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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 22, 1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to ________.
Commission file number 1-10714
AUTOZONE, INC.
(Exact name of registrant as specified in its charter)
Nevada 62-1482048
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
123 South Front Street
Memphis, Tennessee 38103
(Address of principal executive offices) (Zip Code)
(901) 495-6500
Registrant's telephone number, including area code
(not applicable)
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 152,089,797 shares as of January 2, 1998.
AUTOZONE,INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Nov. 22, Aug. 30,
1997 1997
------------ -----------
(Unaudited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,365 $ 4,668
Accounts receivable 22,384 18,713
Merchandise inventories 724,859 709,446
Prepaid expenses 20,208 20,987
Deferred income taxes 25,107 24,988
------------ -----------
Total current assets 796,923 778,802
Property and equipment:
Property and equipment 1,419,667 1,336,911
Less accumulated depreciation
and amortization (287,646) (255,783)
------------ -----------
1,132,021 1,081,128
Other assets:
Cost in excess of net assets acquired 16,428 16,570
Deferred income taxes 5,114 4,339
Other assets 3,789 3,178
------------ -----------
25,331 24,087
------------ -----------
$ 1,954,275 $ 1,884,017
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 465,274 $ 449,793
Accrued expenses 112,504 122,580
Income taxes payable 25,124 20,079
------------ -----------
Total current liabilities 602,902 592,452
Long-term debt 203,000 198,400
Other liabilities 16,607 17,957
Stockholders' equity 1,131,766 1,075,208
------------ -----------
$ 1,954,275 $ 1,884,017
============ ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUTOZONE,INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Twelve Weeks Ended
---------------------------------
Nov. 22, Nov. 23,
1997 1996
------------ ------------
(in thousands, except per share amounts)
Net Sales $ 675,274 $ 569,145
Cost of sales, including warehouse
and delivery expenses 394,833 328,847
Operating, selling, general and
administrative expenses 201,793 178,400
----------- ------------
Operating profit 78,648 61,898
Interest expense-net 2,502 1,173
----------- ------------
Income before income taxes 76,146 60,725
Income taxes 28,600 22,750
----------- ------------
Net income $ 47,546 $ 37,975
=========== ============
Net income per share $ .31 $ .25
=========== ============
Average shares outstanding, including
common stock equivalents 153,823 152,394
=========== ============
SEE NOTES TO CONDENSED CONSOLIDATED FIANANCIAL STATEMENTS
AUTOZONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Weeks Ended
---------------------------
Nov. 22, Nov. 23,
1997 1996
---------- ----------
(in thousands)
Cash flows from operating activities:
Net income $ 47,546 $ 37,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,630 17,482
Net increase in merchandise inventories (15,413) (54,586)
Net increase in current liabilities 10,450 22,656
Other - net (5,755) (10,874)
---------- ----------
Net cash provided by operating activities 56,458 12,653
Cash flows from investing activities:
Cash outflows for property
and equipment, net (70,373) (54,210)
Cash flows from financing activities:
Net proceeds from debt 4,600 38,600
Proceeds from sale of Common Stock, including
related tax benefit 9,012 2,931
---------- ----------
Net cash provided by financing activities 13,612 41,531
---------- ----------
Net decrease in cash and cash equivalents 303 26
Cash and cash equivalents at beginning of period 4,668 3,904
---------- ----------
Cash and cash equivalents at end of period $ 4,365 $ 3,878
========== ==========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the twelve weeks ended November 22, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
August 29, 1998. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-K
for the year ended August 30, 1997.
NOTE B--INVENTORIES
Inventories are stated at the lower of cost or market using the last-
in, first-out (LIFO) method. An actual valuation of inventory under the
LIFO method can be made only at the end of each year based on the inventory
levels and costs at that time. Accordingly, interim LIFO calculations must
necessarily be based on management's estimates of expected year-end
inventory levels and costs.
NOTE C--DEBT
During December 1996, the Company executed an agreement with a group
of banks for a $275 million five-year unsecured revolving credit facility
to replace the existing revolving credit agreements. The rate of interest
payable under the agreement is a function of the London Interbank Offered
Rate (LIBOR), or the lending bank's base rate (as defined in the
agreement), or a competitive bid rate, at the option of the Company. At
November 22, 1997, the Company's borrowings under this agreement were $203
million and the weighted average interest rate was 5.8%. The unsecured
revolving credit agreement contains a covenant limiting the amount of debt
the Company may incur relative to its total capitalization.
On March 27, 1997, the Company acquired a negotiated rate unsecured
revolving credit agreement totaling $25 million which extends until March
26, 1998. There were no amounts outstanding under this agreement as of
November 22, 1997.
NOTE D--RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share." SFAS No. 128 requires dual presentation of basic
earnings per share (EPS) and diluted EPS on the face of all statements of
earnings for periods ending after December 15, 1997. Basic EPS is computed
as net earnings divided by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur from common shares issuable through stock-based
compensation including stock options. Assuming the Company had adopted the
provisions of SFAS No. 128, EPS as reported and pro forma for the twelve
weeks ended November 22, 1997, compared to twelve weeks ended November 23,
1996 would be as follows November 22, 1997 - as reported: $0.31, basic:
$0.31; November 23, 1996 - as reported: $0.25, basic: $0.25. The Company's
reported EPS calculations are the same as pro forma diluted EPS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
TWELVE WEEKS ENDED NOVEMBER 22, 1997, COMPARED TO
TWELVE WEEKS ENDED NOVEMBER 23, 1996
Net sales for the twelve weeks ended November 22, 1997 increased by
$106.1 million, or 18.6%, over net sales for the comparable period of
fiscal 1997. This increase was due to a comparable store sales increase of
7%, (which was primarily due to sales growth in the Company's newer stores
and the added sales of the Company's commercial program), and increases in
net sales for stores opened since the beginning of fiscal 1997. At
November 22, 1997 the Company had 1,772 stores in operation compared with
1,477 stores at November 23, 1996.
