<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AUTOZONE, INC.
(Name of Registrant as Specified in Its Charter)
not applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies: na
(2) Aggregate number of securities to which transaction applies: na
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how its was determined): na
(4) Proposed maximum aggregate value of transaction: na
(5) Total fee paid: na
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: na
(2) Form Schedule or Registration Statement No.: na
(3) Filing Party: na
(4) Date Filed: na
<PAGE>
[LOGO OF AUTOZONE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 1996
TO THE STOCKHOLDERS OF AUTOZONE, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AutoZone,
Inc. (the "Company") will be held at the Company's principal executive
offices, 123 South Front Street, Memphis, Tennessee 38103 on Thursday,
December 12, 1996, at 10 a.m. (Central Standard Time) for the following
purposes:
1. To elect eleven directors for terms of one year each and until their
successors are duly elected and qualified;
2. To approve the 1996 Stock Option Plan;
3. To ratify the appointment of Ernst & Young LLP as independent
certified public accountants for fiscal year 1997; and
4. To transact other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on October 30, 1996,
as the record date for determining the stockholders entitled to notice of, and
to vote at, the meeting and at any adjournment thereof.
You are cordially invited to attend this meeting.
By order of the Board of Directors
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
November 8, 1996
IMPORTANT
PLEASE COMPLETE, DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE>
AUTOZONE, INC.
123 SOUTH FRONT STREET
MEMPHIS, TENNESSEE 38103
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1996
This Proxy Statement and the accompanying proxy are being furnished to
stockholders of AutoZone, Inc. (the "Company" or "AutoZone") in connection
with the solicitation of the enclosed proxy by the Board of Directors of
AutoZone for use at the Annual Meeting of Stockholders of the Company to be
held at the Company's principal executive offices, 123 South Front Street,
Memphis, Tennessee 38103 on December 12, 1996, at 10 a.m. (Central Standard
Time) and at any adjournment thereof. This Proxy Statement and the
accompanying proxy are being first mailed on or about November 8, 1996.
PROXY
When the enclosed proxy is executed and returned, the shares it represents
will be voted at the Annual Meeting and at any adjournment thereof as directed
by the stockholder executing the proxy, unless it is earlier revoked. If an
executed proxy gives no directions concerning any particular matter acted upon
at the Annual Meeting or at any adjournment thereof, the shares represented by
the proxy will be voted in favor of the matters discussed herein, and in the
best judgment of the proxyholder on any other matter that may properly come
before the stockholders for a vote. Any stockholder executing and delivering
the proxy may revoke it at any time prior to a vote on a matter by the due
execution of another proxy bearing a later date or by written notification to
the Secretary of the Company. Stockholders who are present in person at the
Annual Meeting may revoke their proxy and vote in person if they so desire.
Proxies reflecting broker non-votes will be counted as present for purposes of
a quorum, but not be counted as either voting for or against any proposal.
Abstentions will be included in tabulations of the votes cast on proposals
presented (other than the election of Directors) in the same manner as votes
cast against such proposals.
SOLICITATION OF PROXIES
This solicitation of proxies is being made by the Board of Directors of the
Company and the solicitation expenses will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made in person or by telephone, facsimile or electronic communication
by officers of the Company. The Company expects to reimburse brokerage houses,
banks, and other fiduciaries for reasonable expenses of forwarding proxy
materials to beneficial owners.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on October 30, 1996, the Company had outstanding
150,298,667 shares of Common Stock. Each share of Common Stock entitles its
owner to one vote upon each matter to come before the Annual Meeting. Only
stockholders of record at the close of business on Wednesday, October 30,
1996, will be entitled to vote at the Annual Meeting and at any adjournment
thereof.
The following table sets forth certain information regarding the beneficial
ownership of AutoZone's outstanding Common Stock as of October 21, 1996, by
(i) any person or group known by the Company to be the beneficial owner of
more than five percent of the Company's common stock, (ii) each of AutoZone's
directors,
1
<PAGE>
(iii) each of the executive officers named in the Summary Compensation Table,
and (iv) all directors and executive officers of AutoZone as a group. Except
as indicated by the notes to the following table, the holders listed below
have sole voting power and investment power over the shares beneficially held
by them and the beneficial ownership is direct.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF
OCTOBER 21, 1996 (1)
------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------------- ----------
<S> <C> <C>
KKR Associates (2)..................................... 19,908,488 13.2%
9 West 57th Street
New York, NY 10019
J.R. Hyde, III (3)..................................... 12,379,946 8.2%
123 S. Front Street
Memphis, TN 38103
The Prudential Insurance Company of America (4)........ 9,236,278 6.1%
Prudential Plaza
Newark, NJ 07102
Provident Investment Counsel, Inc. (5)................. 8,426,972 5.6%
300 North Lake Avenue
Pasadena, CA 91101
J.C. Adams, Jr. (6).................................... 1,187 *
Andrew M. Clarkson (7)................................. 578,320 *
N. Gerry House......................................... 0 --
Thomas S. Hanemann (8)................................. 687,841 *
James F. Keegan (9).................................... 2,500 *
Henry R. Kravis (2) (10)............................... -- --
Robert I. MacDonnell (2) (11).......................... -- --
Michael W. Michelson (2)............................... -- --
John E. Moll (12)...................................... 998,448 *
George R. Roberts (2) (13)............................. -- --
Ronald A. Terry (14)................................... 5,128 *
Timothy D. Vargo (15).................................. 8,415 *
Robert J. Hunt (16).................................... 100,000 *
All directors and executive officers as a group,
including those named above (other than as set
forth in relation to KKR Associates) (20 persons)
(17).................................................. 15,052,922 10.0%
</TABLE>
- --------
* Less than 1%
(1) For purposes of this table, "beneficial ownership" includes any shares
which such person has the right to acquire within 60 days of October 21,
1996. For purposes of computing the percentage of outstanding shares held
by each person or group of persons named above on a given date, any
security which such person or persons has the right to acquire within 60
days after such date is deemed to be outstanding, but is not deemed to be
outstanding in computing the percentage ownership of any other person.
(2) Includes (i) 10,227,594 shares (6.8%) owned of record by three limited
partnership of which KKR Associates is the sole general partner (the
"Partnerships"), and (ii) 9,680,894 shares (6.4%) owned of record by KKR
Associates. The limited partnership agreements pursuant to which the
Partnerships were organized are, by their terms, to dissolve on December
31, 1996, unless amended by all of the limited partners to extend the
term beyond such date. There can be no assurance that KKR Associates will
seek such amendments, or, if sought, that they will be approved by the
limited partners. In the event of the winding up and dissolution of the
Partnerships, KKR Associates will have sole discretion regarding the
disposition of such Common Stock, including public or private sales of
such Common Stock, the distribution of such Common Stock to the limited
partners of the Partnerships, or a combination of the foregoing. KKR
Associates in its capacity as general partner of the Partnerships may be
deemed to
2
<PAGE>
beneficially own the shares held by the Partnerships. Messrs. Kravis,
Roberts, MacDonnell, Michelson, Edward A. Gilhuly, Perry Golkin, James H.
Greene, Jr., Paul E. Raether, Clifton S. Robbins, Scott M. Stuart, and
Michael T. Tokarz, as general partners of KKR Associates, a limited
partnership, may be deemed to share beneficial ownership of the shares
owned by KKR Associates. Messrs. Kravis, Roberts, MacDonnell, and Michelson
are members of AutoZone's Board of Directors. Not included in the number of
shares listed are 140,000 shares held in trust for the family of Mr.
Raether and for which Mr. Raether's spouse acts as co-trustee, 20,000
shares held in trust for the family of Mr. Gilhuly and for which Mr.
Gilhuly acts as co-trustee, 2,000 shares owned by Mr. Golkin, 40,000 shares
owned jointly by Mr. Greene and his wife, and 40,000 shares owned by Mr.
Tokarz.
(3) Includes 170,000 shares which are held in trusts for which Mr. Hyde is
sole trustee, 400,000 shares held in a trust for which Mr. Hyde is co-
trustee, and 325,000 shares held by a charitable foundation for which Mr.
Hyde is an officer and a director and for which Mr. Hyde shares voting
and investment power. Does not include 2,000 shares owned by Mr. Hyde's
spouse.
(4) All information regarding The Prudential Insurance Company of America
("Prudential") is based upon the Schedule 13G filed by Prudential dated
February 14, 1996. Prudential may have direct or indirect voting and/or
investment discretion over 9,236,278 shares which are held for the
benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. Prudential has sole voting and investment power over 856,300
shares, shares the power to vote 7,294,078 shares, and shares the
investment power over 8,379,978 shares. Prudential's filing of the
Schedule 13G should not be construed as an admission that Prudential is,
for the purposes of Section 13 or 16 of the Securities Exchange Act, the
beneficial owner of these shares.
(5) All information regarding Provident Investment Counsel, Inc.
