O'REILLY AUTOMOTIVE INC.
March 22, 2005
Dear Shareholder:
You are cordially invited to attend the 2005 Annual Meeting of Shareholders
of O'Reilly Automotive, Inc. to be held at the Clarion Hotel, Ballrooms 1 and 2,
3333 South Glenstone Avenue, Springfield, Missouri on Tuesday, May 3, 2005, at
10:00 a.m. local time.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the shareholders.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, please complete, sign, date and return the
enclosed proxy card in the envelope provided at your earliest convenience or
vote via telephone or Internet using the instructions on the proxy card. If you
attend the meeting, you may vote your shares in person even though you have
previously signed and returned your proxy.
In order to assist us in preparing for the Annual Meeting, please let us
know if you plan to attend by contacting Tricia Headley, our Corporate
Secretary, at 233 South Patterson, Springfield, Missouri 65802, (417) 874-7161.
We look forward to seeing you at the Annual Meeting.
David E. O'Reilly Larry P. O'Reilly
Chief Executive Officer & Co-Chairman of the Board
Co-Chairman of the Board
O'REILLY AUTOMOTIVE, INC.
233 South Patterson
Springfield, Missouri 65802
_________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 3, 2005
_________________________________________
Springfield, Missouri
March 22, 2005
The Annual Meeting of Shareholders of O'Reilly Automotive, Inc. (the
Company), will be held on Tuesday, May 3, 2005, at 10:00 a.m., local time, at
the Clarion Hotel, Ballrooms 1 and 2, 3333 South Glenstone Avenue, Springfield,
Missouri 65804, for the following purposes:
(1) To elect three Class III Directors, each to serve for a three year term;
and
(2) To ratify the appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending December 31, 2005; and
(3) To consider and act upon a proposal to amend and restate the 2003 Employee
Stock Option Plan to the 2003 Incentive Plan; and
(4) To consider and act upon a proposal to amend and restate the 2003 Director
Stock Option Plan to the 2003 Director Stock Plan; and
(5) To consider and act upon a proposal to amend our Amended and Restated
Articles of Incorporation to change our authorized shares to 250,000,000
common shares.
(6) To transact such other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on February 25,
2005, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournments or
postponements. A list of all shareholders entitled to vote at the Annual
Meeting, arranged in alphabetical order and showing the address of and number of
shares held by each shareholder, will be available during usual business hours
at the principal office of the Company at 233 South Patterson, Springfield,
Missouri 65802, to be examined by any shareholder for any purpose reasonably
related to the Annual Meeting for 10 days prior to the date thereof. The list
will also be available for examination throughout the course of the meeting.
Your vote is important to ensure a quorum at the meeting. Even if you own
only a few shares, and whether or not you expect to be present at the meeting,
we request you to mark, date, sign and mail the enclosed proxy card in the
postage-paid envelope provided or vote your shares by telephone or Internet as
directed on the enclosed proxy card. Telephone and Internet voting facilities
for shareholders of record will be available 24 hours a day, and will close on
Monday, May 2, 2005, at 11:59 p.m. Eastern Standard Time.
A copy of the Company's Annual Shareholders' Report for fiscal year 2004
accompanies this notice.
By Order of the Board of Directors,
Tricia Headley
Secretary
O'REILLY AUTOMOTIVE, INC.
233 South Patterson
Springfield, Missouri 65802
________________________________
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of O'Reilly
Automotive, Inc. (the Company), for use at the Annual Meeting of the Company's
shareholders to be held at the Clarion Hotel, Ballrooms 1 and 2, 3333 South
Glenstone Avenue, Springfield, Missouri 65804, on Tuesday, May 3, 2005, at 10:00
a.m., local time, and at any adjournments thereof. Whether or not you expect to
attend the meeting in person, please return your executed proxy card in the
enclosed envelope or vote via telephone or Internet using the instructions on
the proxy and the shares represented thereby will be voted in accordance with
your wishes. This Proxy Statement and the accompanying proxy card are first
being mailed to shareholders on or about March 22, 2005.
Solicitation of proxies is being made by the Company and will be made
primarily by mail. The cost of solicitation of proxies will be made by us and
will also include reimbursement paid to brokerage firms and others for their
reasonable out of pocket expenses of forwarding solicitation materials to their
principals.
REVOCABILITY OF PROXY
If, after sending in your proxy, you decide to vote in person or desire to
revoke your proxy for any other reason, you may do so by notifying the Secretary
of the Company in writing at the principal office of the Company of such
revocation at any time prior to the voting of the proxy.
RECORD DATE
Shareholders of record at the close of business on February 25, 2005 will
be entitled to vote at the Annual Meeting.
ACTION TO BE TAKEN UNDER PROXY
All properly executed proxies received by the Board of Directors pursuant
to this solicitation will be voted in accordance with the shareholders'
directions specified in the proxy. If no such directions have been specified by
marking the appropriate squares in the accompanying proxy card, the shares will
be voted by the persons named in the enclosed proxy card as follows:
(1) FOR the election of David E. O'Reilly, Jay D. Burchfield and Paul R.
Lederer, named herein as nominees for Class III Directors of the Company,
to hold office until the annual meeting of the Company's shareholders in
2008 and until his or her successor has been duly elected and qualified;
and
(2) FOR the proposal to ratify the selection of Ernst & Young LLP as our
independent auditors for the fiscal year ending December 31, 2005; and
(3) FOR the approval to amend and restate the 2003 Employee Stock Option Plan
to the 2003 Incentive Plan; and
(4) FOR the approval to amend and restate the 2003 Director Stock Option Plan
to the 2003 Director Stock Plan; and
(5) FOR the approval to amend our Amended and Restated Articles of
Incorporation to change our authorized shares to 250,000,000 common shares.
(6) According to their judgement on the transaction of such other business as
may properly come before the meeting or any postponements or adjournments
thereof.
1
The nominees have not indicated that he would be unable or unwilling to
serve as a Director. However, should any nominee become unable or unwilling to
serve for any reason, it is intended that the persons named in the proxy will
vote for the election of such other persons in their stead as may be designated
by the Board of Directors. The Board of Directors is not aware of any reason
that might cause any nominee to be unavailable to serve as a Director.
VOTING SECURITIES AND VOTING RIGHTS
On February 25, 2005, there were 55,421,404 shares of Common Stock
outstanding, which constitute all of the outstanding shares of the voting
capital stock of the Company. Each share of Common Stock is entitled to one vote
on all matters to come before the Annual Meeting, including the election of
Directors.
A majority of the outstanding shares entitled to vote at the Annual
Meeting, represented in person or by proxy, will constitute a quorum at the
meeting. The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is required to
elect each person nominated for Director. Shares present at the meeting but
which abstain or are represented by proxies that are marked "WITHHOLD
AUTHORITY'' with respect to the election of any person to serve on the Board of
Directors will be considered in determining whether the requisite number of
affirmative votes are cast on such matter. Accordingly, such proxies will have
the same effect as a vote against the nominee as to which such abstention or
direction applies. Shares not present at the meeting will not affect the
election of Directors. Broker non-votes will not be treated as shares
represented at the meeting with respect to the election of Directors, and
therefore will have no effect.
The vote required for the other proposals described in this Proxy Statement
and for any other matter properly brought before the meeting will be the
affirmative vote of the majority of the shares of Common Stock present in person
or represented by proxy at the Annual Meeting and entitled to vote on the
proposal unless Missouri law or the Company's Restated Articles of Incorporation
or By-laws require a greater vote. Shares present at the meeting that abstain
(including proxies that deny discretionary authority on any matters properly
brought before the meeting) will be counted as shares present and entitled to
vote and will have the same effect as a vote against any such matter. Broker
non-votes will not be treated as shares represented at the meeting as to such
matter(s) voted on and therefore will have no effect.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of February 25, 2005, with
respect to each person (other than management) known to the Company to be the
beneficial owner of more than five percent (5%) of our outstanding shares of
Common Stock.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership Of Class
------------------------------ -------------------- --------
Wasatch Advisors, Inc. 5,725,805 (1) 10.3%
150 Social Hall Avenue
Salt Lake City, Utah 84111
T. Rowe Price Associates, Inc. 4,600,201 (2) 8.3%
100 E. Pratt Street
Baltimore, Maryland 21202
George S. Loening 4,017,060 (3) 7.2%
380 Lafayette Street, 6th Floor
New York, New York 10003
(1) As reflected on such beneficial owner's Schedule 13G/A dated February, 14,
2005, provided to the Company in accordance with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Wasatch claimed sole voting
power of 5,725,805, no shared voting power, sole dispositive power of
5,725,805 shares and no shared dispositive power.
(2) As reflected on such beneficial owner's Schedule 13G dated February 14,
2005, provided to the Company in accordance with the Exchange Act. These
securities are owned by various individual and institutional investors,
which T. Rowe Price Associates, Inc. (Price Associates) serves as
investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Exchange Act, as amended, Price Associates is deemed to be a beneficial
owner of such securities; however, Price Associates expressly disclaims
that it is, in fact, the beneficial owner of such securities. Of the
4,600,201 shares reported, Price Associates claimed sole voting power of
966,211 shares, no shared voting power, sole dispositive power of 4,600,201
shares and no shared dispositive power.
2
(3) As reflected on the Schedule 13G filed jointly by George S. Loening, Select
Equity Group, Inc. ("Select") and Select Offshore Advisors, LLC ("Select
Offshore") dated February 14, 2005, provided to the Company in accordance
with the Exchange Act. Mr. Loening is the controlling shareholder of Select
and Select Offshore and claimed sole voting power of 4,017,060, no shared
voting power, sole dispositive power of 4,017,060 shares and no shared
dispositive power.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of February 25, 2005, the beneficial
ownership of each current Director (including the nominees for Director), each
of the executive officers named in the Summary Compensation Table set forth
herein, and the executive officers and Directors as a group, of the outstanding
common stock. Unless otherwise indicated, the Company believes that the
beneficial owners set forth in the following table have sole voting and
investment power.
Amount and
Nature of
Beneficial Percent
Name Ownership(a) of Class
---------------------------- ------------ --------
Charles H. O'Reilly, Jr. (b) 738,420 1.3%
David E. O'Reilly (c) 2,110,235 3.8%
Lawrence P. O'Reilly (d) 698,279 1.2%
Rosalie O'Reilly-Wooten (e) 1,312,524 2.3%
Jay D. Burchfield (f) 46,500 *
Joe C. Greene (g) 26,900 *
Paul R. Lederer (h) 35,000 *
John Murphy (i) 2,500 *
Ronald Rashkow (j) 2,500 *
Ted F. Wise (k) 236,701 *
Greg Henslee (l) 123,438 *
James R. Batten (m) 47,269 *
Jeff Shaw (n) 153,030 *
All Directors and executive officers
as a group(15 persons) (o) 5,614,687 10.1%
*less than 1%
(a) With respect to each person, assumes the exercise of all stock options held
by such person that are exercisable currently or within 60 days of February
25, 2005 (such options being referred to hereinafter as "currently
exercisable options").
(b) The stated number of shares includes 423,830 shares held by the Charles H.
O'Reilly, Jr. Revocable Trust, and 314,590 shares controlled by Mr.
O'Reilly as trustee a trust for the benefit of his children.
(c) The stated number of shares includes 559,004 shares held through the David
E. O'Reilly Revocable Trust, 1,358,174 shares controlled by Mr. O'Reilly as
trustee of a trust for the benefit of his children, 3,370 shares held in
the O'Reilly Employee Savings Plus Plan with SunTrust Bank as trustee and
189,687 shares subject to currently exercisable options.
(d) The stated number of shares includes 698,279 shares held by the Lawrence P.
O'Reilly Revocable Trust.
(e) The stated number of shares includes 817,715 shares held by the Rosalie
O'Reilly-Wooten Revocable Trust, 491,658 shares controlled by Ms. Wooten as
trustee for the benefit of her children and 3,151 shares held in the
O'Reilly Automotive Savings Plus Plan with SunTrust Bank as trustee.
(f) The stated number of shares includes 4,000 shares directly owned by Jay D.
Burchfield and 42,500 shares subject to currently exercisable options.
(g) The stated number of shares includes 4,000 shares directly owned by Joe C.
Greene, 400 shares owned by Mr. Greene's spouse and 22,500 shares subject
to currently exercisable options.
3
(h) The stated number of shares includes 2,500 shares directly owned by Paul R.
Lederer and 32,500 shares subject to currently exercisable options.
(i) The stated number of shares includes 2,500 shares subject to currently
exercisable options owned by John Murphy.
(j) The stated number of shares includes 2,500 shares subject to currently
exercisable options owned by Ronald Rashkow.
(k) The stated number of shares includes 70,726 shares held by a revocable
trust of which Ted Wise, as the sole trustee, has sole voting and investing
power, 4,213 shares held in the O'Reilly Employee Savings Plus Plan with
SunTrust Bank as trustee, 103,762 shares subject to currently exercisable
options and 58,000 shares held of record by a revocable trust of which Mr.
Wise's spouse, as the sole trustee, has sole voting and investment power.
(l) The stated number of shares includes 9,910 shares jointly owned by Greg
Henslee and his spouse, 2,104 shares held in the O'Reilly Employee Savings
Plus Plan with SunTrust Bank as Trustee, 5,162 shares held in the O'Reilly
Automotive Employee Stock Purchase Plan with UMB Bank, N.A. as trustee and
106,262 shares subject to currently exercisable options.
(m) The stated number of shares includes 554 shares directly owned by James R.
Batten, 3,057 shares held in the O'Reilly Employee Savings Plus Plan with
SunTrust Bank as Trustee, 158 shares awarded by the Company's Performance
Incentive Plan and 43,500 shares subject to currently exercisable options.
(n) The stated number of shares includes 8,677 shares directly owned by Jeff
Shaw, 150 shares held in the O'Reilly Employee Stock Purchase Plan, 1,173
shares held in the O'Reilly Employee Savings Plus Plan with SunTrust Bank
as Trustee, 280 shares awarded by the Company's Performance Incentive Plan
and 142,750 shares subject to currently exercisable options.
(o) Includes currently exercisable options to purchase a total of 763,711
shares held by the Company's Directors and executive officers as a group.
4
PROPOSAL 1-ELECTION OF CLASS III DIRECTORS
Information About The Nominees And Directors Continuing in Office
The Company's Amended and Restated By-laws and Restated Articles of
Incorporation, currently provide for three classes of Directors, each class
serving for a three-year term expiring one year after expiration of the term of
the preceding class, so that the term of one class will expire each year. The
terms of the current Class I and Class II Directors expire in 2006 and 2007,
respectively. The Board of Directors has nominated David E. O'Reilly, Jay D.
Burchfield and Paul R. Lederer, who are current Class III Directors, for a term
expiring at the Company's annual shareholders meeting in 2008.
The following table lists the principal occupation for at least the last
five years of each of the nominees and the present Directors continuing in
office, his or her present positions and offices with the Company, the year in
which he or she first was elected or appointed a Director (each serving
continuously since first elected or appointed unless otherwise stated), his or
her age and his or her directorships in any company with a class of securities
registered pursuant to Sections 12 or 15(d) of the Securities Exchange Act of
1934, as amended, or in any company registered as an investment company under
the Investment Company Act of 1940 (as specifically noted).
Service as
Director
Name Age Principal Occupation Since
------------------- ----- ------------------------------------------------------------------- ---------
Nominees for Director - Class III
(To Be Elected to Serve a Three-Year Term Expiring in 2008)
David E. O'Reilly 55 Co-Chairman of the Board since August 1999; Chief Executive 1972
Officer since March 1993; President from March 1993 to August
1999; Vice-President of the Company from 1975 to March 1993.
Jay D. Burchfield 58 Chairman of the Board and Director of Trust Company of the Ozarks 1997
since April 1998; Director of Primary Care Network since January
1998; Director of Quest Capital Alliance since January 2002;
Director of The Beer Company since January 2003. Mr.
Burchfield's career has spanned more than 30 years in the banking
and financial services industry.
Paul R. Lederer 65 Retired October 1998; Executive Vice President of Worldwide 2001
Aftermarket of Federal-Mogul Corporation February 1998 to October
1998; President and Chief Operating Officer of Fel-Pro from
November 1994 to February 1998, when it was acquired by
Federal-Mogul Corporation; presently a Director of the following
companies: MAXIMUS, R & B, Inc. and Trans-Pro, Inc. Mr. Lederer
had been a Director of the Company from April 1993 to July 1997
and was appointed again as a Director in 2001.
