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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 0-21318
O'REILLY AUTOMOTIVE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0618012
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
233 South Patterson
Springfield, Missouri 65802
- --------------------------------------------------------------------------------
(Address of principal executive offices, Zip code)
(417) 862-6708
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(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
Common stock, $0.01 par value - 53,494,797 shares outstanding as of March 31,
2003. As of that date, the aggregate market value of the voting stock held by
non-affiliates of the Company was approximately $1,448,104,155 based on the last
sale price of the common stock reported by the Nasdaq Stock Market (National
Market).
This report contains a total of 31 pages of which this page is number 1.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended March 31, 2003
TABLE OF CONTENTS
Page
------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 7
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 10
ITEM 4 - CONTROLS AND PROCEDURES 10
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 10
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURE PAGE 11
CERTIFICATIONS 12
EXHIBIT INDEX 14
Page 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2003 2002
-------------- --------------
(Unaudited) (Note)
Assets
Current assets:
Cash $ 19,744 $ 29,333
Accounts receivable, net 51,644 45,421
Amounts receivable from vendors 47,684 42,918
Inventory 502,506 504,098
Deferred income taxes -- 5,040
Other current assets 5,014 4,235
-------------- --------------
Total current assets 626,592 631,045
Property and equipment, at cost 523,440 491,523
Accumulated depreciation and amortization 147,788 137,992
-------------- --------------
Net property and equipment 375,652 353,601
Notes receivable 1,861 1,880
Other assets 24,558 22,893
-------------- --------------
Total assets $ 1,028,663 $ 1,009,419
============== ==============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 112,552 $ 85,370
Accrued payroll 13,142 15,257
Accrued benefits & withholdings 18,954 19,165
Income taxes payable 10,998 9,798
Current deferred income taxes 554 --
Other current liabilities 18,869 17,150
Current portion of long-tem debt 578 682
-------------- --------------
Total current liabilities 175,647 147,422
Long-term debt, less current portion 155,371 190,470
Deferred income taxes 17,348 15,939
Other liabilities 7,187 5,064
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares-90,000,000
Issued and outstanding shares-
53,494,797 shares at March 31, 2003,
and 53,371,242 at December 31, 2002 535 534
Additional paid-in capital 271,887 269,030
Retained earnings 400,688 380,960
-------------- --------------
Total shareholders' equity 673,110 650,524
-------------- --------------
Total liabilities and shareholders' equity $ 1,028,663 $ 1,009,419
============== ==============
NOTE: The balance sheet at December 31, 2002, has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
Page 3
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
------------------------------
2003 2002
------------ ------------
(In thousands, except per share data)
Product sales $ 339,475 $ 295,489
Cost of goods sold, including warehouse
and distribution expenses 198,529 169,461
------------ ------------
Gross profit 140,946 126,028
Operating, selling, general and
administrative expenses 107,605 97,390
------------ ------------
Operating income 33,341 28,638
Other expense, net (1,763) (1,871)
------------ ------------
Income before income taxes 31,578 26,767
Provision for income taxes 11,850 10,125
------------ ------------
Net income $ 19,728 $ 16,642
============ ============
Net income per common share $ 0.37 $ 0.31
============ ============
Weighted-average common shares
outstanding 53,402 52,884
============ ============
Net income per common share -
assuming dilution $ 0.37 $ 0.31
============ ============
Adjusted weighted-average common
shares outstanding - assuming dilution 53,753 53,607
============ ============
See notes to condensed consolidated financial statements.
Page 4
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, March 31,
2003 2002
------------ ------------
(In thousands)
Net cash provided by operating activities $ 57,344 $ 27,961
Investing activities:
Purchases of property and equipment (32,189) (21,428)
Proceeds from sale of property and equipment 71 165
Payments received on notes receivable 173 172
Investments in other assets (1,974) 381
------------ ------------
Net cash used in investing activities (33,919) (20,710)
Financing activities:
Payments on notes payable to banks -- (2,000)
Proceeds from issuance of long-term debt -- 61,150
Payments on long-term debt (35,204) (62,398)
Proceeds from issuance of common stock 2,190 1,347
------------ ------------
Net cash used in financing activities (33,014) (1,901)
------------ ------------
Net (decrease) increase in cash (9,589) 5,350
Cash at beginning of period 29,333 15,041
------------ ------------
Cash at end of period $ 19,744 $ 20,391
============ ============
See notes to condensed consolidated financial statements.