("Provident") is based upon the Schedule 13G filed by Provident dated
February 7, 1996. Provident is a registered investment adviser and has
direct beneficial ownership of the shares listed as a result of
Provident's discretionary authority to buy, sell, and vote shares of such
common stock for its investment advisory clients. Provident has the sole
power to vote 6,486,847 shares and no power to vote 1,940,125 shares.
Provident has sole dispositive power for all of the shares.
(6) Does not include 600 shares held in trusts for the benefit of Mr. Adams'
children.
(7) Includes 92,400 shares held by a charitable trust for which Mr. Clarkson
is sole trustee, with respect to which Mr. Clarkson disclaims beneficial
ownership. Does not include 2,000 shares owned by members of Mr.
Clarkson's immediate family nor does it include 56,000 shares held in
trusts for the benefit of certain members of Mr. Clarkson's family, with
respect to both of which Mr. Clarkson disclaims beneficial ownership.
(8) Includes 680,000 shares issuable upon exercise of stock options which are
exercisable immediately or within sixty (60) days after October 21, 1996.
(9) Does not include 400,000 shares that are held in trust for a family
member of Mr. Hyde for which Mr. Keegan is a co-trustee, with respect to
which Mr. Keegan disclaims any beneficial ownership. Does not include 800
shares owned by members of Mr. Keegan's family with respect to which Mr.
Keegan disclaims any beneficial ownership.
(10) Does not include 120,000 shares of Common Stock held by Mr. Kravis as a
trustee of an irrevocable trust created by Mr. Roberts for the benefit of
Mr. Roberts' children (the "Roberts Trust"). As co-trustee, Mr. Kravis
shares the authority to vote and dispose of the shares, but has no
economic interest in such shares. Does not include 120,000 shares of
Common Stock held in an irrevocable trust created by Mr. Kravis for the
benefit of his children with respect to which Mr. Kravis disclaims any
beneficial ownership.
(11) Does not include 120,000 shares of Common Stock held in an irrevocable
trust created by Mr. MacDonnell for the benefit of Mr. MacDonnell's
children (the "MacDonnell Trust") with respect to which Mr. MacDonnell
disclaims any beneficial ownership.
(12) Does not include 150,000 shares held by Mr. Moll's spouse with respect to
which Mr. Moll disclaims beneficial interest.
(13) Does not include 120,000 shares of Common Stock held by Mr. Roberts as a
trustee of the MacDonnell Trust. As co-trustee, Mr. Roberts shares the
authority to vote and dispose of the shares, but has no economic interest
in such shares. Does not include 120,000 shares of Common Stock held in
the Roberts Trust with respect to which Mr. Roberts disclaims any
beneficial ownership.
3
<PAGE>
(14) Does not include 12,558 shares owned by members of Mr. Terry's immediate
family.
(15) Does not include 4,635 shares owned by members of Mr. Vargo's immediate
family.
(16) Includes 2,000 shares owned by Mr. Hunt's wife.
(17) Includes 984,668 shares issuable upon exercise of stock options which are
exercisable immediately or within sixty (60) days after October 21, 1996.
PROPOSAL 1--ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of thirteen members,
each of whom is elected to serve for a term of one year. Eleven directors will
be elected at the Annual Meeting to serve until the Annual Meeting in 1997.
Henry R. Kravis and Robert I. MacDonnell, both current directors of the
Company, have decided not to stand for re-election. Proxies representing
shares of Common Stock held on the Record Date that are returned duly executed
will be voted, unless otherwise specified, in favor of the eleven nominees for
the Board of Directors named below. All nominees are members of the present
Board of Directors and were elected as directors at the 1995 Annual Meeting,
except for Messrs. Adams and Vargo, who were elected on March 2, 1996, and Dr.
House, who was elected to the Board on August 7, 1996. All nominees have
consented to serve if elected, but should any nominee be unavailable to serve
(which event is not anticipated) the persons named in the proxy intend to vote
for such substitute nominee as the Board of Directors may recommend. The
nominees shall be elected by a plurality of the votes cast in the election by
the holders of the Common Stock represented and entitled to vote at the Annual
Meeting, assuming the existence of a quorum.
Biographical and other information for each nominee, each of whom is an
incumbent director, is set forth below:
J.C. ADAMS, JR., 48--VICE CHAIRMAN, CHIEF OPERATING OFFICER, AND DIRECTOR
J.C. Adams, Jr., was elected Vice Chairman and Chief Operating Officer and a
director in March 1996. Previously, he was Executive Vice President--
Distribution since 1995. From 1990 to 1994, Mr. Adams was a co-owner of
Nicotiana Enterprises, Inc., a company primarily engaged in food distribution.
From 1983 to 1990, Mr. Adams was President of the Miami Division of Malone &
Hyde, Inc. ("Malone & Hyde") the former parent company of AutoZone. The
Company anticipates that Mr. Adams will be elected President and Chief
Operating Officer upon Mr. Hanemann's retirement on December 12, 1996.
ANDREW M. CLARKSON, 59--DIRECTOR
Andrew M. Clarkson has been a director since 1986 and is employed by the
Company as Chairman of the Finance Committee. Mr. Clarkson had been Vice
President and Treasurer of the Company in 1986, Senior Vice President and
Treasurer of the Company from 1986 to 1988, was Secretary from 1988 to 1993
and was Treasurer from 1990 to 1995. Previously Mr. Clarkson was Chief
Financial Officer of Malone & Hyde from 1983 to 1988.
THOMAS S. HANEMANN, 59--PRESIDENT AND DIRECTOR
Thomas S. Hanemann has been a director and President since 1994. He had
previously been Executive Vice President--Stores and Distribution between 1992
and 1994, and had been Senior Vice President--Stores of AutoZone since 1986.
Previously, Mr. Hanemann was President of Ike's and Super D, drug store
divisions of Malone & Hyde. Mr. Hanemann has been employed by AutoZone or
Malone & Hyde since 1974. Mr. Hanemann has expressed his intention to retire
as President of the Company as of December 12, 1996.
N. GERRY HOUSE, 49--DIRECTOR
N. Gerry House was elected to the Board of Directors on August 7, 1996. Dr.
House has been Superintendent of the Memphis, Tennessee, City Schools since
1992. Prior to that time Dr. House was Superintendent of the Chapel Hill-
Carrboro School System in North Carolina.
J.R. HYDE, III, 53--CHAIRMAN AND CHIEF EXECUTIVE OFFICER
J.R. Hyde, III, has been Chairman of the Board of Directors and Chief
Executive Officer since 1986. Previously, Mr. Hyde was Chief Executive Officer
of Malone & Hyde. Mr. Hyde has been employed by AutoZone or Malone & Hyde
since 1965. Mr. Hyde is also a director of Federal Express Corp.
4
<PAGE>
JAMES F. KEEGAN, 64--DIRECTOR
James F. Keegan has been a director since 1991. Mr. Keegan has been a
managing director of Weibel Huffman Keegan, Inc., an investment management
firm located in Memphis, Tennessee, since 1991. Previously, Mr. Keegan served
as Senior Vice President of National Bank of Commerce and as President and
Chief Executive Officer of Commerce Investment Corporation, a broker/dealer
subsidiary of National Bank of Commerce.
MICHAEL W. MICHELSON, 45--DIRECTOR
Michael W. Michelson has been a director since 1986. Mr. Michelson has been
a General Partner of KKR during the last five years. Mr. Michelson is also a
director of Fred Meyer, Inc., Owens-Illinois, Inc., Owens-Illinois Group,
Inc., Red Lion Hotels, Inc., Red Lion Properties, Inc., and Union Texas
Petroleum Holdings, Inc.
JOHN E. MOLL, 62--DIRECTOR
John E. Moll has been a director since June 1992 and from 1986 until 1988.
Mr. Moll was President and Chief Operating Officer for Fleming Companies,
Inc., from 1990 until his retirement in 1992, and was Executive Vice President
of Fleming Companies, Inc., from 1988 to 1989. Previously, Mr. Moll was
Executive Vice President--Wholesale Foods of Malone and Hyde.
GEORGE R. ROBERTS, 53--DIRECTOR
George R. Roberts has been a director since 1986. Mr. Roberts has been a
General Partner of KKR during the last five years. Mr. Roberts is also a
director of Borden, Inc., Duracell International, Inc., Flagstar Companies,
Inc., Flagstar Corporation, IDEX Corporation, K-III Communications
Corporation, Neway Anchorlok International, Owens-Illinois, Inc., Owens-
Illinois Group, Inc., Red Lion Hotels, Inc., Red Lion Properties, Inc.,
Safeway Inc., Union Texas Petroleum Holdings, Inc., Walter Industries, Inc.,
and World Color Press, Inc.
RONALD A. TERRY, 65--DIRECTOR
Ronald A. Terry has been a Director since 1995. Mr. Terry was the Chairman
of First Tennessee National Corporation, a bank holding company, and of First
Tennessee Bank National Association, a national bank, from 1973 until his
retirement in January 1996, and had been Chief Executive Officer until 1994.