5
Service as
Director
Name Age Principal Occupation Since
------------------- ----- ------------------------------------------------------------------- ---------
Directors Continuing in Office - Class I
(Term Expiring in 2006)
Charles H. O'Reilly, Jr. 65 Retired from active company management, February 2002. 1966
Vice-Chairman of the Board since August 1999; Chairman of the
Board from March 1993 to August 1999; President and Chief
Executive Officer of the Company from 1975 to March 1993.
John Murphy 54 Executive Vice President and Chief Financial Officer of Accuride 2003
Corporation, 1998 to present. Executive Vice President,
Administration/Chief Financial Officer/Corporate Secretary of
North American Stainless, Inc. 1994 to 1997.
Ronald Rashkow 64 Principal of RPMS, Inc., an investment banking services firm. 2003
Member of the advisory Boards of Hilco Trading Co., MLC Leasing
and Milton's Baking Co. Founder of Handy Andy Home Improvement
Centers and a founding principal of Chapman Partners, LLC.
Directors Continuing in Office - Class II
(Term Expiring in 2007)
Lawrence P. O'Reilly 58 Retired from active Company management, February 2003; 1969
Co-Chairman of the Board since August 1999; Chief Operating
Officer from March 1993 to February 2003; President from March
1993 to August 1999; Vice President of the Company from 1975 to
March 1993. Director of St. Johns Hospital since January 2000;
Director of Drury University since June 1993; and Chairman of the
Missouri Sports Hall of Fame since January 2003.
Rosalie O'Reilly-Wooten 63 Retired from active Company management, February 2002. Executive 1980
Vice President of the Company from March 1993 to February 2002.
Joe C. Greene 68 Partner in the law firm of Husch & Eppenberger, LLC, Managing 1993
partner of the firm of Greene & Curtis, LLP, from 1975 to 2002,
Director of Bass Pro, Inc., Director of Ozarks Coca-Cola Bottling
Co., Director of Missouri Sports Hall of Fame, Executive
Secretary of Missouri Golf Association and Director of Commerce
Bank, N.A.; Mr. Greene has been engaged in the private practice
of law for more than 40 years.
The Board of Directors recommends a vote "FOR" each of the Class III nominees.
6
INFORMATION CONCERNING BOARD OF DIRECTORS
Determination of Director Independence
Rules of the Nasdaq Stock Market require that a majority of the Board of
Directors be "independent," as defined in Rule 4200 (a)(15) of the National
Association of Securities Dealers listing standards (the "NASD Rule"). Under the
NASD Rule, a director is independent if he or she is not an officer or employee
of the Company and does not have any relationship with the Company which, in the
opinion of the Board, would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. The Board has reviewed the
independence of its directors under the new NASD Rule. During this review, the
Board considered transactions and relationships between each director or any
member of his or her family and the Company. The Board has determined that
Messrs. Murphy, Lederer, Rashkow, Burchfield and Greene are independent under
the NASD Rule.
Family Relationships
Charles H. O'Reilly, Jr., Rosalie O'Reilly-Wooten, Lawrence P. O'Reilly and
David E. O'Reilly are all children of Charles H. O'Reilly, Sr., Co-Founder of
the Company.
Lead Director
The Corporate Governance/Nominating Committee nominated Paul R. Lederer to
serve in the capacity as Lead Director and the Board of Directors approved such
nomination.
Board and Committee Meetings; Corporate Governance
During fiscal year 2004, four regularly scheduled meetings of the Board of
Directors were held. During such year, each Director attended 100% of (i) the
total number of meetings of the Board of Directors held during the period for
which he or she has served as a Director, and (ii) the total number of meetings
held by all committees of the Board of Directors on which he or she served
during the period for which he or she served.
The Board of Directors has three standing committees, the Audit Committee,
the Compensation Committee and the Corporate Governance/Nominating Committee.
Each committee is comprised solely of independent directors in accordance with
the Nasdaq Stock Market Listing Qualifications. Charters for each committee are
available on the Company's website at www.oreillyauto.com, and can be obtained
free of charge by written request to the attention of the Secretary at the
Company's address appearing on the first page of this proxy statement or by
telephone at (417) 862-2674.
The Audit Committee currently consists of Messrs. Murphy (Chairman),
Lederer and Rashkow. The Board had determined that each member of the Audit
Committee is "independent" pursuant to Rule 4200(a)(15) of the National
Association of Securities Dealers listing standards, as well as the independence
requirements for audit committee members under Rule 10A-3 promulgated under the
Securities Exchange Act of 1934. In addition, the Board has determined that Mr.
Murphy, a member of the Audit Committee, is qualified as an audit committee
financial expert, as that term is defined in the rules of the Securities and
Exchange Commission. The Audit Committee recommends the engagement of
independent auditors, confers with the external auditors regarding the adequacy
of our financial controls and fiscal policy, and directs changes to financial
policies or procedures as appropriate. During fiscal year 2004, nine Audit
Committee meetings were held.
The Compensation Committee consists of Messrs. Burchfield (Chairman),
Lederer and Rashkow. The purpose of the Compensation Committee is to act on
behalf of the Board of Directors with respect to the establishment and
administration of the policies which govern the annual compensation of the
Company's executive officers. The Compensation Committee also administers the
Company's stock option and other benefit plans. During fiscal year 2004, four
Compensation Committee meetings were held.
7
The Corporate Governance/Nominating Committee consists of Messrs. Greene
(Chairman), Murphy and Burchfield. The principal purposes of the committee are:
(1) to establish criteria for the selection of Directors and to recommend to the
Board the nominees for Director in connection with the Company's annual meeting
of shareholders; (2) to take a leadership role in shaping the Company's
corporate governance policies and to issue and implement the Corporate
Governance Principles of the Company; (3) to develop and coordinate annual
evaluations of the Board, its committees and its members; and (4) to adhere to
all legal standards required by the Securities and Exchange Commission and The
Nasdaq National Market. The Corporate Governance/Nominating Committee functions
pursuant to a written charter, a copy of which was attached as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
During fiscal year 2004, three Corporate Governance/Nominating Committee meeting
were held. Our Corporate Governance Principles may be viewed along with the
Corporate Governance/Nominating Committee Charter at www.oreillyauto.com.
The Corporate Governance/Nominating Committee does not have a written
policy on the consideration of director candidates recommended by shareholders.
All candidates are evaluated based on the established criteria for persons to be
nominated for election to the Board and its committees.
A shareholder who desires to nominate one or more persons for election as
directors shall deliver "timely notice" (as defined in Section 12, Article II of
the Company's Bylaws) of the shareholder's intent to make such nomination or
nominations, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Company at the Company's address appearing on
the first page of this proxy statement. Such notice shall set forth: (a) the
name and address of record of the shareholder who intends to make the
nomination; (b) the class and number of shares of the capital stock that are
beneficially owned by the shareholder on the date of such notice; (c) the name,
age, business and residential addresses, and principal occupation or employment
of each proposed nominee; (d) a description of all arrangements or
understandings between the shareholder and each nominee, and other arrangements
or understandings known to the shareholder, pursuant to which the nomination or
nominations are to be made by the shareholder; (e) any other information
regarding each proposed nominee that would be required to be included in a proxy
statement filed with the Securities and Exchange Commission; and (f) the written
consent of each proposed nominee to being so named and to serve as a director of
the Company. The presiding officer of a meeting may, if the facts warrant,
determine at the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he or she should make that determination, he or she
shall so declare at the meeting, and the defective nomination shall be
disregarded.
The established criteria for persons to be nominated for election to the
Board and its committees, taking into account the composition of the Board as a
whole, at a minimum, includes (a) a candidate's qualification as "independent"
under the federal securities laws and the rules and regulations of the
Securities and Exchange Commission and Nasdaq applicable to the Board and each
of its committees; (b) depth and breadth of experience within the Company's
industry and otherwise; (c) outside time commitments; (d) special areas of
expertise; (e) accounting and finance knowledge; (f) business judgment; (g)
leadership ability; (h) experience in developing and assessing business
strategies; (i) corporate governance expertise; (j) risk management skills; and
(k) for incumbent members of the Board, the past performance of the incumbent
director.
Certain Business Relationships
Joe C. Greene, a director of the Company and a member of the Corporate
Governance/Nominating Committee, is a partner in the law firm of Husch &
Eppenberger, LLC, which has provided legal services to the Company and is
expected to provide legal services to the Company in the future. We believe that
the terms of the legal services provided by Mr. Greene are no less favorable to
the Company than those that would have been available to the Company in
comparable transactions with unaffiliated parties.
8
Compensation of Directors
In 2004, the Company paid an annual fee of $20,000, plus $2,000 per board
meeting to each non-employee Director. The Company also reimburses Directors for
out-of-pocket expenses incurred in connection with their attendance at Board and
Committee meetings. Directors' fees of $140,000 were paid during 2004.
The Company also maintains a Directors' Stock Option Plan, providing for an
automatic annual grant (on April 22 or the first business day thereafter) to
each director who is not an employee of the Company of a non-qualified stock
option to purchase 2,500 shares of Common Stock at a per share exercise price
equal to the fair market value of the Common Stock on the date the option is
granted. Director stock options expire immediately upon the date on which the
optionee ceases to be a director for any reason or seven years after the date on
which the option is granted, whichever first occurs. Each of the Company's five
non-employee directors in 2004 were granted options during the year to purchase
2,500 shares of Common Stock under the Company's Directors' Stock Option Plan at
an exercise price of $41.67 per share.
Annual Meeting
It is our policy that members of the Board of Directors are not required to
attend the Annual Meeting of Shareholders. All members of the Board of Directors
attended the Company's 2004 Annual Meeting of Shareholders.
EXECUTIVE COMPENSATION
The following information is given for the fiscal years ended December 31,
2004, 2003 and 2002, concerning annual and long-term compensation for services
rendered to the Company and its subsidiaries for the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (other than the Chief Executive Officer) during fiscal year 2004.
Summary Compensation Table
Long Term Compensation
Awards
------------------------
Annual Compensation Restricted
--------------------------------- Stock Securities All Other
Name and Salary Bonus Other Awards Underlying Compen-
Principal Position Year ($) ($) ($)(a) ($)(b) Options(#)(c) sation($)(d)
--------------------- ---- ------- ------- ------ ---------- ------------ -----------
David E. O'Reilly 2004 787,500 399,375 - - 78,750 19,402
Co-Chairman of the 2003 750,000 281,500 - - 75,000 17,063
Board and Chief 2002 350,000 350,000 - - - 16,987
Executive Officer
Ted F. Wise 2004 430,500 145,550 - - 43,050 11,845
Co-President 2003 410,000 102,500 - - 41,000 11,125
2002 264,000 131,000 - - - 11,219
Greg Henslee 2004 430,500 145,550 - - 43,050 11,334
Co-President 2003 410,000 102,500 - - 41,000 7,768
2002 247,000 123,000 - - - 6,957
James R. Batten 2004 210,000 67,450 - - 21,000 6,946
Executive 2003 190,000 47,500 - - 19,000 6,523
Vice-President of 2002 134,800 57,814 - 11,319 - 5,805
Finance and Chief
Financial Officer
Jeff Shaw 2004 140,000 18,578 - 9,333 - 4,701
Senior Vice- 2003 127,500 17,000 - 8,989 15,000 4,501
President of Store 2002 120,000 17,586 - 8,793 - 4,608
Operations and Sales
9
(a) Cash awarded under the Company's Performance Incentive Plan ("PIP").
(b) Shares awarded to Mr. Batten under the PIP include 475 shares for fiscal
year 2002, having a per share fair market value of $23.83 on the day
awarded, for an aggregate value of $11,319. As of December 31, 2004, Mr.
Batten owned in the aggregate, 434 of such shares having an aggregate value
of $19,552. Shares awarded to Mr. Shaw under the PIP include 369 shares for
fiscal year 2002, having a per share fair market value of $23.83 on the day
awarded, for an aggregate value of $8,793 and 236 shares for fiscal year
2003, having a per share fair market value of $38.09 on the day awarded,
for an aggregate value of $8,989. As of December 31, 2004, Mr. Shaw owned
in the aggregate, 565 of such shares having an aggregate value of $25,453.
All shares awarded under the PIP vest in equal installments over a
three-year period commencing on the first anniversary of the award and are
based on the achievement of certain performance goals. No dividends are
paid on shares of restricted stock.
(c) See "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values" tables for additional information with respect to these
options.
(d) "All Other Compensation" for the year ended December 31, 2004, includes
primarily (i) Company contributions of $17,338, $11,569, $11,214, $6,826
and $4,581 to its Profit Sharing and Savings Plan made on behalf of David
E. O'Reilly, Ted Wise, Greg Henslee, James R. Batten and Jeff Shaw,
respectively.
Information as to Stock Options
The following table provides certain information concerning grants of
options to purchase Common Stock made during the 2004 fiscal year to the named
executive officers. All stock options that were granted before and including May
6, 2003, were granted pursuant to the Company's 1993 Employee Stock Option Plan.
All stock options that were granted on or after May 7, 2003, were granted
pursuant to the Company's 2003 Employee Stock Option Plan.
Option Grants in Last Fiscal Year
Individual Grants
------------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to Price Grant Date
Options Employees Per Expiration Present
Name Granted(#) in 2004 Share($) Date Value($)(2)
----------------- ----------- ---------- -------- ---------- -----------
David E. O'Reilly 78,750 (1) 6.5% 37.55 02/05/14 980,000
Ted F. Wise 43,050 (1) 3.6% 37.55 02/05/14 536,000
Greg Henslee 43,050 (1) 3.6% 37.55 02/05/14 536,000
James R. Batten 21,000 (1) 1.7% 37.55 02/05/14 261,000
(1) Stock options become exercisable with respect to 25% of the covered shares
one year from the date of grant; 50% exercisable two years from the date of
grant; 75% exercisable three years from the date of grant and the remainder
become exercisable four years from the date of grant.
(2) The Company used a Black-Scholes model of option valuation to determine
grant date present value. Calculations for the named executive officers are
based on a four-year expected life, which reflects the Company's
expectation that its options, on average, will be exercised within four
years of grant. Other assumptions used for the valuations are: risk free
rate of return of 3.01%; annual dividend yield of 0%; and volatility of
.404.
10
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Value of Unexercised
Number of Unexercised In-The-Money
Securities Options Options at
Underlying At FY-End FY-End
Option Value Exercisable/ Exercisable/
Name Exercised (#) Realized ($) Unexercisable(#) Unexercisable($)(1)
------------------ ------------ ------------ ----------------- -------------------
David E. O'Reilly - - 151,250 / 142,500 3,975,150 / 1,939,050
Ted F. Wise - - 82,750 / 81,300 1,824,400 / 1,123,050
Greg Henslee - - 85,250 / 81,300 1,970,950 / 1,123,050
James R. Batten - - 33,500 / 41,500 687,125 / 579,750
Jeff Shaw 5,000 160,500 142,750 / 16,250 4,188,538 / 166,163
(1) Represents the market value of the underlying Common Stock on December 31,
2004, less the aggregate exercise price.
Employment Arrangements with Executive Officers
The Company entered into a written employment agreement effective January
1, 1993, with David E. O'Reilly. Such agreement provides for Mr. O'Reilly to be
employed by the Company for a minimum period of three years and automatically
renews for each calendar year thereafter. As compensation for services rendered
to the Company, the agreement provides for Mr. O'Reilly to receive (i) a base
annual salary adjusted annually, and (ii) a bonus, the amount of which is
determined by reference to such criteria as may be established by the
Compensation Committee.
Mr. O'Reilly's employment may be terminated by the Company for cause (as
defined in the agreement) or without cause. If Mr. O'Reilly's employment is
terminated for cause or if Mr. O'Reilly resigns, his salary and bonus rights
will cease on the date of such termination or resignation. If the Company
terminates Mr. O'Reilly without cause, all compensation payments will continue
through the remainder of the agreement's term. Pursuant to his agreement, Mr.
O'Reilly has agreed for so long as he is receiving payments thereunder to
refrain from disclosing information confidential to the Company or engaging,
directly or indirectly, in any automotive parts distribution, manufacturing or
sales business in the states in which the Company operates without prior written
consent of the Company.
The Company has also entered into written retirement agreements with David
E. O'Reilly, Lawrence P. O'Reilly, Charles H. O'Reilly, Jr. and Rosalie
O'Reilly-Wooten. Such agreements, as amended and which are in substantially
identical form, provide for each of the foregoing executive officers to be
employed as a consultant upon retirement, for a period of ten years at a yearly
salary of $125,000, adjusted annually three percent for inflation and payable in
equal monthly payments. The agreements also provide for each officer to receive
medical benefits, death and disability benefits, as well as the use of a car.