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2003
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
O'Reilly Automotive, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended March 31, 2003, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002.
2. Variable Interest Entitiy
In January 2003, the Financial Accounting Standards Board issued Interpretation
46, Consolidation of Variable Interest Entities. The interpretation expands upon
and strengthens existing accounting guidance that addresses when a company
should include in its financial statements the assets, liabilities and
activities of another entity. A variable interest entity is a corporation,
partnership, trust or any other legal structure used for business purposes that
either (a) does not have equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for the entity to
support its activities. The interpretation requires a variable interest entity
to be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or is entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of the interpretation apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. The Company has determined that the Lessor under the Synthetic Lease
Facility is a variable interest entity under Interpretation No. 46 and that the
Company is the primary beneficiary. The Company is evaluating the various
alternatives and the related impact on its consolidated financial position and
results of operations.
3. Stock-based Compensation
The Company has elected to use the intrinsic value method of accounting for
stock options issued under our stock option plans and accordingly do not record
an expense for such stock options. For purposes of pro forma disclosures under
the fair value method, the estimated fair value of the options is amortized to
expense over the options' vesting period. The Company's pro forma information
for the quarters ended March 31, is as follows:
2003 2002
------------------------
(In thousands,
except per share data)
Net income as reported......................... $ 19,728 $ 16,642
========================
Stock-based compensation expense
as reported.................................. - -
Stock-based compensation expense
under fair value method..................... 2,270 1,525
------------------------
Pro forma net income........................... $ 17,458 $ 15,117
========================
Pro forma basic net income per share........... $ 0.33 $ 0.29
========================
Pro forma net income per share-
assuming dilution ......................... $ 0.32 $ 0.28
========================
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Unless otherwise indicated, "we," "us," "our" and similar terms, as well as
references to the "Company" or "O'Reilly" refer to O'Reilly Automotive, Inc. and
its subsidiaries.
Critical Accounting Policies and Estimates
The fundamental objective of financial reporting is to provide useful
information that allows a reader to comprehend the business activities of our
company. To aid in that understanding, management has identified our "critical
accounting policies." These policies have the potential to have a more
significant impact on our financial statements, either because of the
significance of the financial statement item to which they relate, or because
they require judgment and estimation due to the uncertainty involved in
measuring, at a specific point in time, events which are continuous in nature.
o Cost of goods sold - Cost of goods sold includes estimates of shortages
that are adjusted upon physical inventory counts in subsequent periods and
estimates of amounts due from vendors for certain merchandise allowances
and rebates. These estimates are consistent with historical experience.
o Operating, selling, general and administrative expense ("OSG&A") -
Operating, selling, general and administrative expense includes estimates
for worker's compensation and other general liability obligations, which
are partially based on estimates of certain claim costs and historical
experience.
o Credit operations - Allowance for doubtful accounts is estimated based on
historical loss ratios and consistently have been within management's
expectations.
o Revenue - We recognize sales upon delivery of the products.
o Stock-based compensation - We have elected to use the intrinsic value
method of accounting for stock options issued under our stock option plans
and accordingly do not record an expense for such stock options. For
purposes of pro forma disclosures under the fair value method, the
estimated fair value of the options is amortized to expense over the
options' vesting period. Our pro forma information for the quarters ended
March 31, is as follows:
2003 2002
------------------------
(In thousands,
except per share data)
Net income as reported......................... $ 19,728 $ 16,642
========================
Stock-based compensation expense
as reported.................................. - -
Stock-based compensation expense
under fair value method...................... 2,270 1,525
------------------------
Pro forma net income........................... $ 17,458 $ 15,117
========================
Pro forma basic net income per share........... $ 0.33 $ 0.29
========================
Pro forma net income per share-
assuming dilution............................ $ 0.32 $ 0.28
========================
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.)
Results of Operations
Product sales for the first quarter of 2003 increased by $44.0 million, or 14.9%
over product sales for the first quarter of 2002, to $339.5 million. This
increase was primarily due to the opening of 30 net, new stores during the first
quarter of 2003, in addition to a 6.2% increase in comparable store product
sales for the first quarter of 2003. At March 31, 2003, we operated 1,011 stores
compared to 981 stores at March 31, 2002.
