<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
DISCOUNT AUTO PARTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[DISCOUNT AUTO PARTS LOGO]
August 27, 1997
Dear Stockholder:
On behalf of the Board of Directors and all the team members of Discount
Auto Parts, Inc. I am pleased to invite you to the Annual Meeting of
Stockholders of Discount Auto Parts, Inc., which will be held at the Lakeland
Center, 700 West Lemon Street, Lakeland, Florida at 10:30 A.M., local time, on
Tuesday, October 7, 1997. I hope you will be able to join us to review the year
and the progress of your company.
The items of business to be acted on during the meeting are listed in the
Notice of Annual Meeting of Stockholders and are described more fully in the
Proxy Statement. In addition, the formal business of the meeting will include a
report on operations followed by a question and discussion period.
TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED, I URGE YOU TO VOTE, DATE,
SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE WHICH IS PROVIDED, WHETHER
OR NOT YOU EXPECT TO BE PRESENT. YOU MAY, OF COURSE, ATTEND THE ANNUAL MEETING
AND VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
I look forward to seeing you at the meeting, and on behalf of the Board of
Directors and team members of Discount Auto Parts, Inc. I want to thank you for
your continued support and confidence in us.
Sincerely,
/s/ Peter J. Fontaine
PETER J. FONTAINE
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
[DISCOUNT AUTO PARTS LOGO]
DISCOUNT AUTO PARTS, INC.
4900 FRONTAGE ROAD SOUTH
LAKELAND, FLORIDA 33815
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 7, 1997
To the Stockholders of
Discount Auto Parts, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Discount
Auto Parts, Inc. will be held on Tuesday, the 7th day of October, 1997, at 10:30
A.M., local time, at the Lakeland Center, 700 West Lemon Street, Lakeland,
Florida for the following purposes:
1. To elect two Class II directors to serve for three-year terms;
2. To approve the amendment and restatement of the 1992 Team Member
Stock Purchase Plan;
3. To approve the amendment and restatement of the 1995 Stock Option
Plan; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on August 24, 1997 has been fixed by the Board of
Directors as the record date for the determination of the stockholders entitled
to notice of and to vote at the meeting or any adjournments thereof.
Stockholders are requested to vote, date, sign and mail the enclosed proxy
promptly in the enclosed addressed envelope. If you should be present at the
meeting and desire to vote in person, you may withdraw your proxy.
By Order of the Board of Directors,
/s/ C. Michael Moore
C. MICHAEL MOORE
Secretary
August 27, 1997
<PAGE> 4
[DISCOUNT AUTO PARTS LOGO]
DISCOUNT AUTO PARTS, INC.
4900 FRONTAGE ROAD SOUTH
LAKELAND, FLORIDA 33815
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
August 27, 1997
To the Stockholders of
Discount Auto Parts, Inc.:
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Discount Auto Parts, Inc. (the "Company"),
from the holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), to be used at the Annual Meeting of Stockholders and at any
adjournments thereof. This meeting will be held at 10:30 A.M., Local Time, on
Tuesday, October 7, 1997, at the Lakeland Center, 700 West Lemon Street,
Lakeland, Florida.
Any proxy given pursuant to this solicitation may be revoked by notice in
writing to the Secretary prior to the voting, by delivering a proxy bearing a
later date or by attending the Annual Meeting and voting the shares in person.
No such notice of revocation or later-dated proxy, however, will be effective
until received by the Company at or prior to the Annual Meeting. Unless the
proxy is revoked, the shares represented thereby will be voted at the Annual
Meeting or any adjournment thereof. The giving of the proxy does not affect the
right to vote in person should the stockholder attend the meeting.
The entire cost of preparing and mailing the proxy material will be borne
by the Company. Solicitation of proxies will be made by mail, personally, or by
telephone or telegraph, by officers, directors and regular employees of the
Company. The Company will request brokerage houses and other custodians,
nominees and fiduciaries to forward soliciting material to the stockholders and
the Company will reimburse such institutions for their out-of-pocket expenses
incurred thereby.
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, whether you plan to attend or not, you are urged regardless
of the number of shares of stock owned, to vote, date, sign and return the
enclosed proxy promptly.
The approximate date on which this proxy is to be mailed to stockholders is
September 9, 1997.
Shares of Common Stock are the only outstanding voting securities of the
Company.
The Board of Directors, in accordance with the bylaws, has fixed the close
of business on August 24, 1997 as the record date for determining the
stockholders entitled to notice of and to vote at the Annual Meeting of
Stockholders and adjournments thereof. At the close of business on such date,
the outstanding number of voting securities of the Company was 16,593,983 shares
of Common Stock, each of which is entitled to one vote. All votes will be
tabulated by employees of ChaseMellon Shareholder Services, the Company's
transfer agent for the Common Stock. An employee of ChaseMellon Shareholder
Services and an employee of the Company are expected to serve as the inspectors
of election. Abstentions and broker non-votes are each included in the
determination of the number of shares present but are not counted on any matters
brought before the meeting.
<PAGE> 5
1. ELECTION OF DIRECTORS -- ITEM ONE ON YOUR PROXY CARD
The current terms of the three classes of directors expire in 1997 (Class
II directors), 1998 (Class III directors) and 1999 (Class I directors).
Directors are generally elected for three-year terms.
Two directors (the Class II directors) are to be elected at the 1997 Annual
Meeting. The Board of Directors has nominated the following named persons to
stand for election at the 1997 Annual Meeting for the two Class II director
seats (terms expiring in 2000):
Warren Shatzer
E. E. Wardlow
It is the intention of the persons named in the enclosed form of proxy,
unless otherwise directed, to vote such proxy "FOR" the election of Warren
Shatzer and E. E. Wardlow as the Class II directors of the Company, to serve for
the term described above. The nominees that receive a plurality of the votes
cast by the shares entitled to vote at the Annual Meeting shall be elected as
the Class II directors.
The proposed nominees for election as directors are willing to be elected
as such. If, as a result of circumstances not now known or foreseen, a nominee
shall be unavailable or unwilling to serve as a director, proxies may be voted
for the election of such other person as the Board of Directors may select. The
Board of Directors has no reason to believe that any nominee will be unable or
unwilling to serve.
The following sets forth information as to each nominee for election at
this meeting and each Director continuing in office, including his or her age,
present principal occupation, other business experience during the last five
years, directorships in other publicly held companies and period of service as a
Director of Discount Auto Parts.
Nominees for election at this meeting to terms expiring in 2000:
Warren Shatzer, 50, Executive Vice President -- Merchandising for the
Company. Mr. Shatzer has been with the Company since July 1980, serving in
various executive capacities. He was elected Merchandising Director in 1980, and
Executive Vice President -- Merchandising in 1992. Mr. Shatzer has more than 26
years of experience in retailing. Mr. Shatzer is principally responsible for
formulating and implementing the Company's merchandising strategies and programs
and for overseeing real estate operations.
Director since 1983.
E. E. Wardlow, 75. Mr. Wardlow was President and Chief Operating Officer of
Kmart Corporation from 1972 until his retirement in 1981 after 44 years of
service with Kmart Corporation. Over the past eleven years, Mr. Wardlow has
provided consulting services to the Company on a part time basis. He is also
currently a director of Wolohan Lumber Co.
Director since 1992.
Directors whose present terms continue until 1998:
Peter J. Fontaine, 43, Chairman and Chief Executive Officer of the Company.
Mr. Fontaine has been with the Company since March 1975, serving since 1978 in
various managerial and executive capacities. Mr. Fontaine was elected Secretary
and Treasurer in 1979, Executive Vice President -- Operations in 1992, Chief
Operating Officer in 1993 and President, Chief Executive Officer and Chairman of
the Board in July 1994. Effective February 1, 1997 Mr. Fontaine stepped down
from his position as President of the Company but continued in his positions of
Chief Executive Officer and Chairman of the Board of the Company. Mr. Fontaine
is currently a director of Vision Twenty-One, Inc.
Director since 1978.
William C. Perkins, 40, President and Chief Operating Officer of the
Company. Mr. Perkins has been with the Company since June 1983, serving in
various managerial capacities and executive capacities since 1989. He currently
holds the positions of President and Chief Operating Officer, offices to which
he was
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<PAGE> 6
elected effective February 1, 1997. Mr. Perkins had previously served as
Controller and Chief Accounting Officer from 1989 to 1992, Chief Financial
Officer from 1992 until 1996 and Executive Vice President -- Operations and
Secretary from 1994 until 1997. Mr. Perkins has more than 17 years of experience
in retailing.
Director since 1994.
Directors whose present terms continue until 1999:
A Gordon Tunstall, 52, Founder of and for more than 14 years has served as
President of Tunstall Consulting, Inc., a provider of strategic consulting and
financial planning services. Tunstall Consulting has provided financial
consulting services to the Company over the past several years. Mr. Tunstall is
also currently a director of LA T Sportswear, Orthodontic Centers of America,
Inc., Romac International and Advanced Lighting Technologies.
Director since 1992.
David P. Walling, 66. Since 1990, David P. Walling has provided consulting
services to the Company on a part time basis. Prior to 1990, Mr. Walling was
employed by Kmart for over 32 years in various managerial and executive
capacities. Mr. Walling served as Vice President, General Controller of Kmart
Corporation from 1976 until 1980. From 1980 until 1988, Mr. Walling served as
Vice President -- Corporate Accounting and Reporting and from 1988 until his
retirement in 1989 he served as Vice President -- Accounting/ Administration.
Director since 1996.
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors held seven meetings during fiscal 1997. Each of the
incumbent Directors attended at least 75% of all meetings of the Board and each
committee of which he was a member.
The Board of Directors has a standing Audit Committee and a Compensation
and Benefits Committee (the "Compensation Committee"); it does not have a
Nominating Committee. The Board of Directors functions as a Nominating
Committee, and the Board will consider written recommendations from stockholders
for positions on the Board of Directors in accordance with the procedures set
forth in the Amended and Restated Articles of Incorporation of the Company.
See -- "Stockholder Proposals for Presentation at the 1998 Annual Meeting" for
further information.
The members of the Audit Committee are E. E. Wardlow, A Gordon Tunstall and
David P. Walling. The Audit Committee held two meetings during fiscal 1997. The
Audit Committee recommends the appointment, subject to approval by the Board of
Directors, of the Company's independent auditors. The Committee also reviews the
accounting principles and the financial reporting practices adopted by
management, the non-audit services performed by the independent auditors, the
scope of the audits performed by the independent auditors, and the findings and
recommendations of the independent auditors and approves the fees paid to the
independent auditors.
The members of the Compensation Committee are E. E. Wardlow, A Gordon
Tunstall and David P. Walling. The Compensation Committee held two meetings
during fiscal 1997. The Compensation Committee reviews and recommends to the
Board of Directors the compensation of officers of the Company, examines
periodically the compensation structure of the Company and administers the
Company's 1992 Stock Option Plan, the Company's 1992 Team Members Stock Purchase
Plan, the Company's 1995 Stock Option Plan and certain aspects of the Company's
Supplemental Executive Profit Sharing Plan along with other employee
compensation and benefit programs.
COMPENSATION OF OUTSIDE DIRECTORS
Directors who are not employees received a fee of $2,500 for each regularly
scheduled meeting attended plus reimbursement for reasonable out-of-pocket
expenses to attend meetings of the Board of Directors and its committees. Such
directors are also paid a $2,500 fee for certain special meetings, depending on
the duration
3
<PAGE> 7
of such meetings. In addition, non-employee directors are entitled to receive
1,000 stock options on an annual basis under the Discount Auto Parts, Inc.
Non-Employee Directors' Stock Option Plan. In fiscal 1997, each non-employee
director was granted options to purchase 1,000 shares of the Company's Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant. The options become exercisable in 25% percent increments on
each subsequent anniversary of the date of grant.
No director who is an employee of the Company will receive separate
compensation for services rendered as a director.
2. PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE 1992 TEAM MEMBER
STOCK PURCHASE PLAN -- ITEM TWO ON YOUR PROXY CARD
The Company's 1992 Team Members' Stock Purchase Plan became effective upon
the consummation of the Company's initial public offering on August 26, 1992.
The purpose of the Stock Purchase Plan is to provide the Company's employees
with an opportunity, through the purchase of stock, to become part owners of the
Company, or to increase the amount of their stock ownership. The Company
believes that employees finding themselves in the dual roles of part owners and
employees will have every reason to do all that they can to maintain and
increase the success of the Company.
The Amendments
As originally adopted, the Stock Purchase Plan provided for eleven offering
periods, with the first offering period being the 45 days ending September 30,
1992 and the remaining ten offering periods consisting of each of the months of
March and September in the years 1993 through 1997. In July 1997, the Board of
Directors approved, subject to stockholder approval at the 1997 Annual Meeting
of Stockholders, an amendment to the Stock Purchase Plan to increase the number
of offering periods under the plan from eleven to twenty-three, with offering
periods to continue in each of the months of March and September through and
until September 2003. The Board of Directors also approved additional
administrative amendments to the Stock Purchase Plan including incorporating the
changed name of the committee that implements the Stock Purchase Plan and
conforming the requirements for membership on the committee to comply with
revised Rule 16b-3 under the Securities Exchange Act of 1934.