13
Lawrence P. O'Reilly, Charles H. O'Reilly, Jr. and Rosalie O'Reilly-Wooten
have retired from the Company and currently receive payments under the
retirement agreements.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is now an officer or an employee of
the Company or any of its subsidiaries or has been at any time an officer or an
employee of the Company or any of its subsidiaries.
11
Compensation Committee Report
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might be incorporated by reference in
future filings, including this Proxy Statement, in whole or in part, the
following Compensation Committee Report shall not be incorporated into any such
filings.
General
The Compensation Committee of the Board of Directors is responsible for
recommending to the Board of Directors, a compensation package and specific
compensation levels for the executive officers of the Company. Additionally, the
Compensation Committee establishes policies and guidelines for other benefit
programs and administers the award of stock options under the Company's 2003
Employee Stock Option Plan. The Compensation Committee is composed of three
independent members of the Board of Directors.
Policy
The Compensation Committee's policy, with respect to executive
compensation, is to provide the executive officers of the Company with a total
compensation package which is competitive and equitable and which encourages and
rewards performance based in part upon the Company's performance in terms of
increases in share value. The key components of the Company's compensation
package for its executive officers are base salary, annual cash bonuses and
long-term, stock-based incentives.
Base Salary
The annual base salary of each executive officer is set to bring them in
line with base compensation then being paid by the Company's competitors for
executive management, based upon the Compensation Committee's review of, among
other things, compensation data for comparable companies and positions. The
Compensation Committee believes that the Company's principal competitors for
executive management are not necessarily the same companies that would be
included in a peer group compiled for purposes of comparing shareholder returns.
Consequently, the companies that are reviewed for such compensation purposes may
not be the same as the companies comprising The Nasdaq Retail Trade Stock Price
Index included in this Proxy Statement. The base salaries of the executive
officers were increased in 2004 to reflect increases in the Consumer Price Index
from 2003 to 2004, increases in responsibilities due to the Company's growth and
to align executive compensation with comparable companies and positions.
Bonuses
The Compensation Committee has established a bonus plan for the Chief
Executive Officer and Co-Chairman of the Board, the Co-Presidents and the Chief
Financial Officer of the Company based upon objective criteria. Under this bonus
plan, these executive officers of the Company each will receive a bonus based
upon a percentage of their respective base salary for the attainment of certain
performance goals for the Company. Such performance goals are designed to
address multiple facets of financial performance, including sales performance,
operating income performance, financial returns and various balance sheet
measures. Actual Company performance in each of these areas is compared to the
targets pre-determined by the Compensation Committee, in order to determine the
bonus amount achieved by each executive officer.
The bonuses to be awarded to all other officers of the Company are based
upon each officer's contribution, responsibility and performance during the
year, and are thus subjective in nature. In formulating its recommendation for
the bonuses of other officers of the Company, the Compensation Committee
considers, among other things, the evaluation from the Chief Executive Officer
of the Company with regard to the contribution, responsibility and performance
of each officer and his views on the appropriate compensation level of each
executive officer.
12
Long-Term Incentives
The only long-term incentives currently offered for senior executives by
the Company are stock option awards. Stock options may be awarded to the Chief
Executive Officer, the other individual executive officers and upper and middle
managers by the Board of Directors, based upon, in the case of the Chief
Executive Officer and other executive officers, the recommendation of the
Compensation Committee.
It is the stock option program which links rewards to the achievement of
long-term corporate performance. In determining whether and how many options
should be granted, the Compensation Committee may consider the responsibilities
and seniority of each of the executive officers, as well as the financial
performance of the Company and other factors as it deems appropriate, consistent
with the Company's compensation policies.
The Chief Executive Officer and Co-Chairman of the Board, the Co-Presidents
and the Chief Financial Officer of the Company can receive option grants
annually in an amount equal to 10% of their respective base salary. However, the
Compensation Committee has not established specific target awards governing the
receipt, timing or size of option grants to other individuals. Thus,
determinations with respect to the granting of these stock options are
subjective in nature.
CEO Compensation
The base salary of David E. O'Reilly, the Chief Executive Officer of the
Company, was established under his employment agreement dated January 1, 1993,
and the criterion to be achieved for his bonus was determined by the
Compensation Committee in February 2004, based upon a percentage of his base
salary for the attainment of certain performance goals for the Company. This
cash bonus will be paid to the Chief Executive Officer during 2005. The cash
bonus to be earned by the Chief Executive Officer in 2005 will be based upon
performance goals to be determined by the Compensation Committee.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS OF O'REILLY AUTOMOTIVE, INC.
Jay D. Burchfield
Chairman of the Compensation Committee
Paul R. Lederer
Member of the Compensation Committee
Ronald Rashkow
Member of the Compensation Committee
13
Audit Committee Report
The Audit Committee functions pursuant to a written charter, a copy of
which was attached to the Company's 2004 Proxy Statement and may be viewed on
our website at www.oreillyauto.com. The Audit Committee's Charter was most
recently revised and approved by the Board of Directors on May 6, 2003. In
connection with the December 31, 2004, financial statements, the Audit
Committee:
o reviewed and discussed with management the Company's audited financial
statements as of and for the year ended December 31, 2004; and
o discussed with the Company's independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with
Audit Committees, as amended, by the Auditing Standards Board of American
Institute of Certified Public Accountants; and
o received and reviewed the written disclosures and the letter from the
Company's independent accountants required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as amended,
and discussed with the independent accountant the independent accountant's
independence.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements
referred to above be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2004.
THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF
O'REILLY AUTOMOTIVE, INC.
John Murphy
Chairman of the Audit Committee
Paul R. Lederer
Member of the Audit Committee
Ronald Rashkow
Member of the Audit Committee
Transactions with Management and Others
The Company leases 73 store locations (three of such locations are no
longer occupied, but remain subject to a lease agreement) from one of two real
estate investment partnerships and a limited liability corporation formed by the
O'Reilly family. David E. O'Reilly, Lawrence P. O'Reilly, Charles H. O'Reilly,
Jr. and Rosalie O'Reilly-Wooten, their spouses, children and grandchildren each
hold a beneficial interest in such partnerships or the limited liability
company. The Company has entered into separate master lease agreements with each
of the affiliated real estate investment partnerships and the limited liability
company for the store locations covered thereby. The master leases generally
provide for payment of a fixed base rent, payment of certain tax, insurance and
maintenance expenses, and an original term of six years, subject to one or more
renewals at the Company's option. The original term of the master lease
agreements with the real estate investment partnerships expired in December
2004. The term of the master lease with the limited liability company expires on
either December 31, 2013 or August 31, 2016. The total aggregate rent payments
paid by the Company to the partnerships and the limited liability company was
$3,290,000 in fiscal 2004. The Company believes that the terms and conditions of
the transactions with affiliates described above were no less favorable to the
Company than those that would have been available to the Company in comparable
transactions with unaffiliated parties.
14
Performance Graph
Set forth below is a line graph comparing the annual percentage change in
the cumulative total shareholder return of a $100 investment on December 31,
1999, in the Company's Common Stock against The Nasdaq Stock Market Total Return
Index and The Nasdaq Retail Trade Stocks Total Return Index, assuming
reinvestment of all dividends.
Measurement Period O'Reilly Nasdaq U.S. Nasdaq Retail
(Fiscal Year Covered) Automotive, Inc. Stock Market Trade Stocks
---------------------- ---------------- ------------ ------------
12/99 100 100 100
12/00 124 61 60
12/01 170 85 48
12/02 118 72 33
12/03 179 100 49
12/04 210 127 54
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers
and Directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Such individuals are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. To our knowledge, based solely on our review of the
copies of such forms furnished to us and written representations with respect to
the timely filing of all reports required to be filed, we believe that such
persons complied with all Section 16(a) filing requirements applicable to them
with respect to transactions during fiscal 2004 with the following exceptions
(in which each of such persons has not timely reported one transaction on Form
4, resulting in one late filing of such Form 4 for each): David E. O'Reilly, Ted
Wise, Greg Henslee and James R. Batten were awarded stock options on February 5,
2004, that were not reported until February 19, 2004; Charles H. O'Reilly, Jr.,
and Rosalie O'Reilly-Wooten entered into Variable Prepaid Forward contracts on
April 7, 2003, that were not reported until February 14, 2005; and Jeff Shaw
sold shares held under the Employee Stock Purchase Plan on April 30, 2004, that
were not reported until February 14, 2005.
PROPOSAL 2 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as our independent auditors for the year ending December 31, 2005, and has
further directed that management submit the selection of independent auditors
for ratification by the shareholders at the annual meeting. Ernst & Young LLP
has audited our financial statements since 1993. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting. They will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
15
Neither our Bylaws nor our other governing documents or law require
shareholder ratification of the selection of Ernst & Young LLP as our
independent auditors. However, the Audit Committee is submitting the selection
of Ernst & Young LLP to the shareholders for ratification as a matter of good
corporate practice. If the shareholders fail to ratify the selection, the Audit
Committee will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may direct the
appointment of different independent auditors at any time during the year if the
Audit Committee determines that such a change would be in the best interests of
the Company and our shareholders.
Fees Paid to Independent Auditors
The following is a summary of fees billed by Ernst & Young LLP for audit
and other professional services during the year ended December 31:
2004 2003
--------- ---------
Audit Fees:
Consists of fees and expenses billed for the audit of O'Reilly's
consolidated financial statements for such year and for the
review of O'Reilly's quarterly reports on Form 10-Q and reviews
and reports relating to internal control over financial reporting....................... $ 927,720 $ 267,247
Audit-Related Fees:
Consists of fees and expenses billed for the annual audit of the
Company's employee benefit plan, and consultations regarding
restructuring of the Company's synthetic lease arrangement
and assistance in documenting internal control policies and
procedures over financial reporting..................................................... 165,160 88,382
Tax Fees:
Consists of fees and expenses billed for tax advisory services,
including compliance and planning....................................................... 85,347 93,808
All Other Fees.......................................................................... $ -- $ --
---------- ---------
Total Fees.............................................................................. $1,178,227 $ 449,437
========== =========
The Audit Committee has adopted a policy that requires advance approval of
all audit, audit-related, tax services, and other services performed by the
independent auditor. The policy provides for pre-approval by the Audit Committee
of specifically defined audit and non-audit services. Unless the specific
service has been previously approved with respect to that year, the Audit
Committee must approve the permitted service before the independent auditor is
engaged to perform it. The Audit Committee has delegated to the Chairman of the
Audit Committee authority to approve permitted services, provided that the
Chairman reports any decisions to the Committee at its next scheduled meeting.
The Audit Committee, after review and discussion with Ernst & Young LLP of
the preceding information, determined that the provision of these services was
compatible with maintaining Ernst & Young LLP's independence.
Ratification of Independent Auditors
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
The Board of Directors recommends that you vote "FOR" the proposal to ratify the
selection of Ernst & Young LLP as our independent auditors for the year ending
December 31, 2005.
16
PROPOSAL 3 - APPROVAL OF THE AMENDED AND RESTATED
O'REILLY AUTOMOTIVE, INC. 2003 INCENTIVE PLAN
The Company historically has offered stock options as the primary means of
providing long-term incentives to its exectutive officers and other key
employees in order to align their interests with the interests of shareholders
and increase their stake in the future growth and prosperity of the Company. The
O'Reilly Automotive, Inc. 2003 Employee Stock Option Plan (the "Original Plan"),
which was adopted by the Board on February 13, 2003 and approved by the
shareholders on May 6, 2003, is the only stock option plan of the Company
currently in effect as of March 10, 2005.
On March 10, 2005, the Board amended and restated in its entirety and
renamed the Original Plan as the Amended and Restated O'Reilly Automotive, Inc.
2003 Incentive Plan (the "Plan"), subject to shareholder approval, to provide
for long-term incentive awards and to permit the issuance of restricted stock
and restricted stock units, stock appreciation rights, performance awards, other
stock-based awards and cash bonus awards, as well as stock options. In addition,
the Board amended and restated the Plan to ensure compliance with Section 409A
of the Internal Revenue Code regarding deferrals of awards made under the Plan.
The approval of the Plan by our shareholders will enable the Compensation
Committee to provide incentive compensation awards in forms other than stock
options. This is intended to:
o be consistent with many compensation and governance best practices that
emphasize the usage of other long-term incentive vehicles in addition to,
or in replacement of, stock options;
o permit the Company to continue to be competitive with other companies that
are using other long-term incentives in addition to stock options; and
o provide the Company with greater flexibility to respond to recent changes
in the accounting for stock options and other regulatory changes.
The following is a summary of the principal features of the Plan. This
summary is qualified in its entirety by the more detailed terms and conditions
of the Plan, a copy of which is attached as Attachment A to this Proxy
Statement. If the Plan is not approved by the required vote of shareholders at
the 2005 Annual Meeting, it will terminate.
Plan Administration: The Board has initially designated the Compensation
Committee to administer all aspects of the Plan. The Compensation Committee is
composed solely of non-employee directors, as defined under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, and "outside directors," within the
meaning of Section 162(m) of the Internal Revenue Code.
The Compensation Committee has the authority to, among other things:
o construe and interpret the Plan;
o make rules and regulations relating to the administration of the Plan;
o designate eligible persons to receive awards;
o establish the terms and conditions of awards; and
o determine whether the awards or any portion thereof will contain time-based
restrictions and/or performance-based restrictions, and, with respect to
performance-based awards, the criteria for achievement of performance
goals.
Eligibility: The Compensation Committee shall designate those persons eligible
to participate in the Plan. The Compensation Committee will consider the
significant responsibilities of the participant, the nature of such
participant's services and accomplishments, the present and potential
contribution of the participant to the success of the Company and such other
factors as the Compensation Committee may deem appropriate.
Shares Authorized: Subject to adjustment in the event of recapitalization, stock
split, reorganization or similar transaction, 4,000,000 shares of our Common
Stock are reserved for issuance in connection with awards granted under the Plan
to employees of the Company.
17
Awards:
The Plan provides for the grant of non-qualified stock options, incentive
stock options that qualify under Section 422 of the Code, stock appreciation
rights, restricted stock, restricted stock units and cash bonus awards, each as
defined in the Plan.
Options. Options to purchase shares of Common Stock may be granted alone or
in tandem with stock appreciation rights. A stock option may be granted in the
form of a non-qualified stock option or an incentive stock option. The price at
which a share may be purchased under an option (the exercise price) will be
determined by the Compensation Committee, but may not be less than the fair
market value of the Company's Common Stock on the date the option is granted.
Except in the case of an adjustment related to a corporate transaction, the
exercise price of a stock option may not be decreased after the date of grant
and no outstanding option may be surrendered as consideration for the grant of a
new option with a lower exercise price without shareholder approval.
The Compensation Committee may establish the term of each option, but no
option shall be exercisable after 10 years from the grant date. An option shall
not be exercisable until at least six months after the grant date. The amount of
incentive stock options that become exercisable for the first time in a
particular year cannot exceed a face value of $100,000 per participant,
determined using the fair market value of the shares on the date of grant.
SARs. Stock appreciation rights (SARs) may be granted either alone or in
tandem with stock options. The exercise price of a SAR must be equal to or
greater than the fair market value of the Company's Common Stock on the date of
grant. The Compensation Committee may establish the term of each SAR, but no SAR
shall be exercisable after 10 years from the grant date.
Restricted Stock / Restricted Stock Units. Restricted stock and restricted
stock units may be issued to eligible participants, as determined by the
Compensation Committee. The restrictions on such awards are determined by the
Compensation Committee, and may include time-based or performance-based
restrictions. Any time-based restriction must be for a minimum of three years.
Restricted stock units may be settled in cash, shares of Common Stock or a
combination thereof. Except as otherwise determined by the Compensation
Committee, holders of restricted stock or restricted stock units will have the
right to receive dividends, and holders of restricted stock will have voting
rights during the restriction period.
Other Stock-Based Awards. The Compensation Committee may grant to eligible
persons such other awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to shares of our
Common Stock, including securities convertible into Common Stock, or are deemed
by the Compensation Committee to be consistent with the purpose of the Plan.
Cash Bonus Awards. Cash bonus awards are awards that provide participants
with the opportunity to earn a cash payment based upon the Company's achievement
of one or more performance goals established for an award cycle of one or more
years. For each award cycle, the Compensation Committee shall determine the
relevant performance criteria, the goal for each criteria, the achievement
necessary for awards to be paid, the weighting of performance goals and the
amount of the awards.
