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AUTOZONE, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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AUTOZONE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 2002
WHAT:
Annual Meeting of Stockholders
WHEN:
December 12, 2002, 8 a.m., EST
WHERE:
The Waldorf=Astoria
301 Park Avenue
New York, New York
STOCKHOLDERS
WILL VOTE REGARDING:
RECORD DATE:
Stockholders of record as of October 15, 2002,
may vote at the meeting.
Memphis, TennesseeBy order of the Board of Directors,
HARRY L. GOLDSMITH
Secretary
November 1, 2002
We encourage you to vote by telephone or Internet, both of which are convenient, cost effective and reliable alternatives to returning your proxy card by mail.
TABLE OF CONTENTS
Corporate Governance
PROPOSAL
2-Approval of Director Stock Option Plan
PROPOSAL 3-Approval of Director Compensation Plan
PROPOSAL 4-Approval of Independent Auditors
Audit Committee Report
Summary Table
Security
Ownership of Certain Beneficial Owners
Option/SAR Grants in Last Fiscal Year
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Compensation
Committee Report on Executive Compensation
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
Certain Relationships and Related Transactions
Section 16(a) Beneficial Ownership Reporting Compliance
Stockholder Proposals for 2003 Annual Meeting
Corporate Governance Principles
AutoZone, Inc. Audit Committee Charter
AutoZone, Inc.
123 South Front Street
Memphis, Tennessee 38103
Proxy Statement
for
Annual Meeting of Stockholders
December 12, 2002
Our Annual
Meeting will be held at The Waldorf=Astoria, 301 Park Avenue, New York,
New York, at 8 a.m., EST, on December 12, 2002.
Our Board of Directors has sent you this Proxy Statement
to solicit your vote at the Annual Meeting. We will pay all expenses incurred
in this proxy solicitation. In addition to mailing this Proxy Statement
to you, we have retained D.F. King & Co., Inc., to be our proxy solicitation
agent for a fee of $5,000, plus expenses. We also may make additional solicitations
in person, by telephone, facsimile, e-mail, or other forms of communication.
Brokers, banks, and others who hold our stock for the beneficial owners
will be reimbursed by us for their expenses related to forwarding our proxy
materials to the beneficial owners. This Proxy Statement is first being
mailed on or about November 1, 2002.
You may vote your shares in person or by proxy:
At the close of business on October 15, 2002, we had 98,549,013 shares
of common stock outstanding. Each share of common stock is entitled to
one vote. However, AutoZone had forward purchase agreements under its common
stock repurchase program covering 1,342,100 shares of common stock that
are deemed to be beneficially owned by AutoZone and are ineligible to be
voted at the meeting. Therefore, only 97,206,913 shares will be deemed
outstanding at the meeting.
ESL Investments, Inc., in an agreement dated October 10, 2000, agreed not
to vote any shares it or its affiliates acquired after October 20, 2000,
until after April 1, 2004, unless AutoZone gives consent otherwise, but
such shares will be deemed present for purposes of determining a quorum.
As of the record date, this agreement applied to 8,923,500 to 3,767,300
shares beneficially owned by ESL Investments, Inc., and its affiliates.
Holders of a majority of the shares of common stock outstanding and entitled
to vote must be present in person or by proxy in order for a quorum to
be present. Shares deemed beneficially owned by AutoZone will not be deemed
to be outstanding for purposes of a quorum. Shares beneficially owned by
ESL Investments, Inc., and its affiliates that are not eligible to be voted
will be deemed to be present for purposes of a quorum, but will be counted
as voting "WITHHELD" for directors and "ABSTAINING" on all other issues.
PROPOSAL 1-Election
of Directors
Nine directors will be elected at the Annual Meeting to
serve until the Annual Meeting in 2003. The nine persons nominated for
director receiving the most votes will be elected. Each of the nominees
named below was elected a director at the 2001 annual meeting, except for
Ms. Evans and Mr. Graves, who were elected as directors by the Board in
February 2002. These nominees have consented to serve if elected. Should
any nominee be unavailable to serve, your proxy will vote for the substitute
nominee recommended by the Board of Directors or the Board of Directors
may reduce the number of directors on the Board. The nominees are:
Michael W. Michelson, a director since 1986, will be retiring
at the Annual Meeting and will not be running for reelection.
In June 2001, our Board of Directors adopted Corporate Governance Principles
to govern the operation of the Board and to assure that the Board was focused
on stockholder value. These principles were amended in August 2002 to conform
them to the proposed new director independence rules of the New York Stock
Exchange. However, the amendments to the principles did not disqualify
any of our independent directors.
Our Board of
Directors has determined that Charles M. Elson, Marsha J. Evans, Earl G.
Graves, Jr., N. Gerry House, James F. Keegan, Edward S. Lampert, W. Andrew
McKenna and Michael W. Michelson meet the independence standards of our
Corporate Governance Principles and the New York Stock Exchange. A copy
of the Corporate Governance Principles is attached as Appendix A to this
Proxy Statement.
Board
Meetings
The Board of Directors held ten meetings in fiscal year 2002. All directors
attended at least 75% of the total of the Board of Directors and committee
meetings during the fiscal year.
Board Committees
Audit Committee.
The charter of the Audit Committee is attached to
this Proxy Statement as Appendix B. Under its charter, the Audit Committee
is responsible for:
Compensation Committee.
Under its charter, the Compensation Committee:
Nominating and Corporate Governance Committee.
Under its charter, the
Nominating and Corporate Governance Committee ensures that:
PROPOSAL 2-Approval
of Director Stock Option Plan
What is the director stock option plan?
The AutoZone, Inc. 2003 Director Stock Option Plan, which is referred to
in this proposal as the "option plan," allows us to grant non-qualified
options to our non-employee directors to purchase shares of AutoZone, Inc.,
common stock, $0.01 par value, at a fixed price at some point in the future.
The closing price of the common stock on the New York Stock Exchange as
of October 15, 2002, was $83.50. The following information regarding the
option plan is only a summary. For more complete information, please refer
to the complete copy of the plan attached as Appendix C to this proxy statement.
How many shares are reserved for issuance under the
option plan?
Up to 400,000 shares will be reserved for issuance under the option plan.
Who receives stock options under the option plan?
All non-employee directors are eligible to receive stock option grants.
The plan defines a non-employee director as a director that is not an employee
or officer of AutoZone, Inc., or any of its subsidiaries.
In fiscal year 2003, options under the option plan will be granted to directors
as shown in this table (based upon stock ownership of each director as
of October 15, 2002):
How are the terms of the option grants determined?
The option grants are automatic under the operation of the plan and are
not subject to discretion.
When are options granted under the option plan?
Options to purchase shares under the option plan are granted to all directors
on January 1 of each year. In addition, new directors are granted options
to purchase shares as of the date of their election to the Board.
How many options to purchase common stock are issued
to a director on a grant date?
On January 1 of each year, each director is granted an option to purchase
1,500 shares. Also, each director who beneficially owns shares of common
stock having an aggregate fair market value greater than or equal to five
times the annual directors' fee (not including meeting fees or fees for
being a committee chair) is granted an option to purchase an additional
1,500 shares.
Each new director is granted an option to purchase 3,000 shares as of the
date of his or her election to the Board of Directors plus an additional
grant of an option to purchase 1,500 shares prorated for the number of
days remaining in the calendar year.
How is the exercise price for the stock option determined
under the option plan?
The exercise price for the options granted under the option plan is
based upon the average high and low price of AutoZone common stock traded
on the New York Stock Exchange as of the first business day prior to the
date of the grant as published in
The Wall Street Journal.
When do the stock options become exercisable?
The options become exercisable on the first to occur of:
The Compensation Committee of the Board of Directors is the administrator
under the plan. Only independent directors can serve as members of the
Compensation Committee. The current committee members are Mr. Lampert,
Ms. Evans, Dr. House, and Mr. McKenna, all of whom are independent directors.
How are stock options exercised?
Stock options may be exercised at any time after they have become exercisable
by delivering a notice of exercise to the Secretary with payment of the
option price and any required taxes. The option price may be paid:
The stock options granted under the option plan will expire on the
first to occur of:
The option plan may be amended by the Board, except that the stockholders
must approve any amendment to the option plan to:
The option plan will expire on December 31, 2012, unless sooner terminated
by the Board. No further options may be granted under the option plan after
the termination date; however, all benefits granted under the option plan
prior to the termination date shall continue to be paid in accordance with
their terms.
What happens to stock options in case of a stock split
or other corporate event?
In the event of a corporate event such as a stock split, spin-off, or other
corporate transaction that affects our common stock, the Compensation Committee
may make appropriate adjustments to the number of options granted and the
exercise price to prevent dilution or enlargement of the benefits under
stock options granted, including making adjustments to:
Are the stock options transferable?
Options granted under the stock option plan are not transferable, except
by will or the laws of descent and distribution.
What are the federal income tax consequences of stock
option grants and exercises?
Federal income taxes are due from a recipient of non-qualified stock options
when the stock options are exercised. The difference between the exercise
price of the option and the fair market value of the stock purchased on
the exercise date is taxed as ordinary income. Thereafter, the tax basis
for the acquired stock is equal to the fair market value of the stock as
of the exercise date. AutoZone will take a tax deduction equal to the amount
of income realized by the option recipient on the exercise date.
What vote is required to approve the option plan?
To approve the option plan, the plan must receive more votes in favor of
the plan than are cast against it. Broker non-votes and abstentions will
be counted as present at the meeting for purposes of a quorum, but will
not be counted as voting either for or against the option plan.
The Board of Directors recommends that you vote FOR
the Director Stock Option Plan.
PROPOSAL 3-Approval
of Director Compensation Plan
What is the director compensation plan?
The AutoZone, Inc. 2003 Director Compensation Plan, which is referred to
in this proposal as the "compensation plan," allows AutoZone's non-employee
directors to have flexibility in compensation for serving on AutoZone's
Board of Directors. The plan will also allow non-employee directors to
participate in the ownership of AutoZone and to defer all or a portion
of the director's compensation into common stock equivalent units. Non-employee
directors are required to take at least one-half of their directors fees
in AutoZone common stock or stock equivalent units, also known as "stock
appreciation rights" or "SARs." The closing price of the common stock on
the New York Stock Exchange as of October 15, 2002, was $83.50. The following
information regarding the compensation plan is only a summary. For more
complete information, please refer to the complete copy of the plan attached
as Appendix D to this proxy statement.
How many shares are reserved for issuance under the
compensation plan?
Up to 100,000 shares are reserved for issuance under the compensation plan.
Who may participate in the compensation plan?
All non-employee directors of AutoZone are required to participate in the
plan. A non-employee director is a director that is not an employee or
officer of AutoZone or any of its subsidiaries. Currently, there are nine
non-employee directors on AutoZone's Board of Directors.
How are the non-employee directors compensated under
the compensation plan?