The Board recommends that you vote "FOR" approval of the Amended and
Restated 1992 Team Member Stock Purchase Plan (the "Amended Stock Purchase
Plan"). The Amended Stock Purchase Plan will be approved if the votes cast,
"FOR" approval of the plan by holders entitled to vote exceed the votes cast
opposing the approval of the Plan.
Summary of the Plan
An aggregate of 550,000 shares of Common Stock have been reserved for
issuance under the Amended Stock Purchase Plan. As of July 31, 1997, 53,500
shares had been purchased under the Amended Stock Purchase Plan and 496,500
shares remain reserved for issuance under the Amended Stock Purchase Plan. Under
the Amended Stock Purchase Plan, which is intended to qualify under the
provisions of Section 423 of the Internal Revenue Code, all team members are
given the right to purchase shares of the Common Stock of the Company two times
a year at a price equal to 85% of the value of the stock immediately prior to
the beginning of each exercise period. On July 31, 1997, the closing price of
the Company's Common Stock on the New York Stock Exchange was $20.50.
All team members are eligible to participate except for those who have been
employed by the Company for less than one year, team members who customarily
work 20 hours or less per week, team members who customarily work five months or
less per year, and team members owning at least 5% of the Company's stock.
Rights to acquire stock are to terminate if the team member's employment is
terminated for any reason, and the rights are not to be transferable by the team
members. No consideration will be received by the Company for the granting of
the right to acquire stock under the Amended Stock Purchase Plan other than the
services rendered to the Company by the team member in such capacity.
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<PAGE> 8
The Amended Stock Purchase Plan provides for two exercise periods -- the
month of March and the month of September -- in each year through 2003.
During each exercise period, an eligible team member is entitled to
purchase one share of Common Stock of the Company for each $240 of compensation
received by him or her for the Company's fiscal year preceding the exercise
period. However, no eligible team member is entitled to purchase fewer than 10
shares or more than 200 shares in any one exercise period. Within these limits,
an eligible team member is able to elect to purchase as many or as few shares in
each exercise period as he or she chooses.
Payment for the shares is required in cash or by check at the time of the
exercise of the rights.
The Amended Stock Purchase Plan is administered by the Compensation and
Benefits Committee whose members are E. E. Wardlow, A Gordon Tunstall and David
P. Walling, none of whom are eligible to participate in the Plan.
Federal Income Tax Consequences
Generally, no gain or loss is recognized until the stock is sold or
otherwise disposed of by its owner.
If the shares acquired under the Amended Stock Purchase Plan are held by
the team member for the holding period required by the Internal Revenue Code
(two years from the beginning of the exercise period in which the shares were
acquired), upon the disposition of the stock, the team member will recognize
ordinary income (as compensation) to the extent of the lesser of: (i) the amount
by which the fair market value of the stock at the beginning of the exercise
period exceeded 85% of such fair market value or (ii) the amount by which the
fair market value of the stock at the time of disposition exceeds the purchase
price. Any further gain will be taxed as a capital gain. If the sales price is
less than the purchase price, there will be no ordinary income; and the team
member will recognize a long-term capital loss equal to the difference between
the purchase price and the disposition price. If the holding period is
satisfied, the Company will not be entitled to a deduction at any time.
If the two-year holding period is not satisfied, the team member will
generally recognize in gross income (as compensation) in the year of disposition
the amount by which the fair market value of the stock on the date of transfer
exceeded the purchase price. Any difference between the fair market value of the
stock on the date of transfer and the sales price upon disposition will be taxed
as a capital gain or loss. The Company will be entitled to a deduction in the
year of disposition equal to the amount of ordinary income recognized by the
team member.
The specific application and impact of the tax rules will vary depending on
the specific personal situation of individual team members.
3. PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE 1995 STOCK OPTION
PLAN -- ITEM THREE ON YOUR PROXY CARD
In 1995, the Board of Directors and stockholders of the Company adopted the
Discount Auto Parts, Inc. 1995 Stock Option Plan. The purpose of the 1995 Stock
Option Plan is to enable the Company to be in a position to continue to
effectively attract and retain executive officers and other key employees.
The Amendments
The 1995 Stock Option Plan as originally adopted covered a maximum of
300,000 shares of Common Stock. The Board of Directors has determined that the
number of shares remaining under the plan is insufficient to continue to meet
the Company's needs of attracting and retaining executive officers and other key
employees. As a result, the Board of Directors has approved, subject to approval
by the stockholders at the 1997 Annual Meeting of Stockholders, an amendment to
the 1995 Stock Option Plan increasing the number of shares of Common Stock that
may be issued upon exercise of options to a maximum of 900,000. In addition, the
Board of Directors approved certain other amendments to the 1995 Stock Option
Plan that limit the maximum number of shares of Common Stock for which options
may be granted to any one person to
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<PAGE> 9
250,000 and permit the payment of taxes owed upon the exercise of an option to
be made by a brokerage firm on behalf of the person exercising the option. The
Board of Directors also approved additional amendments affecting certain
administrative aspects of the 1995 Stock Option Plan including incorporating the
changed name of the committee that implements the 1995 Stock Option Plan and
conforming the requirements for membership on the committee to comply with
revised Rule 16b-3 under the Securities Exchange Act of 1934.
The Board recommends that you vote "FOR" approval of the Amended and
Restated 1995 Stock Option Plan (the "Amended 1995 Option Plan"). The Amended
1995 Option Plan will be approved if the votes cast, "FOR" approval of the
Amended 1995 Option Plan by holders entitled to vote exceed the votes cast
opposing the approval of the Amended 1995 Option Plan.
Summary of the Plan
An aggregate of 900,000 shares of Common Stock have been reserved for
issuance under the Amended 1995 Option Plan. Under the Amended 1995 Option Plan,
incentive stock options, nonqualified stock options or any combination thereof
are granted to eligible individuals. The Amended 1995 Option Plan is
administered by the Compensation and Benefits Committee whose members currently
are E. E. Wardlow, A Gordon Tunstall and David P. Walling, none of whom are
eligible to participate in the Amended 1995 Option Plan.
All officers of the Company and other team members who have executive or
supervisory responsibility are eligible to receive options under the Amended
1995 Option Plan, except with respect to incentive stock options for any team
member ineligible by reason of the provisions of Section 422 of the Internal
Revenue Code (e.g., a team member owning or who would own upon the exercise of
the option more than 10% of the outstanding common stock of the Company, unless
the option price is at least 110% of the fair market value of the Common Stock
subject to the option and the option is not exercisable after five years from
the date of grant). No one person may receive options to purchase in excess of
250,000 shares. No consideration will be received by the Company for the
granting of the options under the Amended 1995 Option Plan other than the
services rendered to the Company by the team member in such capacity.
The aggregate number of shares covered by the Amended 1995 Option Plan, as
well as the number of shares covered by outstanding options (and the per share
purchase price thereof) are subject to automatic adjustment, without further
action of the Board of Directors or the stockholders, in the event of a stock
dividend, a stock split or certain other recapitalizations with respect to the
Company's stock.
The Board of Directors may amend the Amended 1995 Option Plan (or suspend
or discontinue it) without further stockholder approval, except with respect to
certain major changes such as changing the number of shares subject to the
Amended 1995 Option Plan, the minimum option price or the class of team members
eligible to receive options, removing the administration of the Amended 1995
Option Plan from the committee or amending the Amended 1995 Option Plan in any
other way so that incentive stock options granted thereunder would fail to
qualify under Section 422 of the Internal Revenue Code. No amendment may
adversely affect any then outstanding option.
The Amended 1995 Option Plan will continue for 10 years from the date of
its original adoption (i.e., through 2005), unless the Amended 1995 Option Plan
terminates earlier upon the granting of options covering 900,000 shares (options
that are forfeited may be reissued by the committee).
Incentive Stock Options. The per share exercise price of each incentive
stock option may not be less than the fair market value of the stock on the date
of grant or, in the case of a team member owning more than 10% of the
outstanding Common Stock of the Company, not less than 110% of such fair market
value. Also, the aggregate fair market value of the stock with respect to which
options are exercisable for the first time by a team member in any calendar year
may not exceed $100,000.
Nonqualified Stock Options. The per share exercise price of each
nonqualified stock option may not be less than the fair market value of the
stock on the date of grant.
If exercised, an option must be exercised within the exercise period by
payment of the option price in cash, by check or by other means prescribed by
the committee.
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No option is exercisable within three years from the date of grant or more
than 10 years after the date of grant, or, in the case of an individual who owns
more than 10% of the outstanding common stock of the Company, more than five
years after the date of grant. Each option is exercisable in stock of the
Company. Options are exercisable based on vesting schedules established by the
committee administering the Amended 1995 Option Plan. Options may not be
exercisable any more rapidly than in cumulative installments of one quarter of
the number of shares covered by the option every year beginning on the third
anniversary from the date of grant and continuing annually for a period of four
years thereafter. If the individual's affiliation with the Company as a team
member is terminated during the term of the option, the end of the option period
will be accelerated. Notwithstanding the foregoing general rules, the committee
may issue options for shorter periods of time and may permit the earlier
exercise of outstanding options.
An individual may not transfer any option granted under the Amended 1995
Option Plan, although, in some circumstances after the individual's death, the
individual's personal representative may exercise the option and, in certain
other circumstances, options can be exchanged for new options.
On July 31, 1997, the reported closing price of the Company's Common Stock
on the New York Stock Exchange was $20.50.
Federal Income Tax Consequences
The recipient of an incentive stock option should not recognize any taxable
income or loss for federal income tax purposes at the time the incentive stock
option is granted or exercised; however, upon exercise, the difference between
the stock purchase price set forth in the option and the fair market value of
the shares received may be subject to the alternative minimum tax. If the Common
Stock purchased upon the exercise of an incentive stock option is held for at
least two years after the granting of the option and at least one year after
exercise, the recipient should receive a long term capital gain or loss upon the
sale or disposition of the Common Stock based on the difference between the fair
market value of the Common Stock on the date of sale or other disposition and
the purchase price of the Common Stock under the option. The Company will not be
entitled to any deductions with respect to the granting or exercise of the
incentive stock option in such cases.
If the recipient of an incentive stock option does not hold the shares for
two years after the grant of the option and one year after exercise, the
recipient will generally recognize as ordinary income in the year of disposition
the difference between (1) the purchase price of Common Stock covered by the
option and (2) the lesser of the sales price or the fair market value of the
shares on the date of exercise; and the Company will be entitled to a
corresponding deduction for such amount in that year. Any remaining gain would
be taxable to the recipient as capital gain. However, if the sales price is less
than the purchase price under the option, no income will be recognized; the
recipient would generally realize a capital loss equal to the difference between
the purchase price and the disposition price; and the Company will not receive
any deduction.
The general rules described in the preceding paragraph apply only when the
sale is made to an unrelated party. If the recipient makes a sale or other
disposition to certain related persons or entities before the end of the
applicable holding periods, then the recipient will be treated as having
received ordinary income (with a corresponding deduction to the Company) in the
year of disposition in an amount equal to the difference between the sales price
and the fair market value of the shares on the date of exercise (even if the
fair market value of the shares is less on the date of sale or other
disposition).
Because the Company does not anticipate that any nonqualified stock option
will have a readily ascertainable fair market value when issued, the recipient
of such an option should not recognize any taxable income or loss for federal
income tax purposes at the time the option is granted. The exercise of the
nonqualified stock option, however, will result in the immediate recognition of
taxable income by its holder at ordinary income rates based on the difference
between the purchase price for shares covered by the option and the fair market
value of the shares received at the time of exercise. The Company will receive a
corresponding deduction at the same time. Additional gain or loss, determined
under general rules of taxation, may be realized upon the sale of the shares.
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<PAGE> 11
The specific application and impact of the tax rules will vary depending on
the specific personal situation of individual option recipients.
PLAN BENEFITS TABLE -- AMENDED AND RESTATED 1992 TEAM MEMBER STOCK
PURCHASE PLAN AND AMENDED AND RESTATED 1995 STOCK OPTION PLAN
The following table provides information regarding the number of stock
purchase rights and the dollar value of stock purchase rights under the amended
stock purchase plan and the number of options to be granted and the dollar value
of such options under the amended stock option plan.
<TABLE>
<CAPTION>
AMENDED AND RESTATED
1992 TEAM MEMBERS' AMENDED AND RESTATED
STOCK PURCHASE PLAN 1995 STOCK OPTION PLAN
----------------------- --------------------------
NUMBER NUMBER
NAME AND POSITION DOLLAR VALUE OF UNITS DOLLAR VALUE OF UNITS
- ----------------- ------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
Peter J. Fontaine................................. * * (2) (2)
Chairman of the Board and Chief Executive
Officer
William C. Perkins................................ (1) (1) (2) (2)
President, Chief Operating Officer
Warren Shatzer.................................... (1) (1) (2) (2)
Executive Vice President -- Merchandising
C. Michael Moore.................................. (1) (1) (2) (2)
Chief Financial Officer
Clifford J. Wiley................................. (1) (1) (2) (2)
Vice President -- Real Estate
Executive Group(3)................................ (1) (1) (2) (2)
Non-Executive Director Group...................... * * * *
Non-Executive Officer Employee Group.............. (1) (1) (2) (2)
</TABLE>
- ---------------
* Not eligible for participation
(1) Participation in the Amended and Restated 1992 Team Members Stock Purchase
Plan is voluntary. The Company cannot determine the amount of shares that
will be purchased in the future. During fiscal 1997, 200, 0, 0 and 200
shares were purchased under this plan by Messrs. Perkins, Shatzer, Moore and
Wiley, respectively. In fiscal 1997, 750 aggregate shares and 14,332
aggregate shares of Common Stock were purchased under this plan by the
Executive Group and the Non-Executive Officer Employee Group, respectively.
