O'Reilly Automotive, Inc.
March 26, 2003
Dear Shareholder:
You are cordially invited to attend the 2003 Annual Meeting of Shareholders
of O'Reilly Automotive, Inc. to be held at the University Plaza Convention
Center, Arizona Room, 333 John Q. Hammons Parkway, Springfield, Missouri on
Tuesday, May 6, 2003, 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 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
Co-Chairman of the Board and Co-Chairman of the Board
Chief Executive Officer
O'REILLY AUTOMOTIVE, INC.
233 South Patterson
Springfield, Missouri 65802
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 6, 2003
Springfield, Missouri
March 26, 2003
To the Shareholders of O'Reilly Automotive, Inc.:
The Annual Meeting of Shareholders of O'Reilly Automotive, Inc. (the
"Company"), will be held on Tuesday, May 6, 2003, at 10:00 a.m., local time, at
the University Plaza Convention Center, 333 John Q. Hammons Parkway,
Springfield, Missouri 65806, for the following purposes:
(1) To elect one Class I Director to the Company's Board of Directors, to serve
for three years; and
(2) To consider and act upon a proposal to approve the O'Reilly Automotive,
Inc. 2003 Employee Stock Option Plan; and
(3) To consider and act upon a proposal to approve the O'Reilly Automotive,
Inc. 2003 Director Stock Option Plan; and
(4) To ratify the appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending December 31, 2003; and
(5) 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 28,
2003, 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 conduct of the meeting.
A copy of the Company's Annual Shareholders' Report for fiscal year 2002
accompanies this notice. By Order of the Board of Directors
TRICIA HEADLEY
Secretary
--------------------------------------------------------------------------------
IMPORTANT
Please VOTE by proxy card, telephone or Internet whether or not you intend to
attend the meeting.
--------------------------------------------------------------------------------
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 University Plaza Convention Center, 333 John Q.
Hammons Parkway, Springfield, Missouri 65806, on Tuesday, May 6, 2003, 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 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 26, 2003.
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 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 28, 2003, 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 Charles H. O'Reilly Jr., named herein as nominee for
Class I Director of the Company, to hold office until the annual meeting of
the Company's shareholders in 2006 and until his successor has been duly
elected and qualified; and
(2) FOR the approval of the 2003 Employee Stock Option Plan; and
(3) FOR the approval of the 2003 Director Stock Option Plan; and
(4) FOR the proposal to ratify the selection of Ernst & Young LLP as our
independent auditors for the fiscal year ending December 31, 2003; and
(5) According to their judgement on the transaction of such other business as
may properly come before the meeting or any postponements or adjournments
thereof.
The nominee has 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 person 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 28, 2003, there were 53,368,259 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 28, 2003, with
respect to each person (other than management) known to us to be the beneficial
owner of more than five percent (5%) of our outstanding shares of Common Stock.
Unless otherwise indicated, the Company believes that the beneficial owners set
forth in the table have sole voting and investment power.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership Of Class
--------------------- ---------------------- ----------
Wasatch Advisors, Inc. 5,854,204 (1) 11.0%
150 Social Hall Avenue
Salt Lake City, UT 84111
T. Rowe Price Associates, Inc. 4,842,600 (2) 9.0%
100 E. Pratt Street
Baltimore, Maryland 21202
________
(1) As reflected on such beneficial owner's Schedule 13G dated January 10,
2003, provided to the Company in accordance with the Securities Exchange
Act of 1934, as amended. Wasatch claimed sole voting power of 5,854,204, no
shared voting power, sole dispositive power of 5,854,204 shares and no
shared dispositive power.
(2) As reflected on such beneficial owner's Schedule 13G dated February 14,
2003, provided to the Company in accordance with the Securities Exchange
Act of 1934, as amended. These securities are owned by various individual
and institutional investors, to whom 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 Securities Exchange Act of 1934, 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 4,842,600 shares reported, Price Associates claimed
sole voting power of 684,900 shares, no shared voting power, sole
dispositive power of 4,842,600 shares and no shared dispositive power.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 28, 2003, the beneficial
ownership of each current Director (including the nominee 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 table have sole voting and investment power.
Amount and Nature of Percent
Name Beneficial Ownership (a) of Class
------ ------------------------- ----------
Charles H. "Chub" O'Reilly, Sr. (b) 86,475 *
Charles H. O'Reilly, Jr. (c) 1,188,558 2.2%
David E. O'Reilly (d) 2,632,979 4.9%
Lawrence P. O'Reilly (e) 1,530,818 2.9%
Rosalie O'Reilly-Wooten (f) 1,501,584 2.8%
Ted F. Wise (g) 233,821 *
Greg Henslee (h) 62,302 *
Jay D. Burchfield (i) 34,000 *
Joe C. Greene (j) 38,400 *
Paul Lederer (k) 37,500 *
James R. Batten (l) 22,387 *
All Directors and executive officers as a group
(11 persons) (m) 7,368,824 13.8%
________
*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
28, 2003 (such options being referred to hereinafter as "currently
exercisable options").
(b) The stated number of shares includes 71,000 shares held through the Charles
H. O'Reilly, Sr. Rev. Trust, 4,969 shares held in the O'Reilly Automotive
Employee Stock Purchase Plan with UMB Bank, N.A. as trustee, 3,000 shares
held by Mr. O'Reilly's wife and 7,506 shares held in the O'Reilly Employee
Savings Plus Plan with SunTrust Bank as trustee.
(c) The stated number of shares includes 708,968 shares held through the
Charles H. O'Reilly, Jr. Rev. Trust, 15,000 shares subject to currently
exercisable options and 464,590 shares controlled by Mr. O'Reilly as
trustee of a trust for the benefit of his children.
(d) The stated number of shares includes 616,554 shares held through the David
E. O'Reilly Rev. Trust, 1,908,174 shares controlled by Mr. O'Reilly as
trustee of a trust for the benefit of his children, 3,251 shares held in
the O'Reilly Employee Savings Plus Plan with SunTrust Bank as trustee and
105,000 shares subject to currently exercisable options.
(e) The stated number of shares includes 895,353 shares held through the
Lawrence P. O'Reilly Rev. Trust, 495,460 shares controlled by Mr. O'Reilly
as trustee of a trust for the benefit of his children, 5,005 shares held in
the O'Reilly Employee Savings Plus Plan with SunTrust Bank as trustee and
135,000 shares subject to currently exercisable options.
(f) The stated number of shares includes 827,690 shares held through the
Rosalie O'Reilly-Wooten Rev. Trust, 655,797 shares controlled by Ms. Wooten
as trustee of a trust for the benefit of her children, 15,000 shares
subject to currently exercisable options and 3,097 shares held in the
O'Reilly Automotive Savings Plus Plan with SunTrust Bank as trustee.
(g) The stated number of shares includes 104,726 shares held through a
revocable trust of which Ted Wise, as the sole trustee, has sole voting and
investing power, 4,095 shares held in the O'Reilly Employee Savings Plus
Plan with SunTrust Bank as trustee, 45,000 shares subject to currently
exercisable options and 80,000 shares held of record by a revocable trust
of which Mr. Wise's wife, as the sole trustee, has sole voting and
investment power.
(h) The stated number of shares includes 9,910 shares jointly owned by Mr.
Henslee and his wife, 1,810 shares held in the O'Reilly Employee Savings
Plus Plan with SunTrust Bank as Trustee, 3,082 shares held in the O'Reilly
Automotive Stock Purchase Plan with UMB Bank, N.A. as trustee and 47,500
shares subject to currently exercisable options.
3
(i) The stated number of shares includes 4,000 shares directly owned by Mr. Jay
Burchfield and 30,000 shares subject to currently exercisable options.
(j) The stated number of shares includes 8,000 shares directly owned by Mr.
Joe Greene, 400 shares owned by Mr. Greene's spouse and 30,000 shares
subject to currently exercisable options.
(k) The stated number of shares includes 17,500 shares directly owned by Mr.
Paul Lederer and 20,000 shares subject to currently exercisable options.
(l) The stated number of shares includes 579 shares owned by Mr. Batten, 2,821
shares held in the O'Reilly Employee Savings Plus Plan with SunTrust Bank
as Trustee, 237 shares awarded by the Company's Performance Incentive Plan
and 18,750 shares subject to currently exercisable options.