Performance-Based Awards:
Awards may be structured to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended. In order to qualify as "performance-based compensation," the grant,
payment or vesting schedule of the award must be contingent upon the achievement
of pre-established performance goals over a performance period for the Company.
The performance goal shall be based on one or more performance criteria,
including stock price, market share, sales revenue, cash flow, sales volume,
earnings per share, return on equity, return on assets, return on sales, return
on invested capital, economic value added, net earnings, total shareholder
return, gross margin, and/or costs. Performance awards may be paid in cash,
stock or a combination thereof.
18
Certain Plan Limits:
Annual Share Limits. The maximum number of shares of stock issued in
connection with awards that may be made under the Plan in any calendar year
shall be 2,000,000 shares, subject to adjustment for recapitalizations, stock
splits, reorganizations and similar transactions. To the extent that, in any
calendar year, awards are made covering less than 2,000,000 shares, the
difference between such maximum amount and the number of shares covered by
awards made during such calendar year may be carried forward to subsequent
calendar years.
Any unexercised, unconverted or undistributed portion of any award that is
not paid in connection with the settlement of an award or are forfeited shall
again be available for award.
Individual Limits. For any individual, the maximum number of shares of
stock that may be subject to stock options and stock appreciation rights granted
or issued under the Plan in any calendar year is 500,000 shares, subject to
adjustment for stock splits, recapitalization and similar transactions. In
addition, the maximum amount of other awards (other than stock options and stock
appreciation rights) that any individual can receive during a calendar year
cannot exceed 500,000 shares.
Maximum Term of Awards. No award that contemplates exercise or conversion
may be exercised or converted, and no other award that defers vesting, shall
remain outstanding and unexercised, unconverted or unvested more than ten years
after the date the award was initially granted.
Award Agreements:
Each Plan award shall be evidenced by an award agreement setting forth the
terms and conditions of the awards, such as, in the case of share-based awards,
the number of shares of stock or stock units, as applicable, subject to the
award, and the price (if any) and term of the award and, in the case of
performance-based awards, the applicable performance goals.
A participant shall have no rights as a holder of stock with respect to any
unissued securities covered by an award until the date the participant becomes
the holder of record of the securities. The participant shall be responsible for
payment of any taxes or similar charges required by law to be withheld from an
award.
Change in Control:
In the event of a change in control of the Company, all outstanding and
unvested options and stock appreciation rights under the Plan shall become
exercisable. Awards of restricted stock and stock units shall vest immediately
and be distributed effective as of the date of change in control. Awards granted
which are subject to the achievement of performance goals will immediately vest
and the holder of such performance-based award is entitled to a lump sum cash
payment equal to the amount of the award, payable at the end of the applicable
performance period as if 100% of the performance goals had been achieved. All
cash-based awards will be adjusted pro rata in the same manner as the
share-based awards that were granted subject to the achievement of performance
goals.
The Board of Directors may at any time terminate, suspend or discontinue
the Plan. The Board may amend the Plan at any time, provided that any material
amendment to the Plan will not be effective unless approved by the Company's
shareholders. No award may be granted under the Plan after February 13, 2013.
Tax Consequences:
The following is a brief description of the Federal income tax treatment
that will generally apply to awards under the Plan based on current Federal
income tax rules.
Non-Qualified Stock Options. A participant who has been granted a
non-qualified stock option will not realize taxable income at the time of grant,
and the Company will not be entitled to a tax deduction at that time. In
general, when the option is exercised, the participant will realize ordinary
income in an amount equal to the excess of the fair market value of the acquired
shares over the exercise price for those shares, and the Company will be
entitled to a corresponding tax deduction. Any gains or losses realized by the
participant upon disposition of the shares will be treated as capital gains or
losses, and the participant's basis in such shares will be equal to the fair
market value of the shares at the time of exercise.
19
Incentive Stock Options. A participant who has been granted an incentive
stock option will not realize taxable income at the time of grant, and the
Company will not be entitled to a tax deduction at that time. The exercise of an
incentive stock option will not result in taxable income to the participant
provided that the participant was, without a break in service, an employee of
the Company or a subsidiary during the period beginning on the date of the grant
of the option and ending on the date three months prior to the date of exercise
(one year prior to the date of exercise if the participant is disabled). The
excess of the fair market value of the shares at the time of the exercise of an
incentive stock option over the exercise price is included in calculating the
participant's alternative minimum taxable income for the tax year in which the
incentive stock option is exercised unless the participant disposes of the
shares in the year of exercise.
If the participant does not sell or otherwise dispose of the shares within
two years from the date of the grant of the incentive stock option or within one
year after the transfer of such shares to the participant, then, upon
disposition of such shares, any amount realized in excess of the exercise price
will be taxed to the participant as capital gain and the Company will not be
entitled to a corresponding tax deduction. The participant will generally
recognize a capital loss to the extent that the amount realized is less than the
exercise price.
If the foregoing holding period requirements are not met, the participant
will generally realize ordinary income at the time of the disposition of the
shares in an amount equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price, and the Company will be entitled to a corresponding tax
deduction. Any amount realized in excess of the value of the shares on the date
of exercise will be capital gain. If the amount realized is less than the
exercise price, the participant will not recognize ordinary income, and the
participant will generally recognize a capital loss equal to the excess of the
exercise price over the amount realized upon the disposition of the shares.
Stock Appreciation Rights. A participant who has been granted a SAR will
not realize taxable income at the time of the grant, and the Company will not be
entitled to a tax deduction at that time. Upon the exercise of an SAR, the
amount of cash or the fair market value of any shares received will be taxable
to the participant as ordinary income and the Company will be entitled to a
corresponding tax deduction. Any gains or losses realized by the participant
upon disposition of any such shares will be treated as capital gains or losses,
and the participant's basis in such shares will be equal to the fair market
value of the shares at the time of exercise.
Performance Shares and Units; Restricted Stock Units. A participant who has
been granted a performance share award, a performance unit award or restricted
stock unit award will not realize taxable income at the time of grant and the
Company will not be entitled to a tax deduction at that time. The participant
will have compensation income at the time of distribution equal to the amount of
cash received and the then fair market value of the distributed shares, and will
have a tax basis in the shares equal to the amount of compensation income
recognized. The Company will then be entitled to a corresponding tax deduction.
Restricted Stock. In general, a participant who has been granted a
restricted stock award will not realize taxable income at the time of grant and
the Company will not be entitled to a tax deduction at that time, assuming that
the shares are not transferable and that the restrictions create a "substantial
risk of forfeiture" for federal income tax purposes. Upon the vesting of the
shares subject to an award, the participant will realize ordinary income in an
amount equal to the then fair market value of the shares, and the Company will
be entitled to a corresponding tax deduction. Any gains or losses realized by
the participant upon disposition of such shares will be treated as capital gains
or losses, and the participant's basis in such shares will be equal to the fair
market value of the shares at the time of vesting. A participant may elect
pursuant to Section 83(b) of the Internal Revenue Code to have income recognized
at the date of grant of a restricted stock award and to have the applicable
capital gain holding period commence as of that date. If a participant makes
this election, the Company will be entitled to a corresponding tax deduction in
the year of grant. If the Participant does not make an election pursuant to
Section 83(b), dividends paid to the participant during the restriction period
will be treated as compensation income to the participant and the Company will
be entitled to a corresponding tax deduction.
20
Miscellaneous:
When a participant sells shares of stock that the participant has received
under an award, the participant will generally recognize long-term capital gain
or loss if, at the time of the sale, the participant has held the stock for more
than one year from the date the participant acquired the stock (or, in the case
of a restricted stock award, more than one year from the date the shares vested
unless the participant made an election pursuant to Section 83(b), described
above). If the participant has held the shares of stock for one year or less,
the gain or loss will be short-term capital gain or loss. Under Section 162(m)
of the Internal Revenue Code, a federal income tax deduction is unavailable for
annual compensation exceeding $1,000,000 paid to the Chief Executive Officer or
any of the four other most highly compensated officers. However,
"performance-based" compensation is not counted against this limit. Shareholder
approval of the Plan is required if payments under the Plan are to qualify as
performance-based compensation under Section 162(m). No payments will be made
under the Plan if shareholders do not approve the Plan at the Annual Meeting.
However, neither the submission of the Plan nor the failure of our shareholders
to approve the Plan shall in any way limit the power of the Board of Directors
to adopt such other incentive arrangements as it deems desirable, including,
without limitation, the awarding of cash bonuses, subject to any shareholder
approval as may be required by law, regulatory rules or NASDAQ rules.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to amend and restate the O'Reilly Automotive, Inc. 2003 Employee
Stock Option Plan to the 2003 Incentive Plan.
The Board of Directors recommends that you vote "FOR" approval to amend and
restate the 2003 Employee Stock Option Plan to the 2003
Incentive Plan. of O'Reilly Automotive, Inc.
PROPOSAL 4 - APPROVAL OF THE AMENDED AND RESTATED O'REILLY AUTOMOTIVE, INC. 2003
DIRECTOR STOCK PLAN
The Company has in the past provided for the automatic granting of
non-qualified stock options to our non-employee directors as the means of
aligning their interests with the interest of our shareholders. The O'Reilly
Automotive, Inc. 2003 Director Stock Option Plan (the "Original Plan") was
adopted by the Board of Directors on February 13, 2003, and approved by the
shareholders of the Company on May 6, 2003.
On March 10, 2005, our Board of Directors amended and restated and renamed
the Original Plan, subject to the approval by our shareholders, as the Amended
and Restated O'Reilly Automotive, Inc. 2003 Director Stock Plan (the "Plan") to
enable us to continue to provide incentives to qualified persons who are
otherwise unaffiliated with the Company to become and remain our directors and
to encourage ownership of our Common Stock by these persons. The Compensation
Committee has determined that an annual award, consisting of an option to
acquire up to 20,000 shares of Common Stock and up to 20,000 shares of
restricted stock, would be an advantageous means of providing a stock-based
incentive to our non-employee directors by providing comparable value through
the use of less shares of our Common Stock.
The following is a summary of the principal features of the Plan. This
summary is qualified in its entirety by the more detailed terms and conditions
of the Plan, a copy of which is attached as Attachment B to this Proxy
Statement. If the Plan is not approved by the required vote of shareholders at
our 2005 Annual Meeting, it will terminate. [If approved, the Company will file
a registration statement under the Securities Act of 1933, as amended, to
register the additional shares of our Common Stock issuable under the Plan.]
General. The Plan provides for the automatic annual award to each
non-employee director, on the first business day after the annual meeting of
shareholders, commencing with our 2005 Annual Meeting of shareholders,
consisting of an option to acquire up to 20,000 shares of our Common Stock and
up to 20,000 shares of Restricted Stock, in addition to his or her cash
directors' fees. The Board shall determine annually the number of shares of
Restricted Stock and the number of shares underlying an Option to be awarded to
every Eligible Director pursuant to the Plan. There are currently five
non-employee directors.
21
Directors' Stock Option Awards. Each option component of an annual award
provides for the acquisition of shares of our Common Stock at an exercise price
equal to the fair market value of our Common Stock on the date of the award, and
is generally immediately exercisable as to any or all shares at any time and
from time to time following the award date until the earlier of the date upon
which the director ceases to be a director for any reason other than retirement,
death or disability or seven years. Options will survive for a limited period of
time if the non-employee director ceases to be a director due to his or her
death, disability or normal retirement from the Board of Directors.
Restricted Stock Awards. Each Restricted Stock component of an annual award
is for shares that are subject to restrictions for a period of [one year (with
respect to one-third of the total amount of shares awarded), two years (with
respect to an additional one-third of the total amount of shares awarded), and
three years (with respect to the remaining one-third of the total amount of
shares awarded)], and cannot be sold or otherwise transferred until the
restrictions have lapsed. If the service of a director terminates at a time when
the restrictions on his or her shares of Restricted Stock are still in effect,
such shares are forfeited unless termination is due to disability, death, the
failure of the director standing for reelection to be elected to the Board of
Directors or a change in control of the Company. In any such case, the
director's restricted shares are not forfeited; rather, they immediately vest
and become unrestricted.
Stock Available for Grants. The Plan reserves 200,000 shares of our Common
Stock for awards under the Plan, which shall be authorized but unissued shares
of stock, treasury shares, or issued shares that have been reacquired by the
Company. The Board of Directors may adjust the number of shares granted to
prevent dilution or enlargement in the event of a stock split, a stock dividend,
or other event that increases or decreases the number or value of issued and
outstanding shares.
Plan Administration. The Board has initially designated the Compensation
Committee to administer all aspects of the Plan. The Compensation Committee is
composed solely of non-employee directors, as defined under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended.
The Compensation Committee has the authority to, among other things:
o determine all questions of fact that may arise under the Plan;
o construe and interpret the Plan;
o make rules and regulations relating to the administration of the Plan
The Compensation Committee has sole discretion to make all determinations
necessary for plan administration. The decisions of the Compensation Committee
shall be final and binding on all persons.
Amendment or Termination. The Board of Directors may amend or terminate the
Plan at any time. Approval by the Company's shareholders of any amendment shall
be obtained if required by Rule 16b-3 under the Securities Exchange Act of 1934,
as amended, or the rules and regulations of NASDAQ or any other applicable
regulatory or legal authority.
Federal Tax Consequences. As non-qualified stock options, awards of stock
options under the Plan will not result in taxable income to the optionee at the
time of grant, and the Company will not be entitled to a tax deduction at that
time. In general, when the options are exercised, the optionee will realize
ordinary income in an amount equal to the excess of the fair market value of the
acquired shares over the exercise prices of those shares, and the Company will
be entitled to a corresponding tax deduction. Any gains or losses realized by
the optionee upon disposition of the shares will be treated as capital gains or
losses, and the optionee's basis in such shares will be equal to the fair market
value of the shares at the time of exercise.
In general, a non-employee director who has been awarded shares of
restricted stock will not realize taxable income at the time of the award, and
the Company will not be entitled to a tax deduction at that time. Upon the
lapsing of restrictions applicable to the shares subject to an award, the
non-employee director will realize ordinary income in an amount equal to the
then fair market value of the shares, and the Company will be entitled to a
corresponding tax deduction. Any gains or losses realized by the non-employee
director upon disposition of such shares will be treated as capital gains or
losses, and the non-employee director's basis in such shares will be equal to
the fair market value of the shares at the time of vesting. A non-employee
director may elect, pursuant to Section 83(b) of the Internal Revenue Code, to
have income recognized at the date the shares of restricted stock are awarded
and to have the applicable capital gain holding period commence as of that date.
If a non-employee director makes this election, the Company will be entitled to
a corresponding tax deduction in the year of the award. If the non-employee
director does not make an election pursuant to Section 83(b), dividends paid to
the non-employee director during the restriction period will be treated as
compensation income to the participant and the Company will be entitled to a
corresponding tax deduction.
22
Effective Date and Duration. The Plan is effective upon approval by the
Company's shareholders at our 2005 Annual Meeting and shall remain in effect
until May 6, 2013, unless sooner terminated.
Required Vote of Shareholders
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to amend and restate the O'Reilly Automotive, Inc. 2003 Director
Stock Option Plan to the 2003 Director Plan.
The Board of Directors recommends that you vote "FOR" approval to amend and
restate the 2003 Director Stock Option Plan to the 2003 Director Plan of
O'Reilly Automotive, Inc.
PROPOSAL 5 - AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARES OF COMPANY'S COMMON STOCK TO 250,000,000 SHARES
The board of directors has adopted, subject to shareholder approval, an
amendment to our Articles of Incorporation to increase the number of authorized
shares of common stock from 90,000,000 to 250,000,000. Our board of directors is
now requesting that the shareholders approve an increase in the number of shares
of common stock which we can issue from 90,000,000 to 250,000,000. Currently, we
have 55,421,404 shares of common stock outstanding. The board of directors
believes that increasing the number of authorized but unissued shares of common
stock will provide the board with further flexibility to raise capital.
The amendment to paragraph (a) of Article III our Articles of Incorporation
with respect to this Proposal 5 shall read as follows:
ARTICLE III. (a) The aggregate number, class and par value of shares which
the corporation shall have the authority to issue shall be two hundred and fifty
million (250,000,000) shares, which shall include two hundred and fifty million
(250,000,000) shares of common stock, par value $0.01 per share and five million
(5,000,000) shares of preferred stock, par value $0.01 per share.