The dollar values of the shares purchased by Messrs. Perkins, Shatzer, Moore
and Wiley determined using the fair market value of the Company's Common
Stock of $20.50 per share as of July 31, 1997 are $4,100, $0, $0, and
$4,100, respectively. In addition, the dollar values of the aggregate shares
purchased by the Executive Group and Non-Executive Officer Employee Group
determined using the fair market value of the Company's Common Stock of
$20.50 per share as of July 31, 1997 are $15,375 and $293,806, respectively.
(2) The grant of options under the Amended and Restated 1995 Stock Option Plan
is entirely within the discretion of the Compensation and Benefits
Committee. The Company cannot determine the nature or amount of awards that
will be made in the future. For information regarding grants of options in
fiscal 1997 to Messrs. Perkins, Shatzer, Moore and Wiley, see the Summary
Compensation Table, Option/SAR Grants Table and Option/SAR Exercises and
Year-End Value Table. During fiscal 1997, 8,500 stock options and 109,650
stock options were granted and remain outstanding under this plan to the
Executive Group and Non-Executive Officer Employee Group, respectively. The
dollar value of such stock options cannot be determined.
(3) Consists of 10 executive officers including the five executive officers
listed above.
8
<PAGE> 12
INFORMATION CONCERNING INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of Ernst & Young LLP, the Company's independent auditors,
are expected to be present at the Meeting with the opportunity to make a
statement if they desire to do so and to respond to appropriate questions posed
by stockholders. Matters pertaining to the auditing of the Company's financial
condition are referred to the Company's Board of Directors and its Audit
Committee.
It is expected that the Company's independent certified public accountants
for fiscal 1998 will be confirmed by the Board of Directors during the fiscal
year.
OTHER BUSINESS
It is not expected that any other matters are likely to be brought before
the meeting. However, if any other matters are presented, it is the intention of
the persons named in the proxy to vote the proxy in accordance with their best
judgment.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT
To: The Board of Directors
As members of the Compensation and Benefits Committee (the "Compensation
Committee"), it is our duty to administer the Company's various incentive plans,
including its stock option plans, its stock purchase plan and its annual bonus
plans. In addition, we review compensation levels of the executive officers,
evaluate the performance of the executive officers, make recommendations to the
Board of Directors with respect to the Company's executive compensation
policies, and deal with related matters. In evaluating the performance of
executive officers, we consult with the Chief Executive Officer, except when
evaluating his performance, in which case we meet independently. The
Compensation Committee will review with the Board of Directors in detail all
aspects of compensation for the executive officers. The Compensation Committee
is composed of three outside directors.
The Compensation Committee has available to it access to independent
compensation data and may, from time to time in the future, consult with an
outside compensation consultant.
The Company's compensation policy for executive officers, which is endorsed
by the Compensation Committee, is designed to support the overall objective of
enhancing value for stockholders by attracting, developing, rewarding and
retaining highly qualified and productive individuals; relating compensation to
both Company and individual performance; and insuring compensation levels that
are, in general, externally competitive and internally equitable.
The key elements of the Company's executive officers' compensation in
fiscal 1997 consisted principally of (1) base salary, (2) potential bonuses
based on overall Company performance for the Chief Executive Officer, the
President, the Executive Vice President -- Merchandising, the Executive Vice
President -- Operations and certain of the other vice presidents, and based in
part on overall Company performance and in part on specific performance criteria
keyed to areas of responsibility for each of the other executive officers and
(3) the award of stock options under the 1992 Stock Option Plan and/or the 1995
Stock Option Plan which is designed to give certain of the officers and other
team members the opportunity to be awarded long-term, stock-based incentives.
The Compensation Committee's policies with respect to each of these
elements are discussed below, including the basis for the compensation awarded
in fiscal 1997 to Peter J. Fontaine, the Company's Chief Executive Officer (and
President through January 31, 1997). In addition, although the elements of
compensation described below are considered separately, the Compensation
Committee takes into account the full compensation package afforded by the
Company to the individual.
Base Salary
Each officer's base salary is reviewed annually. The specific base salaries
are based upon the Chief Executive Officer's subjective determination of
appropriate salary levels, taking into consideration the scope of
responsibility, experience, Company and individual performance, as well as pay
practices of other companies relating to executives with similar responsibility.
The Chief Executive Officer then makes recommendations to the Compensation
Committee, which is responsible for approving or disapproving those
recommendations.
With respect to the base salary of Peter J. Fontaine in fiscal 1997,
consideration was given to a comparison of base salaries of persons with
comparable positions and responsibilities in peer companies and an assessment of
the individual performances of Mr. Fontaine. Mr. Fontaine was granted a base
salary of $192,400 for fiscal 1997 which was unchanged from his base salary for
fiscal 1996. The level nature of the base salary was reflective of the desire to
reward improved overall performance of the Company and the perceived
contribution of Peter J. Fontaine to this improved performance through the
annual bonus rather than by increasing base salary.
10
<PAGE> 14
Annual Bonus Program
Under the Company's annual bonus plans, incentive compensation is somewhat
discretionary but through objective overall performance criteria established
under the plans, is expected to be paid based on current year's performance. The
fiscal year 1997 annual bonus plans for the Chief Executive Officer, the
President, the Executive Vice President -- Merchandising, the Executive Vice
President -- Operations and certain of the vice presidents were directly tied to
pre-tax net income and is earned based in part on the ability of the Company to
achieve a preestablished goal for comparable store sales growth and in part on
the ability of the Company to achieve a preestablished goal for earnings growth.
Under the bonus program in fiscal 1997 for the particular executive officers who
held these positions during fiscal 1997, determinations as to payment of bonuses
were made quarterly. The base bonus for each of the Chief Executive Officer and
the Executive Vice President -- Merchandising was 1% of the Company's pre-tax
earnings, and for the Executive Vice President -- Operations was .75% of the
Company's pre-tax earnings until such executive was promoted to the position of
President on February 1, 1997, whereupon the base bonus was increased to 1% of
the Company's pre-tax earnings. Under the bonus program for these three
executive officers, the amount of the base bonus is adjusted downward if and to
the extent the goals are not achieved and is increased if and to the extent the
goals are exceeded. In fiscal 1997, the goal for comparable store sales increase
was 10% and the goal for earnings growth was 25%.
The fiscal year 1997 annual bonus plan for the other executive officers was
either based entirely on pre-tax net income and comparable store sales growth or
in part on pre-tax net income and comparable store sales growth and in part on
such executive officer meeting personal performance goals established at the
beginning of the fiscal year. The applicable percentage of pre-tax earnings
target for the other executive officers and the performance criteria for the
executive officers who had other personal performance goals were developed by
the Chief Executive Officer of the Company, with input from the respective
senior officer to whom they report and subject to approval by the Compensation
Committee. For fiscal year 1998, the performance criteria for the other
executive officers is to be developed by the President of the Company in
coordination with the Chief Executive Officer.
In order to provide some flexibility, management is given the authority to
terminate these various bonus plans at any time.
Long-Term Compensation
The Compensation Committee awards stock options under the 1992 Stock Option
Plan and/or the 1995 Stock Option Plan to executive officers, other members of
management and key individual contributors. Generally, the Chief Executive
Officer (and in the future the President together with the Chief Executive
Officer) will recommend the number of options to be granted and will present
this number along with appropriate supporting data to the Compensation Committee
for its review and approval. Options are granted at fair market value on the
date of grant and therefore any value which ultimately accrues to key team
members under such options is based entirely on the Company's performance, as
perceived by investors who establish the price for the Company's stock. These
options generally vest beginning after three years and then over a four year
period and have a 10 year duration.
Stock option grants are designed to retain key team members, including
executive officers, and to provide an incentive for key team members to improve
the return to stockholders. In fiscal 1997, the Compensation Committee awarded
stock options to Mr. Perkins, Mr. Moore, Mr. Bair, Mr. Bottino, Mr. Viele, Mr.
Joiner, Mr. Harrah and Mr. Wiley. The grants were based on their respective
responsibilities, their relative positions in the Company and their respective
contributions to the Company's financial performance. Although stock options
were issued to other key team members as well, no stock options were awarded to
Mr. Fontaine or Mr. Shatzer.
Other
The Committee believes that linking executive compensation to corporate
performance through a more significant emphasis on performance bonuses results
in a better alignment of compensation with corporate
11
<PAGE> 15
goals and stockholder interest. As performance goals are met or exceeded,
resulting in increased value to stockholders, executives are rewarded
commensurately. The Committee believes that compensation levels during fiscal
1997 adequately reflect the Company's compensation goals and policies.
No member of the Compensation Committee is a former or current officer of
the Company.
COMPENSATION COMMITTEE:
E. E. Wardlow
A Gordon Tunstall
David P. Walling
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the companies in the Standard &
Poor's 500 Index and an Automotive Peer Group(1). Cumulative total return for
each of the periods shown in the Performance Graph is measured assuming an
initial investment of $100 on August 18, 1992, the date of the Company's initial
public offering, and the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DAP S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
AUGUST 18, 1992 100.00 100.00 100.00
JUNE 1, 1993 167.00 110.00 128.00
MAY 31, 1994 128.00 114.00 138.00
MAY 30, 1995 149.00 135.00 136.00
MAY 28, 1996 144.00 179.00 175.00
JUNE 3, 1997 103.00 224.00 162.00
</TABLE>
- ---------------
(1) The peer group comprises publicly traded Automotive Parts Retailers which
are engaged principally or in significant part in the retail sale of
automotive replacement parts, maintenance items and accessories to the
Do-It-Yourself consumer and which often are viewed as being in competition
with the Company. The returns of each company have been weighted according
to their respective stock market capitalization for purposes of arriving at
a peer group average. The members of the peer group are as follows: Auto
Zone, Inc.; Genuine Parts Co.; Hi-Lo Automotive, Inc.; The Pep
Boys -- Manny, Moe & Jack and Trak Auto Corporation.
12
<PAGE> 16
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
executive officers:
<TABLE>
<CAPTION>
YEARS WITH
NAME POSITIONS THE COMPANY
- ---- --------- -----------
<S> <C> <C>
Peter J. Fontaine................... Chairman of the Board, Chief Executive Officer 22
and Director
William C. Perkins.................. President, Chief Operating Officer and 14
Director
Warren Shatzer...................... Executive Vice President -- Merchandising and 17
Director
C. Michael Moore.................... Chief Financial Officer and Secretary 1
David C. Viele...................... Vice President -- Purchasing and Distribution 21
Steven C. Bair...................... Vice President -- Operations 19
Clement A. Bottino.................. Vice President -- Operations 18
Steven K. Joiner.................... Vice President -- Marketing 13
Michael D. Harrah................... Vice President -- Information Systems 5
Clifford J. Wiley................... Vice President -- Real Estate 13
</TABLE>
NON-DIRECTOR EXECUTIVE OFFICERS
C. Michael Moore joined the Company in July 1996 as Chief Financial Officer
and was elected as Secretary in February 1997. Prior to joining the Company, Mr.
Moore was employed by Ernst & Young LLP from December 1981 until June 1996, most
recently as Senior Manager.
David C. Viele has been with the Company since March 1976, serving in
various distribution and purchasing capacities. Mr. Viele served as Purchasing
Manager from 1988 until April 1994, at which time he was elected to his current
position as Vice President -- Purchasing and Distribution.
Steven C. Bair has been with the Company since September 1978, serving in
various managerial capacities. Mr. Bair served as a Division Manager from 1985
until April 1994, at which time he was elected to his current position as Vice
President -- Operations.
Clement A. Bottino has been with the Company since July 1979, serving in
various managerial capacities. Mr. Bottino served as a Division Manager from
1985 until April 1994, at which time he was elected to his current position as
Vice President -- Operations.
Steven K. Joiner has been with the Company since October 1983, serving in
various managerial capacities. Since 1995, Mr. Joiner has served in the position
of Vice President -- Marketing.
Michael D. Harrah was appointed Vice President -- Information Systems in
1995. Prior thereto, Mr. Harrah was the Company's Director of Information
Systems since October 1992. Before joining the Company, Mr. Harrah worked for
Lykes Bros., Inc., for over 13 years, where he last served as Director of Data
Processing.
Clifford J. Wiley has been with the Company since August 1984, serving in
various real estate related capacities. Mr. Wiley served as a Real Estate
Manager from August 1984 to July 1996, at which time he was elected to his
current position as Vice President -- Real Estate.
None of the executive officers or directors are related to one another.
Executive officers are elected by and serve at the discretion of the Board of
Directors.