(m) Includes currently exercisable options to purchase a total of 431,250
shares held by the Company's Directors and executive officers as a group.
PROPOSAL 1-ELECTION OF CLASS I DIRECTOR
Information About The Nominee 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 II and Class III Directors expire in 2004 and 2005,
respectively. The Board of Directors has nominated Charles H. O'Reilly, Jr., who
is a current Class I Director, for a term expiring at the Company's annual
shareholders meeting in 2006.
The following table lists the principal occupation for at least the last
five years of the nominee 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). Charles H. O'Reilly, Sr. is the father of
Charles H. O'Reilly, Jr., Rosalie O'Reilly-Wooten, Lawrence P. O'Reilly and
David E. O'Reilly.
Service as
Director
Name Age Principal Occupation Since
----- ----- ---------------------- ----------
Nominee for Director Class I
(To Be Elected to Serve a Three-Year Term Expiring in 2006)
Charles H. O'Reilly, Jr. 63 Vice-Chairman of the Board since August 1999. Retired from active 1966
company management, February, 2002. Chairman of the Board from
March 1993 to August 1999; President and Chief Executive Officer
of the Company from 1975 to March 1993.
4
Directors Continuing in Office Class II
(Terms Expiring in 2004)
Lawrence P. O'Reilly 56 Co-Chairman of the Board since August 1999; retired from 1969
active Company management, February, 2003; 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.
Rosalie O'Reilly-Wooten 61 Retired from active Company management, February, 2002. 1980
Executive Vice President of the Company from March 1993 to
February 2002.
Joe C. Greene 67 Attorney-At-Law at Husch & Eppenberger, LLC, managing partner of 1993
the Springfield, Missouri firm of Greene & Curtis, LLP,from 1975
to 2002, Director of Bass Pro, Inc., Director of Ozarks
Coca-Cola Bottling Co., Chairman of Missouri Sports Hall of Fame,
Executive Secretary of Missouri Golf Association and Director of
Commerce Bank, N.A. in Springfield, Missouri; Mr. Greene has been
engaged in the private practice of law for more than 40 years.
Directors Continuing in Office Class III
(Terms Expiring in 2005)
David E. O'Reilly 53 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 56 President of Oklahoma City Bakery, Inc. since January 1999; 1997
Chairman of the Board and Director of Trust Company of the Ozarks
since April 1998; Director of Quest Capital Alliance, since
January 2002; Director of The Primary Care Network since January
1998; Chairman of the Board and Director of City Bancorp since
January 1997; Chairman of the Board and CEO of Boatmen's National
Bank of Oklahoma from January 1996 to January 1997; Chairman,
President and CEO of Boatmens' Bank of Southern Missouri from
April 1987 to January 1996. Mr. Burchfield's career has spanned
more than 25 years in the banking industry.
5
Paul R. Lederer 63 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: R & B, Inc., Icarz.com and Trans-Pro, Inc. Serves as
a member of the advisory boards of the following companies:
Richco, Inc. and The Wine Discount Center. Mr. Lederer had been
a Director of the Company from April 1993 to July 1997 and was
appointed again as a Director in 2001.
The Board of Directors recommends a vote "FOR" the Class I nominee.
6
Information Concerning Board of Directors
During fiscal year 2002, four meetings of the Board of Directors were held.
During such year, each Director attended 75% or more of the aggregate 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, with the exception of Charles H.
O'Reilly, Sr., who attended 50% of the aggregate of such meetings, 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 two standing committees, the Audit Committee and
the Compensation Committee. The Board of Directors expects to create a Corporate
Governance/Nominating Committee for 2003.
The Audit Committee currently consists of Messrs. Burchfield, Greene and
Lederer, each of whom are "independent" pursuant to the standards imposed by the
Nasdaq Stock Market. The Audit Committee recommends the engagement of
independent accountants, confers with the external auditors regarding the
adequacy of our financial controls and fiscal policy, and directs changes to
financial policies or procedures as suggested by the auditors. The Audit
Committee functions pursuant to a written charter, a copy of which was attached
as an appendix to the Company's 2001 proxy statement. During fiscal year 2002,
two formal Audit Committee meetings were held.
The Compensation Committee consists of Messrs. Burchfield, Greene and
Lederer. 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 2002, one Compensation Committee
meeting was held.
Compensation of Directors
The Company pays an annual fee of $10,000 to Directors who are not
employees of the Company. In addition, the Company pays non-employee Directors
$500 for each Board of Directors meeting or committee meeting attended. The
Company also reimburses Directors for out-of-pocket expenses incurred in
connection with their attendance at Board and committee meetings. Directors'
fees of $36,000 were paid during 2002.
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 10,000 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 three
non-employee directors in 2002 were granted options during the year to purchase
10,000 shares of Common Stock under the Company's Directors' Stock Option Plan
at an exercise price of $29.02 per share.
7
EXECUTIVE COMPENSATION
The following information is given for the fiscal years ended December 31,
2002, 2001 and 2000, concerning annual and long-term compensation for services
rendered to the Company and its subsidiaries for the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (other than the Chief Executive Officer) during fiscal year 2002.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
----------------------------------- -------------------------
Restricted
Stock Securities All Other
Name and Salary Bonus Other Awards Underlying Compen-
Principal Position Year ($)(a) ($) ($)(b) ($)(c) Options(#)(d) sation($)(e)
------------------ ---- -------- ------ ------ ----------- ------------- ------------
David E. O'Reilly 2002 350,000 350,000 - - - 16,987
Co-Chairman of the 2001 330,000 330,000 - - 30,000 4,835
Board and Chief 2000 312,000 312,000 - - - 13,107
Executive Officer
Lawrence P. O'Reilly 2002 210,000 210,000 - - - 12,095
Co-Chairman of the 2001 264,000 264,000 - - 25,000 4,929
Board and Chief 2000 275,000 275,000 - - - 12,945
Operating Officer
Ted F. Wise 2002 264,000 131,000 - - - 11,219
Co-President 2001 247,500 122,500 - - 30,000 5,833
2000 235,000 115,000 - - - 13,002
Greg Henslee 2002 247,000 123,000 - - - 6,957
Co-President 2001 207,500 102,500 - - 30,000 6,044
2000 167,500 82,500 20,007 9,992 - 15,727
James R. Batten 2002 134,800 35,200 23,468 11,732 - 5,805
Vice-President of 2001 128,000 32,000 - - 25,000 4,098
Finance and Chief 2000 120,000 30,000 13,334 6,666 - 5,074
Financial Officer
________
(a) Includes portion of salary deferred at named executive's election under the
Company' Profit Sharing and Savings Plan.
(b) Cash awarded under the Company's Performance Incentive Plan ("PIP").
(c) Shares awarded to Mr. Henslee under the Company's PIP include 778 shares in
fiscal year 2000, having a per share fair market value of $12.84375 on the
day awarded, for an aggregate value of $9,992. As of December 31, 2002, all
such shares had been released to Mr. Henslee and reflected as shares owned
by Mr. Henslee under the Security Ownership of Management table. Shares
awarded to Mr. Batten under PIP include (i) 356 shares in fiscal year 2002,
having a per share fair market value of $32.955 on the day awarded, for an
aggregate value of $11,732 and (ii) 519 shares in fiscal year 2000, having
a per share fair market value of $12.84375 on the day awarded, for an
aggregate value of $6,666. As of December 31, 2002, Mr. Batten owned in the
aggregate, 237 number of such shares having an aggregate value of $5,994.
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 for the year preceding the
year in which the awards are made. No dividends are paid on shares of
restricted stock.
(d) See "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values" tables for additional information with respect to these
options.
(e) "All Other Compensation" for the year ended December 31, 2002, includes (i)
Company contributions of $16,711, $11,579, $10,943, $6,837 and $5,685 to
its Profit Sharing and Savings Plan made on behalf of David E. O'Reilly,
Lawrence P. O'Reilly, Ted F. Wise, Greg Henslee and James R. Batten,
respectively, and (ii) the benefits inuring to David E. O'Reilly ($276),
Lawrence P. O'Reilly ($516), Ted F. Wise ($276), Greg Henslee ($120) and
James R. Batten ($120) from the Company's payment of certain life and
health insurance premiums, vehicle expenses, memberships and services.