The above is not the Articles of Incorporation in its entirety but specific
language reflecting the changes of the Articles of Incorporation, a copy of the
Articles of Incorporation are incorporated by reference and filed as exhibit 3.3
to our Form 10-Q for the period ended September 30, 1999 filed on November
15,1999.
The board of directors recommends that you vote "FOR" the approval to amend our
Amended and Restated Articles of Incorporation to increase the number of
authorized shares of common stock from 90,000,000 to 250,000,000.
23
ANNUAL SHAREHOLDERS' REPORT
The Annual Shareholders' Report of the Company for fiscal 2004 containing,
among other things, audited consolidated financial statements of the Company,
accompanies this Proxy Statement.
FUTURE PROPOSALS OF SHAREHOLDERS
Shareholder proposals intended to be presented at the year 2006 Annual
Meeting and included in the Company's proxy statement and form of proxy relating
to that meeting pursuant to Rule 14a-8 under the Exchange Act must be received
by the Company at the Company's principal executive offices by November 25,
2005. In order for shareholder proposals made outside of Rule 14a-8 under the
Exchange Act to be considered "timely" within the meaning of Rule 14a-4(c) under
the Exchange Act, the Company's Amended Bylaws require that such proposals must
be submitted, not later than February 9, 2006, and not earlier than January 19,
2006.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Annual
Meeting other than as set forth above. If other matters properly come before the
meeting, it is the intention of the persons named in the solicited proxy to vote
the proxy on such matters in accordance with their judgment as to the best
interests of the Company.
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit the return of proxies by telephone,
telegram or personal interview and may request brokerage houses and custodians,
nominees and fiduciaries to forward soliciting material to their principals and
will agree to reimburse them for their reasonable out-of-pocket expenses.
Shareholders are urged to mark, sign, date and send in their proxies
without delay or vote via telephone or Internet using the instructions on the
proxy card.
COMMUNICATION WITH THE BOARD OF DIRECTORS
A shareholder who wishes to communicate with our Board of Directors,
specific individual directors or the independent directors as a group, may do so
by directing a written request addressed to such director(s) in care of the
Corporate Secretary at the Company's address appearing on the first page of this
proxy statement or via e-mail through our website at www.oreillyauto.com. Such
communication will be directed to the intended director, group of directors or
the entire Board, as the case may be.
HOUSEHOLDING OF MATERIALS
In some instances, only one copy of this Proxy Statement or Annual Report
is being delivered to multiple shareholders, sharing an address, unless we have
received instructions from one or more of the shareholders to continue to
deliver multiple copies. We will deliver promptly upon oral or written request a
separate copy of the Proxy Statement or Annual Report, as applicable, to any
shareholder at your address. If you wish to receive a separate copy of the Proxy
Statement or Annual Report, you may call us at (417) 862-6708, or send a written
request to O'Reilly Automotive, Inc., 233 South Patterson, Springfield, Missouri
65802, Attention: Secretary. Alternatively, shareholders sharing an address who
now receive multiple copies of the Proxy Statement or Annual Report may request
delivery of a single copy, also by calling us at the number or writing to us at
the address listed above.
24
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in the Company's
Annual Report on Form 10-K for the year ended December 31, 2004, filed by the
Company with the Securities and Exchange Commission.
A copy of the Company's Annual Report on Form 10-K for fiscal year (as
filed with the Securities and Exchange Commission), including financial
statements and financial statement schedule (excluding exhibits), is available
to shareholders without charge, upon written request to O'Reilly Automotive,
Inc., 233 South Patterson, Springfield, Missouri 65802, Attention: Secretary.
By Order of the Board of Directors
Tricia Headley
Secretary
Springfield, Missouri
March 22, 2005
25
APPENDIX A
O'REILLY AUTO PARTS
You are cordially invited to attend the Annual Meeting of Shareholders of
O'Reilly Automotive, Inc., to be held at the Clarion Hotel, 3333 South Glenstone
Ave, Springfield, Missouri on Tuesday, May 3, 2005, at 10:00 a.m. Central Time.
2004 HIGHLIGHTS
o 12th Consecutive Year of Record Revenues and Earnings
o 13.9% Increase in Sales to $1.72 Billion
o 6.8% Comparable Store Product Sales
o 140 New Stores Opened
o Net Income of $117.7 Million
--------------------------------------------------------------------------------
PROXY
O'REILLY AUTOMOTIVE, INC.
Annual Meeting of Shareholders - Tuesday, May 3, 2005
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints David E. O'Reilly, Lawrence P. O'Reilly and
Charles H. O'Reilly, Jr., and each of them, as proxies, with full power of
substitution, and hereby authorizes them to represent and vote as the
undersigned designates, all shares of Common Stock of O'Reilly Automotive, Inc.,
a Missouri corporation (the "Company"), held by the undersigned on February 25,
2005, at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
May 3, 2005, at 10:00 a.m. Central Time in Springfield, Missouri or at any
adjournment or postponement thereof, upon the matters set forth on the reverse
side of this card, all in accordance with and as more fully described in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement,
receipt of which is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ACTIONS OR PROPOSALS.
O'REILLY AUTO PARTS VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic
delivery of information up until 11:59
P.M. Eastern Time, May 2, 2005. Have
your proxy card in hand when you access
the web site. You will be prompted to
enter your 12-digit Control Number which
is located below to obtain your records
and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59
P.M. Eastern Time, May 2, 2005. Have
your proxy card in hand when you call.
You will be prompted to enter your 12-
digit Control Number which is located
below and then follow the simple
instructions the Vote Voice provides
you.
VOTE BY MAIL
Mark, sign and date your proxy card and
return in the postage-paid envelope
we have provided or return to O'Reilly
Automotive, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
O'REILLY AUTOMOTIVE, INC.
The Board of Directors recommends a vote FOR the following actions
or proposals (as described in the accompanying Proxy Statement).
Election of Directors For Withhold For All To withhold authority to vote,
1. Proposal to elect Class III Directors (three-year term). All All Except mark "For All Except" and write
01) David E. O'Reilly the nominee's number on the
02) Jay D. Burchfield line below.
03) Paul R. Lederer ______________________________
Vote on Proposal For Against Abstain
2. Ratification of apppointment of Ernst & Young, LLP as independent auditors. ---- ---- ----
3. Approval to amend and restate the 2003 Employee Stock Option Plan to the ---- ---- ----
2003 Incentive Plan
4. Approval to amend and restate the 2003 Director Stock Option Plan ---- ---- ----
5. Approval to amend the Company's Amended and Restated Articles of
Incorporation ---- ---- ----
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting.
Please sign exactly as name(s) appear hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
--------------------------------- --------- ------------------------ --------
APPENDIX B
AMENDED AND RESTATED
O'REILLY AUTOMOTIVE, INC.
2003 INCENTIVE PLAN
Section 1. Purposes
The O'Reilly Automotive, Inc. 2003 Employee Stock Option Plan ("Original
Plan") was adopted by the Board of Directors on February 13, 2003, and approved
by the shareholders of the Company on May 6, 2003 and amended and restated in
its entirety and renamed the Amended and Restated O'Reilly Automotive, Inc. 2003
Incentive Plan by the Board of Directors on March 10, 2005. The purposes of the
Plan are to provide long-term incentives to those persons with significant
responsibility for the success and growth of the Company and its subsidiaries,
divisions and affiliated businesses, to associate the interest of such persons
with those of the Company's shareholders, to assist the Company in recruiting,
retaining and motivating qualified employees on a competitive basis and to
ensure a pay for performance linkage for such employees.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" means (i) any entity that, directly or indirectly through one
or more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in each case as
determined by the Committee.
(b) "Award" means any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Other Stock-Based Award or Cash Bonus Award granted
under the Plan.
(c) "Award Agreement" means any written agreement, contract or other instrument
or document evidencing any Award granted under the Plan. Each Award
Agreement shall be subject to the applicable terms and conditions of the
Plan and any other terms and conditions (not inconsistent with the Plan)
determined by the Committee.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash-Bonus Award" means any right granted under Section 6(f) of the Plan.
(f) "Change in Control" is defined in Section 9(e) of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, and any regulations promulgated thereunder.
(h) "Committee" means a committee of Directors designated by the Board to
administer the Plan, which shall initially be the Compensation Committee of
the Board. The Committee shall be comprised of not less than such number of
Directors as shall be required to permit Awards granted under the Plan to
qualify under Rule 16b-3 and Section 162(m) of the Code, and each member of
the Committee shall be a Non-Employee Director; provided, however that
noncompliance with such qualifications shall not invalidate any grants of
Awards by the Committee.
(i) "Common Stock" means the common stock, having a par value of $0.01 per
share, of the Company.
(j) "Company" means O'Reilly Automotive, Inc., a Missouri corporation, and any
successor corporation.
(k) "Director" means a member of the Board, including any Non-Employee
Director.
(l) "Disability" means a condition such that an individual would be considered
disabled pursuant to Section 409A(C) of the Code.
B-1
(m) "Eligible Person" means any officer, Director or other key employee
providing services to the Company and/or Subsidiary of the Company or any
other Person the Committee determines to be an Eligible Person.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means, on any given date (i) with respect to any
property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and
(ii) with respect to Common Stock, (A) if the Common Stock is not publicly
traded, the amount determined by the Committee on such date; (B) if the
Common Stock is traded only otherwise than on a securities exchange and is
not quoted on the NASDAQ, the closing quoted selling price of the Common
Stock on such date as quoted in "pink sheets" published by the National
Daily Quotation Bureau; (C) if the Common Stock is traded only otherwise
than on a securities exchange and is quoted on NASDAQ, the closing quoted
selling price of the Stock on such date as reported by the Wall Street
Journal; or (D) if the Common Stock is admitted to trading on a securities
exchange, the closing quoted selling price of the Common Stock on such date
as reported in the Wall Street Journal.
(p) "Incentive Stock Option" means an Option granted under Section 6(a) of the
Plan that is intended to qualify as an "incentive stock option" in
accordance with the terms of Section 422 of the Code or any successor
provision.
(q) "NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
(r) "Non-Employee Director" means any Director who is not also an employee of
the Company or an "Affiliate" within the meaning of Rule 16b-3 and an
"outside director" within the meaning of Section 162(m) of the Code.
(s) "Non-Qualified Stock Option" means an option granted under Section 6(a) of
the Plan that is not an Incentive Stock Option.
(t) "Option" means an Incentive Stock Option or a Non-Qualified Stock Option.
(u) "Other Stock-Based Award" means any right granted under Section 6(e) of the
Plan.
(v) "Participant" means an Eligible Person designated to be granted an Award
under the Plan.
(w) "Performance Award" means any right granted under Section 6(d) of the Plan.
(x) "Performance Goal" means the goals established by the Committee, based upon
one or more performance measures, as the condition(s) precedent to earning
a Performance Award.
(y) "Performance Measures" means the criteria set out in Section 6(d) of the
Plan that may be used by the Committee as the basis for a Performance Goal.
(z) "Performance Period" means the period established by the Committee during
which the achievement of Performance Goals is assessed in order to
determine whether and to what extent a Performance Award has been earned.
(aa) "Performance Shares" means shares of Common Stock awarded to a Participant
based on the achievement of Performance Goals during a Performance Period.
(bb) "Performance Units" means an Award denominated in Shares of Common Stock,
cash or a combination thereof, as determined by the Committee, awarded to a
Participant based on the achievement of Performance Goals during a
Performance Period.
(cc) "Person" means any individual or entity, including a corporation,
partnership, limited liability company, association, joint venture or
trust.
B-2
(dd) "Plan" means the Amended and Restated O'Reilly Automotive, Inc. 2003
Incentive Plan, as amended from time to time, the provisions of which are
set forth herein.
(ee) "Restricted Stock" means any Share granted under Section 6(c) of the Plan.
(ff) "Restricted Stock Unit" means any unit granted under Section 6(c) of the
Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date.
(gg) "Retirement" means retirement in accordance with the terms of a retirement
plan of the Company or one of its subsidiaries.
(hh) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor rule or regulation.
(ii) "Securities Act" means the Securities Act of 1933, as amended.
(jj) "Share" or "Shares" means a share or shares of Common Stock or such other
securities or property as may become subject to Awards subject to an
adjustment made under Section 4(c) of the Plan.
(kk) "Stock Appreciation Right" means any right granted under Section 6(b) of
the Plan.
(ll) "Subsidiary" means a corporation or other entity constituting a "subsidiary
corporation" under Section 424(f) of the Code, or any successor provision.
Section 3. Administration
(a) Power and Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan and to applicable
law, the Committee shall have full power and authority to: (i) designate
Eligible Persons to receive Awards; (ii) determine the type or types of
Awards to be granted to each Participant under the Plan; (iii) determine
the number of Shares to be covered by (or the method by which payments or
other rights are to be determined in connection with) each Award; (iv)
determine the terms and conditions of any Award or Award Agreement,
including time-based restrictions and performance-based restrictions; (v)
establish the Performance Measures for achievement of Performance Goals
with respect to Performance Awards; (vi) amend the terms and conditions of
any Award or Award Agreement and accelerate the exercisability of any
Option or waive any restrictions relating to any Award; provided that no
Award shall be amended if such amendment would cause the Award to be
subject to Section 409A of the Code; (vii) determine whether, to what
extent and under what circumstances Awards may be exercised in cash,
Shares, promissory notes (provided, however, that the par value of any
Shares to be issued pursuant to such exercise shall be paid in the form of
cash, services rendered, personal property, real property or a combination
thereof and the acceptance of such promissory notes does not conflict with
Section 402 of the Sarbanes-Oxley Act of 2002), other securities, other
Awards or other property, or canceled, forfeited or suspended;(viii)
construe and interpret the Plan and any instrument or agreement, including
an Award Agreement, relating to the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or
any Award shall be within the sole discretion of the Committee, may be made
at any time and shall be final, conclusive and binding upon any Eligible
Person, any Participant and any holder or beneficiary of any Award.
(b) Power and Authority of the Board. Notwithstanding anything to the contrary
contained herein, the Board may, at any time and from time to time, without
any further action of the Committee, exercise the powers and duties of the
Committee under the Plan.
B-3
(c) Day-to-Day Administration. All expenses and liabilities incurred by the
Committee in connection with the administration of the Plan shall be borne
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons, and the Committee, the
Board, the Company and the officers and employees of the Company shall be
entitled to rely upon the advice, opinions or valuations of any such
persons. The interpretation and construction by the Committee of any
provision of the Plan and any determination by the Committee under any
provision of the Plan shall be final and conclusive for all purposes.
Neither the Committee nor any member thereof shall be liable for any act,
omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be
entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including counsel fees) arising
therefrom to the fullest extent permitted by law. The members of the
Committee shall be named as insureds in connection with any directors' and
officers' liability insurance coverage that may be in effect from time to
time.
Section 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in Section 4(c) of the
Plan, the maximum aggregate number of Shares available for issuance under
the Plan shall be 4,000,000. Shares to be issued under the Plan may be
either authorized but unissued Shares or Shares reacquired and held in
treasury. Notwithstanding the foregoing, the number of Shares available for
granting Incentive Stock Options under the Plan shall not exceed 2,000,000,
subject to adjustment as provided in Section 4(c) of the Plan and subject
to the provisions of Sections 422 and 424 of the Code or any successor
provision. The number of Shares granted to any one individual during any
calendar year as part of Performance Awards under the Plan, regardless of
when such Shares are deliverable, shall not exceed 1,000,000.
(b) Accounting for Awards. For purposes of this Section 4, if an Award entitles
the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan. Any Shares that are used by a
Participant as full or partial payment to the Company of the purchase price
relating to an Award or in connection with the satisfaction of tax
obligations relating to an Award, shall again be available for granting
Awards (other than Incentive Stock Options) under the Plan. In addition, if
any Shares covered by an Award or to which an Award relates are not
purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan.
(c) Adjustment Provisions.
(i) No Limitation on Corporate Acts. The existence of the Plan and the
Awards granted hereunder shall not affect in any way the right or
power of the Board or the shareholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger
or consolidation of the Company with or into another entity, any
issuance of bonds, debentures, preferred or prior preference stocks
ahead of or affecting the Stock or the rights thereof, the dissolution
or liquidation of the Company for any sale or transfer of all or any
part of its assets or business, or any other corporate act or
proceeding.