In recent years, the Company has also benefitted from the advice of four
seasoned retailers who, prior to retirement, were executives with Kmart
Corporation. E. E. Wardlow has provided advice and consultation on all phases of
mass merchandising and discount retailing; David P. Walling has provided advice
and consultation on accounting and financial matters; and Ken Dunkel, with
experience in distribution and Kenneth Dowden, with experience in distribution
and information systems, have also been providing guidance to the Company for
the past several years and continue to serve as advisors to the Company.
13
<PAGE> 17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information concerning the annual compensation
of each of the named executive officers of the Company, as defined under
applicable Securities and Exchange Commission Rules, for services rendered to
the Company in each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION(1) AWARDS(2)
------------------------ ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS(3)($) OPTIONS(#)(4) COMPENSATION($)(5)
- --------------------------- ---- ---------- ----------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Peter J. Fontaine, 1997 192,400 203,786 (6) 1,586
Chief Executive Officer and 1996 192,400 253,793 (6) 5,981
Chairman of the Board 1995 192,400 181,199 (6) 3,473
William C. Perkins, 1997 141,996 170,142 (6) 12,676
President and 1996 125,000 155,047 (6) 15,696
Chief Operating Officer 1995 125,000 90,653 60,000 2,706
Warren Shatzer, 1997 186,150 203,786 (6) 1,628
Executive Vice President -- 1996 186,150 253,793 (6) 5,590
Merchandising 1995 186,150 181,199 (6) 2,818
C. Michael Moore, 1997 120,000 19,575 5,500 0
Chief Financial Officer(7)
Clifford J. Wiley, 1997 92,000 48,900 500 15,449
Vice President -- 1996 82,000 59,325 1,000 10,181
Real Estate 1995 75,000 65,008 6,000 11,867
</TABLE>
- ---------------
(1) All Other Compensation, other than salary and bonuses, does not exceed the
minimum amounts required to be reported pursuant to Securities and Exchange
Commission Rules.
(2) The Company does not offer any Restricted Stock Awards, SAR or other LTIP
programs.
(3) Amounts in this column include bonuses earned under the annual management
incentive plan which is keyed to the Company's performance. Amounts earned
with respect to a particular fiscal year are accrued as expenses in such
fiscal year.
(4) This category reflects stock options pursuant to the Company's 1992 Stock
Option Plan and 1995 Stock Option Plan.
(5) For 1997, includes: for Mr. Fontaine and Mr. Shatzer the amounts contributed
by the Company to the Team Member's Section 401(k) Plan (the "401(k) Plan");
for Mr. Perkins: $2,176 contributed by the Company to the 401(k) Plan and
$10,500 accrued under the Company's Supplemental Employee Profit Sharing
Plan (the "Supplemental Plan"); and for Mr. Wiley: $1,538 contributed by the
Company to the 401(k) Plan, $10,310 accrued under the Supplemental Plan and
$3,600 in allowances and relocation compensation.
(6) Not applicable. No compensation of this type received.
(7) Mr. Moore began his employment with the Company in July 1996 as Chief
Financial Officer.
14
<PAGE> 18
OPTION/SAR GRANTS TABLE
The following table shows information concerning stock options granted
during fiscal 1997 for the individuals shown in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
---------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION ----------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------- ------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Fontaine......................... -0- -- -- -- -- --
Warren Shatzer............................ -0- -- -- -- -- --
William C. Perkins........................ -0- -- -- -- -- --
C. Michael Moore.......................... 5,500 4.99 (1) (1) (1) (1)
Clifford J. Wiley......................... 500 * 22.25 9/23/06 6,996 17,730
</TABLE>
- ---------------
* Less than one percent
(1) Mr. Moore was granted options to purchase 5,000 shares of Common Stock in
July 1996 (the "July Options") and options to purchase 500 shares of Common
Stock in September 1996 (the "September Options"). The July Options have an
exercise price of $25.38 per share and an expiration date of 7/8/06 and the
September Options have an exercise price of $22.25 per share and an
expiration date of 9/23/06. The potential realizable values, at a 5% and 10%
annual rate of appreciation, for the July Options are $79,806 and $202,246,
respectively and for the September Options are $6,996 and $17,730,
respectively.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table shows information concerning stock option values as of
the end of fiscal 1997.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------------------------- ----------------------------
<S> <C> <C>
Peter J. Fontaine............................ -0-/-0- -0-/-0-
Warren Shatzer............................... -0-/-0- -0-/-0-
William C. Perkins........................... 10,669/80,892 2,778/127,500
C. Michael Moore............................. -0-/5,500 -0-/-0-
Clifford J. Wiley............................ 3,409/12,558 1,042/11,667
</TABLE>
- ---------------
(1) This represents the amount by which the fair market value of the Company's
Common Stock of $18.50 per share as of June 3, 1997 exceeds the exercise
price of those options held by the named executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Benefits Committee (the
"Committee"), are E. E. Wardlow, A Gordon Tunstall and David P. Walling. Neither
Mr. Wardlow, Mr. Tunstall nor Mr. Walling has at any time been an officer of the
Company. Neither Mr. Wardlow, Mr. Tunstall nor Mr. Walling were employees of the
Company during fiscal 1997.
15
<PAGE> 19
No director, executive officer or member of the Committee had any
interlocking relationship with any other company which would require disclosure
in this proxy statement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 20, 1992, the Company and Denis L. Fontaine, Peter J. Fontaine
and Warren Shatzer entered into an S Corporation Tax Allocation and
Indemnification Agreement (the "Tax Agreement") relating to their respective
income tax liabilities. Because the Company is fully subject to corporate income
taxation as a result of terminating its S Corporation status prior to the
consummation of its initial public offering (the "Offering"), the reallocation
of income and deductions between the period during which the Company was treated
as an S Corporation and the period during which the Company is subject to
corporate income taxation may increase the taxable income of one party while
decreasing that of another party. Accordingly, the Tax Agreement is intended to
assure that taxes are borne by the Company on the one hand and Messrs. Fontaine,
Fontaine and Shatzer and their respective heirs, successors and permitted
assigns (the "Stockholders"), on the other only to the extent that such parties
are required to report the related income for tax purposes. Subject to certain
limitations, the Tax Agreement generally provides that the Stockholders will be
indemnified by the Company with respect to federal and state income taxes (plus
interest and penalties) shifted from a Company taxable year subsequent to the
Offering to a taxable year in which the Company was an S Corporation, and the
Company will be indemnified by the Stockholders with respect to federal and
state income taxes (plus interest and penalties) shifted from an S Corporation
taxable year to a Company taxable year subsequent to the Offering. Any payment
made by the Company to the Stockholders pursuant to the Tax Agreement may be
considered by the Internal Revenue Service or the state taxing authorities to be
nondeductible by the Company for income tax purposes.
As of October 10, 1992, the Company and Herman and Marie Fontaine ("Mr. and
Mrs. Fontaine"), entered into a Wage Agreement (the "Agreement") that provides
that from October 10, 1992 and continuing as long as Mr. and Mrs. Fontaine are
both living and are continuing to provide the services required under the
Agreement, the Company will pay to Mr. and Mrs. Fontaine, collectively,
$140,000.00 per year. Upon the death of either Herman or Marie Fontaine, the
Company is required to continue to pay the survivor $140,000.00 per year
provided the survivor continues to provide the services required under the
Agreement. Under the Agreement, Mr. and Mrs. Fontaine must continue to provide
services to the Company in their present capacities as consultant and sales
auditor, respectively, or to provide consulting services to the Company. Herman
Fontaine is one of the founders of the Company and is currently Chairman
Emeritus of the Company. Marie Fontaine has been an employee of the Company
since the Company was founded. Mr. and Mrs. Fontaine are the parents of Denis L.
Fontaine and Peter J. Fontaine. In fiscal 1997, the Company paid Mr. and Mrs.
Fontaine a total of $147,950 of which $140,000 was paid in accordance with the
Agreement and $7,950 was paid as additional compensation to Mrs. Fontaine.
The Company leases two of its store locations under separate one year
leases from a Florida partnership which was established by Denis L. Fontaine and
Peter J. Fontaine and the current partners of which are Peter J. Fontaine and
the Glenda A. Fontaine Marital Trust, which was formed after Denis L. Fontaine's
death in June 1994 (the "Marital Trust"). The leases provide for fixed monthly
rental, pass-through of all expenses to the Company, including taxes, repairs
and insurance and one year renewal terms. In the past, the leases have been
renewed from year to year and it is anticipated that such renewals will
continue. Lease payments under the two leases aggregated $127,000 in fiscal
1997. The leases are believed to be at or below fair market value.
During fiscal 1997, the Company subleased on a month-to-month tenancy a
single store location from a single-purpose corporation which was owned equally
by Denis L. Fontaine and Peter J. Fontaine until Denis L. Fontaine's death in
June 1994. The corporation is currently owned equally by Peter J. Fontaine and
the Marital Trust. The corporation leased the store location from an unrelated
third party and subleased the store location to the Company on a pass-through
basis. Lease payments under the sublease aggregated $13,570 in fiscal 1997. The
lease is believed to be at or below fair market value.
During fiscal 1997, the Company chartered on a regular basis an airplane
from PF Flyers, Inc., a Florida corporation that owns and operates an airplane
charter service and all of the common stock of which is
16
<PAGE> 20
beneficially owned by Peter J. Fontaine. The payments made during fiscal 1997 by
the Company to PF Flyers, Inc., aggregated approximately $50,610. The rates
charged to the Company by PF Flyers, Inc., for the chartering services are
believed to be at or below fair market value.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the Company's knowledge, based solely on a review of the forms, reports
and certificates filed with the Company by the Company's directors and officers
and the holders of more than 10% of the Company's Common Stock, all Section
16(a) filing requirements were complied with by such persons in fiscal 1997.
SECURITY OWNERSHIP
The following table sets forth, as of August 24, 1997, the number of shares
of the Company's Common Stock beneficially owned by (i) each person known to the
Company as having beneficial ownership of more than 5% of the Company's Common
Stock together with such person's address, (ii) each of the Company's directors
and nominees to become a director, (iii) each named executive officer as defined
under applicable Securities and Exchange Commission rules and (iv) all directors
and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OR NUMBER IN GROUP OWNERSHIP(1) OF CLASS
- ------------------------------------------- ------------- --------
<S> <C> <C>
Fontaine Industries Limited Partnership..................... 3,998,255(2) 25.1
3305 W. Spring Mountain Road #60
Las Vegas, Nevada 89012
Fontaine Enterprises Limited Partnership.................... 3,916,331(3) 23.6
3305 W. Spring Mountain Road #60
Las Vegas, Nevada 89012
Peter J. Fontaine........................................... 8,066,586(4) 48.7
c/o Discount Auto Parts, Inc.
4900 Frontage Road South
Lakeland, Florida 33815
Glenda A. Fontaine Marital Trust............................ 3,916,331(5) 23.6
under Agreement dated July 8, 1993
c/o Discount Auto Parts, Inc.
4900 Frontage Road South
Lakeland, Florida 33815
William C. Perkins.......................................... 15,430(6) *
Warren Shatzer.............................................. 151,000(7) *
C. Michael Moore............................................ 1,000 *
Clifford J. Wiley........................................... 4,525(8) *
E. E. Wardlow............................................... 7,500(9) *
A Gordon Tunstall........................................... 3,500(10) *
David P. Walling............................................ 5,540(11) *
FMR Corp.................................................... 1,158,900(12) 6.98
82 Devonshire Street
Boston, Massachusetts 02109
Fidelity Management & Research Company...................... 1,131,300(12) 6.82
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OR NUMBER IN GROUP OWNERSHIP(1) OF CLASS
- ------------------------------------------- ------------- --------
<S> <C> <C>
Edward C. Johnson 3d........................................ 1,158,900(12) 6.98
82 Devonshire Street
Boston, Massachusetts 02109
Abigail P. Johnson.......................................... 1,158,900(12) 6.98
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. ............................. 1,192,500(13) 7.2
100 E. Pratt Street
Baltimore, Maryland 21202
T. Rowe Price New Horizons Fund, Inc. ...................... 1,000,000(13) 6.0
100 E. Pratt Street
Baltimore, Maryland 21202
All Directors and Executive Officers as a Group (13
persons).................................................. 8,205,131 49.5
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission rules, includes shares as to which a
person has or shares voting power and/or investment power. Except as
otherwise indicated, all shares are held of record with sole voting and
investment power.
(2) Fontaine Industries Limited Partnership ("Industries L.P.") is a Nevada
Limited Partnership. A revocable trust established by Peter J. Fontaine and
under which Mr. Fontaine is the trustee, is the sole general partner and is
one of two limited partners of Industries L.P., owning an aggregate of 99%
of the partnership interests. Peter J. Fontaine is a limited partner and
owns the remaining 1% of the partnership interests. Although not reflected
in the table, Industries L.P. may be considered, for beneficial ownership
purposes, part of a group which also includes Fontaine Enterprises Limited
Partnership, Peter J. Fontaine Revocable Trust, Glenda A. Fontaine Marital
Trust, certain trusts established for the benefit of the children of Denis
L. Fontaine, Peter J. Fontaine and Merritt A. Gardner as Trustee;
therefore, Industries L.P. may be considered as beneficially owning the
same aggregate number of shares shown in the table as being beneficially
owned by Peter J. Fontaine.