Mr. Terry is also a director of BellSouth Corporation and Promus Hotels
Corporation.
TIMOTHY D. VARGO, 44--VICE CHAIRMAN AND DIRECTOR
Timothy D. Vargo was elected Vice Chairman and a director in March 1996.
Previously, he was Executive Vice President--Merchandising and Systems
Technology since 1995 and had been Senior Vice President--Merchandising since
1995. Previously, Mr. Vargo was Senior Vice President--Merchandising for
AutoZone from 1986 to 1992 and Director of Stores for AutoZone from 1984 to
1986.
Mr. Roberts and Mr. Kravis are first cousins. Mr. MacDonnell and Mr. Roberts
are brothers-in-law. Messrs. Kravis and MacDonnell have decided not to stand
for re-election.
The Company's Board of Directors held nine meetings in fiscal year 1996.
Except for Messrs. Kravis, MacDonnell, and Roberts, each director attended at
least 75% of the total number of Board of Directors and Committee meetings
during the fiscal year. The Board of Directors has established standing Audit,
Compensation and Finance Committees. The Board of Directors does not have a
nominating committee.
As directed by the Board, the Audit Committee recommends independent
auditors to be employed by the Company, confers with the auditors regarding
their audit of the Company, reviews the auditors' fees and other terms of
their engagement, considers the adequacy of internal financial controls and
the results of fiscal policies and financial management of the Company, meets
with the Company's internal auditors, reviews the auditors' examination
results, and recommends changes in financial policies or procedures as
suggested by the auditors. During fiscal year 1996, the Audit Committee,
consisting of Messrs. Keegan, Moll, and Terry, held two meetings.
5
<PAGE>
The Compensation Committee reviews new and modified executive salary and
incentive compensation programs and stock option plans, direct and indirect
compensation matters, and management's compensation actions for executive
officers and other key personnel. During fiscal year 1996 the Compensation
Committee, consisting of Messrs. Keegan, MacDonnell, and Michelson, held seven
meetings.
The Finance Committee reviews financing options for AutoZone and makes
recommendations to management and AutoZone's Board of Directors as to
appropriate financing mechanisms. Mr. Clarkson is the sole member of the
Finance Committee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and its other four most highly paid executive officers, for
the fiscal years ended August 31, 1996, August 26, 1995, and August 27, 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
--------------------------------------------- --------------------- ALL OTHER
NAME AND OTHER ANNUAL SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($)(2) COMPENSATION($)(3) OPTIONS/SARS (#)(4) ($)(5)
------------------ ---- ------------- ------------ ------------------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Hyde, III (6)...... 1996 634,675 404,755 94,048 0 5,544
Chairman and Chief 1995 601,650 451,238 0 0 5,561
Executive Officer 1994 581,300 581,300 0 0 6,354
J.C. Adams, Jr.(6)...... 1996 292,788 92,859 0 200,000 2,219
Vice Chairman and Chief 1995 134,269 67,135 0 200,000 1,625
Operating Officer
Timothy D. Vargo (7).... 1996 291,282 92,583 0 150,000 2,442
Vice Chairman 1995 84,808 63,606 0 200,000 507
Thomas S. Hanemann...... 1996 374,567 238,875 0 0 5,833
President 1995 350,000 262,500 0 0 8,104
1994 315,292 315,292 0 200,000 8,789
Robert J. Hunt (8)...... 1996 249,711 79,625 14,257 0 2,878
Executive Vice 1995 144,231 81,130 51,910 150,000 1,343
President
</TABLE>
- --------
(1) Salary for 1996 fiscal year was paid over 53 weeks. Salary for all other
years shown is paid over a 52 week fiscal year.
(2) Bonuses are shown in the fiscal year in which earned although paid in the
following fiscal year.
(3) Other Annual Compensation consists principally of amounts paid to Mr. Hyde
in 1996 for personal security services and Mr. Hunt in 1996 for
reimbursement of tax expenses, and relocation allowances paid in 1995.
(4) All options are granted pursuant to the Company's Amended and Restated
Stock Option Plan. The number of options has been adjusted for a 2-for-1
stock split in April 1994. AutoZone did not grant SARs in the 1994, 1995,
and 1996 fiscal years.
(5) All Other Compensation for fiscal year 1996 consists of term life
insurance provided for the benefit of the named executive's designated
beneficiary. Amounts deemed received by the named executive as a result of
participation in the Employee Stock Purchase Plan are included for fiscal
years 1994 and 1995, but have been omitted for fiscal year 1996 pursuant
to the regulations of the Securities and Exchange Commission.
(6) Mr. Adams was employed by the Company as an Executive Vice President in
November 1994, and was promoted to Vice Chairman and Chief Operating
Officer in March 1996. Accordingly, the amounts listed for fiscal year
1995 are for a partial fiscal year.
6
<PAGE>
(7) Mr. Vargo was employed by the Company as a Senior Vice President in
February, 1995, was promoted to Executive Vice President in June 1995, and
was promoted to Vice Chairman in March 1996. Accordingly, the amounts
listed for fiscal year 1995 are for a partial fiscal year.
(8) Mr. Hunt was employed by the Company as an Executive Vice President in
December 1994. Accordingly, the amounts listed for fiscal year 1995 are
for a partial fiscal year
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the named executive officers during the fiscal year ended August 31, 1996,
pursuant to the Company's Amended and Restated Stock Option Plan. The Company
did not grant SARs in the 1996 fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL
% OF REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS/SARS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS/SARS EMPLOYEES OR BASE FOR OPTION TERM (2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#)(1) YEAR ($/SH)(1) DATE 5% ($) 10% ($)
---- ------------ ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J.R. Hyde, III.......... 0 -- -- -- -- --
J.C. Adams, Jr.......... 200,000 12.3 27.25 03/06/06 3,427,472 8,685,894
Timothy D. Vargo........ 150,000 9.2 27.25 03/06/06 2,570,604 6,514,420
Thomas S. Hanemann...... 0 -- -- -- -- --
Robert J. Hunt.......... 0 -- -- -- -- --
</TABLE>
- --------
(1) All options vest and are exercisable in one-quarter increments on each of
the fourth, fifth, sixth and seventh years, respectively, after the date
of grant. The exercise price of all options is the fair market value of
the Company's stock at the time of the grant.
(2) These amounts represent assumed rates of appreciation for the market value
of the Company's stock from the date of the grant until the end of the
option period at rates arbitrarily set by the Securities and Exchange
Commission. They are not intended to forecast possible future appreciation
in the Company's stock and any actual gains on exercise of options are
dependent on the future performance of the Company's stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table shows the stock option exercises by the named executive
officers during the fiscal year ended August 31, 1996. In addition, this table
includes the number of exercisable and non-exercisable stock options held by
each of the named executives as of August 31, 1996. The fiscal year-end value
of "in-the-money" stock options is the difference between the exercise price
of the option and the fair market value of the Company's common stock (not
including options with an exercise price greater than the fair market value)
on August 30, 1996 (the last trading day before the fiscal year end) which was
$27.25 per share. AutoZone has never granted SARs.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.R. Hyde, III.......... 0 0 0 0 0 0
J.C. Adams, Jr.......... 0 0 0 400,000 0 425,000
Timothy D. Vargo........ 0 0 0 350,000 0 425,000
Thomas S. Hanemann...... 0 0 653,334 226,666 16,740,045 482,255
Robert J. Hunt.......... 20,000 486,700 0 150,000 0 318,750
</TABLE>
- --------
(1) "Value Realized" is the difference between the fair market value of the
underlying shares on the exercise date and the exercise price of the
option.
7
<PAGE>
PENSION PLAN TABLE
The following table shows the estimated annual benefits payable upon
retirement at age 65 and the payment of a single-life annuity to a participant
with 60 monthly payments guaranteed.
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 $25,894 $34,525 $43,157 $43,157 $43,157
120,000 31,594 42,125 52,657 52,657 52,657
140,000 37,294 49,725 62,157 62,157 62,157
160,000 40,144 53,525 66,907 66,907 66,907
180,000 40,144 53,525 66,907 66,907 66,907
</TABLE>
Remuneration includes Salary and Bonus as set forth in the Summary
Compensation Table. A participant's benefit is based on such person's average
monthly earnings for the consecutive five year period during which the
participant had his or her highest level of earnings. The benefits stated in
the table are the benefits to be received by a participant and will not be
reduced by Social Security or other amounts received by a participant.
Remuneration greater than $150,000 is not credited for benefit calculation
purposes. Years of service in excess of 25 years are not considered for
benefit calculation purposes.
The following are the current years of credited service under the Pension
Plan for the named executive officers in the Summary Compensation Table: J.R.
Hyde, III--25 (maximum); J.C. Adams, Jr.--1; Timothy D. Vargo--10; Thomas S.
Hanemann--21; and Robert J. Hunt--1.