Each non-employee director receives a director's fee as set by the Board.
The director's fee has a fixed component and a variable component. The
variable component of a director's compensation is currently based on the
number of Board meetings attended by the director and is paid in quarterly
installments, in arrears, based on the number of Board meetings attended
by the director during the preceding quarter.
Each non-employee director is required to accept at least one-half, or
at the discretion of the director up to all, of the fee in AutoZone common
stock or stock appreciation rights. The balance of the fee is paid in cash.
During fiscal year 2002, non-employee director compensation included $25,000
as a fixed fee and $1,000 per Board meeting attended by the director. The
following table shows the amount and type of compensation received by each
director in fiscal year 2002:
What are "stock appreciation rights (SARs)"?
Stock appreciation rights are referred to in the compensation plan as "common
stock equivalent units." They permit a non-employee director to participate
in the appreciation in the value of AutoZone's common stock while deferring
the recognition of income for tax purposes. The number of SARs a non-employee
director receives under the compensation plan is recorded in a ledger,
but no stock certificates are issued until requested and as permitted under
the plan. Each director receiving SARs will have an individual account
in the ledger.
The purpose of using the SARs instead of issuing stock is to defer the
income taxes that ordinarily would have been paid upon the issuance of
the stock or payment of the director's fee until the issuance of the stock
or payment of the fee.
How are the number of shares of common stock or SARs
to be issued calculated?
The number of common shares or SARs issued is determined by dividing the
director's fee payable by the fair market value of a share of AutoZone's
common stock on the date the fee is due. The fair market value of the common
stock is determined by the average of the high and the low price of the
common stock for the business day before the relevant compensation date
as published by
The Wall Street Journal
.
Calculations of the number of common shares to be issued are truncated
to the whole share with the fractional amount paid in cash. Calculations
of the number of SARs to be issued are rounded to the nearest one-tenth.
How long must a director hold common stock or SARs
issued under the compensation plan?
A director may not sell, assign, or otherwise transfer common stock received
under the compensation plan for at least six months and one day after the
shares of the common stock are issued. A director may not sell, assign
or otherwise transfer his or her interests in SARs received under the compensation
plan for at least six months and one day after the SARs are credited to
the director's account.
How does a director receive proceeds from his or her
account?
Upon termination as a director, a non-employee director may elect to receive
a distribution from his or her SAR unit account in cash or in common stock
or may elect to continue to defer payments in the compensation plan. Deferred
payments will be credited with interest at a rate set by the Board of Directors.
If a director desires to defer payments after termination as a director,
then, at least 12 months prior to the director's termination date, the
director must notify AutoZone's Secretary of how the director wishes the
deferred payments to be distributed. The director may elect to have deferred
payments distributed in one of the following ways:
Benefits granted under the compensation plan are not transferable, except
by will or the laws of descent and distribution.
What happens to the compensation plan in the case of
a stock split or other corporate event?
In the event of a corporate event such as a stock split, spin-off, or other
corporate transaction that affects our common stock, the Compensation Committee
may make adjustments to the number and kind of shares of common stock which
may be issued under the compensation plan, such as:
The compensation plan may be amended by the Board, except that the stockholders
must approve any amendment to the plan to:
The Compensation Committee of the Board of Directors is the administrator
under the plan. Only independent directors can serve as members of the
Compensation Committee. The current committee members are Mr. Lampert,
Ms. Evans, Dr. House, and Mr. McKenna, all of whom are independent directors.
When does the compensation plan expire?
The compensation plan will expire on December 31, 2012, unless sooner terminated
by the Board. No further benefits may be paid under the compensation plan
after the termination date; however, all benefits granted under the compensation
plan prior to the termination date will continue to be paid in accordance
with their terms, or the Board may accelerate payment of benefits.
What vote is required to approve the compensation plan?
To approve the compensation plan, the plan must receive more votes in favor
of the plan than are cast against it. Broker non-votes and abstentions
will be counted as present at the meeting for purposes of a quorum, but
will not be counted as voting either for or against the compensation plan.
The Board of Directors recommends that you vote FOR
the Director Compensation Plan.
PROPOSAL 4-Approval
of Independent Auditors
Ernst & Young LLP, our independent auditors for the past fifteen fiscal
years, has been selected by the Audit Committee to be AutoZone's independent
auditors for fiscal year 2003. Representatives of Ernst & Young LLP
will be present at the Annual Meeting to make a statement if they so desire
and to answer any appropriate questions. During fiscal year 2002, the aggregate
fees billed for professional services rendered by Ernst & Young LLP
for the audit of AutoZone's annual financial statements for the 2002 fiscal
year and the reviews of the financial statements included in AutoZone's
Forms 10-Q for the 2002 fiscal year were $327,500, and the aggregate fees
billed for other services, including other audit related services, were
$1,335,926, which included:
For approval, the auditors must receive more votes in favor of approval
than votes cast against. Abstentions and broker non-votes will not be counted
as voting either for or against the auditors. However, the Audit Committee
is not bound by a vote either for or against the auditors. The Audit Committee
will consider a vote against the auditors by the stockholders in selecting
auditors in the future.
The Audit Committee recommends that you vote FOR approval
of Ernst & Young LLP as independent auditors.
To the Board of Directors of AutoZone, Inc.:
The Audit Committee of AutoZone, Inc., has reviewed and discussed AutoZone's
audited financial statements for the year ended August 31, 2002. In addition,
we have discussed with Ernst & Young LLP, AutoZone's independent auditing
firm, the matters required by Codification of Statement on Auditing Standards
No. 61., and other matters required by the charter of this committee.
The committee also has received the written disclosures and the letter
from Ernst & Young LLP required by Independence Standards Board Standard
No. 1, and we have discussed with AutoZone's management and the auditing
firm such other matters and received such assurances from them as we deemed
appropriate. In addition, we have considered whether the provision of nonaudit
services by Ernst & Young LLP to AutoZone is compatible with maintaining
auditor independence.
As a result of our review and discussions, we have recommended to the Board
of Directors the inclusion of AutoZone's audited financial statements in
the annual report for the year ended August 31, 2002, on Form 10-K.
While the Audit Committee has the responsibilities and powers set forth
in its Charter, the audit committee does not have the duty to plan or conduct
audits or to determine that AutoZone's financial statements are complete,
accurate, or 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 conduct investigations, to
resolve disagreements, if any, between management and the independent auditor,
or to assure compliance with laws and regulations and the policies of the
Board of Directors.
James F. Keegan, Chairman
We do not know of any matters to be presented at the Annual Meeting other
than those discussed in this proxy statement. If, however, other matters
are properly brought before the Annual Meeting, your proxies will be able
to vote those matters in their discretion.
Security Ownership
of Management
This table shows the beneficial ownership of common stock
as of October 15, 2002, by each director, the Chief Executive Officer,
the other four most highly compensated executive officers, and all current
directors and executive officers as a group. Unless stated otherwise in
the notes to the table, each person named below has sole authority to vote
and invest the shares shown.
1
Calculated assuming shares deemed beneficially owned by AutoZone
under forward purchase agreements are not outstanding.
2
Includes 100,000 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002.
3
Includes 108,200 shares held by charitable trusts for which Mr.
Clarkson is a trustee and has sole investment and voting power, with respect
to which Mr. Clarkson disclaims beneficial ownership. Mr. Clarkson retired
from the Board of Directors in December 2001.
4
Includes 497 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights.
5
Includes 174 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights.
6
Includes 350 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights.
7
Includes 2,280 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights and 2,000 shares
that may be acquired upon exercise of stock options either immediately
or within 60 days of October 15, 2002.
8
Includes 350,410 shares held by a charitable foundation for which
Mr. Hyde is an officer and a director and for which he shares investment
and voting power, 4,498 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights, and 3,000 shares
that may be acquired upon exercise of stock options either immediately
or within 60 days of October 15, 2002. Does not include 2,000 shares owned
by Mr. Hyde's wife.
9
Includes 3,000 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002. Does
not include 800 shares owned by a member of Mr. Keegan's family with respect
to which Mr. Keegan disclaims any beneficial ownership.
10
Mr. Lampert is the Chief Executive Officer of ESL Investments,
Inc. All shares indicated, other than 2,847 shares owned directly by Mr.
Lampert, are owned by ESL Partners, L.P., ESL Limited, ESL Institutional
Partners, L.P., ESL Investors, L.L.C., Acres Partners, L.P., Marion Partners,
L.P, and Blue Macaw Partners, L.P. Mr. Lampert may be deemed to have indirect
beneficial ownership of the shares owned by these entities. ESL Investments,
Inc., in an agreement dated October 10, 2000, agreed not to vote any shares
it or its affiliates acquired after October 20, 2000, until after April
1, 2004, unless AutoZone gives consent otherwise. As of the record date,
this agreement applied to 3,767,300to 8,923,500 shares beneficially owned
by ESL Investments, Inc., and its affiliates. See also footnote 2 under
Security Ownership of Certain Beneficial Owners, below.
11
Includes 2,170 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights.
12
Includes 4,548 shares that may be acquired immediately upon termination
as a director by conversion of stock appreciation rights and 3,000 shares
that may be acquired upon exercise of stock options either immediately
or within 60 days of October 15, 2002.
13
Includes 109,305 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002, and 1,400
shares held by trusts for which Mr. Goldsmith is a beneficiary.
14
Includes 68,999 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002.
15
Includes 5,000 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002, and 27,652
shares held by a revocable trust for the benefit of Mr. Olsen's family
members of which Mr. Olsen and his wife are the trustees.
16
Includes 420,385 shares that may be acquired upon exercise of stock
options either immediately or within 60 days of October 15, 2002, and 14,516
shares that may be acquired immediately upon termination as a director
by conversion of stock appreciation rights. Does not include shares deemed
beneficially owned by Mr. Clarkson.
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, and the AutoZone, Inc. Executive Stock Purchase 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 approved by the stockholders.
Only treasury shares may be issued under these plans. The 2003 Director
Compensation Plan and the 2003 Director Stock Option Plan are being presented
to the stockholders at this Annual Meeting. For details, please see the
descriptions of Proposals 2 and 3 in this Proxy Statement. Upon adoption
of the new plans, the Second Amended and Restated Director Compensation
Plan and the Fourth Amended and Restated Director Stock Option Plan will
be terminated.
Under the Second Amended and Restated Director Compensation Plan, a non-employee
director may receive no more than one-half of the annual and meeting fees
immediately in cash, and the remainder of the fees must be taken in common
stock or may be deferred in units with value equivalent to the value of
shares of common stock as of the grant date (also known as "stock appreciation
rights" or "SARs"). The current annual fee for each director is $25,000
and the fee per Board meeting is $1,000. Fees are established and may be
changed by the Board from time to time.