(3) Fontaine Enterprises Limited Partnership ("Enterprises L.P.") is a Nevada
Limited Partnership. The Glenda A. Fontaine Marital Trust (the "Glenda
Fontaine Trust"), of which Peter J. Fontaine and Merritt A. Gardner are the
trustees, is the sole general partner and a limited partner of Enterprises
L.P., owning an aggregate of 81.5% of the partnership interests. Certain
trusts established for the benefit of the children of Denis L. Fontaine
(the "Children's Trusts"), of which Peter J. Fontaine and Merritt A.
Gardner are also the trustees, are limited partners of Enterprises L.P. and
in such capacity own the remaining 18.5% of the partnership interests.
Although not reflected in the table, Enterprises L.P. may be considered,
for beneficial ownership purposes, part of a group which also includes
Fontaine Industries Limited Partnership, Peter J. Fontaine Revocable Trust,
Glenda A. Fontaine Marital Trust, certain trusts established for the
benefit of the children of Denis L. Fontaine, Peter J. Fontaine and Merritt
A. Gardner as Trustee; therefore, Enterprises L.P. may be considered as
beneficially owning the same aggregate number of shares shown in the table
as being beneficially owned by Peter J. Fontaine.
(4) Peter J. Fontaine does not directly own any shares. Beneficial ownership by
Mr. Fontaine reflects (i) 3,998,255 shares owned by Industries L.P., (ii)
3,916,331 shares owned by Enterprises L.P., (iii) 150,000 shares owned by
the Peter J. Fontaine Revocable Trust, (iv) 1,000 shares owned by Debra
Fontaine, Mr. Fontaine's wife and (v) 1,000 shares owned by Mr. Fontaine's
daughter. See Notes (2) and (3) above.
(5) The Glenda Fontaine Trust does not directly own any shares. Beneficial
ownership by the Glenda Fontaine Trust reflects shares owned by Enterprises
L.P. See Note (3) above.
18
<PAGE> 22
(6) The number of shares shown includes 13,558 shares deemed to be beneficially
owned by Mr. Perkins by virtue of certain stock options that are currently
exercisable or become exercisable within 60 days. Also includes 272 shares
owned by Gina Perkins, his wife, and 200 additional shares (100 owned by
each of his two sons).
(7) The number of shares shown for Warren Shatzer includes all of the shares
held by Shatzer Enterprises Limited Partnership, a Nevada limited
partnership. A revocable trust established by Mr. Shatzer and under which
Mr. Shatzer is the trustee, is the sole general partner and is one of two
limited partners of Shatzer Enterprises Limited Partnership, owning an
aggregate of 99% of the partnership interests, with Warren Shatzer being a
limited partner and owning the remaining 1% of the partnership interests.
The number of shares also includes 1,000 shares owned by his son.
(8) The number of shares shown includes 4,525 shares deemed to be beneficially
owned by Mr. Wiley by virtue of certain stock options that are currently
exercisable or become exercisable within 60 days.
(9) The number of shares shown includes 2,500 shares deemed to be beneficially
owned by Mr. Wardlow by virtue of certain stock options that are currently
exercisable or become exercisable within 60 days. Also includes 5,000
shares that are held in a revocable trust established by Mr. Wardlow and
under which Mr. Wardlow is the Trustee.
(10) The number of shares shown includes 2,500 shares deemed to be beneficially
owned by Mr. Tunstall by virtue of certain stock options that are currently
exercisable or become exercisable within 60 days.
(11) The number of shares shown includes 250 shares deemed to be beneficially
owned by Mr. Walling by virtue of certain stock options that are currently
exercisable or become exercisable within 60 days. Also includes 245 shares
owned by Elizabeth Walling, his wife.
(12) This information is derived from a Schedule 13G dated February 14, 1997,
filed by FMR Corp., Edward C. Johnson 3d. and Abigail P. Johnson. FMR
Corp., Edward C. Johnson 3d and Abigail P. Johnson are each shown to have
sole dispositive power with respect to all 1,158,900 shares. Fidelity
Management & Research Company is a wholly owned subsidiary of FMR Corp. and
is deemed the beneficial owner with respect to 1,131,300 shares as a result
of acting as investment adviser to several investment companies registered
under Section 8 of the Investment Company Act of 1940. Neither FMR Corp.,
Edward C. Johnson, 3d, or Abigail P. Johnson has the sole power to vote or
direct the voting of any of the 1,158,900 shares shown. This power resides
with the Board of Trustees of the various institutions for which FMR
Corp.'s wholly owned subsidiaries act as investment advisers.
(13) The number of shares shown are owned by various individual and
institutional investors including the T. Rowe Price Horizons Fund, Inc.
(which owns 1,000,000 shares, representing 6.0% of the shares outstanding),
for which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
This information is derived from a Schedule 13G dated February 14, 1997
filed by Price Associates and T. Rowe Price Horizons Fund, Inc.
STOCKHOLDERS PROPOSALS FOR PRESENTATIONS AT THE 1998 ANNUAL MEETING
Pursuant to the General Rules under the Securities Exchange Act of 1934,
proposals of stockholders intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by management of the Company at its executive
offices by April 27, 1998 (i.e., 120 days prior to August 27, 1998).
The Company's Amended and Restated Articles of Incorporation also contain
requirements concerning advance notice to the Company of any stockholder
proposal and of any nominations by stockholders of persons to stand for election
as directors at a stockholders' meeting. Notice of stockholder proposals and of
director nominations must be timely given in writing to the Secretary of the
Company prior to the meeting at which the directors are to be elected. To be
timely, notice must be received at the principal executive offices of the
Company not less than 60 days prior to the meeting of stockholders; provided,
however, that in the event that less than 70 days' notice prior to public
disclosure of the date of the meeting is given or made to the stockholders,
notice by the stockholder, in order to be timely, must be so delivered or
received not later than
19
<PAGE> 23
the close of business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or public disclosure of the date of
the annual meeting was made, whichever first occurs.
A stockholder's notice with respect to a proposal to be brought before the
annual meeting must set forth (a) a brief description of the proposal and the
reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business and any other stockholders known by such stockholder to be
supporting such proposal, (c) the class and number of shares of the Company
which are beneficially owned by such stockholder on the date of such stockholder
notice and by any other stockholders known by such stockholder to be supporting
such proposal on the date of such stockholder notice, and (d) any financial
interest of the stockholder in such proposal.
A stockholder's notice with respect to a director nomination must set forth
(a) as to each nominee 1) the name, age, business address and residence address
of the person, 2) the principal occupation or employment of the person, 3) the
class and number of shares of the Company which are beneficially owned by such
person, 4) all information that would be required to be included in a proxy
statement soliciting proxies for the election of the nominee director (including
such person's written consent to serve as a director if so elected) and (b) as
to the stockholder providing such notice (i) the name and address, as they
appear on the Company's books, of the stockholder and (ii) the class and number
of shares of the Company which are beneficially owned by such stockholder on the
date of such stockholder notice.
The complete Amended and Restated Articles of Incorporation provisions
governing these requirements are available to any stockholder without charge
upon request from the Secretary of the Company.
By Order of the Board of Directors,
/s/ C. Michael Moore
C. MICHAEL MOORE,
Secretary
Dated: August 27, 1997
20
<PAGE> 24
APPENDIX A
DISCOUNT AUTO PARTS, INC.
AMENDED AND RESTATED
1992 TEAM MEMBER STOCK PURCHASE PLAN
ARTICLE 1
Purpose
The purpose of the Discount Auto Parts, Inc. Team Member Stock
Purchase Plan (the "Plan") is to provide employees of Discount Auto Parts, Inc.
(the "Company") and its subsidiaries with an opportunity to acquire a
proprietary interest in the Company through the purchase of authorized but
unissued shares of common stock (par value $.01 per share) of the Company (the
"Common Stock"). It is the intention of the Company to have the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, or any
statute or regulation of similar import. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
ARTICLE 2
Definitions
The following words and terms as used herein shall have that meaning
set forth therefor in this Article 2 unless a different meaning is clearly
required by the context. Whenever appropriate, words used in the singular
shall be deemed to include the plural and vice versa, and the masculine gender
shall be deemed to include the feminine gender.
2.1 "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.3 "Committee" shall mean the Compensation and Benefits Committee
of the Board or such other committee as may be appointed by the Board as the
Committee in accordance with Section 3.1.
2.4 "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
2.5 "Company" shall mean Discount Auto Parts, Inc., a Florida
corporation, and any successor.
2.6 "Compensation" shall mean an Eligible Employee's regular
salary and wages, overtime pay, bonuses and commissions (in all cases, before
any reduction for elective contributions to any Code Section 401(k) or Code
Section 125 Plan), but does not include credits or benefits under the Plan, or
any amount contributed by the Company to any pension, profit sharing or
employee stock ownership plan, or any employee welfare, life insurance or
health insurance plan or arrangement, or any deferred compensation plan or
arrangement.
1.
<PAGE> 25
2.7 "Eligible Employee" shall mean any individual employed by the
Company or any Subsidiary who meets the eligibility requirements of Article 4.
The Committee shall have the sole power to determine who is and who is not an
Eligible Employee.
2.8 "Fair market value" of the shares of Common Stock shall mean
the closing price, on the date in question (or, if no shares are traded on such
day, on the next preceding day on which shares were traded), of the Common
Stock as reported on the Composite Tape, or if not reported thereon, then such
price as reported in the trading reports of the principal securities exchange
in the United States on which such stock is listed, or if such stock is not
listed on a securities exchange in the United States, the mean between the
dealer closing "bid" and "ask" prices on the over-the-counter market as
reported by the National Association of Security Dealers Automated Quotation
System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair
market value of such stock as determined by the Committee in good faith and
based on all relevant factors.
2.9 "Purchase Documents" is defined in Section 6.1.
2.10 "Plan" shall mean the Discount Auto Parts, Inc. 1992 Team
Member Stock Purchase Plan, as set forth herein and as amended from time to
time.
2.11 "Shares" shall mean shares of the Common Stock.
2.12 "Subsidiary" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition of "subsidiary
corporation" contained in Section 424(f) of the Code.
ARTICLE 3
Administration
3.1 Committee. This Plan shall be administered by a committee
appointed by the Board of Directors (the "Committee"). The Committee shall
consist of not less than two (2) nor more than five (5) persons, each of whom
shall be a member of the Board and none of whom shall be eligible to
participate under the Plan. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors.
3.2 Organization. The Committee shall select one of its members
as chairman, and shall hold meetings at such time and places as it may
determine. The acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be valid acts of the Committee.
3.3 Power and Authority. Subject to the provisions of the Plan,
the Committee shall have full authority, in its discretion: (a) to determine
the employees of the Company and its Subsidiaries who are eligible to
participate in the Plan; (b) to determine the purchase price of the shares of
Common Stock being offered; and (c) to interpret the Plan, and to prescribe,
amend and rescind rules and regulations with respect thereto. The
interpretation and construction by the Committee of any provision of the Plan
over which it
2.
<PAGE> 26
has discretionary authority shall be final and conclusive. All actions and
policies of the Committee shall be consistent with the qualification of the
Plan at all times as an employee stock purchase plan under Section 423 of the
Code.
(a) No Liability. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan.
ARTICLE 4
Employees Eligible To Participate
4.1 General Rule. Any person, including any officer but not a
person who is solely a director, who is in the employment of the Company or any
Subsidiary on the first day of an offering period is eligible to participate in
the Plan with respect to that offering, except (a) a person who has been
employed less than one year; (b) a person whose customary employment is 20
hours or less per week; and (c) a person whose customary employment is for not
more than five months in any calendar year.
4.2 Special Rules. Notwithstanding any provision of the Plan to
the contrary, no employee shall be eligible to subscribe for any shares under
the Plan if:
(a) immediately after the subscription, the employee
would own stock and/or hold outstanding options to purchase stock, possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or of any Subsidiary (as determined in accordance with the
provisions of Section 423(b)(3) of the Code);
(b) the subscription would permit his rights to purchase
shares under all stock purchase plans of the Company and its parent and
subsidiary corporations to accrue at a rate that exceeds $25,000 of fair market
value of such shares (determined at the time such right to subscribe accrues)
for each calendar year in which such right to subscribe is outstanding at any
time;
(c) the subscription is otherwise prohibited by law; or
(d) his employment is terminated for any reason prior to
the time revocation or cancellation of participation in an offering is
prohibited under Section 6.2.
ARTICLE 5
Offers
5.1 Offering Periods. There shall be twenty three (23) offering
periods under the Plan: the first offering period shall commence on the
effective date of the Plan and shall conclude on September 30, 1992;
thereafter, a separate offering period shall commence on the first day and
conclude on the last day of the months of March and September in each of the
years 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002 and 2003.
Except for the maximum number of shares to be offered under the Plan,
3.
<PAGE> 27
except for a lack of available shares, and except for the limitation on the
number of shares for which each Eligible Employee may subscribe, there shall be
no limit on the aggregate number of shares for which subscriptions may be made
with respect to any particular offering. The right of an Eligible Employee to
subscribe to shares in an offering shall not be deemed to accrue until the
first day of that offering period.
