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HomeMy WebLinkAboutContract 37996 I Y �FC'RETARY STATE OF TEXAS § COUNTIES OF TARRANT,DENTON § AND WISE CONTRACT FOR THE PROVISION OF PARTS,SUPPLIES,STAFFING AND MANAGEMENT FOR THE CITY OF FORT W��O..��R,,TH THIS CONTRACT is made and entered into on the l may of October, 2008 ("Effective Date") by and between the City of Fort Worth., a home-rule municipal corporation in Tarrant County, Texas, acting herein and through Karen L. Montgomery, its duly authorized Assistant City Manager/CFO, hereinafter called "City", and AutoZone, Texas L.P., a Delaware limited partnership,hereinafter called "Contractor." WHEREAS, on or about March 7, 2009, the City issued RFP 08-0016: Information/Specifications for Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities (hereinafter. "RFP"); WHEREAS, on or about April 10, 2008 Contractor submitted its response to RFP 08-0016 (hereinafter, "RFP Response"): WHEREAS, the City has determined that Contractor should be awarded the contract for the Provision of Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities pursuant to the RFP and the RFP Response; WHEREAS, on September 16, 2008, the City Council approved such award and authorized the City Manager to enter into an agreement for the Provision of Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities pursuant to the RFP and the RFP Response; and WHEREAS,the parties hereto agree to all terms and conditions as stated herein. NOW THERFORE, this Contract shall be for the Provision of Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities pursuant to the RFP, provided however that to the extent there are any conflicting terms in the RFP and this Contract the parties agree that the terms and conditions in this Contract will control. 1. DEFINITIONS In this Contract,the following words and phrases shall be defined as follows; Applicable Law shall mean any statute, law, constitution, charter, ordinance, resolution, judgment, order, decree, rule, regulation, directive, interpretation, standard or similarly binding OFFIVAL RECORD C"►Y SECRETARY FT.WORTH,TX authority, which in any case, shall be enacted, adopted, promulgated, issued or enforced that relates to or affects the City, the Contractor, or the performance by a party of its obligations hereunder. Applicable Law does not include laws which are not applicable to private employers who are not governmental agencies or subcontractors. City shall mean the City of Fort Worth,Texas. Contract shall mean this document, the RFP Response: Information/Specifications for Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities and all addenda as attached as Exhibit A, and all other attachments to this document. Should there be any inconsistency between the terms of the Contract and the RFP Response,the terms of the Contract shall prevail. Contractor or AutoZone shall mean AutoZone Texas,L.P. ESD shall mean Equipment Services Department. Parts Distribution Centers shall mean those ESD facilities identified in Section 2.A. Procured Inventory those parts or services which the City may by right direct AutoZone to procure from non-AutoZone sources. RFP shall mean RFP 08-0016: Information/Specifications for Parts, Supplies, Staffing and Management for Vehicle and Equipment Parts Facilities and all addenda. USC Agreement shall mean the Master Purchase Agreement dated July 26, 2006, between AutoZone Stores, Inc. and the City of Charlotte. 2. GENERAL SCOPE OF CONTRACTOR'S SERVICES A. ESD Facilities: Commencing on the date this Contract is fully executed by both parties, Contractor shall provide personnel and management for each Parts Distribution Centers at the City's following location(s): facility Narne Address MARSCO Southside Service Center 4100 Columbus Trail, Ft.Worth,Texas 76133 103L James Avenue Service Center 5021 James Avenue, Fort Worth,TX 76115 90Q Water Service Center 2201 West Daggett Street, Ft.Worth,Texas 76104 76G Brennan Service Center 2500 Brennan Avenue, Ft.Worth,Texas 76106 63E Tire Service Center 2950 Bolt Street, Ft.Worth,Texas 76110, 90E Locations may be added to or deleted from this Contract by written amendment executed and agreed to by both the City and Contractor. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRRI0.06.08 VEXECUTIONCOPY 2 B. Contractor shall be solely responsible for the on-site inventory at the ESD facilities and shall provide for a stock area. On Demand Inventory shall be defined as parts, supplies and other goods that are normally stocked by an AutoZone retail store. Heavy Equipment will be defined as the parts, supplies and other goods that will be provided by and are normally stocked by AutoZone's subcontractor's stores. City shall, depending availability, have the right to direct AutoZone to procure parts or services from non-AutoZone sources for items which are not normally available through the AutoZone supply chain("Procured Inventory"). Contractor and its subcontractor shall provide parts in accordance with the following schedule: • On Demand Inventory will be delivered within forty-five (45) minutes of Contractor's receipt of City's request, with 90% of requested On Demand Inventory being delivered at the time of request, 95% of requested On Demand Inventory being delivered within 24 hours or less and 100% of requested On Demand Inventory being delivered within three (3)business days or less from request. • Heavy Equipment Inventory: 90% of requested Heavy Equipment Inventory will be delivered on demand, 95% of parts of requested Heavy Equipment Inventory will be delivered within 24 business hours and 100% of requested Heavy Equipment Inventory will be delivered within three(3)business days or less from request. • Contractor will provide Procured Inventory, including, but not limited to, Off Road and Specialized Inventory, as defined in the RFP, within twenty-four (24) business hours to the Parts Distribution Center, provided that such item of Procured Inventory is available through Contractor's Vendor Direct Parts ("VDP") program. Contractor will provide 90% of items of Procured Inventory, including, but not limited to, Off Road and Specialized inventory, which are not available through Contractor's VDP program within three(3) to five (5) days and Contractor will use reasonable efforts to provide these items as follows: 75% on demand, 90% of such items within five (5) business days or less, and 95%of such items within ten(10)business days from request. C. If Contractor is unable to provide a requested item of On Demand Inventory or Heavy Equipment Inventory within the time limits set forth above, City shall have the right to purchase the part from a supplier other than Contractor. D. Contractor shall deliver On Demand Inventory to the Parts Distribution Centers as needed on a daily basis. In addition, Contractor shall accelerate delivery on those items City requires to be delivered on an expedited basis at no additional charge to City. E. Contractor shall operate the Parts Distribution Centers at all times during City's service technicians' normal business hours. In addition, Contractor shall upon reasonable notice from City provide back-up emergency service during non-working hour contingencies. Contractor will provide a list of personnel, including telephone numbers, who will respond to emergency service requests. The overtime expense (calculated at time and one half) will be charged on a cost basis to City. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 VExECUTIONCOPY 3 F. Contractor shall be responsible for the removal of any recyclable or disposable hazardous materials to the extent such materials are directly generated by Contractor at the Parts Distribution Centers. Contractor shall either return such materials to the manufacturers or shall arrange for a vendor to pick up or be delivered such materials. Any such disposal or recycling shall be performed in accordance with the guidelines of the Environmental Protection Agency and in conformity with all federal, state and local laws. G. Contractor shall manage the inventory and provide City with the reports listed in Exhibit B on a periodic basis which indicate the status of inventory at the Service Center. City shall provide Contractor with input where necessary relative to City's anticipated needs, so that Contractor can maintain necessary inventory. Contractor shall conduct a cycle count inventory of the inventory on a monthly basis and shall provide City with a report summarizing such inventory. AutoZone shall conduct a physical inventory of the inventory on a semi-annual basis and shall provide City with a report summarizing such inventory. Contractor shall take all steps reasonably necessary to maintain and safeguard the inventory. Contractor is responsible for securing the Parts Distribution Centers at all times. Title and risk of loss of inventory remains with Contractor until City, a City employee or an agent of City takes possession of the inventory, at which time title and risk of loss pass to City. City specifically agrees and understands that City obtains no right,title or ownership interest in,or license or right to use, any portion of inventory by virtue of the presence of inventory in the Parts Distribution Centers until such time as title and risk of loss for inventory pass to City. H. Contractor may use any qualified subcontractor or third party for the performance of any duties and responsibilities under this Contract. Contractor shall ensure that each subcontractor shall comply with the terms and condition of this Contract, including but not limited to Section 18. I. Contractor shall provide invoice consolidation, bill payment and account reconciliation services to City for Heavy Equipment Inventory obtained by City from Contractor's subcontractor under this Contract(`Bill Management Services"). J. Operation: Contractor's operation at the ESD facilities shall include the following: 1. A balanced inventory tailored to the City's ESD maintenance needs; 2. Access to all area inventories of automotive and heavy-duty OEM or approved replacement parts,paint, supplies and equipment; 3. Daily stock orders to the Part's Distribution Centers from Contractor's supply chain to replenish the inventory on a regular basis; 4. A minimum of two deliveries daily from Contractor's supply chain and local store to supplement the normal stock orders; 5. Pick up and delivery truck to procure non-stock parts from Contractor's stores or any other suppliers including overnight and/or airfreight on a timely basis; and 6. Contractor agrees to pass all applicable warranties it receives from its vendors to the City. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.09 VEXECUTIONCOPY 4 K. Trainin : Contractor shall provide training (both classroom and hands-on) through manufacturers'representative and factory training instructors by way of: 1. VHS tapes, DVD, data disc or written materials from the manufacturer with toll-free service number or live online technical support by way of Internet Website; 2. A factory representatives who can offer personal service and assistance as needed; and 3. An advanced, fully automated training center provided by the City and located at the James Avenue Service Center to be used as a training center by appointment. 3. SCOPE OF CITY SERVICES The City agrees to perform the following services: A. Notify the Contractor of the start which shall be no sooner than the date this Contract is fully executed by both parties. B. Timely review and respond to reports submitted by Contractor. C. Make timely payments per Section 5C after review and approval of invoices submitted by the Contractor. D. Work cooperatively with Contractor to resolve issues related to this Contract. E. City shall provide usable space for Contractor's Parts Distribution Centers and the inventory. City shall provide access to restroom facilities for Contractor employees. Further, City shall furnish, at its sole expense, water, sanitation, sewer, light, telephone, heat, gas, electricity, power and all other utilities; excluding cable, Internet connect and vehicle fuel, for the Parts Distribution necessary for the Contractor to perform its duties pursuant to the terms and conditions herein. F. City may allow Contractor, at its own discretion, the use of its equipment for the movement of Contractor's supplies and parts. Contractor agrees that it shall only allow personnel who are knowledgeable and competent in operating such equipment to operate such equipment. Contractor further agrees that to the extent any damage is caused by the use by Contractor of the City's equipment shall be subject to Section 18 of this Contract. 4. TERM The term of this Contract shall be for a period of two (2) years commencing on the date this Contract is fully executed by both parties. The Contract may be renewed for up to three (3) successive one (1) year terms by mutual written agreement of the parties if the City Council so AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 VEXECUTIONCOPY 5 approves and sufficient funds have been appropriated. Renewal options shall have the same terms and conditions contained herein, unless otherwise amended by the parties in a written agreement,modification or amendment. 5. PAYMENT A. On Demand Inventory provided by Contractor under this Contract will be provided at the discounts set forth in the USC Agreement, a copy of which is attached hereto as Exhibit C. The City recognizes that the discounts and, if applicable, pricing for On Demand Inventory, may be changed only as permitted in the USC Agreement. Both parties agree that all other terms and conditions contained in this Contract shall prevail over the USC Agreement only as it pertains to the City,unless otherwise prohibited by applicable law. B. Contractor agrees it shall provide the City with the discounts and, if applicable, pricing for On Demand Inventory, as provided in the USC Agreement. However, in the event that Contractor propose a price increase or discount structure change pursuant to the USC Agreement, Contractor agrees to provide the City with sixty (60) days notice prior to the effective date of the price increase. Upon the City's request, Contractor shall submit documented evidence of material and labor price increases that directly impact current prices. If the City determines such increase is not in the City's best interest, the City may terminate this Contract pursuant to Section 16(B). C. Heavy Equipment Inventory shall be invoiced to City at the price invoiced by Contractor's subcontractor plus ten percent(10%) for any individual part with a price less than or equal to $1,000 and plus five percent(5%)for any individual part with a price greater than $1,000. D. Procured Inventory shall be invoiced to City at a price which will be marked-up ten percent (10%) above the costs Contractor pays for such Procured Inventory for any individual part with a price less than or equal to $1,000 and a marked-up of five percent (5%) above the costs Contractor pays for such Procured Inventory for any individual part with a price greater than$1,000. E. Parts Distribution Centers Management Fee. During the first year of this Contract (October 1, 2008-September 30, 2009), City agrees to pay Contractor a fixed fee for parts management and staffing of the Parts Distribution Centers in the amount of $702,000.00 ("Parts Distribution Centers Management Fee"). Thereafter for year 2 and .subsequent contract years, Contractor may submit a request to the City's purchasing manager and ESD Senior Contract Compliance Specialist for a price increase not greater than six percent (6%), provided such increase is based on the Consumer Price Index, Inflation Calculator and submitted in writing with supporting evidence of the need for such increase ninety (90) days prior to the anniversary date of the Contract year. The City may by right grant such increase and the parties will agree in writing to amend the Contract. If the City fails to grant such increase, either party may terminate this Contract in whole or in part. If the City approves the increase by written amendment it shall take affect October I" of the year the request is AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 V EXECUTIONCOPY 6 made. If City requests Contractor to provide staffing in addition to that set forth in Section 9, the parties agree that the Parts Distribution Management Fee will increase to an amount agreed to by the parties in writing. If Contractor fails to provide a staff of at least twenty-six (26) employees (or such other number as may be required by this Contract or otherwise mutually agreed to by the parties in writing) for a period longer than thirty (30) calendar days, the Parts Distribution Centers Management Fee shall be discounted by the percentage of positions that were vacant for each day there was a failure to staff appropriately. F. Contractor shall invoice City monthly for: (a) one-twelfth (1/12) of the annual Parts Distribution Centers Management Fee and (b)the actual costs for any after-hours coverage or emergency services provided by Contractor at the request of the City. Payment shall be made to the Contractor within thirty (30) days from receipt and approval by the City of the Contractor's invoices and reports as provided herein. G. Contractor will invoice City for all purchases of On Demand Inventory, Heavy Equipment Inventory, and Procured Inventory on a weekly basis. City agrees to pay all undisputed amounts of each weekly invoice within eight (8)business days following receipt of any such invoice. 6 USE OF PREMISES A. So long as this Contract is in effect, Contractor may use the Parts Distribution Centers, in accordance with the provisions and conditions of this Contract, solely for the performance of Contractor's duties under this Contract. Contractor hereby agrees that its use of the Parts Distribution Centers shall not interfere with the service centers. At the expiration or earlier termination of this Contract, Contractor shall (i) remove all of its property from the Parts Distribution Centers and return all keys to City and (ii) deliver to City physical possession of the Parts Distribution Centers in good condition excepting, however, ordinary wear and tear, damage by fire or any other casualty,or damage from any other cause unless such other cause is solely attributable to the negligence of Contractor. B. On the date this Contract is fully executed, City agrees to provide Contractor with possession of the Parts Distribution Centers in good and clean condition. Prior to Contractor assuming control of the Parts Distribution Centers, the City will provide all fixtures required by Contractor to operate the Parts Distribution Centers. City's shall be responsible for repairs at or to the Parts Distribution Centers. Contractor shall have no responsibility or obligation to make any repairs to the Parts Distribution Centers except to the extent s AutoZone causes such damage, ordinary wear and tear excepted. C. City agrees that(i)AutoZone and its agents and employees shall have access to and rights of ingress and egress to the Parts Distribution Centers each day through the main building entrances when they are open, (ii) AutoZone and its agents and employees shall have rights to access restroom facilities at the Parts Distribution Centers, (iii) AutoZone and AutoZone's agents and employees shall have the right to parking in the parking area of the properties on which the Parts Distribution Centers are located, and (iv) AutoZone shall have the right to AutoZone Contract for Supplies,Parts and Material at ESB Facilities CRR I0.06.05 VEXECUTIONCOPY 7 load and unload On Demand Inventory,Heavy Equipment Inventory,Procured Inventory and other items necessary for AutoZone to perform its obligations under this Contract in the parking area of the properties on which the Parts Distribution Centers are located and in the Parts Distribution Centers. D. Contractor may not make any modification, renovation or improvement to or engage in any other construction activity (collectively"Improvement") on the ESD facilities unless the City provides advance written consent to Contractor, which consent shall not be unreasonably withheld, delayed or conditioned and which consent will be made or withheld within five (5) business days of request thereof or such Improvements will be deemed approved, unless such request requires the approval and consent of the City Council of Fort Worth. In order to obtain such consent, Contractor shall submit a written request to the City,which shall include all plans and estimates for the costs of the proposed .Improvement, to the Director of Equipment Services or his or her authorized representative. All plans, specifications and required work for the proposed Improvement must conform to and be in accordance with all applicable and then-current federal, state and local laws, ordinances, rules and regulations. If Contractor intends to employ or engage a contractor or other third party to perform any work on the proposed Improvement, Contractor shall supply the City with the name of such party and must obtain the City's advance written approval before it authorizes such party to work on the premises, which approval shall not be unreasonably withheld, delayed or conditioned. Unless otherwise agreed to by the parties in writing, all trade fixtures, equipment, and inventory of whatever nature purchased by AutoZone and placed or installed in or upon the Parts Distribution Centers by AutoZone shall remain the property of AutoZone, and subject to the terms of the Agreement, AutoZone shall be entitled to remove such fixtures, equipment, and inventory at any time during the term hereof, provided AutoZone repairs any damage to the Parts Distribution Centers caused by such removal. E. Within five(5) business days following the effective date of termination or expiration, Contractor shall remove from the premises all trade fixtures, tools, machinery, equipment, materials and supplies placed on the premises by Contractor. After such time, City shall have the right to take full possession of the Improvements,and may remove any and all property remaining on any part of the premises. Contractor agrees that it will assert no claim of any kind against City, its agents, servants, employees or representatives, which may stem from City's termination of this Contract or any act incident to City's assertion of its right to terminate or City's exercise of any rights granted hereunder. F. Each Parts Distribution Center shall be appropriately secured and maintained separate and apart from the business of the City. There shall be no intermingling of City parts or other inventory (including, but not limited to, the Special Tools) with Contractor's parts, inventory or other property. Access to the secured Parts Distribution Centers shall be restricted to Contractor employees and authorized Contractor representatives only. City employees, contractors or agents may enter secured Parts Distribution Center area when accompanied by a Contractor employee or other authorized Contractor representative. Such keys shall be stored in the on call supervisors' briefcase to be used only in emergency situations when it would be impossible or unreasonable for Contractor to provide access to the Parts AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08V EXECUTIONCOPY 8 Distribution Center within a reasonable amount of time. In the event City uses such key, City shall provide Contractor with (i) notice of such use and (ii) access to security tapes, if available, of the Parts Distribution Center during the period of such use. G. City and Contractor agree that City may store special tools (the"Special Tools") in the Parts Distribution Centers for City's use as needed. City and only City will sign-out the Special Tools on an as-needed basis, and Contractor will ensure ready availability of the Special Tools. Title to the Special Tools remains at all times with City, and Contractor specifically agrees and understands that Contractor obtains no right, title or ownership interest in, or license or right to use, the Special Tools by virtue of the presence of the Special Tools in the Parts Distribution Centers. Contractor shall take all steps necessary to safeguard the Special Tools; provided, however, that Contractor will not be responsible for maintenance of the Special Tools. H. City agrees to pay all real estate and personal property taxes assessed against the Parts Distribution Centers and the properties on which the Parts Distribution Centers are located which accrue during the term of this Contract. I. Contractor may enter into other agreements with respect to the Parts Distribution Centers (in whole or in part) with the prior consent of City, which City shall not unreasonably deny or delay such consent, to provide Heavy Equipment Inventory and Procured Inventory, including, but not limited to, Off Road and Specialized Inventory,provided that City hereby agrees that Contractor may use subcontractors to provide Heavy Equipment Inventory under this Contract. Contractor shall require each subcontractor to provide a release, indemnification and hold harmless agreement acceptable to the City prior to the Contractor entering into any agreements as described above. In the event that City will not consent to a subcontractor selected by Contractor to provide services under this Contract, Contractor will be permitted to terminate this Contract on thirty (30) days prior written notice to City. 7. CURRENT INVENTORY AND STOCK AT THE ESD FACILITIES A. Contractor shall purchase the City's current inventory of automotive parts and accessories ("Lifted Inventory"), which Lifted Inventory is identified on Exhibit D to this Contract. Contractor shall make payment for the purchase of such inventory within thirty (30) days of the execution of this Contract. Contractor shall mark each item for sale back to the City, when requisitioned by the City. At its own discretion, the City may elect to purchase or maintain ownership of certain specialized items. B. City agrees to purchase the Lifted Inventory within the Contract term in accordance with the terms of this section. City shall purchase from Contractor sixty percent(60%) (in dollar value) of the Lifted Inventory between October 1, 2008, and September 30, 2009, If City fails to purchase sixty percent (60%) (in dollar value) of the Lifted Inventory between October 1, 2008, and September 30,2009, City agrees, on September 30, 2009, to purchase items of Lifted Inventory selected by Contractor which will make the total amount of AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR I0.06.08V EXECUTIONCOPY 9 Lifted Inventory purchased by City between October 1, 2008, and September 30, 2009, equal 60% of the dollar value of the Lifted Inventory. City shall purchase all of the remaining items of Lifted Inventory from Contractor between October 1, 2009, and September 30, 2010. If City fails to purchase all of the remaining items of Lifted Inventory from AutoZone between October 1, 2009, and September 30, 2010, City agrees, on September 30, 2010, to purchase all remaining items of Lifted Inventory. If this Contract is terminated for any reason prior to October 1, 2010, then the City will purchase all of the remaining items of Lifted Inventory from Contractor with fifteen(15) calendar days of the time of termination of the Contract. Nothing herein shall prohibit the City from using and/or depleting its own inventory prior to acquiring any parts from Contractor. Both parties agree to use all reasonable efforts to work together to dispose of any identified obsolete parts in either the City's inventory or the Lifted Inventory. C. Contractor may choose to replace the items of Lifted Inventory with its own inventory. Contractor shall sell items of Lifted Inventory to the City, as-is with no warranty from Contractor, when requisitioned by City or as otherwise provided for in this Contract. All Lifted Inventory purchased by Contractor and sold to City will be sold at a fifteen percent (15%) mark-up between October 1, 2008, and September 30, 2009, and at a ten percent UcR- (10%) mark-up between October 1,2Q@t, and September 30,2QW. IT L.>x� 2rDi ; , 3 D. The City may by right, inspect the quality of materials, supplies and equipment and may reject any items which are reasonably determined not to meet original equipment standards and performance, provided that Contractor shall have the right to have third party testing performed on any material,supplies and equipment. E. All parts, supplies and equipment shall remain the property of the Contractor until purchased by the City. F. City represents that all Lifted Inventory complies with all Applicable Laws, including, but not limited to, environmental laws. Contractor shall not be required to purchase any item of Lifted Inventory which Contractor reasonably determines does not comply with all Applicable Laws, including,but not limited to, environmental laws. Contractor assumes no obligations relating to the failure of Lifted Inventory to comply with all Applicable Laws, including, but not limited to, environmental laws. City shall remain liable for the failure of Lifted Inventory to comply with all Applicable Laws, including, but not limited to, environmental laws. 8. REPORTING REQUIREMENTS A. Contractor shall provide all reports generated by City and/or Contractor's computer operating system upon request. B. Contractor shall properly invoice all parts at the time of sale/disbursement from the point of order to the point of delivery. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 VEXECUTIONCOPY 10 C. Contractor shall provide a detailed statement at the end of the each day and week showing all invoice numbers, equipment numbers, repair order numbers, account numbers, and the amounts purchased. D. Contractor shall enter any information into the City owned computer at the time of sale as required by ESD administration, including complete repair order information. 9 LABOR FORCE A. Contractor will staff Parts Distribution Centers with the personnel required to maintain the Parts Distribution Centers pursuant to the terms of the Contract. Contractor's personnel will fill orders and sell Inventory to City through the Parts Distribution Center located on each property. Staffing to be provided by Contractor includes a Project Manager and at least twenty-six (26) personnel to provide full-time coverage for parts operations and staffing at the Parts Distribution Centers, B. Contractor shall provide a list of Contractor's managers, assistant manager and key personnel located at the Parts Distribution Centers who are performing the services in this Contract to the City within fifteen (15) days of execution of this Contract. Notice to the City shall be provided if Contractor intends to hire managers or assistant managers located at the Parts Distribution Centers. Contractor shall allow the City an opportunity to participate in the hiring process for its managers or assistant managers located at the Parts Distribution Centers and shall provide reasonable notice of the time of such selection process. Contractor shall employ only such managers, assistant manager and key personnel at the Parts Distribution Centers who are careful, competent and fully qualified to perform the duties or tasks assigned to them and shall take appropriate action against any employees or subcontractors of Contractor who shall behave themselves in such manner as to be actionable or who neglect or refuse to comply with or carry out the directions of Contractor. 