Under the Fourth Amended and Restated 1998 Director Stock Option Plan,
on January 1 of each year, each non-employee director receives an option
to purchase 1,500 shares of common stock, and each non-employee director
that owns common stock worth at least five times the annual fee paid to
each non-employee director on an annual basis will receive an additional
option to purchase 1,500 shares of common stock. In addition, each new
director receives an option to purchase 3,000 shares upon election to the
Board of Directors, plus a portion of the annual directors' option grant
prorated for the portion of the year actually served in office. These stock
option grants are made at the fair market value as of the grant date.
Security
Ownership of Certain Beneficial Owners
The following entities are known by us to own more than
five percent of our outstanding common stock:
2
Shares deemed beneficially owned by ESL Investments, Inc., are owned
by a group consisting of ESL Partners, L.P., ESL Limited, ESL Institutional
Partners, L.P., ESL Investors, L.L.C., Acres Partners, L.P., Marion Partners,
L.P., Blue Macaw Partners, L.P., and Edward S. Lampert. The general partner
of ESL Partners, L.P., is RBS Partners, L.P. The general partner of RBS
Partners, L.P. is ESL Investments, Inc. ESL Investment Management, LLC,
is the investment manager of ESL Limited. RBS Investment Management, LLC,
is the general partner of ESL Institutional Partners, L.P. ESL Investments,
Inc., is the general partner of Acres Partners, L.P. Mr. Lampert is the
managing member of ESL Investment Management, LLC, and RBS Investment Management,
LLC. In their respective capacities, each of the foregoing may be deemed
to be the beneficial owner of the shares of AutoZone common stock beneficially
owned by other members of the group. ESL Partners, L.P., is the record
owner of 12,338,984 shares, ESL Limited is the record owner of 2,985,290
shares, ESL Institutional Partners, L.P., is the record owner of 443,272
shares, ESL Investors, L.L.C., is the record owner of 1,521,365 shares,
Acres Partners, L.P., is the record owner of 7,526,599 shares, Marion Partners,
L.P., is the record owner of 224,840 shares, Blue Macaw Partners, L.P.,
is the record owner of 488,350 shares, and Mr. Lampert is the record owner
of 2,847 shares. Each entity or person has the sole power to vote and dispose
of the shares deemed beneficially owned by it. ESL Investments, Inc., in
an agreement dated October 10, 2000, agreed not to vote any shares it or
its affiliates acquired after October 20, 2000, until after April 1, 2004,
unless AutoZone gives consent otherwise. As of the record date, this agreement
applied to 8,923,500to 3,767,300 shares beneficially owned by ESL Investments,
Inc., and its affiliates.
3
All information regarding FMR Corp. is based upon the Schedule 13F
for the period ended June 30, 2002, filed by a group consisting of FMR
Corp., Edward C. Johnson 3d, its chairman, and Abigail P. Johnson, a director
of FMR Corp. Edward C. Johnson 3d and Abigail P. Johnson are deemed to
be members of a controlling group with respect to FMR Corp. The shares
of common stock deemed beneficially owned by FMR Corp. are held by investment
subsidiaries under the control of FMR Corp., including Fidelity Management
& Research Company, Fidelity Management Trust Company, and Strategic
Advisors, Inc. FMR Corp. has the sole power to vote 1,089,439 shares and
no power to vote 6,952,780 shares.
4
All information regarding Putnam Investment Management, Inc. is
based upon the Schedule 13F for the period ended June 30, 2002. Putnam
Investment Management, Inc. has the sole power to vote 538,041 shares and
no power to vote 6,811,147 shares.
Non-employee directors are paid an annual fee of $25,000 in quarterly installments,
plus $1,000 for each Board meeting attended. Under the AutoZone, Inc. Second
Amended and Restated Director Compensation Plan, a non-employee director
may receive no more than one-half of the annual and meeting fees immediately
in cash, and the remainder of the fees must be taken in common stock or
may be deferred in units with value equivalent to the value of shares of
common stock as of the grant date (also known as "stock appreciation rights").
Under the AutoZone, Inc. Fourth Amended and Restated 1998 Director Stock
Option Plan, on January 1 of each year, each non-employee director receives
an option to purchase 1,500 shares of common stock, and each non-employee
director that owns common stock worth at least five times the annual fee
paid to each non-employee director on an annual basis will receive an additional
option to purchase 1,500 shares of common stock. In addition, each new
director receives an option to purchase 3,000 shares upon election to the
Board of Directors, plus a portion of the annual directors' option grant
prorated for the portion of the year actually served in office. These stock
option grants are made at the fair market value as of the grant date.
Andrew M. Clarkson is an AutoZone employee and was a director until his
retirement in December 2001. He received a salary in fiscal year 2002 of
$50,962 and a bonus of $80,400.
Executive Compensation
This table shows the compensation paid to the Chief Executive Officer and
the other four most highly paid executive officers for the past three fiscal
years.
1
Fiscal year 2002 consisted of 53 weeks. Therefore, salary for each
person includes an additional week. Bonuses for fiscal year 2002 were paid
based on annual base salaries.
2
Bonuses are shown for the fiscal year earned, but paid in the following
fiscal year.
3
Amount shown for Mr. Odland for 2002 is for discounts on stock purchased
under the Amended and Restated Executive Stock Purchase Plan. Amount shown
for Mr. Odland for 2001 includes $68,155 paid for relocation expenses and
$45,435 paid in taxes on the relocation expenses. Amount shown for Mr.
Olsen for 2001 includes $88,781 for relocation expenses and $61,782 paid
in taxes on the relocation expenses and amount shown for 2000 includes
$7,636 for relocation expenses and $4,272 paid in taxes on the relocation
expenses. Amount shown for Mr. Clark for 2000 is for taxes paid on relocation
expenses.
4
All amounts shown are stock options granted in accordance with the
Second Amended and Restated 1996 Stock Option Plan. AutoZone did not grant
SARs to executive officers in the fiscal years shown.
5
Amount shown in fiscal 2002 for Mr. Odland consists of $3,600 for
life insurance and $1,938 in accrued contributions under defined contribution
plans. Amount shown in fiscal 2002 for Mr. Longo consists of $3,600 for
life insurance, $1,224 in accrued contributions under defined contribution
plans, and $91 in interest in excess of market rates on deferred compensation.
Amount shown in fiscal 2002 for Mr. Olsen consists of $3,545 for life insurance
and $1,044 in accrued contributions under defined contribution plans. Amount
shown in fiscal 2002 for Mr. Goldsmith consists of term life insurance
provided for the benefit of the named officer's beneficiary. Amount shown
in fiscal 2002 for Mr. Clark consists of $3,600 for life insurance, $2,098
in accrued contributions under defined contribution plans, and $1,154 in
interest in excess of market rates on deferred compensation.
6
Mr. Odland was first employed in January 2001.
7
Mr. Olsen was re-employed in April 2000.
Option/SAR Grants in
Last Fiscal Year
This table shows the number of stock options granted to
certain executive officers during the most recent fiscal year pursuant
to the Second Amended and Restated 1996 Stock Option Plan. Executive officers
were not granted SARs during the 2002 fiscal year.
2
Options shown vest in one-quarter increments on each of the first
through fourth anniversaries after the grant date.
Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR Values
This table shows stock option exercises by certain executive officers during
the most recent fiscal year, and their exercisable and unexercisable stock
options as of August 31, 2002. The fiscal year-end value of "in-the-money"
stock options is the aggregate difference between the exercise price of
the option and $72.35 per share, the market value of the common stock on
August 31, 2002. Executive officers do not have SARs.
Remuneration includes salary and bonus. The benefit is based on the average
monthly earnings for the consecutive five-year period during which a participant
had his or her highest level of earnings. The benefits stated in the table
will not be reduced by Social Security or other amounts received by a participant.
Remuneration shown is assumed to be the participant's five-year average
earnings.
Benefits under the pension plan vest after five years of service. The number
of years of credited service certain executive officers have accrued under
the pension plan as of the most recent fiscal year end are:
Compensation Committee
Report on Executive Compensation
The executive compensation program is designed to attract and retain executives
who are key to our long-term success. In this process, we want to align
an executive's compensation with AutoZone's attainment of business goals
and the increase in stockholder value. The Compensation Committee reviews
executive compensation annually and makes appropriate adjustments based
on company performance, achievement of predetermined goals, and changes
in an executive's duties and responsibilities. The compensation of other
AutoZone employees is based on a similar philosophy.
Compensation Philosophy
Executive compensation consists of salary, bonus, and stock options.
Salary.
The Compensation Committee desires that overall compensation
reflect each executive's performance over time. Base salaries are then
set at levels determined by the Compensation Committee to adequately reward
and retain capable executives.
At the beginning of each fiscal year, the Compensation Committee reviews
and establishes the annual salary of executive officers. The Committee
makes an independent determination of the appropriate level of these officers'
salaries taking into consideration the salary ranges recommended for a
particular position by outside compensation consultants, and the executive
officer's performance for the past fiscal year.
Bonus.
Each fiscal year executive officers are paid a bonus based
on the attainment of goals set by the Compensation Committee. The goals
for fiscal year 2002 were based on AutoZone's earnings before interest
and taxes (EBIT) and return on invested capital (ROIC). The Compensation
Committee establishes a bonus payout matrix at the beginning of the fiscal
year granting higher rewards as a percentage of annual salary as milestones
shown on the matrix are achieved. The bonus payout under the matrix is
not capped; the better AutoZone's performance, the higher the bonus payout.
As a general matter, as an executive's level of management responsibility
in the Company increases, the greater the portion of his or her potential
total compensation depends on the Company's performance as measured by
attaining goal objectives.
Stock Options.
To align the long-term interests of management
and our stockholders, the Compensation Committee awards stock options to
all levels of management, including some individual store managers. Stock
options are granted to executives and managers upon initial hire and thereafter
annually in accordance with guidelines established by the Committee, that
give a range of potential grant by position and the grant within that range
is determined by the performance of the individual in the position.
CEO Compensation
AutoZone's Chief Executive Officer, Steve Odland, received an annual base
salary in fiscal year 2002 of $650,000 pursuant to his employment agreement
based on a 52 week fiscal year. He was also paid a bonus of $2,090,400,
which was calculated in accordance with the bonus matrix discussed above.
Of this amount, $1,300,000 is deemed to be paid under the AutoZone, Inc.
Executive Incentive Compensation Plan. The bonus paid was a result of the
increase in EBIT to $771 million from $545 million and an increase in ROIC
to 19.8% from 14.3%. Increases are calculated before the effect of one-time
restructuring and impairment charges in fiscal year 2001.
Tax Deductions for Compensation
The federal tax code limits the amount of compensation that we may deduct
in any year for the Chief Executive Officer and our other four most highly
paid officers to $1 million. However, this deduction limitation does not
apply to performance-based compensation as defined in the tax code. Our
compensation plans are generally designed and implemented so that they
qualify for deductibility. However, we may from time to time pay compensation
to our executive officers that may not be deductible.