COMPENSATION OF DIRECTORS
Directors of the Company who do not serve as executive officers receive an
annual fee of $25,000. Members of the Committees of the Board of Directors
receive $1,000 for each Committee meeting attended in person.
Messrs. Kravis, MacDonnell, Michelson, and Roberts are each a general
partner of KKR. During 1996, KKR received $271,666 for management, consulting,
and financial services provided to the Company. Such services included advice
and assistance concerning the operation, planning, and financing of the
Company. The services ended as of the end of the 1996 fiscal year. This
arrangement is also discussed under "Compensation Committee Interlocks and
Insider Participation."
Mr. Clarkson is chairman of the Finance Committee and an employee of the
Company, where he advises the Company on treasury matters and long-term
strategic planning. Mr. Clarkson was paid salary and bonus for the 1996 fiscal
year of $51,305, in addition to the other benefits ordinarily received by
employees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors ("Committee") is
composed of James F. Keegan, Michael W. Michelson, and Robert I. MacDonnell.
These persons are all non-employee directors of the Company and Mr. Michelson
and Mr. MacDonnell are general partners of KKR Associates which controls a
significant portion of the outstanding shares of the Company (see "Voting
Securities and Security Ownership of Certain Beneficial Owners and
Management").
The Committee reviews and approves executive compensation, establishes
target profit goals, makes grants of long-term incentives, and determines the
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company. The goal of the executive compensation
program is to reward executives for their performance and enhancement of
stockholder value.
8
<PAGE>
The Company's executive compensation program is designed to attract and
retain executives who are key to the long-term success of the Company and
align compensation with the attainment of the Company's business goals and the
increase in share value. The Company utilizes the same philosophy as the
Committee in establishing compensation for employees other than executive
officers.
Executive compensation consists of (1) base salary, (2) annual performance
incentives, and (3) long-term incentives. The Committee reviews executive
compensation annually and makes appropriate adjustments based on (i) Company
performance, (ii) achievement of predetermined goals, and (iii) changes in an
executive's duties and responsibilities.
Base Salary. The Committee desires that overall compensation reflect the
performance of each individual executive over time. Base salaries are set at
levels subjectively determined by the Committee to adequately reward and
retain capable executives, including the Chief Executive Officer. The
Committee considers the importance of and skills required in a particular
executive position in establishing base salary.
At the beginning of each fiscal year, the Committee reviews annual salary
recommendations made under the direction of the Chief Executive Officer for
all executive officers. The Committee makes an independent, subjective
determination of the appropriateness of each recommendation and may accept
such recommendation as made or may increase or decrease such recommendation as
the Committee deems appropriate. Neither the Company in making
recommendations, nor the Committee in approving base salary uses any
mechanical formulations or weighting of any of the factors considered.
Mr. Hyde received a base salary of $634,675 in fiscal year 1996 which
represents a 5.5% increase over fiscal year 1995, while the Company's net
income increased 20% in 1996 over fiscal 1995 net income.
Annual Performance Incentives. The Company has established the Executive
Incentive Compensation Plan (the "Plan"), which is an annual bonus plan for
executive officers that is based on the attainment by the Company of targeted
increases in pretax earnings. Under the Plan, a maximum bonus is established
for each executive officer. As a general matter, as an executive's level of
management responsibility in the Company increases, a greater portion of his
or her potential total compensation depends on the Company's performance as
measured by increases in pretax profit over the previous year. This bonus may
equal up to a maximum of 100% of an executive's base salary depending on the
position of the executive and the achievement of certain profit goals set by
the Committee. Under the Plan, no executive officer may receive in any one
fiscal year an award greater than the lesser of 100% of such individual's base
salary for that year or $2 million. No bonus is payable under the Plan unless
a predetermined minimum increase in pretax earnings is achieved. It is the
Committee's desire that a significant portion of each officer's compensation
be directly related to the performance of the Company.
In fiscal year 1996, Mr. Hyde received a bonus under the Plan of $404,755.
Long Term Incentives. In an effort to properly align the long-term interests
of the Company's management and stockholders, the Committee has a history of
awarding non-qualified stock options to all levels of management, including
individual store managers. In the past, the Company's Amended and Restated
Stock Option Plan ("Former Plan") under which the Company could award
incentive stock options and non-qualified stock options, had provided
employees with the opportunity to acquire an equity interest in the Company
and to participate in appreciation of the Company's stock. The Committee
believes that the Former Plan was important in enabling the Company to attract
and retain the highest quality managers. Under the Former Plan, the Committee
was responsible for establishing who was granted options, the term of the
options, requisite conditions for exercise, and the number of options to be
granted. Stock awards granted to any recipient are made by a subjective
determination by the Committee, upon recommendation by the Chief Executive
Officer, who considers the manager's past performance and current
responsibilities, and the number of shares previously granted to that person.
9
<PAGE>
In October 1996, the Board of Directors adopted the 1996 Stock Option Plan
("1996 Plan"), subject to the approval of the stockholders at the 1996 annual
meeting (see Proposal 2 in this Proxy Statement). The Committee believes that
the 1996 Plan will provide a vehicle to continue the Company's policy of
assuring that employees have an appropriate equity interest in the Company.
Under the 1996 Plan, the Committee can make grants of incentive stock options
and non-qualified stock options. The Committee will be responsible for
establishing who will be granted awards, the number of shares to be awarded in
options, and the terms and conditions of such grants.
Mr. Hyde was last awarded stock options prior to the Company's initial
public offering and has not received any additional grants since that time.
Section 162(m). Section 162(m) of the Internal Revenue Code of 1996, as
amended, places a limit of $1,000,000 on the amount of compensation that may
be deducted by the Company in any one fiscal year with respect to the Chief
Executive Officer and the other four most highly compensated individuals who
are executive officers as of the end of the fiscal year. However, this
deduction limit does not apply to certain "performance based" compensation.
The Committee intends to generally design and implement compensation plans
that qualify for full deductibility in accordance with Section 162(m).
However, the Company may from time to time pay compensation to its executive
officers that may not be deductible. The Committee generally intends that all
stock options granted under the 1996 Plan will qualify as "performance based"
compensation.
Summary. The Committee has established compensation for executive officers
that links a large portion of each officer's compensation to the profit
performance of the Company and the long term appreciation of the stock price
and in so doing has rewarded executive officers for performance and
enhancement of stockholder value. The Committee also believes that the 1996
Stock Option Plan will continue to fulfill the Company's goal of rewarding the
officers and employees of the Company while simultaneously ensuring that the
interests of the officers and employees are more closely aligned with those of
the Company's stockholders.
James F. Keegan
Robert I. MacDonnell
Michael W. Michelson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Messrs. Keegan, Michelson, and
MacDonnell. Messrs. Michelson and MacDonnell are also general partners of KKR.
During 1996, KKR received $271,666 for management, consulting, and financial
services provided to the Company. Such services included advice and assistance
concerning the operation, planning, and financing of the Company. The services
ended as of the end of the 1996 fiscal year.
Mr. Hyde was a member of the Board of Directors and of the Human Resources
Committee of First Tennessee National Corporation, which determines executive
compensation, until April 1996. Mr. Terry retired as Chairman of First
Tennessee National Corporation, a bank holding company, and its wholly-owned
subsidiary First Tennessee Bank National Association, a national bank ("Bank")
in January 1996. The Company uses the services of Bank for retail banking
services, including demand deposit accounts, credit card processing, trust
services, and financing. For fiscal year 1996, the Company paid Bank
approximately $5,379,000 in fees and $409,000 in interest on debt. The Company
believes that all fees charged by and paid to Bank for services performed, and
all interest charged by and paid to Bank for financing, are reasonable and no
greater than those fees and interest rates generally commercially available
from other sources.
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows, since the end of fiscal year 1991, changes in the
value of $100 invested in (i) the Company's common stock, (ii) Standard &
Poor's Retail Store Composite Index, and (iii) Standard & Poor's 500 Composite
Index.
The Stock Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference the Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates this
information by reference and shall not otherwise be deemed filed under such
Acts.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AUTOZONE S&P 500 INDEX AND S&P RETAIL STORE COMPOSITE INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period AUTOZONE, S&P S&P RETAIL STORE
(Fiscal Year Covered) INC. 500 INDEX COMPOSITE INDEX
- ------------------- ---------- --------- ----------------
<S> <C> <C> <C>
Measurement Pt- 08/91 $100.00 $100.00 $100.00
FYE 08/92 $143.56 $108.13 $104.77
FYE 08/93 $256.44 $123.53 $116.16
FYE 08/94 $235.59 $130.25 $116.76
FYE 08/95 $263.82 $158.49 $122.50
FYE 08/96 $267.50 $189.12 $147.22
</TABLE>
In previous years' Proxy Statements, the Company had used the S&P Retail-
Specialty Index as a comparison. In August 1996, Standard & Poor's
reconstructed its retail indices and the S&P Retail-Specialty Index, as
previously composed, no longer exists and is therefore no longer available for
comparison. The Company has substituted the S&P Retail Store Composite Index
for all years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Hyde is the sole stockholder of a corporation that owns an aircraft that
was leased to the Company for Company business at times during the 1996 fiscal
year. For the use of that aircraft in fiscal year 1996, the Company paid lease
fees and expenses to the corporation totaling $241,885. In addition, pilots
who are employees of AutoZone operated such aircraft for Mr. Hyde's personal
benefit at times during the 1996 fiscal year. For the use of such pilot's
services, Mr. Hyde paid AutoZone $96,000. AutoZone believes that the charges
for the use of the plane by AutoZone and for the pilots used by Mr. Hyde are
reasonable and equivalent to the fees charged by others for the use of similar
aircraft and pilots.