10. PERSONNEL STANDARDS A. Contractor shall furnish such qualified personnel as may be necessary to provide the services required in a safe, economical and efficient manner and agree to abide by Contractor's then- current employee handbook. B. Contractor shall provide suitable operational and safety training for all of its employees who utilize or operate vehicles or equipment. C. Contractor shall use commercially reasonable to assure that all employees present a neat appearance and conduct themselves in a courteous manner. Contractor shall regularly train its employees in customer courtesy, shall prohibit the use of loud or profane language. If any employee is found not to be courteous or not to be performing services in the manner required by the Contract, Contractor shall take all appropriate corrective measures. If City has notified Contractor of a complaint related to discourteous or improper behavior, AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.0G.08 V EXECUTIONCOPX II Contractor will take corrective action as necessary. D. Contractor shall designate qualified employees as supervisors. Supervisors will be available by radio or phone during the Contractor's hours of operation to handle calls and complaints from the City, or to follow up on problems and inspect Contractor's operations. E. All employees of the Contractor performing work under the Contract shall be uniformed, showing their association with the Contractor while working the Parts Distribution Centers. Contractor shall provide a list of current employees, contractors and subcontractors to City upon request. Il. WARRANTIES A. Contractor shall maintain warranty records of items sold to the City. B. Contractor and City agree that the sole warranty with respect to any non-AutoZone part sold by Contractor or any subcontractor pursuant to this Agreement shall be the written warranty of the manufacturer of any such part. Contractor makes no warranty for any equipment provided by Contractor to the City under this Agreement. CONTRACTOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LIFTED INVENTORY, HEAVY EQUIPMENT INVENTORY, OR PROCURED INVENTORY, INCLUDING, BUT NOT LIMITED TO, OFF ROAD AND SPECIALIZED INVENTORY, PARTICULARLY NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ALL INVENTORY IS SUPPLIED "AS IS" AND "WITH ALL FAULTS." Copies of the manufacturers' warranties are available upon request. C. Contractor shall use commercially reasonable efforts in assisting the City in dealing with all warranty providers and resolving any issues concerning warranties. D. With respect to On Demand Inventory, Contractor warrants that if any components of the On Demand Inventory fail due to defects in workmanship or materials, within one (1) year from the date of delivery, Contractor shall repair or replace, free of charge, all parts found defective. CONTRACTOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO ON DEMAND INVENTORY, INCLUDING, BUT NOT LIMITED TO, OFF ROAD AND SPECIALIZED INVENTORY, PARTICULARLY NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 12. ELECTRONIC COMPUTER SYSTEM A. Contractor shall maintain a computer system that will store all purchase transactions under this Contract for period of one (1) year. After one (1) year, Contractor shall transfer such AutoZone Contract for Supplies.Parts and Material at ESD Facilities CRR10.06.08 VEXECLM0NCOPY 12 records to disk or other electronic storage format and provide a copy to the City, upon City's written request. B. Contractor shall use its own computers at each Service Center to look up inventory, process sales and orders and to create reports for each Service Center as necessary to monitor monthly expenses as they pertain to the daily operation of the Service Center. Contractor shall retain all right, title and interest to all computers and related equipment and software provided by Contractor under this Contract and City specifically acknowledges and agrees that City obtains no right, title or ownership interest in, or license to use, the computers or related hardware and software by virtue of the presence of same in the Parts Distribution Centers. Contractor shall provide computer ordering and cataloging to each Service Center. C. Contractor's computer and operating system shall be compatible and work with the City's computer and operating system which includes but is not limited,except for Lifted Inventory, to the following capabilities: invoicing, cataloging, bar coding of On Demand Inventory only, master interchange, inventory control, custom pricing, parts on order and backorder information, lost sales/distribution reports and analysis, automatic stock levels by part, parts cost and the ability to check stock and order from any distribution center in the United States. D. Contractor computer system shall be capable of setting as many account numbers as deemed necessary to keep City departments separate and/or supply codes audited. E. The computer system shall remain property of the Contractor, but all purchasing and inventory data and information shall be sent to the ESD information system computer upon request by the City and/or in the event of termination of this Contract. F. Contractor's computer system shall have and maintain complete inventory control and invoicing function as well as cataloging and part:number interchange capabilities. G. Contractor's computer shall have the capability of providing and printing the following information: 1. Invoicing, cataloging and bar coding,as applicable; 2. Master interchange and custom pricing; 3. Parts in stock, on order or backorder information; 4. Lost sales report and analysis; 5. Automatic stock level by part; and 6. Parts cost. H. Contractor's computer system must have the ability to check stock and order from any of the Contractor's supply chain. 1. Contractor's computer system must provide all daily and weekly reports generated by Contractor's data computer upon request by authorized ESD personnel and properly invoice all parts at time of sale and provide a detailed statement at weeks end, showing all invoice numbers and amounts purchased. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR10.06.08 V EXECUTIONCOPY 13 I Contractor's computer system shall be readable by FASTER, the computer system used by the City and integrated with the Contractor's system inventory control plan as of the Effective Date of the Contract. 13. EVENTS OF DEFAULT BY CONTRACTOR A. The following shall constitute events of default on the part of the Contractor except to the extent caused by the occurrence of an uncontrollable circumstance or City's fault unless otherwise specified herein: 1. Failure by the Contractor to perform any material obligation as defined in section 2 of this Contract, and continuance of such failure after (i) written notice thereof has been provided by the Director of Equipment Services specifying such failure and requesting that such condition be remedied, and (ii) Contractor's failure to cure the default or immediately initiate and diligently pursue reasonable action and cure such non performance within fifteen(15) days after receiving notice from the Director(provided, if such failure is of a nature that it cannot be cured within such fifteen (15) day period, Contractor shall not be in default if Contractor commences the curing of such failure within such fifteen (15) day period, and diligently pursues the curing thereof and both City and Contractor agree that the failure cannot be cured in fifteen(15)days);or 2. The Contractor being insolvent or bankrupt or ceasing to pay its debts as they mature or making an arrangement with or for the benefit of its creditors or consenting to or acquiescing in the appointment of a receiver trustee, or liquidator for a substantial part of its property; or a bankruptcy, winding up, reorganization, insolvency, arrangement, or similar proceeding instituted by the Contractor, under the laws of any Governmental Body or against the Contractor, if the Contractor does not take the appropriate action to dismiss said proceedings; which proceedings have not been dismissed within ninety (90) days of the institution of such proceedings; or any action or answer by the Contractor approving, consenting to, or acquiescing in, any such proceedings; or the event of any distress, execution, or attachment upon the property of the Contractor which shall substantially interfere with its performance hereunder. B. City shall, as soon as practical, notify Contractor of any failure on the Contractor's part to comply with the terms of this Contract. After receipt of notice from the City of an event of default set forth in Section 13.A above, Contractor shall acknowledge receipt of such notice by telephone, facsimile, or email within three (3) business days. Contractor shall provide the City with verbal notice of what corrective action has or shall be taken by the Contractor and shall follow up with written notice describing the same along with any additional relevant information, within forty-eight (48) hours. Failure to provide acknowledgement of receipt of notice, or plan of corrective action, within the above mentioned time period(s) shall constitute an event of default by the Contractor. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 VEXEC UTIONCOPY 14 14. EVENTS OF DEFAULT BY CITY A. The following shall constitute events of default on the part of the City, except to the extent excused by the occurrence of an uncontrollable circumstance or Contractor's fault unless otherwise specified herein: 1.A failure by City to timely perform any material obligation as specified in the City Scope of Services in Section 3 under the terms of this Contract,and the continuance of such failure for a period of thirty(30) days after written notice thereof has been provided by the Contractor specifying such failure and requesting that such condition be remedied if City does not either cure the default or initiate and diligently pursue reasonable actions to cure such non-performance; or 2. City being insolvent or bankrupt or ceasing to pay its debts as they mature or making an arrangement with or for the benefit of its creditors or consenting to or acquiescing in the appointment of a receiver,trustee or liquidator for a substantial part of its property; or a bankruptcy, winding up,reorganization, insolvency, arrangement or similar proceeding instituted by City under the laws of any jurisdiction or against City, if City does not take appropriate action to dismiss said proceedings, which proceedings have not been dismissed within ninety(90)days of the institution of such proceedings; or any action or answer by City,approving of, consenting to,or acquiescing in,any such proceedings; or the levy of any distress, execution or attachment upon the property of City,which shall substantially interfere with its performance hereunder. B. Contractor shall, as soon as practical, notify City of any failure on the City's part to comply with the terms of this Contract. After receipt of notice from the Contractor of an event of default, City shall acknowledge receipt of such notice by telephone, facsimile, or email within three (3) business days. City shall provide the Contractor with verbal notice of what corrective action has or shall be taken by the City and shall follow up with written notice describing the same along with any additional relevant information, within forty-eight (48) hours. Failure to provide acknowledgement of receipt of notice, or plan of corrective action, within the above mentioned time period(s) shall constitute an event of default by the City. 15. COMPLAINTS AND NON-PERFORMANCE A. All service complaints received shall be directed to Contractor and Contractor shall take steps for the complaints to be resolved (or resolution initiated) within twenty-four (24) hours, excluding non-working days and hours. When a complaint is received on the day preceding a holiday or a weekend, Contractor will begin addressing the complaint on the next calendar day. B. The Director of Equipment Services shall notify Contractor of each complaint reported to the City throughout each day. It shall be the duty of Contractor to take whatever steps may be necessary to remedy the cause of the complaint and notify the Director of its disposition AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR10.06.08 VEXECUTIONCOPY 15 within twenty-four (24) hours, excluding non-working days and hours, after receipt of the complaint by Contractor. 16. TERMINATION A. Except for as provided for in Section 5.13., all work and services of this Contract may be suspended or terminated on written order by the non-defaulting party due to an Event of Default pursuant to Sections 13 or Section 14 hereof. If this Contract is terminated for any cause or causes, Contractor shall immediately discontinue performance under this Contract. Contractor agrees and understands that there is no guaranteed minimum purchase amount guaranteed by City. B. The City may terminate this Contact if it determines that a proposed price increase or discount structure change by Contractor pursuant to Section 5.B. is not in the City's best interest. In such event, the City shall provide thirty (30) days prior written notice to Contractor of such termination no later than sixty-one (61) days after notice is given by Contractor of the proposed price increase or discount structure change. C. Upon termination of this Contract, Contractor may but is not obligated to,make available to the City for purchase any or all inventory owned by Contractor located in the Parts Distribution Center at an agreed upon price. City shall have no obligation to purchase such inventory. 17. INDEPENDENT CONTRACTOR It is expressly understood and agreed that Contractor shall perform all work and services described herein as an independent contractor and not as an officer, agent, servant or employee of the City; that Contractor shall have exclusive control of and the exclusive right to control the details of the services and work performed hereunder, and all persons performing the same; and shall be solely responsible for the acts and omissions of its officers, agents, employees, and contractors; that the doctrine of respondeat superior shall not apply as between City and Contractor, its officers, agents, employees and contractors; and that nothing herein shall be construed as creating a partnership or joint enterprise between City and Contractor. No person performing any of the work and services described hereunder shall be considered an officer, agent, servant or employee of the City. 18. INDEMNIFICATION A. CONTRACTOR SHALL RELEASE, INDEMNIFY, HOLD HARMLESS, REIMBURSE AND DEFEND CITY, ITS OFFICERS, AGENTS, AND/OR EMPLOYEES FROM ANY LOSS, DAMAGE, LIABILITY OR EXPENSE FOR DAMAGE TO OFFICERS, AGENTS OR EMPLOYEES OF CONTRACTOR OR SUBCONTRACTORS, TO THE EXTENT THE SAME ARISE OUT OF THE AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 V£XECUTIONCOPY 16 INTENTIONAL. OR NEGLIGENT ACTS, ERRORS OR OMISSIONS OF CONTRACTOR OR ITS OFFICERS, AGENTS, EMPLOYEES OR SUBCONTRACTORS IN THE PERFORMANCE OF THIS CONTRACT. B. Both parties agree that Contractor shall not be responsible for the installation of any parts purchased or supplied by Contractor. City agrees that it shall release Contractor from any claims or action brought against Contractor for the installation of such parts, provided that Contractor shall be responsible to the extent that Contractor has caused or contributed to, either by its own intentional or negligent acts, any loss or damage relating to such installation. C. UPON LEARNING OF A CLAIM, LAWSUIT, OR OTHER LIABILITY WHICH CONTRACTOR IS REQUIRED HEREUNDER TO INDEMNIFY, THE CITY SHALL PROVIDE CONTRACTOR WITH PROMPT NOTICE OF SAME. D. THE OBLIGATIONS OF THE CONTRACTOR AND CITY UNDER THIS SECTION SHALL SURVIVE THE EXPIRATION OF THIS CONTRACT AND THE DISCHARGE OF ALL OTHER OBLIGATIONS OWED BY THE PARTIES TO EACH OTHER HEREUNDER. 19. LICENSES PERMITS,AND FEES Contractor agrees to obtain and pay for all licenses, permits, certificates, inspections and all Governmental Approvals and other fees required by Applicable Law or otherwise necessary to perform the services prescribed hereunder. 20. INSURANCE Contractor shall not commence work under this Contract until it has obtained all the insurance required under the Contract, and such insurance has been approved by the City. Contractor shall keep the required insurance in force throughout the term of this Contract. A. EMPLOYERS EXCESS INDEMNITY, including Injury Benefits and Employers Liability: Contractor shall maintain, during the term of this Contract, Employers Excess Indemnity, including Injury Benefits and Employers Liability at$10,000,000 limit per occurrence. B. GENERAL LIABILITY INSURANCE (CGL): Contractor shall procure and shall maintain during the term of this Contract a Commercial General Liability Insurance Policy at a minimum limits as One Million Dollars ($1,000,000) per occurrence with an aggregate of Two Million ($2,000,000) Dollars aggregate. Coverage shall include, but not be limited to, the following: premises/operations, independent contractors, products/completed operations, personal injury and contractual liability. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR10.06.08VEXECUTIONCOPY . 17 C. AUTOMOBILE INSURANCE: Contractor shall procure and maintain during the term of this Contract Comprehensive Automobile Liability Insurance covering all vehicles involved with Contractor's operations under this Contract-owned, hired and non-owned. The minimum limits of liability coverage shall be in the amount of One Million Dollars ($1,000,000) per occurrence combined single limit, or $250,000 bodily injury per person, $500,000 bodily injury each accident and $100,000 property damage during the effective dates of Contract and any renewal period. The following shall pertain to all applicable policies of insurance(A. through B.)listed above: 1. Additional Insured Clause: "The City of Fort Worth, its officers, agents, employees, and representatives are added as additional insureds as respects operations and activities of, or on behalf of the named insured, performed under Contract with the City of Fort Worth." An equivalent clause may be acceptable in the discretion of the City. 2. Subcontractors shall be covered under the Contractor's insurance policies or they shall provide their own insurance coverage; and, in the latter case, documentation of coverage shall be submitted to the Contractor prior to the commencement of work and the Contractor shall deliver such to the City. 3. Prior to commencing work under this Contract, the Contractor shall deliver to the City of Fort Worth insurance certificate(s) documenting the insurance required and terms and clauses required. 4. Each insurance policy required by this Contract shall contain the following clauses: "This insurance shall not be canceled, limited in scope or coverage, or non-renewed until after thirty (30) Days prior written notice has been given to the Director of Equipment Services, City of Fort Worth, 4100 Columbus Trail, Fort Worth, Texas 76133." Note: Written notice can be by Contractor or insurance company. 5. The insurers for all policies must be approved to do business in the State of Texas. . All insurers must have a minimum rating of A-:VII in the current A.M. Best Key Rating Guide. 6. The deductible or self-insured retention (SIR) shall be reflected on the certificate of insurance. 21. NOTICES Any notices (unless otherwise specified herein), bills, invoices or reports required by this Contract shall be sufficient if sent by the parties in the United States mail, postage paid, to the address noted below: AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRP I0.06.08VEXECUTIONCOPY is If notices and reports to the City: Wayne Corum, Director Equipment Services Department City of Fort Worth 4100 Columbus Trail Fort Worth,Texas 76133 If bills and invoices to the City: ATTN: Contract Compliance Equipment Services Department City of Fort Worth 5021 James Avenue Fort Worth,Texas 76115 If to the Contractor: AutoZone Texas, L.P. 123 S. Front Street, Dept. 9011 Memphis,Tennessee 38103 ATTN: Executive Vice President- Commercial With a copy to: AutoZone Texas, L.P. 123 S. Front Street,Dept. 8074 Memphis,Tennessee 38103 ATTN: General Counsel 22. CUMULATIVE REMEDIES The rights and remedies granted in this Contract are cumulative,and the exercise of such rights shall be without prejudice to the enforcement of any other right or remedy authorized by law or this Contract. No waiver of any violation shall be deemed or construed by a court of law or an arbitrator to constitute a waiver of any other violation or other breach of any of the terms, provisions, and covenants contained herein. 23. REMEDIES FOR BREACH The parties agree that, except as otherwise provided herein with respect to termination, in the event that either party breaches this Contract,the other party may exercise any legal rights it has under this Contract under the security instruments and under Applicable Law to recover damages or to secure specific performance, and that such rights to recover damages and to secure specific performance shall ordinarily constitute adequate remedies for any such breach. Neither party shall have the right to terminate this Contract for cause except upon the occurrence of an event of default unless otherwise stated herein. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.05 V EXECU TIONCOPI 19 24. NO WAIVER OF RIGHTS No failure by the City or by the Contractor to insist upon the strict performance of any term, covenant, Contract, provision, condition or limitation of this Contract or to exercise any right or remedy hereunder, and no acceptance by the City or the Contractor of full or partial payment during the continuance of any such breach, shall constitute a waiver of any such breach or of such term, covenant, Contract, provision, condition or limitation. No term, covenant, Contract, provision, condition or limitation of this Contract to be kept, observed or performed by the City or by the Contractor, and no breach thereof, may be waived, altered or modified except by a written instrument executed and acknowledged by and delivered to the City and the Contractor. No waiver of any breach shall affect or alter this Contract, but each and every term, covenant, Contract, provision, condition and limitation of this Contract shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. This Contract may be terminated only by a written instrument of termination executed by the appropriate party and delivered to the non-terminating party(except by expiration of the term of this Contract). 25. SURVIVAL OF CERTAIN PROVISIONS UPON TERMINATION All representations and warranties of the parties contained in this Contract, the Contractor's indemnity obligations in this Contract with respect to events that occurred prior to the termination,the rights and obligations of the parties hereto pursuant to all other provisions of this Contract that so provide shall survive the termination of this Contract. No termination of this Contract shall (1) limit or otherwise affect the respective rights and obligations of the parties hereto accrued prior to the date of such termination, or(2) preclude either party from impleading the other party in any legal proceeding originated by a third-party as to any matter occurring during the term of this Contract. 26. RIGHT TO AUDIT Until the expiration of three(3)years after the final payment under this Contract,the City shall have access to and the right to examine any directly pertinent books, documents, papers and records of the Contractor involving transactions relating to this Contract. Contractor further agrees to include in all its subcontracts hereunder a provision to the effect that the subcontractor agrees that the City shall,until the expiration of three(3)years after final payment under the subcontract,have access to papers and records of such subcontractor involving transactions relating to the subcontract. The term"subcontract" as used herein includes purchase orders. 27. GOVERNMENTAL POWERS AND IMMUNITIES It is understood and agreed that, by execution of this Contract, City does not waive or surrender any of its governmental powers or immunities. Contractor acknowledges that the City is a AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR10.06.08VEXECUTIONCOPY 20 Governmental Body and as such has certain rights, powers and duties that may affect the Contractor's rights or obligations under the Contract. The Contractor agrees that no action by the City acting in its governmental capacity shall be construed as a breach or default by the City under this Contract, nor shall any such action excuse the Contractor from performance of its obligations under this Contract; provided, however, if such action constitutes an uncontrollable circumstance, the Contractor may assert any rights it may have under this Contract as is permitted for any other uncontrollable circumstance. 28. COMPLIANCE WITH LAWS Contractor, its officers, agents and employees shall abide by and comply with all Applicable Law, federal, state and local, including the City's charter and all ordinances, rules and regulations of the City of Fort Worth. It is agreed and understood that, if City calls the attention of Contractor to any such violations on the part of Contractor, its officers, agents and employees then Contractor shall immediately desist from and correct such violation. 29. NON-ASSIGNMENT Contractor shall not assign, transfer, sublet, convey, or otherwise dispose of the Contract or the rights, title, or interest in or to the same or any part thereof without the previous consent of the City Council with concurrence of the surety. In the event Contractor does, without such previous consent, assign, transfer, sublet, convey or otherwise dispose of the Contract or of the right, title or interest therein or any part thereof, City may, at its discretion, terminate the Contract in accordance with this Section. Consent will not be withheld unreasonably in the case of a proposed assignment to an affiliate of Contractor, but may be withheld for any reason or for no reason in the case of a proposed assignment by Contractor to a non-affiliate, provided that Contractor and surety shall not be released from their respective obligations hereunder. In the event of an assignment of any duty required under this Contract, Contractor shall assume responsibility for performance of that duty including all liabilities pursuant to this Contract. The City may not assign its rights and privileges under this Contract without the prior written consent of the Contractor which shall not be unreasonably withheld. 30. SUCCESSORS AND ASSIGNS All of the terms, covenants, and Contracts contained herein shall be binding upon and shall inure to the benefit of successors and assigns of the respective parties hereto. 31. VENUE Should any action, whether real or asserted, at law or in equity, arise out of the terms and conditions of this Contract,venue for said action shall be in Tarrant County, Texas. AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR I0.06.08 VEXEUMONCOPY 2I 32. SAVINGS CLAUSE In case any one or more of the provisions contained in this Contract shall, for any reason,be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Contract; this Contract shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 33. NON-APPROPRIATION In the event that no funds or insufficient funds are collected, appropriated and budgeted or funds are otherwise unavailable for payment of amounts due hereunder by City to Contractor, City shall notify Contractor and this Contract shall terminate on the last day of the fiscal period for which appropriations were made without penalty or expense to City of any kind whatsoever, except as to the payment of amounts due and payable for which appropriations have been made for said fiscal period. City covenants that it will provide Contractor as much notice as possible of this contingency and shall include in its notice an expected payment date. Provided, however, that this Section is not intended to grant to the City an independent ground for termination of this Contract separate and apart from any grounds for termination for non-appropriation or non-availability of funds which would be provided to City by reason of Tex. Const. Ann. Art. 11, Sec. 5 and 7. 34, CONTRACT CONSTRUCTION The parties acknowledge that each party and, if it so chooses, its counsel have reviewed and revised this Contract and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party must not be employed in the interpretation of this Contract or any amendments or exhibits hereto. 35. NO THIRD-PARTY BENEFICIARIES This Contract shall inure only to the benefit of the parties hereto and third persons not privy hereto shall not, in any form or manner, be considered a third party beneficiary of this Contract. Each party hereto shall be solely responsible for the fulfillment of its own contracts or commitments. 36. NO JOINT VENTURE. PARTNERSHIP AGENCY This Contract will not be construed in any form or manner to establish a partnership, joint venture or agency, express or implied, nor any employer-employee, borrowed servant or joint AutoZone Contract for Supplies.Parts and Material at ESb Facilities CRR 10.06.05 VEXECUTIONCOPY 22 enterprise relationship by and among the parties. The City shall be an independent contractor and shall be responsible at all times for directing its employees in the course of their duties. Contractor shall be responsible at all times for directing Contractor's employees in the course of their duties. IN WITNESS WHEREOF, The parties hereto have executed this Contract this_ 151-day of October, 2008. CITY OF FORT WORTH,TEXAS AUTOZONE,TEXAS,L.P. By:AZ Texas Operations,LLC,its general partner By:AutoZone Stores,Inc.,its sole member By: C am16 _ Karen L.Montgomery Name: ei'1 1C'`` C g4°,(v a Assistant City Manager/CFO Title: re Jf�1! s. C cc> Date Signed:_ j Q f — (� 0 Date: By: Name: ,r f- D GI se.ti Title: VEVO Date: ►t;• i 3 O R3 ATTEST: COMPANY'S WITNESS: Mar Hendrix City Secretary APPROVED AS TO FORM CORPORATE SEAL: AND LEGALITY: Christy Lk.Reynolds Assistant City Attorney OFFICIAL RECORD Con act Authorization CITY SECRETARY I 1('1 0? FT.WORTH,TX Date AutoZone Contract for Supplies.Parts and Material at ESD Facilities CRR10.06.08V EXECUTIONCOPY 23 !t ti.'. Exhibit A Contractor's Response to the RFP AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 V EXECUT IONCOPY 24 123 Front Street Memphis, TN 38103 April 10, 2008 Mr. Kevin Karle Senior Buyer City of Ft Worth Purchasing Division 1000 Throckmorton St Ft Worth,TX 76102 RE: City of Ft Worth RFP Reply No. 08-0016(Parts,Supplies,Staffing&Management for On-Site Vehicle &Equipment Maintenance Parts Facilities) Dear Mr. Karle: Thank you for the opportunity to respond to the request for proposal for the City of Ft Worth Parts, Supplies, Staffing &Management for On-Site Vehicle & Equipment Maintenance Parts Facilities. On behalf of everyone at AutoZone and our Public Sector sales division, it is our sincerest desire that the City of Ft Worth will recognize the value, convenience, and savings represented by the AutoZone reply. As the exclusive automotive parts, services, and diagnostic software provider under the U.S. Communities Group Cooperative Purchasing Alliance, we believe that AutoZone is capable of providing our public sector customers with a total _. procurement solution that provides maximized value for your City. Pursuant to our contractual commitments through U.S. Communities,AutoZone is obligated to provide our U.S. Communities pricing and services offering to all of our public sector and government agency accounts. In order to support our response, we have provided the following documents attached with our response package to your offering: • AutoZone Annual Report • AutoZone Organizational Chart • Copy of-our U.S. Communities contract through City of Charlotte-Mecklenburg County • City of Austin Testimonial • Master Inter-governmental Cooperative Purchasing Agreement (MICPA), already signed by the City of Ft Worth • Copy of the group cooperative purchasing governing legislation for Texas • Affidavit • Sample Reports Thank you in advance for your consideration and time-investment for reviewing our response to your offering. U.S. Communities is the largest group cooperative purchasing group in the United States with over 31,000 participating government agencies. We sincerely.believe that our program-offering is the best in the industry. Please feel free to contact Eric Schultz or myself for any questions or requests. Most Respectfully Yours, Cristopher G Hollingsworth Director of National Sales REPLY REQUEST FOR PROPOSAL City of Ft Worth TX Parts, Supplies, Staffing & Management for On-Site Vehicle & Eguipment Maintenance Parts Facilities RFP # 08-0016 Respectfully Submitted: April 10, 2008, by 1:30pm CST Company Name: AutoZone Texas LP Federal Tax IQ: 62-1611061 Contact: Eric Schultz Address: 1801 Prince Meadow Dr Colleyville, TX 76034 Phone: (214) 552-8317 Fax: Call for fax Proprietary Information 17.1.1 TABLE OF CONTENTS 18.0 Statement of Qualifications 19.0 Organization 20.0 AutoZone's Experience 21.0 Proposed Methodology & Pricing 22.0 Financial Information 23.0 Authorized Negotiator 24.0 Competitive Selection 25.0 Proposal Evaluation Factors 26.0 Proposal Evaluation Matrix 1.0 Background 2.0 Purpose 3.0 Statement of Needs 4.0 Completion Timeframe 5.0 General Requirements - 6.0 Maintenance Summary 7.0 Requirements 8.0 Warranties 9.0 Electronic Computer System 10.0 Additional Requirements 11.0 Terms of Agreement 12.0 Escalation Clause 1.0 Job Function 2.0 Job Duties 3.0 Managing/Protecting Offeror's Assets 4.0 Personal Characteristics 5.0 Additional City Duties & Responsibilities 6.0 Implementation Timetable 7.0 Hours of Operation 8.0 Bond Requirements 9.0 Executed Contract ATTACHMENTS Proprietary Information a irfr` 18.0 STATEMENT OF QUALIFICATIONS History of AutoZone, Inc. AutoZone`s history is a rich one, marked by many milestones— new name, new store designs, new opportunities and new countries. 