyBoard and the employee at the timeCorporate Secretary, and to refrain from participating in discussions or votes on such issue unless a majority of the grant. The termsBoard determines, after consultation with counsel, that no conflict of the Stock Option Agreements are determined by the Compensation Committee. They usually provide that stock options may be exercised within 30 days from the option holder’s termination of employment dueinterest exists as to permanent disability, voluntary termination, involuntary termination without Cause (as defined) or retirement at normal retirement age, or within one year from the date of the option holder’s death, whichever occurs later. The Stock Option Agreements also provide that stock options may expire in the event of certain change in control transactions unless the Compensation Committee waives the provision in connection with the transaction.
Executive officers are eligible to participate in the AutoZone, Inc. Executive Deferred Compensation Plan, a nonqualified plan that allows executives who participate in AutoZone’s 401(k) plan to make a pretax deferral of base salary and bonus compensation. Officers may defer up to 25% of base salary and bonus, minus deferrals under the 401(k) plan. The Company matches 100% of the first 3% of deferred compensation and 50% of the next 2% deferred. Participants may elect to receive distribution of their deferral accounts at retirement or starting in a specific future year of choice before or after anticipated retirement (but not later than the year in which the participant reaches age 75). If a participant’s employment with AutoZone terminates other than by retirement or death, the account balance will be paid in a lump sum payment six months after termination of employment.such matter.
Equity Compensation Plans
Equity Compensation Plans Approved by Stockholders
Our stockholders have approved the AutoZone, Inc. 1996 Stock Option Plan, the AutoZone, Inc. Second Amended and Restated Employee Stock Purchase Plan, the AutoZone, Inc. Executive Stock Purchase Plan, the AutoZone, Inc. 2003 Director Compensation Plan, and the AutoZone, Inc. 2003 Director Stock Option Plan. Our stockholders are being asked to approve a new stock option plan, the AutoZone, Inc. 2006 Stock Option Plan, to replace the 1996 Stock Option Plan and the AutoZone, Inc. Fourth Amended and Restated Executive2006 Stock Plan which will extend the term of the AutoZone, Inc. Executive Stock PurchaseOption Plan.
Equity Compensation Plans Not Approved by Stockholders
The AutoZone, Inc. Second Amended and Restated Director Compensation Plan and the AutoZone, Inc. Fourth Amended and Restated 1998 Director Stock Option Plan were approved by the Board, but were not submitted for approval by the stockholders as then permitted under the rules of the New York Stock Exchange. Both of these plans were terminated in December 2002 and were replaced by the AutoZone, Inc. 2003 Director Compensation Plan and the AutoZone, Inc. 2003 Director Stock Option Plan, respectively, after the stockholders approved them. No further grants can be made under the terminated plans. However, any grants made under these plans will continue under the terms of the grant made. Only treasury shares are issued under the terminated plans.
Under the Second Amended and Restated Director Compensation Plan, a non-employee director could receive no more than one-half of the annual retainer and meeting fees immediately in cash, and the remainder of the fees were taken in common stock or deferred in stock appreciation rights.
Under the Fourth Amended and Restated 1998 Director Stock Option Plan, on January 1 of each year, each non-employee director received an option to purchase 1,500 shares of common stock, and each non-employee director who owned common stock worth at least five times the annual fee paid to each non-employee director on an annual basis received an additional option to purchase 1,500 shares of common stock. In addition, each new director received an option to purchase 3,000 shares upon election to the Board of Directors, plus a portion of the annual directors’ option grant prorated for the portion of the year actually served in office. These stock option grants were made at the fair market value as of the grant date.
Summary Table
The following table sets forth certain information as of August 26, 2006,25, 2007, with respect to compensation plans under which shares of AutoZone common stock may be issued.
| | | | | | | | | | | | | |
| | | | | | | | | Number of Securities
| |
| | | | | | | | | Remaining Available for
| |
| | | | | | | | | Future Issuance Under
| |
| | | Number of Securities to
| | | | | | Equity Compensation
| |
| | | be Issued Upon Exercise
| | | Weighted Average
| | | Plans (Excluding
| |
| | | of Outstanding
| | | Exercise Price of
| | | Securities Reflected
| |
| | | Options, Warrants and
| | | Outstanding Options,
| | | in the
| |
Plan Category | | Rights | | | Warrants and Rights | | | First Column) | |
| |
| Equity Compensation plans approved by security holders | | | 2,922,005 | | | $ | 79.85 | | | | 5,612,434 | |
| Equity compensation plans not approved by securities holders | | | 56,083 | | | $ | 42.96 | | | | 0 | |
| Total | | | 2,978,088 | | | $ | 79.16 | | | | 5,612,434 | |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | |
| | | | | | | | |
| Equity Compensation plans approved by security holders | | | 3,309,846 | | $ | 71.21 | | | 3,041,135 | |
| | | | | | | | | | | |
| Equity compensation plans not approved by securities holders | | | 64,583 | | $ | 43.16 | | | 0 | |
| | | | | | | | | | | |
| Total | | | 3,374,429 | | $ | 70.67 | | | 3,041,135 | |
Section 16(a) Beneficial Ownership Reporting Compliance
Securities laws require our executive officers, directors, and beneficial owners of more than ten percent of our common stock to file insider trading reports (Forms 3, 4, and 5) with the Securities and Exchange Commission and the New York Stock Exchange relating to the number of shares of common stock that they own, and any changes in their ownership. To our knowledge, all persons related to AutoZone that are required to file these insider trading reports have filed them in a timely manner. Copies of the insider trading reports can be found on the AutoZone corporate website atwww.autozoneinc.com.
STOCKHOLDER PROPOSALS FOR 20072008 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement for the Annual Meeting in 20072008 must be received by June 27, 2007.2008. In accordance with our Bylaws, stockholder proposals received after August 15, 2007,14, 2008, but by September 14, 2007,13, 2008, may be presented at the meeting,Meeting, but will not be included in the Proxy Statement. Any stockholder proposal received after September 14, 2007,13, 2008, will not be eligible to be presented for a vote to the stockholders in accordance with our Bylaws. Any proposals must be mailed to AutoZone, Inc., Attention: Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee38101-2198.
A copy of our Annual Report is being mailed with this Proxy Statement to all stockholders of record.
| | By order of the Board of Directors, |
|
|
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| | Harry L. Goldsmith
Secretary
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| |
By order of the Board of Directors,Harry L. Goldsmith
Secretary
Memphis, Tennessee
October 25, 200622, 2007
APPENDIX A
AUTOZONE, INC.
2006 STOCK OPTION PLAN
ARTICLE 1.
PURPOSE
The purpose of the AutoZone, Inc. 2006 Stock Option Plan (the “Plan”) is to promote the success and enhance the value of AutoZone, Inc. (the “Company”) by linking the personal interests of Employees to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Employees and attract potential Employees upon whose judgment, interest and special effort the successful conduct of the Company’s operation is largely dependent.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1“Award” means an Option granted to a Participant pursuant to the Plan.