(ii) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company or other similar
corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order
to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any
or all of (A) the number and type of Shares (or other securities or
other property) that thereafter may be made the subject of Awards, (B)
the number and type of Shares (or other securities or other property)
subject to outstanding Awards and (C) the purchase price or exercise
price with respect to any Award; provided, however, that the number of
Shares covered by any Award or to which such Award relates shall
always be a whole number and any adjustment made hereunder shall
comply with Treasury Regulation Section 1.424-1.
B-4
(iii)Right to Cancel Awards Upon Certain Events. Notwithstanding the
above, in the event (A) of any reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or
other securities of the Company or any other similar corporate
transaction or event or (B) the Company shall enter into a written
agreement to undergo such a transaction or event, the Committee may,
in its sole discretion, cancel any or all outstanding Awards and pay
to the holders of any such Awards that are otherwise vested, in cash,
the value of such Awards based upon the price per share of capital
stock received or to be received by other shareholders of the Company
in such event.
(iv) No Adjustment Upon Issuance of Securities. Except as may otherwise be
expressly provided in the Plan, the issuance by the Company of Shares
of Stock of any class or securities convertible into Shares of Stock
of any class for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefore, or
upon conversion of shares or obligations of the Company convertible
into such shares of capital stock or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of
Stock available under the Plan or subject to Options theretofore
granted or the exercise price per share with respect to outstanding
Options.
Section 5. Eligibility
Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions to
the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive
Stock Option may only be granted to full-time or part-time employees (which term
as used herein includes, without limitation, officers and directors who are also
employees), and an Incentive Stock Option shall not be granted to an employee of
an Affiliate unless such Affiliate is also a Subsidiary of the Company.
Section 6. Awards
(a) Options. The Committee is hereby authorized to grant Options to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions
of the Plan, as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however,
that such purchase price shall not be less than 100% of the Fair
Market Value of a Share on the date of grant of such option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee at the time of grant, provided that no Option shall be
exercisable after ten years from its Grant Date.
(iii)Time and Method of Exercise.
(A) The Committee shall determine the time or times at which an
Option may be exercised in whole or in part. Notwithstanding
the foregoing, however, in no event shall an Option, or any
portion thereof, be exercisable until at least six months
after the date of grant of such Option, and no Option shall
be exercisable (and any attempted exercise shall be deemed
null and void) if such exercise would create a right of
recovery for "short-swing profits" under Section 16(b) of
the Exchange Act, unless the Participant pays the Company
the amount of such "short-swing profits" at the time of the
exercise of the Option.
(B) The full exercise price for the Shares with respect to which
the Option is being exercised shall be payable to the
Company:
B-5
(1) in cash or by check payable and acceptable to the
Company;
(2) subject to the approval of the Committee, by tendering
to the Company shares of Common Stock owned by the
optionee having an aggregate Fair Market Value per
share as of the date of exercise that is not greater
than the full exercise price for the shares with
respect to which the Option is being exercised,
provided that such shares shall have been then owned by
the optionee for a period of at least six months prior
to such exercise, and by paying any remaining amount of
the exercise price as provided in (1) above; or
(3) subject to the approval of the Committee and to such
instructions as the Committee may specify, at the
optionee's written request the Company may deliver
certificates for the shares of Common Stock for which
the Option is being exercised to a broker for sale on
behalf of the optionee, provided that the optionee has
irrevocably instructed such broker to remit directly to
the Company on the optionee's behalf the full amount of
the exercise price from the proceeds of such sale;
(4) provided, however, that in the case of an Incentive
Stock Option, (2) and (3) above shall apply only if
Committee approval is given on or prior to the date
such Option was granted and the Award Agreement
expressly provides for such optional payment terms.
In the event that the optionee elects to make payment
as allowed under clause (2) above, the Committee may, upon
confirming that the optionee owns the number of shares of
Common Stock being tendered, authorize the issuance of a new
certificate for the number of shares being acquired pursuant
to the exercise of the Option less the number of shares
being tendered upon the exercise and return to the optionee
(or not require surrender of) the certificate for the shares
of common Stock being tendered upon the exercise. Payment
instruments will be received subject to collection.
(iv) Acceleration and Conversion. The Committee, at any time: (A) may
accelerate the time at which any Option granted hereunder is
exercisable or otherwise vary the terms of an Option,
notwithstanding the fact that such variance may cause the Option
to be treated as a Non-Qualified Stock Option; and (B) subject to
the consent of the Participant, may convert an outstanding
Incentive Stock Option to a Non-Qualified Stock option if it
deems such conversion to be in the best interest of the
Participant.
(v) Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to
the grant of stock options that are intended to qualify as
Incentive Stock Options:
(A) The Committee will not grant Incentive Stock Options in
which the aggregate Fair Market Value (determined as of the
time the option is granted) of the Shares with respect to
which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under this
Plan and all other plans of the Company and its Affiliates)
shall exceed One Hundred Thousand Dollars ($100,000).
(B) All Incentive Stock Options must be granted within ten years
from the date on which the Original Plan was adopted by the
Board.
(C) Unless sooner exercised, all Incentive Stock Options shall
expire and no longer be exercisable no later than ten years
after the date of grant; provided, however, that in the case
of a grant of an Incentive Stock Option to a Participant
who, at the time such Option is granted, owns (within the
meaning of Section 422 of the Code) stock possessing more
than 10% of the total combined voting power of all classes
of stock of the Company or of its Affiliate, such Incentive
Stock Option shall expire and no longer be exercisable no
later than five years from the date of grant.
(D) The purchase price per Share for an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of a
Share on the date of grant of the Incentive Stock Option;
provided, however, that, in the case of the grant of an
Incentive Stock Option to a Participant who, at the time
such option is granted, owns (within the meaning of Section
422 of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company
or of its Affiliate, the purchase price per Share
purchasable under an Incentive Stock Option shall be not
less than 110% of the Fair Market Value of a Share on the
date of grant of the Incentive Stock Option.
B-6
(E) Any Incentive Stock Option authorized under the Plan shall
contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and
contain all provisions required in order to qualify the
Option as an Incentive Stock Option.
(vi) Termination of Employment.
(A) In the event an individual's employment with the Company and
its Subsidiaries shall terminate for reasons other than (1)
Retirement; (2) Disability; or (3) death, the individual's
Options shall terminate as of the date of such termination
of employment and shall not be exercisable to any extent as
of and after such time.
(B) If any termination of employment is due to Retirement or
Disability, the individual shall have the right to exercise
any Option at any time within the 12-month period
(three-month period in the case of Retirement for Options
that are Incentive Stock Options) following such termination
of employment, but only to the extent that the Option was
exercisable immediately prior to such termination of
employment. Notwithstanding any other provision contained in
the Plan or any Award Agreement, if the termination of
employment is due to Retirement, and such retiring
individual at the time of his or her Retirement (1) is at
least fifty-five (55) years of age, and (2) the sum of the
individual's age and years of service to the Company is
equal to or greater than eighty (80) years, then all
outstanding Options granted to such retiring individual
shall automatically become immediately exercisable within
such 12-month period (three-month period in the case of
Options that are Incentive Stock Options).
(C) Whether any termination of employment is due to Retirement
or Disability and whether an authorized leave of absence or
absence for military or government service or for other
reasons shall constitute a termination of employment for
purposes of the Plan shall be determined by the Committee in
its sole discretion.
(D) If an individual shall die while entitled to exercise an
Option, the individual's estate, personal representative or
beneficiary, as the case may be, shall have the right to
exercise the Option at any time within the 12-month period
(three-month period in the case of Retirement for Options
that are Incentive Stock Options) following the date of the
Participant's death, to the extent that the Participant was
entitled to exercise the same on the day immediately prior
to the Participant's death.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Eligible Persons subject to the terms of the
Plan. Each Stock Appreciation Right granted under the Plan shall confer on
the holder upon exercise the right to receive, as determined by the
Committee, a number of Shares equal to the excess of (i) the Fair Market
Value of one Share on the date of exercise over (ii) the grant price of the
Stock Appreciation Right as determined by the Committee, which grant price
shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the
Plan, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions (including
conditions or restrictions on the exercise thereof) of any Stock
Appreciation Right shall be as determined by the Committee.
(c) Restricted Stock / Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Eligible
Persons with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan, as
the Committee shall determine:
(i) Restrictions. The Committee shall impose such terms, conditions and/or
restrictions on any Restricted Stock or Restricted Stock Units granted
pursuant to the Plan as it may deem advisable including, without
limitation: (A) a requirement that Participants pay a stipulated
purchase price for each Restricted Stock or each Restricted Stock
Unit; (B) restrictions based upon the achievement of specific
Performance Goals (Company-wide, divisional, and/or individual); (C)
time-based restrictions on vesting; and/or (D) restrictions under
applicable Federal or state securities laws. Unless otherwise
determined by the Committee at the time of grant, any time-based
restriction period shall be for a minimum of three years. To the
extent the Restricted Stock or Restricted Stock Units are intended to
be deductible under Section 162(m) of the Code, the applicable
restrictions shall be based on the achievement of Performance Goals
over a Performance Period, as described in Section 6(d) below.
B-7
(ii) Payment of Units. Restricted Stock Units that become payable in
accordance with their terms and conditions shall be settled in cash,
Shares of Common Stock, or a combination of cash and Common Stock, as
determined by the Committee and paid no later than 2 1/2 months after
the tax year in which the Restricted Stock Units vest.
(iii)No Disposition During Restriction Period. During the Restriction
Period, Restricted Stock may not be sold, assigned, transferred or
otherwise disposed of, or mortgaged, pledged or otherwise encumbered.
In order to enforce the limitations imposed upon the Restricted Stock,
the Committee may (A) cause a legend or legends to be placed on any
certificates relating to such Restricted Stock, and/or (B) issue "stop
transfer" instructions, as it deems necessary or appropriate.
(iv) Dividend and Voting Rights. Unless otherwise determined by the
Committee, during the Restriction Period, Participants who hold
Restricted Stock shall have the right to vote such Restricted Stock as
the record owner thereof. Unless otherwise determined by the
Committee, any dividends payable to a Participant during the
Restriction Period shall be distributed to the Participant only if and
when the restrictions imposed on the applicable Restricted Stock or
Restricted Stock Units lapse.
(v) Stock Certificates. Each certificate issued for Restricted Stock shall
be registered in the name of the Participant and deposited with the
Company or its designee. At the end of the Restriction Period, a
certificate representing the number of Shares to which the Participant
is then entitled shall be delivered to the Participant free and clear
of the restrictions. No certificate shall be issued with respect to a
Restricted Stock Unit unless and until such unit is paid in Shares.
(d) Performance Awards. Subject to the provisions of the Plan, Performance
Awards may be granted either alone or in addition to other Awards made
under the Plan.
(i) Grants. Subject to the provisions of the Plan, Performance Awards
consisting of Performance Shares or Performance Units may be granted
to Eligible Persons.
(ii) Performance Goals. Unless otherwise determined by the Committee,
Performance Awards shall be conditioned on the achievement of
Performance Goals (which shall be based on one or more Performance
Measures, as determined by the Committee) over a Performance Period.
The Performance Period shall be one year, unless otherwise determined
by the Committee.
(iii)Performance Measures. The Performance Measure(s) to be used for
purposes of Performance Awards may be described in terms of objectives
that are related to the individual Participant or objectives that are
Company-wide or related to a subsidiary, division, department, region,
function or business unit of the Company in which the Participant is
employed, and may consist of one or more or any combination of the
following criteria: stock price, market share, sales revenue, cash
flow, sales volume, earnings per share, return on equity, return on
assets, return on sales, return on invested capital, economic value
added, net earnings, total shareholder return, gross margin and/or
costs. The Performance Goals based on these Performance Measures may
be made relative to the performance of other corporations.
(iv) Negative Discretion. Notwithstanding the achievement of any
Performance Goal established under this Plan, the Committee has the
discretion, by Participant, to reduce some or all of a Performance
Award that would otherwise be paid.
(v) Extraordinary Events. At, or at any time after, the time an Award is
granted, and to the extent permitted under Section 162(m) of the Code
and the regulations thereunder without adversely affecting the
treatment of the Award under the Performance Based Exception, the
Committee may provide for the manner in which performance will be
measured against the Performance Goals (or may adjust the Performance
Goals) to reflect the impact of specific corporate transactions,
accounting or tax law changes and other extraordinary and nonrecurring
events.
B-8
(vi) Interpretation. With respect to any Award that is intended to satisfy
the conditions for the Performance Based Exception under Section
162(m) of the Code: (A) the Committee shall interpret the Plan and
this Section 6(d) in light of Section 162(m) of the Code and the
regulations thereunder; (B) the Committee shall have no discretion to
amend the Award in any way that would adversely affect the treatment
of the Award under Section 162(m) of the Code and the regulations
thereunder; and (C) such Award shall not be paid until the Committee
shall first have certified that the Performance Goals have been
achieved.
(vii)Payments. Performance Awards shall be paid no later than 2 1/2 months
after the tax year in which the Performance Award vests.
(e) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Eligible Persons, subject to the terms of the Plan, such other Awards that
are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purposes of the Plan. Shares or other securities
delivered pursuant to a purchase right granted under this Section 6(e)
shall be purchased for such consideration, which may be paid by such method
or methods and in such form or forms (including, without limitation, cash,
Shares, promissory notes (provided, however, that the par value of any
Shares to be issued pursuant to such exercise shall be paid in the form of
cash, services rendered, personal property, real property or a combination
thereof, provided, further, that the acceptance of such promissory notes
does not conflict with Section 402 of the Sarbanes-Oxley Act of 2002),
other securities, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
applicable exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made. The Company shall
pay Awards no later than 2 1/2 months after the tax year in which the Award
vests.
(f) Cash-Bonus Awards. The Committee is hereby authorized to grant to Eligible
Persons, subject to the terms of the Plan, Cash-Bonus Awards that provide
participants with the opportunity to earn a cash payment based upon the
achievement of one or more Performance Goals for a period of time of one or
more years (the "Award Cycle"), as determined by the Committee. For each
Award Cycle, the Committee shall determine the relevant Performance
Measurements, the Performance Goal for each Performance Measurement, the
level or levels of achievement necessary for Awards to be paid, the
weighting of the Performance Goals if more than one Performance Goal is
applicable, and the size of the Awards. The Company shall pay the
Cash-Bonus Award no later than 2 1/2 months after the tax year in which the
Cash-Bonus Award is earned.
(g) General.
(i) Consideration for Awards. Awards may be granted for no cash
consideration or for any cash or other consideration as determined by
the Committee, consistent with the Plan and in compliance with
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Subsidiary of the
Company. Awards granted in addition to or in tandem with other Awards
or in addition to or in tandem with awards granted under any such
other plan of the Company or any Subsidiary of the Company (A) may be
granted either at the same time as or at a different time from the
grant of such other Awards or awards and (B) shall only be granted if
the grant complies with Section 409A of the Code.
(iii)Forms of Payment under Awards. Subject to the terms of the Plan and
the requirements of applicable law, payments or transfers to be made
by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall
determine including, without limitation, cash (other than Stock
Appreciation Rights, which will be settled in Shares), Shares,
promissory notes (provided, however, that the acceptance of such
promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other
property or any combination thereof, and may be made on any schedule
of payments or transfers, so long as all such payments and transfers
occur no later than 2 1/2 months after the tax year in which such
payment or transfer obligation vests, in accordance with rules and
procedures established by the Committee.
B-9
(iv) Limits on Transfer of Awards. No Award and no right under any such
Award shall be transferable by a Participant otherwise than by will or
by the laws of descent and distribution and the Company shall not be
required to recognize any attempted assignment of such rights by any
Participant; provided, however, that, if so determined by the
Committee, a Participant may, in the manner established by the
Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant; provided,
further, that, if so determined by the Committee, a Participant may
transfer a Non-Qualified Stock Option to any "Family Member" (as such
term is defined in the General Instructions to Form S-8 or successor
to such Instructions or such Form) at any time that such Participant
holds such Option, provided that the Participant may not receive any
consideration for such transfer, the Family Member may not make any
subsequent transfers other than by will or by the laws of descent and
distribution and the Company receives written notice of such transfer;
provided, further, that, if so determined by the Committee and except
in the case of an Incentive Stock Option, Awards may be transferable
as determined by the Committee. Except as otherwise determined by the
Committee, each Award (other than an Incentive Stock Option) or right
under any such Award shall be exercisable during the Participant's
lifetime only by the Participant or, if permissible under applicable
law, by the Participant's guardian or legal representative. Except as
otherwise determined by the Committee, no Award (other than an
Incentive Stock Option) or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or other encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Term of Awards. Subject to Section 6(a)(v)(C) of the Plan, the term of
each Award shall be for such period as may be determined by the
Committee; provided, however, no Award shall have a term greater than
ten years from the grant date of the Award.