Gross profit for the twelve weeks ended November 22, 1997, was $280.4
million, or 41.5% of net sales, compared with $240.3 million, or 42.2% of
net sales, during the comparable period for fiscal 1997. The decrease in
the gross profit percentage was due primarily to lower commodities gross
margins.
Operating, selling, general and administrative expenses for the twelve
weeks ended November 22, 1997 increased by $23.4 million over such expenses
for the comparable period for fiscal 1997, and decreased as a percentage of
net sales from 31.3% to 29.9%. The decrease in the expense ratio was due
primarily to a sales increase in the Company's commercial program,
favorable payroll leverage and efficiencies gained with the call center
closings. The number of stores participating in the commercial program was
1,282 at November 22, 1997.
The Company's effective income tax rate was 37.6% of pre-tax income
for the twelve weeks ended November 22, 1997 and 37.5% for the twelve weeks
ended November 23, 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the twelve weeks ended November 22, 1997, net cash of $56.5
million was provided by the Company's operations versus $12.7 million for
the comparable period of fiscal year 1997. The comparative increase in cash
provided by operations was due primarily to favorable inventory require-
ments in comparison to the twelve weeks ended November 23, 1996.
Capital expenditures for the twelve weeks ended November 22, 1997 were
$70.4 million. The Company anticipates that capital expenditures for fiscal
1998 will be approximately $400 million. Year-to-date, the Company opened
44 net new stores and 2 stores that replaced existing stores. The Company
plans to open approximately 350 net new stores during fiscal 1998.
The Company anticipates that it will rely on internally generated funds to
support a majority of its capital expenditures and working capital
requirements; the balance of such requirements will be funded through
borrowings. The Company has revolving credit agreements with several banks
providing for lines of credit in an aggregate maximum amount of $300
million. At November 22, 1997, the Company had borrowings outstanding under
these credit agreements of $203 million.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
3.1 Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-K for the fiscal year ended August
27, 1994.
3.2 Amendment to Articles of Incorporation of AutoZone, Inc., dated
December 16, 1993, to increase its authorized shares of common stock to
200,000,000. Incorporated by reference to Exhibit 3.2 to the Form 10-K for
the fiscal year ended August 27, 1994.
3.3 By-laws of AutoZone, Inc. Incorporated by reference to Exhibit
3.2 to the Registration Statement filed by the Company under the
Securities Act of 1993 (No. 33-45649) (the "February 1992 Form S-1").
4.1 Form of Common Stock Certificate. Incorporated by reference to
Exhibit 4.1 to Pre-Effective Amendment No. 2 to the February 1992 Form S-1.
4.2 Registration Rights Agreement, dated as of February 18, 1987, by
and among Auto Shack, Inc. and certain stockholders. Incorporated by
reference to Exhibit 4.9 to the Form S-1 Registration Statement filed by
the Company under the Securities Act of 1993 (No.33-9197) (the "April 1991
Form S-1").
4.3 Amendment to the Registration Rights Agreement dated as of August
1, 1993, by and among AutoZone, Inc. and certain stockholders. Incorporated
by reference to Exhibit 4.1 to the Form S-3 Registration Statement filed
by the Company under the Securities Act of 1933. (No. 33-67550).
4.4 Amendment No. 2 to the Registration Rights Agreement dated as of
November 6, 1997, by and among AutoZone, Inc. and certain stockholders.
Incorporated by reference to Exhibit 4.4 to the Form S-3 Registration
Statement filed by the Company under the Securities Act of 1933
(No. 333-39715).
10.1 Amended and Restated Agreement between J. R. Hyde III, and
AutoZone, Inc., dated October 23, 1997.
10.2 AutoZone Inc., Executive Incentive Compensation Plan.
Incorporated by reference to Exhibit A to the definitive Proxy Statement
dated November 14, 1994, filed by the Company pursuant to Regulation 14A of
the Securities Exchange Act of 1934.
10.3 Amended and Restated 1996 Stock Option Plan
11.1 Statement re: Computation of earnings per share.
27.1 Financial Data Schedule. (SEC Use Only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUTOZONE, INC.
By: /s/ Robert J. Hunt
---------------------------
Robert J. Hunt
Executive Vice President and
Chief Financial Officer-Customer Satisfaction
(Principal Financial Officer)
By: /s/ Michael E. Butterick
----------------------------
Michael E. Butterick
Vice President, Controller-Customer Satisfaction
(Principal Accounting Officer)
Dated: January 6, 1998
EXHIBIT INDEX
3.1 Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-K for the fiscal year ended August
27, 1994.
3.2 Amendment to Articles of Incorporation of AutoZone, Inc., dated
December 16, 1993, to increase its authorized shares of common stock to
200,000,000. Incorporated by reference to Exhibit 3.2 to the Form 10-K for
the fiscal year ended August 27, 1994.
3.3 By-laws of AutoZone, Inc. Incorporated by reference to Exhibit
3.2 to the Registration Statement filed by the Company under the
Securities Act of 1993 (No. 33-45649) (the February 1992 Form S-1).
4.1 Form of Common Stock Certificate. Incorporated by reference to
Exhibit 4.1 to Pre-Effective Amendment No. 2 to the February 1992 Form S-1.
4.2 Registration Rights Agreement, dated as of February 18, 1987, by
and among Auto Shack, Inc. and certain stockholders. Incorporated by
reference to Exhibit 4.9 to the Form S-1 Registration Statement filed by
the Company under the Securities Act of 1993 (No.33-9197), (the "April
1991 Form S-1").
4.3 Amendment to the Registration Rights Agreement dated as of August
1, 1993, by and among AutoZone, Inc. and certain stockholders. Incorporated
by reference to Exhibit 4.1 to the Form S-3 Registration Statement filed
by the Company under the Securities Act of 1933. (No. 33-67550).
4.4 Amendment No. 2 to the Registration Rights Agreement dated as of
November 6, 1997, by and among AutoZone, Inc., and certain stockholders.