8
Information as to Stock Options
No Stock Options to purchase Common Stock were granted during the 2002
fiscal year to any of the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Value
Number of of Unexercised
Unexercised In-The-Money
Number of Options Options at
Securities At FY-End(#) FY-End ($)(1)
Underlying Options Value Exercisable/ Exercisable/
Name Exercised (#) Realized ($) Unexercisable Unexercisable
----- ------------------- ------------ ------------------ -----------------
David E. O'Reilly 0 0 105,000 / 35,000 922,406 / 22,269
Charles H. O'Reilly, Jr. 0 0 15,000 / 0 0 / 0
Lawrence P. O'Reilly 0 0 105,000 / 35,000 922,406 / 22,269
Rosalie O'Reilly-Wooten 30,000 532,500 15,000 / 0 0 / 0
Ted F. Wise 0 0 45,000 / 35,000 140,006 / 22,269
Greg Henslee 0 0 47,500 / 35,000 237,138 / 22,269
James R. Batten 0 0 18,750 / 23,750 110,063 / 0
______
(1) Represents the market value of the underlying Common Stock on December 31,
2002, less the aggregate exercise price.
Employment Arrangements with Executive Officers
The Company entered into written employment agreements effective January 1,
1993, with David E. O'Reilly and Lawrence P. O'Reilly. Such agreements, which
are in substantially identical form, provide for each of the foregoing executive
officers to be employed by the Company for a minimum period of three years and
automatically renew for each calendar year thereafter. As compensation for
services rendered to the Company, the agreements provide for each executive
officer to receive (i) a base annual salary adjusted annually for increases in
the cost of living as reflected by the Consumer Price Index for All Urban
Consumers as determined by the United States Department of Labor, Bureau of
Labor Statistics, and (ii) a bonus, the amount of which is determined by
reference to such criteria as may be established by the Compensation Committee.
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.
An executive officer's employment may be terminated by the Company for
cause (as defined in the agreement) or without cause. If an executive officer's
employment is terminated for cause or if an executive officer resigns, such
executive officer's salary and bonus rights will cease on the date of such
termination or resignation. If the Company terminates an executive officer
without cause, all compensation payments will continue through the remainder of
the agreement's term. Pursuant to his or her respective agreement, each
executive officer has agreed for so long as he or she 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.
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 it subsidiaries.
9
Joe C. Greene, a Director of the Company and member of the Compensation
Committee, is a partner of the law firm of Husch & Eppenberger, LLC, and was the
Managing Partner of the law firm of Greene & Curtis, LLP, both of which have
provided legal services to the Company in prior years and is expected to provide
legal services to the Company in the future. The Company believes 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.
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 1993
Employee Stock Option Plan and the 2003 Employee Stock Option Plan. The
Compensation Committee is composed of three non-employee 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 minimum annual base salary of each of David E. O'Reilly and Lawrence P.
O'Reilly is fixed under their employment agreements with the Company, subject to
increases by the Board of Directors (after considering the recommendations of
the Compensation Committee). The base salary for each of these executive
officers was established prior to the Company's initial public offering in April
1993. The minimum annual base salary, which was set by the Board of Directors
(as then constituted) for purposes of the employment agreements with each of the
aforementioned executive officers, represented the subjective judgment of the
Board as to a fair minimum compensation level, taking into account the then
contemplated initial public offering and the potential for additional cash
compensation in the form of a bonus for 1993. Any future recommendation by the
Compensation Committee for adjustments to the annual base salary of an executive
officer will be for the purposes of bringing 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, and, in the case of executive
officers other than the Chief Executive Officer, the Chairman of the Board or
the Chief Operating Officer, reflecting increased responsibilities. 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 aforementioned
executive officers were increased in 2002 to reflect increases in the Consumer
Price Index from 2001 to 2002, increases in responsibilities due to the
Company's growth and to align executive compensation with comparable companies
and positions.
10
Bonuses
The Compensation Committee has established a bonus plan for the Chief
Executive Officer, the Chairman of the Board and the Chief Operating Officer of
the Company based upon objective criteria. Under this bonus plan, the Chief
Executive Officer, the Chairman of the Board and the Chief Operating Officer of
the Company each will receive a bonus based upon a percentage of pre-tax
earnings (with no minimum level of pre-tax earnings required), exclusive of
extraordinary items, earned by the Company, subject to a maximum cash bonus
equal to such executive officer's base salary for the year in which such bonus
is earned. The bonuses to be awarded to all other officers of the Company are
based upon each such officer's contribution, responsibility and performance
during the year, and are thus subjective in nature. In formulating its
recommendation for the bonuses of such other officers of the Company, the
Compensation Committee considers, among other things, the evaluation of the
Chief Executive Officer of the Company with regard to the contribution,
responsibility and performance of the officer in question and his views on the
appropriate compensation level of such executive officer.
Long-Term Incentives
The only long-term incentive currently offered for senior executives by the
Company is 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 individual 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 such other factors as it deems appropriate,
consistent with the Company's compensation policies. However, the Compensation
Committee has not established specific target awards governing the receipt,
timing or size of option grants. Thus, determinations with respect to the
granting of stock options are subjective in nature.
CEO Compensation
The base salary of Mr. 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 2002, based upon a percentage of the pre-tax
earnings, exclusive of extraordinary items, earned by the Company in 2001. This
cash bonus, in an amount equal to his base salary for 2002, was paid to the
Chief Executive Officer in equal monthly installments during 2002. The cash
bonus to be paid to the Chief Executive Officer in 2003 will be based upon the
same percentage of pre-tax earnings, exclusive of extraordinary items, earned by
the Company in 2002, not to exceed the Chief Executive Officer's base salary for
2003.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS OF
O'REILLY AUTOMOTIVE, INC.
Jay D. Burchfield
Chairman of the Compensation Committee
Joe C. Greene
Member of the Compensation Committee
Paul. R Lederer
Member of the Compensation Committee
11
Audit Committee Report
In connection with the December 31, 2002 financial statements, the Audit
Committee has:
o reviewed and discussed with management the Company's audited financial
statements as of and for the fiscal year ended December 31, 2002; 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 auditors required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and have discussed with the auditors the
auditors' independence.
Based on the reviews and discussions referred to above, the Audit Committee
has 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, 2002.
THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF
O'REILLY AUTOMOTIVE, INC.
Jay D. Burchfield
Chairman of the Audit Committee
Joe C. Greene
Member of the Audit Committee
Paul R. Lederer
Member of the Audit Committee
Transactions with Insiders and Others
Seventy of the Company's stores are leased 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. Leases with affiliated parties 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 Company has entered into separate master lease agreements with each
of the affiliated real estate investment partnerships and the limited liability
company for the occupancy of the stores covered thereby. The master lease
agreements with the real estate investment partnerships expired on December 31,
1998, and were renewed through December 2004. The term of the master lease with
the limited liability company expires on December 31, 2013. The total aggregate
rent payments paid by the Company to the partnerships and the limited liability
company was $3,222,000 in fiscal 2002. 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.
12
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,
1997, 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
--------------------- ---------------- ------------ ------------
12/97 100 100 100
12/98 180 141 122
12/99 164 261 107
12/00 204 157 65
12/01 278 125 91
12/02 193 86 77
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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. Based on the Company's review of
the copies of such forms furnished to it and written representations with
respect to the timely filing of all reports required to be filed, the Company
believes that such persons complied with all Section 16(a) filing requirements
applicable to them with respect to transactions during fiscal 2002 with two
exceptions. Mr. Greene made a direct purchase of the Company's stock in October
2002 that was not reported until November 2002. Mr. Batten was awarded a stock
option in June 2001 that was not reported until February 2003.
PROPOSAL 2 - APPROVAL OF THE O'REILLY AUTOMOTIVE, INC.
2003 EMPLOYEE STOCK OPTION PLAN
The Company's Board of Directors is submitting for shareholder approval the
O'Reilly Automotive, Inc., 2003 Employee Stock Option Plan (the "Employee
Plan"), approved and adopted by the Board of Directors on February 13, 2003.
13
Purposes Of the Employee Plan
The principal purposes of the Employee Plan are to provide a means whereby
certain key employees of the Company may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company and
its subsidiaries and to encourage the key employees to remain with and devote
their best efforts to the business of the Company and its subsidiaries, thereby
advancing the interests of the Company and its shareholders. This plan is
replacing the 1993 Employee Stock Option Plan that is to expire in 2003. The
features of both plans are the same in all material respects.