(vi) Restrictions; Securities Exchange Listing. All Shares or other
securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan,
applicable federal or state securities laws and regulatory
requirements, and the Committee may direct appropriate stop transfer
orders and cause other legends to be placed on the certificates for
such Shares or other securities to reflect such restrictions. If the
Shares or other securities are traded on a securities exchange, the
Company shall not be required to deliver any Shares or other
securities covered by an Award unless and until such Shares or other
securities have been admitted for trading on such securities exchange.
(vii)Except as provided in Section 4(c) hereof, no Option or Stock
Appreciation Right may be amended to reduce its initial exercise price
and no Option shall be canceled and replaced with Options or Stock
Appreciation Rights having a lower exercise price, without the
approval of the shareholders of the Company or unless there would be
no material adverse effect on the Company's financial statements as
prepared in accordance with Generally Accepted Accounting Principles.
(h) Award Limitations.
(i) Annual Plan Limitation. The maximum amount of Shares issuable in
connection with Awards that may be made in any calendar year shall not
exceed 2,000,000, subject to adjustment as provided in Section 4(c) of
the Plan; provided, however, that with respect to any calendar year
following calendar year 2005, such maximum amount of Shares shall be
increased to the extent that Awards covering less than 2,000,000
shares are made in a prior calendar year so that such unused Awards
may be carried forward to subsequent calendar years.
B-10
(ii) Limitations on Grants to Participants. The maximum number of Options
and Stock Appreciation Rights that may be granted or issued under the
Plan in any calendar year to any Participant during a single calendar
year is 500,000 Shares (subject to adjustment as provided for in
Section 4(c) of the Plan and this subsection (h)). The maximum amount
of Awards other than Options and Stock Appreciation Rights that may be
made in any calendar year to any Participant shall not exceed 500,000
Shares. The maximum amount of Awards that may be made to a Participant
for a Performance Period greater than one year shall not exceed the
foregoing annual maximum multiplied by the number of full years in the
Performance Period. The foregoing annual limitation specifically
includes the grant of any Award or Awards representing "qualified
performance-based compensation" within the meaning of Section 162(m)
of the Code.
Section 7. Amendment and Termination; Adjustments
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; provided, however,
that, notwithstanding any other provision of the Plan (other than
Section 7(d) hereof) or any Award Agreement, without the approval of
the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent
such approval: (i) violates the rules or regulations of the NASDAQ or
any other securities exchanges that are applicable to the Company;
(ii) causes the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan; (iii) increases the number of
shares authorized under the Plan as specified in Section 4(a) of the
Plan; (iv) permits the award of Options or Stock Appreciation Rights
at a price less than 100% of the Fair Market Value of a Share on the
date of grant of such Option or Stock Appreciation Right, as
prohibited by Sections 6(a)(i) and 6(b)(ii) of the Plan or the
repricing of Options or Stock Appreciation Rights, as prohibited by
Section 6(g)(vii) of the Plan; or (v) would prevent the grant of
Options or Stock Appreciation Rights that would qualify under Section
162(m) of the Code.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in an Award
Agreement, the Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, if
such action would adversely affect the rights of the holder of such
Award, without the consent of the Participant or holder or beneficiary
thereof. Except as provided in Section 4(c) of the Plan, in no event
may the Board reprice any award without first obtaining the approval
of the shareholders of the Company.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent
it shall deem desirable to carry the Plan into effect.
Section 8. Income Tax Withholding
In order to comply with all applicable federal, state or local income tax
laws or regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal, state or local payroll, withholding, income
or other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant. In order to assist a
Participant in paying all or a portion of the federal, state and local taxes to
be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations) or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.
B-11
Section 9. Change in Control
(a) Options and SARs. Effective on the date of such Change in Control, all
outstanding and unvested Options and Stock Appreciation Rights granted
under the Plan shall immediately vest and, in the case of Options, become
exercisable, and all Options then outstanding under the Plan shall remain
outstanding in accordance with their terms. Notwithstanding anything to the
contrary contained therein, in the event that any Option or Stock
Appreciation Right granted under the Plan becomes unexercisable during its
term on or after a Change in Control because: (i) the individual who holds
such Option or Stock Appreciation Right is involuntarily terminated (other
than for cause) within two (2) years after the Change in Control; (ii) such
Option or Stock Appreciation Right is terminated or adversely modified; or
(iii) in the case of Options, shares of Common Stock are no longer issued
and outstanding, or no longer traded on a national securities exchange,
then the holder of such Option or Stock Appreciation Right shall
immediately be entitled to receive a lump sum cash payment equal to (A) the
gain on such Option or Stock Appreciation Right or (B) only if greater than
the gain and only with respect to Non-Qualified Stock Options, the
Black-Scholes value of such Option (as determined by a nationally
recognized independent investment banker chosen by the Company), in either
case calculated on the date such Option becomes unexercisable. For purposes
of the preceding sentence, the gain on an Option shall be calculated as the
difference between the closing price per share of Common Stock as of the
date such Option becomes unexercisable less the Option Exercise Price.
(b) Restricted Stock/Restricted Stock Units. Upon a Change of Control, all
Restricted Stock and Restricted Stock Units shall immediately vest and be
distributed to Participants, effective as of the date of the Change of
Control.
(c) Performance Awards. Each Performance Award granted under the Plan that is
outstanding on the date of the Change in Control shall immediately vest and
the holder of such Performance Award shall be entitled to a lump sum cash
payment equal to the amount of such Performance Award payable at the end of
the Performance Period as if 100% of the Performance Goals have been
achieved.
(d) Timing of Payment. Any amount required to be paid pursuant to this Section
9 shall be paid as soon as practical after the date such amount becomes
payable.
(e) Change in Control. As used herein, the term "Change in Control," with
respect to the Company, means, and shall be deemed to have occurred on the
date upon which (i) the Board (or, if approval of the Board is not required
as a matter of law, the shareholders of the Company) shall approve (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or
(B) any sale, lease, exchange, or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Company, or (C) the adoption of any plan or proposal for the
liquidation or dissolution of the Company, or (ii) any person (as such term
is defined in Section 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation, or other entity shall purchase any Common Stock of the Company
(or securities convertible into the Common Stock) for cash, securities or
any other consideration pursuant to a tender offer or exchange offer,
without the prior consent of the Board, or any such person, corporation or
other entity (other than the Company or any benefit plan sponsored by the
Company or any subsidiary) shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35 percent or more of
the combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote in the election of directors (calculated as
provided in paragraph (d) of such Rule 13d-3 in the case of rights to
acquire the Company's securities), or (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of the period.
B-12
Section 10. General Provisions
(a) No Rights to Awards. No Eligible Person or other Person shall have any
claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Eligible Persons or holders or beneficiaries
of Awards under the Plan. The terms and conditions of Awards need not be
the same with respect to any Participant or with respect to different
Participants.
(b) Award Agreements. No Participant will have rights under an Award granted to
such Participant unless and until an Award Agreement shall have been duly
executed on behalf of the Company and, if requested by the Company, signed
by the Participant.
(c) Plan Provisions Control. In the event that any provision of an Award
Agreement conflicts with or is inconsistent in any respect with the terms
of the Plan as set forth herein or subsequently amended, the terms of the
Plan shall control.
(d) No Rights of Shareholders. Except with respect to Shares of Restricted
Stock as to which the Participant has been granted the right to vote,
neither a Participant nor the Participant's legal representative shall be,
or have any of the rights and privileges of, a shareholder of the Company
with respect to any Shares issuable to such Participant upon the exercise
or payment of any Award, in whole or in part, unless and until such Shares
have been issued in the name of such Participant or such Participant's
legal representative without restrictions thereto.
(e) No Limit on Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ, nor will it
affect in any way the right of the Company or an Affiliate to terminate
such employment at any time, with or without cause. In addition, the
Company or an Affiliate may at any time dismiss a Participant from
employment free from any liability or any claim under the Plan or any
Award, unless otherwise expressly provided in the Plan or in any Award
Agreement. Nothing in this Plan shall confer on any person any legal or
equitable right against the Company or any Affiliate, directly or
indirectly, or give rise to any cause of action at law or in equity against
the Company or an Affiliate. The Awards granted hereunder shall not form
any part of the wages or salary of any Eligible Person for purposes of
severance pay or termination indemnities, irrespective of the reason for
termination of employment. Under no circumstances shall any person ceasing
to be an employee of the Company or any Affiliate be entitled to any
compensation for any loss of any right or benefit under the Plan which such
employee might otherwise have enjoyed but for termination of employment,
whether such compensation is claimed by way of damages for wrongful or
unfair dismissal, breach of contract or otherwise. By participating in the
Plan, each Participant shall be deemed to have accepted all the conditions
of the Plan and the terms and conditions of any rules and regulations
adopted by the Committee and shall be fully bound thereby.
(g) Governing Law. The validity, construction, and effect of the Plan, Award
Agreement or any Award, and any rules and regulations relating to the Plan,
Award Agreement or any Award, shall be determined in accordance with the
internal laws, and not the law of conflicts, of the State of Missouri.
(h) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform
to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the
purpose or intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction or Award, and the remainder of the Plan or
any such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and an Eligible Person or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
B-13
(j) Other Benefits. No compensation or benefit awarded to or realized by any
Participant under the Plan shall be included for the purpose of computing
such Participant's compensation under any compensation-based retirement,
disability or similar plan of the Company unless required by law or
otherwise provided by such other plan.
(k) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(l) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(m) Section 16 Compliance; Section 162(m) Administration. The Plan is intended
to comply in all respects with Rule 16b-3 or any successor provision, as in
effect from time to time, and in all events the Plan shall be construed in
accordance with the requirements of Rule 16b-3. If any Plan provision does
not comply with Rule 16b-3 as hereafter amended or interpreted, the
provision shall be deemed inoperative. The Board of Directors, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan with respect to persons who
are officers or directors subject to Section 16 of the Exchange Act without
so restricting, limiting or conditioning the Plan with respect to other
Eligible Persons. With respect to Options and Stock Appreciation Rights,
the Company intends to have the Plan administered in accordance with the
requirements for the award of "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
(n) Conditions Precedent to Issuance of Shares. Shares shall not be issued
pursuant to the exercise or payment of the purchase price relating to an
Award unless such exercise or payment and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the
rules and regulations promulgated thereunder, the requirements of any
applicable Stock Exchange and the Missouri General Corporation Law. As a
condition to the exercise or payment of the purchase price relating to such
Award, the Company may require that the person exercising or paying the
purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a
representation and warranty is required by law.
(o) Nonexclusivity of the Plan. Neither the submission of the Plan, the
approval of the Plan by the shareholders of the Plan nor the failure of
such shareholders to approve the Plan shall in any way limit the power of
the Board to adopt such other incentive arrangements deemed desirable by
it, including without limitation, the awarding of cash bonuses, subject to
any shareholder approval as may be required by law, regulatory rules or the
NASDAQ System.
(p) Compliance with all applicable laws. Notwithstanding any other provision of
the Plan, the Company shall have no liability to deliver any Shares of
Common Stock under the Plan or make any other distribution of benefits
under the Plan unless such delivery or distribution would comply with all
applicable laws (including, without limitation, the requirements of the
Securities Act, as amended, and the Exchange Act, as amended), and the
applicable requirements of any securities exchange, the NASDAQ System, or
any similar entity. If the employee fails to timely accept delivery of and
pay for the Shares specified in a notice to the Company stating the number
of shares for which the Option is being executed, the Committee shall have
the right to terminate the Option with respect to such Shares.
(q) Preemption by Applicable Laws and Regulations. Anything in the Plan or any
Award Agreement entered into pursuant to the Plan to the contrary
notwithstanding, if, at any time specified herein or therein for the making
of any determination with respect to the issuance or other distribution of
Shares of Common Stock, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require
either the Company or the Participant (or the Participant's beneficiary),
as the case may be, to take any action in connection with any such
determination, the issuance or distribution of such Shares or the making of
such determination shall be deferred until such action shall have been
taken.
B-14
Section 12. Effective Date of the Plan
The Plan shall be effective upon its adoption by the Board, provided,
however, that in the event the Plan is not approved by the shareholders of the
Company at the 2005 annual meeting of the shareholders of the Company, the
Original Plan shall continue in full force and effect.
Section 13. Term of the Plan
No Award shall be granted under the Plan after the tenth anniversary of the
adoption of the Original Plan or any earlier date of discontinuation or
termination established pursuant to Section 7(a) of the Plan. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date, and the authority of
the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board to amend the Plan, shall extend beyond the
termination of the Plan.
B-15
APPENDIX C
AMENDED AND RESTATED
O'REILLY AUTOMOTIVE, INC.
2003 DIRECTOR STOCK PLAN
I. Establishment and Purpose.
The O'Reilly Automotive, Inc. 2003 Director Stock Option Plan was adopted
by the Board of Directors on February 13, 2003 and approved by the shareholders
of the Company on May 6, 2003 and amended and restated in its entirety as the
O'Reilly Automotive, Inc. 2003 Director Stock Plan by the Board of Directors on
March 10, 2005. The purposes of the Plan are to provide (a) further inducement
to qualified persons to become and remain Eligible Directors of the Company, and
(b) additional incentive to Eligible Directors of the Company by encouraging
them to acquire an increased proprietary interest in the business of the Company
through the granting of Options and Restricted Stock hereunder in return for
services rendered by them to the Company; thereby furthering the interest of the
Company and its shareholders.
II. Definitions.
(a) "Act" means the Securities and Exchange Act of 1934, as amended from time
to time.
(b) "Award" means any Option or Restricted Stock granted pursuant to Section V
of the Plan.
(c) "Award Agreement" means any written agreement, contract or other instrument
or document evidencing any Option or Restricted Stock Award granted under
the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Change of Control" means, and shall be deemed to have occurred on, the
date upon which (i) the Board of Directors (or, if approval of the Board is
not required as a matter of law, the shareholders of the Company) shall
approve (A) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of Stock immediately
prior to the merger have the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, or (B) any sale,
lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (C) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (ii) any person (as such term is defined in
Section 13(d)(3) and 14(d)(2) of the Act), corporation, or other entity
shall purchase any Stock of the Company (or securities convertible into the
Stock) for cash, securities or any other consideration pursuant to a tender
offer or exchange offer, without the prior consent of the Board, or any
such person, corporation or other entity (other than the Company or any
benefit plan sponsored by the Company or any subsidiary) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 35
percent or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of
directors (calculated as provided in paragraph (d) of such Rule 13d-3 in
the case of rights to acquire the Company's securities), or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constitute the entire Board shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of the period.
C-1
(f) "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, and any regulations promulgated thereunder.
(g) "Committee" means a committee of Directors designated by the Board to
administer the Plan, which shall initially be the Compensation Committee of
the Board. The Committee shall be comprised of not less than such number of
Directors as shall be required to permit Awards granted under the Plan to
qualify under Rule 16b-3 and each such Director shall be a "non-employee
director" as such term is used in Rule 16b-3; provided, however that
noncompliance with such qualifications shall not invalidate any grants of
Awards by the Committee.
(h) "Company" means O'Reilly Automotive, Inc., a Missouri corporation, and any
successor corporation.
(i) "Disability" means a condition such that an Eligible Director would be
considered disabled pursuant to Section 409A(a)(2)(C) of the Code, or, if
the Company has a long-term disability plan, the condition described in
such plan as a disability.
(j) "Eligible Director" means a director of the Company who is not otherwise an
officer or employee of the Company or of any subsidiary thereof.
(k) "Fair Market Value" of the Stock, on a given date, means: (i) if the Stock
is not publicly traded, the amount determined by the Committee on such
date; (ii) if the Stock is traded only otherwise than on a securities
exchange and is not quoted on the NASDAQ, the closing quoted selling price
of the Stock on such date as quoted in "pink sheets" published by the
National Daily Quotation Bureau; (iii) if the Stock is traded only
otherwise than on a securities exchange and is quoted on NASDAQ, the
closing quoted selling price of the Stock on such date as reported by the
Wall Street Journal; or (iv) if the Stock is admitted to trading on a
securities exchange, the closing quoted selling price of the Stock on such
date as reported in the Wall Street Journal.
(l) "Grantee" means the Eligible Director to whom an Award is granted.
