AutoZone 2013 Annual Report Download - page 46

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(3) Represents options awarded pursuant to the 2011 Equity Plan. See “Compensation Discussion and Analysis”
at page 20 and the discussion following this table for more information on equity plans.
Discussion of Plan-Based Awards Table
Executive Incentive Compensation Plan. The EICP is intended to be a performance-based compensation
plan under Section 162(m) of the Internal Revenue Code. The Company’s executive officers, as determined by
the Compensation Committee of the Board of Directors, are eligible to participate in the EICP. At the beginning
of each fiscal year, the Compensation Committee establishes a goal, which may be a range from a minimum to a
maximum attainable bonus, based on one or more of the following measures:
• Earnings • Return on invested capital
• Earnings per share • Economic value added
• Sales • Return on inventory
• Market share • EBIT margin
• Operating or net cash flows • Sales per square foot
• Pre-tax profits • Comparable store sales
• Earnings before interest and taxes (EBIT)
The EICP provides that the goal may be different for different executives. The goals can change annually to
support our business objectives. After the end of each fiscal year, the Compensation Committee must certify the
attainment of goals under the EICP and direct the amount to be paid to each participant in cash. See
“Compensation Discussion and Analysis” on page 20 for more information about the EICP.
Executive Stock Purchase Plan. The Executive Stock Purchase Plan permits participants to acquire
AutoZone common stock in excess of the purchase limits contained in AutoZone’s Employee Stock Purchase
Plan. Because the Executive Stock Purchase Plan is not required to comply with the requirements of Section 423
of the Internal Revenue Code, it has a higher limit on the percentage of a participant’s compensation that may be
used to purchase shares (25%) and places no dollar limit on the amount of a participant’s compensation that may
be used to purchase shares under the plan. For more information about the Executive Stock Purchase Plan, see
“Compensation Discussion and Analysis” on page 20.
Stock Options. Stock options are awarded to many levels of management, including executive officers,
to align the long-term interests of AutoZone’s management and our stockholders. During the 2013 fiscal year,
604 AutoZone employees received stock options. The stock options shown in the table were granted pursuant to
the 2011 Equity Plan.
Both incentive stock options and non-qualified stock options, or a combination of both, can be granted
under the 2011 Equity Plan. Incentive stock options have a maximum term of ten years, and non-qualified stock
options have a maximum term of ten years and one day. Options granted during the 2013 fiscal year vest in one-
fourth increments over a four-year period. All options granted under the 2011 Equity Plan have an exercise price
equal to the fair market value of AutoZone common stock on the date of grant, which is defined as the closing
price on the grant date. Option repricing is expressly prohibited by the terms of the 2011 Equity Plan.
Each grant of stock options is governed by the terms of a Stock Option Agreement entered into between the
Company and the executive officer at the time of the grant. The Stock Option Agreements provide vesting
schedules and other terms of the grants in accordance with the 2011 Equity Plan.
Under the 2011 Equity Plan, participants may receive equity-based compensation in the form of stock
appreciation rights, restricted shares, restricted share units, dividend equivalents, deferred stock, stock payments,
performance share awards and other incentive awards structured by the Compensation Committee and the Board
within parameters set forth in the Plan.
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