11
<PAGE>
Mr. Terry retired as Chairman of First Tennessee National Corporation, a
bank holding company, and its wholly-owned subsidiary First Tennessee Bank
National Association, a national bank ("Bank") in January 1996. The Company
uses the services of Bank for retail banking services, including demand
deposit accounts, credit card processing, trust services, and financing. For
fiscal year 1996, the Company paid Bank approximately $5,379,000 in fees and
$409,000 in interest on debt. The Company believes that all fees charged by
and paid to Bank for services performed, and all interest charged by and paid
to Bank for financing, are reasonable and no greater than those fees and
interest rates generally commercially available from other sources.
See also the discussion under the heading "Compensation Interlocks and
Insider Participation" regarding certain services rendered to the Company by
KKR.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities to
file reports of beneficial ownership (Forms 3, 4, and 5) of Common Stock with
the Securities and Exchange Commission and the New York Stock Exchange.
Officers, directors, and greater-than-ten percent holders are required to
furnish the Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of Forms 3 and 4 and amendments thereto received by it during fiscal
year 1996, and Forms 5 and amendments thereto received by it with respect to
fiscal year 1996, or written representations that no reports were required,
all filings applicable to its officers, directors, greater-than-ten percent
beneficial owners and other persons subject to Section 16 of the Exchange Act
were timely, except that Stephen W. Valentine was late filing a Form 3 after
his election as Senior Vice President, and Mr. Adams was late filing an
amendment to his Form 3 showing indirect ownership of the Company's common
stock held for the benefit of his immediate family
PROPOSAL 2--APPROVAL OF 1996 STOCK OPTION PLAN
On October 21, 1996, the Board of Directors approved the 1996 Stock Option
Plan ("Plan"), subject to stockholder approval, which would reserve 6,000,000
shares of Common Stock that may be awarded as stock options under the Plan.
The existing Amended and Restated Stock Option Plan ("Former Plan") which was
adopted on February 11, 1987, expires on February 11, 1997. The Board of
Directors believes that in order to continue to provide an incentive to secure
and retain employees of outstanding ability and to provide added incentives to
those employees responsible for the success of the Company, the Company should
continue its policy of assuring equity ownership of the Company for all levels
of management. Over 2,900 employees of the Company (including over 1,400 store
managers) have been granted stock options under the Former Plan. As of August
31, 1996, the Company had 26,800 employees, all of whom would be eligible to
receive option grants. The closing price of the Company's Common Stock on the
New York Stock Exchange on October 21, 1996, was $27.75 per share.
The following description is only a summary of the Plan. The Plan is
reproduced in its entirety as Exhibit A to this Proxy Statement. Reference is
made to Exhibit A for a full description of all terms and conditions of the
Plan and the description below is qualified in its entirety by reference to
the Plan itself.
Summary of the Plan. Under the Plan, key employees of the Company, its
subsidiaries and any limited partnership of which the Company or any of its
subsidiaries is the general partner, will be eligible to receive awards of stock
options. Subject to the terms of the Plan, the Compensation Committee will have
sole discretion to determine the conditions of each award including whether such
awards shall be considered incentive stock options under the Internal Revenue
Code of 1986, as amended (the "Code") or non-qualified stock options, the number
of shares to be granted, the exercise price, the expiration date, and the
vesting schedule. No person may be granted an option to purchase more than
500,000 shares of Common Stock in any one calendar year, and in
12
<PAGE>
the case of a grant of incentive stock options, to the extent that the
aggregate fair market value of stock as of the date of grant with respect to
which incentive stock options are exercisable for the first time by any
optionee during any calendar year exceeds $100,000, such options shall be
treated as options which are not incentive stock options. Options will not be
transferable except by will or the laws of descent and distribution.
The Plan is neither a qualified pension, profit sharing or stock bonus plan
under Section 401(a) of the Code nor an "employee benefit plan" subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Stock Options. The Committee may grant options to purchase Common Stock of
the Company at a price not less than 85% of the market value on the date of
the award, provided that (i) such price shall be no less than the par value of
the stock, (ii) in the case of incentive stock options and options intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
such price shall not be less than 100% of the fair market value, and (iii) in
the case of incentive stock options granted to a person then owning more than
10% of the total combined voting power of all classes of stock of the Company,
any subsidiary or parent corporation, such price shall be not less than 110%
of the fair market value. Stock options may be exercised by the grantees at
any time after vesting and before the expiration of the options by written
notice to the Company and the payment of the option price and any required
taxes. The option price and taxes may be paid in cash at the time of exercise
or by the delivery of a notice that the optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the option and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the option exercise price, or at the discretion of the
Committee, by the delivery of Common Stock in value equivalent to the option
price, or by delivery of a promissory note bearing interest and payable upon
such terms and conditions as may be prescribed by the Committee, or any
combination of the foregoing.
No option may vest prior to the passage of one year from the date of grant.
All incentive stock options granted under the Plan must expire on or before
the passage of ten years from the date of grant. The term of all non-qualified
stock options is determined by the Committee in its discretion. Upon
termination of employment no portion of an option which is unexercisable shall
become exercisable unless otherwise provided by the Committee.
Other Provisions. In the event that the Committee, in its sole discretion,
determines that any corporate transaction (including, but not limited to any
dividend, recapitalization, reclassification, stock split, merger, spin-off or
disposition or all or substantially all of the Company's assets) affects the
common stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits
intended to be made available under the Plan or with respect to any option
grant, then the Committee shall, in a manner that it deems equitable, adjust
any or all of the (i) number or kind of shares of stock with respect to such
options that may be granted under the Plan, (ii) the number and kind of shares
of stock subject to outstanding options, or (iii) the grant or exercise price
with respect to any option. Further, in the event of any corporate transaction
involving a merger in which the Company is not the surviving entity, a sale or
disposition of all or substantially all of the assets of the Company, or any
reverse merger in which the Company is the surviving entity, but in which
securities possessing more than 50% of the total combined voting power of the
Company's outstanding securities are transferred or issued to a person
different from those who held such securities immediately prior to such
merger, or other non-recurring or unusual event affecting the Company, or the
financial statement of the Company, or any subsidiary or affiliate, the
Committee may, in its discretion in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, or to facilitate such transactions or events, the Committee may in its
discretion, (A) repurchase for cash from any grantee all options granted in an
amount that could have been attained upon the exercise of such option,
(B) provide that any such option may not be exercised after such transaction
or event, (C) provide that all such options may be exercised prior to such
transaction or event, notwithstanding the period of exercisability established
in the option agreement, (D) provide that such option shall be assumed by or
substituted for any securities of any successor corporation, or parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, or (E) make adjustments in the number and type of shares
subject to options.
13
<PAGE>
The Plan may be amended by the Committee at its discretion except that,
without the consent of the stockholders, the Committee may not amend the Plan
to increase the number of shares available to be awarded under the Plan,
increase the number of shares that may be optioned to any one person in a
calendar year, materially modify the eligibility requirements to receive
options, extend the expiration date of the Plan, or otherwise modify or amend
the Plan where applicable law or regulation (including provisions requiring
qualification under Sections 422 or 162(m) of the Code) would require such
modification or amendment to be approved by the stockholders.
The Plan will expire on October 21, 2006. After the expiration date, no
further options may be granted under the Plan. All options granted under the
Plan prior to the expiration date will continue to operate under the Plan.
Federal Income Tax Consequences. Generally, no tax is imposed on an optionee
upon the grant of a non-qualified stock option. Upon the exercise of a non-
qualified stock option, the optionee will realize ordinary income for federal
income tax purposes in an amount equal to the excess of the fair market value
of the shares purchased over the option price. The tax basis for the stock so
acquired will be the fair market value of the stock on the date of exercise of
the option. At the time of the exercise, the Company is entitled to an income
tax deduction equal to the amount of income recognized by the optionee.
However, to the extent total non-performance compensation in one year realized
by an optionee after exercise of option exceeds one million dollars, if the
Plan or the grant fails to satisfy the requirements of Section 162(m) of the
Code, the Company may not be able to claim such income tax deduction for the
amount in excess of one million dollars.