Summary Of the Employee Plan
The principal features of the Employee Plan are summarized below, but the
summary is qualified in its entirety by reference to the Employee Plan itself,
which is included as Appendix B.
Shares Available to be Issued under the Employee Plan. Under the Employee
Plan, an aggregate of 4,000,000 shares of Common Stock, plus any shares that may
be available under the 1993 Employee Stock Option Plan upon its expiration, may
be issued upon the exercise of options. Options to purchase no more than
1,000,000 shares of Common Stock may be granted to any one individual during any
calendar year. The shares of Common Stock available under the Employee Plan upon
exercise of stock options may be either previously authorized and unissued
shares or treasury shares. The Employee Plan provides for appropriate
adjustments in the number and kind of shares subject to the Employee Plan and to
outstanding grants thereunder in the event of a stock split, stock dividend and
certain other types of transactions, including restructurings. If any portion of
an option expires or is canceled without having been fully exercised under the
Employee Plan, the shares that were subject to the unexercised portion of such
option will continue to be available for issuance under the Employee Plan.
Administration. The Employee Plan is administered by the Company's
Compensation Committee (the "Committee"). The Committee consists solely of
members of the Board who are both "non-employee" directors as defined in Rule
16b-3 of the Securities Exchange Act of 1934 and "outside directors" for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended. The
Committee is authorized to determine, consistent with the Employee Plan, the
individuals eligible to participate in the Employee Plan, the number, exercise
price and other terms and conditions of each award to employees who are eligible
under the Employee Plan. The Committee is also authorized to adopt, amend and
rescind rules relating to the administration of the Employee Plan.
Eligibility; Awards under the Employee Plan. Key employees, are eligible to
receive options under the Employee Plan. The Committee is authorized to
determine which employees are key employees and to select from among the key
employees the individuals to whom options are to be granted and to determine the
number of shares to be subject thereto and the terms and conditions thereof,
consistent with the Employee Plan. Each option grant will be evidenced by an
option agreement that specifies the exercise price, the duration of the option,
the number of shares to which the option pertains, the vesting schedule, and
such other provisions as the Committee may determine. In addition, the option
agreement will specify whether the option was intended to be an incentive stock
option or a non-qualified stock option. The exercise price must not be less than
the market value of a share of the Company's Common Stock on the date of grant.
The duration of an option granted under the Employee Plan may not exceed ten
years.
Payment for Shares. The exercise price for all options and the tax required
to be withheld upon exercise (a) may be paid in full in cash at the time of
exercise, (b) may be paid, with the approval of the Committee, in whole or in
part in Common Stock owned by the optionee or issuable to the optionee upon
exercise of an option and having a fair market value on the date of exercise
equal to the aggregate exercise price of the shares to be purchased plus the tax
required to be withheld, or, (c) may be paid, with the approval of the
Committee, pursuant to a cashless exercise procedure. However, in no event will
an optionee be allowed to exercise an option with a loan from the Company if it
is prohibited by law. The Committee may also authorize a combination of these
forms of consideration.
14
Amendment and Termination. Generally, the Board of Directors may, at any
time amend or terminate the Employee Plan without approval of the participants
or the Company's shareholders. However, the Employee Plan requires the Board of
Directors to get shareholder approval of an amendment that would (a) materially
increase or decrease the benefits accruing to the participants under the
Employee Plan, (b) increase or decrease the number of shares that may be issued
under the Employee Plan, or (c) materially modify the eligibility requirements.
The Committee may waive any conditions of or rights of the Company or modify or
amend the terms of any outstanding option consistent with the terms of the
Employee Plan. The Committee generally may not, however, amend, alter, suspend,
discontinue or terminate any outstanding option without the consent of the
holder of the option.
Unless previously terminated by the Board of Directors, the Employee Plan
will remain in effect for ten years following the approval of the Employee Plan
by the Company's shareholders, after which no additional options may be granted
under the Employee Plan.
Change in Control. In the event of a dissolution or liquidation of the
Company, or a merger or consolidation of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, the
Employee Plan shall terminate on the day before the consummation of the
transaction. In this situation, the Committee may accelerate the time in which
any options granted under the Employee Plan may be exercised. The Employee Plan
will not terminate, however, if the successor entity provides for such options
in writing in a manner acceptable to the Committee.
Miscellaneous. The option agreements generally provide that options may
continue to be exercisable for a period of time following the optionee's
termination, retirement, death or disability. Options granted under the Employee
Plan may not be assigned or transferred by the optionee, (except for transfer to
beneficiaries designated in accordance with the individual agreements embodying
the awards.)
Certain Federal Income Tax Consequences
The current federal income tax consequences of the Employee Plan are
summarized in the following discussion. This discussion addresses only the
general tax principles applicable to the Employee Plan, and is intended for
general information only. Alternative minimum tax and other federal taxes, as
well as foreign, state and local income taxes are not discussed, and may vary
depending on individual circumstances and from locality to locality.
Under current federal income tax laws, options under the Employee Plan will
have the following federal income tax consequences:
o The grant of an option will not, by itself, result in the recognition of
taxable income to the participant or entitle the Company to a deduction at
the time of grant.
o If a participant exercises an incentive stock option, the exercise of the
option will generally not, by itself, result in the recognition of taxable
income by the participant or entitle the Company to a deduction at the time
of exercise. However, the difference between the exercise price and the
fair market value of the shares of Common Stock acquired on the date of
exercise is an item of adjustment included for purposes of calculating the
participant's alternative minimum tax.
o If a participant does not hold the shares of Common Stock acquired upon
exercise of an incentive stock option for at least one year after the
exercise of the option or two years after the grant of the option,
whichever is later, the participant will recognize ordinary income or loss
upon disposition of the shares in an amount equal to the difference between
the exercise price and the fair market value of the shares on the date of
exercise of the option. If this happens, the Company will be entitled to a
corresponding deduction in the amount of ordinary income, if any, that the
participant recognizes. The participant also will recognize a capital gain
or loss in an amount equal to the difference, if any, between the sale
price and the fair market value of the shares of Common Stock on the date
of exercise of the option. The capital gain or loss will be characterized
as short-term if the participant does not hold the shares for more than one
year after the exercise of the option and long-term if the participant does
hold the shares for more than one year after the exercise of the option.
The Company will not be entitled to a corresponding deduction for the
capital gain or loss.
o If the participant holds the shares of Common Stock acquired upon exercise
of an incentive stock option for one year after the option is exercised and
two years after the option is granted, the participant will recognize a
capital gain or loss upon disposition of the shares in an amount equal to
the difference between the sale price and the exercise price. The Company
will not be entitled to a corresponding deduction for the capital gain or
loss.
o If a participant exercises a non-qualified stock option, he or she will
recognize ordinary income on the date of exercise in an amount equal to the
difference between the exercise price and the fair market value on the date
of exercise of the shares of Common Stock acquired pursuant to the
exercise. The Company will be allowed a deduction in the amount of any
ordinary income recognized by the participant upon exercise of the option.
When the participant sells the shares acquired upon exercise of a
non-qualified stock option, he or she will recognize a capital gain or loss
equal to the amount of any appreciation or depreciation in value of the
shares from the time of exercise. The Company will not be entitled to a
corresponding deduction for the capital gain or loss. The capital gain or
loss will be short-term if the participant does not hold the shares for
more than one year after the exercise of the option and long-term if the
participant does hold the shares for more than one year after the exercise
of the option.
15
Under Code Section 162(m) of the Code, in general, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, and income from stock option exercises)
for certain executive officers exceeds $1 million in any one taxable year.
However, under Code Section 162(m), the deduction limit does not apply to
certain "performance-based" compensation established by an independent
compensation committee which conforms to certain restrictive conditions stated
under the Code and related regulations. The Employee Plan has been structured
with the intent that options granted under the Employee Plan may meet the
requirements for "performance-based" compensation under Code Section 162(m).
Options Under the Employee Plan
As of the date of this proxy statement, no options have been granted under
the 2003 Employee Stock Option Plan.