1979 —The first AutoZone was established in Forrest City, AR under the name of Auto Shack. 1984 —AutoZone became the first auto parts provider to create a quality control program for all parts offered to customers. 1987 — Name changed from Auto Shack to AutoZone. WITT-]R was introduced representing the first electronic catalog and warranty tracking system in the auto parts industry. 1989— AutoZone implements the first SMS stocking system for the auto parts industry in order to enhance the "in-stock"condition of parts for our customers. 1991 —AutoZone stock (AZO) debuts on the New York Stock Exchange. Additionally, AutoZone becomes the first auto parts provider to register all customer warranties into a single database. We are still the only provider of this service today in the auto parts industry. 1994 —The AutoZone satellite broadcast system debuts, which allows stores and locations across the country to access product inventory from multiple shipping locations. 1995 —The 1,000"' AutoZone is opened. Duralast and Duralast Gold batteries are introduced to the auto parts industry. Today, Duralast and Duralast Gold represent the best selling batteries in the auto parts industry. 1996 —The new www.autozone.com website is launched along with a dedicated vertical management team for the commercial automotive parts market. AutoZone acquires ALLDATA, the leading software provider of automotive diagnostic and repair information. Proprietary Information 1998 —AutoZone acquires and converts nearly 800 locations from existing auto parts providers in addition to entering Mexico. 1999 —AutoZone obtains Fortune 500 ranking for the first time. AutoZone has improved its ranking on the Fortune 500 list every year since the initial listing in 1999. 2002 —AutoZone introduces the"hub-feeder-satellite" supply chain management program in order to enhance the amount of availability of customer products. 2003 —AutoZone introduces the Duralast tool line. Additionally,AutoZone partners with CarAfax in order to place AutoZone support personnel and distribution "storesnon-site inside CarMax facilities 2004 - Founder Pitt Hyde inducted into the Automotive Hall of Fame. Pitt set a precedent as the first aftermarket retailer to be inducted. 2007—AutoZone exceeds $6.2 billion in revenue for the first time and extends its lead as the largest provider in the auto parts industry. The 4,000t' AutoZone location is opened in Houston, Texas. 2008 —AutoZone public sector sales division awarded the exclusive automotive parts contract for the State of New Jersey through the U.S. Communities Group Purchasing Alliance, AutoZone is the recipient of many quality awards (provided upon request) and we require all of our vendors to be ISO 9001 and QS9000 certified. AutoZone currently employs over 55,000 AutoZoner's across North America (over 2,000 in Florida). AutoZone is a class"C"corporation incorporated in the state of Nevada. As a publicly traded company, AutoZone has a diverse ownership group representing a wide variety of investors and management groups from across the world. AutoZone is headquartered at: 123 S. Front St Memphis, TN 38103 AutoZone's Experience in Parts Inventory Management - AutoZone has been actively engaged with multiple customers and national account groups across the country for the last 8 years with Integrated Business Solutions (IBS). We currently manage over 50 IBS locations for our commercial customers across the United States. Based upon on our experience under managed IBS, we have found that the most successful approach is based upon providing a framework for the IBS model to our customer as a baseline Proprietary Information t^ starting point. The most critical step in the process is to establish the needs and goals from our customer in order to customize the IBS program inside the framework. This will make certain our IBS solution accomplishes the stated goals by our customers. Once the goals have been established, AutoZone and the customer mutually establish milestone dates and the executables required in order to reach those goals. The final step in the planning process is to build out the goals, executables and milestone targets into a site-specific business deployment plan for the IBS solution. Through this process, AutoZone and the customer establish an enhanced business relationship, co-ownership of the steps necessary in order to reach the highest levels of success, and a working operations deployment plan with shared accountabilities that are driven by the milestone target dates. Once this process has been completed, AutoZone and the customer meet regularly to review progress on the deployment plan during the build- out phase of the IBS project. Upon completion of the IBS start-up deployment phase, AutoZone and the customer are able to transition into an operation's plan and review- process that executes the necessary steps for reaching the original customer defined goals. Comparable Projects - Carmax - Durate, CA (example — multiple sites across the country) • On-site personnel: 23-25 • Procurement of approximately 97% of all product needs to include core as well as AZ outside buy items • Operating hours = Monday - Friday 18 - 20 hours a day / Saturday 12 - 14 hours • Annual Parts Volume: $4.8mm • Contractual performance measurements = Carmax supplied KPI's (Key Performance Indicators) to include product cost, fill times and waste control per vehicle (measured weekly) • Wes Barton - wes barton@carmax.com — (626)303-2703 • Inventory forecasting models = Customer supplies data on vehicles weekly. Customer history (excel files). Standard AutoZone IM system modeling L2 Auto - Lubbock,TX • On-site Personnel: 6-8 • Procurement of approximately 99% of all product needs to include core as well as AZ outside buy items • Operating hours = Monday - Friday 12 - 14 hours a day / Saturday 8 - 10 hours • Annual Parts Volume: $3.Omm • Jerry O'Dell - jodell@)L2.com — (860)849-1657 Proprietary Information • Inventory forecasting methods = Customer supplies data on vehicles weekly. Standard AutoZone IM system modeling. United Auto Recovery - Memphis, TN • On-site Personnel: 3-4 • Procurement of approximately 80% of all product needs to include core as well as AZ outside buy items. • Operating hours = Monday - Friday (10 - 12 hours) / Saturday (6 - 10 hours) • Annual Parts Volume: $400k • Kevin Wilson - kwilsonCa unitedautorecovery.com — (901) 795-5044 • Inventory forecasting methods = Standard AutoZone IM system modeling. ID Byrider - Pinellas Park, FL (multiple sites across country) • On-site Personnel: 3-4 • Procurement of approximately 76% of all product needs to include core as well as AZ outside buy items. • Operating hours = Monday - Friday (10 - 12 hours) • Annual Parts Volume: $1.8mm • David Borshoff- davidb2(&idbyrider.com — (317) 696-7740 • Inventory forecasting methods = Standard AutoZone IM system modeling. 7DB Sales of Knoxville, Inc. - Knoxville, TN &Charlotte, NC • On-site Personnel: 2-3 per location • Procurement of approximately 75% of all product needs to include core as well as AZ outside buy items. • Operating hours = Monday - Friday (10 - 12 hours) • Annual Parts Volume: $750k • Inventory forecasting methods = Standard AutoZone IM system modeling • Natisha Sims— nsims aC)idbyrider.com — (865) 684-2211 Proprietary Information IMF- 19.0 ORGANIZATION 19.1 AutoZone Texas, LP 123 S Front St Memphis, TN 38103 19.2 AutoZone has 12 locations in Ft Worth, TX, and more than 150 employees. Furthermore, AutoZone has 39 stores and more than 475 employees in Tarrant City. 6615 MEADOWBROOK FORT WORTH TX 76112-0000 2733 LAS VEGAS TRA FORT WORTH TX 76116-0000 3208 N MAIN ST FORT WORTH TX 76106-5948 3200 RACE ST FORT WORTH TX 761 1 1-0000 929 E. BERRY ST FORT WORTH TX 76110-4441 3125 MANSFIELD HWY FORT WORTH TX 76119-0000 2000 EPHRIHAM AVE FORT WORTH TX 76106-6636 6635 MCCART AVE FORT WORTH TX 76133-0000 2900 W CLEBURNE RD FORT WORTH TX 76110-0000 7500 HIGHWAY 80 W FORT WORTH TX 76116-6412 6712 RUFE SNOW DR FORT WORTH TX 76148-2354 4331 E LANCASTER FORT WORTH TX 76103-3224 19.3 AutoZone is a class"C"corporation incorporated in the state of Nevada 19.4 AutoZone Texas, LP is licensed to operate in Texas 19.5 AutoZone is unaware of any pending civil or criminal actions against the company related to contracting or contracts specific to RFP 08-0016 19.6 AutoZone is unaware of any anticipated merger/acquisition or transfer of ownership, management reorganization, or departure of key personnel within the next year that would affect its ability to fulfill the contract requirements Proprietary Information 20.0 AutoZone's Experience 20.1 —AutoZone has over 50 Integrated Business Services (IBS) models deployed throughout the United States with some notable references provided in the RFP response. These models vary in size, scope and scale from the deployment of onsite personnel who manage onsite part storerooms to the integration of AutoZone personnel in the process of providing fleet management services. AutoZone will deploy"best practices" operating models for the City of Fort Worth based upon our cumulative IBS modeling experience. Prior to the exclusive US Communities contract award to AutoZone, our company was specifically focused on partnering with private sector fleet and parts management companies. These organizations represent the best match for AutoZone's business analytics model of cost benefit goal setting based upon efficient resource productivity improvement contracts. In the last ten years, AutoZone has become aware of the adoption of similar"best practices"throughout the United States by innovative and leading edge municipal governments. AutoZone was proactive in seeking the US Communities contract award for the purpose of offering our"learned" private industry knowledge to our public sector customers against their desire to maximize cost efficiencies in their operating models. Finally, AutoZone feels that public sector customers will benefit from the competitive addition of AutoZone (the largest automotive parts provider) into the public sector IBS industry that has been defined by limited offerings from large scale and capable solution providers. 20.2 — Publicly acknowledged IBS references provided previously in the RFP response. Should the City of Ft Worth decide to engage in an IBS contract negotiation based upon our US Communities reply, AutoZone will directly connect City of Ft Worth officials with multiple government customers who have agreed to provide unbiased AutoZone reviews. For the purpose of respecting the work hours of our existing reference customers, AutoZone has agreed to provide the contact names after an agency has made a determination to review the AutoZone IBS onsite model based upon our US Communities contract commitments. 20.3 — AutoZone has been servicing government accounts through various models since it was established in 1979. These relationships have varied from an "on-call" parts provider to "exclusive" product provisioning relationships. As detailed in our reply to 20.1, AutoZone has made a strategic decision to start offering our IBS models to the public sector under our US Communities contract since the exclusive award to AutoZone. Proprietary Information Q 20.4—AutoZone uses a multi-channel and company-owned supply chain model for the purpose of providing light and medium duty automotive parts to our locations throughout North America. At any given time, our supply chain has the ability to leverage over $1.3 billion in onsite inventory that is deployed throughout 4,100+ company-owned locations in a DC-to-Hub-to-Spoke location model. For the purpose of supporting our IBS customers, AutoZone engages a three tiered sourcing model made up of our company-owned supply chain (supply chain), manufacturer/vendor direct sourcing/shipping (hot shot) and third parry supply chain supported by national and local providers (outside buys). All of the sourcing models listed above are governed by the pricing guarantees and pricing formulary commitments incorporated into our US Communities agreement. These national cooperative pricing commitments guarantee that all of our public sector customers will always receive the best government price on every item sourced through AutoZone. As part of the IBS contract engagement process under the master US Communities agreement, AutoZone engages in a 1-2 year legacy parts procurement review with our public sector customers in order to create a master purchasing history. Once the purchasing history has been created (and prior to implementation), AutoZone establishes a supply chain channel for every part in the purchasing history file through one of our three supply sourcing models. 20.5 - AutoZone maintains a large third party supply chain relationship model that includes national providers and local market specialists in order to support our"one- stop" service models. At any given time, our AutoZone IBS servicing locations could be acquiring parts from our third party supply chain that represent up to 40% of the total parts usage at the IBS location. Unless the part required is special order, AutoZone will maintain all delivery service commitments defined in the US Communities//Charlotte agreement irrespective of the supply chain source used for acquisition of the part. In order to leverage total purchasing power, AutoZone employs local market specialist who manage our third party vendor relationships based upon the total needs of all AutoZone customers (onsite, delivery and pick-up) within a defined MSA (Metropolitan Statistical Area). AutoZone maintains confidentiality agreements with many of our third party supply chain providers. Under our US Communities agreement, we are able to provide the names and contact information of our third party providers based upon the request of our customer. AutoZone will work with the City of Ft Worth in order to set- up direct contact meetings with the third party provider categories identified by the City for review. 20.6 —Through our various IBS engagements, AutoZone provides a wide variety of parts service support. This includes our innovative"tool loaner" program in which we provide our public sector customers with high cost tools through an onsite "loan" Proprietary Information R program for the purpose of lowering operating costs and preserving customer capital expenditures. For our customers who are OEM warranty repair certified, AutoZone will manage the parts acquisition, return, recovery processes in addition to providing support for warranty labor service claim submissions. 20.7 — AutoZone has been engaged in the combined parts and parts service industry from the day of our incorporation in 1979. Specific to our IBS onsite support models, we have been providing all onsite services for most of our IBS customers over the last ten years. Services include OEM warranty support, specialty parts acquisition, tool programs, stocking programs, recycling and recovery services in addition to all of the necessary support activities required for a productive IBS installment. 20.8 — As part of our US Communities/Charlotte master agreement, AutoZone has agreed to extend "best in class" guaranteed delivery response times, maximized commercial warranties, no core charge operations, onsite stocking programs, guaranteed lowest price contract and dedicated local service personnel to all of the public sector customers who engage AutoZone under our US Communities agreement. In addition to the service commitments incorporated into the US Communities agreement, local governments have the option of adding local terms and conditions required by their local statutes that can compliment and/or override contract provisions within the Charlotte/US Communities master agreement. In all cases, the local customer benefits from all the contract commitments under the US Communities agreement in addition to the requested local terms and conditions. Currently, over 31,000 government agencies and local municipalities have joined the US Communities group cooperative purchasing alliance. Proprietary Information gr' ® Avok4 :f' k s _ Or A 21.0 PROPOSED METHODOLOGY & PRICING 21.1 The project and scope of this RFP is for AutoZone to provide quality parts, inventory management, warehouse expertise, related supplies, and replacement parts on a timely basis at a competitive price for the City. Providing these services will allow the City to repair, maintain and maximize the"time-in-service" of all City-owned vehicles and heavy equipment. AutoZone will "Partner"with the City to bring about efficiencies that reduce the operating cost of the City fleet. AutoZone will provide on- site"Commercial Specialists" at mutually agreed upon City Service Centers. Primary objectives include; but are not limited to: (1) greater efficiency in parts ownership/management by having a professional parts organization responsible for distribution; (2) reduction in repair costs caused by management of the repair process; (3) lower-priced parts through a national volume purchasing program (US Communities); (4) no interest/floor plan costs caused by the City owning parts; (5) no cost related to parts becoming outdated or obsolete; (6) reduction in City payroll costs and other costs savings as they occur, due to increased operating efficiencies from the outsourced management of the on-site parts operations. AutoZone provides over 750,000 products and services: Air Conditioning, parts and accessories Alternators, parts and accessories Batteries, parts and accessories Bearings, parts and accessories Belts, hoses, parts and accessories Brake, brake system, parts and accessories Cables, parts and accessories Caps, parts and accessories Clutch, clutch parts and accessories Cooling, parts and accessories Drive train, parts and accessories Transmissions, parts and accessories Engines, engine parts and accessories Engine management, parts and accessories Exhaust, parts and accessories Air, oil, breather, PVC, cabin, transmission, modulator filters Fuel systems, parts and accessories Gaskets, parts and accessories Proprietary Information Heating, parts and accessories Ignition, parts and accessories Lift support, parts and accessories Lighting, parts and accessories Manuals Seals, parts and accessories Shop equipment and tools Spark plugs Starters, parts and accessories Steering, suspension, parts and accessories Wheel products, parts and accessories Windshield products, parts and accessories ALLDATA Repair, Manage, Market and Collision products "Vendor Direct" Programs for specialty products and accessories "Outside Buy" Programs for products not currently part of the AutoZone supply chain. 21.1.1 — 21.1.5 &21.1.7 — 21.1.12 AutoZone will provide warehousing of parts and inventory-management through its proprietary Inventory Management (IM) system. Additionally, AutoZone will forecast City needs to minimize City expenses through the use of our IM system, while distributing parts needed for City fleet vehicles within contract time frames, by having location inventories on consignment from AutoZone along with the utilization of inventories of parts within area AutoZone stores and hubs. Concurrently, AutoZone will utilize the City's existing fleet management system for the purpose of billing OEM warranties and inventory-management with a future goal of integrating the City's system with AutoZone's IM solution. These initiatives will minimize technician downtime, by providing delivery of time-sensitive parts on a timely basis. For heavy duty applications, AutoZone will utilize various partners for fulfillment. AutoZone will track performance standards by providing the City with documented parts deployment and delivery times. For orders pulled from on-site stock, AutoZone will provide the City with daily, weekly, monthly and quarterly parts usage and return reports based upon user-level detail for each site location. All on-site orders will be tracked and reconciled through electronic signature capture each time an order is filled by the on-site AutoZone personnel. For off-site stock, AutoZone maintains a portable Personal Data Assistant (PDA) mobile tracking system which tracks the time an order is entered into the IM system, when the part was provided, who signed for the part with an electronic signature capture, and time it was delivered. AutoZone realizes the standards for parts delivery are critical for certain heavy-duty applications and emergency service vehicles and will provide the"PDA"tracking system to monitor parts delivery in order to track against performance goals established by the City. AutoZone is working to establish electronic signature capture programs throughout all of its Proprietary Information V AW V70 commercial business initiatives in an effort to maintain maximum cost-efficiency and reduce the level of environmental impact caused by paper-based ordering systems. Performance standards will be measured thru the AutoZone"PDA" and electronic signature capture system with reports being provided weekly, on Monday, for the preceding week tracking delivery times of parts against mutually agreed upon performance metrics between the City and AutoZone. These reports will be reviewed with the City each week (or at a time sequence designated by the City) during a dedicated performance review. AutoZone proposes the use of its proprietary inventory management tools and processes to customize inventory assortments at the site-specific level. These sophisticated tools use customer inventory data, historical usage trends, part type failure and vehicle population data as well as maintenance intervals to maximize the City's return on inventory. Using data, processes, and technology AutoZone will collaboratively work with the City to provide an on-site specific custom inventory assortment plan. This plan can be revised quarterly during the first year and either once or twice annually during subsequent years. This process assures the City the highest inventory in-stock status possible. The City and its mechanics would order parts and other items as follows: On-site"stocked parts" would require no lead-time and be pulled from existing inventory. "Non-stocked parts" located at a local AutoZone store and/or HUB in the Ft Worth area would be delivered to the on-site facilities by one of the dedicated driver- truck teams designated to support the City. All metro area deliveries will average a delivery time of 45 minutes or less. "Unique" or"Special Order Parts"will be shipped to the on-site location through the AutoZone existing supply chain; or, directly from the vendor, based upon the method that provides the quickest delivery. AutoZone will provide estimated arrival times for all of these orders in order to assist in the most efficient application of fleet management. Heavy-Duty parts will be transferred daily from AutoZone's local partners (Mon — Fri). Next day stock orders will replenish on-site inventory used during the prior day. AutoZone is committed to the timely delivery of all parts and products based upon the needs defined by the City. AutoZone will maintain on-site inventory of high-turn parts within the City's Service Centers. Lower turn items will be provided by local area AutoZone locations. Lower turn inventory will not be subject to the"45 minute" delivery guarantee included in the US Communities agreement (Attachment"C'� for all AutoZone public sector customers. Heavy-Duty parts will be placed on-site with the inventory managed against the down- time performance metrics established by the City. Parts will be bar-coded and inventoried monthly in order to reconcile any inventory discrepancies. Proprietary Information ,. Q if AutoZone has over 50 safety stock algorithms/replenishment formulas based on specific demand patterns and variability for items and categories of items. AutoZone tracks sales for every item, by day, in every facility against on-site and off-site parts usage, allowing daily forecasts and improved ability to react to changes in demand or trends in every market. AutoZone considers both location order cycle and lead-time on delivery from the distribution center when determining each items stock level. This process is called order-up—to-level (OTL). AutoZone site managers can make changes to their replenishment orders to increase inventories for upcoming seasons and in anticipation of changing demand requirements. The AutoZone replenishment system also captures delayed product deployment if stock-outs occur. This prevents the forecast from dropping off because of stock-outs. If a stock out occurs because of significantly increased parts usage, this "lost sale" logic will cause the forecast to increase. Finally, the AutoZone replenishment systems account for seasonality and will increase location and Distribution Center inventory levels on seasonal items before the start of the season. AutoZone will maintain an on-site and in-market inventory based upon the current inventory list provided by the City, historical parts usage (inventory turns) and forecasting that is derived from quarterly reviews of updated fleet records. AutoZone will work with the City in order to establish target goals and milestones providing 90% of parts used through on-site and in-market inventory. The remaining 10% of sku's will be inventoried by the AutoZone locations within a 25 mile radius, through our national distribution, or through the process of"outside buys"from local in-market parts specialists partnered with AutoZone. The typical AutoZone location maintains an on-site inventory of $750,000 in parts. Within a 45-mile radius of the City of Ft Worth service centers, AutoZone has more than $29,000,000 in automobile and light duty truck parts. Furthermore, there is additional inventory on heavy-duty parts, at AutoZone's local partners. All US Communities public sector customers are covered by the 30 and 45 minute delivery guarantees, included in the US Communities Master Agreement. Vendor Direct Parts (VDP; specialty parts being shipped directly from the vendor) are shipped via overnight carrier, whenever possible, unless the size, dimensions, or weight of the product makes these shipments economically unfeasible. The US Communities delivery commitment applies to normal working hours (in this case, to cover working shifts at the City facilities). After hour deliveries will be made in the most expedient manner based upon the location of the part being delivered and the local delivery conditions occurring in the general in-market area. After hour deliveries are targeted to be made no less than one hour after AutoZone has acquired physical possession of the part at an in-market location. AutoZone's proprietary IM system is designed to maximize on-hand parts and availability in order to minimize down time for technicians. AutoZone consistently Proprietary Information 1F . F Af r updates its IM system, based upon the national purchasing and parts consumption behavioral experience from its 4,100+ locations in North America. The IM system integrates in a cross-functional manner to the City of Ft Worth's service center, in order to track part's usage and provide a forecasting report that will be used in a collaborative purchasing approach by our local Ft Worth team and national category managers in Memphis, TN. AutoZone is the largest provider of aftermarket automotive parts in the United States. We use multiple supply chain initiatives in order to meet the variable needs and desires of our customers. Based upon demand metrics and customer forecasts, AutoZone has implemented a tiered supply chain strategy as detailed below: Tier One — Direct AutoZone sourcing from worldwide manufacturers. Parts are shipped direct to AutoZone distribution for deployment to AutoZone "owned" locations across North America. Parts are stocked in all locations or through a hub-to-spoke local distribution strategy. Tier Two — Direct AutoZone sourcing from worldwide distributors. Parts are shipped direct to AutoZone distribution for deployment to AutoZone "owned" locations across North America. Parts are stocked in all locations or through a hub-to-spoke local distribution strategy. Tier Three —Vendor Direct Sourcing (Hot shot). AutoZone locations receive direct shipment from manufacturers or distributors based upon customer driven "response" demand or provided on a schedule basis based upon customer"forecast" demand. Tier Four— Alternate vendor sourcing from regional-based distributors who specialize in harder to find and low volume parts. Parts are shipped directly from the regional distributor to the local AutoZone customer location in order to minimize distribution costs. Tier Five — Local market"outside buy"sourcing. AutoZone maintains a very strong network of local relationships in order to expedite sourcing of non-core product items and emergency need parts. AutoZone leverages the consolidated volume of its local customer base, in order to maximize pricing discounts from our local network of suppliers. By leveraging aggregate volume from the local market, AutoZone is able to provide locally-sourced parts with compelling pricing and reduced acquisition costs to our customers leveraging a single source provider. AutoZone provides our"outside buy" services at a cost-plus formula for our local market customers. Proprietary Information 21.1.6 AutoZone takes great pride in its logistical systems, availability of parts, and its network of regional and national suppliers. 21.1.13 AutoZone will work with the City of Ft Worth in order to provide on-site response personnel during times of emergency service demands within the City. AutoZone personnel will be equipped with communication devices available to City of Ft Worth personnel in order to notify AutoZone when emergency support services are required and/or anticipated. In addition to the first tier response protocol, AutoZone will provide the City of Ft Worth with a back-up emergency response protocol process and personnel contact method for use during emergency service periods. These services are anticipated to be needed on a 24x7 basis. The City of Ft Worth will use good faith efforts in order to provide AutoZone with as much notification available, prior to the deployment of AutoZone personnel to City sites and service projects. Once employees are selected/hired for on-site services, AutoZone can furnish estimates for overtime. 21.1.14 —AutoZone is unique amongst the automotive parts providers in the public sector. In June of 2006; AutoZone was awarded the automotive parts contract for the Charlotte/Mecklenburg Purchasing Authority of North Carolina. Pursuant to the contract award; Charlotte/Mecklenburg Purchasing Authority agreed to act as the"sponsoring agency"for public sector automotive parts acquisition, under the US Communities Master Agreement (see attachment E). The US Communities group cooperative purchasing agreement is the largest, best- known, and most widely accepted cooperative buying agreement for the public sector. Copies of the Charlotte/Mecklenburg Purchasing Authority Contract along with the US Communities Master Agreement have been included in our reply for your review. The US Communities Master Agreement requires AutoZone to provide a "most favored nations pricing commitment"to all public sector agencies. AutoZone has committed to a pricing formulary under the Agreement that provides the lowest public sector pricing to be made available to all AutoZone public sector customers. AutoZone is bound by the terms and conditions of the US Communities Master Agreement through our contract with Charlotte/Mecklenburg Purchasing Authority. Pursuant to the master agreement; AutoZone is required to make available and offer the US Communities Master Contract to all public sector customers engaged for our services. AutoZone is making the entire US Communities pricing contract available to Hernando City as part of our RFP reply. This will include future pricing discounts on all contracted products under the agreement as additional volume tiers are obtained through the consolidated purchasing efforts of all the public sector customers engaged Proprietary Information with AutoZone under the US Communities agreement. AutoZone will provide the on-site management services detailed in this reply as an integrated part of our US Communities pricing commitments. The Charlotte/Mecklenburg Purchasing Authority contract with AutoZone was awarded in June of 2006 and runs through June 2011, with two, 1-year extension options. The contract was awarded through a "sponsoring agency" agreement under the US Communities Master Cooperative Purchasing Agreement. The contract has a $100,000,000 per year dollar estimation target by June of 2011. The complete contract agreement has been attached to this RFP reply and includes all of the terms and conditions of the agreement with Charlotte/Mecklenburg and the US Communities Master Agreement. Contract Manager: Karen Ruppe 600 East Fourth Street Charlotte, NC 28202 kruppe@ci.cha rlotte.nc.us (704) 336-2992 — Phone 21.1.15 — Cost determinants for personnel are derived based upon the consolidation of our master US Communities terms and conditions contract commitments against the addition of local terms and conditions contract requirements. As stated in our US Communities master agreement, "services" and the their related fees are determined through the process of a mutually developed onsite staffing plan between the City and AutoZone. In order to maintain our best price guarantee under our master agreement and provide all levels of onsite service, AutoZone and the City will need to engage in a strategic staffing plan that properly identifies each specific position that addresses the City's requirements. 