This report was unanimously adopted by the Compensation Committee.
Edward S. Lampert, Chairman
This graph shows, from the end of fiscal year 1997 to the end of fiscal
year 2002, changes in the value of $100 invested in each of AutoZone's
common stock, Standard & Poor's 500 Composite Index, and a peer group
consisting of other automotive aftermarket retailers.
The peer group consists of CSK Auto Corporation, Discount Auto Parts, Inc.
(which was acquired by Advance Auto Parts, Inc., in November 2001), Genuine
Parts Company, O'Reilly Automotive, Inc., and The Pep Boys-Manny, Moe &
Jack.
Employment Contracts
and Termination of Employment and Change-in-Control Arrangements
Mr. Odland was hired as Chairman and Chief Executive Officer in January
2001. At that time, he entered into a three-year employment agreement for
a minimum base salary of $650,000 per year plus bonuses, and was granted
four years of service credit under our pension plan as of his hire date.
The agreement may be terminated by AutoZone with or without cause and by
Mr. Odland with or without good reason at any time. If AutoZone terminates
the agreement without cause or Mr. Odland resigns for either good reason
or upon a change of control, then Mr. Odland shall be paid an amount equal
to his then-current base salary for the balance of the fiscal year that
the agreement is terminated, plus two times his then-prevailing annual
base salary, a bonus for the fiscal year that the agreement was terminated,
health insurance coverage under our health insurance plan until the end
of the second full fiscal year following termination or until he becomes
eligible to participate in another employer's group health plan, and the
stock option grant related to his initial employment shall be fully vested
and exercisable on the date of termination. Under the agreement, "good
reason" means a failure by AutoZone to provide the benefits provided in
the agreement, any material adverse change in the status, responsibilities,
perquisites (other than changes that apply to all executive officers as
a group), the occurrence of any event that would cause Mr. Odland to cease
to be CEO or Chairman, requiring him to report to anyone other than the
Board of Directors, assignment of duties inconsistent with his position
as Chairman or CEO, relocation of AutoZone's principal office more than
60 miles from its current location, failure by AutoZone to assign the agreement
to any successor of AutoZone, failure of a successor of AutoZone to assume
the agreement, or any other material breach of the agreement by AutoZone.
Under the agreement "cause" means the willful engagement by Mr. Odland
in conduct which is demonstrably and materially injurious to AutoZone as
determined by the Board of Directors in good faith. Under the agreement,
a "change of control" will occur upon the occurrence of either of the following
events:
Certain Relationships
and Related Transactions
Disclosures under Rule 404(a) or (b)
Upon his retirement as Chairman in 1997, Mr. Hyde entered into an agreement
not to compete against the Company until March 2002. In fiscal year 2002,
under the terms of that agreement, Mr. Hyde was paid $155,290, for the
fiscal year, and was provided personal security services valued at approximately
$31,552. All such payments and security services ended in March 2002.
Other Disclosures
The following information is not required to be disclosed by securities
laws, but we are disclosing it for your information:
Mr. Lampert, an AutoZone director and the CEO of ESL Investments that beneficially
owns 26.3% of our outstanding common stock, is also a director and substantial
shareholder of AutoNation, Inc., a seller of new and used vehicles. At
times AutoZone purchases vehicles from AutoNation and AutoNation makes
purchases from AutoZone. Neither our purchases from AutoNation nor AutoNation's
purchases from us are material to either party.
Mr. Hyde, an AutoZone director, is also a director of FedEx Corp. AutoZone
purchases delivery services from FedEx Corp. and its subsidiaries from
time to time. Our purchases from FedEx Corp. and its subsidiaries are not
material to either party. FedEx Corp. and its subsidiaries may make purchases
from AutoZone from time to time. FedEx's purchases from us are not material
to either party. Mr. Hyde is also a minority owner of the Memphis Grizzlies
basketball team. During the 2002 fiscal year, AutoZone leased a portion
of a building that it held for sale or lease to the Grizzlies for rental
payments equal to the fair market value of the leased space for the period
occupied. This transaction was not material to either party.
Ms. Evans, an AutoZone director, is the President and CEO of The American
Red Cross. From time to time, AutoZone makes charitable contributions to
the Red Cross and its affiliates. Our contributions are not material to
either party.
In the 2000 fiscal year, the Board of Directors adopted the AutoZone, Inc.
Management Stock Ownership Plan. Under this plan, directors and executive
officers were expected to purchase and maintain ownership of AutoZone stock
in an amount that is a multiple of their annual salary. As a part of that
program, executive officers and directors could be loaned up to one-half
of the funds required to purchase the stock. The notes were demand notes
that matured in five years from the execution date. Interest accrued on
the notes at a 6% annually-compounded rate.
In fiscal year 2001, the Board of Directors eliminated the loan feature
of the program, but outstanding loans continued in effect under the terms
of their respective notes. All of the loans have been repaid and the program
has been terminated. None of the loans were forgiven.
The following table shows the highest amount of indebtedness of the persons
participating in the loan program since the beginning of the 2002 fiscal
year, and the current balance of such indebtedness as of October 15, 2002.
Section 16(a) Beneficial
Ownership Reporting Compliance
Securities laws require our executive officers, directors, and owners of
more than ten percent of our common stock to file reports (Forms 3, 4,
and 5) with the Securities and Exchange Commission and the New York Stock
Exchange relating to the number of shares of common stock that they own,
and any changes in their ownership. To our knowledge, all persons required
to file such forms have done so in a timely manner.
Stockholder Proposals
for 2003 Annual Meeting
Stockholder proposals for inclusion in the Proxy Statement for the Annual
Meeting in 2003 must be received by July 3, 2003. In accordance with our
bylaws, Stockholder proposals received after August 14, 2003, but by September
13, 2003, may be presented at the meeting, but will not be included in
the 2003 Proxy Statement. Any stockholder proposal received after September
13, 2003, 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,
Tennessee 38101-2198.
A copy of our Annual Report is being mailed with this Proxy Statement
to all stockholders of record.
HARRY L. GOLDSMITH
Corporate Governance Principles
ADOPTION
The Board of Directors of AutoZone, Inc., has adopted these Corporate Governance
Principles on June 5, 2001.
BOARD MISSION & OBJECTIVES
Mission Statement
AutoZone's primary objective is to maximize long-term stockholder value,
while adhering to the laws of the jurisdictions wherein it operates and
at all times observing the highest ethical standards.
Corporate Authority & Responsibility
All corporate authority resides in the Board of Directors as the representative
of the stockholders. Authority is delegated to management by the Board
in order to implement AutoZone's mission. Such delegated authority includes
the authorization of spending limits and the authority to hire employees
and terminate their services. The Board retains responsibility to recommend
candidates to the stockholders for election to the Board of Directors.
The Board retains responsibility for selection and evaluation of the CEO,
oversight of the succession plan, determination of senior management compensation,
approval of the annual budget, assurance of adequate systems, procedures
and controls, as well as assisting in the preparation and approval of the
strategic plan. Additionally, the Board provides advice and counsel to
senior management. The Board may exercise its authority through committees
of the Board.
DIRECTORS
Personal Characteristics & Core Competencies of Directors:
Individual Directors should possess all of the following personal characteristics:
To adequately fulfill the Board's complex roles, from monitoring managerial
performance to responding to crises and approving AutoZone's strategic
plan, a host of core competencies need to be represented on the Board.
The Board as a whole should possess the following core competencies, with
each member contributing knowledge, experience and skills in one or more
domains:
The Board should consider whether a change in an individual's professional
responsibilities directly or indirectly impacts that person's ability to
fulfill directorship obligations. All Directors should submit a resignation
as a matter of course upon retirement, a change in employer, or other significant
change in their professional roles and responsibilities. If the Board believes
that a director will continue to make a contribution to the organization,
the continued membership of that director may be supported.
Identification and Recruitment of Directors
One of the tasks of the Nominating and Corporate Governance Committee is
to identify and recruit candidates to serve on the Board of Directors.
A list of candidates shall be presented to the Board for nomination and
to the stockholders for consideration. The committee may, at its discretion,
seek third-party resources to assist in the process. The CEO will be included
in the process on a non-voting basis. The Nominating and Corporate Governance
Committee will make the final recommendation to the Board.
Independent Directors
A substantial majority of the Board of Directors should be independent.
An independent director is defined as a director who:
The members of the Board acknowledge that significant time is required
to be a fully participating and effective member of AutoZone's Board of
Directors. Therefore, each independent director should not hold more than
two or three directorships of public companies other than AutoZone. The
CEO should not be a member on more than one or two Boards of other public
companies, and AutoZone's other executive officers should not be members
of more than one other Board of a public company. A Director should notify
the Secretary prior to accepting a new position on another Board in order
that the Secretary may examine the relationship for a potential conflict
of interest.
Compensation of Directors
Outside Directors are compensated in accordance with the Director Compensation
Plan and the Director Stock Option Plan as may be in effect from time to
time. The Board believes that a significant portion of a director's compensation
should be in common stock to further the direct correlation of directors'
and stockholders' interests.
The Compensation Committee shall review independent director compensation
from time to time and recommend to the full Board any changes in compensation
as the committee may deem necessary.
Directors that are officers or employees shall not receive any additional
compensation for their service as Directors. Outside Directors shall not
receive a pension solely as a result of service as a Director.
Direct Investment in AutoZone Stock by Directors
Since a significant ownership stake leads to a stronger alignment of interests
between directors and stockholders, each director is required to personally
invest at least $100,000 in company stock within three years of joining
the board. Exceptions to this requirement may only be made by the board
under compelling mitigating circumstances.
Service Limitations of Directors
A Director may not stand for reelection after age 70, but need not resign
until the end of his or her term. The Board may, however, upon evaluation
of a Director that has reached 70 years of age, in its discretion ask such
Director to remain on the Board in extraordinary circumstances if the Board
believes that such Director will continue to make significant contributions
to the work of the Board.
No director shall be eligible to be reelected to the Board of Directors
after serving on the Board for 15 years. However, notwithstanding the foregoing,
Directors serving on the Board as of the first date of the adoption of
these Corporate Governance Principles shall be eligible to be reelected
as a Director until the first annual meeting of stockholders held after
the passage of 15 years from the date of first adoption of these Corporate
Governance Principles.
In order to retain freshness in the process and to give new management
the unfettered ability to provide new leadership, a retiring CEO shall
not continue to serve on the Board except in extraordinary circumstances.
Conflict of Interest
From time to time, an issue being considered by the Board may present,
or may give the appearance of presenting, a conflict of interest for a
Director. Each Director should take appropriate steps to assure that in
each matter considered that the Director is disinterested with respect
to that matter, other than the interests of AutoZone and its stockholders.
Any Director faced with any potential conflict should disclose any such
potential conflict to the Secretary and the Chairman and should not participate
in discussions or votes on such issue unless a majority of the Board determines,
after consultation with counsel, that no conflict of interest exists as
to such matter.