Incorporated by reference to Exhibit 4.4 to the Form S-3 Registration
Statement filed by the Company under the Securities Act of 1933
(No. 333-39715).
10.1 Amended and Restated Agreement between J. R. Hyde III, and
AutoZone, Inc., Dated October 23, 1997.
10.2 AutoZone Inc., Executive Incentive Compensation Plan.
Incorporated by reference to Exhibit A to the definitive Proxy Statement
dated November 14, 1994, filed by the Company pursuant to Registration 14A
of the Securities Exchange Act of 1934.
10.3 Amended and Restated 1996 Stock Option Plan
11.1 Statement re: Computation of earnings per share.
27.1 Financial Data Schedule. (SEC Use Only)
EXHIBIT 10.1
AMENDED AND RESTATED AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that J. R. Hyde, III ("Hyde") and
AutoZone, Inc., a Nevada corporation, and its subsidiaries (collectively
"AZO") for and in consideration of the promises, undertakings and benefits
first set out in this Agreement as of March 18, 1997, and as herein amended
and restated as of October 23, 1997, agree as follows:
1. EFFECTIVE DATE. Hyde resigns as an employee and Chairman of AZO
as of March 18, 1997 (the "Effective Date"). Notwithstanding such
resignation, Hyde shall remain a member of the Board of Directors of AZO
subject to election, resignation, and replacement in the same manner as
other members of the Board of Directors.
2. RELEASE. Except for the obligations of AZO and Hyde undertaken
pursuant to the terms of this Agreement, Hyde and AZO each release and
forever discharge the other and their respective employees, agents,
subsidiaries, predecessors, successors, affiliates, heirs, and assigns from
all claims of whatsoever nature and the right to receive compensation from
such claims, growing out of or in any way directly or indirectly connected
with the employment relationship between Hyde and AZO, included but not
limited to:
A. Breach of any express or implied term or condition of employment;
B. Any other causes of action under any federal, state or local law,
rule or regulation, including but not limited to claims under any
worker's compensation law, the Age Discrimination in Employment
Act (as amended), the Older Workers' Benefit Protection Act, the
Civil Rights Act of 1991, the Civil Rights Act of 1964 (as
amended), the Civil Rights Act of 1866, the Americans with
Disabilities Act of 1990, the Family and Medical Leave Act of
1993, and/or the Tax Reform Act of 1986 (as amended); and/or
C. Any right to receive any monetary damages or liability payments
from any actions at law or in equity filed on his behalf with
regard to his employment with or arising out of or relating to
his employment with AZO.
3. RECISION. AZO's offer as described in this Agreement will remain
open and effective for twenty-one (21) days from the Effective Date. Hyde
may elect to accept or reject this offer within that time period. If Hyde
does nothing within the twenty-one (21) day period, the offer shall be
deemed withdrawn by AZO. If Hyde does sign the Agreement within the
twenty-one (21) day period, Hyde will have seven (7) days following the
date he signed this Agreement to change his mind and revoke the Agreement
in writing. Therefore, this Agreement will not be in effect until seven
(7) days have passed following the date Hyde signs this Agreement.
4. BENEFITS. In consideration of the release granted by Hyde and
the other obligations undertaken by Hyde pursuant to this Agreement, AZO
agrees to provide, subject only to the limitations contained in this
Agreement, the following benefits in his favor (the "Benefits"):
A. Any vacation pay accrued as of the Effective Date;
B. A prorated bonus for AZO's 1997 fiscal year based on the period
from September 1, 1996, to the Effective Date. Such bonus shall be in
accordance with the bonus plan previously approved by the Compensation
Committee of AZO's Board of Directors and will be paid after the end of
AZO's 1997 fiscal year when the bonuses of all other executive officers of
AZO are paid;
C. AZO shall pay Hyde the following amounts ("Payments"), to be paid
in regular installments as and when AZO pays its regular employees:
1. For the period from March 19, 1997, to March 18, 1998, the sum of
$281,683.
2. For the period from March 19, 1998, to March 18, 1999, the sum of
$298,170.
3. For the period from March 19, 1999, to March 18, 2000, the sum of
$295,070.
4. For the period from March 19, 2000, to March 18, 2001, the sum of
$291,815.
5. For the period from March 19, 2001, to March 18, 2002, the sum of
$288,396.
D. Health and dental insurance during the period of time beginning
on the Effective Date and ending on the date that Hyde ceases to receive
payments pursuant to Section 3(C) of this Agreement as if Hyde were still
employed by AZO, and thereafter the coverage as required by law.
E. Personal security services, consisting of a single person
employed by AutoZone, to provide security services for Hyde in a manner
mutually agreed between the parties. Payments to Hyde are based upon the
assumption of the provision of the single person to Hyde to provide
security services. Should Hyde request that AutoZone provide additional or
different security services, or no security services, AutoZone and Hyde
agree that Payments shall be adjusted appropriately to reflect the change
in security services provided.
HYDE UNDERSTANDS AND AGREES THAT AUTOZONE IS NOT AN INSURER AND THE
SECURITY SERVICES ARE INTENDED TO DETER CRIME, BUT THE SECURITIES SERVICES
WILL NOT ELIMINATE THE POSSIBILITY OF SUCH.
FURTHER, HYDE UNDERSTANDS AND AGREES THAT THE ONLY SALARY OR BENEFITS
(OTHER THAN SUCH COMPENSATION HE MAY RECEIVE AS A NON-EMPLOYEE DIRECTOR OF
AZO) HE WILL RECEIVE FROM AZO ARE SET FORTH HEREIN, AND THAT ALL OTHER
SALARY OR BENEFITS HE IS PRESENTLY RECEIVING FROM AZO, INCLUDING BUT NOT
LIMITED TO LIFE INSURANCE, LONG TERM DISABILITY COVERAGE, SHORT TERM
DISABILITY COVERAGE AND STOCK PURCHASE PLAN, SHALL BE AND ARE TERMINATED AS
OF THE EFFECTIVE DATE. TIME IN SERVICE UNDER THE AUTOZONE, INC., ASSOCIATES
PENSION PLAN SHALL CEASE TO ACCRUE AS OF THE EFFECTIVE DATE.