21.1.16 — AutoZone will provide a sufficient number of personnel to achieve the City of Ft Worth's in-stock and delivery time requirements, through placing knowledgeable personnel on-site at City of Ft Worth service center. AutoZone will also provide mutually agreed upon reports and administrative functions, through the use of the City's system and AutoZone's IM system. In addition, AutoZone recognizes that a high percentage of the overall parts' volume is derived from non-core parts. Through AutoZone's existing local partners, as well as any other reputable vendors that have a good history with the City, AutoZone will engage in regular business reviews to analyze historical purchases and forecasted future purchases to ensure adequate inventories are kept on-hand, to ensure pricing integrity, to ensure timely deliveries, and to ensure continuous improvement in operations. Proprietary Information 21.1.17 — Described in detail in sections 21.1.1 — 21.1.5 & 21.1.7 — 21.1.12 (above) All of the sourcing models listed above are governed by the pricing guarantees and pricing formulary commitments incorporated into our US Communities agreement. These national cooperative pricing commitments guarantee that all of our public sector customers will always receive the best government price on every item sourced through AutoZone. Proprietary Information 22.0 FINANCIAL INFORMATION (See Attachment"A'� — AutoZone Annual Report Rest of page intentionally left blank Proprietary Information 23.0 AUTHORIZED NEGOTIATOR Cris Hollingsworth Director of National Sales 123 South Front Street Memphis, TN 38103 Cris.hollingsworth(a)autozone.com 253-973-9275 — mobile 253-793-7777 — facsimile Corporate contact: Mike Broderick Vice President, Commercial 123 South Front Street Memphis, TN 38103 Mike.broderick(-Oautozone.com 901-495-6587— office 901-495-8248 - facsimile Proprietary Information 24.0 COMPETITIVE SELECTION No questions to reply to in this section The rest of the page intentionally left blank Proprietary Information Ij r 25.0 PROPOSAL EVALUATION FACTORS No questions to reply to in this section The rest of the page intentionally left blank Proprietary Information i9�1,,! l�KsF3 26.0 PROPOSAL EVALUATION MATRIX 26.2.4 Organizational chart as Attachment"B" 26.2.5 AutoZone knows of no conflict of interest Proprietary Information 1.0 BACKGROUND No questions to reply to in this section Rest of page intentionally left blank Proprietary Information �'lr 2.0 PURPOSE No questions to reply to in this section Rest of page intentionally left blank Proprietary Information 3.0 STATEMENT OF NEEDS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information T 4.0 COMPLETION TIMEFRAME 4.1 As a Fortune 400 company with all company-owned stores, AutoZone (as the largest provider in the industry) is in a position to best serve all of its' commercial and public sector customers through leveraged economies of scale in our activities for the benefit of our customers. These activities provide us with the ability to; (1) procure parts in the most cost efficient manner for our customers based upon the size of our aggregate purchases, (2) seek new sourcing partners across a wide array of product segments as we constantly strive to increase the productivity of our customer offerings, (3) share national "best practices"testimonials across our entire Commercial portfolio and (4) influence manufacturer product specifications based upon feedback from our customer portfolio(s). As the exclusive auto parts provider to the US Communities Master Agreement, AutoZone is in a position to build upon unique fleet management experience information that is specific to the public sector. AutoZone has recently launched a "Strategic Partners" program for public sector customers under our US communities contract. The goal of the program is to build upon the cumulative "learned" experience of public sector fleet managers across the entire country and share the best practice findings in a manner that will drive additional efficiencies for all of the public sector agencies engaged in the project. AutoZone proposes a kick-off implementation meeting in order to establish benchmarks and targeted milestones for the first year of the contract. Monthly updates will be provided on benchmark progress and quarterly reviews will be engaged in order to focus on the City's desire to maximize fleet productivity, cost efficiency, and minimized capital burdens. Upon completion of the first year of the contract; AutoZone and the City will review the prior year and establish new benchmark targets for the upcoming year and subsequent years of the contract. AutoZone and Hernando City would immediately engage in the operational deployment process described through our IBS philosophical planning approach. Based upon the anticipated milestones outlined in the RFP, AutoZone would recommend using the sample framework template below for transition planning and execution: DAY 1 = City selects AutoZone DAY 3 through DAY 10 = On-site goal review, milestone set-up and execution plan finalized and approved by all participants. To include on-site facility review, inventory reconciliation and proposed on-site facility alterations from AutoZone. DAY 8 = AutoZone and City complete first weekly review meeting. DAY 7 through DAY 10 = On-site implementation starts with inventory transition, Proprietary Information AMW stocking of new on-site inventory levels from AutoZone, site-level personnel training, IT systems install, bulk fluid/chemicals transition planning engaged and process flow training. DAY 15 = AutoZone and City complete second weekly review meeting. DAY 15 through DAY 20 = City personnel training completed, on-site personnel training completed, on-site personnel working through first week of testing all systems with partial parts management oversight and in-market level delivery service fully engaged. ..'._ DAY 22 = AutoZone and City complete third weekly review meeting. DAY 20 through DAY 25 = Fully-stocked on-site inventory levels in place, in-market inventory level adjustments completed, outside buying process in place, bulk fluids/chemicals transition completed, all on-site locations fully engaged, local in-market delivery fully-engaged and tracking mechanisms for reporting tool sets in production mode. DAY 29 = AutoZone and City complete first full monthly review meeting to include transition and milestone review, goal tracking and establishment of next-steps for post start-up implementation. The plan detailed above represents a sample snapshot of the framework for the first month of IBS transition management by AutoZone. It is important that this is being provided in order to show the City the AutoZone approach; not the specific dates of actual transition milestones and execution. Based upon our experience and the needed input from the City, it appears that a staggered transition approach will be in the best interest of the City. It is anticipated that AutoZone and the City will mutually agree upon a deployment plan that is reasonable, conservative, and accounts for all of the transition variables that are involved in a project of this magnitude. Proprietary Information l� J i a 5.0 GENERAL REQUIREMENTS 5.1 AutoZone will provide warehousing of parts and inventory-management through its proprietary Inventory Management (IM) system. Additionally, AutoZone will forecast City needs to minimize City expenses through the use of our IM system, while distributing parts needed for City fleet vehicles within contract time frames, by having location inventories on consignment from AutoZone along with the utilization of inventories of parts within area AutoZone stores and hubs. Concurrently, AutoZone will utilize the City's existing fleet management system for the purpose of billing OEM warranties and inventory-management with a future goal of integrating the City's system with AutoZone's IM solution. These initiatives will minimize technician downtime, by providing delivery of time-sensitive parts on a timely basis. For heavy duty applications, AutoZone will utilize various partners for fulfillment. 5.2 On-site AutoZone employees will be educated on this policy 5.3 AutoZone is currently working toward integrating its systems with Maximus & CCG - 5.4 AutoZone will work with the City of Ft Worth in order to provide on-site response personnel during times of emergency service demands within the City. AutoZone personnel will be equipped with communication devices available to City of Ft Worth personnel in order to notify AutoZone when emergency support services are required and/or anticipated. In addition to the first tier response protocol, AutoZone will provide the City of Ft Worth with a back-up emergency response protocol process and personnel contact method for use during emergency service periods. These services are anticipated to be needed on a 240 basis. The City of Ft Worth will use good faith efforts in order to provide AutoZone with as much notification available, prior to the deployment of AutoZone personnel to City sites and service projects. 5.5 — 5.11 No questions to reply to in this section 5.12 Please refer to US Communities Agreement (Attachment"C) Proprietary Information } 6.0 MAINTENANCE SUMMARY 6.1 AutoZone and the City will engage in a mutually-documented and managed inventory count in order to verify existing City inventory counts against City records. Reconciliation of final inventory counts will be based upon mutual consensus derived from this inventory process. AutoZone and the City will engage in a visual inventory inspection in order to co-validate the actual physical counts of existing City inventory. Upon completion of the physical inventory process, the City will provide AutoZone with a report detailing the acquisition cost and date of acquisition for all inventory items validated through the on-site inventory process. Once total value has been determined, AutoZone will provide the City with a formula-based estimation of current value, based upon the specific category represented from the physical inventory. The City and AutoZone will reach a mutual consensus on the real-time inventory value in order to set the inventory transfer value. Upon completion of the real-time inventory valuation-process, AutoZone and the City will engage in an inventory transfer plan (not to exceed 60 days) that will transfer all existing City inventory to AutoZone ownership. 6.2 AutoZone's staffing capacity for meeting the City's requirements are found in AutoZone's continual recruiting efforts, ongoing training efforts, and E-Hire system. AutoZone, at any given, time has 3 or 4 Store"Manager-In-Training"(MIT) employees, within Ft Worth, in addition to mentoring, succession-planning, and training. The AutoZone Commercial group is responsible for public sector sales and includes highly- tenured Commercial Specialists (CS), Territory Managers (TM), as well as a District Manager (DM) &Area Sales Manager (ASM). All AutoZone's locations are company-owned, in order to provide the highest level of consistency in service, training, and customer experience. The magnitude of trained staff in the marketplace provides AutoZone with a distinct advantage in our capability to provide the City with long-term stability of on-site services. With AutoZone's existing talent-pool of more than 475 Tarrant County employees, AutoZone will be able to provide trained "back-up" personnel to the City. Additionally, should the need arise to provide any replacement personnel based upon the City's approval, AutoZone will be able to provide a replacement that is a trained industry-expert, in addition to being trained on the City's account needs. AutoZone will assign a dedicated manager to the City's account, based upon a positive award (the dedicated manager will act as the key, point-of-contact for all on-site activities and manage the on-site personnel assigned to support the City's account, as Proprietary Information z � IWAVAW detailed in the organizational chart incorporated with the RFP reply). In addition to the on-site support team, the City's business relationship with AutoZone will be supported by our local and regional management team detailed below: Rick Koonsman, Regional Manager (RM), has 10 years with AutoZone & 26 years in the industry. Rick is also ASE Certified. Jim Taylor, District Manager (DM), has 15 years with AutoZone and 17 years in the industry, and Jim is ASE Certified. Relevant Stores Managers (SM) have more than 26 years with AutoZone and over 39 years in the industry, and all are ASE Certified. And, Relevant Drivers (D) have more than 19 years with AutoZone and 28 years in the industry. These individuals make-up AutoZone's location operational management team in Ft Worth. Rich Merchant, Zone Manager (ZM), has 18 years with AutoZone & 18 years in the industry, and Rick is ASE Certified. JR Howle, Area Sales Manager (ASM), has 13 years with AutoZone & 30 years in the industry, and JR is also ASE Certified. Guy Payne, Territory Manager(TM), has 5 years with AutoZone and 13 years in the industry. Guy is ASE Certified. And, Relevant Commercial Specialists (CS), have more than 24 years with AutoZone & 31 years in the industry. These AutoZoners make-up AutoZone's Commercial management team in Ft Worth. 6.3 — 6.13 No questions to reply to in these sections Proprietary Information a 7.0 REQUIREMENTS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information .F E�lY; 8.0 WARRANTIES No questions to reply to in this section Rest of page intentionally left blank Proprietary Information f' V,ffe 9.0 ELECTRONIC COMPUTER SYSTEM No questions to reply to in this section Rest of page intentionally left blank Proprietary Information f` 90AFArV 10.0 ADDITIONAL REQUIREMENTS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information WAS AMA& 11.0 TERMS OF AGREEMENT No questions to reply to in this section Rest of page intentionally left blank Proprietary Information AAi�}r s> FPA, 'Ann a- 12.0 ESCALATION CLAUSE No questions to reply to in this section Rest of page intentionally left blank Proprietary Information t�t r' +4 1.0 JOB FUNCTION No questions to reply to in this section Rest of page intentionally left blank Proprietary Information • eC :�.- R i` 3'sf WFAM 2.0 JOB DUTIES No questions to reply to in this section Rest of page intentionally left blank Proprietary Information C NfIrVA COA ffe 3.0 MANAGING/PROTECTING OFFEROR'S ASSETS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information /l 4.0 PERSONAL CHARACTERISTICS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information 5.0 ADDITIONAL CITY DUTIES & RESPONSIBILITIES No questions to reply to in this section Rest of page intentionally left blank Proprietary Information r R 6.0 IMPLEMENTATION TIMETABLE No questions to reply to in this section Rest of page intentionally left blank Proprietary Information y $V IWAVAW 7.0 HOURS OF OPERATION No questions to reply to in this section Rest of page intentionally left blank Proprietary Information 8.0 BOND REQUIREMENTS No questions to reply to in this section Rest of page intentionally left blank Proprietary Information 9.0 EXECUTED CONTRACT No questions to reply to in this section Rest of page intentionally left blank Proprietary Information 4wT p4 �a pLTEP"��ItF r..��- - _,v► - _ l� y i _ � t VOW Ilk POW "Opw D } � . „ ,r 2007 Annual Report ` 'ail 1 �9 AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. The Company also operates stores in Puerto Rico and Mexico. Each store carries an extensive product line for cars, sport u't!.lity vehicles, vans and light trucks, including new and remanufactureci automotive hard parts., maintenance items.. accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to Iccal regional ar,d nationa, repair garages_ AutoZono also sells the ALLDATA brand iagnostic and repair softwa--e. Cn the web. AutoZone sells diagnostic and repair information, and auto an 11,light truck parts through wvjw.autozone.ccm. Fiscal Year ErA Aua131 (Coin- mrn;one,cx�;eo^p sParF aala) 200' OOu 2005 2006 2007 Net Saies $5 457 55 637 $5,711 S5.9* $6,170 Operating Profit $ B1E $ 999, $ P76 $1,01C! $1,055 1 Dilutes Earnings pe Share $ 1.34 $ 6.56 $ 7 i 8 $ 7.50 S 8.53 Aiter-Tax Return on Invested Capital 23.4% 25.1;0 23.91/0 22 2% 22.7% Domestic Same Store Sales S)rowth 3.2 0.2 (2.1)`>o D 0.1% Operating Margin 16.E f. 7.7% 17.1131. 17.01,0 17.1% Case ^io.1.,from Operai!ons 1 721 $ 63c $ E4E $ 823 S 845 44 2C37 Sales tv Strategic Pr::ority 25 2 t6' zz 46 112, 42 13 2? 101 ii o., 15 192 12- 110 51 66 145 Pis : 54 68 Bt d'J 1F0 A9? 97 7� U.S.Retail-84°ro 723 Commercial 1% Mexico/Other-5°ram 3,933 U.S.Stores Across All 123 Mexico Stores Across 48 Coniinentai United States 20 Mexican States and Puerto Rico 64 � # IL •• 46 Od tAV Ir r - 4 • a � dp Ito .0 fir' r' 1 ! ; # r *_ { '. r 1 lb it aw, 4F 5 ► *, ray # JT AutoZoners always put customers first! We know our parts and products. Our stores look great! We've got the best merchandise at the right price. AutoZone Pledae, est. 1986 Dear Customers, • • • Stockholders: It is an honor for me, on behalf of our 55,000 AutoZoners So why the excitement as we head into fiscal 2008? across North America,to write this letter and update you Our Retail business,which currently represents 84%of on our progress in 2007.For the year,we delivered what our overall sales, continues to provide significant oppor- we characterize as a solid year, and I believe we are well tunities for growth While challenges have existed in the positioned for continued growth heading into fiscal 2008. macro-environment,we feel our efforts over the last two In last year's letter, I mentioned that we would continue years have positioned us well as we head into fiscal "Living the Pledge!" in 2007 Our Pledge represents the 2008 Retail remains our#1 strategic priority. things we do in every store,every day.We understand In fiscal 2006,we reset the sales floors in virtually our that knowledgeable AutoZoners,taking care of their entire domestic store base;over 3,200 stores,We com- customers and their stores,who have the best merchan- pleted this task in an amazing twelve-week period for dise,will naturally lead to our key point of focus—always a fraction of our initial cost estimates.Additionally,we putting customers first! intensified our focus on customer service,training,store Being an AutoZoner is more than being an employee of maintenance and other important elements of our value AutoZone. It's having a passion for our business, our proposition.To make sure our efforts were resonating customers,our culture and each other.It's about being with our customers,we developed a new process to an integral part of a high performance team Recently,we consistently measure customer satisfaction, an Internet- held our National Sales Meeting in Memphis to celebrate based survey that efficiently receives feedback from our the year's accomplishments and challenge each other to customers.We have seen our customer satisfaction scores strive for new heights in fiscal 2008 We took time to con- Increase in each of the last two years since the imple- gratulate everyone on our industry-leading EPS growth, mentation of this new measurement process Specifically, 13.6%,and industry-leading Return on Invested Capital, we have seen improvements in customer responses to 22 7%;however,we did not spend a tremendous amount the layouts of our stores, product assortment and most of time on specific financial expectations for fiscal 2008 importantly, in overall customer service levels Instead,we focused on the importance of executing the In fiscal 2007,we completed another large merchandis- key elements outlined in our Pledge We recognize that ing initiative We added over$70 million of new, mainly our customers have many choices to fulfill their automo- late-model,hard parts to our product assortment This tive needs, and we must give them compelling reasons inventory was added to allow us to say"yes" more Pre- to choose AutoZone In addition, our AutoZoners feel quently to our Retail and Commercial customers.These confident they have all the necessary tools to succeed parts additions represented the largest additions to our We have significantly improved parts coverage,we have stores this decade.We aggressively began implementing Implemented great new technological innovations,our individual category assortments early in the first quarter stores look better than they have in years and, most of the year and finished in the fourth quarter When we importantly,we have terrific AutoZoners were finished,we managed to complete merchandise line reviews on every single category,the first time this Y - AutoZone celebrated the opening of its 4,000th store this past year. was accomplished in many years! While we had miscues opinion, is clearly the most effective and efficient elec- along the way,we were very pleased with the overall tronic parts catalog in the industry With enhanced dia- results.We have learned from our efforts in 2007 and will grams, built-in schematics on how to complete the repair, continue to refine our merchandise assortments in 2008 and even an ability to help customers understand the and beyond benefits between our good, better, and best product We are also excited about the benefits we are beginning to offerings,we are encouraged with the response we have see from the investment we have made in our AutoZoners received from our customers and AutoZoners This new Over the last two years,we've conducted periodic tool is very user friendly as evidenced by the fact that we WITTDTJR®("What It Takes To Do The Job Right")meet- implemented it in all of our domestic stores in one quar- ings.These meetings include all store AutoZoners and pro- ter.This was our single largest software implementation vide training on our culture, our products,our processes in many years and required the dedication and support and other important topics We consistently reinforce to from many AutoZoners In recognition of their efforts,this all AutoZoners that we must differentiate ourselves from team recently won the prestigious"Starter's Club Award" our competitors to give our customers a reason to"turn This award is given annually to a team of AutoZoners left across traffic to shop at AutoZone"when it would be who creates a program or process that has a significant easier to "turn right" into a competitor's parking lot. Our impact on AutoZone operations,growth or development AutoZoners represent our greatest opportunity for differ- I congratulate the entire Z-netTM team for flawlessly imple- entiation, and having knowledgeable AutoZoners is criti- menting this terrific new AutoZone innovation cally important.We encourage our AutoZoners to receive Finally,we were pleased to open 163 new AutoZone stores industry certification, and I would like to congratulate across the United States and Puerto Rico to finish the all the ASE-certified AutoZoners With over 7,000 certifi- year with 3,933 domestic stores We continue to believe cations held by AutoZoners,we couldn't be prouder of we can open new stores at a mid-single digit growth rate, these individuals and this important accomplishment and we continue to see opportunities for new store expan- We believe this independent certification adds a sense sion across virtually all of our markets in addition,we of comfort to our customers so they know they're being continue to invest in our existing stores in order to ensure helped by the best trained parts professionals in the that they are up to our standards.We're very proud to business In fiscal 2008,we believe continued focus on be able to walk into a twenty-year-old AutoZone store improving our AutoZoners'skills will allow us to always today and feel confident that it represents the AutoZone put our customers first! brand well We also made significant investments in technology in Commercial,our Second Growth Priority fiscal 2007 We implemented our new assortment plan- We are very excited by the substantial growth opportunity ning software to improve the selection of the right part for our Commercial business represents and believe the the right location And,we implemented our new Z-net'TM software in all of our stores including our Mexico stores ongoing investments we've made in our Commercial Z-netT"' leverages advances in technology and, in our business to profitably grow sales will pay dividends in the new fiscal year. i .a r, J4 Bill Rhodes Chairman, President and CEO : �P w Customer Satisfaction IFF At the end of fiscal 2007,there were 2,182 AutoZone stores sales culture. The sales approach in a direct sales busi- across the country meeting or exceeding the expectations ness is vastly different from a pure Retail business We of professional technicians on a daily basis Additionally, must ensure that our Commercial sales team has the our parts coverage is better than it's ever been! By add- training,processes,and tools necessary to effectively ing over$70 million in incremental,mainly late model, communicate our value proposition and differentiate hard parts coverage to our stores,we are positioned to AutoZone as the preferred supplier. We are in the early say"yes" more often to both our Commercial and Retail stages of this endeavor, but we are excited by our initial customers progress. In an effort to build stronger relationships with Our continued focus on developing cutting edge tech- our customers,we moved our credit processing opera- nology has helped us to more effectively identify our best tion in house,where we knew we could significantly Commercial customers, improve customer retention,and improve the service. We initiated a test store program that identify additional growth strategies has become the standard operating platform for all our Commercial programs.We've expanded our efforts to Two years ago,we enhanced our systems to provide add the right sales staff across the much of the country improved information on every Commercial transaction We've created sales and marketing collateral that provide With this information,we were able to isolate unprofitable a compelling message for our outside sales team to com- sales and better understand which customers we were municate.And,we've improved our timeliness of delivery able to service most efficiently.With this new information, we challenged our Commercial Specialists to focus Most important to our growth objectives is sustained profitability We are very excited to have increased our primarily on those customers that we could consistently operating profits within our Commercial program this satisfy The formula was not difficult:we focused our past year,and we believe we're well positioned to grow Commercial programs on fewer customers,typically those that are physically closer to our stores, where our Commercial business this upcoming year. revenue growth potential was significant and where we We understand the significant opportunity this business could fulfill on our promise of fast delivery represents. We are using a methodical approach to Additionally,we challenged ourselves to think more like develop a compelling value proposition for our Commer- a best-in-class business-to-business distributor and less cial customers.We are pleased with the progress we like a pure retailer.Since our inception back in 1979,we made in fiscal 2007, and we are optimistic about fiscal have focused on Retail customers However,the Commer- 2008. 1 would like to thank our entire organization for their cial business is different Commercial customers expect a commitment to this important priority different level of service from their suppliers Specifically, Mexico,our Third Growth Priority they expect consistent execution on parts delivery and With 123 stores across twenty Mexican states,we couldn't a commitment from us to help them grow their business be prouder of our wonderful AutoZoners in these stores We've listened intensely to these Important customers During the year,we embarked on building a"world class" We're proud to say we'll celebrate our ninth year of busi- ness in Mexico this December! We continue to believe QLLDATA Su Supertienda de Autopartes:' fVieww a5f L ' growth opportunities exist for years to come in Mexico; industry, and we remain committed to this metric as a however,we will continue to grow prudently and profit- measurement of our efficiency regarding investment ably as we expand our infrastructure, concurrent with decisions As we begin this year,we certainly are aware our store expansion plans of the many challenges facing our customers We under- stand the pressures,for example,that high gas prices The Future can have on our customers' abilities to afford to maintain As I mentioned at the outset,we delivered solid perfor- and enhance their vehicles. However,we also continue to mance in fiscal 2007;however,solid is not good enough believe AutoZone provides an opportunity for Retail and for AutoZone or AutoZoners.The past two years we've Commercial customers to find quality products at the focused on "Living the AutoZone Pledge," and this year right prices to satisfy their needs. will be no different.This year's operating plan theme is based on the first line of our Pledge—Customers First! As we have said before,our past success and future achievements will be built on exceeding our customers' We're making sure we have great AutoZoners providing expectations.And we are determined to do that by great customer service. In fiscal 2008,we will focus focusing on the basics. We cannot, and will not,take on improving the in-store experience by helping our for granted our customers' patronage customers complete their transactions more quickly and easily while attracting and retaining the highest quality In summary,AutoZone continues to have an incredible AutoZoners.We will continue our focus on enhancing business model built on a strong foundation of disciplined Processes focused on delivering great customer service. our critically important culture where all AutoZoners feel We are confident we will continue to be successful We valued and have opportunities to achieve or surpass their own career aspirations look forward to updating you on our continued success well into the future We are focused on improving our inventory productivity In closing, I would personally like to thank our entire team and related sales performance through continual training of our store AutoZoners and ongoing refinement of our of AutoZoners, all 55,000 of them,for their commitment to our customers and our great company category management process . And,we're committed to growing our Commercial business Sincerely, in fiscal 2008.We're committed to building and enhanc- ing asales culture designed to satisfy the demanding �� �� needs of our professional customers Most importantly,we are committed to being diligent Bill Rhodes stewards of your capital We enjoy the highest Return on Chairman, President and CFO Invested Capital, 22 7%, of any direct competitor in our Customer Satisfaction �,,�� .,, � �a�,. �� i y� ��°� M1 �fi���� _ !!!!ll������ry�}�}�}rrrSrrr...,,,,,,'''"'}}y}}yam�` �L �; t�� £�, �. az w 5. `. �� ��� _ - x ��� :. -� �., , -: a, ,� „� ,. .. �: i- ,. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K l] Annual Report under section 13 or 15(d)of the Securities Exchange Act of 1934 For the fiscal year ended August 25,2007,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 1-10714 AUTOZONE, INC. (Exact name of registrant as specified in its charter) Nevada 62-1482048 (State or other jurisdiction of (I.R..S.Employer Identification No..) incorporation or organization) 123 South Front Street,Memphis,Tennessee 38103 (Address of principal executive offices)(Zip Code) (901)495-6500 Registrant's telephone number,including area code Securities registered pursuant to Section 12(b)of the Act: Name of each exchange Title of each class on which registered Common Stock New York Stock Exchange (S.01 par value) Securities registered pursuant to Section 12(g)of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes 0 No❑ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Exchange Act..Yes❑ No Mx 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 0 No❑ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter)is not contained herein,and will not be contained,to the best of registrant's knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.. IE indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,or a non- accelerated filer. Sce definition of"accelerated filer and large accelerated filer"in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer El Accelerated filer 0 Non-accelerated filer,0 Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act) Yes❑ No OO The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold,or the average bid and asked price of such common equity,as of the last business day of the registrant's most recently completed second fiscal quarter-was $8,723,547,564. The number of shares of Common Stock outstanding as of October 15,2007,was 64,914,833.. Documents Incorporated By Reference Portions of the definitive Proxy Statement to be filed within 120 days of August 25,2007,pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Annual Meeting of Stockholders to be held December 12, 2007,are incorporated by reference into Part III. TABLE OF CONTENTS PARTI........................................................................................................................................................................... 5 Item1. Business.......................................................................................,.................................................................. 5 Introduction............................................................................................................................................................... 5 Marketing and Merchandising Strategy..................................................................................................................... 6 Commercial...........................................................................................................,.................................................... 7 StoreOperations.......................................................:..................................... StoreDevelopment.................................................................................................................................................... 8 Purchasingand Supply Chain................................................................................................................................... 9 Competition..................................................................,.......................... . ............................................................. 9 Trademarks and Patents...................................................................... ............... 9 ........................................................ Employees........................................................................................................,...................................I..................... 9 AutoZoueWebsite.................................................................................................................................................... 10 Executive Officers of the Registrant......................................................................................................................... 10 Item1A.Risk Factors...................................................,..............................., ., ........................ 11 Item 1B. Unresolved Staff Comments........................................................................................................................ 13 Item2. Properties.................................................................................................................................................... 13 Item3. Legal Proceedings................................................................................. .................................. 14 Item 4. Submission of Matters to a Vote of Security Holders.................................................................................. 14 PARTII .......................................................................................................................................... 15 Item 5. Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchase of Securities. 15 Item6. Selected Financial Data................................................................................................................................ 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 19 Item 7A.Quantitative and Qualitative Disclosures About Market Risk.......................................................................28 Item 8. Financial Statements and Supplementary Data............................................................................................. 30 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure....................... 58 Item 9A.Controls and Procedures............................................................................................................................... 58 Item9B. Other Information.......................................................................................................................................... 58 PARTIII.....................................................................................................................................................................,. 59 Item 10. Directors,Executive Officers and Corporate Governance.........................................•.................................. 59 Item 11, Executive Compensation...................................................................... ................... 59 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.... 59 Item 13. Certain Relationships and Related Transactions,and Director Independence............................................. 59 Item 14. Principal Accountant Fees and Services...................................................................................................... 59 PARTIV............................................................................................................ .................. 60 Item 15. Exhibits,Financial Statement Schedules..................................................................................................... 60 3 Forward-Looking Statements Certain statements contained in this Annual Report on Form 10-K are forward-looking statements.Forward-looking statements typically use words such as"believe,""anticipate,""should,""intend,""plan,""will,""expect," "estimate,""project,""positioned,""strategy"and similar expressions.These are based on assumptions and assessments made by our management in light of experience and perception of historical trends,current conditions, expected future developments and other factors that we believe to be appropriate..These forward-looking statements are subject to a number of risks and uncertainties,including without limitation,competition;product demand;the economy;credit markets;the ability to hire and retain qualified employees;consumer debt levels;inflation;weather; raw material costs of our suppliers;energy prices;war and the prospect of war,including terrorist activity; availability of commercial transportation;construction delays;access to available and feasible financing;and changes in laws or regulations. Forward-looking statements are not guarantees of future performance and actual results,developments and business decisions may differ from those contemplated by such forward-looking statements,and such events could materially and adversely affect our business.Forward-looking statements speak only as of the date made.Except as required by applicable law,we undertake no obligation to update publicly any forward-looking statements,whether as a result of new information,future events or otherwise.Actual results may materially differ from anticipated results.Please refer to the Risk Factors section contained in Item 1 under Part I of this Form 10-K for more details. 4 PART I Item 1.Business Introduction We are the nation's leading specialty retailer and a leading distributor of automotive replacement parts and accessories,with most of our sales to do-it-yourself("DIY")customers..We began operations in 1979 and at August 25,2007 operated 3,933 stores in the United States and Puerto Rico,and 123 in Mexico.Each of our stores caries an extensive product line for cars,sport utility vehicles,vans and light trucks,including new and remanufactured automotive hard parts,maintenance items,accessories and non-automotive products.In many of our stores we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local,regional and national repair garages,dealers and service stations..We also sell the ALLDATA brand automotive diagnostic and repair software. On the web at www.autozone.com,we sell diagnostic and repair information,auto and light truck parts,and accessories. We do not derive revenue from automotive repair or installation services.. At August 25,2007,our stores were in the following locations: Alabama................................................................................................................................................................................. 90 Arizona..............,.........,....,...,...............................................................,.............__........,...........................,....................... .............. 110 Arkansas.............................. ................ ......... .............................. .............................__......... 59 California................,,......................................................,...............................,....,...............,............................................... 428 Colorado........................,,....................................................,...................,...........,..........,..,..........,............................................. 55 Connecticut.................................................................................................................................................................................. 31 Delawaze......................._.....,..._......................................................................,..,_._......,,.,................................,................................ 10 Florida.......................... ............................................_,.............................................,......,_..........................,.,. 173 Georgia......_.,.,_....._..........,...................................._........,,........................._....,....................,..,.................,._..............,.......... 160 ldaho............................................................................................................................................................................. ............. 18 Illinois.........._.....................................,........................................._,.........._....................._..................................,....................._.............. 192 lndiana........._........_.,_......................,..............................................................................,........................_.._,.....•................................ 125 Iowa...---..................... ........ _............... . . ............................................... ....... ................. 22 Kansas............. •............._.....................................................,........,..............._.........................................,.....-................... 37 Kentucky.................................................................................................................................................................................•..................... 74 Louisiana......................._..............................................,........................................................_.........,........................_......................,.......... 97 Maine_...__.............._.__.....,,..................................................................,....................................,.....................,..._................................., 6 Maryland.............................................................................................................................................•...,.........,..............................,...,.,.... 38 Massachusetts............................................................................................................................................................. ............... 66 Michigan........,........... ........................................................ .....................................................,................................... 133 Minnesota...............................................•,...,_.................................................................................,............................................................ 22 Mississippi........................................................................................................................................................................................ 81 Missouri............._.......................................................................................................................................,.,...............,........................ 90 Montana..................._.......,...,....................,,....................................,..,............_.............._........_._.................._....,. ._..............,..... 1 Nebraska......................................................................................•..........._,......,.............._.....................,...............,..............,..........,......,. 13 Nevada......__......_,...................._..............................,..............,..,......,.,............,..._.............,......,.......................,.._........,,..,..... ..... .......... 42 NewHampshire......,.....................,........................................................._...................,..,.................................. 16 New Jersey......................... ....... ........................ 57 NewMexico...,.......... ..................................,...,...................,...................,...............................................................,.,.......... 54 NewYork..............,...............................................................................,..................._,................_...........,..,...,.._.._.................,...........,,,......._. 112 NorthCarolina.............._............................................,.......,.................................................................,.................,............................ 145 NorthDakota............................................••.......................................................,.......,..................................................................... 2 Ohio............,.,..,,..,_................................,..................,..........._,..,.,...,..........._.................. ........................................,.............. 205 Oklahoma......................................................................................................... ...................................................................................................... 66 Oregon..................................................................................................................................................................................•.,..........._. 25 Pennsylvania .................................................-..................,,.......,..•...•..............,,..........,......._.................,,......,.................,.................. 101 PuertoRico.......................................... ......................,..............._................,.,...................................................... . ..................... 15 RhodeIsland...................................................................................... .................................................................................... . .... 15 SouthCarolina..............._... ....... .. ........................................,.................,.........................,...._....................._............................. 68 5 SouthDakota......._ ............. ...............__'_—___— .......___------------ _.......................................... l Tennessee........... ......... -__..... __-___-__ ............. ............... ............................. ......................... 145 Texas................. .................... ............................................._..................... ........................ ......................... 492 Utah........................................... .......--__ ...................... ....... .............' ........... .................................. 34 Vermont..................... .......... -- .................... ...... ................._........ -- ................. ........................ l Virginia .................................. -_............ ...........-'' ....... ............................................................................ 81 Washington....................................................... ........................................... ....................... ...................... 44 Washington, _............ ... .... .... ._ ........................... ... ................................. ............................................. _ l9eu ............... ......____-__--_-_ ................... .................................... ... ................ _ 22 YVis0000in—.... ........... ........... ------- .................................................................... .......................................... 48 '' ................................................ ....................._................ ........... ...................... ...................... ` Domestic Total.............. ..................................... .............................. ........ ............................................... 3,933 Mexico..................... -_...... .......................... ........................... - .............. ............................................. 123 TOTAL.................... .................. ............... ....................-- ................................... ............ ......................... A-05-6 Marketing and Merchandising Strategy We are dedicated to providing customers with superior service,value and quality automotive parts and products at conveniently located,well-designed stores.Key elements ofthis strategy are: Customer Service Customer service is the most important element in our marketing and merchandising strategy,which is based upon xoumouer marketing research.,We emphasize that our AutoZoners(employees)should always put customers first by providing prompt,courteous service and trustworthy advice,,Our electronic parts catalog assists io the selection of parts;and lifetime warranties are offered by us or our vendors on many of the parts we sell.Our wide area network io our stores helps oou,expedite credit or debit card and check approval processes,molocate parts atneighboring Anto%oue stores,and in some cases,to place special orders directly with our vendors. / Our stores generuUyopcmat7:30uc8uzu and close between 8andlOp.ouMonduydrnum6SuturduyuodtypiouDy open ax9u.no,and close between 6 and Pp.00. on Sunday.However,some stores are open 24hours,and some have extended hours nf0or7uou.until midnight seven days uweek. YVu also provide specialty tools through our Louo,A'Tvn}VN program.Customers can borrow u specialty tool,such uu u steering wheel puli,u,for which uDlYcustomer ora repair shop would have little oznn use other than for aobgle juh'Auto%nue,s also provide other free services,including check engine light readings;battery charging; oil ooydbug;and testing uf$ar-teTS,alternators,batteries,sensors and actuators.. Merchandising The following table shows some of the types of products that we sell: Hard Parts Maintenance Items Accessories and Non-Amomotive A/C Compressors Antifreeze&Windshield Washer Fluid Air Fresheners /\bvoouoco Belts&Hoses Cell Phone Accessories Batteries&;Accessories Chemicals,including Brake&Power Drinks&Snacks Bode Drums,Rnooza. Steering Fluid,0U&Fuel Additives Floor Mats Shoes&Pads Fvaoo Hand Cleaner Carburetors Lighting Neon Lighting Clutches Od&Transmission Fluid Mirrors CV Axles Oil,Air,Fuel&Transmission Filters Paint&/\cceouodro Engines Oxygen Sensors Performance Products Fuel Pumps y,oteouanto&Cleaners Seat Covers Mufflers Refrigerant 6tAccessories Steering Wheel Covers Shock Absorbers&Struts Sealants&/\dbeoivro Stereos Starters Spark Plugs&;Wires Tools Water Pumps Wash&Wax Windshield Wipers 6 We believe that the satisfaction of DIY customers and professional technicians is often impacted by our ability to provide specific automotive products as requested..Our stores generally offer approximately 21,000 stock keeping units("SKUs"),covering a broad range of vehicle types.Each store caries the same basic product lines,but we tailor our parts inventory to the makes and models of the vehicles in each store's trade area..Our hub stores carry a larger assortment of products that can be delivered to commercial customers or local satellite stores.. In excess of 750,000 additional SKUs of slower-selling products are available either through our vendor direct program ("VDP"),which offers overnight delivery,or through our salvage auto parts and original equipment manufacturer ("OEM")parts programs. We are constantly updating the products that we offer to assure that our inventory matches the products that our customers demand. Pricing We want to be perceived by our customers as the value leader in our industry by consistently providing quality merchandise at the right price,backed by a good warranty and outstanding customer service..On many of our products we offer multiple value choices in a good/better/best assortment,with appropriate price and quality differences from the"good"products to the"better"and"best"products.A key component is our exclusive line of in-house brands: Valucraft,AutoZone,Duralast and Duralast Gold. We believe that our overall prices and value compare favorably to those of our competitors. Marketing:Advertising and Promotions We believe that targeted advertising and promotions play important roles in succeeding in today's environment. We are constantly working to understand our customers' wants and needs so that we can build long-lasting,loyal relationships.We utilize promotions and advertising primarily to advise customers about the overall importance of' vehicle maintenance,our great value and the availability of high quality parts.. Broadcast and targeted loyalty efforts are our primary marketing methods of driving traffic to our stores. We utilize in-store signage and creative product placement to help educate customers about products they need.. Store Design and Visual Merchandising We design and build stores for a high visual impact.The typical AutoZone store utilizes colorful exterior and interior signage,exposed beams and ductwork and brightly lighted interiors..Maintenance products,accessories and miscellaneous items are attractively displayed for easy browsing by customers.In-store signage and special displays promote products on floor displays,end caps and on the shelf. Commercial Our commercial sales program operates in a highly fragmented market and is one of the leading distributors of automotive parts and other products to local,regional and national repair garages,dealers and service stations in the United States. As a part of the program we offer credit and delivery to our commercial customers.The program operated out of 2,182 stores as of August 25,2007.Through our hub stores,we offer a greater range of parts and products desired by professional technicians,and this additional inventory is available for our DIY customers as well.We have a national sales team focused on national and regional commercial accounts. Store Operations Store Formats Substantially all AutoZone stores are based on standard store formats,resulting in generally consistent appearance, merchandising and product mix..Approximately 85%to 90%of each store's square footage is selling space,of which approximately 40%to 45%is dedicated to hard parts inventory..The hard parts inventory area is generally fronted by counters or pods that run the depth or length of the store,dividing the hard parts area from the remainder of the store..The remaining selling space contains displays of maintenance,accessories and non-automotive items. We believe that our stores are"destination stores,"generating their,own traffic rather than relying on traffic created by adjacent stores.Therefore,we situate most stores on major thoroughfares with easy access and good parking.. 7 Store Personnel and Training Each store typically employs from 10 to 16 AutoZoners,including a manager-and,in some.cases,an assistant manager.AutoZoners typically have prior automotive experience.All AutoZoners are encouraged to complete courses resulting in certification by the National Institute for Automotive Service Excellence("ASE"),which is broadly recognized for-training certification in the automotive industry.Although we do on-the-job training,we also provide formal training programs,including an annual national sales meeting,regular store meetings on specific sales and product issues,standardized training manuals and a specialist program that provides training to AutoZoners in several areas of technical expertise from both the Company and from independent certification agencies.Training is supplemented with frequent store visits by management. Store managers receive financial incentives through petformance-based bonuses..In addition,our growth has provided opportunities for the promotion of qualified AutoZoners.We believe these opportunities are important to attract,motivate and retain high quality AutoZoners. All store support functions are centralized in our-store support centers located in Memphis,Tennessee and Mexico. We believe that this centralization enhances consistent execution of our merchandising and marketing strategies at the store level,while reducing expenses and cost of sales. Store Automation All of our stores have Z-netTM'our proprietary electronic catalog that enables our AutoZoners to efficiently look up theparts our-customers need and provides complete job solutions,advice and information for customer vehicles. Z- net M provides parts information based on the year,make,model and engine type of a vehicle and also tracks inventory availability at the store,at other nearby stores and through special order. The Z-netTM display screens are placed on the hard parts counter or,pods,where both AutoZoners and customers can view the screen..In addition, our-wide area network enables the stores to expedite credit or debit card and check approval processes,to access immediately national warranty data,to implement real-time inventory controls and to locate and hold parts at neighboring AutoZone stores. Our stores utilize our computerized proprietary Store Management System,which includes bar code scanning and point-of-sale data collection terminals.The Store Management System provides administrative assistance and improved personnel scheduling at the store level,as well as enhanced merchandising information and improved inventory control.We believe the Stoic Management System also enhances customer service through faster, processing of transactions and simplified warranty and product return procedures. Store Development The following table reflects store development during the past five fiscal years: Fiscal Year 2007 2006 2005 2004 2003 Beginning Domestic Stores._.........,... ....... ........... 3,771 3.592 3,420 3,219 3,068 New Stores....................................... ...................,........... .............,...................... 163 185 175 202 160 ClosedStores........................,..,..............,............•,..,............,......................... 1 6 3 1 9 Net New Stores.....................,........................................................................ 162 179 172 201 151 RelocatedStoics........................................•....,........,.. ..............,..,............. 18 18 7 4 6 Ending Domestic Stores............................................................................... 3,933 3,771 3,592 3,420 3,219 Ending Mexico Stores........,,............... .......................................................,........ 123 100 81 63 49 Ending Total Stores..........., .............................. ........ ........... 