Directors that are not independent Directors shall not participate in the
Board's decision of selection, removal, or performance assessment of the
CEO.
BOARD ORGANIZATION
Board Size
In general, smaller boards are more cohesive, work better together and
tend to be more effective monitors than larger boards. Ideally, the Board
should be comprised of six to ten outside Directors and one to two Directors
who also are employees or officers.
Committees
All major decisions will be considered by the Board as a whole. As a consequence,
the committee structure of the Board is limited to those committees considered
to be basic to or required for the operation of AutoZone as a publicly-owned
entity. Standing committees shall include audit, compensation, and nominating
and corporate governance. The audit, compensation, and nominating and corporate
governance committees shall be composed solely of independent Directors.
The Board may form other committees as it determines appropriate. Each
committee shall operate in accordance with its charter as adopted by the
Board. Committee members and chairs shall be appointed annually by the
Board in accordance with the charter of each committee.
BOARD OPERATIONS
The Board shall meet at least four times per fiscal year in accordance
with a meeting schedule that is approved by the Board. The Board may also
meet at such other times in meetings which may be called in accordance
with AutoZone's Bylaws.
Other members of management may attend non-executive meetings of the Board
at the invitation of the Chairman.
Communications
Directors have full access to the Chairman and CEO and senior officers
reporting directly to the CEO and to information about the corporation's
operations. Directors should refrain from giving strategic or operating
direction to members of management outside the scope of full Board or committee
responsibility and accountability.
Board Ability to Retain Advisors
The Board shall retain advisors as it believes to be appropriate. If management
is retaining advisors to the Board, such decision must be ratified by the
Board.
Material in Advance of Meetings
The Board must be given sufficient information to fully exercise its governance
functions. This information comes from a variety of sources, including
management reports, a comparison of performance to plans, security analysts'
reports, articles in various business publications, etc. Generally, Board
members will receive information prior to Board meetings so they will have
an opportunity to reflect properly on the items to be considered at the
meeting.
The Board will ensure that adequate time is provided for full discussion
of important items and that management presentations are scheduled in a
manner that permits a substantial proportion of Board meeting time to be
available for open discussion.
Executive Session
The non-management Directors should meet privately in executive session
from time to time to review the performance of the CEO and other executive
officers. The non-management Directors should meet in executive session
at the end of each Board meeting to consider other issues that they may
determine from time to time, without the presence of any member of management.
A "non-management" Director is a Director that is not an officer of AutoZone.
Evaluation of the CEO
The selection and evaluation of the chief executive officer and concurrence
with the CEO's selection and evaluation of the corporation's top management
team are the most important function of the Board. In its broader sense,
"selection and evaluation" includes considering compensation, planning
for succession and, when appropriate, replacing the CEO or other members
of the top management team. The performance of the CEO will be reviewed
at least annually solely by the outside Directors without the presence
of the CEO or other inside Directors. The evaluation of the CEO shall be
led by the chair of the compensation committee. The Board should have an
understanding with the CEO with respect to criteria on which he or she
will be evaluated, and the results of the evaluation will be communicated
to the CEO.
Succession and Management Development
The CEO will report annually to the Board on AutoZone's program for succession
and management development.
CEO succession is a Board-driven, collaborative process. Although the current
CEO has an important role to play, the Board must own the plan for succession
while collaborating with the CEO in deciding the timing and the necessary
qualifications for making a final decision.
Outside Communication
The Board believes that management speaks for the company. In accordance
with this philosophy, Directors should defer to the Chairman or AutoZone's
public relations department when requested to make any comments regarding
AutoZone or its business.
Annual Election of Directors
In order to create greater alignment between the Board's and our stockholders'
interests and to promote greater accountability to the stockholders, Directors
shall be elected annually.
PERIODIC REVIEW OF GUIDELINES
These guidelines shall be reviewed periodically by the Nominating and Corporate
Governance Committee and any amendments shall be presented to the Board
for adoption.
Amended: December 13, 2001
August 27, 2002
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, and on August
26, 2002.
Purpose
The audit committee
assists AutoZone's Board in fulfilling its oversight responsibilities by:
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:
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
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:
The Committee
shall have the authority to retain consultants or counsel of its selection
to advise it with respect to its work, at AutoZone's expense.
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.
AutoZone, Inc. 2003 Director Stock Option Plan
SECTION 1. PURPOSE OF THE PLAN.
Under this 2003 Director Stock Option Plan (the "Plan") of AutoZone, Inc.
(the "Company"), non-qualified stock options to purchase shares of the
Company's Common Stock shall be granted to Non-Employee Directors (as defined
below) of the Company. The Plan is designed to enable the Company to attract
and retain Non-Employee Directors of the highest caliber and experience,
and to increase their ownership of the Company's Common Stock.
SECTION 2. STOCK SUBJECT TO PLAN.
The maximum number of shares of stock for which non-qualified stock options
("Options") granted hereunder may be exercised shall be 400,000 shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
subject to the adjustments provided in Section 7. All shares of stock subject
to Options may be authorized but unissued shares or treasury shares of
Common Stock. Shares of stock subject to the unexercised portions of any
Options which expire or terminate or are canceled may again be subject
to Options granted hereunder.
SECTION 3. PARTICIPATING DIRECTORS.
Each member of the Board of Directors of the Company (the "Board") who
is not, at the time that eligible directors are granted Options pursuant
to Section 5 hereof, an employee or officer of the Company or any of its
subsidiaries (a "Non-Employee Director"), shall be eligible to participate
in the Plan.
SECTION 4. ADMINISTRATION.
(b) 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) 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) All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and 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 on each
Non-Employee Director who has been granted an Option hereunder (sometimes
referred to hereinafter as an "Optionee"), 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 with respect to any such action, determination
or interpretation.
During the existence of the Plan, Options shall be granted as follows:
SECTION 6. OPTION PROVISIONS.
Each Option shall be evidenced by a written agreement between the Company
and the Non-Employee Director and shall contain the following terms and
provisions, and such other terms and provisions as the Committee may authorize:
(b) Payment for shares of Common Stock purchased upon any exercise of the
Option shall be made in full at the time of such exercise (i) in cash,
(ii) by delivery of shares of Common Stock already owned by the Optionee,
duly endorsed for transfer to the Company, (iii) by delivery of a notice
that the Optionee has placed a market sell order with a broker approved
by the Company with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in satisfaction
of the option exercise price, or (iv) by a combination of any of the foregoing
methods of payment. For purposes of exercising the Option, the value of
any shares of Common Stock delivered in payment shall be the Fair Market
Value of such shares of Common Stock as of the day of delivery;
(c) Subject to subsection (d) below and Section 7 hereof, the Option shall
become fully vested and exercisable on the first to occur of either:
(ii) the third anniversary of the date of grant.
(ii) the expiration of five years from the date upon which
the Non-Employee Director ceases to be a director of the Company if the
Non-Employee Director has become ineligible to be reelected as a result
of reaching the term limits or mandatory retirement age specified in the
Company's Corporate Governance Principles, in effect as of the applicable
date ("Normal Retirement Age");
(iii) the expiration of 90 days from the date of the Non-Employee
Director's death;
(iv) the expiration of 30 days from the date that the
Non-Employee Director ceases to be a director of the Company (for a reason
other than the death of the Non-Employee Director) if the Non-Employee
Director has not reached Normal Retirement Age; or
(v) subject to Section 7(b) hereof, the effective date
of a Corporate Transaction (as defined below), unless the Committee waives
this provision in connection with such transaction.
(ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Options; and
(iii) the grant or exercise price with respect to any
Option.
(ii) 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 (i) above; or
(iii) 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.
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Optionee of any sums required by federal,
state or local tax laws to be withheld with respect to the issuance, vesting
or exercise of any Option. The Committee may in its discretion and in satisfaction
of the foregoing requirement allow such Optionee to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Option (or
allow the return of shares of Common Stock) having an aggregate Fair Market
Value equal to the sums required to be withheld.
SECTION 9. TERMINATION AND AMENDMENT OF PLAN.
Unless sooner terminated, this Plan shall expire on December 31, 2012,
so that no Option may be granted hereunder after that date although any
option outstanding on that date may thereafter be exercised in accordance
with its terms. The Board may alter, amend, suspend or terminate this Plan,
provided that no such action shall deprive an Optionee, without his or
her consent, of any Option previously granted pursuant to the Plan or of
any of the Optionee's rights under such Option. However, without approval
of the Company's stockholders given within 12 months before or after the
action by the Board, no action of the Board may increase the limit imposed
in Section 2 on the maximum number of shares which may be issued as Options
under the Plan (other than adjustments under Section 7), change the types
of shares issued under the Plan, extend the term of the Plan, materially
change the method of determining the exercise price under the Plan, materially
modify the definition of "Non-Employee Director" under the Plan, or modify
the Plan in a manner requiring stockholder approval under the listed company
rules of the New York Stock Exchange, and no action of the Board may be
taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule.
SECTION 10. COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money
under this Plan or under Options granted hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including
but not limited to state and federal securities laws and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary
or advisable in connection therewith. Any securities delivered under this
Plan shall be subject to such restriction, and the person acquiring such
securities shall, if requested by the Company, provide such assurances
and representations to the Company as the Company may deem necessary or
desirable to assure compliance with all applicable legal requirements.
To the extent permitted by applicable law, the Plan and Options granted
or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules or regulations.
SECTION 11. TITLES.
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Plan.
SECTION 12. GOVERNING LAW.
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the internal laws of the State of Nevada without regard
to the conflicts of laws rules thereof.
SECTION 13. STOCKHOLDER APPROVAL
The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the stockholder approval requirements of the New York
Stock Exchange. This Plan shall be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's adoption
of this Plan. This Plan shall become effective immediately upon approval
by the stockholders.
AutoZone, Inc. 2003 Director Compensation Plan
SECTION 1. PURPOSE.
This 2003 Director Compensation Plan (this "Plan") is established to allow
the non-employee directors of AutoZone, Inc. ("AutoZone") to participate
in the ownership of AutoZone through ownership of shares of AutoZone Common
Stocks or units representing the right to receive shares of AutoZone Common
Stock. In addition, the Plan is intended to allow AutoZone's non-employee
directors to defer all or a portion of their compensation for their service
as directors of AutoZone.
SECTION 2. DEFINITIONS.
As used herein, the following words shall have the definitions given them
below:
"Affiliate" means any corporation, company limited by shares, partnership,
limited liability company, business trust, other entity, or other business
association that is controlled by AutoZone.
"Annual Fee" means the amount of the fixed annual Director fees set by
the Board from time to time as payable to a Director in each Plan Year
(including any compensation as a committee member or chairman) on the terms
and subject to the conditions stated in this Plan, subject to reduction
for any portion thereof that a Director elects to defer as provided in
this Plan.
"Board" means the Board of Directors of AutoZone.