An optionee does not generally realize federal taxable income upon either
the grant or the exercise of an incentive stock option. If the optionee does
not dispose of the stock acquired within one year after its receipt and two
years after the option was granted, the gain or loss realized on the
subsequent disposition of the stock will be treated as capital gain or loss.
If the stock is disposed of prior to that time, the optionee will realize
ordinary income in an amount equal to the excess of the sale price of the
stock over the option price. The Company is generally not entitled to an
income tax deduction with respect to the grant or exercise of an incentive
stock option or the disposition of the option stock by the optionee. However,
if the optionee disposes of the option stock prior to the required holding
period, a deduction is available to the Company to the extent of the income
realized by the optionee on the date of the early disposition. In addition,
the exercise of an incentive stock option may, depending on the number of
stock options exercised and the optionee's individual income tax situation,
trigger liability for the alternative minimum tax.
Approval by Stockholders. Stockholder approval of the Plan is required (i)
under Section 162(m) of the Code to have the Plan qualify as an incentive
compensation plan, (ii) under Section 422 of the Code for any options so
designated to qualify as incentive stock options, and (iii) under the rules of
the New York Stock Exchange, Inc., for listing the shares of Common Stock
reserved under the Plan. Approval of Proposal 2 requires the affirmative vote
of the holders of a majority of the Company's outstanding shares of Common
Stock represented at and entitled to vote at the meeting. Broker non-votes
will be counted as present at the meeting for quorum purposes, but will not be
counted as voting either for or against the proposal. Abstentions will be
counted the same as a vote against the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 2 TO
RATIFY AND ADOPT THE 1996 STOCK OPTION PLAN.
PROPOSAL 3--RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, acting on the recommendation of its Audit Committee,
has selected the firm of Ernst & Young LLP, which has served as independent
auditors for the past nine fiscal years, to conduct an audit, in accordance
with generally accepted auditing standards, of the Company's financial
statements for the 52-week fiscal year ending August 30, 1997. AutoZone
expects representatives of that firm to be present at the Annual Meeting to
respond to appropriate questions and to make a statement, if they so desire.
This selection is being submitted for ratification at the meeting.
14
<PAGE>
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy at the meeting and entitled to
vote is required for such ratification. If not ratified, the Board will
reconsider the selection upon recommendation of the Audit Committee, although
the Board of Directors will not be required to select different independent
auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
OTHER MATTERS
The Board of Directors is not presently aware of any matters to be presented
at the Annual Meeting other than the election of directors, ratification and
approval of the 1996 Stock Option Plan, and the ratification of Ernst & Young
LLP as the Company's independent auditors. If, however, other matters are
properly brought before the Annual Meeting, the enclosed proxy gives
discretionary authority to the persons named therein to act in accordance with
their best judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals to be presented at the fiscal year 1997 annual meeting
of stockholders must be received by the Company by July 17, 1997, to be
considered by the Board of Directors for inclusion in the 1997 Proxy
Statement. Any proposals must be mailed to AutoZone, Inc., to the attention of
the Secretary, Post Office Box 2198, Dept. 8074, Memphis, Tennessee 38101-
9842.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended August 31, 1996, is being mailed herewith to all
stockholders of record.
By the order of the Board of
Directors
HARRY L. GOLDSMITH
Secretary
Memphis, Tennessee
November 8, 1996
15
<PAGE>
EXHIBIT A
AUTOZONE, INC.
1996 STOCK OPTION PLAN
AutoZone, Inc., a corporation organized under the laws of the State of
Nevada, by resolution of the Board of Directors of the Company (the "Board")
on October 21, 1996, adopted this AutoZone, Inc. 1996 Stock Option Plan (the
"Plan").
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its executive and
other key employees who have been or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type
of professional, technical and managerial employees considered essential to
the long-range success of the Company by providing and offering them an
opportunity to become owners of capital stock of the Company.
ARTICLE I
Definitions
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.
Section 1.1--Affiliate
"Affiliate" shall mean any Subsidiary and any limited partnership of which
the Company or any Subsidiary is the general partner.
Section 1.2--Award Limit
"Award Limit" shall mean 500,000 shares of Common Stock.
Section 1.3--Board
"Board" shall mean the Board of Directors of the Company.
Section 1.4--Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5--Committee
"Committee" shall mean the Compensation Committee or another committee of
the Board, appointed as provided in Section 6.1.
Section 1.6--Common Stock
"Common Stock" shall mean the common stock of the Company, par value $.01
per share, and any equity security of the Company issued or authorized to be
issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock. Debt securities of the
Company convertible into Common Stock shall be deemed equity securities of the
Company.
A-1
<PAGE>
Section 1.7--Company
"Company" shall mean AutoZone, Inc. In addition, "Company" shall mean any
corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options, outstanding under the Plan, in a transaction to
which Section 424(a) of the Code applies.
Section 1.8--Corporate Transaction
"Corporate Transaction" shall mean any of the following stockholder-approved
transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Awards are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
Section 1.9--Director
"Director" shall mean a member of the Board.
Section 1.10--Employee
"Employee" shall mean any employee (as defined in accordance with Section
3401(c) of the Code) of the Employer, whether such employee is so employed at
the time this Plan is adopted or becomes so employed subsequent to the
adoption of this Plan.
Section 1.11--Employer
"Employer" shall mean the Company or an Affiliate, whichever at the time
employs the Employee.
Section 1.12--Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
Section 1.13--Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given date shall be
(i) the closing price of a share of Common Stock on the principal exchange on
which shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred; or (ii) if Common Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if Common Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the Fair Market Value of a
share of Common Stock as established by the Committee acting in good faith.
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Section 1.14--Incentive Stock Option
"Incentive Stock Option" shall mean an Option that qualifies under Section
422 of the Code and which is designated as an Incentive Stock Option by the
Committee.
Section 1.15--Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not designated as an
Incentive Stock Option and which is designated as a Non-Qualified Option by
the Committee.
Section 1.16--Officer
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Exchange Act, as such Rule may be amended in the future.
Section 1.17--Option
"Option" shall mean a stock option granted under Article III of this Plan.
An Option granted under this Plan, as determined by the Committee, shall
either be an Incentive Stock Option or a Non-Qualified Option, provided,
however that options granted to Employees of an Affiliate which is not a
Subsidiary shall be Non-Qualified Options.
Section 1.18--Grantee
"Grantee" shall mean an Employee to whom an Option is granted under this
Plan.
Section 1.19--Plan
"Plan" shall mean this 1996 Stock Option Plan of AutoZone, Inc.
Section 1.20--Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
Section 1.21--Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.22--Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.23--Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Section 1.24--Termination of Employment
"Termination of Employment" shall mean the time when the employee-employer
relationship between an Grantee and the Employer is terminated for any reason,
with or without cause, including, but not by way of limitation, a termination
by resignation, discharge, death, or retirement, but excluding (i)
terminations where there is a simultaneous reemployment or continuing
employment of an Grantee by the Employer; (ii) at the
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discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship; and (iii) at the discretion
of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Employer with the former
Employee. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that, with respect to Incentive Stock Options, a leave of
absence, change in status from an employee to an independent contractor or
other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. However, notwithstanding any provision of this
Plan, the Employer has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
Shares Subject to Plan
Section 2.1--Shares Subject to Plan
(a) The shares of stock subject to Awards shall be Common Stock, initially
shares of the Company's common stock, $.01 par value. The aggregate number of
such shares which may be issued upon exercise of Options under the Plan shall
not exceed 6,000,000. The shares of Common Stock issuable under the Plan upon
exercise of such Options may be either previously authorized but unissued
shares or treasury shares.
(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any calendar year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, the number
of shares subject to Options which are canceled continue to be counted against
the Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellation of the
Option and a grant of a new Option and both the Option deemed to be canceled
and the Option deemed to be granted are counted against the Award Limit.
Section 2.2--Add-back of Options
If any Option expires or is canceled without having been fully exercised or
vested, the number of shares subject to such Option, but as to which such
Option was not exercised or vested prior to its expiration or cancellation,
may again be awarded hereunder, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Options which are adjusted pursuant to
Section 7.8 and become exercisable with respect to shares of stock of another
corporation, shall be considered canceled and may again be awarded hereunder,
subject to the limitations of Section 2.1. Shares of Common Stock which are
delivered by the Grantee or withheld by the Company upon the exercise or
vesting of any Option, in payment of the exercise price thereof, may again be
awarded hereunder, subject to the limitations of Section 2.1. Notwithstanding
the provisions of this Section 2.2, no shares of Common Stock may again be
optioned if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the Code.
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ARTICLE III
Granting of Options
Section 3.1--Eligibility
Any key Employee selected by the Committee pursuant to Section 3.4(a)(i)
shall be eligible to be granted an Option, provided, however, that an Employee
of an Affiliate which is not a Subsidiary shall be eligible to be granted Non-
Qualified Options only.
Section 3.2--Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted to any person who is not an
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company or a Subsidiary.