The parties understand that applicable local, state, and federal tax
and appropriate insurance premium deductions and withholdings will be made
from all of the appropriate payments.
The parties further understand and agree that this Agreement shall not
diminish or adversely affect in any way Hyde's retirement benefits under
the AutoZone, Inc. Associates' Pension Plan, except that payment of
Benefits in no way increases the vesting period for retirement benefits nor
does it have any effect on the computation of retirement benefits which
shall be as provided for pursuant to the AutoZone, Inc. Associates' Pension
Plan.
5. NON-COMPETE. Hyde further agrees that he will not, for the
period commencing on the Effective Date and ending on the date five years
later, be engaged in or concerned with, directly or indirectly, any
business related to or involved in the retail sale of auto parts to "DIY"
customers, or the wholesale or retail sale of auto parts to commercial
installers in any state or area in which AZO operates now or shall operate
during the term of the non-compete agreement (herein called "Competitor"),
as an employee, consultant, beneficial or record owner, partner, joint
venturer, officer or agent of the Competitor. Notwithstanding the
foregoing, an investment by Hyde in an investment partnership or mutual
fund whereby Hyde does not own more than five (5%) percent of such
partnership or fund and does not or have the right to exercise investment
control, shall not be considered a breach of this Section 5.
The parties acknowledge and agree that the time, scope, geographic
area and other provisions of this Non-Compete section have been
specifically negotiated by sophisticated commercial parties and
specifically hereby agree that such time, scope, geographic area and other
provisions are reasonable under the circumstances. The parties further
agree that if, at any time, despite the express agreement of the parties
hereto, Hyde violates the provisions of this Non-Compete section and fails
to cure such violation within thirty days after him receipt of notice of
such violation from AZO, and if AZO attempts to enforce this Agreement and
a court of competent jurisdiction holds that any portion of this Non-
Compete section is unenforceable for any reason, AZO may cease paying any
further Benefits. In the event of breach by Hyde of any provision of this
Non-Compete section Hyde acknowledges that such breach will cause
irreparable damage to AZO, the exact amount of which will be difficult or
impossible to ascertain, and that remedies at law for any such breach will
be inadequate. Accordingly, AZO shall be entitled, in addition to any
other rights or remedies existing in its favor, to obtain, without the
necessity for any bond or other security, specific performance and/or
injunctive relief in order to enforce, or prevent breach of any such
provision and AZO shall be entitled to the remedies set forth in the
section entitled "Remedies." Further, Hyde agrees not to hire, for himself
or any other entity, encourage anyone or entity to hire, or entice away
from AZO any full time employee of AZO during the term of this non-compete
agreement other than current administrative personnel in the Chairman's
office.
6. CONFIDENTIALITY AND AZO PROPERTY. Unless otherwise required by
law, Hyde shall hold in confidence any proprietary or confidential
information obtained by him during his employment with AZO, which shall
include, but not be limited to, information regarding AZO's present and
future business plans, systems, operations and personnel. Confidential
information shall not include information: (a) publicly disclosed by
AutoZone; (b) rightfully received by Hyde from a third party without
restrictions on disclosure or use; (c) approved for release or disclosure
by AutoZone; or (d) produced or disclosed pursuant to applicable laws,
regulation or court order. Hyde acknowledges that all such confidential or
proprietary information is and shall remain the sole property of AZO and
all embodiments of such information shall remain with or be returned to
AZO.
7. AZO PROPERTY. Hyde agrees to return to AZO any and all property
of AZO within a reasonable time after the Effective Date. AZO acknowledges
that it is in possession of certain art belonging to Hyde and agrees to
return such art upon request by Hyde. During such time as such art is in
possession of AZO, AZO agrees to continue to take the same care as it is
currently taking to safeguard such art. AZO agrees to insure such art
while it is in the possession for such amounts as Hyde and AZO shall
mutually agree upon it being agreed that the current insurance is
sufficient until otherwise notified in writing by Hyde. AZO and Hyde agree
that should any damage occur to such art while it is in the possession,
AZO's liability to Hyde shall be limited to the insurance proceeds
recovered by AZO.
8. COMPLETE AGREEMENT. This Agreement contains the entire agreement
between the parties concerning the matters covered herein and integrates
and merges all prior understandings, discussions and negotiations. No
other agreements, oral or written, relating to the subject matter contained
herein shall be binding upon or enforceable against any of the parties.
This Agreement and the documents executed pursuant to it may be amended
only in a writing signed by authorized representatives of the parties. No
provision of this Agreement or any document executed pursuant to it may be
waived except in a writing signed by authorized representatives of the
parties.
This Agreement shall be governed and construed by the laws of the
State of Tennessee, without regard to its choice of law rules. The parties
agree that the only proper venue for any dispute under this Agreement shall
be in the state or federal courts located in Shelby County, Tennessee.
9. SEVERABILITY. The sections of this Agreement are intended to be
severable. If any section or provision of this Agreement shall be held to
be unenforceable by any court of competent jurisdiction, this Agreement
shall be modified to the minimum extent necessary to be enforceable, or if
such modification is not possible, then this Agreement shall be construed
as though such section or provision had not been included. If any section
or provision of this Agreement shall be subject to two constructions, one
of which would render such section or provision invalid, then such section
or provision shall be given that construction that would render it valid.
10. REMEDIES. In the event of breach by Hyde of any provision of this
Agreement, Hyde acknowledges that such breach will cause irreparable damage
to AZO, the exact amount of which will be difficult or impossible to
ascertain, and that remedies at law for any such breach will be inadequate.