16
Securities Authorized For Issuance Under Equity Compensation Plans
The following table sets forth certain information with respect to the
Company's equity compensation plans (all of which were approved by the Company's
shareholders except as noted below) as of December 31, 2002:
Equity Compensation Plan Information
Weighted-Average Number of Securities
Number of Securities to Exercise Price of Remaining Available
be Issued Upon Exercise Outstanding for Future Issuance
Equity compensation plans approved by the of Outstanding Options, Options, Warrants Under Equity
Company's shareholders: Warrants and Rights and Rights Compensation Plans (1)
------------------------- ------------------------ ------------------ ----------------------
O'Reilly Automotive, Inc. 1993 Employee
Stock Option Plan (2)................... 3,532,565 $22.75 1,181,400
O'Reilly Automotive, Inc. 1993 Director
Stock Option Plan....................... 80,000 $23.17 80,000
O'Reilly Automotive, Inc. Performance
Incentive Plan.......................... 0 $ 0 367,865
O'Reilly Automotive, Inc. Stock Purchase
Plan.................................... 0 $ 0 260,728
-------------------------- -- -------------------- -- -----------------------
Total.............................. 3,612,565 $22.78 1,889,993
========================== ==================== =======================
_______
(1) Excludes securities to be issued upon the exercise of outstanding options,
warrants and rights.
(2) The plan was amended in May 2001 by the Company's Board of Directors to
increase the number of authorized shares by two million shares. The
amendment was not approved by the Company's shareholders.
Approval of the Employee Plan
Approval of The Employee Stock Option Plan requires the affirmative vote of
the holders of a majority of the shares of the Company's Common Stock
represented and entitled to vote on the matter at the Meeting.
The Board of Directors recommends that you vote "FOR" approval of the O'Reilly
Automotive, Inc. 2003 Employee Stock Option Plan.
PROPOSAL 3 - APPROVAL OF THE O'REILLY AUTOMOTIVE, INC.
2003 DIRECTOR STOCK OPTION PLAN
The Company's Board of Directors is submitting for shareholder approval the
O'Reilly Automotive, Inc., 2003 Director Stock Option Plan (the "Director
Plan"), approved and adopted by the Board of Directors on February 13, 2003.
Purposes Of the Director Plan
The principal purposes of the Director Plan are to provide further
inducement to qualified persons to become and remain directors of the Company
and to increase the proprietary interest of the Company's directors in the
business of the Company, thereby furthering the interest of the Company and its
shareholders. This plan is replacing the 1993 Director Stock Option Plan that is
to expire in 2003. The features of both plans are the same in all material
respects.
17
Summary Of the Director Plan
The principal features of the Director Plan are summarized below, but the
summary is qualified in its entirety by reference to the Director Plan itself,
which is included as Appendix C.
Shares Available to be Issued under the Director Plan. Under the Director
Plan, an aggregate of 200,000 shares of Common Stock, plus any shares that may
be available under the 1993 Director Stock Option Plan upon its expiration, may
be issued upon the exercise of options. The shares of Common Stock available
under the Director Plan upon exercise of stock options may be either previously
authorized and unissued shares or treasury shares. The Director Plan provides
for appropriate adjustments in the number and kind of shares subject to the
Director Plan and to outstanding grants thereunder in the event of a stock
split, stock dividend and certain other types of transactions, including
restructurings. If any portion of an option expires or is canceled without
having been fully exercised under the Director Plan, the shares that were
subject to the unexercised portion of such option will continue to be available
for issuance under the Director Plan.
Administration. The Director Plan is administered by the Company's
Compensation Committee (the "Committee"). The Committee consists solely of
members of the Board who are "non-employee" directors as defined in Rule 16b-3
of the Securities Exchange Act of 1934. Subject to the provisions of the
Director 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 Director Plan.
Eligibility; Awards under the Director Plan. The Director Plan provides for
the granting of options to purchase Common Stock to each member of the Board of
Directors who is not an employee of the Company. The amount, timing and other
material terms of the options are fixed under the Director Plan. Each
non-employee director who is serving on the Board of Directors as of the date
immediately following the 2003 Annual Meeting of Shareholders will receive an
option to purchase 10,000 shares of Common Stock. On the date following each
annual meeting of shareholders, each non-employee director then serving on the
Board will receive an option to purchase 10,000 shares of Common Stock. The
exercise price of each option granted under the Director Plan will be equal to
the fair market value of the underlying shares as of the grant date of such
option. The ordinary term of each option granted under the Director plan is
seven years, but the option may terminate sooner if the non-employee director
ceases to serve on the Board. The Director Plan also permits additional options
to be granted from time to time upon approval by the full Board.
Payment for Shares. The exercise price for all options and the tax required
to be withheld upon exercise (a) may be paid in full in cash at the time of
exercise, (b) may be paid, with the approval of the Committee, in whole or in
part in Common Stock owned by the director or issuable to the director upon
exercise of an option and having a fair market value on the date of exercise
equal to the aggregate exercise price of the shares to be purchased plus the tax
required to be withheld, or, (c) may be paid, with the approval of the
Committee, pursuant to a cashless exercise procedure. However, in no event will
an director be allowed to exercise an option with a loan from the Company if it
is prohibited by law. The Committee may also authorize a combination of these
forms of consideration.
Amendment and Termination. Generally, the Board of Directors may, at any
time amend or terminate the Director Plan without approval of the participants
or the Company's shareholders. However, the Committee may not amend, alter,
suspend, discontinue or terminate any outstanding option without the consent of
the holder of the option, adopt an amendment requiring shareholder approval in
order to meet the requirements of Rule 16b-3 or amend the amount, price and
timing of awards more than once every six months except to comply with certain
changes in law.
Change in Control. In the event of a dissolution or liquidation of the
Company, or a merger or consolidation of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, the
Director Plan shall terminate on the day before the consummation of the
transaction. In this situation, the Committee may accelerate the time in which
any options granted under the Director Plan may be exercised. The Director Plan
will not terminate, however, if the successor entity provides for such options
in writing in a manner acceptable to the Committee.
18
Miscellaneous. The options are exercisable immediately upon grant and
continue to be exercisable for a period of time following the retirement, death
or disability of the director. Options granted under the Director Plan may not
be assigned or transferred by the director, except for transfer to beneficiaries
designated in accordance with the individual agreements embodying the awards.
Federal Income Tax Consequences
The Company has been advised that the following are the federal income tax
consequences of the Director Plan. The granting of an option in accordance with
the terms of the Director Plan will not result in taxable income to the
non-employee director or a deduction in computing the income tax of the Company.
Upon exercise of an option, the excess of the fair market value of the shares
acquired over the exercise price is (a) taxable to the non-employee director as
ordinary income and (b) generally deductible in computing the Company's income
tax.
Options Under the Director Plan
As of the date of this proxy statement, no options have been granted under
the Director Plan.
Approval of the Director Plan
Approval of the Director Plan requires the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock represented and
entitled to vote on the matter at the Meeting.
The Board of Directors recommends that you vote "FOR" approval of the O'Reilly
Automotive, Inc. 2003 Director Stock Option Plan.
PROPOSAL 4 - 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, 2003, 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.
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 stockholders 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 stockholders.
19
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, 2002:
2002 2001
------------ ------------
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............... $ 212,000 $ 207,000
Financial Information Systems Design and Implementation Fees:
There were no financial information systems design and
implementation services provided to the Company in fiscal 2002.... $ 0 $ 0
All Other Fees:
Tax Advisory
Consists of fees billed for tax advisory services, including
compliance and planning.......................................... $ 323,500 $ 226,000
Audit Related
Consists of fees and expenses billed for the annual audit of the
Company's employee benefit plan and the due diligence in
connection with acquisitions related services, merger and
acquisition related services, and employee benefit plan audits.... $ 8,500 $ 25,500
Total All Other Fees............................................... $ 332,000 $ 251,500
Total All Fees..................................................... $ 544,000 $ 458,500
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 votes attached to
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 fiscal year
ending December 31, 2003.
20
ANNUAL SHAREHOLDERS' REPORT
The Annual Shareholders' Report of the Company for fiscal 2002 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 2004 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 26,
2003. 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, 2004, and not earlier than January 19,
2004.
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.
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 the
Company has 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.
21
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002, 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 schedules (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 26, 2003
22
A-18
APPENDIX A
O'Reilly Automotive, Inc.
Form of Proxy (Proxy Card)
PROXY
O'REILLY AUTOMOTIVE, INC.