Section 3.3--Disqualification for Stock Ownership
No person may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any then existing Subsidiary or parent
corporation unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
Section 3.4--Granting of Options
(a) The Committee shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are key employees (including Employees who
have previously received Options under this Plan, or any other plan of the
Company) and in its opinion should be granted Options; and
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to such selected Employees; and
(iii) Determine whether such Options are to be Incentive Stock Options or
Non-Qualified Options and whether such Options are to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code; and
(iv) Determine the terms and conditions of such Options, consistent with
the Plan; provided, however, that the terms and conditions of such Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m)(4)(C) of the Code.
(b) Upon the selection of an Employee to be granted an Option, the Committee
shall instruct the Secretary to issue such Option and may impose such
conditions on the grant of such Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition
of the grant of an Option to an Employee that the Employee surrender for
cancellation some or all of the unexercised Options which have been previously
granted to him under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an exercise price lower (or higher)
than the exercise price of the surrendered Option, may cover the same (or a
lesser or greater) number of shares as the surrendered Option, may contain
such other terms as the Committee deems appropriate and shall be exercisable
in accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of the surrendered Option.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such Option from treatment as an "incentive stock
option" under Section 422 of the Code.
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Section 3.5--Consideration
Except as the Committee may otherwise determine, in consideration of the
granting of an Option, the Grantee shall agree, in the written Option
agreement, to remain in the employ of the Company, or any Affiliate, for a
period of at least one year (or such shorter period as may be fixed in the
Option agreement or by action of the Committee following grant of the Option)
after the Option is granted. Nothing in this Plan or in any Option agreement
hereunder shall confer upon any Grantee any right to continue in the employ of
his respective Employer, or shall interfere with or restrict in any way the
rights of each respective Employer, which are hereby expressly reserved, to
discharge any Grantee at any time for any reason whatsoever, with or without
cause.
ARTICLE IV
Terms of Options
Section 4.1--Option Agreement
Each Option shall be evidenced by a written Option agreement which shall be
executed by the Grantee and authorized Officers of the Company and which shall
contain such terms and conditions as the Committee shall determine, consistent
with the Plan. Option agreements evidencing Incentive Stock Options shall
contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code. Stock Option agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the
Code.
Section 4.2--Option Price
The price per share of the shares subject to each Option shall be set by the
Committee; provided, however, that such price shall be no less than eighty-
five percent (85%) of the Fair Market Value of the underlying shares on the
date of grant; further provided that (i) such price shall be no less than the
par value of a share of Common Stock, unless otherwise permitted by applicable
state law, (ii) in the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted; and (iii) in the
case of Incentive Stock Options granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code)
such price shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
Section 4.3--Option Term
The term of an Option shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term
shall not be more than ten (10) years from the date the Incentive Stock Option
is granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within
the meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment of the Grantee, or
amend any other term or condition of such Option relating to such a
termination.
Section 4.4--Option Vesting
(a) Except as the Committee may otherwise provide, no Option may be
exercised in whole or in part during the first year after such Option is
granted unless the Option is being granted in modification or substitution of
a previously granted Option, in which case the one year period shall be
measured from the date of the grant of the previously granted Option.
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(b) Subject to the provisions of Sections 4.4(a) and 4.4(d), the period
during which the right to exercise an Option in whole or in part vests in the
Grantee shall be set by the Committee and the Committee may determine that an
Option may not be exercised in whole or in part for a specified period after
it is granted. At any time after grant of an Option, the Committee may, in its
sole and absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option vests.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Option agreement or by action of the
Committee following the grant of the Option.
(d) To the extent that the aggregate Fair Market Value of stock with respect
to which "incentive stock options" (within the meaning of Section 422 of the
Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by a Grantee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(d), the Fair Market Value
of stock shall be determined as of the time the Option with respect to such
stock is granted.
ARTICLE V
Exercise of Options
Section 5.1--Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
Section 5.2--Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised upon
delivery to the Secretary of the Company or his designee:
(a) A written notice complying with the applicable rules established by
the Committee stating that the Option, or a portion thereof, is exercised.
The notice shall be signed by the Grantee or other person then entitled to
exercise the Option or such portion;
(b) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act, the Code, and any other
federal or state laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option or portion thereof shall be by any
person or persons other than the Grantee, appropriate proof of the right of
such person or persons to exercise the Option or portion thereof; and
(d) Full cash payment to the Company of the exercise price and any
applicable taxes for the shares with respect to which the Option, or
portion thereof, is exercised or through the delivery of a notice that the
Grantee has placed a market sell order with a broker approved by the
Company with respect to shares of Common Stock then issuable upon exercise
of the Option, 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 and any applicable taxes. However, the Committee
may, in its discretion, allow payment, in whole or in part, through (i) the
delivery of shares of Common Stock owned by the Grantee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of
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the Option or exercised portion thereof; (ii) allow payment, in whole or in
part, through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the imputation
of interest under the Code) and payable upon such terms as may be
prescribed by the Committee or the Board; or (iii) allow payment through
any combination of the foregoing. In the case of a promissory note, the
Committee may also prescribe the form of such note and the security to be
given for such note. The Option may not be exercised, however, by delivery
of a promissory note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law.
Section 5.3--Rights as Stockholders
Grantees shall not be, nor have any of the rights or privileges of,
stockholders of the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such Grantees.
Section 5.4--Transfer Restrictions
The Committee, in its absolute discretion, may impose such restrictions on
the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate. Any such restrictions shall be set forth in the
respective Option agreement and may be referred to on the certificates
evidencing such shares. Without limiting the generality of the foregoing, the
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of stock acquired by exercise of an Incentive Stock
Option within two years from the date of granting such Option or one year
after the transfer of such shares to such Employee. The Committee may direct
that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE VI
Administration
Section 6.1--Compensation Committee
The Committee shall consist solely of two or more Directors, appointed by
and holding office at the pleasure of the Board, each of whom is both a "non-
employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at
any time by delivering written notice to the Board. Vacancies in the Committee
shall be filled by the Board.
Section 6.2--Duties and Powers of the Committee
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the
power to interpret the Plan and the agreements pursuant to which Options are
granted and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent herewith and to interpret, amend or
revoke any such rules. Any such interpretations and rules in regard to
Incentive Stock Options shall be consistent with provisions of Section 422 of
the Code. Any grant under this Plan need not be the same with respect to each
Grantee. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under this
Plan except with respect to matters which under Rule 16b-3 or Section 162(m)
of the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
Section 6.3--Majority Rule; Unanimous Written Consent
The Committee shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
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Section 6.4--Professional Assistance; Good Faith Actions
All expenses and liabilities which members of the Committee incur in
connection with the administration of this Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and its Officers and
Directors shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee or Board in good faith shall be final and binding upon
all Grantees, the Company and all other interested persons. No members of the
Committee or the Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Awards, and all members of the Committee and the Board shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
ARTICLE VII
Other Provisions
Section 7.1--Options Not Transferable
Options may not be sold, pledged, assigned, or transferred in any manner
other than by will or the laws of descent and distribution, unless and until
such Options have been exercised, and the shares underlying such Options have
been issued, and all restrictions applicable to such shares have lapsed. No
Option or interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Grantee or his successors in interest
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and
of no effect except as otherwise permitted in this Section 7.1.
Section 7.2--Eligibility to Exercise
Only a Grantee may exercise an Option granted under the Plan during the
Grantee's lifetime. After the death of the Grantee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Option agreement or other agreement, be exercised
by the Grantee's personal representative, or by any person empowered to do so
under the deceased Grantee's will or under the then applicable laws of descent
and distribution.
Section 7.3--Conditions to Issuance of Stock Certificates
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
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Section 7.4--Amendment, Suspension or Termination of the Plan
Except as otherwise provided in this Section 7.4, the Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, to the extent
required by Sections 422 or 162(m) of the Code, without approval of the
Company's stockholders given within 12 months before or after the action by
the Committee or Board, no action of the Committee or Board may increase any
limit imposed in Section 2.1 on the maximum number of shares which may be
issued under the Plan, modify the Award Limit, materially modify the
eligibility requirements of Section 3.1, or extend the limit imposed in this
Section 7.4 on the period during which Options may be granted or amend or
modify the Plan in a manner requiring stockholder approval under Sections 422
or 162(m) of the Code, and no action of the Committee or Board may be taken
that would otherwise require stockholder approval as a matter of applicable
law, regulation or rule. Neither the amendment, suspension nor termination of
the Plan shall, without the consent of the holder of the Option, alter or
impair any rights or obligations under any Option theretofore granted unless
the Option agreement itself expressly so provides. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event any Option be granted under this Plan on or after October 21, 2006. No
amendment, suspension or termination of this Plan shall, without the consent
of the Grantees alter or impair any rights or obligations under any Option
theretofore granted or awarded, unless the Option agreement otherwise
expressly so provides.
Section 7.5--Approval of Plan by Stockholders
The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Sections 162(m) and 422 of the Code.
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of this
Plan. Options may not be granted under the Plan prior to such stockholder
approval.