2.2“Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium.
2.3“Board” means the Board of Directors of the Company.
2.4“Code” means the Internal Revenue Code of 1986, as amended.
2.5“Committee” means the committee of the Board described in Article 8 hereof.
2.6“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 Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Company is incorporated, form a holding company or effect a similar reorganization as to form whereupon this Plan and all Awards are assumed by the successor entity;
(b)the sale, transfer, exchange or other disposition of all or substantially all of the assets 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 Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred or issued to a person or persons different from those who held such securities immediately prior to such merger.
2.7“Covered Employee” means an Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.
2.8“Disability” means that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time or, if no such plan is applicable to a Participant, as determined in the sole discretion of the Committee.
2.9“Effective Date” shall have the meaning set forth in Section 9.1 hereof.
2.10“Eligible Individual” means any person who is an Employee as determined in the sole discretion of the Committee.
2.11“Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.
2.12“Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.13“Fair Market Value” means, as of any given date, (a) if Stock is traded on an exchange (including without limitation, NASDAQ), the closing price of a share of Stock as reported by that exchange for the first trading date immediately prior to such date during which a sale occurred; or (b) if Stock is not publicly traded, the fair market value established by the Committee acting in good faith, provided, that the Committee may, in its sole discretion, conduct such valuation in a manner that causes such valuation to fall within the meaning of “fair market value” under Code Section 409A.
2.14“Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
2.15“Independent Director” means a member of the Board who is not an Employee of the Company.
2.16“Non-Employee Director” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor rule.
2.17“Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.
2.18“Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
2.19“Participant” means any Eligible Individual who has been granted an Award pursuant to the Plan.
2.20“Plan” means this AutoZone, Inc. 2006 Stock Option Plan, as it may be amended from time to time.
2.21“Securities Act” shall mean the Securities Act of 1933, as amended.
2.22“Stock” means the common stock of the Company, par value $0.01 per share, and such other securities of the Company that may be substituted for Stock pursuant to Article 7 hereof.
2.23“Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1Number of Shares.
(a)Subject to Article 7 and Section 3.1(b), the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be equal to 4,600,000 shares of Stock.
(b)To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan; however, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall not subsequently be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of Common Stock may again be awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
3.2Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.
3.3Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Article 7, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during any calendar year shall be 500,000.
ARTICLE 4.
ELIGIBILITY AND PARTICIPATION
4.1Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.
4.2Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.
4.3Foreign Participants. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to this Plan as appendices); provided, that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3 hereof; and (v) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any securities law or governing statute or any other applicable law.
ARTICLE 5.
STOCK OPTIONS
5.1General. The Committee is authorized to grant Options to Eligible Employees on the following terms and conditions:
(a)Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided, that, subject to Section 5.2(c), the exercise price for any Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant.
(b)Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided, that the term of any Incentive Stock Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c)Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of Stock having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, including shares of Stock that would otherwise be issuable or transferable upon exercise of the Option, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided, that payment of such proceeds is then made to the Company, at such time as may be required by the Company, but not later than the settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or continue any extension of credit with respect to the exercise price of an Option with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
(d)Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.
(e)Right to Exercise. During a Participant’s lifetime, an Option may be exercised only by the Participant. Upon the Participant’s Disability or death, any Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant fails to make testamentary disposition of such Option or dies intestate, by the person or persons entitled to receive the Option pursuant to the applicable laws of descent and distribution.
5.2Incentive Stock Options. Incentive Stock Options shall be granted only to Employees of the Company or any “parent corporation” or “subsidiary corporation” of the Company within the meaning of Sections 424(e) and 424(f) of the Code, respectively, and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to the requirements of Section 5.1 hereof, must comply with the provisions of this Section 5.2.
(a)Exercise Limitations. An Incentive Stock Option shall be considered to be a Non-Qualified Stock Option if it is exercised by anyone after the first to occur of the following events:
(i)Three months after the date of the Participant’s termination of employment as an Employee other than on account of the Participant’s Disability or death; and
(ii)One year after the date of the Participant’s termination of employment or service on account of Disability or death.
(b)Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.
(c)Ten Percent Owners. An Incentive Stock Option may not be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any “parent corporation” or “subsidiary corporation” of the Company within the meaning of Sections 424(e) and 424(f) of the Code, respectively, unless such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant.
(d)Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option that occurs within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant.
(e)Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option, which, for any reason, including as provided in Section 5.2(a) hereof, fails to meet the requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option.
ARTICLE 6.
PROVISIONS APPLICABLE TO AWARDS
6.1Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
6.2Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
6.3Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. No Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution.
6.4Beneficiaries. Notwithstanding Section 6.3 hereof, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
6.5Share Delivery; Book Entry Procedures.
(a)Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such shares of Stock is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All shares of Stock delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted or traded. To the extent that the Company delivers any Stock certificates, the Committee may place legends on such Stock certificates to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.
(b)Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award and instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
6.6Paperless Exercise. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless exercise of Awards by a Participant may be permitted through the use of such an automated system.
ARTICLE 7.
CHANGES IN CAPITAL STRUCTURE
7.1Adjustments.
(a)In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock, the Committee shall make such proportionate adjustments to reflect such change with respect to (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards under the Plan.
(b)In the event of any transaction or event described in this Section 7.1 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, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, shall take any one or more of the following actions 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 Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i)To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 7.1 the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;
(ii)To provide that such Award 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;
(iii)To make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding Awards and/or in the terms and conditions of outstanding Awards (including the grant or exercise price) and the criteria included in outstanding options, rights and awards and options, rights and awards which may be granted in the future;
(iv)To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and
(v)To provide that the Award cannot vest, be exercised or become payable after such event.
7.2Acceleration Upon a Corporate Transaction. Notwithstanding Section 7.1 hereof, and except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company and a Participant, if a Corporate Transaction occurs and a Participant’s Awards are not converted, assumed or replaced by a successor entity, then immediately prior to the Corporate Transaction such Awards may, in the sole and absolute discretion of the Committee, become partially or fully vested and exercisable. Upon, or in anticipation of, a Corporate Transaction, the Committee may, in its sole and absolute discretion, cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Corporate Transaction, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company or any Company Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 7.2, this Section 7.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.
7.3No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.
ARTICLE 8.
ADMINISTRATION
8.1Committee. The Plan shall be administered by the Compensation Committee of the Board or a subcommittee thereof appointed by the Compensation Committee. The Committee shall consist solely of two or more members of the Board each of whom is an Independent Director and a Non-Employee Director. The governance of such Committee shall be subject to the charter of the Committee as approved by the Board. Any action taken by the Committee shall be valid and effective, regardless of whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 8.1 or otherwise. Notwithstanding the foregoing the Committee may delegate its authority hereunder to the extent permitted by Section 8.5 hereof. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.