Gross profit increased $14.9 million, or 11.8% from $126.0 million (or 42.7% of
product sales) in the first quarter of 2002, to $140.9 million (or 41.5% of
product sales) in the first quarter of 2003. The increase in gross profit
dollars was primarily a result of the increase in sales resulting from the
increases in the number of stores open during the first quarter of 2003 compared
to the same period in 2002, and increased sales levels at existing stores. The
decrease in gross profit as a percent of sales is primarily due to increased
warehouse and delivery expenses resulting from the Company's remodeling of its
Nashville and Knoxville, Tennessee distribution centers and additional
independent jobber sales resulting from the acquisition of Mid-State Automotive
Distributors, in the fourth quarter of 2001, which sales are at a lower gross
margin.
Operating, selling, general and administrative expenses ("OSG&A expenses")
increased $10.2 million from $97.4 million (or 33.0% of product sales) in the
first quarter of 2002 to $107.6 million (or 31.7% of product sales) in the first
quarter of 2003. The dollar increase in OSG&A expenses resulted from the
addition of team members and resources in order to support the increased level
of our operations. The decrease in OSG&A as a percentage of product sales was
primarily due to economies of scale achieved and the result of managements
efforts to increase in labor productivity.
Other expense, net decreased by $108,000 in the first quarter of 2003 compared
to the first quarter of 2002. The overall decrease in other expense, is
primarily due to an increase in interest expense.
Our estimated provision for income taxes increased $1.7 million to $11.9 million
for the first quarter of 2003 compared to 2002, as a result of our increased
taxable income. Our effective tax rate was 37.5% of income before income taxes
for the first quarter of 2003 and 37.8% for the first quarter of 2002.
Principally, as a result of the foregoing, net income increased from $16.6
million or 5.6% of product sales in the first quarter of 2002 to $19.7 million
or 5.8% of product sales in the first quarter of 2003.
Liquidity and Capital Resources
Net cash provided by operating activities increased from $28.0 million for the
first three months in 2002 to $57.3 million for the first three months of 2003.
This increase was principally the result of increased net income and an increase
in accounts payable, income taxes payable and other current liabilities,
partially offset by increases in accounts receivable. The increase in accounts
payable was primarily attributable to the timing of payments and more favorable
payment terms from vendors. The increase in accounts receivable is primarily due
to our continuing store growth.
Net cash used in investing activities increased from $20.7 million during the
first three months in 2002 to $33.9 million for the comparable period in 2003,
primarily due to the increased purchases of property and equipment resulting
from new store growth.
Net cash used in financing activities was $1.9 million in the first three months
of 2002, compared to $33.0 million in the first three months of 2003 primarily
due to increased repayment of debt.
We maintain an unsecured, three-year syndicated revolving credit facility in the
amount of $150 million. The credit facility is guaranteed by all of our
subsidiaries and may be increased to a total of $200 million at any time prior
to January 29, 2004, subject to availability of such additional credit from
either existing banks within the syndicate or other banks. At March 31, 2003,
$55.0 million of the revolving credit facility was outstanding including amounts
under letters of credit totaling $6.0 million. Accordingly, we have aggregate
availability for additional borrowings of $89.0 million under the credit. The
credit facility, which bears interest at LIBOR plus a spread ranging from 0.875%
to 1.375% (2.1875% at March 31, 2003), expires in July 2005.
Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.)
In August 2001, we completed a sale-leaseback with O'Reilly-Wooten 2000 LLC (an
entity owned by certain shareholders of the Company). The transaction closed on
September 1, 2001, with a purchase price of approximately $5.6 million for nine
O'Reilly Auto Parts stores and did not result in a material gain or loss. The
lease, which has been accounted for as an operating lease, calls for an initial
term of 15 years with three five-year renewal options.
On May 16, 2001, we completed a $100 million private placement of two series of
unsecured senior notes ("Senior Notes"). The Series 2001-A Senior Notes were
issued for $75 million, are due May 16, 2006, and bear interest at 7.72% per
year. The Series 2001-B Senior Notes were issued for $25 million, are due May
16, 2008, and bear interest at 7.92% per year. The private placement agreement
allows for a total of $200 million of Senior Notes issuable in series. Proceeds
from the transaction were used to reduce outstanding borrowings under our
revolving credit facility.