4 056 Uf1 3.673 -_:483 1.268 domestic stores include stores in the United States and Puerto Rico. The new store count in 2007 reflects 3 stores that were temporarily closed during fiscal 2006 and excluded from the prior year ending store count. We believe that expansion opportunities exist both in markets that we do not currently serve,as well as in markets where we can achieve a larger presence,.We attempt to obtain high visibility sites in high traffic locations and undertake substantial research prior to entering new markets•The most important criteria for opening a new store are its projected future profitability and its ability to achieve our required investment hurdle rate..Key factors in selecting 8 new site and market locations include population,demographics,vehicle profile,number and strength of competitors'stores and the cost of real estate.In reviewing the vehicle profile,we also consider the number of vehicles that are seven years old and older-"our kind of vehicles,"as these are generally no longer under the original manufacturers'warranties and will require more maintenance and repair than younger vehicles.We generally seek to open new stores within or contiguous to existing market areas and attempt to cluster development in markets in a relatively short period of time..In addition to continuing to lease or develop our own stores,we evaluate and may make strategic acquisitions.. Purchasing and Supply Chain Merchandise is selected and purchased for all stores through our store support centers located in Memphis, Tennessee and Mexico.No one class of product accounts for as much as 10 percent of our total sales.In fiscal 2007, no single supplier accounted for more than 10 percent of our total purchases..We generally have few long-term contracts for the purchase of merchandise.We believe that we have good relationships with suppliers.We also believe that alternative sources of'supply exist,at similar cost,for most types of product sold.. Most of our merchandise flows through our distribution centers to our stores by our fleet of tractors and trailers or by third-party trucking firms. Our hub stores have increased our ability to distribute products on a timely basis to many of our stores.A hub store is able to provide replenishment of products sold and deliver other products maintained only in hub store inventories to a store in its coverage area generally within 24 hours.Hub stores are generally replenished from distribution centers multiple times per week.. Competition The sale of automotive parts,accessories and maintenance items is highly competitive in many areas,including name recognition,product availability,customer service,store location and price.AutoZone competes in both the retail("DIY")and commercial do-it-for-me("DIFM")auto parts and accessories markets.. Competitors include national and regional auto parts chains,independently owned parts stores,wholesalers and jobbers,repair shops,car'washes and auto dealers,in addition to discount and mass merchandise stores,department stores,hardware stores,supermarkets,drugstores,convenience stores and home stores that sell aftermarket vehicle parts and supplies,chemicals,accessories,tools and maintenance parts.AutoZone competes on the basis of customer service,including the trustworthy advice of our AutoZoners,merchandise selection and availability,price, product warranty,store layouts and location. Trademarks and Patents We have registered several service marks and trademarks in the United States Patent and Trademark office as well as in certain other countries,including our service marks,"AutoZone"and"Get in the Zone,"and trademarks, "AutoZone,""Duralast,""Duralast Gold,""Valucraft,""ALLDATA"and"Z-netTM." We believe that these service marks and trademarks are important components of our merchandising and marketing strategy. Employees As of August 25,2007,we employed approximately 55,000 persons,approximately 56 percent of whom were employed full-time.About 93 percent of our AutoZoners were employed in stores or in direct field supervision, approximately 5 percent in distribution centers and approximately 2 percent in store support functions_Included in the above numbers are approximately 2,000 persons employed in our Mexico operations. We have never experienced any material labor disruption and believe that relations with our AutoZoners are generally good.. 9 AutoZone Website AutoZone's primary website is at http://www.autozone.com.,We make available,free of charge,at our investor relations website,http://www.autozoneinc.con- our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)or 15(d) of the Securities and Exchange Act of 1934,as amended,as soon as reasonably feasible after we electronically file such material with,or-furnish it to,the Securities and Exchange Commission, Executive Officers of the Registrant The following list describes our executive officers.The title of each executive officer includes the words"Customer Satisfaction"which reflects our commitment to customer service..Officers are elected by and serve at the discretion of the Board of Directors. William C.,Rhodes,111, 42—Chairman,President and Chief Executive Officer-, Customer Satisfaction William C.Rhodes,III,was named Chairman of AutoZone in June 2007 and has been President,Chief Executive Officer and a director since March 2005. Prior to his appointment as President and Chief Executive Officer,Mr'. Rhodes was Executive Vice Presidcnt—Store Operations and Commercial. Prior to fiscal 2005,he had been Senior Vice President—Supply Chain and Information Technology since fiscal 2002,and prior thereto had been Senior Vice President—Supply Chain since 2001. Prior to that time,he served in various capacities within the Company, including Vice President—Stores in 2000,Senior Vice President—Finance and Vice President—Finance in 1999 and Vice President—Operations Analysis and Support from 1997 to 1999. Prior to 1994,Mr.Rhodes was a manager with Ernst&Young LLP. William T Giles, 48—Chief Financial Officer and Executive Vice President,Finance,Information Technology and Store Development, Customer Satisfaction William T.Giles was elected Executive Vice President—Finance,Information Technology and Store Development in March 2007. Prior-to that,he was Executive Vice President,Chief Financial Officer and Treasurer from June 2006 to December 2006 and Executive Vice President,Chief Financial Officer since May 2006. From 1991 to May 2006,he held several positions with Linens N'Things,Inc..,most recently as the Executive Vice President and Chief Financial Officer. Prior to 1991,he was with Melville,Inc..and PricewaterhouseCoopers. Harry L. Goldsmith, 56—Executive Vice President,Secretary and General Counsel, Customer Satisfaction Harry L.Goldsmith was elected Executive Vice-President,General Counsel and Secretary during fiscal 2006, Previously,he was Senior Vice President,Secretary and General Counsel since 1996 and was Vice President, General Counsel and Secretary from 1993 to 1996. Robert D.. Olsen, 54 Executive Vice President—Store Operations, Commercial and Mexico, Customer Satisfaction Robert D.Olsen was elected Executive Vice President—Store Operations,Commercial and Mexico during fiscal 2007..Prior to that,he was Executive Vice President—Supply Chain,Information Technology,Mexico and Store Development since fiscal 2006.. Previously,he was Senior Vice President since fiscal 2000 with primary responsibility for store development and Mexico operations.From 1993 to 2000,Mr. Olsen was Executive Vice President and Chief Financial Officer of Leslie's Poolmart.From 1985 to 1989,Mr.Olsen held several positions with AutoZone,including Controller,Vice President—Finance,and Senior Vice President and Chief Financial Officer, James A..Shea, 62—Executive Vice President—Merchandising, Marketing and Supply Chain, Customer Satisfaction .James A,Shea was elected Executive Vice President Merchandising,Marketing and Supply Chain during fiscal 2007 and has served as Executive Vice President—Merchandising and Marketing since fiscal 2005. He was President and Co-founder of Portero during 2004. Prior to 2004,he was Chief'Executive Officer of'Party City from 1999 to 2003. From 1995 to 1999,he was with Lechters Housewares where he was Senior Vice President Marketing and Merchandising before being named President in 1997.. From 1990 to 1995,he was Senior Vice President of Home for Kaufmanns Department Store,a division of May Company. 10 Timothy W.Briggs, 46—Senior Vice President—Human Resources, Customer Satisfaction Timothy W.Briggs was elected Senior Vice President—Human Resources in October 2005. Prior to that,he was Vice President—Field Human Resources since March 200.5. From 2002 to 2005,Mr.Briggs was Vice President- Organization Development.. From 1996 to 2002,Mr Briggs served in various management capacities at the Limited Inc.,including Vice President,Human Resources.. William W. Graves,47—Senior Vice President—Supply Chain, Customer Satisfaction William W.Graves was elected Senior Vice President—Supply Chain in October 2005. Prior thereto,he was Vice President—Supply Chain since 2000- From 1992 to 2000,Mr_Graves served in various capacities with the Company. Lisa R..Kranc, 54—Senior Vice President—Marketing, Customer Satisfaction Lisa R Kranc was elected Senior Vice President—Marketing during fiscal 2001.Previously,she was Vice President— Marketing for Hannaford Bros.Co.,a Maine-based grocery chain,since 1997,and was Senior Vice President— Marketing for Bruno's,Inc.,from 1996 to 1997..Prior to 1996,she was Vice President-Marketing for-Giant Eagle, Inc..since 1992.. Thomas B..Newbern, 45—Senior,Vice President—Store Operations, Customer Satisfaction Thomas B.Newbern,was elected Senior Vice President—Store Operations in March 2007.Previously,Mr..Newbern held the title Vice President,Store Operations for AutoZone since 1998.A twenty-one year AutoZoner,he has held several key management positions with the Company. Charlie Pleas,III, 42—Senior Vice President, Controller, Customer Satisfaction Charlie Pleas,III,was elected Senior Vice President and Controller in March 2007.Prior to that,he was Vice President,Controller since 2003..Previously,he was Vice President—Accounting since 2000,and Director of General Accounting since 1996.Prior to joining AutoZone,Mr..Pleas was a Division Controller with Fleming Companies, Inc.where he served in various capacities from 1988. Larry M.Roesel, 50—Senior Vice President—Commercial, Customer Satisfaction Larry M,Roesel joined AutoZone as Senior Vice President—Commercial in March 2007.Mr.Roesel came to AutoZone with more than thirty years of experience with OfficeMax,Inc..and its predecessor,where he served in operations,sales and general management. Item 1A.Risk Factors Our business is subject to a variety of risks.. Set forth below are certain of the important risks that we face and that could cause actual results to differ materially from historical results,These risks are not the only ones we face. Our business could also be affected by additional factors that are presently unknown to us or that we currently believe to be immaterial to our business. We may not be able to increase sales by the same historic growth rates. We have increased our store count in the past five fiscal years,growing fiom 3,107 stores at August 31,2002,to 4,056 stores at August 25,2007,an average store count increase per year of 5%.Additionally,we have increased annual revenues in the past five fiscal years from$5.326 billion in fiscal 2002 to$6..170 billion in fiscal 2007,an average increase per year of 3%.. Annual revenue growth is driven by the opening of new stores and same-store sales.. We cannot provide any assurance that we can continue to open stores or increase same-store sales. Our business depends upon qualified employees. At the end of fiscal 2007,our consolidated employee count was approximately 55,000..We cannot assure that we can continue to hire and retain qualified employees at current wage rates If we do not maintain competitive wages, our customer service could suffer by reason of a declining quality of our,workforce or,alternatively,our earnings could decrease if we increase our wage rates. 11 If demand for our products slows,then our business may be materially affected. Demand for products sold by our stores depends on many factors. In the short term,it may depend upon: • the number of miles vehicles are driven annually,as higher vehicle mileage increases the need for maintenance and repair.Mileage levels may be affected by gas prices and other factors. • the number of vehicles in current service that are seven years old and older,as these vehicles are no longer under the original vehicle manufacturers'warranties and will need more maintenance and repair than younger vehicles. • the weather,as vehicle maintenance may be deferred. • the economy.In periods of'rapidly declining economic conditions,both retail DIY and commercial DIFM customers may defer vehicle maintenance or repair.During periods of expansionary economic conditions, more of our DIY customers may pay others to repair and maintain their cars instead of working on their own vehicles or they may purchase new vehicles. For the long term,demand for our products may depend upon: • the quality of the vehicles manufactured by the original vehicle manufacturers and the length of the warranty or maintenance offered on new vehicles. • restrictions on access to diagnostic tools and repair information imposed by the original vehicle manufacturers or by governmental regulation. If we are unable to compete successfully against other businesses that sell the products that we sell,we could lose customers and our sales and profits may decline. The sale of automotive parts,accessories and maintenance items is highly competitive based on many factors, including name recognition,product availability,customer service,store location and price..Competitors are rapidly opening locations near our,existing stores. AutoZonc competes as a supplier in both the DIY and DIFM auto parts and accessories markets. Competitors include national,regional and local auto parts chains,independently owned parts stores,jobbers,repair shops,car washes and auto dealers,in addition to discount and mass merchandise stores,department stores, hardware stores,supermarkets,drugstores,convenience stores and home stores that sell aftermarket vehicle parts and supplies,chemicals,accessories,tools and maintenance parts.Although we believe we compete effectively on the basis of customer service,including the knowledge and expertise of our AutoZoners;merchandise quality, selection and availability;product warranty;store layout,location and convenience;price;and the strength of our AutoZone brand name,trademarks and service marks;some competitors may have competitive advantages,such as greater financial and marketing resources,larger stores with more merchandise,longer operating histories,more frequent customer visits and more effective advertising_If we are unable to continue to develop successful competitive strategies,or if our competitors develop more effective strategies,we could lose customers and our sales and profits may decline.. If we cannot profitably increase our market share in the commercial auto parts business,our sales growth may be limited. Although we are one of the largest sellers of auto parts in the commercial market,to increase commercial sales we must compete against national and regional auto parts chains,independently owned pans stores,wholesalers and jobbers,repair shops and auto dealers Although we believe we compete effectively on the basis of customer service, merchandise quality,selection and availability,price,product warranty and distribution locations,and the strength of our AutoZonc brand name,trademarks and service marks,some automotive aftermarket jobbers have been in business for substantially longer periods of time than we have,have developed long-term customer relationships and 12 have large available inventories..We can make no assurances that we can profitably develop new commercial customers or make available inventories required by commercial customers. If our vendors continue to consolidate,we may pay higher prices.for our merchandise. In recent years,several of our vendors have merged..Further vendor consolidation could limit the number of vendors from which we may purchase products and could materially affect the prices we pay for these products. Consolidation among our competitors may negatively impact our business. If our competitors consolidate with other auto parts chains and are able to achieve efficiencies in their mergers,then there may be greater competitive pressures in the markets in which they are stronger, War or acts of terrorism or the threat of either may negatively impact availability of merchandise and adversely impact our sales. War or acts of terrorism,or the threat of either,may have a negative impact on our ability to obtain merchandise available for sale in our stores.. Some of our merchandise is imported from other countries.If imported goods become difficult or impossible to bring into the United States,and if we cannot obtain such merchandise from other sources at similar costs,our sales and profit margins may be negatively affected. In the event that commercial transportation is curtailed or substantially delayed,our business may be adversely impacted,as we may have difficulty shipping merchandise to our distribution centers and stores. Rising energy prices may negatively impact our profitability. As mentioned above,rising energy prices may impact demand for the products that we sell,overall transaction count and our profitability. Higher energy prices impact our merchandise distribution,commercial delivery,utility,and product costs.. Demand for our merchandise may decline if vehicle manufacturers refuse to make available the information our customers need to work on their own vehicles. Demand for our merchandise may decline if vehicle manufacturers refuse to make available to the automotive aftermarket industry diagnostic,repair and maintenance information that our customers,both retail("DIY")and commercial("DIFM"),require to diagnose,repair and maintain their vehicles, Without public dissemination of this information,consumers may be forced to have all diagnostic work,repairs and maintenance performed by the vehicle manufacturers'dealer network.. Item 1B.Unresolved Staff Comments None. Item 2.Properties The following table reflects the square footage and number of leased and owned properties for our stores as of August 25,2007: No.of Stores Square Footaee Leased.. ..................,........,...,.........,,........................,........,............................ ........,..... ........ 1,873 11,250,612 Owned...._, ........ ...,._.._..... . 2,183 14,793,581 Total....,..................:._................._................................................... ..,......................,,.,...................... 4,056 26.044.193 We have over 3A million square feet in distribution centers servicing our stores,of which approximately 13 million square feet is leased and the remainder is owned.Our distribution centers are located in Arizona,Califomia, Georgia,Illinois,Ohio,Tennessee,Texas and Mexico. Our primary store support center,which we own,is located in Memphis,Tennessee,and consists of approximately 260,000 square feet.We also own and lease other properties that are not material in the aggregate. 13 item 3.Legal Proceedings AutoZone,Inc.is a defendant in a lawsuit entitled"Coalition for a Level Playing Field,L.L.C.,et al.,v.AutoZone, Inc..et al.,"filed in the U.S.District Court for the Southern District of'New York in October 2004..The case was filed by more than 200 plaintiffs,which are principally automotive aftermarket warehouse distributors and jobbers (collectively"Plaintiffs"),against a number of defendants,including automotive aftermarket retailers and aftermarket automotive parts manufacturers. In the amended complaint,the plaintiffs allege,inter alia,that some or all of the automotive aftermarket retailer defendants have knowingly received,in violation of the Robinson-Patman Act(the"Act"),from various of the manufacturer defendants benefits such as volume discounts,rebates,early buy allowances and other allowances,fees,inventory without payment,sham advertising and promotional payments,a share in the manufacturers'profits,benefits of pay on scan purchases,implementation of radio frequency identification technology,and excessive payments for services purportedly performed for the manufacturers.. Additionally,a subset of plaintiffs alleges a claim of fraud against the automotive aftermarket retailer defendants based on discovery issues in a prior litigation involving similar Robinson-Patman Act claims_In the prior litigation, the discovery dispute,as well as the underlying claims,were decided in favor of AutoZone and the other automotive aftermarket retailer defendants who proceeded to trial,pursuant to a unanimous jury verdict which was affirmed by the Second Circuit Court of Appeals.In the current litigation,plaintiffs seek an unspecified amount of damages (including statutory trebling),attorneys'fees,and a permanent injunction prohibiting the aftermarket retailer- defendants from inducing and/or knowingly receiving discriminatory prices from any of the aftermarket manufacturer defendants and fi•om opening up any further stores to compete with plaintiffs as long as defendants allegedly continue to violate the Act..The Company believes this suit to be without merit and is vigorously defending against it.Defendants have filed motions to dismiss all claims with prejudice on substantive and procedural grounds.Additionally,the Defendants have sought to enjoin plaintiffs from filing similar lawsuits in the future.If granted in their entirety,these dispositive motions would resolve the litigation in Defendants'favor. On June 22,2005,the Attorney General of the State of California, in conjunction with District Attorneys for San Bernardino,San Joaquin and Monterey Counties,filed suit in the San Bernardino County Superior Court against AutoZone,Inc.and its California subsidiaries. The San Diego County District Attorney later joined the suit. The lawsuit alleges that AutoZone failed to follow various state statutes and regulation governing the storage and handling of used motor oil and other materials collected for recycling or used for cleaning AutoZone stores and parking lots. The suit sought$12 million in penalties and injunctive relief.. On June 1,2007,AutoZone and the State entered into a Stipulated Final Judgment by Consent.. The Stipulated Final Judgment amended the suit to also allege weights and measures(pricing)violations Pursuant to this Judgment, AutoZone is enjoined from committing these types of violations and agreed to pay civil penalties in the amount of$1.8 million,including$1.5 million in cash and a$300,000 credit for work performed to insure compliance.. AutoZone is involved in various other legal proceedings incidental to the conduct of our business..Although the amount of liability that may result from these other proceedings cannot be ascertained,we do not currently believe that,in the aggregate,they will result in liabilities material to our financial condition,results of operations,or cash flows. Item 4.Submission of Matters to a Vote of Security Holders Not applicable. 14 PART H Item 5.Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities AutoZone's common stock is listed on the New York Stock Exchange under the symbol"AZO."On October 15, 2007,there were 3,589 stockholders of record,which does not include the number of beneficial owners whose shares were represented by security position listings. We currently do not pay a cash dividend on our common stock.Any payment of dividends in the future would be dependent upon our financial condition,capital requirements,earnings,cash flow and other factors. The following table sets forth the high and low sales prices per share of common stock,as reported by the New York Stock Exchange,for the periods indicated: Price Ranee of Common Stock xieh Low Fiscal Year Ended August 25,2007: Fourthquarter......................„-.................................................,.......,....,.,,......,............... $140.29 $111.46 Thirdquarter.......,....,........................,....,,.......,.................................................................. $137..66 $121.52 Secondquarter ............................................................................................ --..........................., $128.00 $112.39 Firstquarter.........---.......................................................-...........-................................... $114.98 $ 87.30 Fiscal Year Ended August 26,2006: Fourthquarter.............,................................................,,.................,....,....,............,....,...,....,.....,.,.... S 94.61 S 83.81 Third quarter...................-..................... .................................-....................................... S 102..00 $ 91.35 Secondquarter...................................................................................................................,..,.,.. $ 99.32 $ 86.50 Firstquarter............................................................................................................... .............. $ 97.08 $ 77.76 During 1998 the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company's Board of Directors. The program was most recently amended in June 2007,to increase the repurchase authorization to$5.9 billion from$5.4 billion.. The program does not have an expiration date. Shares of common stock repurchased by the Company during the quarter ended August 25,2007,were as follows: Total Number of Maximum Dollar Shares Purchased Value that May Yet Total Number Average as Part of Publicly Be Purchased of Shares Price Paid Announced Plans Under the Plans or Period Purchased per Share or Programs Programs May 6,2007,to June 2,2007 816,200 $127.84 97,809,493 $651,360,893 June 3,2007,to June 30,2007 1,444,560 133.66 99,254,053 458,281,384 July 1,2007,to July 28,2007 - - 99,254,053 458,281,384 July 29,2007,to August 25,2007 - - 99,254,053 458,281,384 Total 2.260,760 1 $131.56 1 99,254,053 1 $458,281,384 The Company also repurchased,at fair value,an additional 65,152 shares in fiscal 2007,62,293 shares in fiscal 2006,and 87,974 shares in fiscal 2005 from employees electing to sell their stock under the Company's Third Amended and Restated Employee Stock Purchase Plan,qualified under Section 423 of the Internal Revenue Code, under which all eligible employees may purchase AutoZone's common stock at 85%of the lower of the market 15 price of the common stock on the first day or last day of each calendar quarter through payroll deductions. Maximum permitted annual purchases are$15,000 per employee or 10 percent of compensation,whichever is less. Under the plan,39,139 shares were sold to employees in fiscal 2007,51,167 shares were sold to employees in fiscal 2006,and 59,479 shares were sold in fiscal 2005.. At August 25,2007,395,997 shares of common stock were reserved for future issuance under this plan.. Under the Amended and Restated Executive Stock Purchase Plan all eligible executives are permitted to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus.. Purchases by executives under this plan were 1,257 shares in fiscal 2007,811 shares in fiscal 2006,and 5,366 shares in fiscal 2005.At August 25,2007,263,037 shares of common stock were reserved for future issuance under this plan. Stock Performance Graph This graph shows,from the end of fiscal year 2002 to the end of fiscal year 2007,changes in the value of$100 invested in each of the following: AutoZone's common stock,Standard&Poor's 500 Composite Index,and a peer group consisting of other automotive aftermarket retailers. Comparison of Cumulative Five Year Total Return i $200 i I I I $150 I i $100 I I $50 i $0 8131/02 8130/03 8128104 8127105 8/26106 8125107 1 AutoZone, Inc. --o­5&P 500 Index —6 Peer Group AuE-02 Auk-03 Aua-04 Au2-05 Aug-06 Aue-07 AutoZone,Inc. 100 126.88 104.16 131.93 120.54 17037 S&P 500 Index 100 112.07 12530 138.83 15105 176..88 Peer Group 100 115.32 125.85 164.71 146,05 178.66 The peer group consists of Advance Auto Parts,Inc,CSK Auto Corporation,Genuine Parts Company,O'Reilly Automotive,Inc..,and The Pep Boys-Manny,Moe&Jack. 16 Item 6.Selected Financial Data Fiscal Year Ended Aueust (in thousands,except per share data and selected oneratine data) 2007o1 20061" 2005rZr 2004(" 2003t01 Income Statement Data Net sales .........._............___..........................._....._ ..... $ 6,169,804 $ 5,948,355 S 5,710,882 $ 5,637,025 $ 5,457,123 Cost of sales,including warehouse and delivery expenses..._....__....._..........._............................................... 3,105,554 3,009,835 2,918,334 2,880,446 2,942,114 Operating,selling,general and administrative expenses......................... ......................_......... ............ 2,008,984 1,928,595 1,816,884 1,757,873 1,597,212 Operatingprofit........................ ........ .. _._ .,...... .._...... 1,055,266 1,009,925 975,664 998,706 917,797 Interrstexpense-net........................ ......._.._......_...._... 119,116 107,889 102,443 92,804 84,790 Income before income taxes......._........................_..._..... 936,150 902,036 873,221 905,902 833,007 Income taxes ._......_. .-._.. .........._._.................._... 340,478 332,761 302,202 339,700 315,403 Net income..... Diluted earnings per share....._.................. Adjusted weighted average shares for diluted earnings per share...... .......................... ... Balance Sheet Data Current assets..._.............._........... .._........_..........._ . $ 2,270,455 S 2,118,927 $ 1,929,459 $ 1,755,757 $ 1,671,354 Working capital(deficit).._........ ... ..__.._...:.,.............__. (15,439) 64,359 118,300 4,706 (40,050) Total assets......... ..........__...,. .__..... ........_. .... ......... 4,804,709 4,526,306 4,245,257 3,912,565 3,766,826 Current liabilities,,... ,...._.....___..... ........ 2,285,894 2,054,568 1,811,159 1,751,051 1,711,404 Debt .. ...._.. .......... ...... ......,.......... 1,935,618 1,857,157 1,861,850 1,869,250 1,546,845 Long-term capital leases............._...........,. _............ . 39.073 - - - - Stockhotders'equity ..,. . .. .._ .._.....__._..._............._. $ 403,200 $ 469,528 $ 391,007 $ 171,393 $ 373,758 Selected Operating Data Number of domestic stores at beginning of year... .... .... 3,771 3,592 3,420 3,219 3,068 New stores........ ... .. .. ___....... ,............................ 163 185 175 202 160 Closed stores ._. ...._ .......... ......_....__.. .., _ _ 1 6 3 1 9 Net new stores.........._.. _...._ ..... ........._ ............._.._... 162 179 172 201 151 Relocated stores............. 18 18 7 4 6 Number of domestic stores at end of year .._......_.... . . 3,933 3,771 3,592 3,420 3,219 Number of Mexico stores at end of year 123 100 81 63 49 Number of total stores at end of year ...... .................... 4,056 3.871 3.673 3.483 3,268 Total domestic store square footage(in thousands)._...._.. 25,135 24,016 22,808 21,689 20,500 Average square footage per domestic store 6,391 6,369 6,350 6,342 6.368 Inctease in domestic store square footage.._. 5% 5% 5% 61/0 4% Increase(decrease)in domestic comparable store net sales(" 0.1% 0,4% (2 1)% 0 1". 3 2% Average net sales per domestic store(in thousands)..... .. $ 1,523 $ 1,548 $ 1,573 $ 1,647 S 1,689 Average net sales per domestic store square foot........ ..-. $ 239 $ 243 $ 248 S 259 $ 264 Total domestic employees at end of year....................... 54,859 52,677 50,869 48,294 47,727 Merchandise undeway-on-scan arrangements(in thousands) $ 22,387 $ 92,142 $ 151,682 $ 146,573 $ - Inventory turnovef ... .... .. 1.6x 1.7x 1 8x 1.9x 2.Ox After-tax return on invested capital t�i...,. 22.7ia 22.2% 23.9% 25 1% 23.4% Net cash provided by operating activities(in thousands).... $ 845,194 $ 822,747 $ 648,083 $ 638,379 S 720,807 Cash flow before share repurchases and changes in debt(in thousands)"'._............. .. ..... _ . .. ......... ........._....... $ 678,522 $ 599,507 $ 432,210 $ 509,447 S 561,563 Return on average equity_......... .. .... ... ..........._.._.. 137% 132% 203% 2080,'0 9'7% (1) Fiscal 2007 operating results include a$18.5 million pre-tax non-cash expense for share-based compensation, and fisca12006 operating results contain a$17.4 million pre-tax non-cash expense for share-based compensation as a result of the adoption of SFAS 123(R)at the beginning of fisca12006, (2) Fiscal 2005 operating results include a$40..3 million pre-tax non-cash charge related to lease accounting, which includes the impact on prior years and reflects additional amortization of leasehold improvements and additional rent expense, and a$21.3 million income tax benefit from the repatriation of earnings from our Mexican operations and other discrete income tax items. (3)Fiscal2004 operating results include$42.1 million in pre-tax gains from warranty negotiations with certain vendors 17 (4) Fiscal 2003 operating results include$8.7 million in pre-tax gains from warranty negotiations, a$4.7 million pre-tax gain associated with the settlement of certain liabilities and the repayment of a note associated with the sale of the TruckPro business in December,2001, and a$4..6 million pre-tax gain as a result of the disposition of properties associated with the 2001 restructuring and impairment charges.. (5)The domestic comparable sales increases(decreases)are based on sales for all domestic stores open at least one year. (6)Inventory turnover is calculated as cost of'sales divided by the average of'the beginning and ending recorded merchandise inventories,which excludes merchandise underpay-on-scan arrangements. The calculation includes cost of sales related to pay-on-scan sales,which were$85.4 million for the 52 weeks ended August 25, 2007, $198.1 million for the 52 weeks ended August 26,2006, $234.6 million for the 52 weeks ended August 27, 2005,and$83.2 million.for the 52 weeks ended August 28,2004. (7) After-tax return on invested capital is calculated as after-tax operating profit(excluding rent and restructuring and impairment charges)divided by average invested capital(which includes a factor,to capitalize operating leases)_See Reconciliation of'Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations. (8) Cash flow before share repurchases and changes in debt is calculated as the change in cash and cash equivalents less the change in debt plus treasury stock purchases. See Reconciliation of Non-GAAP Financial Measures in Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations We are the nation's leading retailer and a leading distributor of automotive parts and accessories,with most of our sales to do-it-yourself("DIY")customers.We began operations in 1979 and as of August 25,2007,operated 3,933 stores in the United States and Puerto Rico,and 123 in Mexico.Each of our stores carries an extensive product line for cars,sport utility vehicles,vans and light trucks,including new and remanufactured automotive hard parts, maintenance items,accessories and non-automotive products..In many of our stores we also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local,regional and national repair-garages,dealers and service stations.We also sell the ALLDATA brand automotive diagnostic and repair software. On the web,we sell diagnostic and repair information and automotive hard parts,maintenance items,accessories,and non-automotive products through www.,autozone..com, We do not derive revenue from automotive repair or installation. Results of Operations Fiscal 2007 Compared with Fiscal 2006 For the year ended August 25,2007,AutoZone reported net sales of$6.170 billion compared with$5.948 billion for the year ended August 26,2006,a 3.7%increase from fiscal 2006..This growth was primarily driven by an increase in the number of open stores. At August 25,2007,we operated 3,933 domestic stores and 123 in Mexico,compared with 3,771 domestic stores and 100 in Mexico at August 26,2006. Domestic retail sales increased 14%and domestic commercial sales decreased 0.4%from prior year. ALLDATA and Mexico sales increased over prior year,contributing 0.9 percentage points of the total increase in net sales.. Domestic same store sales,or sales for domestic stores open at least one year,increased 0..1%from the prior year.. Gross profit for fiscal 2007 was$3.064 billion,or 49.7%of net sales,compared with$2.939 billion,or 49.4%of net sales,for fiscal 2006.The improvement in gross profit margin was primarily attributable to ongoing category management initiatives and supply chain efficiencies. Operating,selling,general and administrative expenses for fiscal 2007 increased to$2.009 billion,or 32..6%of net sales,from$1.929 billion,or 32.4%of net sales for fiscal 2006. The increase in expenses is driven primarily by higher occupancy cost versus the prior year. Interest expense,net for fiscal 2007 was$119.1 million compared with$107.9 million during fiscal 2006.This increase was primarily due to higher short term rates and higher average bon-owing levels over the comparable prior year period and the recognition of interest expense on capital lease obligations that were accounted for as operating leases prior to a modification to the lease agreements in fiscal 2007.. Average borrowings for fiscal 2007 were $1.972 billion,compared with$1.928 billion for fiscal 2006.. Weighted average borrowing rates were 5.7%at August 25,2007,compared to 5.5%at August 26,2006.. Our effective income tax rate decreased to 36..4%of pre-tax income for fiscal 2007 as compared to 36.9%for fiscal 2006 primarily due to benefits from changes in our pre-tax earnings mix and an increase in certain federal and state tax credits. Refer to"Note D-Income Taxes" for additional information regarding our income tax rate, Net income for fiscal 2007 increased by 4..6%to$595.7 million,and diluted earnings per share increased by 13.6% to$8.53 from$7.50 in fiscal 2006.The impact of the fiscal 2007 stock repurchases on diluted earnings per share in fiscal 2007 was an increase of approximately$0.14.. 