8.2Reliance. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
8.3Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
(a)Designate Participants to receive Awards;
(b)Determine the type or types of Awards to be granted to each Participant;
(c)Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;
(d)Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;
(e)Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f)Prescribe the form of each Award Agreement, which need not be identical for each Participant;
(g)Decide all other matters that must be determined in connection with an Award;
(h)Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i)Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and
(j)Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.
8.4Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
8.5Delegation of Authority. To the extent permitted by applicable law, the Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 8.5 shall serve in such capacity at the pleasure of the Committee.
ARTICLE 9.
EFFECTIVE AND EXPIRATION DATE
9.1Effective Date. The Plan is effective as of the date the Plan is approved by the Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by the stockholders if it receives the affirmative vote of the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Bylaws.
9.2Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after the tenth anniversary of the Effective Date, provided, that no Incentive Stock Option shall be granted under the Plan after the tenth anniversary of the earlier to occur of (a) the Plan’s adoption by the Board or (b) the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.
ARTICLE 10.
AMENDMENT, MODIFICATION, AND TERMINATION
10.1Amendment, Modification, and Termination. Subject to Section 11.14 hereof, with the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, (b) stockholder approval is required for any amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 7 hereof), or (ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the Company’s shareholders, (I) no Option may be amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Award is granted, (II) except as permitted by Article 7 hereof, no Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having a higher per share exercise price, and (III) except as permitted by Article 7 hereof, no Award may be granted in exchange for the cancellation or surrender of an Option with a per share exercise price that is greater than the Fair Market Value on the date of such grant or cancellation.
10.2Awards Previously Granted. Except with respect to amendments made pursuant to Section 11.14 hereof, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.
ARTICLE 11.
GENERAL PROVISIONS
11.1No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.
11.2No Stockholders Rights. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock.
11.3Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a fair market value on the date of withholding equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a fair market value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.
11.4No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary.
11.5Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
11.6Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee and of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
11.7Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
11.8Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
11.9Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
11.10Fractional Shares. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.
11.11Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
11.12Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.
11.13Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Nevada.
11.14Section 409A. Awards granted under this Plan and amounts payable in connection therewith are not intended to provide for any deferral of compensation subject to gross income inclusion under Code Section 409A; rather, such Awards and amounts payable in connection therewith are intended to be exempt from gross income inclusion under Code Section 409A because either such Awards are “stock rights” or “statutory stock options” that do not constitute “nonqualified deferred compensation” within the meaning of Code Section 409A. In the event that any Awards or amounts payable in connection therewith would, nevertheless, be subject to gross income inclusion under Code Section 409A for any reason, to the extent such amounts constitute a deferral of compensation subject to Code Section 409A, then (x) subject to clause (y), such amounts shall be paid during the year following the year in which such amounts are no longer subject to a substantial risk of forfeiture, and (y) if the Employee is a “specified employee,” within the meaning of Code Section 409A, with respect to the Company, such amounts shall be paid upon the date which is six months after the date of the Employee’s “separation from service” (or, if earlier, the date of the Employee’s death) in accordance with Code Section 409A.
APPENDIX B
AUTOZONE, INC.
FOURTH AMENDED AND RESTATED
EXECUTIVE STOCK PURCHASE PLAN
AUTOZONE, INC., a corporation organized under the laws of the State of Nevada, by resolution of its Board of Directors on October 2, 2001, hereby adopts the AutoZone, Inc. Executive Stock Purchase Plan (the “Plan”), subject to the approval of the Plan by the stockholders of the Company as provided in paragraph 16 of the Plan. The Plan was approved by the stockholders on December 13, 2001. This Plan was Amended and Restated on July 11, 2002, December 10, 2003, December 14, 2005 and September 26, 2006, by the Compensation Committee.
The purposes of the Plan are as follows:
(1) To assist selected employees of the Company or of a Parent or Subsidiary of the Company in acquiring a stock ownership interest in the Company above the maximum amount of stock ownership interest allowable pursuant to the AutoZone, Inc. Second Amended and Restated Employee Stock Purchase Plan, or any successor plan thereto (the “ESPP”). The Plan is not intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended.
(2) To help selected employees provide for their future security and to encourage them to remain in the employment of the Company or of a Parent or Subsidiary of the Company.
1. DEFINITIONS
Whenever any of the following terms are used in the 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) “Board” shall mean the Board of Directors of the Company.
(b) “Cause” shall mean the willful engagement by the Employee in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise, as determined by the Committee.
(c) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(d) “Committee” shall mean the Compensation Committee of the Board appointed to administer the Plan pursuant to paragraph 12.
(e) “Company” shall mean AutoZone, Inc., a Nevada corporation.
(f) “Date of Exercise” shall mean, with respect to any Option, (i) the March 31 of the Plan Year in which the Option was granted (in the case of an Option granted on January 1), (ii) the June 30 of the Plan Year in which the Option was granted (in the case of an Option granted on April 1), (iii) the September 30 of the Plan Year in which the Option was granted (in the case of an Option granted on July 1), or (iv) the December 31 of the Plan Year in which the Option was granted (in the case of an Option granted on October 1).
(g) “Date of Grant” shall mean the date upon which an Option is granted, as set forth in subparagraph 3(a).
(h) “Disability” shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code, or such other definition as the Committee shall provide in its discretion.
(i) “Eligible Compensation” shall mean (i) the Eligible Employee’s rate of pay for the fiscal year immediately preceding an election to participate in the plan based on the base salary plus annual incentive compensation paid for the fiscal year, if the Eligible Employee was employed by the Company for the full preceding fiscal year, otherwise (ii) the Eligible Employee’s annualized current salary plus any annual incentive compensation accrued for the fiscal year as of the date of the election to participate.
(j) “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 who is selected by the Committee and designated in writing to be eligible to participate in the Plan.
(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(l) “Fair Market Value” shall mean: (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, (A) the last sales price (if the Stock is then listed as a National Market Issue under the NASD National Market System) or (B) 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 value established by the Committee acting in good faith.
(m) “Form” shall mean either a paper form or a form on electronic media, prepared by the Company.
(n) “Normal Retirement Date” shall mean a Participant’s normal retirement date as set forth in the AutoZone, Inc. Associate’s Pension Plan, as it may be amended from time to time.
(o) “Option” shall mean an option granted under the Plan to an Eligible Employee to purchase shares of the Company’s Stock.
(p) “Option Period” shall mean with respect to any Option the period beginning upon the Date of Grant and ending upon the Date of Exercise.
(q) “Option Price” has the meaning set forth in subparagraph 4(b).
(r) “Parent of the Company” shall mean any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Option each of the corporations other than the Company owns stock possessing more than 50% of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(s) “Participant” shall mean an Eligible Employee who has complied with the provisions of subparagraph 3(b).