Accordingly, AZO shall be entitled, in addition to any other rights or
remedies existing in its favor, to obtain, without the necessity for any
bond or other security, specific performance and/or injunctive relief to
enforce, or prevent breach of any such provision. In the event Hyde
breaches this Agreement in any way and fails to cure such breach within
thirty (30) days of receipt by Hyde of notice of such breach from AZO, any
unpaid Benefits shall immediately terminate. AZO shall have the right, but
not the obligation, to exercise any of its remedies under this Agreement or
any that may be allowed by law in the event of a breach of this Agreement.
Any such remedies available to AZO shall be cumulative, not exclusive. of
this Agreement. Any such remedies available to Hyde shall be cumulative,
not exclusive.
11. FURTHER ASSURANCES. Hyde warrants and represents to AZO that he
has returned to AZO all keys, documents, and other property of AZO. Should
Hyde fail or refuse to return any AZO property, AZO shall be entitled to
exercise its rights under "REMEDIES," in addition to any rights that AZO
may have by law.
The parties agree to execute on or after the date of the execution of
this Agreement any and all reasonable additional documents as requested by
the other or its counsel to effectuate the purposes hereof.
12. NOTICES. All notices shall be deemed received three days after it
is sent by certified mail, return receipt requested, or when actually
received by hand-delivery or overnight courier. All notices shall be sent
to:
To AutoZone: General Counsel
Legal Department
AutoZone, Inc.
123 South Front Street
Memphis, TN 38103-3607
To Hyde: P. O. Box 1152
Memphis, TN 38101-1152
IN WITNESS WHEREOF, the respective parties execute this Agreement.
AUTOZONE, INC.
By: /s/ Timothy D. Vargo /s/ J. R. Hyde, III
----------------------- -----------------------
J. R. Hyde, III
Title: President and COO
By: /s/ Harry L. Goldsmith
-----------------------
Title: Senior Vice President
EXHIBIT 10.3
AUTOZONE, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
AutoZone, Inc., a corporation organized under the laws of the State of
Nevada, by resolution of the Board of Directors of the Company (the
"Board") on October 21, 1996, and as approved by the stockholders of the
Company on December 12, 1996, adopted this AutoZone, Inc. 1996 Stock Option
Plan (the "Plan").
The Board of Directors of the Company by resolution adopt this Amended
and Restated 1996 Stock Option Plan effective as of October 21, 1997.
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its executive and
other key employees who have been or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type
of professional, technical and managerial employees considered essential to
the long-range success of the Company by providing and offering them an
opportunity to become owners of capital stock of the Company.
ARTICLE I
Definitions
Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter and
the singular shall include the plural, where the context so indicates.
Section 1.1--Affiliate
"Affiliate" shall mean any Subsidiary and any limited partnership of
which the Company or any Subsidiary is the general partner.
Section 1.2--Award Limit
"Award Limit" shall mean 500,000 shares of Common Stock.
Section 1.3--Board
"Board" shall mean the Board of Directors of the Company.
Section 1.4--Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5--Committee
"Committee" shall mean the Compensation Committee or another committee
of the Board, appointed as provided in Section 6.1.
Section 1.6--Common Stock
"Common Stock" shall mean the common stock of the Company, par value
$.01 per share, and any equity security of the Company issued or authorized
to be issued in the future, but excluding any preferred stock and any
warrants, options or other rights to purchase Common Stock. Debt securities
of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
Section 1.7--Company
"Company" shall mean AutoZone, Inc. In addition, "Company" shall mean
any corporation assuming, or issuing new employee stock options in
substitution for, Incentive Stock Options, outstanding under the Plan, in a
transaction to which Section 424(a) of the Code applies.
Section 1.8--Corporate Transaction
"Corporate Transaction" shall mean any of the following stockholder-
approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Awards are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
Section 1.9--Director
"Director" shall mean a member of the Board.
Section 1.10--Employee
"Employee" shall mean any employee (as defined in accordance with
Section 3401(c) of the Code) of the Employer, whether such employee is so
employed at the time this Plan is adopted or becomes so employed subsequent
to the adoption of this Plan.
Section 1.11--Employer
"Employer" shall mean the Company or an Affiliate, whichever at the
time employs the Employee.
Section 1.12--Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.13--Fair Market Value
"Fair Market Value" of a share of Common Stock as of a given date
shall be (i) the closing price of a share of Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any (or as
reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which
a trade occurred; or (ii) if Common Stock is not traded on an exchange but
is quoted on NASDAQ or a successor quotation system, the mean between the
closing representative bid and asked prices for the Common Stock on the
trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the Fair
Market Value of a share of Common Stock as established by the Committee
acting in good faith.
Section 1.14--Incentive Stock Option
"Incentive Stock Option" shall mean an Option that qualifies under
Section 422 of the Code and which is designated as an Incentive Stock
Option by the Committee.
Section 1.15--Non-Qualified Option
"Non-Qualified Option" shall mean an Option which is not designated as
an Incentive Stock Option and which is designated as a Non-Qualified Option
by the Committee.
Section 1.16--Officer
"Officer" shall mean an officer of the Company, as defined in Rule
16a-1(f) under the Exchange Act, as such Rule may be amended in the future.
Section 1.17--Option
"Option" shall mean a stock option granted under Article III of this
Plan. An Option granted under this Plan, as determined by the Committee,
shall either be an Incentive Stock Option or a Non-Qualified Option,
provided, however that options granted to Employees of an Affiliate which
is not a Subsidiary shall be Non-Qualified Options.
Section 1.18--Grantee
"Grantee" shall mean an Employee to whom an Option is granted under
this Plan.
Section 1.19--Plan
"Plan" shall mean this 1996 Stock Option Plan of AutoZone, Inc.
Section 1.20--Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended from time to time.
Section 1.21--Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.22--Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.23--Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Section 1.24--Termination of Employment
"Termination of Employment" shall mean the time when the employee-
employer relationship between an Grantee and the Employer is terminated for
any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death, or retirement, but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Grantee by the Employer; (ii) at the discretion
of the Committee, terminations which result in a temporary severance of the
employee-employer relationship; and (iii) at the discretion of the
Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Employer with the former
Employee. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a
Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations
of Employment; provided, however, that, with respect to Incentive Stock
Options, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the
extent that, such leave of absence, change in status or other change
interrupts employment for the purposes of Section 422(a)(2) of the Code and
the then applicable regulations and revenue rulings under said Section.