"Business Day" means on a day which AutoZone's executive offices in Memphis,
Tennessee are open for business and on which trading is conducted on the
New York Stock Exchange.
"Committee" means the Compensation Committee appointed by the Board.
"Common Stock" means the Common Stock, $0.01 par value per share, of AutoZone.
"Compensation Date" means the first Business Day of each Plan Quarter.
"Deferral Account" means an account established upon the conversion of
a Unit Account by a Director and maintained in the Special Ledger for such
Director to which cash equivalent amounts allocable to the Director under
this Plan are credited.
"Director" means any member of the Board who is not an employee or officer
of AutoZone or an Affiliate.
"Fair Market Value" means, as to any particular day, the average of the
highest and lowest prices quoted for a share of Common Stock trading on
the New York Stock Exchange on the immediately prior Business Day. The
highest and lowest prices for the shares of Common Stock shall be those
published in the edition of
The Wall Street Journal
or any successor
publication reporting stock quotations for such day.
"Fee" means the amount of compensation (including, without limitation,
Annual Fees and Meeting Fees) set by the Board from time to time as payable
to a Director in each Plan Year on the terms and subject to the conditions
stated in this Plan.
"First Component" means the portion of the Fee payable to a Director that
accounts for at least one-half of the Fee and at the Director's option,
up to the full amount of the Fee and that is payable in Shares and may
be deferred by crediting Units to a Unit Account maintained for the Director.
"Interest Rate" means the annual rate at which interest is deemed to accrue
on the amounts credited in a Deferral Account for a Director. The Interest
Rate shall be set by the Board or a committee of the Board and may be changed
from time to time as necessary to reflect prevailing interest rates.
"Meeting Fee" means the amount of compensation, other than the Annual Fee,
set by the Board from time to time as payable to a Director (including,
without limitation, fees for attending meetings of the Board) on the terms
and subject to the conditions stated in this Plan, subject to reduction
for any portion thereof that a Director elects to defer as provided in
this Plan.
"Plan Quarter" the three month period beginning each September 1, December
1, March 1, and June 1.
"Plan Year" means each 12-month period beginning September 1 of each year.
"Second Component" means the balance, if any of the Fee (after reduction
for the First Component) payable to a Director in cash.
"Shares" means shares of Common Stock.
"Special Ledger" means a record established and maintained by AutoZone
in which the Deferral Accounts and Unit Accounts for the Directors, if
any, and the Units and/or amounts credited to the accounts, are noted.
"Termination Date" means the date on which a Director ceases to be a member
of the Board.
"Unit Account" shall mean the account maintained in the Special Ledger
for a Director to which Units allocable to the Director under this Plan
are credited.
"Unit" means a credit in a Director Unit Account representing one Share.
SECTION 3. FEE.
During each Plan Year in which a person is a Director and is entitled to
receive the Fee during the existence of the Plan, the Director will be
eligible to receive the Fee payable as follows:
(a) The First Component shall be (1) payable to the Director in Shares,
or (2) at the Director's option, deferred by having AutoZone credit Units
to a Unit Account maintained for the Director as provided in this Plan,
and
(b) The Second Component, if any, shall be payable to the Director in cash.
The Annual Fee will be payable in advance in equal quarterly installments
on each Compensation Date unless deferred as provided herein. Each quarterly
installment will consist of one-fourth of the First Component and one-fourth
of the Second Component, if any, for each Director. The Meeting Fee will
be payable or deferred in arrears on each Compensation Date. Each quarterly
installment will consist of the Meeting Fees earned for Board meetings
attended by the Director in the Plan Quarter immediately preceding the
Compensation Date.
SECTION 4. ELECTIONS.
With respect to each Plan Year, each Director who was a Director during
the prior Plan Year must elect by no later than August 31 of the prior
Plan Year how he or she will receive the Fee for the Plan Year. Each Director
who becomes a Director during a Plan Year must elect within 30 days after
becoming a Director how he or she will receive the Fee for such Plan Year.
Each election must be made by the Director filing an election form with
the Secretary of AutoZone. If a Director does not file an election form
for each Plan Year by the specified date the Director will be deemed to
have elected to receive and defer the Fee in the manner elected by the
Director in his or her last valid election or, if there had been no prior
election, will be deemed to have elected to receive all of the Fee in Shares.
Any election to defer a portion of the Fee made by a person who becomes
a Director during a Plan Year will be valid as to the portion of the Fee
received after the election is filed with the Secretary of AutoZone. When
an election is made for a Plan Year, the Director may not revoke or change
that election with respect to such Plan Year.
SECTION 5. THE SHARES.
If a Director elects (or is deemed to elect) to receive Shares in payment
of all or any part of the Director's Fee, the number of Shares to be issued
on any Compensation Date shall be a whole number of shares (truncating
any fractional share) nearest to one-fourth of the amount of the Fee to
be paid in Shares for the Plan Year divided by the Fair Market Value of
a Share as of the Compensation Date. The amount of the Fee representing
a fractional share not paid in Shares shall be paid in cash. Any Shares
issued under this Plan will be registered under the Securities Act of 1933,
as amended, and, so long as shares of the Common Stock are listed for trading
on the New York Stock Exchange, will be listed for trading on the New York
Stock Exchange.
SECTION 6. THE UNITS.
If a Director defers any portion of the Fee in the form of Units, then
on each Compensation Date, AutoZone will credit a Unit Account maintained
for the Director with a number of Units (rounded to the nearest one-tenth)
equal to (1) one-fourth of the dollar amount of the Fee that the Director
has elected to defer in the form of Units for the Plan Year divided by
(2) the Fair Market Value of a Share as of the Compensation Date. AutoZone
will credit to the Director's Unit Account on the date any dividend is
paid on the Common Stock, an additional number of Units equal to (i) the
aggregate amount of the dividend that would be paid on a number of Shares
equal to the number of Units credited to the Director's Unit Account on
the date the dividend is paid divided by (ii) the Fair Market Value of
a Share as of that date.
SECTION 7. DISTRIBUTION OF THE AMOUNTS IN A UNIT ACCOUNT.
Upon the Termination Date for a Director, such Director shall be entitled
to receive that whole number of Shares (truncating any fractional share)
with which the Director's Unit Account is credited. Subject to Section
11 hereof, the Director may elect to receive such Shares in any one of
the following forms:
(a) a single lump-sum issuable as soon as practicable after the Termination
Date; or
(b) a single lump-sum issuable as soon as practicable after the fifth anniversary
of the Termination Date; or
(c) a single lump-sum issuable as soon as practicable after the tenth anniversary
of the Termination Date; or
(d) two (2) equal installments, one of which shall be issuable as soon
as practicable after the fifth anniversary of the Termination Date and
the other of which shall be issuable as soon as practicable after the tenth
anniversary of the Termination Date, as provided below.
If the Director has elected to receive the Shares in the manner set forth
in (d) above (i.e., in two equal installments), one-half of the Shares
credited to the Unit Account as of the Termination Date will be issued
to the Director for each installment plus additional Shares equal to the
Units credited to the Unit Account respecting dividends paid on the Common
Stock since the prior installment was made (or, in the case of the first
installment, since the Termination Date). Any fractional share amount shall
be valued at the Fair Market Value and be paid in cash at the date of distribution
of the Shares.
SECTION 8. CONVERSION OF UNIT ACCOUNT.
A Director who has a Unit Account may convert all (but not less than all)
of the Unit Account into a Deferral Account, provided that such Director
delivers notice to AutoZone of such election to convert at least 12 full
months prior to the Director's Termination Date. The cash amount to be
credited to the Director's Deferral Account upon the conversion shall equal
(i) the number of Units credited to his or her Unit Account so converted
multiplied by (ii) the Fair Market Value of a Share on the date of the
Director's election to convert.
Any election to convert must be made on a form prescribed by AutoZone and
filed with its Secretary. The conversion of a Unit Account into a Deferral
Account shall be deemed to occur on the date of the Director's election,
except that, unless the Board provides otherwise, any portion of a Unit
Account granted within six months of the date of election shall be converted
to a Deferral Account six months and one day from the date in which the
Units representing such portion were credited to the Unit Account.
A Deferral Account shall accrue interest from the effective date of conversion
at the Interest Rate, accrued and compounded quarterly.
SECTION 9. DISTRIBUTION OF THE AMOUNTS IN A DEFERRAL ACCOUNT.
Upon the Termination Date for a former Director, such former Director shall
be entitled to receive an amount of cash equal to the amount with which
the former Director's Deferral Account is credited. Subject to Section
11 hereof, the former Director may elect to receive such cash in any one
of the following forms:
(a) a single lump-sum payable as soon as practicable after the Termination
Date; or
(b) a single lump-sum payable as soon as practicable after the fifth anniversary
of the Termination Date; or
(c) a single lump-sum payable as soon as practicable after the tenth anniversary
of the Termination Date; or
(d) two (2) equal installments, one of which shall be payable as soon as
practicable after the fifth anniversary of the Termination Date and the
other
of which shall be payable as soon as practicable after the tenth anniversary
of the Termination Date, as provided below.
If the former Director has elected to receive the cash in the manner set
forth in (d) above (i.e., in two equal installments), one-half of the amount
credited to the Deferral Account as of the Termination Date will be paid
in each installment, along with the additional amount credited to the Deferral
Amount as interest (at the Interest Rate) since the prior installment was
paid (or, in the case of the first installment, since the Termination Date).
SECTION 10. DISTRIBUTION IN THE EVENT OF A DIRECTOR'S DEATH.
With respect to a Director's Unit Account (or, if applicable, the Director's
Deferral Account), each Director who defers any part of the Fee payable
to him or her in any Plan Year may designate one or more beneficiaries
which may be changed from time to time upon written notice to AutoZone.
The designation of a beneficiary must be made by filing with AutoZone's
Secretary a form prescribed by AutoZone. If no designation of a beneficiary
is made, any deferred benefits under this Plan will be paid to the Director's
or former Director's estate. If a Director dies while in office or a former
Director dies during the installment payment period, AutoZone will issue
the Shares that are issuable (or if applicable, pay the amounts of cash
that are payable) to the Director or former Director in the manner set
forth in the most recent timely election filed by such Director or former
Director, or if no such election has been filed, in a single lump-sum as
soon as practicable after the death of the Director or the former Director.
SECTION 11. TIMING OF ELECTION TO RECEIVE DEFERRED BENEFITS IN INSTALLMENTS.
If a Director desires to have his Unit Account and/or Deferral Account
distributed in installments as provided in Section 7(d) or Section 9(d)
hereof, the election to receive payments in installments must be delivered
to the Secretary of AutoZone at least 12 full months prior to the Director's
Termination Date. Any such election delivered by the Director within the
12-month period ending on the Director's Termination Date shall be of no
force or effect. If a Director has filed more than one timely election,
the most recent such election shall govern and all prior elections shall
be superseded and shall be of no force or effect.