(t) “Plan” shall mean the AutoZone, Inc. Executive Stock Purchase Plan, as amended and restated.
(u) “Plan Year” shall mean the calendar year beginning on January 1 and ending on December 31.
(v) “Restricted Share Option” shall mean an Option for Restricted Shares.
(w) “Restricted Share Option Price” has the meaning set forth in subparagraph 4(b)(i).
(x) “Restricted Shares” has the meaning set forth in subparagraph 4(c)(i).
(y) “Securities Act” shall mean the Securities Act of 1933, as amended.
(z) “Separation from Service” shall have the meaning provided in Code Section 409A.
(aa)“Stock” shall mean shares of the Company’s common stock.
(bb) “Subsidiary of the Company” shall mean any corporation other than the Company in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing more than 50% of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(cc) “Unvested Share Option” shall mean an Option for Unvested Shares.
(dd) “Unvested Share Option Price” has the meaning set forth in subparagraph 4(b)(ii).
(ee) “Unvested Shares” has the meaning set forth in subparagraph 4(c)(ii).
2. STOCK SUBJECT TO THE PLAN
Subject to the provisions of paragraph 9 (relating to adjustment upon changes in the Stock), the Stock which may be sold pursuant to options granted under the Plan shall not exceed in the aggregate 300,000 shares, and may be unissued shares or reacquired shares or shares bought on the market for purposes of the Plan.
3. GRANT OF OPTIONS
(a) General Statement. Following the effective date of the Plan and continuing while the Plan remains in force, the Company may offer Options under the Plan to all Eligible Employees. These Options may be granted four times each Plan Year on the January 1, the April 1, the July 1, or the October 1 of each Plan Year, or on such other days during the Plan Year as may be determined by the Committee. The term of each Option shall be for three months and shall end on the March 31 (with respect to a January 1 Date of Grant), the June 30 (with respect to an April 1 Date of Grant), the September 30 (with respect to a July 1 Date of Grant), or the December 31 (with respect to an October 1 Date of Grant) of the Plan Year in which the Option is granted or for such other term or Date of Exercise during the Plan Year as may be determined by the Committee. The Options are granted in consideration of past and future services to the Company. Each Option shall consist of a Restricted Share Option granted together with an Unvested Share Option, and exercise of an Option may only occur by exercising both the Restricted Share Option and the Unvested Share Option together. The number of shares of Stock subject to each Restricted Share Option shall be the quotient of (i) the aggregate payroll deductions authorized by each Participant in accordance with subparagraph 3(b) for the Option Period divided by (ii) the Restricted Share Option Price and rounded down to the nearest whole share. The number of shares of the Stock subject to each Unvested Share Option shall be the quotient of the number of shares subject to the Restricted Share Option for the Option Period divided by 5.66667 and rounded to the nearest whole share.
(b) Election to Participate; Payroll Deduction Authorization. An Eligible Employee may participate in the Plan only by payroll deduction. Each Eligible Employee who elects to participate in the Plan shall deliver to the Company no later than December 31 of the calendar year preceding the applicable Plan Year, the properly completed Form whereby the Eligible Employee gives notice of the election to participate in the Plan as of one or more Dates of Grant during such Plan Year, and which shall designate a stated dollar amount, in $5.00 increments, of Eligible Compensation to be withheld on each regular payday and or bonus payment date, provided, however, that an individual who first becomes an Eligible Employee during any Plan Year and who has not at such time already been eligible to participate for more than 30 days in any Company plan that is described in Prop. Treas. Reg. 1.409A-1(c)(2)(D) may deliver to the Company notice of election to participate in respect of such Plan Year up to 30 days after the earlier of the first date on which such individual (i) first becomes an Eligible Employee and (ii) first becomes eligible to participate in a Company plan described in Prop. Treas. Reg. 1.409A-1(c)(2)(D), in either case, with respect to periods of the Plan Year following such election. The stated dollar amount may not be less than $5.00 and may not exceed 25% of the Eligible Employee’s Eligible Compensation.
(c) Changes in Payroll Authorization Impermissible. The payroll deduction authorization referred to in subparagraph 3(b) may not be changed on or after the commencement of the applicable Plan Year.
(d) Special Deferral Election for 2005. Notwithstanding anything in this Plan to the contrary, with respect to calendar year 2005 only, Participants shall be permitted, on or prior to March 15, 2005, to make an irrevocable election (the “Special Election”) to participate in the Plan with respect to one or more 2005 Dates of Grant following the Special Election date. Each Special Election shall specify (i) the Participant’s level of participation (in dollars) in accordance with the terms of the Plan and (ii) whether amounts deferred under the Plan shall (A) be distributed as soon as practicable after the Participant’s termination of employment without Cause or due to death, retirement on or after the Participant’s Normal Retirement Date or Disability, or (B) continue to be deferred through the remainder of the Option Period and subsequently exercised in accordance with the Plan. If a Participant does not so designate a distribution schedule applicable to amounts deferred under the Special Election upon the Participant’s termination of employment without Cause or due to death, retirement on or after the Participant’s Normal Retirement Date or Disability occurring prior to the expiration of any 2005 Option Period, then amounts so deferred by such Participant shall be distributed as soon as practicable following any such termination of employment. Notwithstanding anything in the Plan to the contrary, amounts deferred pursuant to a Special Election shall not be reduced based on the level of a Participant’s participation (or lack thereof) in the Company’s Employee Stock Purchase Plan. Any Participant who has not made a timely Special Election shall not be permitted to participate in the Plan with respect to any Dates of Grant occurring between March 15, 2005 and December 31, 2005.
4. EXERCISE OF OPTIONS
(a) General Statement. Each Participant will be deemed to have exercised the Option on each Date of Exercise to the extent that the balance then in the Participant’s account under the Plan is sufficient to purchase at the Option Price whole shares of the Stock subject to the Option. The excess balance, if any, in a Participant’s account shall remain in the account and be available for the purchase of Stock on the following Date of Exercise occurring during the same Plan Year unless and until the Participant experiences a Separation from Service prior to such subsequent Date of Exercise or, if an excess balance remains on the last Date of Exercise during a Plan Year, such excess shall be returned to the Participant as soon as practicable following such last Date of Exercise.
(b) “Option Price” Defined. The option price per share of the Stock (the “Option Price”) to be paid by each Participant on each exercise of an Option shall be as follows:
(i) The Option Price to be paid by each Participant on each exercise of a Restricted Share Option (the “Restricted Share Option Price”) shall be an amount equal to 100% of the Fair Market Value of the Stock on the Date of Exercise.
(ii) The Option Price to be paid by each Participant on each exercise of an Unvested Share Option (the “Unvested Share Option Price”) shall be zero.
(c) Delivery of Shares.