However, notwithstanding any provision of this Plan, the Employer has an
absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in writing.
ARTICLE II
Shares Subject to Plan
Section 2.1--Shares Subject to Plan
(a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's common stock, $.01 par value. The
aggregate number of such shares which may be issued upon exercise of
Options under the Plan shall not exceed 6,000,000. The shares of Common
Stock issuable under the Plan upon exercise of such Options may be either
previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any calendar year shall not
exceed the Award Limit. To the extent required by Section 162(m) of the
Code, the number of shares subject to Options which are canceled continue
to be counted against the Award Limit and if, after grant of an Option, the
price of shares subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and a grant of a new Option and
both the Option deemed to be canceled and the Option deemed to be granted
are counted against the Award Limit.
Section 2.2--Add-back of Options
If any Option expires or is canceled without having been fully
exercised or vested, the number of shares subject to such Option, but as to
which such Option was not exercised or vested prior to its expiration or
cancellation, may again be awarded hereunder, subject to the limitations of
Section 2.1. Furthermore, any shares subject to Options which are adjusted
pursuant to Section 7.8 and become exercisable with respect to shares of
stock of another corporation, shall be considered canceled and may again be
awarded hereunder, subject to the limitations of Section 2.1. Shares of
Common Stock which are delivered by the Grantee or withheld by the Company
upon the exercise or vesting of any Option, in payment of the exercise
price thereof, may again be awarded hereunder, subject to the limitations
of Section 2.1. Notwithstanding the provisions of this Section 2.2, no
shares of Common Stock may again be optioned if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option
under Section 422 of the Code.
ARTICLE III
Granting of Options
Section 3.1--Eligibility
Any key Employee selected by the Committee pursuant to Section
3.4(a)(i) shall be eligible to be granted an Option, provided, however,
that an Employee of an Affiliate which is not a Subsidiary shall be
eligible to be granted Non- Qualified Options only.
Section 3.2--Qualification of Incentive Stock Options
No Incentive Stock Option shall be granted to any person who is not an
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company or a Subsidiary.
Section 3.3--Disqualification for Stock Ownership
No person may be granted an Incentive Stock Option under this Plan if
such person, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any then existing Subsidiary or
parent corporation unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
Section 3.4--Granting of Options
(a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(i) Determine which Employees are key employees (including Employees who
have previously received Options under this Plan, or any other plan of the
Company) and in its opinion should be granted Options; and
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to such selected Employees; and
(iii) Determine whether such Options are to be Incentive Stock Options or
Non-Qualified Options and whether such Options are to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code; and
(iv) Determine the terms and conditions of such Options, consistent with
the Plan; provided, however, that the terms and conditions of such Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m)(4)(C) of the Code.
(b) Upon the selection of an Employee to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee
may, in its discretion and on such terms as it deems appropriate, require
as a condition of the grant of an Option to an Employee that the Employee
surrender for cancellation some or all of the unexercised Options which
have been previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Option, may cover the same (or a lesser or greater) number of shares as the
surrendered Option, may contain such other terms as the Committee deems
appropriate and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of the surrendered Option. However, in no event may Options to
purchase more than 300,000 shares of common stock be granted at a lower
price on a per share basis than the per share price of any Options required
to be surrendered.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such Option from treatment as an "incentive
stock option" under Section 422 of the Code.
Section 3.5--Consideration
Except as the Committee may otherwise determine, in consideration of
the granting of an Option, the Grantee shall agree, in the written Option
agreement, to remain in the employ of the Company, or any Affiliate, for a
period of at least one year (or such shorter period as may be fixed in the
Option agreement or by action of the Committee following grant of the
Option) after the Option is granted. Nothing in this Plan or in any Option
agreement hereunder shall confer upon any Grantee any right to continue in
the employ of his respective Employer, or shall interfere with or restrict
in any way the rights of each respective Employer, which are hereby
expressly reserved, to discharge any Grantee at any time for any reason
whatsoever, with or without cause.
ARTICLE IV
Terms of Options
Section 4.1--Option Agreement
Each Option shall be evidenced by a written Option agreement which
shall be executed by the Grantee and authorized Officers of the Company and
which shall contain such terms and conditions as the Committee shall
determine, consistent with the Plan. Option agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary
to meet the applicable provisions of Section 422 of the Code. Stock Option
agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.
Section 4.2--Option Price
(a) Subject to subsection 4.2(b), the price per share of the shares
subject to each Option shall be set by the Committee; provided, however,
that such price shall be no less than eighty- five percent (85%) of the
Fair Market Value of the underlying shares on the date of grant; further
provided that (i) such price shall be no less than the par value of a share
of Common Stock, unless otherwise permitted by applicable state law, (ii)
in the case of Incentive Stock Options and Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; and (iii) in the
case of Incentive Stock Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422
of the Code) such price shall not be less than 110% of the Fair Market
Value of a share of Common Stock on the date the Option is granted.
(b) Options to purchase no more than 300,000 shares of common stock
may be granted at a price lower than 100% of the Fair Market Value of the
underlying shares on the date of grant.
(c) Except as provided in 3.4(b), the price of an Option, once
established by the Committee as of the grant date, may not be lowered.
Section 4.3--Option Term
The term of an Option shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term
shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting
power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except
as limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any
Termination of Employment of the Grantee, or amend any other term or
condition of such Option relating to such a termination.
Section 4.4--Option Vesting
(a) Except as the Committee may otherwise provide, no Option may be
exercised in whole or in part during the first year after such Option is
granted unless the Option is being granted in modification or substitution
of a previously granted Option, in which case the one year period shall be
measured from the date of the grant of the previously granted Option.
