What are the main changes to AutoZone's director compensation?

Effective January 1, 2008, AutoZone introduced an optional supplemental retainer for non-employee directors. Directors can choose between the standard annual base retainer or the base retainer plus an additional $35,000 supplemental retainer. The latter option comes with a reduced stock option award.

How is director compensation paid?

At least half of the director's base retainer and supplemental retainer (if elected), plus any chairman fees, must be paid in AutoZone common stock. Directors also have the option to receive up to 100% of these fees in stock or to defer all or part of the fees in Stock Units, which are equivalent in value to AutoZone common stock.

How do the stock option grants differ under the new plan?

Stock option grants vary based on whether a director elects the supplemental retainer, their years of service, and their existing stock ownership. Generally, directors receiving only the base retainer receive more options than those taking the supplemental retainer. Option grants also increase after the first two years of service, and additional options are granted if a director's stock ownership reaches five times the base retainer amount.

Are there any exceptions to the new stock option grant rules?

Yes, the changes to stock option grants during a director's first two years of service do not apply to any director who was a member of the Board of Directors as of June 6, 2007.

AZO 8-K: Material Agreements

Summary

AutoZone, Inc. (AZO) has filed an 8-K report on January 4, 2008, detailing amendments to its director compensation structure effective January 1, 2008. The company has updated its Director Compensation Plan and Director Stock Option Plan to provide non-employee directors with more flexibility in their compensation arrangements. Key changes include the introduction of an optional supplemental retainer, which allows directors to elect a higher cash component in exchange for potentially fewer stock options. Furthermore, the structure of stock option grants has been modified based on years of service and stock ownership levels, aiming to better align director interests with shareholder value. These adjustments reflect AutoZone's ongoing efforts to attract and retain experienced leadership while ensuring appropriate incentives are in place.

Key Highlights

1Amendments to AutoZone's director compensation structure effective January 1, 2008.
2Introduction of two compensation options for non-employee directors: a Base Retainer or a Base Retainer plus a Supplemental Retainer.
3Directors electing the Supplemental Retainer ($35,000 additional) will receive a smaller annual stock option award.
4Compensation for retainers and chairman fees will be paid with at least half in common stock, with director options for up to 100% in stock or deferral in Stock Units.
5Stock option grants are tiered based on years of service (first two years vs. after two years) and stock ownership levels (owning stock/units worth at least five times the Base Retainer).
6Changes in option grants during the first two years of service do not apply to directors who were on the Board as of June 6, 2007.
7The full Director Compensation Program and amended 2003 Plans are filed as exhibits.

AUTOZONE INC 8-K Report, Material Agreement (Jan 4, 2008)

Summary

Key Highlights

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