5.2 Price. The purchase price per share for an offering period
shall be 85% of the fair market value of the Common Stock on the last day
immediately preceding the first day of the offering period; provided, however,
that with respect to the first offering period (the offering period ending
September 30, 1992), the purchase price per share shall be 85% of the lesser of
(a) the fair market value of the Common Stock on the last day immediately
preceding the first day of the offering period or (b) the fair market value of
the Common Stock on the last day immediately preceding the last day of the
offering period.
5.3 Number of Shares To Be Offered.
(a) The maximum number of shares of Common Stock that may
be offered under the Plan is 550,000.
(b) In each offering, an Eligible Employee shall be
entitled to subscribe for a total number of shares of Common Stock equal to one
share for each Two Hundred Forty Dollars ($240.00) of Compensation paid to him
for the calendar year immediately preceding the year in which the offering
occurs. However, no Eligible Employee shall be entitled to subscribe in any
offering to more than two hundred (200) shares or (for those Eligible Employees
who are entitled to purchase at least ten (10) shares) fewer than ten (10)
shares.
(c) Subscriptions shall be allowed for full shares only.
Any rights to subscribe for fractional shares shall be void; and any
computation relating to fractional shares shall be rounded down to the next
lowest whole number of shares.
(d) If with respect to any offering the available shares
are oversubscribed, the aggregate of the subscriptions allowable under Section
5.3(b) shall be reduced to such lower figure as may be necessary to eliminate
the oversubscription. Such reduction shall be effected on a proportionate
basis as equitably as possible; but in no event shall such reduction result in
a subscription of less than the minimum subscription or a subscription for
fractional shares. In the event of an oversubscription and cutback as provided
in this paragraph (d), the Company will refund to the participating employees
any excess payment for subscribed shares as soon as practicable after
completion of the offering.
ARTICLE 6
Participation and Payment
6.1 Election To Participate. An Eligible Employee may become a
participant in an offering (a) by completing a subscription agreement,
indicating the number of shares of Common Stock to be purchased, and such other
documents as the Company may require (the "Purchase Documents"); and (b) by
tendering the Purchase Documents and cash or a check (payable in U.S. funds)
for the full subscription price to the Secretary of the Company (or such other
person as may be designated by the Committee) at
4.
<PAGE> 28
any time during the offering; provided however that with respect to the first
offering period (the offering period ending September 30, 1992), all
participants in such offering shall be deemed to have become participants in
the offering on September 30, 1992 notwithstanding when during the offering
period the Purchase Documents and the cash or check are tendered. Purchase
Documents and cash or check received by the Secretary of the Company (or other
designated person) before or after the offering shall be void and shall be
given no effect with respect to the offering; and the Secretary shall return
such documents and cash or check to the involved employee as soon as
practicable after receipt.
6.2 No Revocation of Election. No election to participate in an
offering may be revoked or cancelled by an Eligible Employee once the Purchase
Documents and full payment have been tendered to the Company.
6.3 No Interest. No interest shall be payable on the purchase
price of the shares of Common Stock subscribed for or on the funds returned to
employees as a result of an oversubscription, or pursuant to Section 6.1 for
early or late delivery.
6.4 Delivery of Certificates Representing Shares.
(a) As soon as practicable after the completion of each
offering, the Company shall deliver or cause to be delivered to each
participating employee a certificate or certificates representing the shares of
Common Stock purchased in the offering.
(b) Certificates representing shares of Common Stock to
be delivered to a participating employee under the Plan will be registered in
the name of the participating employee, or if the participating employee so
directs, by written notice to the Company prior to the termination date of the
pertinent offering, and to the extent permitted by applicable law, in the names
of the participating employee and one such other person as may be designated by
the participating employee, as joint tenants with rights of survivorship.
6.5 Rights as Stockholder. No participating employee shall have
any right as a stockholder until after the completion of the offering in which
the employee participated and the date on which he becomes a record owner of
the shares purchased under the Plan (the "record ownership date"). No
adjustment shall be made for dividends or other rights for which the record
date is prior to the record ownership date.
6.6 Termination of Employment. An employee whose employment is
terminated for any reason shall have no right to participate in the Plan after
termination. However, the termination shall not affect any election to
participate in the Plan that is made prior to termination in accordance with
the provisions of Section 6.1.
6.7 Rights Not Transferable. The right of an Eligible Employee to
participate in the Plan shall not be transferable by the employee, and no right
of an Eligible Employee under this Plan may be exercised after his death, by
his Personal Representative or anyone else, or during his lifetime by any
person other than the Eligible Employee.
5.
<PAGE> 29
ARTICLE 7
Miscellaneous
7.1 Stock Adjustments.
(a) In the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split or other
division or consolidation of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without any receipt of consideration by the Company, then,
in any such event, the number of shares of Common Stock that remain available
under the Plan, and the number of shares of Common Stock and the purchase price
per share of Common Stock then subject to subscription by Eligible Employees,
shall be proportionately and appropriately adjusted for any such increase or
decrease.
(b) Subject to any required action by the stockholders,
if any change occurs in the shares of Common Stock by reason of any
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting the shares of Common
Stock, then, in any such event, the number and type of shares then subject to
subscription by Eligible Employees, and the purchase price thereof, shall be
proportionately and appropriately adjusted for any such change.
(c) In the event of a change in the Common Stock as
presently constituted that is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any change shall be deemed to
be shares of Common Stock within the meaning of the Plan.
(d) To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by, and
in the discretion of, the Committee, whose determination in that respect shall
be final, binding and conclusive.
(e) Except as hereinabove expressly provided in this
Section 7.1, an Eligible Employee shall have no rights by reason of any
division or consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease the number of shares of stock
of any class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
any subscription.
(f) The existence of the Plan, and any subscription for
shares of Common Stock hereunder, shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate, or
to dissolve, to liquidate, to sell, or to transfer all or any part of its
business or assets.
7.2 Necessity for Delay. If at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification
of the shares of Common Stock covered by the Plan upon any securities exchange
or under any state or federal law or the consent or approval of any
governmental
6.
<PAGE> 30
regulatory body, is necessary or desirable as a condition of, or in connection
with, the Plan or the offering, issue or purchase of shares thereunder, the
Plan shall not be effective as to later offerings unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
Notwithstanding anything in the Plan to the contrary, if the provisions of this
Section 7.2 become operative and if, as a result thereof, an offering is missed
in whole or in part, then and in that event, the missed portion of the offering
shall be passed and the term of the Plan shall not be affected.
Notwithstanding the foregoing or any other provision in the Plan, the Company
shall have no obligation under the Plan to cause any shares of Common Stock to
be registered or qualified under any federal or state law or listed on any
stock exchange or admitted to any national marketing system.
7.3 Term of Plan. The Plan, unless sooner terminated as provided
in Section 7.4, shall commence upon the satisfaction of the conditions of
Section 7.9 and shall terminate on the conclusion of the offering to be made in
September 2003.
7.4 Amendment of the Plan; Termination. The Board shall have the
right to revise, amend or terminate the Plan at any time without notice,
provided that no Eligible Employee's existing rights are adversely affected
thereby without the consent of the Eligible Employee, and provided further
that, without approval of the stockholders of the Company, no such revision or
amendment shall (a) increase the total number of shares of Common Stock to be
offered; (b) change the formula by which the price at which the shares shall be
sold is determined; (c) increase the maximum number of shares of Common Stock
that an employee can purchase; (d) materially modify the requirements as to
eligibility for participation in the Plan; (e) otherwise materially increase
the benefits under the Plan to Eligible Employees; or (f) remove the
administration of the Plan from the Committee. The foregoing prohibitions
shall not be affected by adjustments in shares and purchase price made in
accordance with the provisions of Section 7.1.
7.5 Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to the Plan will be used for general
corporate purposes.
7.6 No Obligation to Participate. The offering of any Common
Stock under the Plan shall impose no obligation upon any Eligible Employee to
subscribe to purchase any such shares.
7.7 No Implied Rights to Employees. The existence of the Plan,
and the offering of shares of Common Stock under the Plan, shall in no way give
any employee the right to continued employment, give any employee the right to
receive any Common Stock or any additional Common Stock under the Plan, or
otherwise provide any employee any rights not specifically set forth in the
Plan.
7.8 Withholding. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require a participating employee to remit to the Company an amount
sufficient to satisfy any federal, state or local withholding tax liability
prior to the delivery of any certificate or certificates for such shares.
Whenever under the Plan payments are to be made in cash, such payments shall be
made net of an amount sufficient to satisfy any federal, state or local
withholding tax liability.
7.9 Conditions Precedent to Effectiveness. The Plan shall become
effective upon the date that the Plan is adopted by the Board of Directors,
subject to the approval of the Plan by the stockholders of the Company within
12 months after its adoption by the Board.
7.
<PAGE> 31
APPENDIX B
DISCOUNT AUTO PARTS, INC.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
ARTICLE 1
General
1.1 Purpose. This incentive stock option and nonqualified stock
option plan (the "Plan") is established to promote the interests of Discount
Auto Parts, Inc. (the "Company") and its stockholders by enabling the Company,
through the granting of stock options, to attract and retain executive and
other key team members of the Company and its subsidiaries, and to provide
additional incentive to such team members to increase their stock ownership in
the Company. It is intended that those Options issued pursuant to the
provisions of the Plan relating to incentive stock options shall constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder,
or any statute or regulation of similar import.
1.2 Definitions. The following words and terms as used herein
shall have that meaning set forth therefor in this Section 1.2 unless a
different meaning is clearly required by the context. Whenever appropriate,
words used in the singular shall be deemed to include the plural and vice
versa, and the masculine gender shall be deemed to include the feminine gender.
(a) "Board" or "Board of Directors" shall mean the Board
of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Committee" shall mean the Compensation and Benefits
Committee of the Board or such other committee as may be appointed by the Board
as the Committee in accordance with Section 1.3(a).
(d) "Common Stock" shall mean the common stock, $.01 par
value, of the Company.
(e) "Company" shall mean Discount Auto Parts, Inc., a
Florida corporation, and any successor.
(f) "Eligible Employee" shall mean any individual
employed by the Company or any Subsidiary who meets the eligibility
requirements of Section 1.4. The Committee shall have the sole power to
determine who is and who is not an Eligible Employee.
(g) "Fair market value" of the shares of Common Stock
shall mean the closing price, on the date in question (or, if no shares are
traded on such day, on the next preceding day on which shares were traded), of
the Common Stock as reported on the Composite Tape, or if not reported thereon,
then such price as reported in the trading reports of the principal securities
exchange in the United States on which such stock is listed, or if such stock
is not listed on a securities exchange in the United States, the mean between
the dealer closing "bid" and "ask" prices on the over-the-counter market as
reported by the National Association of Security Dealers Automated Quotation
System (NASDAQ), or NASDAQ's
<PAGE> 32
successor, or if not reported on NASDAQ, the fair market value of such stock as
determined by the Committee in good faith and based on all relevant factors.
(h) "ISO" shall mean an incentive stock option granted in
accordance with the provisions of Article 2 of this Plan.
(i) "NSO" shall mean a nonqualified stock option granted
in accordance with the provisions of Article 3 of this Plan.
(j) "Option" shall mean an ISO or a NSO.
(k) "Optionee" shall mean an Eligible Employee to whom an
Option is granted under the Plan.
(l) "Plan" shall mean the Discount Auto Parts, Inc. 1995
Stock Option Plan, as set forth herein and as amended from time to time.
(m) "Subsidiary" shall mean any corporation that at the
time qualifies as a subsidiary of the Company under the definition of
"subsidiary corporation" contained in Section 424(f) of the Code.
(n) "10% Stockholder" is defined in Section 2.2.
1.3 Administration.
(a) The incentive stock option and nonqualified stock
option provisions of the Plan shall be administered by a committee appointed by
the Board of Directors (the "Committee"). The Committee shall consist of not
less than two (2) nor more than five (5) persons, each of whom shall be a
member of the Company's Board of Directors and none of whom shall be eligible
to participate under the Plan. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors.
(b) The Committee shall select one of its members as
chairman, and shall hold meetings at such time and places as it may determine.
The acts of a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the
Committee, shall be valid acts of the Committee.
(c) Subject to the provisions of the Plan, the Committee
shall have full authority, in its discretion: (1) to determine the employees of
the Company and its Subsidiaries to whom Options shall be granted; (2) to
determine the time or times at which Options shall be granted; (3) to determine
whether an Eligible Employee shall be granted an incentive stock option, a
nonqualified stock option or any combination thereof; (4) to determine the
option price of the shares subject to each Option; (5) to determine the time or
times when each Option becomes exercisable and the duration of any Option
period; and (6) to interpret the Plan and the Options granted hereunder, and to
prescribe, amend and rescind rules and regulations with respect thereto. The
interpretation and construction by the Committee of any provision of the Plan
over which it has discretionary authority or of any Option granted hereunder
shall be final and conclusive.
2.
<PAGE> 33
(d) No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted hereunder.