SECTION 12. HOLDING PERIOD
Notwithstanding anything contained herein, unless the Board provides otherwise,
(i) no Shares issued hereunder may be sold, assigned or otherwise transferred
until at least six months and one day have elapsed from the date on which
such Shares were issued, and (ii) no right or interest of a Director or
a former Director in Units credited his or her Unit Account hereunder (including
Units credited to such Unit Account respecting dividends paid on the Common
Stock) shall be sold, assigned or otherwise transferred until at least
six months and one day have elapsed from the date on which such Units were
credited to such Unit Account, except by will or in accordance with the
laws of decent and distribution.
SECTION 13. HARDSHIP WITHDRAWALS.
Prior to the complete distribution of a Director's Unit Account and/or
Deferral Account, such Director may request a withdrawal of any portion
of his or her Unit Account or Deferral Account in an amount sufficient
to meet a "hardship." For purposes of this Plan, "hardship" shall mean
a demonstrated and severe financial hardship resulting from any one or
more of the following: (i) sudden or unexpected illness or accident of
the Director or of a dependent (as defined in Section 152(a) of the Internal
Revenue Code of 1986, as amended) of the Director, (ii) a loss of the Director's
property due to casualty, or (iii) any other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the Director's
control; in each case only to the extent that the hardship is not relieved
(a) through reimbursement or compensation by insurance or otherwise, (b)
by liquidation of the Director's assets (to the extent that such liquidation
does not itself cause a "hardship"), or (c) by cessation of deferrals under
the Plan. The Board, in its sole and absolute discretion, shall determine
the existence of a bona fide hardship based on non-discriminatory procedures,
taking into account any then applicable rulings or regulations from the
Internal Revenue Service. The standards established by the Board for determining
the existence of hardship shall be uniformly applied to all Directors who
request such a withdrawal and the Board's decision with respect to each
such request shall be final.
An approved hardship withdrawal shall be paid to the Director in cash as
soon as practicable after the approval. In the event that part or all of
the withdrawal is to be made from a Unit Account, a number of Units equal
to (i) the amount of the hardship withdrawal required to be made from the
Unit Account, divided by (ii) the Fair Market Value of a Share on the date
of approval, shall be converted into cash and paid to the Director as provided
herein, and the balance of the Unit Account shall be reduced accordingly.
SECTION 14. WITHHOLDING FOR TAXES.
AutoZone will withhold the amount of cash and Shares necessary to satisfy
AutoZone's obligation to withhold federal, state, and local income and
other taxes on any benefits received by the Director, the former Director
or a beneficiary under this Plan
SECTION 15. NO TRANSFER OF RIGHTS UNDER THE PLAN.
A Director or former Director shall not have the right to transfer, grant
any security interest in or otherwise encumber rights he or she may have
under this Plan, any Deferral Account or any Unit Account maintained for
the Director or former Director or any interest therein. No right or interest
of a Director or a former Director in a Deferral Account or a Unit Account
shall be subject to any forced or involuntary disposition or to any charge,
liability, or obligation of the Director or former Director, whether as
the direct or indirect result of any action of the Director or former Director
or any action taken in any proceeding, including any proceeding under any
bankruptcy or other creditors' rights law. Any action attempting to effect
any transaction of that type shall be null, void, and without effect.
SECTION 16. UNFUNDED PLAN.
This Plan will be unfunded for federal tax purposes. The Deferral Accounts
and the Unit Accounts are entries in the Special Ledger only and are merely
a promise to make payments in the future. AutoZone's obligations under
this Plan are unsecured, general contractual obligations of AutoZone.
SECTION 17. AMENDMENT AND TERMINATION OF THE PLAN.
Unless sooner terminated, this Plan shall expire on December 31, 2012,
so that no benefits may be granted hereunder after that date. Except as
otherwise provided in this Section 17, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board. However, without approval of AutoZone's stockholders
given within 12 months before or after the action by the Board, no action
of the Board may increase the limit imposed in Section 19 on the maximum
number of shares which may be issued under the Plan (other than adjustments
under Section 20), change the type of equity compensation paid under the
plan, extend the term of the plan, materially change the method of determining
the price of equity compensation granted under the plan, materially modify
the definition of "Director" under the Plan, or modify the Plan in a manner
requiring stockholder approval under the listed company rules of the New
York Stock Exchange, and no action of the Board may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule.
An amendment or the termination of this Plan will not adversely affect
the right of a Director, former Director, or Beneficiary to receive Shares
issuable or cash payable at the effective date of the amendment or termination
or any rights that a Director, former Director, or a Beneficiary has in
any Deferral Account or Unit Account at the effective date of the amendment
or termination. If the Plan is terminated, however, AutoZone may, at its
option, accelerate the payment of all deferred and other benefits payable
under this Plan.
SECTION 18. GOVERNING LAW.
This Plan shall be administered, interpreted and enforced under the internal
laws of the State of Nevada without regard to the conflicts of law rules
thereof. AutoZone has the right to interpret this Plan, and any interpretation
by AutoZone shall be conclusive as to the meaning of this Plan.
SECTION 19. SHARES SUBJECT TO THE PLAN.
AutoZone shall reserve 100,000 Shares for issuance under the Plan. Shares
issued under the Plan may be authorized but unissued shares or treasury
shares. No Plan participant shall have any of the rights or privileges
of an AutoZone stockholder in respect to any of the Shares unless and until
certificates representing such Shares have been issued by AutoZone.
SECTION 20. CORPORATE EVENTS.
(a) Subject to subsection (d) below, in the event that the Committee determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin- off, combination, repurchase, liquidation, dissolution,
or sale, transfer, exchange or other disposition of all or substantially
all of the assets of AutoZone (including, but not limited to, a Corporate
Transaction, as defined below), or exchange of Common Stock or other securities,
issuance of warrants or other rights to purchase Common Stock or other
securities of AutoZone, or other similar corporate transaction or event,
in the Committee's sole discretion, affects the Common Stock such that
an adjustment is determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of the number and kind of shares
of Common Stock (or other securities or property) which may be granted
under the Plan (including, but not limited to, adjustments of the limitations
in Section 19 on the maximum number of shares which may be issued under
the Plan, and adjustments to the number and kind of shares of Common Stock
(or other securities or property) that may be paid upon the distribution
of Units).
(b) For purposes of the Plan, the term "Corporate Transaction" shall mean
any of the following stockholder-approved transactions to which AutoZone
is a party:
(ii) the sale, transfer, exchange or other disposition
of all or substantially all of the assets of AutoZone, in complete liquidation
or dissolution of AutoZone in a transaction not covered by the exceptions
to clause (i) above; or
(iii) any reverse merger in which AutoZone is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of AutoZone's outstanding securities
are transferred or issued to a person or persons different from those who
held such securities immediately prior to such merger.
SECTION 21. ADMINISTRATION.
(a) The Plan shall be administered by the Committee which shall consist
of two or more Directors, appointed by and holding office at the pleasure
of the Board. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies on the Committee shall
be filled by the Board.
(b) The Committee shall have the power to interpret the Plan 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.
(c) 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) All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by AutoZone.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, and AutoZone 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 on each
Director participating in the Plan, AutoZone 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, and all
members of the Committee shall be fully protected by AutoZone with respect
to any such action, determination or interpretation.
SECTION 22. STOCKHOLDER APPROVAL
AutoZone shall take such actions with respect to the Plan as may be necessary
to satisfy the stockholder approval requirements of the New York Stock
Exchange. This Plan shall be submitted for the approval of AutoZone's stockholders
within twelve months after the date of the Board's adoption of this Plan.
Fees may not be paid in Common Stock under the Plan prior to such stockholder
approval. This Plan shall become effective immediately upon approval by
the stockholders.
Relentlessly creating the most exciting Zone for
vehicle solutions!
Charles M. Elson
,
42,
has been a Director since 2000. He has been the Edgar S. Woolard, Jr. Professor
of Corporate Governance at the University of Delaware since 2000. He is
also of counsel to Holland & Knight LLP. Previously, he had been a
Professor at the Stetson University College of Law since 1990. Mr. Elson
is also a Director of Alderwoods Group, Inc., Nuevo Energy Company, Sunbeam
Corporation, and the Investor Responsibility Research Center.
Marsha J. Evans,
55, was elected
a Director in February 2002. She was named the President and Chief Executive
Officer of The American Red Cross in August 2002. Previously, she was National
Executive Director of the Girl Scouts of the USA since 1998. Prior to that
time Ms. Evans was a Rear Admiral of the U.S. Navy and Superintendent of
the Naval Postgraduate School in Monterey, California since 1995. She served
in the U.S. Navy for 29 years. She is also a Director of The May Department
Stores Company and Weight Watchers International, Inc.
Earl G. Graves, Jr.,
40, was
elected a Director in February 2002. He has been the President and Chief
Operating Officer for Earl G. Graves Publishing Company, publisher of Black
Enterprise magazine, since 1998 and has been employed by the same company
in various capacities, since 1988
.
N. Gerry House
,
55,
has been a Director since 1996. She has been the President and Chief Executive
Officer of the Institute for Student Achievement since 2000. Previously,
she was the Superintendent of the Memphis, Tennessee City School System
since 1992.
J.R. Hyde, III
,
59,
has been a Director since 1986. He has been the President of Pittco, Inc.,
an investment company, since 1989 and has been the Chairman of GTx, Inc.,
a biotechnology, pharmaceutical company since 2000. Mr. Hyde had been AutoZone's
Chairman from 1986 to 1997 and Chief Executive Officer from 1986 to 1996.
He had also been Chairman and Chief Executive Officer of Malone & Hyde,
AutoZone's former parent company, until 1988. Mr. Hyde is also a Director
of FedEx Corporation.
James F. Keegan
,
70,
has been a Director since 1991. He has been the Chairman of Adams Keegan,
Inc., an employee leasing firm, since 1997. Prior to that time, he was
Managing Director of Weibel Huffman Keegan, Inc., an investment management
firm. Mr. Keegan is a former Chairman of the National Association of Securities
Dealers (NASD), former Chairman of the Board of Directors of NASDAQ, Inc.,
and a co-founder of Morgan Keegan & Co., Inc.
Edward S. Lampert
,
40,
has been a Director since 1999. He has been Chief Executive Officer of
ESL Investments, Inc., a private investment firm, since 1988. He is also
a Director of AutoNation, Inc.
W. Andrew McKenna
,
56, has been a Director since 2000. He is a private investor. Until his
retirement in 1999, he had held various positions with The Home Depot,
Inc., including Senior Vice President-Strategic Business Development from
1997 to 1999; President, Midwest Division from 1994 to 1997; and Senior
Vice President-Corporate Information Systems from 1990 to 1994. He was
also President of SciQuest.com, Inc. in 2000.