Section 7.6--Effect of Plan Upon Other Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Employers. Nothing in this Plan shall be
construed to limit the right of the Employers (a) to establish any other forms
of incentives or compensation for employees of the Employers or (b) to grant
or assume options otherwise than under this Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
Section 7.7--Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act, the Exchange Act, the Code, and any and all regulations
and rules promulgated by the Securities and Exchange Commission and the
Internal Revenue Service. Notwithstanding anything herein to the contrary, the
Plan shall be administered, and Options shall be granted and may be exercised,
only in such a manner as to conform to such laws, rules and regulations. To
the extent permitted by applicable law, the Plan and Options granted hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
Section 7.8--Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events
(a) Subject to Section 7.8(d), in event that the Committee determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer, exchange or other disposition of all or substantially all of
the assets of the Company (including, but not limited to, a Corporate
Transaction), or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the
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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 or
with respect to an Option, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other securities or
property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Section 7.8(d), in the event of any Corporate Transaction or
other transaction or event described in Section 7.8(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any affiliate, or
of changes in applicable laws, regulations, or accounting principles, the
Committee in its discretion is hereby authorized to take any one or more of
the following actions whenever the Committee determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to any Option under this Plan, to facilitate such transactions or
events, or to give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may provide, either by the terms of
the Option agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Grantee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
option, or award or realization of the Grantee's rights had such Option
been currently exercisable or payable or fully vested or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its sole and absolute discretion, the Committee may provide,
either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after
such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such option shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option agreement or by action taken prior to the
occurrence of such transaction or event, that upon such event, such Option
be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; or
(v) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may make adjustments in the number
and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding Options that may be granted in the future.
(c) Subject to Section 7.8(d) and 7.12, the Committee may, in its
discretion, include such further provisions and limitations in any Option
agreement or stock certificate, as it may deem equitable and in the best
interests of the Company.
A-11
<PAGE>
(d) With respect to Options intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in this
Section 7.8 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such Option to fail to so qualify under
Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability under
Section 16 of the Exchange Act or violate the exemptive conditions of Rule
16b-3 unless the Committee determines that the Option is not to comply with
such exemptive conditions.
(e) The number of shares of Common Stock subject to any Option shall always
be rounded to the nearest whole number.
Section 7.9--Tax Withholding
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Grantee of any sums required by federal,
state or local tax laws to be withheld with respect to the issuance, vesting
or exercise of any Option. The Committee may in its discretion and in
satisfaction of the foregoing requirement allow such Grantee to elect to have
the Company withhold shares of Common Stock otherwise issuable under such
Option (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld.
Section 7.10--Loans
The Committee may, in its discretion, extend one or more loans to Employees
in connection with the exercise of an Option granted under this Plan. The
terms and conditions of any such loan shall be set by the Committee.
Section 7.11--Forfeiture Provisions
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee shall have the right (to
the extent consistent with the applicable exemptive conditions of Rule 16b-3)
to provide, in the terms of an Option made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds,
gains or other economic benefit actually or constructively received by the
recipient upon any receipt or exercise of the Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the
Company, and (ii) the Option shall terminate and any unexercised portion of
such Option (whether or not vested) shall be forfeited, if (a) a Termination
of Employment occurs prior to a specified date, or within a specified time
period following receipt or exercise of the Option, or (b) the recipient at
any time, or during a specified time period, engages in any activity in
competition with the Company, or which is adverse, contrary or harmful to the
interests of the Company, as further defined by the Committee.
Section 7.12--Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of this Plan, this Plan, and any Option
granted to any individual who is then subject to Section 16, shall be subject
to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that
are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such applicable exemptive
rule. Furthermore, notwithstanding any other provision of this Plan, any
Option intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment
to Section 162(m) of the Code) or any regulations or rulings issued thereunder
that are requirements for qualification as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed
amended to the extent necessary to conform to such requirements.
A-12
<PAGE>
Section 7.13--Compliance with Laws
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money under
this Plan or under Options granted hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, 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, Options granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
or regulations.
Section 7.14--Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
Section 7.15--Governing Law
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the internal laws of the State of Nevada without regard to
the conflicts of laws rules thereof.
A-13
<PAGE>
AUTOZONE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Harry L. Goldsmith and Donald R.
Rawlins, and each of them, as proxies, with full power of substitution,
R to vote all shares of common stock of AutoZone, Inc., which the
undersigned would be entitled to vote at the Annual Meeting of
O AutoZone, Inc., to be held at the Company's principal executive
offices, 123 South Front Street, Memphis, Tennessee, on Thursday,
X December 12, 1996, and at any and all adjournments thereof, on items 1,
2 and 3, as specified herein and such other matters as may come before
Y the meeting.
Election of
Directors, Nominees: (change of address/comments)
J.C. Adams, Jr., ----------------------------------------------
Andrew M. Clarkson, ----------------------------------------------
Thomas S. Hanemann, ----------------------------------------------
N. Gerry House, J.R. ----------------------------------------------
Hyde, III, James F. (If you have written in the above space, please
Keegan, Michael W. mark the corresponding box on the reverse side
Michelson, John E. of this card)
Moll, George R.
Roberts, Ronald A.
Terry, and Timothy D.
Vargo.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
FOLD AND DETACH HERE
<PAGE>
[MAP OF LOCATION You are invited
OF STOCKHOLDERS to attend the
MEETING]
[LOGO OF AUTOZONE]
ANNUAL MEETING
OF STOCKHOLDERS
December 12, 1996
10:00 a.m.
123 South Front Street
Memphis, Tennessee
38103-3607
<PAGE>
[X] Please mark your | 2797
votes as in this |__
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
- -----------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C> <C>
1. Election of [_] [_] 2. Approval of 1996 [_] [_] [_] 4. In the discretion
Directors Stock Option Plan. of the proxies
(see reverse) named herein,
3. Approval of [_] [_] [_] upon such other
For, except vote withheld from the Independent Auditors. matters as may
following nominee(s): properly come
before the
meeting.
- -----------------------------------
---------------------------------------
SPECIAL ACTION
---------------------------------------
Comments/Change of Address [_]
Discontinue Annual Report
Mailing for this Account [_]
Will Attend Annual Meeting [_]
SIGNATURE(S) ____________________________________________________________ DATE __________ The signer hereby revokes all proxies
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD heretofore given by the signer to vote
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, at said meeting or any adjournments
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. thereof.
</TABLE>
FOLD AND DETACH HERE
<PAGE>
IMPORTANT: PLEASE VOTE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED
<PAGE>
AUTOZONE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Harry L. Goldsmith and Donald R.
Rawlins, and each of them, as proxies, with full power of substitution,
R to vote all shares of common stock of AutoZone, Inc., which the
undersigned would be entitled to vote at the Annual Meeting of
O AutoZone, Inc., to be held at the Company's principal executive
offices, 123 South Front Street, Memphis, Tennessee, on Thursday,
X December 12, 1996, and at any and all adjournments thereof, on items 1,
2 and 3, as specified herein and such other matters as may come before
Y the meeting.
Election of
Directors, Nominees: (change of address/comments)
J.C. Adams, Jr., ----------------------------------------------
Andrew M. Clarkson, ----------------------------------------------
Thomas S. Hanemann, ----------------------------------------------
N. Gerry House, J.R. ----------------------------------------------
Hyde, III, James F. (If you have written in the above space, please
Keegan, Michael W. mark the corresponding box on the reverse side
Michelson, John E. of this card)
Moll, George R.
Roberts, Ronald A.
Terry, and Timothy D.
Vargo.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
FOLD AND DETACH HERE
<PAGE>
[MAP OF LOCATION You are invited
OF STOCKHOLDERS to attend the
MEETING]
[LOGO OF AUTOZONE]
ANNUAL MEETING
OF STOCKHOLDERS
December 12, 1996
10:00 a.m.
123 South Front Street
Memphis, Tennessee
38103-3607
<PAGE>
[X] Please mark your | 4631
votes as in this |__
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
- -----------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C> <C>
1. Election of [_] [_] 2. Approval of 1996 [_] [_] [_] 4. In the discretion
Directors Stock Option Plan. of the proxies
(see reverse) named herein,
3. Approval of [_] [_] [_] upon such other
For, except vote withheld from the Independent Auditors. matters as may
following nominee(s): properly come
before the
meeting.
- -----------------------------------
---------------------------------------
SPECIAL ACTION
---------------------------------------
Comments/Change of Address [_]
Discontinue Annual Report
Mailing for this Account [_]
Will Attend Annual Meeting [_]
SIGNATURE(S) ____________________________________________________________ DATE __________ The signer hereby revokes all proxies
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD heretofore given by the signer to vote
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, at said meeting or any adjournments
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. thereof.
</TABLE>
FOLD AND DETACH HERE
<PAGE>
IMPORTANT: PLEASE VOTE AND SIGN YOUR PROXY
AND RETURN IT IN THE ENVELOPE PROVIDED