Annual Meeting of Shareholders - Tuesday, May 6, 2003
(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 28,
2003, at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
May 6, 2003, 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 acknowldged.
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 ACTION OR PROPOSAL.
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 Withold For All To withold authority to
All All Except vote, mark "For All
Except" and write the
nominee's number on the
line below.
___ ___ ___ _______________________
1. Proposal to elect Class I Director (three-year term).
01) Charles H. O'Reilly, Jr.
Vote On Proposals For Against Abstain
2. Approval of the 2003 Directors Stock
Option Plan ___ ___ ___
3. Approval of the 2003 Employee Stock
Option Plan ___ ___ ___
4. Approval of Independent Auditors ___ ___ ___
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 [PLEASE SIGN WITHIN BOX] Date
APPENDIX B
O'REILLY AUTOMOTIVE, INC.
2003 EMPLOYEE STOCK OPTION PLAN
I. Purpose of the Plan.
The O'Reilly Automotive, Inc. 2003 Employee Stock Option Plan (the "Plan")
is intended to provide a means whereby certain key employees of O'Reilly
Automotive, Inc., a Missouri corporation (the "Company"), may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company and its subsidiaries, and to encourage them to remain with and
devote their best efforts to the business of the Company and its subsidiaries,
thereby advancing the interests of the Company and its shareholders.
Accordingly, the Company may make awards to certain employees in the form of
stock options ("Options") with respect to shares of the Company's common stock,
par value $0.01 per share (the "Stock"). Options may either be nonqualified
stock options ("Nonqualified Options") or options ("Incentive Stock Options")
that are intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
II. Administration.
(a) Committee Composition. The Plan shall be administered by a committee of the
Board of Directors of the Company (the "Board") consisting of not less than
two members of the Board as the Board may appoint (the "Committee"). The
members of the Committee shall be "Non-Employee Directors" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), and "outside directors" as defined under
Section 162(m) of the Code; provided, however, that noncompliance with such
qualifications shall not invalidate any grants of Options 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 in office
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 mat take any action under the Plan that
would otherwise be the responsibility of the Committee.
(b) Committee Authority. The Committee shall have the sole authority to: (i)
determine the terms and provisions of the Option agreements (the
"Agreements") entered into under the Plan; (ii) prepare and distribute, in
such manner as the Committee determines to be appropriate, information
about the Plan; and (iii) make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee may vary the
terms and provisions of the individual Agreements in its discretion.
Further, the Committee shall have authority to grant options and to
determine the exercise price of the Stock covered by each Option, the terms
and duration of each Option, the key employees to whom, and the times at
which, Options shall be granted, whether the Option shall be a Nonqualified
Option or an Incentive Stock Option and the number of shares to be covered
by each Option. Notwithstanding the foregoing, the Committee shall not have
the authority to make any determination that would be inconsistent with the
requirements, restrictions, prohibitions or limitations specified in the
Plan.
(c) Day-to-Day Administration. The day-to-day administration of the Plan may be
carried out by such officers and employees of the Company as shall be
designated from time to time by the Committee. 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.
B-1
III. Shares Subject to the Plan.
The aggregate number of shares that may be issued under the Plan shall not
exceed 4,000,000 shares of Stock plus all shares authorized under the 1993
Employee Stock Option Plan not covered by an option on the date such plan
expires. No more than 1,000,000 shares of Stock may be subject to Options that
are intended to be "performance-based compensation" (as that term is used for
purposes of Section 162(m) of the Code) granted to any one individual during any
calendar year, regardless of when such shares are deliverable. The shares of
Stock issuable under the Plan may consist of authorized but unissued shares of
Stock or previously issued shares of Stock reacquired by the Company. Any of
such shares that remain unsold and that are not subject to outstanding Options
at the termination of the Plan shall cease to be subject to the Plan, but until
termination of the Plan and the expiration of all Options granted under the
Plan, the Company shall at all times make available a sufficient number of
shares to meet the requirements of the Plan and the outstanding Options. If any
Option, in whole or in part, expires or terminates unexercised or is cancelled
or forfeited, the shares theretofore subject to such Option may again be subject
to an Option granted under the Plan. The aggregate number of shares that may be
issued under Options granted under the Plan and any maximums set forth in this
Plan shall be subject to adjustment as provided in Article V hereof. The
issuance of Stock pursuant to the exercise of an Option shall result in a
decrease in the number of shares of Stock that may thereafter be available for
purposes of the Plan by the number of shares as to which the Option is exercised
or cancelled.
IV. Grants of Options.
(a) Type and Number. Options granted under the Plan shall be of such type
(Nonqualified Option or Incentive Stock Option) and for such number of
shares of Stock and subject to such terms and conditions as the Committee
shall designate. The Committee may grant Options at any time and from time
to time through, but not after, May 6, 2013, to any individual eligible to
receive the same. For purposes of the Plan, the date on which an Option is
granted is referred to herein as the "Grant Date."
(b) Option Agreement. Options granted pursuant to the Plan shall be evidenced
by Agreements that shall comply with and be subject to the terms and
conditions set forth in this Section IV and may contain such other
provisions, consistent with the Plan, as the Committee shall deem
advisable. Each Agreement shall state the total number of shares of Stock
that are subject to the Option. References herein to "Agreements" shall
include, to the extent applicable, any amendments to such Agreements.
(c) Persons Eligible to Receive Options.
(i) Only key employees of the Company or its subsidiaries shall be
eligible to receive Options under the Plan. In granting Options to an
employee, the Committee shall take into consideration the contribution
the employee has made or may make to the success of the Company or its
subsidiaries and such other considerations as the Committee shall
determine. The Committee shall also have the authority to consult with
and receive recommendations from officers and other employees of the
Company and its subsidiaries with regard to these matters. In no event
shall any employee, his legal representatives, heirs, legatees,
distributees, or successors have any right to participate in the Plan,
except to such extent, if any, as the Committee shall determine.
(ii) Options may be granted under the Plan from time to time in
substitution for stock options and stock appreciation rights granted
by other corporations (the "Acquired Corporation") to their employees
who become key employees of the Company or of any of its subsidiaries
as a result of a merger or consolidation of the Acquired Corporation
with the Company or any such subsidiary, or the acquisition by the
Company or a subsidiary of all or substantially all of the assets of
the Acquired Corporation or the acquisition by the Company or a
subsidiary of stock of the Acquired corporation.
B-2
(d) Exercise Price.
(i) The exercise price of each share of Stock covered by each Option
("Exercise Price") shall not be less than one hundred percent (100%)
of the Market Value Per Share (as defined below) of the Stock on the
date the Option is granted; provided, however, if and when an
Incentive Stock Option is granted and the employee receiving the
Incentive Stock Option owns or will be considered to own by reason of
Section 424(d) of the Code more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (a "10%
Shareholder"), the Exercise Price of the Stock covered by such
Incentive Stock Option shall not be less than one hundred and ten
percent (110%) of the Market Value Per Share of the Stock on the Grant
Date of the Incentive Stock Option.
(ii) "Market Value Per Share" of the Stock shall mean: (A) if the Stock is
not publicly traded, the amount determined by the Committee on the
date of the grant of the Option; (B) if the Stock is traded only
otherwise than on a securities exchange and is not quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the closing quoted selling price of the Stock on the date
of grant of the Option as quoted in "pink sheets" published by the
National Daily Quotation Bureau; (C) 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 the date of grant of the
Option, as reported by the Wall Street Journal; or (D) if the Stock is
admitted to trading on a securities exchange, the closing quoted
selling price of the Stock on the date of grant of the Option, as
reported in the Wall Street Journal.
(e) Exercisability of Options.
(i) An Option may be exercisable in installments or otherwise upon such
terms as the Committee shall determine when the Option is granted. The
Committee may fix such waiting and/or vesting periods, exercise dates
or other limitations as it shall deem appropriate with respect to
Options granted under the Plan including, without limitation, making
the exercisability thereof contingent upon the achievement of specific
goals. 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.
(ii) 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 Nonqualified Option; (B) in the case of a
Nonqualified Option, may permit the transferability of such Option and
may remove any restrictions or conditions to which a Nonqualified
Option is subject; and (C) subject to the consent of the optionee, may
convert an outstanding Incentive Stock Option to a Nonqualified Option
if it deems such conversion to be in the best interest of the
optionee.