1.4 Eligible Employees. An Option may be granted to any executive
or other key employee of the Company or of any Subsidiary (who may or may not
be an officer or member of the Board), with the exceptions only of (a) with
respect to the incentive stock options granted under the Plan, employees who
cannot qualify for the benefits of incentive stock options under Section 422 of
the Code, and (b) with respect to all provisions of the Plan, members of the
Committee and any other members of the Board who are not otherwise employees of
the Company.
1.5 Stock Subject to the Plan.
(a) The stock subject to the Options under the Plan shall
be authorized and unissued shares of Common Stock. The aggregate number of
shares that may be issued upon the exercise of Options granted under the Plan
shall not exceed 900,000 shares of Common Stock, which limitation shall be
subject to adjustment as provided in Section 4.1.
(b) If an Option is surrendered or for any other reason
ceases to be exercisable in whole or in part, the shares of Common Stock that
are subject to such Option, but as to which the Option has not been exercised,
shall again become available for offering under the Plan.
(c) The maximum number of shares of Common Stock for
which options may be granted under the Plan to any one person shall be
[250,000].
ARTICLE 2
Terms and Conditions of Incentive Stock Options
Any incentive stock option ("ISO") granted pursuant to the Plan shall
be authorized by the Committee and shall be evidenced by certificates or
agreements in such form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified.
2.1 Number of Shares. Each ISO shall state the number of shares
to which it pertains.
2.2 Option Price. Each ISO shall state the option price, which
price shall be determined by the Committee in its discretion. In no event,
however, shall such price be less than 100% of the fair market value of the
shares of Common Stock on the date of the granting of the ISO; or, in the case
of an individual who owns (at the time the Option is granted) more than 10% of
the total combined voting power of all classes of stock of the Company or of a
parent or subsidiary corporation (a "10% Stockholder"), shall such price be
less than 110% of such fair market value.
2.3 Method of Payment. Each ISO shall state the method of payment
of the ISO price upon the exercise of the ISO. The method of payment stated in
the ISO shall include payment (a) in United States dollars in cash or by check,
bank draft or money order payable to the order of the Company, or (b)
3.
<PAGE> 34
in the discretion of and in the manner determined by the Committee, by the
delivery of shares of Common Stock already owned by the Optionee, or (c) by
any other legally permissible means acceptable to the Committee at the time of
grant of the ISO, or (d) in the discretion of the Committee, through a
combination of (a), (b) and (c) of this Section 2.3. If the option price is
paid in whole or in part through the delivery of shares of Common Stock, the
decision of the Committee with respect to the fair market value of such shares
shall be final and conclusive. [To the extent permitted by applicable law and
regulations, the Board and/or the Committee may, in their respective
discretions, approve an arrangement with a brokerage firm under which such
brokerage firm, on behalf of the person electing to exercise the options, pays
to the Company the full purchase price of the shares being purchased together
with an amount equal to any taxes which the Company is required to withhold in
connection with the exercise of the option and the Company, pursuant to an
irrevocable notice from such person, delivers the shares being purchased to
such brokerage firm.]
2.4 Term and Exercise of Options. No ISO shall be exercisable
either in whole or in part prior to twelve (12) months from the date it is
granted. The Committee, in its discretion exercised at the time that it grants
an ISO, shall establish such further restrictions on when an ISO shall become
partially or fully exercisable; provided, however, that such vesting provisions
established by the Committee at the time of grant shall not permit the ISO to
be exercised more rapidly than would be permitted by the following chart:
<TABLE>
<CAPTION>
Exercisable Percentage
Number of Years From the of Number of Shares
Date the ISO is Granted Originally Covered by Option
- ----------------------- ----------------------------
10% Stockholder Other Optionee
--------------- --------------
<S> <C> <C>
Less than three years 0% 0%
3 years but less than 4 years 50% 25%
4 years but less than 5 years 100% 50%
5 years but less than 6 years 100% 75%
6 years or more 100% 100%
</TABLE>
To the extent not exercised, exercisable installments of Options shall
be exercisable, in whole or in part, in any subsequent period, but not later
than the expiration date of the Option. No ISO shall be exercisable after the
expiration of ten (10) years from the date it is granted; or, in the case of a
10% Stockholder, no ISO shall be exercisable after the expiration of five (5)
years from the date it is granted. Not less than one hundred (100) shares may
be exercised at any one time unless the number exercised is the total number at
the time exercisable under the ISO.
Within the limits described above, the Committee may impose additional
requirements on the exercise of ISOs, including, but without limitation, the
expiration date of the Option. When it deems special circumstances to exist,
the Committee in its discretion also may accelerate the time at which an ISO
may be exercised if, under previously established exercise terms, such ISO was
not immediately exercisable in full, even if the acceleration would permit the
ISO to be exercised more rapidly than the minimum vesting period set forth
above in the chart would permit.
2.5 Additional Limitations on Exercise of Options. An Optionee
may hold and exercise more than one ISO, but only on the terms and subject to
the restrictions hereafter set forth. The aggregate fair
4.
<PAGE> 35
market value (determined as of the time an ISO is granted) of the Common Stock
with respect to which ISOs are exercisable for the first time by any Eligible
Employee in any calendar year under this Plan and under all other incentive
stock option plans of the Company and any parent and subsidiary corporations of
the Company (as those terms are defined in Section 424 of the Code) shall not
exceed $100,000.
2.6 Notice of Grant of Option. Upon the granting of any ISO to an
employee, the Committee shall promptly cause such employee to be notified of
the fact that such ISO has been granted. The date on which the Committee
approves the grant of an ISO shall be considered to be the date on which such
ISO is granted.
2.7 Death or Other Termination of Employment.
(a) In the event that an Optionee (1) shall cease to be
employed by the Company or a Subsidiary because of his or her discharge for
dishonesty, or because he or she violated any material provision of any
employment or other agreement between him or her and the Company or a
Subsidiary, or (2) shall voluntarily resign or terminate his or her employment
with the Company or a Subsidiary under or followed by such circumstances as
would constitute a breach of any material provision of any employment or other
agreement between him or her and the Company or the Subsidiary, or (3) shall
have committed an act of dishonesty not discovered by the Company or a
Subsidiary prior to the cessation of his or her employment but that would have
resulted in his or her discharge if discovered prior to such date, or (4)
shall, either before or after cessation of his or her employment with the
Company or a Subsidiary, without the written consent of his or her employer or
former employer, use (except for the benefit of his or her employer or former
employer) or disclose to any other person any confidential information relating
to the continuation or proposed continuation of his or her employer's or former
employer's business or any trade secrets of the Company or a Subsidiary
obtained as a result of or in connection with such employment, or (5) shall,
either before or after the cessation of his or her employment with the Company
or a Subsidiary, without the written consent of his or her employer or former
employer, directly or indirectly, give advice to, or serve as an employee,
director, officer, partner or trustee of, or in any similar capacity with, or
otherwise directly or indirectly participate in the management, operation, or
control of, or have any direct or indirect financial interest in, any
corporation, partnership or other organization that directly or indirectly
competes in any respect with the Company or any Subsidiary, then forthwith from
the happening of any such event, any ISO then held by him or her shall
terminate and become void to the extent that it then remains unexercised. In
the event that an Optionee shall cease to be employed by the Company or a
Subsidiary for any reason other than his or her death or one or more of the
reasons set forth in the immediately preceding sentence, subject to the
conditions that no Option shall be exercisable after the expiration of ten (10)
years from the date it is granted, or, in the case of a 10% Stockholder, five
(5) years from the date it is granted, such Optionee shall have the right to
exercise the ISO at any time within three (3) months after such termination of
employment to the extent his or her right to exercise such ISO had accrued
pursuant to this Article 2 at the date of such termination and had not
previously been exercised; such three-month limit shall be increased to one (1)
year for any Optionee who ceases to be employed by the Company or a Subsidiary
because he or she is disabled (within the meaning of Section 22(e)(3) of the
Code) or who dies during the three-month period and the ISO may be exercised
within such extended time limit by the Optionee or, in the case of death, the
personal representative of the Optionee or by any person or persons who shall
have acquired the ISO directly from the Optionee by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall
5.
<PAGE> 36
constitute termination of employment for purposes of the Plan shall be
determined by the Committee, whose determination shall be final and conclusive.
(b) In the event that an Optionee shall die while in the
employ of the Company or a Subsidiary and shall not have fully exercised any
ISO, the ISO may be exercised, subject to the conditions that no ISO shall be
exercisable after the expiration of ten (10) years from the date it is granted,
or, in the case of a 10% Stockholder, five (5) years from the date it is
granted, to the extent that the Optionee's right to exercise such ISO had
accrued pursuant to this Article 2 at the time of his or her death and had not
previously been exercised, at any time within one (1) year after the Optionee's
death, by the personal representative of the Optionee or by any person or
persons who shall have acquired the ISO directly from the Optionee by bequest or
inheritance.
(c) No ISO shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution.
(d) During the lifetime of the Optionee, the ISO shall be
exercisable only by him or her and shall not be assignable or transferable and
no other person shall acquire any rights therein.
(e) Transfers of employment between the Company and any
of its [Subsidiaries] [Affiliates] shall not be considered to be a termination
of employment for the purposes of this Plan.
2.8 Rights as a Stockholder. An Optionee shall have no rights as
a stockholder with respect to any shares covered by his or her ISO until the
date on which he or she becomes a record owner of the shares purchased upon the
exercise of the ISO (the "record ownership date"). No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to record ownership date, except as provided in Article 4.
2.9 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding ISOs granted under the Plan, or accept
the surrender of outstanding ISOs (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the extent
not theretofore exercised). The Committee shall not, however, modify any
outstanding ISO so as to specify a lower option price or accept the surrender
of outstanding ISOs and authorize the granting of new Options in substitution
therefor specifying a lower option price. Notwithstanding the foregoing,
however, no modification of an ISO shall, without the consent of the Optionee,
adversely alter or otherwise impair any of the right or obligations under any
ISO theretofore granted under the Plan.
2.10 Listing and Registration of Shares. Each ISO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such ISO or the issuance or purchase of shares thereunder, such ISO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section 2.10 become operative, and if, as a
6.
<PAGE> 37
result thereof, the exercise of an ISO is delayed, then and in that event, the
term of the ISO shall not be affected.
2.11 Other Provisions. The ISO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the ISO, as the Committee
shall deem advisable. Any such certificate or agreement shall contain such
limitations and restrictions upon the exercise of the ISO as shall be necessary
in order that such ISO will be an incentive stock option as defined in Section
422 of the Code, or to conform to any change in the law.
ARTICLE 3
Terms and Conditions of Nonqualified Stock Options
Any nonqualified stock option ("NSO") granted pursuant to the Plan
shall be authorized by the Committee and shall be evidenced by certificates or
agreements in such form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified.
3.1 Number of Shares. Each NSO shall state the number of shares
to which it pertains.
3.2 Option Price. Each NSO shall state the option price, which
price shall be determined by the Committee in its discretion. In no event,
however, shall such price be less than 100% of the fair market value of the
shares of Common Stock on the date of the granting of the NSO.
3.3 Method of Payment. Each NSO shall state the method of payment
of the NSO price upon the exercise of the NSO. The method of payment stated in
the NSO shall include payment (a) in United States dollars in cash or by check,
bank draft or money order payable to the order of the Company, or (b) in the
discretion of and in the manner determined by the Committee, by the delivery of
shares of Common Stock already owned by the Optionee, or (c) by any other
legally permissible means acceptable to the Committee at the time of the grant
of the NSO, or (d) in the discretion of the Committee, through a combination of
(a), (b) and (c) of this Section 3.3. If the option price is paid in whole or
in part through the delivery of shares of Common Stock, the decision of the
Committee with respect to the fair market value of such shares shall be final
and conclusive. [To the extent permitted by applicable law and regulations,
the Board and/or the Committee may, in their respective discretions, approve an
arrangement with a brokerage firm under which such brokerage firm, on behalf of
the person electing to exercise the options, pays to the Company the full
purchase price of the shares being purchased together with an amount equal to
any taxes which the Company is required to withhold in connection with the
exercise of the option and the Company, pursuant to an irrevocable notice from
such person, delivers the shares being purchased to such brokerage firm.]
3.4 Term and Exercise of Options. No NSO shall be exercisable
either in whole or in part prior to twelve (12) months from the date it is
granted. The Committee, in its discretion exercised at the time that it grants
a NSO, shall establish such further restrictions on when a NSO shall become
partially or fully exercisable; provided, however, that such vesting provisions
established by the Committee at the
7.
<PAGE> 38
time of grant shall not permit the NSO to be exercised more rapidly than would
be permitted by the following chart:
<TABLE>
<CAPTION>
Exercisable Percentage
Number of Years From the of Number of Shares
Date the NSO is Granted Originally Covered by Option
----------------------- ----------------------------
<S> <C>
Less than three years 0%
3 years but less than 4 years 25%
4 years but less than 5 years 50%
5 years but less than 6 years 75%
6 years or more 100%
</TABLE>
To the extent not exercised, exercisable installments of Options shall
be exercisable, in whole or in part, in any subsequent period, but not later
than the expiration date of the Option. No NSO shall be exercisable after the
expiration of ten (10) years from the date it is granted. Not less than one
hundred (100) shares may be exercised at any one time unless the number
exercised is the total number at the time exercisable under the NSO.