Our continuing store expansion program requires significant capital expenditures
and working capital principally for inventory requirements. The costs associated
with the opening of a new store (including the cost of land acquisition,
improvements, fixtures, inventory and computer equipment) are estimated to
average approximately $900,000 to $1.1 million; however, such costs may be
significantly reduced where we lease, rather than purchase, the store site.
Although the cost to acquire the business of an independently owned parts store
varies, depending primarily upon the amount of inventory and the amount, if any,
of real estate being acquired, we estimate that the average cost to acquire such
a business and convert it to one of our stores is approximately $400,000. We
plan to finance our expansion program through cash expected to be provided from
operating activities and available borrowings under our existing credit
facilities.
For the first three months of 2003, 30 net, new stores were opened. The Company
plans to open 100 additional stores during the remainder of 2003. The funds
required for such planned expansions are expected to be provided by operating
activities and the existing and available bank credit facilities.
We believe that our existing cash, short-term investments, cash expected to be
provided by operating activities, available bank credit facilities and trade
credit will be sufficient to fund both our short-term and long-term capital and
liquidity needs for the foreseeable future.
Inflation and Seasonality
We have been successful, in many cases, in reducing the effects of merchandise
cost increases principally by taking advantage of vendor incentive programs,
economies of scale resulting from increased volume of purchases and selective
forward buying. As a result, we do not believe our operations have been
materially affected by inflation.
Our business is seasonal to some extent primarily as a result of the impact of
weather conditions on store sales. Store sales and profits have historically
been higher in the second and third quarters (April through September) of each
year than in the first and fourth quarters.
Internet Address and Access to SEC Filings
Our Internet address is www.oreillyauto.com. Interested readers can access the
Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and any amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, through the www.sec.gov. Such reports are generally available on the
day they are filed. Additionally, the Company will furnish interested readers
upon request and free of charge, a paper copy of such reports.
Forward-Looking Statements
We claim the protection of the safe-harbor for forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Certain
statements contained within this discuss, among other things, expected growth,
store development and expansion strategy, business strategies, future revenues
and future performance. These forward-looking statements are based on estimates,
projections, beliefs and assumptions and are not guarantees of future events and
results. Such statements are subject to risks, uncertainties and assumptions,
including, but not limited to, competition, product demand, the market for auto
parts, the economy in general, inflation, consumer debt levels, governmental
approvals, our ability to hire and retain qualified employees, risks associated
with the integration of acquired businesses, weather, terrorist activities, war
and the threat of war. Actual results may materially differ from anticipated
results described in these forward-looking statements. Please refer to the Risk
Factors sections of the Company's Form 10-K for the year ended December 31,
2002, for more details.
Page 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk to the extent we borrow against our credit
facility with variable interest rates. Assuming the current level of borrowings
at variable rates and assuming a two-percentage point change in the average
interest rates under these borrowings, it is estimated that our interest expense
for the quarter ended March 31, 2003, would have increased by approximately
$275,000. In the event of an adverse change in interest rates, management would
likely take actions that would mitigate our exposure to interest rate risk
particularly if our borrowing levels increase to any significant extent;
however, due to the uncertainty of the actions that would be taken and their
possible effects, this analysis assumes no such action. Further, this analysis
does not consider the effects of the change in the level of overall economic
activity that could exist in such an environment.
ITEM 4. CONTROLS AND PROCEDURES
(a) Our chief executive officer and chief financial officer have reviewed and
evaluated the Company's disclosure controls and procedures within 90 days
of the filing date of this Quarterly Report. Based on such review and
evaluation, the officers believe that the disclosure controls and
procedures are designed effectively to ensure that the information required
to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934, as amended, (1.) is recorded,
processed, summarized and reported within the time period specified in the
SEC's rules and forms and that the information required to be discussed by
the Company in the reports that it files and submits under the Securities
Exchange Act of 1934, as amended, and (2.) is documented and communicated
to the Company's management, including the officers, as appropriate to
allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index on page 14 hereof.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
O'REILLY AUTOMOTIVE, INC.