(i) Subject to Section 13 below, for a number of shares of Stock which are purchased upon the exercise of a Restricted Share Option (the “Restricted Shares”), upon the first anniversary of the applicable Date of Exercise and upon proper completion and submission of the proper Form to the Company, the Company shall deliver to such Participant such number of shares. The Restricted Shares shall not be transferable or assignable by the Participant prior to the first anniversary of the Date of Exercise, provided, however, that upon a Participant’s Separation from Service with the Company by reason of the Participant’s death, Disability, termination by the Company without Cause,or retirement on or after the Participant’s Normal Retirement Date, in any event prior to the first anniversary of the applicable Date of Exercise, upon the proper completion and submission of the proper Form to the Company, the Company shall deliver to such Participant (or Participant’s estate) such Restricted Shares and such transfer and assignment restrictions shall lapse.
(ii) Subject to Section 13 below, for a number of shares of Stock which are purchased upon the exercise of an Unvested Share Option (the “Unvested Shares”), subject to the Participant’s continued employment with the Company except as provided below, on the first anniversary of the Date of Exercise and upon the proper completion and submission of the proper Form to the Company, the Company shall deliver to such Participant such number of shares. If a Participant experiences a Separation from Service with the Company prior to the first anniversary of the Date of Exercise, except by reason of the Participant’s death, Disability, termination by the Company without Cause,or retirement on or after the Participant’s Normal Retirement Date, the Unvested Shares shall be forfeited and the Participant shall have no further interest in the Unvested Shares. Upon a Participant’s Separation from Service with the Company by reason of the Participant’s death, Disability, termination by the Company without Cause,or retirement on or after the Participant’s Normal Retirement Date, the Unvested Shares shall be vested and upon the proper completion and submission of the proper Form to the Company, the Company shall deliver to such Participant (or Participant’s estate) the Unvested Shares.
(iii) In the event the Company is required to obtain from any commission or agency authority to issue any shares, the Company will seek to obtain such authority. The inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such shares shall relieve the Company from liability to any Participant except to return the amount of the balance in the account in cash.
5. PARTICIPATION ELECTIONS IRREVOCABLE
A Participant’s election to participate in the Plan with respect to any Plan Year becomes irrevocable with respect to all Dates of Grant and Dates of Exercise during such Plan Year at the end of the last day preceding such Plan Year, except as may be permitted in the Committee’s sole discretion in the event that a Participant experiences an “unforeseeable emergency” within the meaning of Code Section 409A(a)(2)(B).
6. SEPARATION FROM SERVICE
(a) Separation from Service Other Than By Retirement, Death, Disability, or Without Cause. If a Participant experiences a Separation from Service other than by reason of the Participant’s (i) retirement on or after the Participant’s Normal Retirement Date, or earlier or later with the consent of the Committee, (ii) death, (iii) Disability, or (iv) termination by the Company without Cause, then participation in the Plan shall automatically terminate as of the date of the Separation from Service. As soon as practicable after such a Participant’s Separation from Service, the Company will refund the amount of the balance in that account under the Plan. Upon a Participant’s termination of employment under this subparagraph 6(a), any Option held by such Participant under the Plan shall terminate.
(b) Separation from Service By Retirement, Death or Disability, or Without Cause. If a Participant who experiences a Separation from Service (i) due to retirement on or after the Participant’s Normal Retirement Date, or earlier or later with the consent of the Committee, (ii) by reason of the Participant’s death or Disability, or (iii) by reason of a termination of employment by the Company without Cause, in any case, has so elected in the participation election Form applicable to the Plan Year in which such Separation from Service occurs, such Participant’s Option will be deemed to be exercised on the next Date of Exercise following such Separation from Service to the extent of such Participant’s account balance under the Plan. If no such election has been made by the Participant, amounts in such Participant’s Plan account will be treated in accordance with subparagraph 6(a) above.
7. RESTRICTION UPON ASSIGNMENT
No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of any Participant or any successor in interest, nor 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 attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this paragraph 7 shall prevent transfers by will or by the applicable laws of descent and distribution. Options may not be exercised to any extent except in accordance with the provisions of paragraphs 4 and 6 above.
8. NO RIGHTS OF STOCKHOLDER UNTIL OPTION IS EXERCISED
With respect to shares of the Stock subject to an Option, a Participant shall not be deemed to be a stockholder of the Company, and shall not have any of the rights or privileges of a stockholder. A Participant shall have the rights and privileges of a stockholder of the Company when, but not until, an Option is exercised.
9. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION
Whenever any change is made in the Stock or to Options outstanding under the Plan, by reason of stock dividend or by reason of division, combination or reclassification of shares, appropriate action will be taken by the Committee to adjust accordingly the number of shares of the Stock subject to the Plan and the number and the Option Price of shares of the Stock subject to the Options outstanding under the Plan.
10. USE OF FUNDS; NO INTEREST PAID
All funds received or held by the Company under the Plan will be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose. No interest will be paid to any Participant or credited to any account under the Plan with respect to such funds.
11. AMENDMENT OF THE PLAN
(a)General. The Committee may amend, suspend or terminate the Plan at any time and from time to time; provided, however, that approval by the vote of the holders of more than 50% of the shares of the Company’s Stock present in person or by proxy and entitled to vote at a meeting 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 subparagraph 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 the Code or the Exchange Act.
(b)Code Section 409A. Notwithstanding anything herein to the contrary, in the event that the Committee determines that any cash or shares of Stock distributable under the Plan may be or become subject to taxation under Section 409A of the Code, the Committee may adopt such amendments to the Plan and/or any election Forms or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee reasonably determines are necessary to comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
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 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 Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Board shall have no right to exercise any of the rights or duties of the Committee under the Plan.
(c) Majority Rule. The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee.
(d) Professional Assistance; Good Faith Actions. The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any 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. SPECIFIED EMPLOYEES
Notwithstanding anything herein to the contrary, no cash or shares of Stock shall be distributed under this Plan during the 6-month period following a Participant’s Separation from Service if the Committee determines that paying such amounts at the time or times indicated in this Plan would cause such Participant to incur additional tax under Code Section 409A. If the distribution of any cash or shares of Stock is delayed as a result of the previous sentence, then on the first day following the end of such 6-month period, the Company will distribute to the affected Participant in a lump-sum the cumulative amount of cash and/or shares of Stock that would have otherwise been distributed to such Participant during such 6-month period.
14. 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 or change the terms and conditions of the employment of any person (including any Eligible Employee or Participant) at any time with or without cause.
15. 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 effective date of such merger, consolidation, acquisition, liquidation or dissolution unless the Committee shall, in its sole discretion, provide for the assumption or substitution of such Options.
16. TERM; APPROVAL BY STOCKHOLDERS
No Option may be granted during any period of suspension or after termination of the Plan, and in no event may any Option be granted under the Plan after September 25, 2016 unless extended by the Board of Directors of the Company. The 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.
17. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or a Parent or Subsidiary of the Company. Nothing in this Plan shall be construed to limit the right of the Company or a Parent or Subsidiary of the Company (a) to establish any other forms of incentives or compensation for employees of the Company or a Parent or Subsidiary of the Company or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.
18. RULE 16b-3 RESTRICTIONS UPON DISPOSITIONS OF STOCK
The Plan is intended to conform to the extent necessary with all provisions of the Securities Act, and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
19. NOTICES
Any notice to be given under the terms of the Plan to the Company shall be addressed to the Company in care of its Secretary or any designee and any notice to be given to a Participant shall be addressed to Participant’s last address as reflected in the Company’s records and may be given either in writing or via electronic communication to the extent permitted by law. By a notice given pursuant to this paragraph 19, either party may hereafter designate a different address for notices to be given. Any notice which is required to be given to a Participant shall, if the 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 19. Any notice shall have been deemed duly given when received by the Company or when sent to a Participant by the Company to Participant’s last known mailing address or delivered to an electronic mailbox accessible by Participant as permitted by law.
20. TITLES
Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
21. TAX WITHHOLDING
(a) Payment of any sums required by federal, state or local tax law shall be withheld with respect to the issuance, vesting, exercise or payment of any Restricted Shares, Restricted Share Options or Unvested Shares within the time limit as required by law for such payment. A Participant may elect to pay withholding taxes due upon the vesting of the Restricted Shares and Unvested Shares by having the Company withhold Unvested Shares that have vested and are issuable to such Participant as Stock (without restriction or risk of forfeiture).
(b) Notwithstanding any other provision of the Plan, the number of shares that may be withheld in order to satisfy the Participant’s federal and state income and payroll tax liabilities with respect to the vesting, exercise or payment of the Unvested Shares shall be limited to the number of shares that have a Fair Market Value (as defined below) on the date of withholding equal to the aggregate amount of such tax liabilities based on the minimum statutory withholding rates for federal and state tax income and payroll tax purposes that are applicable to such supplemental taxable income.
APPENDIX C
AUTOZONE, INC.
AUDIT COMMITTEE
CHARTER
Authority
This Audit Committee Charter was adopted by the Board of Directors of AutoZone, Inc., on December 9, 1999, and has been revised on June 6, 2000, August 26, 2002, December 12, 2002, June 10, 2003, October 21, 2003, June 9, 2004, and March 22, 2006.
Purpose
The audit committee assists AutoZone’s Board in fulfilling its oversight responsibilities of
| Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! |
· | the integrityInstead of mailing your proxy, you may choose one of the company’s financial statements,two voting methods outlined below to vote your proxy. |
| · | the company’s systems of internal control over financial reporting,VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. |
| · | Proxies submitted by the company’s compliance with legal and regulatory requirements,Internet or telephone must be received by 1:00 a.m., Central Time, on December 12, 2007. |
| · | the independent auditor’s qualification and independence, and |
| · | the performance of the company’s internal audit function and independent auditors. |
The Committee shall perform its duties by:
| · | appointing , determining the compensation of, and overseeing the work of the independent auditor and the internal auditor; |
| · | reviewing the financial reporting processes and the information that will be providedVote by Internet• Log on to the stockholdersInternet and others; |
| · | reviewinggo towww.investorvote.com• Follow the adequacy and effectiveness of AutoZone’s systems of internal accounting and financial controls; |
| · | reviewing the internal audit function and the annual independent audit of AutoZone’s financial statements; |
| · | reviewing the overall corporate “tone” for quality financial reports, controls and ethical behavior; and |
| · | issuing a report annually as required by the SEC’s proxy solicitation rules. |
In this context, “reviewing” means discussing with and making inquiry of management, internal auditors and independent auditors regarding such matters.
Membership
The Committee shall have at least three directors as members, up to a maximum as the Board of Directors may determine from time to time. The Committee shall consist solely of independent directors. An independent director is defined as a director who:
| § | has not been employed by AutoZone in the last five years; |
| | has not been employed by AutoZone's independent auditor in the last five years; |
| | is not, and is not affiliated with a company that is, an adviser, or consultant to AutoZone or a member of AutoZone’s senior management; |
| | is not affiliated with a significant customer or supplier of AutoZone; |
| | has no personal services contract with AutoZone or with any member of AutoZone’s senior management; |
| | is not affiliated with a not-for-profit entity that receives significant contributions from AutoZone; |
| | within the last three years, has not had any business relationship with AutoZone for which AutoZone has been or will be required to make disclosure under Rule 404 (a) or (b) of Regulation S-K of the Securities and Exchange Commission as currently in effect; |
| | receives no compensation from AutoZone other than as a director; |
| | is not employed by a public company at which an executive officer of AutoZone serves as a director; |
| | has not had any of the relationships described above with any affiliate of AutoZone; and |
| | is not a member of the immediate family of any person with any relationships described above. |
Each audit committee member shall be financially literate and at least one member should be an “audit committee financial expert” as such is defined in Item 401(h) of Regulation S-K under the Securities Act of 1933, as amended.
The Board of Directors shall annually appoint Committee members and its chair, shall fill any vacancies as they occur, and may remove any member at any time.
General Functions
A. | The audit committee shall serve as an informed voice to the Board regarding AutoZone’s accounting and auditing groups in their responsibilities for control and reporting of all financial transactions. |
B. | The audit committee shall provide a channel of communication between the internal auditors, independent auditor, and the Board. The audit committee shall periodically meet in private session, separately, with management, the internal auditors and the independent auditor. |
C. | The audit committee shall report committee actions to the Board and may make appropriate recommendations. |
D. | The audit committee shall meet quarterly and even more frequently if circumstances warrant such meetings, as may be called by the chair of the Committee. |
E. | While the audit committee has the responsibilities and powers set forth in this Charter, the audit committee shall not have the duty to plan or conduct audits or to determine that AutoZone's financial statements are complete and accurate and are in accordance with generally accepted accounting principles; AutoZone's management and the independent auditor have this responsibility. Nor does the audit committee have the duty to assure compliance with laws and regulations and the policies of the Board of Directors. |
F. | The audit committee, the Board, management, and the independent auditor shall jointly understand that the independent auditor is ultimately accountable to the audit committee. |
G. | The audit committee, with the assistance of counsel and/or the company’s independent auditor, shall reassess the adequacy of this Charter at least annually to ensure consistency with changing needs and compliance with all legal and regulatory requirements, and recommend any proposed changes to the Board for approval. |
Specific Functions
The audit committee, as may be required by law, by the Securities and Exchange Commission, or by the rules of the New York Stock Exchange, or otherwise to the extent it deems necessary or appropriate shall perform the following functions:
A. | The audit committee shall review annually the qualifications and proposed audit fees for the next fiscal year of the independent auditor currently retained by the company and shall review such information regarding other potential independent auditors as the committee may deem appropriate. Further, the Committee shall consider whether, in order to assure continuing auditor independence, there should be regular rotation of the audit firm. Upon completion of the review, the audit committee shall be responsible directly for the appointment (subject, if applicable, to shareholder ratification), retention, termination, compensation and terms of engagement, evaluation, and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting). The independent auditor shall report directly to the audit committee. The Committee shall present its conclusions with respect to the independent auditor to the full Board. |
| In its annual review of the independent auditor’s qualifications, the Committee shall review: |
| | the proposed independent auditor’s internal quality-control procedures; and |
| | any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm. |
In addition to the annual review and retention of the independent auditor, the Committee shall have the right to dismiss the auditor if it deems necessary at any time.