(b) Subject to the provisions of Sections 4.4(a) and 4.4(d), the
period during which the right to exercise an Option in whole or in part
vests in the Grantee shall be set by the Committee and the Committee may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted. At any time after grant of an Option,
the Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during
which an Option vests.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Option agreement or by action of
the Committee following the grant of the Option.
(d) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Grantee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-
Qualified Options to the extent required by Section 422 of the Code. The
rule set forth in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted. For purposes of this
Section 4.4(d), the Fair Market Value of stock shall be determined as of
the time the Option with respect to such stock is granted.
ARTICLE V
Exercise of Options
Section 5.1--Partial Exercise
An exercisable Option may be exercised in whole or in part. However,
an Option shall not be exercisable with respect to fractional shares and
the Committee may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
Section 5.2--Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised
upon delivery to the Secretary of the Company or his designee:
(a) A written notice complying with the applicable rules established by
the Committee stating that the Option, or a portion thereof, is exercised.
The notice shall be signed by the Grantee or other person then entitled to
exercise the Option or such portion;
(b) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act, the Code, and any other
federal or state laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option or portion thereof shall be by any
person or persons other than the Grantee, appropriate proof of the right of
such person or persons to exercise the Option or portion thereof; and
(d) Full cash payment to the Company of the exercise price and any
applicable taxes for the shares with respect to which the Option, or
portion thereof, is exercised or through the delivery of a notice that the
Grantee has placed a market sell order with a broker approved by the
Company with respect to shares of Common Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of
the Option exercise price and any applicable taxes. However, the Committee
may, in its discretion, allow payment, in whole or in part, through (i) the
delivery of shares of Common Stock owned by the Grantee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof; (ii) allow payment, in whole or in part, through the delivery of a
full recourse promissory note bearing interest (at no less than such rate
as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board;
or (iii) allow payment through any combination of the foregoing. In the
case of a promissory note, the Committee may also prescribe the form of
such note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited
by law.
Section 5.3--Rights as Stockholders
Grantees shall not be, nor have any of the rights or privileges of,
stockholders of the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such Grantees.
Section 5.4--Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the
exercise of an Option as it deems appropriate. Any such restrictions shall
be set forth in the respective Option agreement and may be referred to on
the certificates evidencing such shares. Without limiting the generality of
the foregoing, the Committee may require the Employee to give the Company
prompt notice of any disposition of shares of stock acquired by exercise of
an Incentive Stock Option within two years from the date of granting such
Option or one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
ARTICLE VI
Administration
Section 6.1--Compensation Committee
The Committee shall consist solely of two or more Directors, appointed
by and holding office at the pleasure of the Board, each of whom is both a
"non- employee director" as defined by Rule 16b-3 and an "outside director"
for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee shall be filled by the Board.
Section 6.2--Duties and Powers of the Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the agreements pursuant to
which Options are granted and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent herewith and
to interpret, amend or revoke any such rules. Any such interpretations and
rules in regard to Incentive Stock Options shall be consistent with
provisions of Section 422 of the Code. Any grant under this Plan need not
be the same with respect to each Grantee. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under this Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole
discretion of the Committee.
Section 6.3--Majority Rule; Unanimous Written Consent
The Committee shall act by a majority of its members in attendance at
a meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
Section 6.4--Professional Assistance; Good Faith Actions
All expenses and liabilities which members of the Committee incur in
connection with the administration of this Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or Board in good
faith shall be final and binding upon all Grantees, the Company and all
other interested persons. No members of the Committee or the Board shall be
personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Awards, and all members of the
Committee and the Board shall be fully protected by the Company in respect
to any such action, determination or interpretation.
ARTICLE VII
Other Provisions
Section 7.1--Options Not Transferable
Options may not be sold, pledged, assigned, or transferred in any
manner other than by will or the laws of descent and distribution, unless
and until such Options have been exercised, and the shares underlying such
Options have been issued, and all restrictions applicable to such shares
have lapsed. No Option or interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Grantee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation
of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect except as otherwise
permitted in this Section 7.1.
Section 7.2--Eligibility to Exercise
Only a Grantee may exercise an Option granted under the Plan during
the Grantee's lifetime. After the death of the Grantee, any exercisable
portion of an Option may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Option agreement or other
agreement, be exercised by the Grantee's personal representative, or by any
person empowered to do so under the deceased Grantee's will or under the
then applicable laws of descent and distribution.
Section 7.3--Conditions to Issuance of Stock Certificates
The Company shall not be required to issue or deliver any certificate
or certificates for shares of stock purchased upon the exercise of any
Option prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion,
deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
Section 7.4--Amendment, Suspension or Termination of the Plan
Except as otherwise provided in this Section 7.4, the Plan may be
wholly or partially amended or otherwise modified, suspended or terminated
at any time or from time to time by the Board or the Committee. However, to
the extent required by Sections 422 or 162(m) of the Code, without approval
of the Company's stockholders given within 12 months before or after the
action by the Committee or Board, no action of the Committee or Board may
increase any limit imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan, modify the Award Limit, materially
modify the eligibility requirements of Section 3.1, or extend the limit
imposed in this Section 7.4 on the period during which Options may be
granted or amend or modify the Plan in a manner requiring stockholder
approval under Sections 422 or 162(m) of the Code, and no action of the
Committee or Board may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Neither the
amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, alter or impair any rights or
obligations under any Option theretofore granted unless the Option
agreement itself expressly so provides. No Option may be granted during any
period of suspension nor after termination of the Plan, and in no event any
Option be granted under this Plan on or after October 21, 2006. No
amendment, suspension or termination of this Plan shall, without the
consent of the Grantees alter or impair any rights or obligations under any
Option theretofore granted or awarded, unless the Option agreement
otherwise expressly so provides.
Section 7.5--Approval of Plan by Stockholders
The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Sections 162(m) and 422 of the
Code. This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial
adoption of this Plan. Options may not be granted under the Plan prior to
such stockholder approval.