May 9, 2003 /s/ David E. O'Reilly
- -------------- -----------------------------------------------------
Date David E. O'Reilly, Co-Chairman of the Board
and Chief Executive Officer (Principal
Executive Officer)
May 9, 2003 /s/ James R. Batten
- -------------- -----------------------------------------------------
Date James R. Batten, Vice-President of Finance and
Chief Financial Officer (Principal Financial and
Accounting Officer)
Page 11
CERTIFICATIONS
I, David E. O'Reilly, Co-Chairman of the Board, President and Chief Executive
Officer of O'Reilly Automotive, Inc. (O'Reilly), certify that:
1. I have reviewed this quarterly report on Form 10-Q of O'Reilly;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of O'Reilly as of, and for, the periods presented in this quarterly
report;
4. O'Reilly's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for O'Reilly and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to O'Reilly, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of O'Reilly's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. O'Reilly's other certifying officer and I have disclosed, based on our most
recent evaluation, to O'Reilly's auditors and the audit committee of
O'Reilly's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect O'Reilly's ability to record,
process, summarize and report financial data and have identified for
O'Reilly's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in O'Reilly's internal controls;
and
6. O'Reilly's other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003 /s/ David E. O'Reilly
-----------------------------------------------------
David E. O'Reilly, Co-Chairman of the Board and
Chief Executive Officer (Principal Executive Officer)
Page 12
CERTIFICATIONS
I, James R. Batten, Vice President of Finance and Chief Financial Officer of
O'Reilly Automotive, Inc. (O'Reilly), certify that:
1. I have reviewed this quarterly report on Form 10-Q of O'Reilly;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of O'Reilly as of, and for, the periods presented in this quarterly
report;
4. O'Reilly's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for O'Reilly and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to O'Reilly, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of O'Reilly's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. O'Reilly's other certifying officer and I have disclosed, based on our most
recent evaluation, to O'Reilly's auditors and the audit committee of
O'Reilly's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect O'Reilly's ability to record,
process, summarize and report financial data and have identified for
O'Reilly's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in O'Reilly's internal controls;
and
6. O'Reilly's other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 9, 2003 /s/ James R. Batten
----------------------------------------------------
James R. Batten, Vice President of Finance
and Chief Financial Officer (Principal Financial and
Accounting Officer)
Page 13
EXHIBIT INDEX
Number Description Page
- ------ ------------- ------
99.1 Certain Risk Factors, filed herewith 15
99.2 Certificate of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, 17
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
99.3 Certificate of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, 18
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
10.29 O'Reilly Automotive, Inc. 2003 Employee Stock Option Plan 19
10.30 O'Reilly Automotive, Inc. 2003 Directors Stock Option Plan 26
10.31 OReilly Automotive, Inc. Stock Purchase Plan First Amendment 31
Page 14
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 99.1 - Certain Risk Factors
Some of the information in this Form 10-Q contains and future reports and press
releases and other public information may contain forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as ''may,'' ''will,'' ''expect,''
''anticipate,'' ''believe,'' ''estimate,'' and ''continue'' or similar words.
These "forward-looking statements" are made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 (See Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.) You should read statements that contain these words carefully because
they: (1) discuss our future expectations; (2) contain projections of our future
results of operations or of our financial condition; or (3) state other
''forward-looking'' information. We believe it is important to communicate our
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or over which we have no control.
The risk factors listed in this exhibit, as well as any cautionary language in
this Form 10-Q, are subject to risks, uncertainties and assumptions, including,
but not limited to, competition, product demand, the market for auto parts, the
economy in general, inflation, consumer debt levels, governmental approvals, our
ability to hire and retain qualified employees, risks associated with the
integration of acquired business, weather, terrorist activities, war and the
threat of war. Actual results may materially differ from anticipated results
described in these forward-looking statements. You should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
Form 10-K could have a material adverse effect on our business, operating
results and financial condition.
Competition
We compete with a large number of retail (DIY) and wholesale (professional
installers) automotive aftermarket product suppliers. The distribution of
automotive aftermarket products is a highly competitive industry, particularly
in the more densely populated market areas that we serve. Competitors include
national and regional automotive parts chains, independently owned parts stores
(some of which are associated with national auto parts distributors or
associations), automobile dealerships, mass or general merchandise, discount and
convenience chains that carry automotive products, independent warehouse
distributors and parts stores and national warehouse distributors and
associations. Some of our competitors are larger than we are and have greater
financial resources. In addition, some of our competitors are smaller than we
are overall but have a greater presence than we do in a particular market. For a
list of our principal competitors, see the ''Competition'' section of Item 1 to
the Company's Form 10-K for the year ended December 31, 2002.