B. | The audit committee shall discuss with the independent auditor its independence from management and AutoZone and the matters included in the written disclosures required by the Independence Standards Board. |
C. | The audit committee shall, after completion of each annual audit, review with management and the independent auditor, the audit report, the management letter relating to the audit report, any significant questions (resolved or unresolved) between management and the independent auditor that arose during the audit or in connection with the preparation of the annual financial statements, and the cooperation afforded or limitations, if any, imposed by management in the conduct of the audit. |
D. | The audit committee shall review and approve AutoZone’s risk assessment and risk management policies. The committee will review internal audit’s planned scope of work relative to the assessment and internal audit’s evaluation of each identified issue. |
E. | The audit committee shall provide oversight over the company’s internal audit process by: |
| · | Ensuring that the company has an internal audit function. |
| · | Reviewing and concurring in the appointment, replacement, reassignment or dismissal of the senior internal audit executive, and the compensation package for such person. |
| · | Reviewing the significant reports to management prepared by the internal audit department and management’s responses. |
| · | Communicating with management and the internal auditors to obtain information concerning internal audits, accounting principles adopted by the company, internal controls of the company, and reviewing the impact of eachsteps outlined on the quality and reliability of the company’s financial statements.secured website. |
| · | Evaluating the internal audit department and its impact on the accounting practices, internal controls and financial reporting of the company. |
| · | Discuss with the independent auditor the internal audit department’s responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit. |
F. | The audit committee shall review the adequacy of AutoZone’s information systems control and security with the independent auditor and the CFO. |
G. | The audit committee shall review with the CFO and the independent auditor compliance with AutoZone’s code of conduct. |
H. | The audit committee shall review the legal and regulatory matters that may have a material effect on the organization’s financial statements, compliance policies and programs. |
I. | The audit committee shall review the quality, effectiveness and appropriateness of AutoZone’s accounting practices and critical accounting policies. |
J. | The audit committee shall review the interim financial statements, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” with the CEO and CFO and other appropriate members of management and the independent auditor prior to the filing of AutoZone’s Quarterly Report on Form 10-Q, and shall review with the CEO and CFO the contents of any required certification related to the filing of the Form 10-Q. Also, the committee shall discuss the results of the quarterly review and any other matters required to be communicated to the committeeVote by the independent auditor under generally accepted auditing standards. |
K. | The audit committee shall review with the CEO and CFO and other appropriate members of management and the independent auditor the information to be included in AutoZone’s Annual Report on Form 10-K, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and their judgment about the quality, not just acceptability, of the critical accounting policies and practices, the reasonableness of significant judgments, the alternatives available to AutoZone for applying different generally accepted accounting principles and the effect and desirability of such alternatives and the independent auditor’s preferred treatment, and the clarity of the information disclosed. The committee shall also review with the CEO and CFO the contents of any required certification related to the filing of the Form 10-K. Also, the committee shall discuss the results of the annual audit and any other matters required to be communicated to the committee by the independent auditor under generally accepted auditing standards, by law, as required by the Securities and Exchange Commission, or the New York Stock Exchange. |
L. | The audit committee shall review the adequacy of AutoZone’s systems of internal accounting controls, review of overall compliance with administrative policies and recommend to the Board of Directors any changes in the system of internal controls, procedures and practices which the Committee determines to be appropriate. Such controls shall be evaluated through a review of the reports issued by AutoZone’s internal auditors and the independent auditor, which identify and describe control weaknesses. The Committee shall inquire as to whether management is management is taking appropriate corrective action. |
M. | The audit committee shall review the scope and plan for the external audit and internal audits for the year. |
N. | The audit committee shall review and report to the Board on compliance with the Foreign Corrupt Practices Act and AutoZone’s policies on business integrity, and ethics and conflict of interest. |
O. | Any retention of the independent auditor (or any affiliate of the independent auditor) for any audit or non-audit service, and the fee for such service, shall be approved by the audit committee prior to the engagement. The independent auditor shall not be retained for the purpose of performing: |
| · | bookkeeping services or other services related to the accounting records or financial statements of AutoZone; |
| · | financial information systems design and implementation; |
| · | appraisal or valuations services, fairness opinions, or contribution-in-kind reports; |
| · | internal audit outsourcing services; |
| · | management functions or human resources; |
| · | broker or dealer, investment adviser, or investment banking services; |
| · | legal services and expert services unrelated to the audit; or |
| · | any other service as prohibited by law, the Securities and Exchange Commission, the New York Stock Exchange, or the Public Company Accounting Oversight Board. |
In making its consideration for approval, the Audit Committee shall consider:
| · | Whether the service is being performed principally for the audit committee; |
| · | The effects of the service, if any, on audit effectiveness or on the quality and timeliness of the entity’s financial reporting process; |
| · | Whether the service would be performed by specialists (e.g., technology specialists) who ordinarily also provide recurring audit support; |
| · | Whether the service would be performed by audit personnel and, if so, whether it will enhance their knowledge of the entity’s business and operations; |
| · | Whether the role of those performing the service (e.g., a role where neutrality, impartiality and auditor skepticism are likely to be subverted) would be inconsistent with the auditor’s role; |
| · | Whether the audit firm’s personnel would be assuming a management role or creating a mutuality of interest with management; |
| · | Whether the independent auditor, in effect, would be “auditing its own numbers;” |
| · | The availability of alternative providers of the service and whether the project must be started and completed very quickly; |
| · | Whether the audit firm has unique expertise in the service; and |
| · | The size of the fee(s) for the non-audit service(s). |
For purposes of this Charter, "non-audit services" shall mean services provided by the independent auditor other than those services provided in connection with an audit or a review of AutoZone’s financial statements.
