EXHIBIT 10.5
EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Timothy D. Vargo, an
individual ("Employee") dated as of June 11, 1997 ("Effective Date").
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:
1. EMPLOYMENT. AutoZone agrees to employ Employee and Employee agrees to
remain in the employment of AutoZone, or a subsidiary or affiliate,
until the expiration or earlier termination of this Agreement.
2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.
3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of four hundred thousand dollars ($400,000), subject to
increases as determined by the Compensation Committee of the Board of
Directors ("Base Salary"). The Base Salary amount shall be paid on a
pro-rated basis for all partial years based on a 364 day year. AutoZone
reserves the right to increase the Base Salary above the amounts stated
above in its sole discretion. All salary shall be paid at the same time
and in the same manner that AutoZone's other officers are paid.
4. BONUS. During the term of this Agreement, Employee shall receive a
bonus up to 75% of his Base Salary in accordance with policies and
procedures established by AutoZone's Compensation Committee and Board of
Directors which shall be based upon the financial and operational goals
and objectives for the Employee and AutoZone established by the
Compensation Committee for each of AutoZone's fiscal years ("Target") in
accordance with AutoZone's Executive Incentive Compensation Plan. The
Target is established at the sole discretion of the Compensation
Committee and Board of Directors and is subject to review and revision
at any time upon notification to the Employee. All bonuses shall be
paid at the same time and in the same manner that AutoZone's other
officers are paid.
5. DUTIES. Employee shall serve as AutoZone's President and COO performing
such duties as AutoZone's Board of Directors may direct from time to
time and as are normally associated with such a position. AutoZone may,
in its sole discretion, alter, expand or curtail the services to be
performed by Employee or position held by Employee from time to time,
without adjustment in compensation. Employee shall devote his entire
time and attention to AutoZone's business. During the term of this
Agreement, Employee shall not engage in any other business activity that
conflicts with his duties with AutoZone, regardless of whether it is
pursued for gain or profit. Employee may, however, invest his assets in
or serve on the Board of Directors of other companies so long as they do
not require Employee's services in the day to day operation of their
affairs and do not violate AutoZone's conflict of interest policy.
Notwithstanding, Employee may from time to time invest deminimus amounts
in the publicly traded stock of Competitors upon written approval of
AutoZone's General Counsel.
6. OTHER BENEFITS. Other benefits to be received by Employee from AutoZone
shall be the ordinary benefits received by AutoZone's other executive
officers, which may be changed by AutoZone in its sole discretion from
time to time.
7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.
8. TERMINATION BY AUTOZONE.
(a) WITHOUT CAUSE. AutoZone may terminate this Agreement without
Cause at any time upon notice to Employee. In such event, Employee shall
continue to be paid his then current Base Salary (on a pro-rated basis
in the same manner as Employee is then receiving his base salary) until
three years after the termination date ("Continuation Period"). During
the Continuation Period, Employee shall not receive any bonus payments.
During the Continuation Period, Employee shall continue to be an
employee of AutoZone or a subsidiary (on leave of absence), and
Employee's stock options shall continue to vest and be exercised in the
manner set forth in the respective stock option agreements until the end
of the Continuation Period, at which time Employee's employment with
AutoZone shall be terminated and further stock option exercise and
vesting shall be governed by the terms of the stock option agreement.
During the Continuation Period, Employee shall receive such other
benefits as other employees of AutoZone, including, but not limited
to, health and life insurance, on the same terms and conditions.
AutoZone shall have no other obligations other than those stated herein
upon the termination of this Agreement and Employee hereby releases
AutoZone from any and all obligations and claims except those as are
specifically set forth herein.
(b) WITH CAUSE. AutoZone shall have the right to terminate this
Agreement and Employee's employment with AutoZone for Cause at any time.
Upon such termination for Cause, Employee shall have no right to receive
any compensation, salary, or bonus and shall immediately cease to
receive any benefits (other than those as may be required pursuant to
the AutoZone Pension Plan or by law) and any stock options shall be
governed by the respective stock option agreements in effect between the
Employee and AutoZone at that time. "Cause" shall mean the willful
engagement by the Employee in conduct which is demonstrably or
materially injurious to AutoZone, monetarily or otherwise. For this
purpose, no act or failure to act by the Employee shall be considered
"willful" unless done, or omitted to be done, by the Employee not in
good faith and without reasonable belief that his action or omission was
in the best interest of AutoZone.
9. TERMINATION BY EMPLOYEE. Employee may terminate this Agreement at
anytime upon written notice to AutoZone. Upon such termination,
Employee's employment shall terminate and Employee shall cease to
receive any further salary, benefits, or bonus, and all stock options
granted shall be governed by the respective stock option agreement(s)
between the Employee and AutoZone.