No Assurance of Future Growth
We believe that our ability to open additional stores at an accelerated rate
will be a significant factor in achieving our growth objectives for the future.
Failure to achieve our growth objectives may negatively impact the trading price
of our common stock. Our ability to accomplish our growth objectives is
dependent, in part, on matters beyond our control, such as weather conditions,
zoning and other issues related to new store site development, the availability
of qualified management personnel and general business and economic conditions.
We cannot be sure that our growth plans for 2003 and beyond will be achieved.
For a discussion of our growth strategies, see the ''Growth and Expansion
Strategies'' section of Item 1 to the Company's Form 10-K for the year ended
December 31, 2002.
Acquisitions May Not Lead to Expected Growth
We expect to continue to make acquisitions as an element of our growth strategy.
Acquisitions involve certain risks that could cause our actual growth to differ
from our expectations. For example: (1) we may not be able to continue to
identify suitable acquisition candidates or to acquire additional companies at
favorable prices or on other favorable terms; (2) our management's attention may
be distracted; (3) we may fail to retain key acquired personnel; (4) we may
assume unanticipated legal liabilities and other problems; and (5) we may not be
able to successfully integrate the operations (accounting and billing functions,
for example) of businesses we acquire to realize economic, operational and other
benefits.
Sensitivity to Regional Economic and Weather Conditions
All of our stores are located in the Central and Southern United States. In
particular, approximately 36% of our stores are located in Texas. Therefore, our
business is sensitive to the economic and weather conditions of these regions.
Unusually severe or inclement weather tends to reduce sales, particularly to DIY
customers.
Page 15
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 99.1 - Certain Risk Factors (continued)
Dependence Upon Key and Other Personnel
Our success has been largely dependent on the efforts of certain key personnel,
including David E. O'Reilly, Lawrence P. O'Reilly, Ted F. Wise and Greg L.
Henslee. One key person, Lawrence P. O'Reilly retired from his operational
duties in February 2003, but will continue to serve on the Board of Directors.
Our business and results of operations could be materially adversely affected by
the loss of the services of one or more of these individuals. Additionally, our
successful implementation and management of our growth and expansion strategies
will depend on our ability to continue to attract and retain qualified
personnel. We cannot be sure that we will be able to continue to attract such
personnel. For a further discussion of our management and personnel, see the
"Business" section of Item 1 and Item 4a of this Form 10-K and our Proxy
Statement on Schedule 14A for the 2003 Annual Meeting of Shareholders, a portion
of which is incorporated herein.
Concentration of Ownership by Management
Our executive officers and directors as a group beneficially own a substantial
percentage of the outstanding shares of our common stock. These officers and
directors have the ability to exercise effective voting control of the company,
including the election of all of our directors, and to effectively determine the
vote on any matter being voted on by our shareholders, including any merger,
sale of assets or other change in control of the company.
Possible Volatility of Our Stock Price
The stock market and the price of our common stock may be subject to volatile
fluctuations based on general economic and market conditions. The market price
for our common stock may also be affected by our ability to meet analysts'
expectations. Failure to meet such expectations, even slightly, could have an
adverse effect on the market price of our common stock. In addition, stock
market volatility has had a significant effect on the market prices of
securities issued by many companies for reasons unrelated to the operating
performance of these companies. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been instituted against such a company. If similar litigation were
instituted against us, it could result in substantial costs and a diversion of
our management's attention and resources, which could have an adverse effect on
our business.
Shares Eligible for Future Sale
All of the shares of common stock currently held by our affiliates may be sold
in reliance upon the exemptive provisions of Rule 144 of the Securities Act of
1933, as amended, subject to certain volume and other conditions imposed by such
rule. We cannot predict the effect, if any, that future sales of shares of
common stock or the availability of such shares for sale will have on the market
price of the common stock prevailing from time to time. Sales of substantial
amounts of common stock, or the perception that such sales might occur, could
adversely affect the prevailing market price of the common stock.
Page 16
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 99.2 - CEO Certification
O'REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of O'Reilly Automotive, Inc. (the
"Company") on Form 10-Q for the period ending March 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, David
E. O'Reilly, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ David E. O'Reilly
- ----------------------------------------------
David E. O'Reilly
Chief Executive Officer
May 9, 2003
This certification is made solely for purposes of 18 U.S.C. Section 1350,
and not for any other purpose.