Within the limits described above, the Committee may impose additional
requirements on the exercise of NSOs, including, but without limitation, the
expiration date of the Option. When it deems special circumstances to exist,
the Committee in its discretion also may accelerate the time at which a NSO may
be exercised if, under previously established exercise terms, such NSO was not
immediately exercisable in full, even if the acceleration would permit the NSO
to be exercised more rapidly than the minimum vesting period set forth above in
the chart would permit.
3.5 Notice of Grant of Option. Upon the granting of any NSO to an
employee, the Committee shall promptly cause such employee to be notified of
the fact that such NSO has been granted. The date on which the Committee
approves the grant of a NSO shall be considered to be the date on which such
NSO is granted.
3.6 Death or Other Termination of Employment.
(a) In the event that an Optionee (1) shall cease to be
employed by the Company or a Subsidiary because of his or her discharge for
dishonesty, or because he or she violated any material provision of any
employment or other agreement between him or her and the Company or a
Subsidiary, or (2) shall voluntarily resign or terminate his or her employment
with the Company or a Subsidiary under or followed by such circumstances as
would constitute a breach of any material provision of any employment or other
agreement between him or her and the Company or the Subsidiary, or (3) shall
have committed an act of dishonesty not discovered by the Company or a
Subsidiary prior to the cessation of his or her employment but that would have
resulted in his or her discharge if discovered prior to such date, or (4)
shall, either before or after cessation of his or her employment with the
Company or a Subsidiary, without the written consent of his or her employer or
former employer, use (except for the benefit of his or her employer or former
employer) or disclose to any other person any confidential information relating
to the continuation or proposed continuation of his or her employer's or former
employer's business or any trade secrets of the Company or a Subsidiary
obtained as a result of or in connection with such
8.
<PAGE> 39
employment, or (5) shall, either before or after the cessation of his or her
employment with the Company or a Subsidiary, without the written consent of his
or her employer or former employer, directly or indirectly, give advice to, or
serve as an employee, director, officer, partner or trustee of, or in any
similar capacity with, or otherwise directly or indirectly participate in the
management, operation or control of, or have any direct or indirect financial
interest in, any corporation, partnership or other organization that directly or
indirectly competes in any respect with the Company or any Subsidiary, then
forthwith from the happening of any such event, any NSO then held by him or her
shall terminate and become void to the extent that it them remains unexercised.
In the event that an Optionee shall cease to be employed by the Company or a
Subsidiary for any reason other than his or her death or one or more of the
reasons set forth in the immediately preceding sentence, subject to the
condition that no Option shall be exercisable after the expiration of ten (10)
years from the date it is granted, such Optionee shall have the right to
exercise the NSO at any time within three (3) months after such termination of
employment to the extent his or her right to exercise such NSO had accrued
pursuant to this Article 3 at the date of such termination and had not
previously been exercised; such three-month limit shall be increased to one (1)
year for any Optionee who ceases to be employed by the Company or a Subsidiary
because he or she is disabled (within the meaning of Section 22(e)(3) of the
Code) or who dies during the three-month period and the NSO may be exercised
within such extended time limit by the Optionee or, in the case of death, the
personal representative of the Optionee or by any person or persons who shall
have acquired the NSO directly from the Optionee by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall constitute termination of employment for purposes of the Plan
shall be determined by the Committee, whose determination shall be final and
conclusive.
(b) In the event that an Optionee shall die while in the
employ of the Company or a Subsidiary and shall not have fully exercised any
NSO, the NSO may be exercised, subject to the condition that no NSO shall be
exercisable after the expiration of ten (10) years from the date it is granted,
to the extent that the Optionee's right to exercise such NSO had accrued
pursuant to this Article 3 at the time of his or her death and had not
previously been exercised, at any time within one (1) year after the Optionee's
death, by the personal representative of the Optionee or by any person or
persons who shall have acquired the NSO directly from the Optionee by bequest
or inheritance.
(c) No NSO shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution.
(d) During the lifetime of the Optionee, the NSO shall be
exercisable only by him or her and shall not be assignable or transferable and
no other person shall acquire any rights therein.
(e) Transfers of employment between the Company and any
of its [Subsidiaries] [Affiliates] shall not be considered to be a termination
of employment for the purposes of this Plan.
3.7 Rights as a Stockholder. An Optionee shall have no rights as
a stockholder with respect to any shares covered by his or her NSO until the
date on which he or she becomes a record owner of the shares purchased upon the
exercise of the NSO (the "record ownership date"). No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to the record ownership date, except as provided in Article 4.
9.
<PAGE> 40
3.8 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding NSOs granted under the Plan, or accept
the surrender of outstanding NSOs, whether issued under this Plan or under any
other stock option plan of the Company (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution therefor
(to the extent not theretofore exercised), including previously granted Options
having higher option prices. Notwithstanding the foregoing, however, no
modification of a NSO shall, without the consent of the Optionee, adversely
alter or otherwise impair any of the rights or obligations under any NSO
theretofore granted under the Plan.
3.9 Listing and Registration of Shares. Each NSO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such NSO or the issuance or purchase of shares thereunder, such NSO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section 3.9 become operative, and if, as a
result thereof, the exercise of a NSO is delayed, then and in that event, the
term of the NSO shall not be affected.
3.10 Other Provisions. The NSO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the NSO, as the Committee
shall deem advisable.
ARTICLE 4
Miscellaneous
4.1 Stock Adjustments.
(a) In the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split or other
division or consolidation of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without any receipt of consideration by the Company, then,
in any such event, the number of shares of Common Stock that remain available
under the Plan, the number of shares of Common Stock covered by each
outstanding Option, the maximum number of shares as to which an Option or
Options may be granted to any one Optionee, and the purchase price per share of
Common Stock covered by each outstanding Option shall be proportionately and
appropriately adjusted for any such increase or decrease.
(b) Subject to any required action by the stockholders,
if any change occurs in the shares of Common Stock by reason of any
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting the shares of Common
Stock, then, in any such event, the number and type of shares covered by each
outstanding Option, and the purchase price per share of Common Stock covered by
each outstanding Option, shall be proportionately and appropriately adjusted
for any such change. A dissolution or liquidation of the Company shall cause
each outstanding Option to terminate.
10.
<PAGE> 41
(c) In the event of a change in the Common Stock as
presently constituted that is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any change shall be deemed to
be shares of Common Stock within the meaning of the Plan.
(d) To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by, and
in the discretion of, the Committee, whose determination in that respect shall
be final, binding and conclusive; provided, however, that any ISO granted
pursuant to pursuant to this Plan shall not be adjusted in a manner that causes
such ISO to fail to continue to qualify as an incentive stock option within the
meaning of Section 422 of the Code.
(e) Except as hereinabove expressly provided in this
Section 4.1, an Optionee shall have no rights by reason of any division or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease the number of shares of stock of any
class or by reason of any dissolution, liquidation, merger or consolidation, or
spin-off of assets or stock of another corporation; and any issuance by the
Company of shares of stock of any class, securities convertible into shares of
stock of any class, or warrants or options for shares of stock of any class
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to the
Option.
(f) The grant of any Option pursuant to the Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate, or to dissolve, to liquidate, to sell,
or to transfer all or any part of its business or assets.
4.2 Term of the Plan. The ISOs and NSOs may be granted pursuant
to the provisions of the Plan from time to time within a period of ten (10)
years from the date the Plan is adopted by the Board, or the date the Plan is
approved by the stockholders of the Company, whichever is earlier.
4.3 Amendment of the Plan; Termination. The Board may, insofar as
permitted by law, from time to time, with respect to any shares at the time not
subject to Options, suspend, discontinue or terminate the Plan or revise or
amend it in any respect whatsoever, except that, without approval of the
stockholders of the Company, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the class of
employees eligible to receive Options, decrease the price at which Options may
be granted, otherwise materially increase the benefits accruing to Eligible
Employees under the Plan, or remove the administration of the Plan from the
Committee. No termination or amendment of the Plan shall adversely affect the
rights of an Optionee under any then issued and outstanding Option, except with
the consent of such Optionee. The foregoing prohibitions shall not be affected
by adjustments in shares and purchase price made in accordance with the
provisions of Section 4.1. Furthermore, the Plan may not, without the approval
of the stockholders of the Company, be amended in any manner that will cause
Options issued under it to fail to meet, when appropriate, the requirements of
incentive stock options as defined in Section 422 of the Code.
4.4 Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
11.
<PAGE> 42
4.5 No Obligation to Exercise. The granting of any Option under
the Plan shall impose no obligation upon any Optionee to exercise such Option.
4.6 No Implied Rights to Employees. The existence of the Plan,
and the granting of Options under the Plan, shall in no way give any employee
the right to continued employment, give any employee the right to receive any
Options or any additional Options under the Plan, or otherwise provide any
employee any rights not specifically set forth in the Plan or in any Options
granted under the Plan.
4.7 Withholding. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require the Optionee to remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax liability prior to the
delivery of any certificate or certificates for such shares. Whenever under
the Plan payments are to be made in cash, such payments shall be made net of an
amount sufficient to satisfy any federal, state or local withholding tax
liability.
4.8 Conditions Precedent to Effectiveness. The Plan shall become
effective upon the date that the Plan is adopted by the Board of Directors,
subject to the approval of the Plan by the stockholders of the Company within
12 months after its adoption by the Board.
12.
<PAGE> 43
APPENDIX
<TABLE>
<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE FOLLOWING PROPOSALS: PLEASE MARK YOUR VOTES AS
INDICATED IN THIS EXAMPLE /X/
1. ELECTION OF DIRECTORS. 2. PROPOSAL TO APPROVE THE AMENDMENT
Nominees for Class II Directors: Warren Shatzer, E. E. Wardlow AND RESTATEMENT OF THE 1992 TEAM MEMBER
STOCK PURCHASE PLAN.
FOR the nominees AUTHORITY (Instruction: To withhold authority to
listed above (except WITHHELD vote for any individual nominee, strike
as marked to the to vote for the a line through the nominee's name in the
contrary). nominees listed list above).
above.
FOR AGAINST ABSTAIN
/ / / / / / / / / /
3. PROPOSAL TO APPROVE THE AMENDMENT 4. OTHER MATTERS. Unless a line is stricken
AND RESTATEMENT OF THE 1995 STOCK through this sentence, the proxies herein
OPTION PLAN. named may in their discretion vote the shares
represented by this Proxy upon such other
FOR AGAINST ABSTAIN matters as may properly come before the
/ / / / / / Annual Meeting. The undersigned acknowledges receipt of
(1) the Company's 1997 Annual Report to
Stockholders and (2) the Company's
Notice of Annual Meeting and Proxy
Statement dated August 27, 1997 relating
to the Annual Meeting. The undersigned
does hereby revoke any proxy previously
given with respect to the shares
represented by this Proxy.
Dated:____________________________, 1997
_______________________________________
Signature
_______________________________________
Signature if held jointly
NOTE: Your signature should appear as
your name appears hereon. As to shares
held in joint names, each joint owner
should sign. If the signer is a
corporation, please sign full corporate
name by a duly authorized officer. If a
PLEASE MARK, SIGN AND DATE THIS PROXY CARD partnership, please sign in partnership
AND PROMPTLY RETURN IT USING THE ENCLOSED ENVELOPE. name by an authorized person. If signing
as attorney, executor, administrator,
trustee, guardian, or in other
representative capacity, please give
full title as such.
FOLD AND DETACH HERE
</TABLE>
[DISCOUNT
AUTO PARTS LOGO]
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE PROXY
CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 44
DISCOUNT AUTO PARTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 7, 1997
The undersigned, a stockholder of DISCOUNT AUTO PARTS, INC. (the
"Company"), does hereby appoint Peter J. Fontaine, William C. Perkins and
Warren Shatzer, and each of them acting individually, as the attorneys and
proxies of the undersigned, with power of substitution, for and on behalf of
the undersigned, to attend the Annual Meeting of Stockholders of the Company to
be held at the Lakeland Center, 700 West Lemon Street, Lakeland, Florida at
10:30 a.m., local time, on October 7, 1997 and any adjournment or adjournments
thereof (the "Annual Meeting"), to represent the undersigned at the Annual
Meeting, and there to vote all the shares of Common Stock of the Company which
the undersigned is entitled to vote at the Annual Meeting, in any manner and
with the same effect as if the undersigned were personally present at the
Annual Meeting, all as described in the Company's Proxy Statement dated August
27, 1997 relating to the Annual Meeting, and the undersigned hereby authorizes
and instructs the above named proxies to vote as specified on the reverse side.
The shares represented by this Proxy will be voted only if this Proxy
is properly executed and timely returned. In that event, such shares will be
voted in the manner directed herein. IF NO DIRECTION IS MADE, THE SHARES WILL
BE VOTED FOR THE NOMINEES FOR DIRECTOR, FOR THE PROPOSAL TO AMEND AND RESTATE
THE 1992 TEAM MEMBER STOCK PURCHASE PLAN, FOR THE PROPOSAL TO AMEND AND RESTATE
THE 1995 STOCK OPTION PLAN AND FOR OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