10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone by giving
written notice to AutoZone within sixty days of the occurrence of a
Change of Control. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option
agreement(s). Any of the following events shall constitute a "Change of
Control": (a) the acquisition after the date hereof, in one or more
transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
by any person or entity or any group of persons or entities who
constitute a group (as defined in Section 13(d)(3) under the Exchange
Act) of any securities such that as a result of such acquisition such
person, entity or group beneficially owns AutoZone, Inc.'s then
outstanding voting securities representing 51% or more of the total
combined voting power entitled to vote on a regular basis for a majority
of the board of Directors of AutoZone, Inc. or (b) the sale of all or
substantially all of the assets of AutoZone (including, without
limitation, by way of merger, consolidation, lease or transfer) in a
transaction where AutoZone or the beneficial owners (as defined in Rule
13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not
receive (i) voting securities representing a majority of the total
combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls
the acquiring entity or (ii) securities representing a majority of the
total combined equity interest in the acquiring entity, if other than a
corporation; provided however, that the foregoing provisions of this
Paragraph 10 shall not apply to any transfer, sale or disposition of
shares of capital stock of AutoZone to any person or persons who are
affiliates of AutoZone on the date hereof.
11. EFFECT OF TERMINATION. Any termination of Employee's service as an
officer of AutoZone shall be deemed a termination of Employee's service
on all boards and as an officer of all subsidiaries of AutoZone.
12. NON-COMPETE. Employee agrees that he will not, for the period
commencing on the termination date of this Agreement pursuant to
Paragraph 8 or 9 (whichever is applicable) of this Agreement and ending
on
(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or
(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,
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, province, territory or foreign country in
which AutoZone operates now or shall operate during the term set forth
in this non-compete paragraph (herein called "Competitor"), as an
employee, director, consultant, beneficial or record owner, partner,
joint venturer, officer or agent of the Competitor.
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 and are in exchange for the
obligations undertaken by AutoZone pursuant to this Agreement.
Further, Employee agrees not to hire, for himself or any other entity,
encourage anyone or entity to hire, or entice away from AutoZone any
employee of AutoZone during the term of this non-compete obligation.
If at any time a court of competent jurisdiction holds that any portion of
this Non-Compete section is unenforceable for any reason, then Employee
shall forfeit his right to any further salary, bonus, stock option
exercises, or benefits from AutoZone during any Continuation Period.
This Paragraph 12 shall not apply to a termination by Employee pursuant
to Paragraph 10.
13. CONFIDENTIALITY. Unless otherwise required by law, Employee shall hold
in confidence any proprietary or confidential information obtained by
him during his employment with AutoZone, which shall include, but not be
limited to, information regarding AutoZone's present and future business
plans, vendors, systems, operations and personnel. Confidential
information shall not include information: (a) publicly disclosed by
AutoZone; (b) rightfully received by Employee from a third party without
restrictions on disclosure (c) approved for release or disclosure by
AutoZone; or (d) produced or disclosed pursuant to applicable laws,
regulation or court order. Employee acknowledges that all such
confidential or proprietary information is and shall remain the sole
property of AutoZone and all embodiments of such information shall
remain with AutoZone.
14. BREACH BY EMPLOYEE. The parties further agree that if, at any time,
despite the express agreement of the parties hereto, Employee violates
the provisions of this Agreement by violating the Non-Compete or
Confidentiality sections, or by failing to perform his obligations under
this Agreement, Employee shall forfeit any unexercised stock options,
vested or not vested, and AutoZone may cease paying any further salary
or bonus. In the event of breach by Employee of any provision of this
Agreement, Employee acknowledges that such breach will cause irreparable
damage to AutoZone, 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, AutoZone 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.
15. DEATH OF EMPLOYEE OR DISABILITY. If Employee should die or become
disabled (such that he is no longer capable of performing his duties)
during the term of this Agreement, then all salary and bonus shall cease
as of the date of his death or disability, all stock options shall be
governed by the terms of the respective stock option agreements, and
Employee shall receive disability or death benefits as may be provided
under AutoZone's then existing policies and procedures related to
disability or death of AutoZone employees.
16. WAIVER. Any waiver of any breach of this Agreement by AutoZone shall
not operate or be construed as a waiver of any subsequent breach by
Employee. No waiver shall be valid unless in writing and signed by an
authorized officer of AutoZone.
17. ASSIGNMENT. Employee acknowledges that his services are unique and
personal. Accordingly, Employee shall not assign his rights or delegate
his duties or obligations under this Agreement. Employee's rights and
obligations under this Agreement shall inure to the benefit of and be
binding upon AutoZone successors and assigns. AutoZone may assign this
Agreement to any wholly-owned subsidiary operating for the use and
benefit of AutoZone.
18. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties related to the matters discussed herein. It may not be
changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension,
or discharge is sought.
19. JURISDICTION. 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.
20. SURVIVAL. Sections 8, 12, 13, 14 and 19 of this Agreement shall
survive any termination of this Agreement or Employee's employment with
AutoZone (including, without limitation termination pursuant to
Paragraphs 8, 9, or 10).
IN WITNESS WHEREOF, the respective parties execute this Agreement.
AUTOZONE, INC.
By: /s/ J.C. Adams /s/ Timothy D. Vargo
---------------- ----------------------
Title: Chairman & CEO Employee
6/13/97
By: Harry L. Goldsmith ---------------------
-------------------- Date
Title: Senior Vice President