P. | The audit committee shall approve employment as an AutoZone officer any employee of the independent auditor that worked on AutoZone's account in the prior year before the offer of employment is tendered to the prospective officer. However, under no circumstance may AutoZone hire any person that was an employee of the independent auditor and performed audit services for AutoZone as AutoZone’s CEO, CFO, Controller, or any person performing any similar function, unless at least a period of one year has passed since the termination of such person’s employment as an employee of the independent auditor. Upon granting of any approval to hire a former employee of the independent auditor, the audit committee may require that AutoZone or the independent auditor, or both, develop an appropriate plan to maintain the auditor's independence. |
Q. | The audit committee shall annually obtain assurance from the independent auditor that Section 10A of the Securities Exchange Act of 1934 has not been implicated. |
R. | The audit committee shall prepare the report required by the rules of the Securities and Exchange Commission for inclusion in AutoZone's proxy statement. |
S. | The audit committee shall be completely accessible to the CFO, the independent auditor, the internal auditors, and management (both individually and collectively) to discuss any matters the committee or these persons believe should be discussed privately with the audit committee. |
T. | The audit committee shall establish procedures for: |
| · | the receipt, retention and treatment of complaints received by AutoZone regarding accounting, internal accounting controls, or auditing matters; and |
| · | the confidential, anonymous submission by AutoZone employee of concerns regarding questionable accounting or auditing matters. |
U. | The audit committee shall assure that the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has not performed audit services for AutoZone in each of the five previous fiscal years. |
V. | The audit committee shall discuss with management AutoZone’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. |
W. | The audit committee shall annually review with the internal auditors AutoZone’s policies and practices regarding expenses reimbursed for executive officers and other perquisites including use of corporate assets. |
Consultants
The Committee shall have the authority to retain consultants or counsel of its selection to advise it with respect to its work.
Funding
The Company must provide for appropriate funding, as determined by the audit committee, in its capacity as a committee of the board of directors, for the payment of:
| | compensation to any public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed issuer; |
| | compensation to any advisers employed by the Committee; and |
| | ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. |
Committee Evaluation
The Committee shall establish criteria and procedures for evaluating the performance of the Committee. Using the criteria and procedures developed, the Committee shall perform an annual evaluation of the performance of the Committee.
Meetings
A quorum for any Committee meeting shall be a majority of the Committee members.
The action of a majority of the members present at any meeting in which a quorum is present shall be the action of the Committee.
Notice for all meetings shall be given as required by AutoZone’s Bylaws.
Committee meetings may be held in person, by telephone, or any other method of
communication in which all committee members may be heard. In lieu of a meeting, a Committee may act by unanimous written consent.
The chair of the Committee shall report results of its meeting to the full Board of Directors at the next following Board meeting.
The agenda and other materials for any meeting should be provided to Committee members in advance of the meeting as may be practical.
The CFO shall coordinate the Committee meeting notices and distribution of materials to Committee members.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS
I hereby appoint Harry L. Goldsmith and Rebecca W. Ballou, and each of them, as proxies, with full power of substitution to vote all shares of common stock of AutoZone, Inc., which I would be entitled to vote at the Annual Meeting of AutoZone, Inc., to be held at the J.R. Hyde III Store Support Center, 123 South Front Street, Memphis, Tennessee, on Wednesday, December 13, 2006, at 8:30 a.m. CST, and at any adjournments, on items 1, 2, 3 and 4 as I have specified, and in their discretion on other matters as may come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
To vote using the Telephone (within U.S. and Canada)
· telephone•Call toll free 1-800-652-VOTE (8683) inwithin the United States, or Canada & Puerto Rico any time on a touch tone telephone. There isNO CHARGEto you for the call.
· •Follow the simple instructions provided by the recorded message.
| To vote using Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the Internet
· Go to the following web site: WWW.COMPUTERSHARE.COM/EXPRESSVOTE
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follow the simple instructions.
designated areas. [x] |
VALIDATION DETAILS ARE LOCATED ON THE FRONT OF THIS FORM IN THE COLORED BAR.
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 1:00 a.m., Central Time, on December 13, 2006.
THANK YOU FOR VOTING
| | Mark this box with an X if you have made changes to your name or address details above. |
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|
Annual Meeting Proxy Card |
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PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
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 the directors nominated by the Board of Directors, FOR proposal 2, FOR proposal 3, and FOR proposal 4.
A Election of Directors
1. Election of Directors.
| | For
| | Withhold
| | | | For
| | Withhold
| | | | For
| | Withhold
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
| | | | | | | | | | | | | | | | 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 the directors nominated by the Board of Directors and FOR proposal 2. |
| 1. Election of Directors:For WithholdFor WithholdFor Withhold |
01 -— Charles M. ElsonElson[ ] [ ]02 — Sue E. Gove[ ] [ ]03 — Earl G. Graves, Jr.[ ] [ ] | | o | | | |
04 -— N. Gerry HouseHouse[ ] [ ]05 — J. R. Hyde, III[ ] [ ]06 — W. Andrew McKenna[ ] [ ] | | | | | |
07 -— George R. Mrkonic, Jr. | | | | |
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02 - Sue E. Gove | | | | | | 05 - J.R. Hyde, III | | | | | | 08 -[ ] [ ]08 — William C. Rhodes, III | | | | |
| | | | | | | | | | | | | | | | |
03 - Earl G. Graves, Jr. | | | | | | 06 - W. Andrew McKenna | | | | | | 09 -III[ ] [ ]09 — Theodore W. Ullyot | | | | Ullyot[ ] [ ] |
B Issues
| | | B Issues For | | Against | | Abstain | | | | |
2. | Approval of the AutoZone, Inc. 2006 Stock Option Plan. | | | | | | | | | | |
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3. | Approval of the AutoZone, Inc. Fourth Amended and Restated Executive Stock Purchase Plan. | | | | | | | | | | |
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4. | Ratification 2.Ratification of Ernst & Young LLP as independent registered public accounting firm for the 20072008 fiscal year. | | | | | | | | Mark this box with an X if you plan to attend the meeting. | | [ ] [ ] [ ] |
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5. | In3.In the discretion of the proxies named herein, upon such other matters as may properly come before the meeting. |
| | | C Non-Voting Items Change of Address- Please print new address below.Meeting AttendanceMark box to the right if you plan to attend the Annual Meeting. [ ]D Authorized Signatures — Sign Here — This section must be completed for your instructions to be executed. |
C Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed.
Please sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such.
| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. |
| Date (mm/dd/yyyy) | | Signature — Please print date below.Signature 1 -— Please keep signature within the box | | Signaturebox.Signature 2 -— Please keep signature within the box |
| | | | |
| | | | box. |
| IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
| PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS |
| I hereby appoint Harry L. Goldsmith and Rebecca W. Ballou, and each of them, as proxies, with full power of substitution to vote all shares of common stock of AutoZone, Inc., which I would be entitled to vote at the Annual Meeting of AutoZone, Inc., to be held at the J. R. Hyde III Store Support Center, 123 South Front Street, Memphis, Tennessee, on Wednesday, December 12, 2007, at 8:30 a.m. CST, and at any adjournments, on items 1 and 2 as I have specifie d, and in their discretion on other matters as may come before the meeting. |
| 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 the directors nominated by the Board of Directors and FOR proposal 2. |
| CONTINUED AND TO BE SIGNED ON REVERSE SIDE |
