AutoZone 2008 Annual Report Download - page 23

(5) The “Total” column is different than total compensation actually paid to our directors in fiscal 2008. See
footnotes 3 and 4 above.
(6) Messrs. Crowley and Grusky joined the Board in August, 2008.
Narrative Accompanying Director Compensation Table
Directors may select at the beginning of each calendar year between two pay alternatives. The first
alternative includes an annual retainer fee of $40,000 and a stock option grant. The second alternative includes
an annual retainer of $40,000, a supplemental retainer fee of $35,000, and a smaller stock option grant. The
second alternative was added in 2008 to make the director compensation package more attractive to potential
director candidates (and existing directors) who, in a given year, might prefer a higher percentage of fixed
compensation. Directors electing either alternative receive a significant portion of their compensation in
AutoZone common stock, since at least one-half of the base retainer and, if applicable, one-half of the
supplemental retainer must be paid in AutoZone common stock or stock units.
Annual Retainer Fees. Non-employee directors must choose each year between the two compensation
alternatives described above. A director electing the first alternative will receive an annual base retainer fee of
$40,000 (the “Base Retainer”). A director electing the second alternative will receive, in addition to the Base
Retainer, an annual supplemental retainer fee in the amount of $35,000 (the “Supplemental Retainer”), but
will receive a smaller annual stock option award under the Director Stock Option Plan. There are no meeting
fees.
The chairman of the Audit Committee receives an additional fee of $10,000 annually, and the chairmen
of the Compensation Committee and the Nominating and Corporate Governance Committee each receive an
additional fee of $5,000 per year.
Director Compensation Plan. Under the AutoZone, Inc. 2003 Director Compensation Plan (the “Direc-
tor Compensation Plan”), a non-employee director may receive no more than one-half of the annual fees in
cash — the remainder must be taken in AutoZone common stock. The director may elect to receive up to
100% of the fees in stock or to defer all or part of the fees in units with value equivalent to the value of
shares of AutoZone Common Stock (“Stock Units”). Unless deferred, the annual fees are payable in advance
in equal quarterly installments on September 1, December 1, March 1, and June 1 of each year, at which time
each director receives cash and/or shares of common stock in the amount of one-fourth of the annual fees. The
number of shares issued is determined by dividing the amount of the fee payable in shares by the fair market
value of the shares as of the grant date.
If a director defers any portion of the annual fees in the form of Stock Units, then on September 1,
December 1, March 1, and June 1 of each year, AutoZone will credit a unit account maintained for the
director with a number of Stock Units determined by dividing the amount of the fees by the fair market value
of the shares as of the grant date. Upon the director’s termination of service, he or she will receive the number
of shares of common stock with which his or her unit account is credited, either in a lump sum or installments,
as elected by the director under the Director Compensation Plan.
Director Stock Option Plan. Under the AutoZone, Inc. 2003 Director Stock Option Plan (the “Director
Stock Option Plan”), directors who elect to be paid only the Base Retainer will receive, on January 1 during
their first two years of service as a director, an option to purchase 3,000 shares of AutoZone common stock.
After the first two years, such directors will receive, on January 1 of each year, an option to purchase
1,500 shares of common stock, and each such director who owns common stock or Stock Units worth at least
five times the Base Retainer will receive an additional option to purchase 1,500 shares. Directors electing to
be paid the Supplemental Retainer will receive, on January 1 during their first two years of service as a
director, an option to purchase 2,000 shares of AutoZone common stock. After the first two years, such
directors will receive, on January 1 of each year, an option to purchase 500 shares of common stock, and each
such director who owns common stock or Stock Units worth at least five times the Base Retainer will receive
an additional option to purchase 1,500 shares. In addition, each new director receives an option to purchase
3,000 shares upon election to the Board, plus a portion of the base annual option grant corresponding to the
director’s compensation election, prorated for the portion of the year served in office.
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