AutoZone 2010 Annual Report Download - page 28

The aggregate number of shares of our common stock available for equity grants pursuant to the Plan
will be reduced by two shares for every share delivered in settlement of an award other than (i) a stock option,
(ii) a stock appreciation right or (iii) any other award for which the holder pays the intrinsic value existing as
of the date of grant (such awards, “Full Value Awards”). To the extent that any award other than a Full Value
Award is forfeited, expires or is settled in cash without the delivery of shares to the holder, then any shares
subject to the award will again be available for the grant of an award pursuant to the Plan; if such forfeited,
expired or cash-settled award is a Full Value Award, then the number of shares available under the Plan will
be increased by two shares for each share subject to the award that is forfeited, expired or cash-settled.
However, shares tendered or withheld in payment of the exercise price of an option or in satisfaction of any
tax withholding obligations with respect to an award, shares subject to a stock appreciation right that are not
issued in connection with the stock settlement of the stock appreciation right on exercise thereof, and shares
purchased on the open market with the cash proceeds from the exercise of options, will not again be available
for the grant of an award pursuant to the Plan. Any shares of restricted stock repurchased by the Company at
the same price paid by the participant, so that such shares are returned to the Company, will again be available
for awards granted pursuant to the Plan. The payment of dividend equivalents in cash in conjunction with any
outstanding awards will not be counted against the shares available for issuance under the Plan.
In the event of a corporate transaction, such as a merger, combination, consolidation or acquisition of
property or stock, any awards granted under the Plan upon the assumption of, or in substitution for,
outstanding equity awards previously granted by another entity, will not reduce the shares authorized for grant
under the Plan. Additionally, in the event that AutoZone or its subsidiaries or affiliates acquire or combine
with a company that has shares available under a pre-existing plan approved by stockholders, the shares
available for grant pursuant to the terms of such pre-existing plan may be used for awards under the Plan
under certain circumstances and will not reduce the shares authorized for grant under the Plan.
What types of equity awards are available under the Plan?
Stock Options. The Plan provides for the grant of incentive stock options, as defined under Section 422
of the Code (“ISOs”), and non-qualified stock options. The option exercise price of all stock options granted
pursuant to the Plan will not be less than 100% of the fair market value of our common stock on the date of
grant. Stock options may be exercised as determined by the Administrator, but in no event may (a) an ISO
have a term extending beyond the tenth anniversary of the date of grant and (b) a non-qualified stock option
have a term extending beyond the date that is ten years and one day after the date of grant. ISOs granted to
any person who owns, as of the date of grant, stock possessing more than ten percent of the total combined
voting power of all classes of our stock, however, shall have an exercise price that is not less than 110% of
the fair market value of our common stock on the date of grant and may not have a term extending beyond
the fifth anniversary of the date of grant. The aggregate fair market value of the shares with respect to which
options intended to be ISOs are exercisable for the first time by an employee in any calendar year may not
exceed $100,000, or such other amount as the Code provides. The Plan prohibits, without stockholder
approval: (i) the amendment of options to reduce the exercise price, and (ii) the replacement of an option with
cash or any other award when the price per share of the option exceeds the fair market value of the underlying
shares.
Restricted Stock. A restricted stock award is the grant of shares of our common stock at a price
determined by the Administrator that may be subject to substantial risk of forfeiture until specific conditions
are met. Conditions may be based on continuing service to us or any of our subsidiaries or affiliates or
achieving performance goals. During the period of restriction, all shares of restricted stock will be subject to
restrictions and vesting requirements, which will lapse in accordance with a schedule or other conditions
determined by the Administrator. Restricted stock is nontransferable and may not be sold or encumbered until
all restrictions are terminated or expire.
Dividend Equivalents. Dividend equivalents may be granted pursuant to the Plan, except that no
dividend equivalents may be payable with respect to options or stock appreciation rights awarded pursuant to
the Plan. A dividend equivalent is the right to receive the equivalent value of dividends paid on shares. If
granted, they are credited as of dividend payment dates occurring between the date an award is granted and
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