(m) "Grant Date" means the date as of which an Award is granted, which shall be
the first business day after the annual meeting of Shareholders of the
Company.
(n) "NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
(o) "Option" means an option granted under this Plan to acquire Stock.
(p) "Plan" means the Amended and Restated O'Reilly Automotive, Inc. 2003
Director Stock Plan.
(q) "Post-Death Representative(s)" means the executor(s) or administrator(s) of
the Grantee's estate or the person or persons to whom the Grantee's rights
under his or her Option pass by the Grantee's will or the laws of the
descent and distribution.
(r) "Restriction Period" means, with respect to shares of Restricted Stock
awarded hereunder, a period of [one year from the Grant Date (with respect
to one-third of the total amount of shares awarded), two years from the
Grant Date (with respect to an additional one-third of the total amount of
shares awarded) and three years from the Grant Date (with respect to the
remaining one-third of the shares awarded)], unless sooner terminated upon
the occurrence of any of the events specified in Section V paragraph (2)(b)
of the Plan.
(s) "Restricted Stock" means any share of Stock granted under Section V
paragraph (2) of the Plan.
(t) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Act, as amended from time to time, or any successor
rule.
(u) "Stock" means authorized and unissued shares of $0.01 per value common
stock of the Company or reacquired shares of such common stock held in its
treasury.
C-2
III. Administration.
(a) The Plan shall be administered by the Committee. The members of the
Committee shall be "Eligible Directors" within the meaning of Rule 16b-3
under the Act, provided, however, that noncompliance with such
qualifications shall not invalidate any grants of Awards by the Committee.
Committee members may resign at any time by delivering written notice to
the Board. Vacancies in the Committee, however caused, shall be filled by
the Board. The Committee shall act by a majority of its members, and the
Committee may act either by vote at a telephonic or other meeting or by a
consent or other written instrument signed by all of the members of the
Committee. If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the Plan that
would otherwise be the responsibility of the Committee.
(b) Subject to and not inconsistent with the express provisions of the Plan,
the Committee has and may exercise such powers and authority of the Board
as may be necessary or appropriate for the Committee to carry out its
functions under the Plan. Without limiting the generality of the foregoing,
the Committee shall have full power and authority (i) to determine all
questions of fact that may arise under the Plan, (ii) to interpret the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan and (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, including, without limitation, any
rules that the Committee determines are necessary or appropriate to ensure
that the Company and the Plan will be able to comply with all applicable
provisions of any applicable federal, state or local law. All
interpretations, determinations and actions by the Committee will be final
and binding upon all persons, including the Company, Eligible Directors and
Grantees.
IV. Shares Subject to the Plan.
(a) Subject to the provisions of Section VII hereof, the Stock which may be
issued pursuant to any Award granted under the Plan shall not exceed in the
aggregate shares of Stock.
(b) At any time during the existence of the Plan, there shall be reserved for
issuance upon any Award granted under the Plan an amount of Stock (subject
to adjustment as provided in Section VII hereof) equal to the total number
of shares then issuable pursuant to all such Awards which shall have been
made prior to such time. The Company in its discretion may use reacquired
shares held in the treasury in lieu of authorized but unissued shares.
(c) If an Award terminates, in whole or in part, by expiration or for any other
reason, except in the case of the exercise of an Option, the shares
previously reserved for issuance upon grant of the Award shall again be
available for issuance as if such shares had never been subject to an
Award.
V. Awards.
On each Grant Date, each person who is then an Eligible Director shall
receive a grant of shares of Restricted Stock and an Option to purchase shares
of Stock.
(1) Options.
(a) Granting of Options.
(i) Each person who is an Eligible Director on the Grant Date shall
receive Options to acquire shares of Stock at a per share purchase
price equal to the per share Fair Market Value of the Stock on the
Grant Date[, provided, however, that no grant shall be made to any
Eligible Director who is first elected a director of the Company at
the annual meeting of the shareholders immediately preceding the Board
meeting on the Grant Date]. [What about directors appointed mid-year?
Will they receive an award upon commencement of service?]
(ii) All Options granted under the Plan shall be granted as of a Grant
Date. Promptly after each Grant Date, the Company shall notify the
Grantee of the grant of the Option, and shall hand deliver or mail to
the Grantee an Award Agreement, duly executed by and on behalf of the
Company, with the request that the Grantee execute and return the
Award Agreement within thirty days after the Grant Date. If the
Grantee shall fail to execute and return the written Award Agreement
within said thirty-day period, his or her Option shall be
automatically terminated, except that if the Grantee dies within said
thirty-day period, such Award Agreement shall be effective
notwithstanding the fact that it has not been signed prior to death.
C-3
(iii)Options granted under the Plan will not be incentive stock options
within the meaning of Section 422 of the Code.
(b) Terms of Options.
Notwithstanding any other provision of the Plan, each Option shall be evidenced
by an Award Agreement, which shall include the substance of the following terms
and conditions:
(i) The option price for each share of Stock covered by an Option shall be
an amount equal to 100% of the Fair Market Value of a share of Stock
on the Grant Date of such Option.
(ii) The Option by its terms shall not be transferable by the Grantee
otherwise than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the
Code or regulations thereunder. The designation of a beneficiary does
not constitute a transfer. The Option shall be exercisable, during the
Grantee's lifetime, only by the Grantee.
(iii)[The Option by its terms shall be immediately exercisable as to any
or all shares and may be exercised at any time and from time to time.]
(iv) Each Option granted under the Plan and all unexercised rights
thereunder shall expire automatically upon the earlier of (A) the date
on which a Grantee ceases to hold office as a director of the Company
for any reason other than retirement, death or Disability, (B) the
date that is three months following the effective date of the
Grantee's retirement from service on the Board, (C) the date that is
one year following the date on which the Grantee's service on the
Board of Directors of the Company ceases due to death or Disability,
and (D) the seventh anniversary date of the Option date.
(c) Exercise of Options.
(i) An Option may be exercised in whole or in part except as otherwise may
be provided in the Award Agreement, by giving written notice to the
Company stating the number of shares of Stock for which the Option is
being exercised, accompanied by payment in full of the aggregate
purchase price for the shares of Stock being purchased. Payment of the
aggregate purchase price for the shares of Stock may be made (A) in
cash or by check payable and acceptable to the Company for the full
amount of the purchase price of the shares with respect to which the
Option is exercised, (B) subject to the approval of the Committee,
upon delivery to the Company on the exercise date of certificates
representing shares of Stock, owned by the Grantee for longer than six
months and registered in the Grantee's name, having a Fair Market
Value on the date of such exercise and delivery equal to the full
amount of the purchase price of the shares with respect to which the
Option is exercised, (C) at the Grantee's written request and subject
to the approval of the Committee and to such instructions as the
Committee may specify, in accordance with a cashless exercise program
pursuant to which the Company may deliver certificates for the shares
of Stock for which the Option is being exercised to a broker for sale
on behalf of the Grantee, provided that the Grantee has irrevocably
instructed such broker to remit directly to the Company on the
Grantee's behalf the full amount of such purchase price from the
proceeds of such sale, or (D) a combination of (A) and (B) that
collectively equals the full amount of the purchase price of the
shares with respect to which the Option is exercised.
(ii) A Grantee shall have none of the rights of a shareholder with respect
to shares of Stock subject to his or her Option until shares of Stock
are issued to him or her upon the exercise of his or her Option.
C-4
(d) General Provisions.
The Company shall not be required to issue or deliver any certificate for
shares of Stock to a Grantee upon the exercise of his or her Option:
(i) Prior to (A) if requested by the Company, the filing with the Company
by the Grantee or the Grantee's Post-Death Representative of a
representation in writing that at the time of such exercise that it is
his or her then present intention to acquire the shares of Stock being
purchased for investment and not for resale, and/or (B) the completion
of any registration or other qualification of such shares of Stock
under any state or federal securities laws or rulings or regulations
of any governmental regulatory body which the Company shall determine
to be necessary or advisable; and
(ii) Unless such issuance or delivery would comply with all applicable laws
and the applicable requirements of any securities exchange, the NASDAQ
or similar entity.
(2) Restricted Stock.
(a) Granting of Restricted Stock.
(i) Each person who is an Eligible Director on the Grant Date shall
receive shares of Restricted Stock on the Grant Date[, provided,
however, that no grant shall be made to any Eligible Director who
is first elected a director of the Company at the annual meeting
of the shareholders immediately preceding the Board meeting on
the Grant Date].
(ii) All Restricted Stock granted under the Plan shall be granted as
of a Grant Date. Promptly after each Grant Date, the Company
shall notify the Grantee of the grant of the Restricted Stock,
and shall hand deliver or mail to the Grantee an Award Agreement,
duly executed by and on behalf of the Company, with the request
that the Grantee execute and return the Award Agreement within
thirty days after the Grant Date. If the Grantee shall fail to
execute and return the written Award Agreement within said
thirty-day period, his or her Restricted Stock Award shall be
automatically terminated, except that if the Grantee dies within
said thirty-day period, such Award Agreement shall be effective
notwithstanding the fact that it has not been signed prior to
death.
(b) All shares of Restricted Stock granted to an Eligible Director
pursuant to the Plan shall be subject to the risk of forfeiture and
the restrictions set forth in paragraph (c) below during the
Restriction Period; provided, however, that such Restriction Period
shall earlier terminate upon the occurrence of any of the following
events:
(i) the date of death or Disability of such Eligible Director;
(ii) the date such Eligible Director, having been nominated for
reelection, is not reelected by the shareholders of the Company
to serve as a member of the Board of Directors; or
(iii) the occurrence of a Change in Control of the Company.
(c) Shares of Restricted Stock, when issued, will be represented by a
stock certificate or certificates registered in the name of the
Eligible Director to whom such shares of Restricted Stock shall have
been granted. Each such certificate shall bear a legend in
substantially the following form:
"The shares represented by this certificate are subject to the terms
and conditions (including forfeiture and restrictions against
transfer) contained in the Amended and Restated O'Reilly Automotive,
Inc. 2003 Director Stock Plan. A copy of such Plan is on file in the
office of O'Reilly Automotive, Inc."
C-5
Such certificates shall be deposited by such Eligible Director with
the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer of the
Company of all or any portion of the shares of Restricted Stock that
shall have been forfeited. Restricted Stock shall constitute issued
and outstanding shares of Stock for all corporate purposes other than
the right to receive and retain dividends or other distributions in
respect of such shares ("Retained Distributions"). The Eligible
Director will have the right to vote such Restricted Stock and to
exercise all other rights, powers and privileges of a holder of Stock
with respect to such shares, with the exception that (i) the Eligible
Director will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the Restriction
Period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled; (ii) the Company will
retain custody of the stock certificate or certificates representing
the Restricted Stock during the Restriction Period; (iii) the Company
will retain custody of all distributions made or declared in respect
of the Restricted Stock (and such Retained Distributions will be
subject to the same restrictions, terms and conditions as are
applicable to the Restricted Stock until such time, if ever, as the
Restricted Stock with respect to which such Retained Distributions
shall have been made, paid or declared shall have become vested, and
such Retained Distributions shall not bear interest or be segregated
in separate accounts; (iv) an Eligible Director may not sell, assign,
transfer, pledge, exchange, encumber or dispose of any shares of
Restricted Stock or any Retained Distributions during the Restriction
Period; and (v) a breach of any restrictions, terms or conditions
provided in the Plan or established by the Board of Directors with
respect to any Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained Distributions
with respect thereto.
(d) Upon the completion of the Restriction Period with respect to an
Eligible Director's Restricted Stock, and the satisfaction of any
other applicable restrictions, terms and conditions, all shares of
Restricted Stock issued to such Eligible Director and any Retained
Distributions with respect to such Restricted Stock shall become
vested. The Company shall promptly thereafter issue and deliver to the
Eligible Director new stock certificates or instruments representing
the Restricted Stock and other distributions registered in the name of
the Eligible Director or, if deceased, his or her legatee, personal
representative or distributee, which do not contain the legend set
forth in paragraph (2)(c) above.
If an Eligible Director ceases to be a member of the Board of Directors
prior to the expiration of the Restriction Period for any reason other than as
set forth in clauses (i) through (iii) of paragraph (2)(b) above, then all
shares of Restricted Stock issued to such Eligible Director as to which the
Restriction Period is applicable and all Retained Distributions with respect to
such shares shall be forfeited to the Company and the Eligible Director shall
not thereafter have any rights (including dividend and voting rights) with
respect to such Restricted Stock and Retained Distributions.
VI. No Right to Remain a Director.
The grant of an Award shall not create any right in any person to remain as
a director of the Company.
VII. Adjustment Provisions.
(a) The existence of the Plan and the Awards granted hereunder shall not affect
in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company with or into another
entity, any issuance of bonds, debentures, preferred or prior preference
stocks ahead of or affecting the Stock or the rights thereof, the
dissolution or liquidation of the Company for any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding.
(b) The shares with respect to which Awards may be granted are shares of Stock
as presently constituted. If, however, the number of outstanding shares of
Stock are increased or decreased, or such shares are exchanged for a
different number or kind of shares or securities of the Company through a
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split, number of shares of Stock subject to the Plan as provided in
Section IV hereof, and the shares of Stock subject to issuance under
outstanding Awards under the Plan shall be appropriately and
proportionately adjusted by the Committee. Any such adjustment in an
outstanding Award shall be made without change in the aggregate purchase
price applicable to an unexercised portion of an Option Award but with an
appropriate adjustment in the price for each share or other unit of any
security covered by such Option Award.
C-6
(c) Except as may otherwise be expressly provided in the Plan, the issuance by
the Company of shares of capital stock of any class or securities
convertible into shares of capital stock of any class for cash, property,
labor or services, upon direct sale, upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares of capital stock or other
securities, and in any case such shares of capital stock or other
securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number of shares of Stock available under the Plan or subject to Awards
theretofore granted or the purchase price per share with respect to
outstanding Option Awards.
(d) Adjustments under this Section VII shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of Stock shall
be issued under the Plan or in connection with any such adjustment.
(e) Notwithstanding anything to the contrary contained in this Section VII,
upon: (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger or consolidation of the Company with one or more
corporations in which the Company is not the surviving corporation, or
(iii) a sale of substantially all of the assets of the Company, the Plan
shall terminate, and any outstanding Options granted under the Plan shall
terminate on the day before the consummation of the transaction; provided
that the Committee shall have the right, but not the obligation, to
accelerate the time in which any Option Awards may be exercised prior to
such a termination. However, the termination of Awards shall not occur if
provision is made in writing in connection with the transaction, in a
manner acceptable to the Committee, for: (A) the continuance of the Plan
and assumption of outstanding Awards, (B) the substitution for such Awards
of new options to purchase the stock of a successor corporation (or parent
or subsidiary thereof), with appropriate adjustments as to number and kind
of shares and option price, or (C) other treatment of the Awards acceptable
to the Committee. The Committee shall have the authority to amend this
paragraph to provide for a requirement that a successor corporation assume
any outstanding Awards.
VIII. Duration, Amendment and Termination.
(a) The Board may at any time terminate the Plan or make such amendments
thereof as it shall deem advisable and in the best interests of the
Company, without further action on the part of the shareholders of the
Company; provided, however, that no such termination or amendment shall,
without the consent of the Grantee, adversely affect or impair the rights
of such Grantee, and provided further, that no amendment requiring
shareholder approval in order to meet the requirements of Rule 16b-3 or the
rules and regulations of NASDAQ or any other applicable regulatory or legal
authority shall be effective unless such shareholder approval is obtained.
(b) The period during which Awards may be granted under the Plan shall
terminate on May 6, 2013, unless the Plan shall have been earlier
terminated as provided above.
IX. Withholding.
The Company shall have the right to deduct from payments of any kind
otherwise due to the Grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to any Stock issued pursuant to
Awards under the Plan.
C-7
X. Shareholder Approval.
The Plan shall become effective upon adoption by the Board and approval by
the Company's shareholders; provided, however, that prior to approval of the
Plan by the Company's shareholders but after adoption by the Board, Options may
be granted under the Plan subject to obtaining such approval.
XI. Separability.
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3 of the Act or the rules and regulations of NASDAQ,
then such terms or provisions shall be deemed inoperative to the extent they so
conflict with such requirements.
XII. Governing Law.
The Plan shall be governed by and construed in accordance with the internal
laws of the State of Missouri, without regard to the conflicts of law principles
thereof, or the conflicts of law principles of any other jurisdiction that could
cause the application of the laws of any jurisdiction other than the State of
Missouri.
C-8