Steve Odland
,
44,
has been Chairman, Chief Executive Officer, and a Director since January
2001, and President since May 2001. Previously, he was an executive with
Ahold USA from 1998 to 2000, including serving as President and CEO of
Tops Markets, Inc. Mr. Odland was President of the Foodservice Division
of Sara Lee Bakery from 1997 to 1998. He was employed by The Quaker Oats
Company from 1981 to 1996 in various executive positions.
Corporate Governance
Corporate
Governance Principles
During fiscal year 2002, the Audit Committee met eight times and consisted
of: Mr. Keegan (Chairman), Mr. Elson (appointed December 2001), Mr. Graves
(appointed April 2002), Mr. Lampert (until December 2001), and Mr. McKenna.
The Audit Committee consists entirely of independent directors under the
standards of AutoZone's Corporate Governance Principles, Item 303.01(B)(2)(a)
of Regulation S-K, and the listing standards of the New York Stock Exchange.
The Compensation Committee, consisting of Mr. Lampert (Chairman), Ms. Evans
(appointed April 2002), Dr. House, and Mr. McKenna held five meetings during
fiscal year 2002.
During fiscal year 2002, the Nominating and Corporate Governance Committee,
consisting of Mr. Elson (Chairman) and Mr. Keegan, held six meetings.
Name and Position
by options
Steve Odland, Chairman, President,
CEO & Director
Charles M. Elson, Director
Marsha J. Evans, Director
Earl G. Graves, Jr., Director
N. Gerry House, Director
J.R. Hyde, III, Director
James F. Keegan, Director
Edward S. Lampert, Director
W. Andrew McKenna, Director
Executive Group
Non-Executive Director Group
Non-Executive Officer Employee
Group
Who is the administrator for the option plan?
When do the stock options expire?
Who can amend the option plan?
When does the stock option plan expire?
In the event of a corporate transaction where AutoZone is not the surviving
entity, a sale of substantially all of our assets, or a reverse merger
resulting in the change in control of AutoZone, then the options granted
under the option plan terminate unless the compensation committee provides
for other terms for the options.
Name and Position
Stock Issued
Issued
Paid ($)
Steve Odland, Chairman, President,
CEO & Director
Charles M. Elson, Director
Marsha J. Evans, Director
Earl G. Graves, Jr., Director
N. Gerry House, Director
J.R. Hyde, III, Director
James F. Keegan, Director
Edward S. Lampert, Director
W. Andrew McKenna, Director
Michael W. Michelson, Director
Executive Group
Non-Executive Director Group
Non-Executive Officer Employee
Group
Are benefits under the compensation plan transferable?
Who can amend the compensation plan?
Who administers the compensation plan?
We did not engage Ernst & Young LLP to provide advice regarding financial
information systems design and implementation during the 2002 fiscal year.
Charles M. Elson
Earl G. Graves, Jr.
W. Andrew McKenna
as of October 15, 2002
Name of Beneficial Owner
Percentage
1
Steve Odland
2
Andrew M. Clarkson
3
Charles M. Elson
4
Marsha J. Evans
5
Earl G. Graves, Jr.
6
N. Gerry House
7
J.R. Hyde, III
8
James F. Keegan
9
Edward S. Lampert
10
W. Andrew McKenna
11
Michael W. Michelson
12
Bruce G. Clark
Harry L. Goldsmith
13
Michael E. Longo
14
Robert D. Olsen
15
All current directors and executive
officers as a group (20
persons)
16
27.7%
*Less than 1%.
Summary Table
The following table sets forth certain information as of
August 31, 2002, with respect to compensation plans under which shares
of AutoZone Common stock may be issued.
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
Equity compensation plans not
approved by securities holders
Total
as of October 15, 2002
Name and Address
of Beneficial Owner
Percentage
1
ESL Investments, Inc.
2
One Lafayette Place
Greenwich, CT 06830
FMR Corp.
3
82 Devonshire Street
Boston, MA 02109
Putnam Investment Management,
Inc.
4
One Post Office Square
Boston, MA 02109
1
Assumes shares deemed beneficially owned by AutoZone under forward
purchase agreements are not outstanding.
Compensation
Name andPrincipal
Position
Compensation
5
Steve Odland
6
Chairman, President,
& Chief Executive Officer
Michael E. Longo
Senior Vice President
Operations, Commercial &
ALLDATA
Robert D. Olsen
7
Senior Vice President
Mexico & Store Development
Harry L. Goldsmith
Senior Vice President,
General Counsel & Secretary
Bruce G. Clark
Senior Vice President
& Chief Information
Officer
Securities
Underlying
Options/SARs Granted (#)
2
Options/SARs
Granted to
Employees in Fiscal Year
or Base
Price ($/Sh)
Date
Valuem at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
1
Steve Odland
Michael E. Longo
Robert D. Olsen
Harry L. Goldsmith
Bruce G. Clark
1
The 5% and 10% appreciation rates have been arbitrarily set by the
Securities and Exchange Commission and do not forecast actual stock price
appreciation.
Underlying Unexercised
Options/SARs
at FY-End
(#)
In-the-Money Options/SARs
at FY-End ($)
Shares Acquired
on Exercise (#)
Value
Realized ($)
Steve Odland
Michael E. Longo
Robert D. Olsen
Harry L. Goldsmith
Bruce G. Clark
Pension Plan Table
This table shows the estimated annual benefits payable upon retirement
at age 65 in 2002 under our pension plan. Sixty monthly payments are guaranteed
after retirement.
Name
Service
Steve Odland
Michael E. Longo
Robert D. Olsen
Harry L. Goldsmith
Bruce G. Clark
Marsha J. Evans
N. Gerry House
W. Andrew McKenna
AutoZone, Inc.
Peer Group
S&P 500 Index
Mr. Goldsmith has an employment agreement providing that he is employed
by AutoZone as Senior Vice President, General Counsel, and Secretary at
a minimum base salary of $216,000 and a minimum bonus eligibility of 60%
of base salary. Mr. Longo has an employment agreement providing that he
is employed by AutoZone as a Senior Vice President at a minimum base salary
of $225,000 and a minimum bonus eligibility of 50% of base salary. Mr.
Olsen has an employment agreement providing that he is employed by AutoZone
as a Senior Vice President at a minimum base salary of $285,000 and a minimum
bonus eligibility of 60% of base salary. Mr. Clark had an employment agreement
providing that he is employed by AutoZone as a Senior Vice President at
a minimum base salary of $250,000 and a minimum bonus eligibility of 50%
of base salary. Mr. Clark's employment agreement expired on September 1,
2002. All minimum salaries and bonus are subject to increase by the Compensation
Committee. Other than Mr. Clark's agreement, all agreements continue until
terminated either by the executive or by us. If an agreement is terminated
by us for cause, or by the executive for any reason, the executive will
cease to be an employee, and will cease to receive salary, bonus, and other
benefits. If an agreement is terminated by us without cause, Mr. Goldsmith
and Mr. Longo will remain employees for three years after the termination
date, Mr. Olsen will remain an employee for two years after the termination
date, Mr. Clark would have remained an employee for one year after the
termination date, and each will continue to receive his then-current salary
and other benefits of an employee, and will receive a prorated bonus for
the fiscal year in which he was terminated, but no bonuses thereafter.
If an executive officer is terminated from his position by us or by the
executive for reasons other than a change in control, then the executive
will be prohibited from competing against AutoZone for the period of time
after the termination date that he remains an employee. "Cause" is defined
in each agreement as the willful engagement by the executive in conduct
which is demonstrably or materially injurious to AutoZone, monetarily or
otherwise. "Change in control" in each agreement means either the acquisition
of a majority of our voting securities by or the sale of substantially
all of our assets to a non-affiliate of the company.
Memphis, Tennessee
By the order of the Board of Directors,
Secretary
November 1, 2002
APPENDIX SECTION
APPENDIX A
Core Competencies of the Board as a Whole
Changes in Professional Responsibility
Outside Directorships
APPENDIX B
Membership
Each audit committee
member shall have a minimum level of financial literacy and at least one
member should possess accounting or financial expertise, as the Board reasonably
determines such qualification in its business judgement.
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 meet in private session with the internal auditors
and the independent auditor to discuss the process and progress of their
work.
C.
The audit committee shall report committee actions to
the Board and may make appropriate recommendations.
D.
The 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 conduct investigations, to resolve disagreements, if any, between
management and the independent auditor, or 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 are ultimately
accountable to the Board and the audit committee.
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..
Upon completion of the review, the audit committee shall retain an independent
auditor on behalf of and for AutoZone, shall approve the fees for the audit,
and shall recommend the selection of the auditors to AutoZone's stockholders
for ratification.
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 process. 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 review the effectiveness of
AutoZone's internal audit process and adequacy of staff and resources;
approve the appointment of AutoZone's senior internal audit executive;
approve the retention and compensation of any firm retained for outsourced
internal audit services; and review the cooperation afforded or limitations,
if any, imposed by management in the conduct of the internal auditing.
The senior internal audit executive shall not be terminated or reassigned
without the consent of the audit committee.
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 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 committee 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 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 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 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:
In making its consideration for approval, the
Audit Committee shall consider:
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:
Consultants
(a) The Plan shall be administered by the Compensation Committee of the
Board (the "Committee") which shall consist of two or more directors who
are Non-Employee Directors, appointed by and holding office at the pleasure
of the Board. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies on the Committee shall
be filled by the Board.
SECTION 5. GRANT OF OPTIONS.
(i) the date on which the Optionee ceases to be a Director
of the Company; or
(i) the expiration of ten years from the date of grant;
(i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Options may be granted
under the Plan (including, but not limited to, adjustments of the limitations
in Section 2 on the maximum number and kind of shares which may be issued
under the Plan);
(i) 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 Options are assumed by the successor entity;
APPENDIX D
PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
I hereby appoint Harry L. Goldsmith and Donald R. Rawlins, and each of
them, as proxies, with full power of substitution to vote all shares of
common stock of AutoZone, Inc., which I would be entitled to vote at the
Annual Meeting of AutoZone, Inc., to be held at The Waldorf - Astoria,
301 Park Avenue, New York, New York, on Thursday, December 12, 2002, at
8 a.m., EST, 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.
AUTOZONE, INC.
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 proposals 2, 3 and 4.
Signature: __________________________
Date:______________ Signature: ________________________
Date: ________________
AUTOZONE, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
SIDE
SIDE
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
Vote by Telephone
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Vote By Internet
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your vote is immediately
confirmed and posted.
Follow
these four easy steps:
Follow
these four easy steps:
1.
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accompanying Proxy Statement and Proxy Card.
1.
Read the
accompanying Proxy Statement and Proxy Card.
2.
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toll-free number
1-877-PRX-VOTE (1-877-779-8683).
2.
Go to the
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3.
Enter your
Voter Control Number located on your Proxy Card above your name.
3.
Enter your
Voter Control Number located on your Proxy Card above your name.
4.
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