(iii)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 Act,
unless the optionee pays the Company the amount of such "short-swing
profits" at the time of the exercise of the Option.
(iv) To the extent that the aggregate Market Value Per Share (determined at
the Grant Date) of Stock with respect to which Incentive Stock Options
(determined without regard to this sentence) are exercisable for the
first time by any individual during any calendar year (under all plans
of the Company and its subsidiaries) exceeds One Hundred Thousand
Dollars ($100,000), such excess portion of such Incentive Stock
Options shall be treated as Nonqualified Options (this sentence shall
be applied by taking Incentive Stock Options into account in the order
in which they were granted).
(f) Method of Exercise and Payment of Exercise Price.
(i) Options may be exercised by giving written notice to the Company
stating the number of shares for which the Option is being exercised,
accompanied by payment in full of the Exercise Price relating to the
shares with respect to which the Option is so exercised.
B-3
(ii) The full Exercise Price for the shares with respect to which the
Option is being exercised shall be payable to the Company: (A) in cash
or by check payable and acceptable to the Company; (B) subject to the
approval of the Committee, by tendering to the Company shares of Stock
owned by the optionee having an aggregate 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 (A)
above; or (C) 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 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;
provided, however, that in the case of an Incentive Stock Option, (B)
and (C) above shall apply only if Committee approval is given on or
prior to the Grant Date and the Agreement expressly provides for such
optional payment terms. In the event that the optionee elects to make
payment as allowed under clause (B) above, the Committee may, upon
confirming that the optionee owns the number of shares of 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 Stock being tendered upon the exercise. Payment instruments
will be received subject to collection.
(iii)Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of 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
of 1933, as amended), and the applicable requirements of any
securities exchange, the NASDAQ or similar entity. If the employee
fails to timely accept delivery of and pay for the shares specified in
such notice, the Committee shall have the right to terminate the
Option with respect to such shares.
(g) Term.
(i) The term of each Option shall be determined by the Committee at the
Grant Date; provided, however, that each Option shall, notwithstanding
anything in the Plan or any Agreement to the contrary, expire not more
than ten years (five years with respect to an Incentive Stock Option
granted to an employee who is a 10% Shareholder) from the Grant Date
or, if earlier, the date specified in the Agreement.
(ii) In the event an individual's employment with the Company and its
subsidiaries shall terminate for reasons other than: (i) retirement in
accordance with the terms of a retirement plan of the Company or one
of its subsidiaries ("Retirement"); (ii) permanent disability (as
defined in Section 22(e)(3) of the Code); or (iii) 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.
(iii)If any termination of employment is due to Retirement or permanent
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 the
Agreements, if the termination of employment is due to retirement, and
such retiring individual at the time of his or her retirement (A) is
at least fifty-five (55) years of age, and (B) 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).
B-4
(iv) Whether any termination of employment is due to Retirement or
permanent 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.
(v) 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 following the date of the optionee's death,
to the extent that the optionee was entitled to exercise the same on
the day immediately prior to the optionee's death.
(vi) The right of an individual to exercise an Option shall terminate to
the extent that such Option is exercised.
V. Corporate Transactions and Adjustment.
(a) Effect on Corporate Actions. The existence of the Plan and the Options
granted hereunder shall not affect in any way the right or power of the
Board of Directors 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 or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding.
(b) Adjustment. The shares with respect to which Options 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 reorganization, merger, recapitalization, reclassification,
stock dividend, stock split, combination of shares or other similar
transaction, the aggregate number of shares of Stock subject to the Plan
and any maximums set forth in Section III hereof, and the shares of Stock
subject to issued and outstanding Options under the Plan shall be
appropriately and proportionately adjusted by the Committee. Any such
adjustment in an outstanding Option shall be made without change in the
aggregate Exercise Price applicable to the unexercised portion of the
Option but with an appropriate adjustment in the price for each share or
other unit of any security covered by the Option.
(c) No Adjustment Upon Issuance of Securities. 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 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.
(d) Final Determination. Adjustments under this Section 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) Automatic Termination of Plan and Options. Notwithstanding anything to the
contrary contained in this Section V, 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 Options
may be exercised prior to such a termination. However, the termination of
such Options 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 Options, (B) the
substitution for such Options 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 Options 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 Options.
B-5
VI. Term of Plan.
No Option shall be granted pursuant to the Plan after ten (10) years
from the earlier of the date of adoption of the Plan by the Board of the
Company or the date of approval by the Company's shareholders.
Notwithstanding the foregoing, if a longer term is permitted with respect
to the duration of an incentive stock option plan under law, the Board may
extend the term of this Plan to a term not to exceed the longest term
permitted with respect to an incentive stock option plan.
VII. Amendment and Termination of Plan.
(a) Authority to Amend and Terminate. The Board may, from time to time, with
respect to any shares at the time not subject to Options, suspend or
terminate the Plan or amend or revise the terms of the Plan; provided that
any amendment to the Plan shall be approved by a majority of the
shareholders of the Company if the amendment would (i) materially increase
or decrease the benefits accruing to participants under the Plan; (ii)
increase or decrease the number of shares of Stock which may be issued
under the Plan, except as permitted under the provisions of Section V
above; or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) Consent of Optionholder Required. Subject to the provisions in Section V
above, no amendment, suspension or termination of this Plan shall, without
the consent of the optionee, alter or impair any rights or obligations
under any Option granted to such optionee under the Plan.
VIII. Effective Date of Plan.
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.
IX. Preemption by Applicable Laws and Regulations.
Anything in the Plan or any 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 Stock, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require either
the Company or the optionee (or the optionee'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.
X. Miscellaneous.
(a) Taxes and Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of
the applicable withholding obligations. The Committee, in its discretion,
and subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, may permit such withholding obligations to
be satisfied through cash payment by the optionee, through the surrender of
shares of Stock that the optionee already owns, or through the surrender of
shares of Stock to which the optionee is otherwise entitled under the Plan.
(b) No Employment Contract. Nothing contained in the Plan shall be construed as
conferring upon any optionee the right to continue in the employ of the
Company or any of its subsidiaries.
(c) Employment with Subsidiaries. Employment by the Company for the purpose of
this Plan shall be deemed to include employment by, and to continue during
any period in which an employee is in the employment of, any subsidiary.
B-6
(d) No Rights as a Shareholder. An optionee shall have no rights as a
shareholder with respect to shares covered by such optionee's Option until
the date of the issuance of shares to the optionee upon the optionee's
exercise of the Option. No adjustment will be made for dividends or other
distributions or rights for which the record date is prior to the date of
such issuance.
(e) No Right to Corporate Assets. Nothing contained in the Plan shall be
construed as giving any optionee, such optionee's beneficiaries or any
other person any equity or other interest of any kind in any assets of the
Company or any subsidiary or creating a trust of any kind or a fiduciary
relationship of any kind between the Company or any subsidiary and any such
person. Any optionee shall have only a contractual right to shares of Stock
as set forth in the Agreement, unsecured by any assets of the Company or
any subsidiary, and nothing contained in the Plan shall constitute a
guarantee that the assets of the Company or any subsidiary shall be
sufficient to pay any benefits to any person.
(f) No Restriction on Corporate Action. Nothing contained in the Plan shall be
construed to prevent the Company or any subsidiary from taking any
corporate action that is deemed by the Company or such subsidiary to be
appropriate or in its best interests, whether or not such action would have
an adverse effect on the Plan or any Option made under the Plan. No
optionee, beneficiary or other person shall have any claim against the
Company or any subsidiary as a result of any such action.
(g) Limitations on Transfer. Except as designated by the optionee by will or by
the laws of descent and distribution, neither an optionee nor an optionee's
beneficiary shall have the power or right to sell, exchange, pledge,
transfer, assign or otherwise encumber or dispose of such optionee's or
beneficiary's interest arising under the Plan or any Option received under
the Plan, nor shall such interest be subject to seizure for the payment of
an Optionee's or beneficiary's debts, judgments, alimony, or separate
maintenance or be transferable by operation of law in the event of an
optionee's or beneficiary's bankruptcy or insolvency and to the extent any
such interest arising under the Plan or an Option received under the Plan
is awarded to a spouse pursuant to any divorce proceeding, such interest
shall be deemed to be terminated and forfeited notwithstanding any vesting
provisions or other terms herein or in the agreement evidencing such
Option.