Section 7.6--Effect of Plan Upon Other Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Employers. Nothing in this Plan shall be
construed to limit the right of the Employers (a) to establish any other
forms of incentives or compensation for employees of the Employers or (b)
to grant or assume options otherwise than under this Plan in connection
with any proper corporate purpose, including, but not by way of limitation,
the grant or assumption of options in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock
or assets of any corporation, firm or association.
Section 7.7--Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act, the Exchange Act, the Code, and any and
all regulations and rules promulgated by the Securities and Exchange
Commission and the Internal Revenue Service. Notwithstanding anything
herein to the contrary, the Plan shall be administered, and Options shall
be granted and may be exercised, only in such a manner as to conform to
such laws, rules and regulations. To the extent permitted by applicable
law, the Plan and Options granted hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
Section 7.8--Changes in Common Stock or Assets of the Company, Acquisition
or
Liquidation of the Company and Other Corporate Events
(a) Subject to Section 7.8(d), in event that the Committee determines
that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited
to, a Corporate Transaction), or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event, in the Committee's sole discretion, affects the
Common Stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits
intended to be made available under the Plan or with respect to an Option,
then the Committee shall, in such manner as it may deem equitable, adjust
any or all of
(i) the number and kind of shares of Common Stock (or other securities or
property) with respect to which Options may be granted under the Plan,
(including, but not limited to, adjustments of the limitations in Section
2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Section 7.8(d), in the event of any Corporate
Transaction or other transaction or event described in Section 7.8(a) or
any unusual or nonrecurring transactions or events affecting the Company,
any affiliate of the Company, or the financial statements of the Company or
any affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take
any one or more of the following actions whenever the Committee determines
that such action is appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under
the Plan or with respect to any Option under this Plan, to facilitate such
transactions or events, or to give effect to such changes in laws,
regulations or principles:
(i) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may provide, either by the terms of
the Option agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Grantee's
request, for either the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
option, or award or realization of the Grantee's rights had such Option
been currently exercisable or payable or fully vested or the replacement of
such Option with other rights or property selected by the Committee in its
sole discretion;
(ii) In its sole and absolute discretion, the Committee may provide,
either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after
such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such option shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option agreement or by action taken prior to the
occurrence of such transaction or event, that upon such event, such Option
be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; or
(v) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may make adjustments in the number
and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding Options that may be granted in the future.
(c) Subject to Section 7.8(d) and 7.12, the Committee may, in its
discretion, include such further provisions and limitations in any Option
agreement or stock certificate, as it may deem equitable and in the best
interests of the Company.
(d) With respect to Options intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in
this Section 7.8 or in any other provision of the Plan shall be authorized
to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such Option to fail to
so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-
swing profits liability under Section 16 of the Exchange Act or violate the
exemptive conditions of Rule 16b-3 unless the Committee determines that the
Option is not to comply with such exemptive conditions.
(e) The number of shares of Common Stock subject to any Option shall
always be rounded to the nearest whole number.
Section 7.9--Tax Withholding
The Company shall be entitled to require payment in cash or deduction
from other compensation payable to each Grantee of any sums required by
federal, state or local tax laws to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such
Grantee to elect to have the Company withhold shares of Common Stock
otherwise issuable under such Option (or allow the return of shares of
Common Stock) having a Fair Market Value equal to the sums required to be
withheld.
Section 7.10--Loans
The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise of an Option granted under this
Plan. The terms and conditions of any such loan shall be set by the
Committee.
Section 7.11--Forfeiture Provisions
Pursuant to its general authority to determine the terms and
conditions applicable to awards under the Plan, the Committee shall have
the right (to the extent consistent with the applicable exemptive
conditions of Rule 16b-3) to provide, in the terms of an Option made under
the Plan, or to require the recipient to agree by separate written
instrument, that (i) any proceeds, gains or other economic benefit actually
or constructively received by the recipient upon any receipt or exercise of
the Option, or upon the receipt or resale of any Common Stock underlying
such Option, must be paid to the Company, and (ii) the Option shall
terminate and any unexercised portion of such Option (whether or not
vested) shall be forfeited, if (a) a Termination of Employment occurs prior
to a specified date, or within a specified time period following receipt or
exercise of the Option, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the
Company, or which is adverse, contrary or harmful to the interests of the
Company, as further defined by the Committee.
Section 7.12--Limitations Applicable to Section 16 Persons and Performance-
Based Compensation
Notwithstanding any other provision of this Plan, this Plan, and any
Option granted to any individual who is then subject to Section 16, shall
be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary
to conform to such applicable exemptive rule. Furthermore, notwithstanding
any other provision of this Plan, any Option intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code)
or any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
Section 7.13--Compliance with Laws
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money
under this Plan or under Options granted hereunder are subject to
compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law
and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for
the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restriction,
and the person acquiring such securities shall, if requested by the
Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law,
the Plan, Options granted or awarded hereunder shall be deemed amended to
the extent necessary to conform to such laws, rules or regulations.
Section 7.14--Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Plan.
Section 7.15--Governing Law
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Nevada
without regard to the conflicts of laws rules thereof.
EXHIBIT 11.1
STATEMENT RE : COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
TWELVE WEEKS ENDED
-----------------------------
Nov. 22, Nov. 23,
1997 1996
--------- ---------
PRIMARY:
Average shares outstanding 151,697 150,243
Net effect of dilutive stock options,
based on the treasury stock method,
using average fair market value 2,126 2,151
--------- ---------
Total shares used in computation 153,823 152,394
========= =========
Net Income $ 47,546 $ 37,975
========= =========
Per share amount $ 0.31 $ 0.25
========= =========
FULLY DILUTED:
Average share outstanding 151,697 150,243
Net effect of dilutive stock options,
based on the treasury stock method,
using higher of average or ending
fair market value 2,126 2,151
--------- ---------
Total shares used in computation 153,823 152,394
========= =========
Net Income $ 47,546 $ 37,975
========= =========
Per share amount $ 0.31 $ 0.25
========= =========