Page 17
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 99.3 - CFO Certification
O'REILLY AUTOMOTIVE, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of O'Reilly Automotive, Inc. (the
"Company") on Form 10-Q for the period ending March 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
R. Batten, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ James R. Batten
- ----------------------------------------------
James R. Batten
Chief Financial Officer
May 9, 2003
This certification is made solely for purposes of 18 U.S.C. Section 1350,
and not for any other purpose.
Page 18
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.29 - O'Reilly Automotive, Inc. 2003 Employee Stock Option Plan
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.
Page 19
O'REILLY AUTOMOTIVE,INC. AND SUBSIDIARIES
Exhibit 10.29 - O'Reilly Automotive, Inc. 2003 Employee
Stock Option Plan (Continued)
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.
(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.
Page 20
O'REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIES Exhibit 10.29 - O'Reilly Automotive, Inc. 2003 Employee
Stock Option Plan (Continued)
(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.
(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.
Page 21
O'REILLY AUTOMOTIVE, INC. AND
SUBSIDIARIES Exhibit 10.29 - O'Reilly Automotive,
Inc. 2003 Employee Stock Option Plan (Continued)
(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).
(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.
Page 22
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.29 - O'Reilly Automotive,
Inc. 2003 Employee Stock Option Plan (Continued)
(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.
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.
Page 23
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.29 - O'Reilly Automotive, Inc. 2003 Employee
Stock Option Plan (Continued)
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.
(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.
Page 24
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.29 - O'Reilly Automotive, Inc. 2003 Employee
Stock Option Plan (Continued)
(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.
Page 25
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.30 - O'Reilly Automotive, Inc. 2003 Director Stock Option Plan
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.
Page 26
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.30 - O'Reilly Automotive, Inc. 2003 Director
Stock Option Plan (Continued)
(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.
Page 27
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.30 - O'Reilly Automotive, Inc. 2003
Director Stock Option Plan (Continued)
(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.
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
Page 28
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.30 - O'Reilly Automotive, Inc. 2003
Director Stock Option Plan (Continued)
(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.
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 x months
except to comport with changes in the Code or the Employee Retirement
Income Security Act of 1974, or the rules thereunder.
Page 29
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.30 - O'Reilly Automotive, Inc. 2003
Director Stock Option Plan (Continued)
(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.
Page 30
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.31 - O'Reilly Automotive, Inc. Stock Purchase Plan First Amendment
O'REILLY AUTOMOTIVE, INC. STOCK PURCHASE PLAN
WHEREAS, O'Reilly Automotive, Inc. (the "Company") has heretofore adopted
the O'Reilly Automotive, Inc. Stock Purchase Plan (the "Stock Purchase Plan"),
under which shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), may be purchased by the employees and officers of the Company
pursuant to and in accordance with the terms of the Stock Purchase Plan; and
WHEREAS, Section 11 of the Stock Purchase Plan empowers the Board of
Directors, at any time and in its sole discretion, to terminate or amend the
Stock Purchase Plan; and
WHEREAS, in order to provide a continuing means of fulfilling the purpose
of the Stock Purchase Plan, the Board of Directors of the Company has authorized
the amendment of the Stock Purchase Plan to increase the number of shares of
Common Stock issuable in accordance with the Stock Purchase Plan from 1,000,000
to 1,300,000.
NOW, THEREFORE, the Stock Purchase Plan is hereby amended as follows:
1. The first sentence of Section 12 of the Stock Purchase Plan is hereby
deleted in its entirety, and the following substituted in lieu thereof to
constitute the first sentence of said Section 12 from and after the
effectiveness of this Amendment:
"The aggregate number of shares which may be issued under the Plan
shall not exceed 1,300,000, consisting of newly issued shares and/or
shares reacquired by the Company."
2. In accordance with Section 11 of the Stock Purchase Plan, the provisions of
this Amendment shall be effective as of the first day of the calendar month
following the date of this Amendment.
3. Except and to the extent hereinabove set forth, the Stock Purchase Plan
shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment is dated as of the 6th day of May,
2003.
By:/s/ David E. O'Reilly
-------------------------------------------
David E. O'Reilly
Chief Executive Officer
Page 31