(h) Application of Funds. The proceeds received by the Company from the sale of
shares of Stock pursuant to the Plan shall be used for general corporate
purposes.
(i) Elections in Writing. Unless otherwise specified herein, each election
required or permitted to be made by any optionee or other person entitled
to benefits under the Plan, and any permitted modification, or revocation
thereof, shall be in writing at such times, in such form, and subject to
such restrictions and limitations, not inconsistent with the terms of the
Plan, as the Committee shall require.
(j) Governing Law; Construction. All rights and obligations under the Plan
shall be governed by, and the Plan shall be construed in accordance with,
the laws of the State of Missouri without regard to the principles of
conflicts of laws. Titles and headings to Sections herein are for purposes
of reference only, and shall in no way limit, define or otherwise affect
the meaning or interpretation of any provisions of the Plan.
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APPENDIX C
O'REILLY AUTOMOTIVE, INC.
2003 DIRECTOR STOCK OPTION PLAN
I. Establishment and Purpose.
O'Reilly Automotive, Inc. hereby establishes a stock option plan to be
named the 2003 O'Reilly Automotive, Inc. Director Stock Option Plan. The purpose
of the Plan is 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 shares of Stock
upon the exercise of Options granted hereunder in return for services rendered
by them to the Company, thereby increasing such Eligible Directors' proprietary
interest in the business of 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) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
(d) "Committee" means the Committee of the Board consisting of not less than
two members of the Board as the Board may appoint.
(e) "Company" means O'Reilly Automotive, Inc., a corporation organized and
existing under the laws of the State of Missouri.
(f) "Eligible Director" means a director of the Company who is not otherwise an
officer or employee of the Company or of any subsidiary thereof.
(g) "Fair Market Value" of the Stock shall mean: (A) if the Stock is not
publicly traded, the amount determined by the Committee on the date of the
grant of the Option; (B) if the Stock is not traded on a securities
exchange and not quoted on the NASDAQ, the closing quoted selling price of
the Stock on the date of grant of the Option as quoted in "pink sheets"
published by the National Daily Quotation Bureau; (C) if the Stock is not
traded on a securities exchange but is quoted on the NASDAQ, the closing
quoted selling price of the Stock on the date of grant of the Option, as
reported by the Wall Street Journal; or (D) if the Stock is admitted to
trading on a securities exchange, the closing quoted selling price of the
Stock on the date of grant of the Option, as reported in the Wall Street
Journal.
(h) "Option" means an option granted under this Plan to acquire Stock.
(i) "Optionee" means the person to whom an Option is granted.
(j) "Option Agreement" means an agreement issued to each Eligible Director with
respect to each Option.
(k) "Option Date" means the date as of which an Option is granted, which shall
be the first business day after the annual meeting of Shareholders of the
Company .
(l) "NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
(m) "Plan" means the 2003 O'Reilly Automotive, Inc. Director Stock Option Plan.
(n) "Post-Death Representative(s)" means the executor(s) or administrator(s) of
the Optionee's estate or the person or persons to whom the Optionee's
rights under his or her Option pass by the Optionee's will or the laws of
the descent and distribution.
(o) "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.
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(p) "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.
III. Administration.
(a) The Plan shall be administered by the Committee. The members of the
Committee shall be "Non-Employee Directors" within the meaning of Rule
16b-3 Act, provided, however, that noncompliance with such qualifications
shall not invalidate any grants of Options 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 in office 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 mat 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
Optionees.
IV. Shares Subject to the Plan.
(a) Subject to the provisions of Section 10 hereof, the Stock which may be
issued pursuant to the exercise of Options granted under the Plan shall not
exceed in the aggregate 200,000 shares of Stock, plus all shares authorized
under the 1993 Director Stock Option Plan not covered by an option on the
date such plan expires.
(b) At any time during the existence of the Plan, there shall be reserved for
issuance upon the exercise of Options granted under the Plan an amount of
Stock (subject to adjustment as provided in Section 10 hereof) equal to the
total number of share then issuable pursuant to all such Option grants
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 Option terminates, in whole or in part, by expiration or for any
other reason except exercise of such Option, the shares previously reserved
for issuance upon grant of the Option shall again be available for issuance
as if such shares had never been subject to an Option.
V. Granting of Options.
(a) Each person who is an Eligible Director on the Option Date shall receive
Options to acquire 10,000 shares of Stock at a per share purchase price
equal to the per share Fair Market Value of the Stock on the Option 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 Option Date.
(b) Each Eligible Director may also be granted Options from time to time upon
approval by the full Board.
(c) All Options granted under the Plan shall be granted as of an Option Date.
Promptly after each Option Date, the Company shall notify the Optionee of
the grant of the Option, and shall hand deliver or mail to the Optionee an
Option Agreement, duly executed by and on behalf of the Company, with the
request that the Optionee execute and return the Option Agreement within
thirty days after the Option Date. If the Optionee shall fail to execute
and return the written Option Agreement within said thirty-day period, his
or her Option shall be automatically terminated, except that if the
Optionee dies within said thirty-day period, such Option Agreement shall be
effective notwithstanding the fact that it has not been signed prior to
death.
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(d) Options granted under the Plan will not be incentive stock options within
the meaning of Section 422 of the Code.
VI. Terms of Options.
Notwithstanding any other provision of the Plan, each Option shall be evidenced
by an Option Agreement, which shall include the substance of the following terms
and conditions:
(a) 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
Option Date of such Option.
(b) The Option by its terms shall not be transferable by the Optionee 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 Optionee's lifetime,
only by the Optionee.
(c) 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.
(d) Each Option granted under the Plan and all unexercised rights thereunder
shall expire automatically upon the earlier of (i) the date on which an
Optionee ceases to hold office as a director of the Company for any reason
other than retirement, death or disability, (ii) the date that is three
months following the effective date of the Optionee's retirement from
service on the Board, (iii) the date that is one year following the date on
which the Optionee's service on the Board of Directors of the Company
ceases due to death or disability, and (iv) the seventh anniversary date of
the Option date.
VII. No Right to Remain a Director.
The grant of an Option shall not create any right in any person to remain as a
director of the Company.
VIII. Exercise of Options.
(a) An Option may be exercised in whole or in part except as otherwise may be
provided in the Option 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 (i) 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, (ii) 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 Optionee
for longer than six months and registered in the Optionee'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, (iii) at the Optionee'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 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 such
purchase price from the proceeds of such sale, or (iv) a combination of (i)
and (ii) that collectively equals the full amount of the purchase price of
the shares with respect to which the Option is exercised.
(b) An Optionee 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.
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IX. General Provisions.
The Company shall not be required to issue or deliver any certificate for shares
of Stock to an Optionee upon the exercise of his or her Option:
(a) Prior to (i) if requested by the Company, the filing with the Company by
the Optionee or the Optionee'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 (ii) 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
(b) Unless such issuance or delivery would comply with all applicable laws and
the applicable requirements of any securities exchange, the NASDAQ or
similar entity.
X. Adjustment Provisions.
(a) The existence of the Plan and the Options 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 Options 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 4 hereof, and the shares of Stock subject to issuance under
outstanding Options under the Plan shall be appropriately and
proportionately adjusted by the Committee. Any such adjustment in an
outstanding Option shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Option but with an
appropriate adjustment in the price for each share or other unit of any
security covered by the Option.
(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
Options theretofore granted or the purchase price per share with respect to
outstanding Options.
(d) Adjustments under this Section 10 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 10,
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 Options may be exercised prior to such a
termination. However, the termination of such Options 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 Options, (B) the substitution for such
Options 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 Options
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 Options.
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XI. 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 Optionee, adversely affect or impair the rights
of such Optionee, and provided further, that no amendment requiring
shareholder approval in order to meet the requirements of Rule 16b-3 shall
be effective unless such shareholder approval is obtained, and provided,
further that the provisions relating to eligible persons, the amount and
price of awards and the timing of awards may not be amended more than once
every six months except to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, or the rules thereunder. (b) The
period during which Options may be granted under the Plan shall terminate
on May 6, 2013, unless the Plan earlier shall have been terminated as
provided above.
XII. Withholding.
The Company shall have the right to deduct from payments of any kind otherwise
due to the Optionee any federal, state or local taxes of any kind required by
law to be withheld with respect to any shares issued upon exercise of Options
under the Plan.
XIII. 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.
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