19 Fiscal 2006 Compared with Fiscal 2005 For the year ended August 26,2006,AutoZone reported sales of$5.948 billion compared with$5.711 billion for the year ended August 27,2005,a 4.2%increase from fiscal 2005..This growth was primarily driven by an increase in the number of open stores. At August 26,2006,we operated 3,771 domestic stores and 100 in Mexico,compared with 3,592 domestic stores and 81 in Mexico at August 27,2005. Domestic Retail sales increased 4.0%and domestic commercial sales decreased 1.3%from prior year. ALLDATA and Mexico sales increased over prior year,contributing 0.9 percentage points of the total increase. Same store sales,or sales for domestic stores open at least one year,increased 0.4%from the prior year. Gross profit for fiscal 2006 was$2.939 billion,or 49.4%of net sales,compared with$2.793 billion,or 48..9%of net sales,for fiscal 2005.The improvement in gross profit margin was primarily attributable to ongoing category management initiatives,partially off-set by increases in certain commodity costs.. Our ongoing category management initiatives have included continued optimization of merchandise assortment and pricing,management of procurement costs,and an increasing focus on direct importing initiatives. Operating,selling,general and administrative expenses for fiscal 2006 increased to$1.929 billion,or 32 4%of net sales,from$L817 billion,or 31.8%of net sales for fiscal 2005.. Expenses for fiscal 2005 include a$403 mullion charge related to accounting for leases(see"Note J—Leases"). Expenses for fiscal 2006 include$17.4 mullion in share-based compensation expense resulting from the current year adoption of Statement of Financial Accounting Standards No. 123(R),"Share-Based Payment"(see"Note B—Share-Based Payments"), The remaining increase in expenses is driven by initiatives to improve the customer's shopping experience and higher occupancy costs driven largely by the opening of new stores. These initiatives continue to include expanded hours of operation,enhanced training programs and ensuring clean,well-merchandised stores. Interest expense,net for fiscal 2006 was$107.9 million compared with$102A million during fiscal 2005..This increase was due to a higher average borrowing rate,partially offset by lower average borrowing levels.. Average borrowings for fiscal 2006 were$1..928 billion,compared with$1.970 billion for fiscal 2005. Weighted average borrowing rates were 5.5%at August 26,2006,compared to 5.2%at August 27,2005. The increase in interest rates reflects both the ongoing effort to extend the terms of our borrowings,as well as the impact from increased short- term rates.. Our effective income tax rate increased to 36.9%of pre-tax income for fiscal 2006 as compared to 34.6%for fiscal 2005.The fiscal 2005 effective income tax rate reflects$213 mullion in tax benefits related to the repatriation of Mexican earnings as a result of the American.Jobs Creation Act of 2004(see"Note D—Income Taxes"), and other discrete income tax items. Net income for fiscal 2006 decreased by 0.3%to$5693 million,and diluted earnings per share increased by 4.5%to $7.50 from$7.18 in fiscal 2005.The impact of the fiscal 2006 stock repurchases on diluted earnings per share in fiscal 2006 was an increase of approximately$0.09. Seasonality and Quarterly Periods AutoZone's business is somewhat seasonal in nature,with the highest sales occurring in the spring and summer months of March through August,in which average weekly per-store sales historically have been about 15%to 25% higher than in the slower months of December through February.During short periods of time,a store's sales can be affected by weather conditions. Extremely hot or extremely cold weather may enhance sales by causing parts to fail and spurring sales of seasonal products..Mild or rainy weather tends to soften sales as parts failure rates are lower in mild weather and elective maintenance is deferred during periods of rainy weather Over the longer term, the effects of weather balance out,as we have stores throughout the United States and Mexico.. Each of the first three quarters of AutoZone's fiscal year consists of 12 weeks,and the fourth quarter consists of 16 weeks.Because the fourth quarter contains the seasonally high sales volume and consists of 16 weeks,compared with 12 weeks for each of the first three quarters,our fourth quarter represents a disproportionate share of the annual net sales and net income The fourth quarter of fiscal 2007 represented 32..5%of annual sales and 36.5% of net 20 income;the fourth quarter of fiscal 2006 represented 32.6%of annual sales and 37.5%of net income;and the fourth quarter of fiscal 2005 represented 33..0%of annual sales and 36.2%of net income. Liquidity and Capital Resources Net cash provided by operating activities was$845.2 million in fiscal 2007,S822.7 million in fiscal 2006, and $649.1 million in fiscal 2005.The primary source of our liquidity is our cash flows realized through the sale of automotive parts and accessories. Our new store development program requires working capital,predominantly for inventories. During the past three fiscal years,we have maintained an accounts payable to inventory ratio of'93%at August 25,2007,92%at August 26,2006,and 93%at August 27,2005. The increase in merchandise inventories, required to support new store development and sales growth,has largely been financed by our vendors,as evidenced by our accounts payable to inventory ratio.. Contributing to this ratio is the use of pay-on-scan("POS") arrangements with certain vendors. Under a POS arrangement,AutoZone will not purchase merchandise supplied by a vendor until that merchandise is ultimately sold to AutoZone's customers. Upon the sale of the merchandise to AutoZone's customers,AutoZone recognizes the liability for the goods and pays the vendor in accordance with the agreed-upon terms. Revenues under POS arrangements are included in net sales in the income statement.. Since we do not own merchandise under POS arrangements until just before it is sold to a customer,such merchandise is not included in our balance sheet. Merchandise under POS arrangements was S22.4 million at August 25,2007. AutoZone's primary capital requirement has been the funding of its continued new store development program. From the beginning of fiscal 2005 to August 25,2007,we have opened 573 net new stores.Net cash flows used in investing activities were$228.7 million in fiscal 2007,compared to S268.3 million in fiscal 2006 and$282.8 million in fiscal 2005.We invested$224.5 million in capital assets in fiscal 2007,compared to$263..6 million in capital assets in fiscal 2006 and$283.5 million in fiscal 2005.New store openings were 186 for fiscal 2007,204 for fiscal 2006,and 193 for fiscal 2005..During fiscal 2006,we began investing a portion of our assets held by the Company's wholly owned insurance captive in marketable securities. We acquired$94.6 million of marketable securities in fiscal 2007 and acquired S160.0 million in fiscal 2006. We had proceeds from matured marketable securities of $86.9 million in fiscal 2007 and$145A million in fiscal 2006. Capital asset disposals provided$3.5 million in fiscal 2007,$9..8 million in fiscal 2006,and$3.8 million for fiscal 2005_ Net cash used in financing activities was$621.4 million in fiscal 2007,$537.7 million in fiscal 2006,and$367.4 million in fiscal 2005.The net cash used in financing activities is primarily attributable to purchases of treasury stock which totaled$761.9 million for fiscal 2007,$5781 million for fiscal 2006,and$426.9 million for fiscal 2005.The treasury stock purchases in fiscal 2007,2006 and 2005 were primarily funded by cash flow from operations,and at times,by increases in debt levels. We expect to invest in our business consistent with historical rates during fiscal 2008,primarily related to our new store development program and enhancements to existing stores and systems. In addition to the building and land costs,our new store development program requires working capital,predominantly for inventories.Historically,we have negotiated extended payment terms from suppliers,reducing the working capital required We believe that we will be able to continue to finance much of our inventory requirements through favorable payment terms from suppliers. Depending on the timing and magnitude of our future investments(either in the form of leased or purchased properties or acquisitions),we anticipate that we will rely primarily on internally generated funds and available borrowing capacity to support a majority of our capital expenditures,working capital requirements and stock repurchases.The balance may be funded through new borrowings.We anticipate that we will be able to obtain such financing in view of our credit rating and favorable experiences in the debt markets in the past. Credit Ratings At August 25,2007,AutoZone had a senior-unsecured debt credit rating from Standard&Poor's of BBB+and a commercial paper rating of A-2.Moody's Investors Service had assigned us a senior unsecured debt credit rating of Baa2 and a commercial paper rating of P-2.. As of August 25,2007,Moody's and Standard&Poor's had AutoZone listed as having a"stable"outlook. If our credit ratings drop,our interest expense may increase;similarly,we anticipate that our interest expense may decrease if our investment ratings are raised.If our commercial paper 21 ratings drop below current levels,we may have difficulty continuing to utilize the commercial paper market and our interest expense will increase,as we will then be required to access more expensive bank lines of credit.If our senior unsecured debt ratings drop below investment grade, our,access to financing may become more limited.. Debt Facilities We maintain$1..0 billion of revolving credit facilities with a group of banks to primarily support commercial paper borrowings,letters of credit and other short-term unsecured bank loans. These facilities expire in May 2010,may be increased to$1.3 billion at AutoZone's election,may include up to S200 million in tatters of credit,and may include up to$100 million in capital leases. As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit,the Company had$6802 million in available capacity under these facilities at August 25,2007. The rate of interest payable under the credit facilities is a function of Bank of America's base rate or a Eurodollar rate(each as defined in the facility agreements),or a combination thereof. Our$300.0 million bank term loan entered in December 2004 was amended in April 2006 to have similar terms and conditions as the$1 A billion credit facilities,but with a December 2009 maturity,and was further amended in August 2007 to reduce the interest rate on Euro-dollar loans. That credit agreement with a group of banks provides for a term loan,which consists of,at our election,base rate loans,Eurodollar loans or a combination thereof. The interest accrues on base rate loans at a base rate per,annum equal to the higher•of the prime rate or the Federal Funds Rate plus 1/2 of 1%..Interest accrues on Eurodollar loans at a defined Eurodollar rate plus the applicable percentage, which can range from 30 basis points to 90 basis points,depending upon our senior unsecured(non-credit enhanced) long-term debt rating.Based on our ratings at August 25,2007,the applicable percentage on Eurodollar loans is 35 basis points.We may select interest periods of one,two,three or six months for Eurodollar loans,subject to availability.Interest is payable at the end of the selected interest period,but no less frequently than quarterly.We entered into an interest rate swap agreement on December 29,2004,to effectively fix,based on current debt ratings, the interest rate of the term loan at 4.4%.We have the option to extend loans into subsequent interest period(s)or convert them into loans of another interest rate type..The entire unpaid principal amount of the term loan will be due and payable in full on December 23,2009,when the facility terminates.We may prepay the term loan in whole or in part at any time without penalty,subject to reimbursement of the lenders'breakage and redeployment costs in the case of prepayment of Eurodollar borrowings. During April 2006,our$150.0 million Senior Notes maturing at that time were repaid with an increase in commercial paper. On June 8,2006,we issued$200.0 million in 6.95%Senior Notes due 2016 under our existing shelf registration statement filed with the Securities and Exchange Commission on August 17,2004.. That shelf registration allowed us to sell up to$300 million in debt securities to fund general corporate purposes,including repaying,redeeming or repurchasing outstanding debt,and for working capital,capital expenditures,new store openings,stock repurchases and acquisitions. The remainder of the shelf registration was cancelled in February, 2007. Our borrowings under our Senior Notes arrangements contain minimal covenants,primarily restrictions on liens. Under our other borrowing arrangements,covenants include limitations on total indebtedness,restrictions on liens,a minimum fixed charge coverage ratio and a provision where repayment obligations may be accelerated if AutoZone experiences a change in control(as defined in the agreements)..All of the repayment obligations under our borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs. As of August 25,2007,we were in compliance with all covenants and expect to remain in compliance with all covenants.. Stock Repurchases During 1998,the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company's Board of Directors.. The program was most recently amended in.June 2007 to increase the repurchase authorization to$5.9 billion from$5.4 billion. From January 1998 to August 25,2007,the Company has repurchased a total of'99.3 million shares at an aggregate cost of $5.4 billion.The Company repurchased 6.0 million shares of its common stock at an aggregate cost of$761.9 million during fiscal 2007,6.2 million shares of its common stock at an aggregate cost of$578..1 million during fiscal 2006,and 4.8 million shares of its common stock at an aggregate cost of$426.9 million during fiscal 2005. 22 Financial Commitments The following table shows AutoZone's significant contractual obligations as of August 25,2007: Total Payment Due by Period Contractual Less than Between Between Over 5 (in thousands) Obligations 1 vear 1-3 years 4-5 vears years Long-term debt(1)....................................................... $1,935,618 $435,618 $300,000 $200,000 $1,000,000 Interest payments(2) ..................................................... 500,707 96,988 154,506 118,300 130,913 Operating leases(3)...,.............................,...............,.. 1,312,252 171,163 291,970 214,984 634,135 Capital leases(4) ........................•...........................,......... 62,510 16,015 28,928 17,567 — Self-insurance reserves(5) ............................................ 141,815 45,727 45,283 22,415 28,390 Construction obligations................................................ 23,804 23,804 — — — 3 76 706 15 8 0 7 73 6 $1.793.438 (1) Long-term debt balances representprincipal maturities, excluding interest.At August 25, 2007,debt balances due in less than one year of$435.6 million are classified as long-term in our consolidated financial.statements, as we have the ability and intent to refinance them on a long-term basis.. (2) Represents obligations for interest payments on long-term debt, including the effect of interest rate hedges. (3)Operating lease obligations include related interest and are inclusive of amounts accrued within deferred rent and closed store obligations reflected in our consolidated balance sheets- (4)Capital lease obligations include related interest. (5) The Company retains a significant portion of the risks associated with workers compensation, employee health, general andproduct liability,property, and automotive insurance. These amounts represent undiscounted estimates based on actuarial calculations. Although these obligations do not have scheduled maturities, the timing of future payments arepredictable basedupon historical patterns. Accordingly, the Company reflects the netpresent value of these obligations in its consolidated balance sheets. We have other obligations reflected in our balance sheet that are not reflected in the table above due to the absence of scheduled maturities or due to the naturc of the account.Therefore,the timing of these payments cannot be determined,except for amounts estimated to be payable in 2008 that are included in current liabilities. We have certain contingent liabilities that are not accrued in our balance sheet in accordance with accounting principles generally accepted in the United States.These contingent liabilities are not included in the table above.. Off-Balance Sheet Arrangements The following table reflects outstanding letters of credit and surety bonds as of August 25,200T Total Other (in thousands) Commitments Standbyletters of credit.........................................................................................•........,......................................................... $ 113,305 Suretybonds ............................................,...,..............................,.........,...... 11,286 124 591 A substantial portion of the outstanding standby letters of credit(which are primarily renewed on an annual basis) and surety bonds are used to cover reimbursement obligations to our workers' compensation carriers.There are no additional contingent liabilities associated with them as the underlying liabilities are already reflected in our consolidated balance sheet.The standby letters of credit and surety bonds arrangements expire within one year,but have automatic renewal clauses. In conjunction with our commercial sales program,we offer credit to some of our commercial customers. The majority of our receivables related to the credit program are sold to a third party at a discount for cash with limited 23 recourse_AutoZone has recorded a reserve for this recourse. At August 25,2007,the receivables facility had an outstanding balance of$55.3 million and the balance of the recourse reserve was$1.8 million.. We have entered into POS arrangements with certain vendors,whereby we will not purchase merchandise supplied by a vendor until just before that merchandise is ultimately sold to our customers..Title and certain risks of ownership remain with the vendor until the merchandise is sold to our customers,Since we do not own merchandise under POS arrangements until just before it is sold to a customer,such merchandise is not recorded on our balance sheet_Upon the sale of the merchandise to our customers,we recognize the liability for the goods and pay the vendor in accordance with the agreed-upon terms. Although we do not hold title to the goods,we do control pricing and have credit collection risk and therefore,gross revenues under POS arrangements are included in net sales in the income statement.. Sales of merchandise under POS arrangements approximated$170.0 million in fiscal 2007, 5390.0 million in fiscal 2006,and$460..0 million in fiscal 2005. Merchandise under POS arrangements was$22.4 million at August 25,2007 and$92.1 million at August 26,2006. Value of Pension Assets At August 25,2007,the fair market value of AutoZone's pension assets was$161.2 million,and the related accumulated benefit obligation was$161.1 million based on a May 31,2007 measurement date..On January 1,2003, our defined benefit pension plans were frozen.Accordingly,plan participants earn no new benefits under the plan formulas,and no new participants may join the plans,The material assumptions for fiscal 2007 are an expected long-term rate of return on plan assets of 8..0%and a discount rate of'6.25%.For additional information regarding AutoZone's qualified and non-qualified pension plans refer to"Note I—Pensions and Savings Plans"in the accompanying Notes to Consolidated Financial Statements. Reconciliation of Non-GAAP Financial Measures "Selected Financial Data"and"Management's Discussion and Analysis of Financial Condition and Results of Operations"include certain financial measures not derived in accordance with generally accepted accounting principles("GAAP").These non-GAAP financial measures provide additional information for determining our optimum capital structure and are used to assist management in evaluating performance and in making appropriate business decisions to maximize stockholders'value.. Non-GAAP financial measures should not be used as a substitute for GAAP financial measures,or considered in isolation,for the purpose of analyzing our operating performance,financial position or cash flows.However,we have presented the non-GAAP financial measures,as we believe they provide additional information to analyze or compare our operations-Furthermore,our management and Compensation Committee of the Board of Director's use the abovementioned non-GAAP financial measures to analyze and compare our underlying operating results and to determine payments of performance-based compensation.We have included a reconciliation of this information to the most comparable GAAP measures in the following reconciliation tables. Reconciliation of'Non-GAAP Financial Measure: Cash Flow Before Share Repurchases and Changes in Debt The following table reconciles net increase(decrease)in cash and cash equivalents to cash flow before share repurchases and changes in debt,which is presented in the"Selected Financial Data". Fiscal Year Ended August (in thousands) 2007 2006 2005 2004 2003 Net increase(decrease)in cash and cash equivalents $ (4,904) S 16,748 S (2,042) $(16,250) $ 22,796 Less: [ncrease(decrease)in debt............................. 78,461 (4,693) (7,400) 322,405 352,328 Less: Share repurchases..._............................................... (761,887) 57_( 8.066) (426,852) 848.102 (891,095) Cash flow before share repurchases and changes in debt......................,.......................................... $678 522 5 5 $432,210 509 447 56 563 24 Reconciliation of Non-GAAP Financial Measure..After-Tax Return on Invested Capital The following table reconciles the percentages of after-tax return on invested capital, or"RO1C." After-tax return on invested capital is calculated as after-tax operating profit(excluding rent)divided by average invested capital (which includes a factor to capitalize operating leases).The RO1C percentages are presented in the"Selected Financial Data." (in thousands, except percentage data) Fiscal Year Ended August 2007 2006 2005 2004 2003 Net income......._..............._................................ $ .595,672 $ 569,275 $ 571,019 $ 566,202 $ 517,604 Adjustments: After-tax interest......... ............. 75,793 68,089 65,533 58,003 52,686 After-tax rent.......................................... 97,050 90,808 96,367 73,086 68,764 After-tax return $ 768515 $ 72E 172 $ 732.919 $ 697.291 $ 639.054 Average debt(1).................... $ 1,955,652 $ 1,909,011 $ 1,969,639 $ 1,787,307 $ 1,484,987 Average equity(2).........................._.....,..... . 478,853 510,657 316,639 292,802 580,176 Rent x6(3)......,..._..........................,.. ..,......_ 915,138 863,328 774,706 701,621 663,990 Average capital lease obligations(4) ......... 30,538 - - - Pre-tax invested capital.............. ....................... $ 3.380181 3.282.996 $ 3.060.9R4 $2.781.730 $ 2.729.153 ROIC.............. ................... ... _...... 22.7% 22.2% 23.9% 2-d% 23.4% (1)Average debt is equal to the average of our long-term debt measured at the end of the prior fiscal year and each of the 13 fiscal periods in the current fiscal year..Long-term debt(in thousands)was$1,194,517 at August 31, 2002.. (2) Average equity is equal to the average of our stockholders'equity measured at the end of the prior fiscal year and each of the 13 fiscal periods of the current fiscal year.Stockholders' equity(in thousands)was$689,127 at August 31,2002. (3) Rent is multiplied by a factor of six to capitalize operating leases in the determination of pre-tax invested capital.This calculation excludes the impact from the cumulative lease accounting adjustments recorded in the second quarter of fiscal 2005. (4) Average of the capital lease obligations relating to vehicle capital leases entered into at the beginning of fiscal 2007 is computed as the average over the trailing 13 periods. Rent expense associated with the vehicles prior to the conversion to capital leases is included in the rent for purposes of calculating return on invested capital, 25 Recent Accounting Pronouncements The Financial Accounting Standards Board("FASB")issued FASB Interpretation No..48,"Accounting for Uncertainty in Income Taxes"("FIN 48")in June 2006.. The interpretation clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No.. 109,"Accounting for Income Taxes." FIN 48 will be effective for our fiscal year beginning August 26,2007. The Company has not determined the effect,if any,that the adoption of FIN.48 will have on the Company's financial position and results of operations. In September 2006,the FASB issued FASB Statement No. 157,"Fair Value Measurements"("SFAS 157"). This new standard defines fair value,establishes a framework for measuring fair value in generally accepted accounting principles(GAAP),and expands disclosures about fair value measurements. SFAS 157 will be effective for AutoZone in fiscal 2009. The Company is still in the process of evaluating the impact,if any,that SFAS 157 will have on the Company's financial position and results of operations. On September 29,2006,the FASB issued FASB Statement No. 158,"Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans--An Amendment of FASB Statements No. 87,88, 106,and 132R("SFAS 158"). This new standard requires an employer to: (a)recognize in its statement of financial position an asset for a plan's overfunded status or a liability for a ples underfunded status;(b)measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year(with limited exceptions);and(c) recognize changes in the funded status of a defined benefit postretuement plan in the year in which the changes occur..Those changes will be reported in comprehensive income.We adopted the recognition and disclosure provisions of SFAS 158 during 2007 and will adopt the measurement date provisions in 2009. Please refer to Note I (Pension and Savings Plan)for further description of this adoption. In February 2007,the FASB issued FASB Statement No. 159,"The Fair Value Option for Financial Assets and Financial Liabilities"("SFAS 159"). This new standard permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will be effective for AutoZone in fiscal 2009.. The Company is still in the process of evaluating the impact,if any,that it will have on the Company's financial position and results of operations. Critical Accounting Policies Preparation of our consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements,reported amounts of revenues and expenses during the reporting period and related disclosures of contingent liabilities..In the Notes to Consolidated Financial Statements,we describe our significant accounting policies used in preparing the consolidated financial statements.. Our policies are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances..Actual results could differ under,different assumptions or conditions..Our senior management has identified the critical accounting policies for the areas that are materially impacted by estimates and assumptions and have discussed such policies with the Audit Committee of our Board of Directors.. The following items in our consolidated financial statements require significant estimation or judgment: Inventory and Cost of'Sales We state our inventories at the lower of cost or market using the last-in,fast-out("LIFO")method.. Included in inventory are related purchasing,storage and handling costs.. Due to price deflation on the Company's merchandise purchases,the Company's inventory balances are effectively maintained under the fist-in,first-out method as the Company's policy is not to write up inventory for favorable LIFO adjustments,resulting in cost of sales being reflected at the higher,amount. Since inventory value is adjusted regularly to reflect market conditions,our inventory methodology reflects the lower of cost or market.The nature of our inventory is such that the risk of obsolescence is minimal and excess inventory has historically been returned to our vendors for credit. We provide reserves where less than full credit will be received for such returns and where we anticipate that items will be sold 26 at retail prices that are less than recorded costs. Additionally,we reduce inventory for estimated losses related to shrinkage.Our shrink estimate is based on historical losses verified by ongoing physical inventory counts.. Vendor Allowances AutoZone receives various payments and allowances from its vendors based on the volume of purchases or for services that AutoZone provides to the vendors.Monies received from vendors include rebates,allowances and promotional funds.The amounts to be received are subject to purchase volumes and the terms of the vendor agreements,which generally do not state an expiration date,but are subject to ongoing negotiations that may be impacted in the future based on changes in market conditions,vendor marketing strategies and changes in the profitability or sell-through of the related merchandise..The Company's level of advertising and other operating, selling,general and administrative expenditures are not dependent on vendor allowances. Rebates and other miscellaneous incentives are earned based on purchases or product sales and are accrued ratably over the purchase or sale ofthe related product,but only if it is reasonably certain that the required volume levels will be reached.These monies are recorded as a reduction of inventories and are recognized as a reduction to cost of sales as the related inventories are sold. For all allowances and promotional funds earned under vendor funding,the Company applies the guidance pursuant to the Emerging Issues Task Force Issue No.02-16,"Accounting by a Customer(Including a Reseller)for.Cash Consideration Received from a Vendor"("EITF 02-16"),by recording the vendor funds as a reduction of inventories that are recognized as a reduction to cost of sales as the inventories are sold. The Company's vendor funding arrangements do not provide for any reimbursement arrangements that are for specific,incremental,identifiable costs that are permitted under EITF 02-16 for the funding to be recorded as a reduction to advertising or other operating,selling,general and administrative expenses. Impairments In accordance with the provisions of Statement of Financial Accounting Standards No.. 144,"Accounting for the Impairment or Disposal of Long-Lived Assets"("SFAS 144"),we evaluate the recoverability of the carrying amounts of long-lived assets,such as property and equipment,covered by this standard annually and more fi•equently if events or changes in circumstances dictate that the carrying value may not be recoverable.As part of the evaluation,we review performance at the store level to identify any stores with current period operating losses that should be considered for impairment..We compare the sum of the undiscounted expected future cash flows with the carrying amounts of the assets. Under the provisions of Statement of Financial Accounting Standards No. 142,"Goodwill and Other Intangible Assets"("SFAS 142"),we perform an annual test of goodwill to compare the estimated fair value of goodwill to the carrying amount to determine if any impairment exists.We perform the annual impairment assessment in the fourth quarter of each fiscal year,unless circumstances dictate more frequent assessments. If impairments are indicated by either of the above evaluations,the amount by which the carrying amount of the assets exceeds the fair value of the assets is recognized as an impairment loss. Such evaluations require management to make certain assumptions based upon information available at the time the evaluation is performed,which could differ from actual results.. Sef Insurance We retain a significant portion of the risks associated with workers' compensation,vehicic,cmployec health, general and product liability and property losses..Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported,Through various methods,which includc analyses of historical trends and utilization of actuaries,the Company estimates the costs of these risks.The actuarial estimated long-term portions of these liabilities are recorded at our estimate of their net present value;other liabilities are not discounted We believe the amounts accrued are adequate,although actual losses may differ from the amounts provided.We maintain stop-loss coverage to limit the exposure related to certain risks.. Income Taxes We accrue and pay income taxes based on the tax statutes,regulations and case law of the various jurisdictions in which we operate. Income tax expense involves management judgment as to the ultimate resolution of any tax 27 matters in dispute with state,federal and foreign tax authorities.Management believes the resolution of the current open tax issues will not have a material impact on our consolidated financial statements. Litigation and Other,Contingent Liabilities We have received claims related to and been notified that we are a defendant in a number of legal proceedings resulting from our business,such as employment matters,product liability claims and general liability claims related to our store premises.We calculate contingent loss accruals using our best estimate of our probable and reasonably estimable contingent liabilities. Pension Obligation Prior to January 1,2003,substantially all full-time employees were covered by a defined benefit pension plan.The benefits under the plan were based on years of service and the employee's highest consecutive five-year average compensation.On January 1,2003,the plan was fi•ozen.Accordingly,pension plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. On January 1,2003,the Company's supplemental defined benefit pension plan for certain highly compensated employees was also frozen. Accordingly,plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan..As the plan benefits are frozen,the annual pension expense and recorded liabilities are not impacted by increases in future compensation levels,but are impacted by actuarial calculations using two key assumptions: i. Expected long-term rate of return on plan assets: estimated by considering the composition of our asset portfolio,our historical long-term investment performance and current market conditions. ii. Discount rate used to determine benefit obligations adjusted annually based on the interest rate for long- term high-quality corporate bonds as of the measurement date(May 31)using yields for maturities that are in line with the duration of our pension liabilities.This same discount rate is also used to determine pension expense for the following plan year. If such assumptions differ materially from actual experience,the impact could be material to our financial statements. Item 7A.Quantitative and Qualitative Disclosures About Market Risk AutoZone is exposed to market risk from,among other,things,changes in interest rates,foreign exchange rates and fuel prices.From time to time,we use various financial instruments to reduce interest rate and fuel price risks.To date,based upon our current level of foreign operations,hedging costs and past changes in the associated foreign exchange rates,no derivative instruments have been utilized to reduce foreign exchange rate risk.All of our hedging activities are governed by guidelines that are authorized by our Board of Directors..Further,we do not buy or sell financial instruments for trading purposes. Interest Rate Risk AutoZone's financial market risk results primarily from changes in interest rates..At times,we reduce our exposure to changes in interest rates by entering into various interest rate hedge instruments such as interest rate swap contracts,treasury lock agreements and forward-starting interest rate swaps. AutoZone has historically utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances.We reflect the current fair value of all interest rate hedge instruments in our consolidated balance sheets as a component of other assets.. All of the Company's interest rate hedge instruments are designated as cash flow hedges. We had an outstanding interest rate swap with a fair value of$5.8 million at August 25,2007,and$10.2 million at August 26,2006,to effectively fix the interest rate on the$300.0 million term loan entered into during December 2004. The related gains and losses on interest rate hedges are deferred in stockholders'equity as a component of other comprehensive income or loss These deferred gains and losses we recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense..However,to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flow being hedged,that ineffective portion is immediately recognized in income.The Company's hedge instrument was determined to be highly effective as of August 25,2007. 28 The fair value of our debt was estimated at$1.928 billion as of August 25,2007,and$1.825 billion as of August 26, 2006,based on the quoted market prices for the same or similar debt issues or on the current rates available to AutoZone for debt having the same remaining maturities.. Such fair value is less than the carrying value of debt by $7.6 million at August 25,2007,and less than the carrying value of debt by$32.3 million at August 26,2006. Considering the effect of any interest rate swaps designated and effective as cash flow hedges,we had$245.6 million of variable rate debt outstanding at August 25,2007,and$167.2 million of variable rate debt outstanding at August 26,2006. At these borrowing levels for variable rate debt,a one percentage point increase in interest rates would have had an unfavorable impact on our pre-tax earnings and cash flows of$2.5 million in 2007 and$1.7 million in 2006,which includes the effects of interest rate swaps.The primary interest rate exposure on variable rate debt is based on LIBOR.Considering the effect of any interest rate swaps designated and effective as cash flow hedges,we had outstanding fixed rate debt of$1.690 billion at August 25,2007,and at August 26,2006.A one percentage point increase in interest rates would reduce the fair value of our fixed rate debt by$60.8 million at August 25,2007,and$68.3 million at August 26,2006. Fuel Price Risk Fuel swap contracts that we utilize have not previously been designated as hedging instruments under the provisions of SFAS 133 and thus do not qualify for-hedge accounting treatment,although the instruments were executed to economically hedge a portion of our diesel fuel and unleaded fuel exposure.. As of August 25,2007,the then current month's fuel swap contract was outstanding with a settlement date of August 31,2007.During fiscal 2007 and 2005, we entered into fuel swaps to economically hedge a portion of our diesel fuel exposure. These swaps were settled within a few days of each fiscal year end and had no significant impact on cost of sales for the 2007 or 2005 fiscal years We did not enter into any fuel swap contracts during fiscal 2006. 29 Item 8.Financial Statements and Supplementary Data Index Management's Report on Internal Control Over Financial Reporting..........,,.................,.......... .......--...........................31 Reports of Independent Registered Public Accounting Firm ...... ........................................................... ...................32 Consolidated Statements of Income.................................................................. ..........--.—.....................................34 Consolidated Balance Sheets.............-................................................................................................................................35 Consolidated Statements of Cash Flows...........................................—................................. ............................ ......................36 Consolidated Statements of'Stockholders'Equity................... ................. ......... ....... ............37 Notes to Consolidated Financial Statements................................................. ....................................................... ........ .........38 Quarterly Summary(unaudited)................ ............................. .............................................................................. ..............57 30 Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)and 15d-15(f)under the Securities Exchange Act of 1934,as amended).Our internal control over financial reporting includes,among other things,defined policies and procedures for conducting and governing our business,sophisticated information systems for processing transactions and properly trained staff. Mechanisms are in place to monitor the effectiveness of our internal control over financial reporting,including regular testing performed by the Company's internal audit team,which is comprised of both Deloitte&Touche LLP professionals and Company personnel. Actions are taken to correct deficiencies as they are identified.Our procedures for financial reporting include the active involvement of senior management,our Audit Committee and a staff of highly qualified financial and legal professionals. Management,with the participation of our principal executive and financial officers,assessed our internal control over financial reporting as of August 25,2007,the end of our fiscal year.Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(the COSO criteria).. Based on this assessment,management has concluded that our internal control over financial reporting was effective as of August 25,2007. Our independent registered public accounting firm,Ernst&Young LLP,audited the effectiveness of our internal control over financial reporting. Ernst&Young has issued their report concurring with management's assessment, which is included in this Annual Report. Certifications Compliance with NYSE Corporate Governance Listing Standards On.January 12,2007,the Company submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 303A.12(a)of the Ncw York Stock Exchange Listed Company Manual.. Rule 13a-14(a) Certifications of'Principal Executive Officer and Principal Financial Officer The Company has filed,as exhibits to its Annual Report on Form 10-K for the fiscal year ended August 25,2007, the certifications of its Principal Executive Officer and Principal Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2004.. 31 AutoZone Orga.nizational Chart in Ft Worth , TX — Attachment " B " Rich Merchant ZM Rick Koonsmn (RM) ( ) 1 Q years (A ) 18 years (AZ) 26 yea`rs (mdustry� El`IC SChUItZ 18"years-(industry) , ASE ASE Public Sector _ Jim Ta lQr DM Southern Div, JR Howie (ASM) O 13 years (AZ) 17 years"(industry) 30 years (industry) E. ASE Guy Payne (TM) Relevant Store Mgr's ASM) 5 years (AZ) 13 years (industry) 39 years (industry) ASE LY.ASE Relevant privers;(D) Relevant Comm Spec's (CS) 24 years (AZ) 18 years (AZ)' 31 years (industry) 28 years (industry) ASE RM egion-al Mgr, DIVI = District Mgr, SM = Store Mgr, D = Driver Zone Mgr = zM, ASM = Area Sales Mgr, TM = Territory Mgr, CS = Commercial Specialist Attachment %Icff CHABLOM. STATE OF RORTH CAROUNA CRY OF np-MBORG CONTRACT NO. 0019 FASTER PURCHASE AGtNT This Master Purchase Agreement(ft'Agreement')is entered into as of this a�±day of June 20M(the `E%obve gate'), by and bet~ AufbZorhe Stores. inc., for Itself and on behalf of its aftates (coledvety, the 'Company'), and the: City of Charipite, a politic M subdi+risian of the StaL- of Noah Carolina(the-City'). Statment of Background and Intent A. The City Issued a 'Request for Proposals for Atttwrr ibm Pasts and At~tssories for Light Duty Verities'Number 259-2Q S4W,dated Match 28,2OW3 vequesting pmposals from qualified li ms to provide the City and other Participating Public Agencies vdth AutarnoWe Parts and Accessories, hereafter mWerred to as ('Products')_ This Re"est for Proposals, together with an Exhtjbits. Appends and Addenda,is referred to herein as th RFP'. B, In response to the RFP, the Company subrinitte+ti to"City a proposal dated Hatay 2,200S.This preposa4 togett+er wt4it Automotive Parts and Accessories for Light Duty Vehicles,all attaohments and any separately seated:onfdential trade secrets,is ratermol to herein as the`Proposal.' C. The City and the Company have negoWied and now desire to enter'hrdo an Agre rnent for the Connparty to provide Automotive Parts and Aaxssornss to the City and other participating public agencies in accordance with ft terns end conditions set forth herein. 0. Chartette-Mecklenburg (herein "Lead Public Agency'), in cooperation vAth the U.S. CA:rri hunitle6 Purthming&Finance Agency(herein`U,S.Communities").and on behalf of other public agencies that eied to access the Mmer Agreement (herein -ParticipaWS Public Agenciesr), competitively saicited and awarded the Master Agreement to Company.Load Public Agency has designated U.S. Cornmunifias as the adminiswdWe and mari eking eondiA for to dmtributicin of the Master Agreement to Participating Public Agencies. Company shall sign and return fa U.S. Communities the Administration Agreement attached herehr and incorporated herein as Exhitiif E. Lead Public Agency is adhV as Ilse"Contracting Agent"for the Partiicoating Public Agencies,and shalt not be held liable or responsible tot any costs,damages,WhIllity or other obligation incurred by Ire Partidpafng Public Agencies.Company shall deal dinolly with each Participating Public Agency comeming the pl=ement of orders,issuance of the purchase order,contradual disputes,invoicing, payment and all other matters relating or referring to'rich Pxbc4 of 9 Public Agencys tzoess to the Master Agreement. The Master Agreement shag be construed to be in accordance with and government by the lairs of the SMOG In which the Participating Public Are=y exists.Participating Public Agencies are required to register on-line with U.S. Communities at www.usmMMunitxes.gM The registration allows the Paftipating Pubhcc Agency to enter into a Master hrtergommrnerYtal Crooperative Purchasing Agreement ("MICIPA`), which is intend$d to alk w the Participating Public Agencies to meat applicable legal requirements and facilitate access to the Muter Ag-r eaeent and the Company. XflowhF C09TRACr MAN 7 NOW,TfIEWORE,for good end valuableconWdoration,the receipt and autibe vy of which are hereby acknowledged,and in further conskiwation of ft covenants and conditions cones In this Agreement, the parties agree as tollows- AGREEMENT 1. tMCORPORATION OF EXHIBITS. The patties aeknowtedge and agree that tie lio lowing Exhibits are hereby incorporated into and made a part of Nis Agreement by : E*Ztt A: Cocttrad Pricing and 00=uMs Exhibit W C4rnpanyts Ptoposat Exh1IA C: Delivery and FreightSMedufes Exhibit G: RFP fr~ 9-2006-W Exhibit E: U.S,Communities Adnlhistrative Apre iawnt Eft 1st it F: U.S.Communities Suppler Standards end Comm*nw is AAny conflict between Wnguage in an Echlitt to this Agreement and the main body of this Agreement shall be resolved in fa%w of ttre main body of this Agreement The fWk*rrg terms shaft how the tallomrq meanings for purposes of this Agreement(iry Wing all Exhibits)" 2.1. 'AFFILIATES'shall mean all departnients ar unilts of the City.MoMenburg County,and all other pubic agencies. 22- 'AGREEMENT"stall mom ttds Agreement including all Attachments and Exhibits.Ctty of Charlotte's RFP No- 269-2006.OW, all subsequent Addenda wed in connectlon with the RFP, the Company's proposal dated May 2. 2006 in response tD the RFP as referenced and kwAxpaated herein as though My set forth. 21. 'CONTRACTING AGENT'refers to the City of Charlotte,North Carolina. 24. 'EFFECTIVE DATE' refers to the date this Agreement is fully executed by all parties to the Agreement. 2.5. 'EOUIPMeW MANAGEMENT' refers to the City of Chanotte, Ericripment Maintenance Division. 2.6, "LEAD PUBLIC AGENCr refers to Chariette Mecklenburg Procurement Services Division 27. "PRODUCTS'strati man the Automotive Parts and Accessories for Light Duty Vetdcfes and related services to be provided by the Company as identified and described in this Agreement.Including Exhibits. 2.8. 'PARTICIPATING PUBLIC AGENCY' shall mean► any and all government agencies, except Federal, that have the authority to purchase from another pubic agency's aompetltivety solicited cor#reac including Counties, Cities. Towns, Villages, $pedal Dish M, Public Schools, Community Colleges, Universities, State Agencies and Non profit agencies providing services on behalf of government agencies. AUrOM CONTRACT rraroe 2 29. 'SERVICES" shall include all services tat the Company provdes or is required to provide under this Agreement 2.10. SPECIFICATIONS AND REQUIREMENTS.The tern"Spadfiratione and RequirerneW &halt mean all dR;6eitions, damriptions. tequiremenls, criteria. wwteritiies, end perfonimvv standards relating to the Products aW Services Rust are sat forth or referenced in!this Agreemi it,Including the Exhibits. 3. TERM. The Wall tarn of Om Agreement:Will be for fret(5)Years from the Effective pate witty an option to mnew for two (2) addlft Tal one-year tarTtrs. This Agreement may be extended only by a wrftp amendment signed by bath parties. 4. DESCRI"Ift OF GOWS AND SERVK 8S. The Company shall provitia Automotive Part; and Accessories per bid specifications and in accordance with each and every one of the condWons, oovenants. stipuf dads, terns and pans cartaared In this Agreamertt. 5 CONMACT PRICING. 5.1 The City agrees to flay fine Company for MAeria:1% supplies, moment,apparatus and smvmm dellvaed in accordance with the terms and corAtic s of this Agreement based on a faced pare rrtage discount from the current Company Lowest Zone Price list as identifred and incorporates into this Agreement as ExbibKA 5.2 The Company agrees the ford percentage discount will reamer firm for entire contract term. 53 The Company shall advise the Charlotte-Meddenburg Procurement Services Division in vwriting of any proper price increases no later than sixty(W)days prior to the affective clam,of my such'increases.The Company mast provide documented evidence of material and WaT pdree increases tot directly impact current Products.prices.No adjustments shalt be made to compensate a Company for ine eiency in operation, quan#ily cf product ordered,or for additional profit. 5.4 The City agrees to accept any price Increase that Is documented alter thorough revkw and vadfloatlion,and amend this Agreement K such is in the best interest of the City. 5.5 The Company shall be responsible for furnishing and dehvedng approved price ilsts and most current version of AZ Parts Connect (AZPC) software to the City and other parWpating pub$c entifies upon request 5.6 The Company agrees that during the terry of#te Agreement, no Stave or Local pubttc agency with the same paymentterrns.valume,delivery terms and other conditions set forth in ffrt Master Anent v Al receive the products provided under this Agreement at a borer not price. The C impany will provide U.S. Communities and the Parbooatlrtg Public Agencies vAlh such lower pricing an a gang forward basis.This commitment shall not apply to sped andtor onetime:Offers,4uiddon sales and discounted producge).. 6. DELIVERY AND FRIGHT. All orders shall be shipped F.O.B.Destination and the Company or third panty aanie+r shall be responsible for aay damage or loss in transit AU orders placed by the City or any PartieTating Public Agency shall be delivered by the methods and within the tunas specified in Exhibit C. 7. INVOICES. Each invoice sent by the Company shall detail all Services and Deliverables pe toured and delivered whth am necessary to entitle the Company to tilt requested payment under the tsars at this Agreement. The Company snail real all involoes for the City of Charlotte to: AUTCMIE WNTRACT am 3 City of Chatloite Fnanoe Department Accounts Payable SM Ears O Street I&Floor Chanute,NC 28202 The City will Pay alb acxUrrae,Properly submfted.Uncontested irrrr bn wiffrbt thirty(30)days or rem t Proposals mayr inckrde an rroentive dsoant for ewiy payment. Invoices nwst Mdwe slate and local sales tax In no event steep the City bs liable for arN late fees or hrterm charges. & WARRAIM AND PRO13UCT CMP1RUME. 8.1 All Product provided to lfre City must be new, unused or re nanufaasure-c of the latest desagn and technology and (corn the mast current product Ines, and rrtest all industry standards and otlrer lawns and rr3w taments regarding Airlarnotmma Paris in the state of North Carona or in accdrdancs wflh the taws and applicable purchesMa polidw of the State and locarty where the Participaling Agr M e)btL 8.1 Company warrants that If any wmpvnenta of the prooluds fall due to detects 01 workmanship or mabn wfJf+in are year fmm date of delivery, Company will repair or reptsoe,free of charge,all parts found defedW& 9. GENERAL WARRANTIES. Company represents acid warrants that: 9.1 o is a corporation duly mcorporawl.validly existing and in good standing under the laws of tine state,of North Carolina,and is waliliied to de business in North Care ina; 9.2 it has as the requisfls corporate power and authotily to execute, deliver and pertosm its obligsibm under this A,greanrent; 9.3 The exncudw,delivery,wW perfartrrance of this Agreement have been duly authorized by Company, 9.4 No approval, authorisation or consent of any governmental or reguhrbory authority is required to be obtained or made by It, in order for it bo enter into and perforrn its obligations under this Agreement 8.5 in connection with its obf4ations under this Agr ment,it shall compty with sh applicable federai,state and local laws and regulations and shall obtain an applknMe permits and kcerrses,and 9.6 The Company shah not violate any agreement with any third party by entering into or performing this Agreement lo. ADDITIONAL REPRF.SENTATIMS AND WiARRANTIES. Company represerb warrants and wiermus that ta_i The Sami ies shah satisfy all requirenwnts set forth in this AgreemeM.Inclurding but not knited W Me attached Exhibits; 1 o.2 Ali work perfwned by the Cwnpaury ardor its subcontractors pursuant to this Agreement shall creel ir►kMry accepted standards, and stall be performed in a pm(essionai and vworkmanFks mariner by staff vft the necessary sift,e)gmmnoe and knowledge,, ALnMO F Cnrnucr e►OM 4 10.3 Neither the Products,nor any Seri es provided by to Company under Oft Agreement will inftmp or misapproprislks any patent,copyright,trademark or trade secret t(ghts of any third patty;and It.. TERMNATION. 11.1 Termination Y*ftout Caum— The City may terminate this Agreement at any tfine without cause by giving sixty (6a? days poor.wrftn notice to the Company. 11.2 Temura lion for Default by Either Party. By giving written notice to the other party. Other patty may temur ate thus Agreement upon the occumrtence of are or more of the fokwing events; a. The other pasty violates or faits to perform any covw mt,provision,obligation,term or condition contained in this Agreement,provided that,urtbss c 0mvise,stated in this Agraerrmt, such fa9ime or vfatation shall not be cause for termination if bom of the fallowing conditions are satisfied: P)such dafeutt is reasonably ale to cure; and(u the other party curr"s such dek%M.within (30)days of receipt of written notice of default from 8%non-delauffing parr;or b. The other party afternpts to also.terminate or cancel this Agreement contrary to the hennas hemalt.or c. The other party ceases to do busirness as a going concern,makes an assignment for the benefit of creditors,admks In wrifing its inability to pay debts as they become due, fries a pelion in badmr rtcy or has an irwoluntary bankruptcy peat en tied against it (except in cornte#im with a worgardzafim under which On business of such party is continued and performance of all ifs oblig lima under this Agreement stall canto Muv or V a recsiver.trustee or liquidator is appointed for it or any substantial part of other party's assets or properties. d. Any nofiiee of default shall klcntity this Section of this Agreement and shall state the paws intent to terminate this Agraernent iF the defaut is not cured within the specified period. 11.3 Additional Grounds for Default Termination by the City. By giving written notice to the Carrknany,the City may also terminate this Agreement upon the occurrence of one or more of the following events(which shall each constitute grounds for terrnma6on without a are period and wk art,the occungnca of any of the other events of default previously listed): a. The Company malty or allows to be trade any rnshmat written misrepreserntAim or provides any materially mislieading written infmrmation in connection with this AgreenoM Company's prowl, or any covenant, agreement, obligation, term or condition contained In this Agreement;or b_ The Company takes or falls to take any action which constitutes grounds for immediate termination under the berms of this Agreement,including but not fitted to faikre to obtain or nrabrtarin the insurance pclbas and endorsements as required by this Agromwat. or taiture to provide.the proof of i nsuranoe as required by this Agreement. 11.4 No Suspension. in the event that either party disputes in good faith an afiegation of OWN by the other patty. nob0i standing anything to the contrary in this Agreement, the City and the Company egress that k will not terminate this Agreement or suspend or limit ithe Serrates ALMONE act arx> 5 or payment therefore unless(i3 the parties agree in writing, or (ii) an order of s court of oompetent jurisdr ion determines otherwise. 11.5 Cancellation of Orders and Subcontracts. In the event this Agreement is tsmm nated by either party for any reason prior to the end of the twm,the City and the Company shall mutually agree upon a date for all services to case. The Company shall proceed to conclusion, any order that tras been, or is placed during the agreed upon gme period. As soon as practical after the agreed upon termination date,the Company shall submit a sfatemeM to the City showing in detail the services performed under this Agreement to the date of termination. 11.6 Audwityy to Terminate. The City Manager or City Mana*s designee is authorized m terminate this Agreement on behalf of the City.Two officers of the Company must sign any document terminating the Agreement on behalf of Company. 11.7 No Effect on Taxes,trees, Charges,or Reports. Any termination of this Agreement shall not relieve the Company or the City of itme obligation to pay any has,taxes or other charges then due to the other party,nor relieve the Company of the obligation to file any daily, mordWy, quarterly or annual reports covering the period to termination. 11.8 Other Remedies. Upon termination of this Agreement, each party may seek all legal and equitable remedies to which if is entitled. The remedies set forth herein shawl be deemed cumulative and not exclusive and may be exercised successively or concurrently, in addition to any other available remedies. 12 TRANSITION SERVICES UPON TERMINATION. Upon termination or expiration of this Agreement,the Company shalt provide reasonable efforts to assist the City with the orderly transfer of the Services,iurrWons and operations provided by the Company hereunder to another provider or to the City as determined by the City in its sole discretion.Prior to termination or expiration of this Agreement,the City may require the Company to perform and,if so required,the Company shah perform certain transition services necessary to migrate time work of time Company to another provider or to the City*w#as described beaow(the "Transdion Services").Transition Services may include but shall not be limited to the following. (a) Pre-Migratlon Services. i. Vftking with the City to Jointly develop a mutually agrees! upon Transition Services Plan to facilitate the termination of the Services; and 0. Notifying all affected Agencies and subcontractors of the Company. (b) Migration Services. i. Performing the Transition Service Plan activiiies. (c) Throughout Process and Post-Migration Services. L Answering questions regarding the Services on an as-needed basis;and G. Providing such other reasonable services needed to effectuate an orderly transition to a new Company. This Section 12 pwtains to them City of Charlotte ocmly. The City wm11 not be responsible for, or assist in,the transition sa vices for any other participating agency. PdnMOK COWRAGT Sam 6 13 AUDIT. The Company shall maintain accurate and complete financial records of Its activities and operation reiating to this Agreement in accordance with generally accepted accounting principles. Daring the term of this agreement and for a period of one(1) year after termination or expiration of Oft Agreement far any reason,the City stall have the right to audit, either itself or through a third party,the books and records(including but not limited to the technical records)of the Company in connection with this Agreement,to ensure the Company's compliance with an the terms and conditions of this Agreement or the City's payment obligations. The Company will be responsible br all cost associated with the audit if the discrepancy is ten percent(10%)or more. 14 - COMPANY VALL NOT SELL OR DISCLOSE DATA. The Company will treat as Confidential infommsation all data provided by the City in connection with this Agreanent. City data processed by the Company shag remain the exchrsive property of the City.The Company will not reproduce,copy, duplicate, disclose. or in any way treat the data supplied by the City in any manner except that contemplated by this Agreement. 15 COMPLIANCE WITH LAWS AND CODES. The Company shall ensure that the Services are in compliance with all local, state and federal laws and regulations, in performing the Servuas,the Company shall comply with all local, state and federal laws and regulations. 16 WORK ON CITY'S PREMISES. The Company will ensure that its employees and agents shall.whenever on the City's premises, shall obey all instructions and directions issued by the City w th respect to work on the Ctty's premises. The Company agrees that its personnel and tP* personnel of its subcontractors *11 Comply with all rules,regulations and security procedures of the City when on the City's premises. The Company shall repair, or cause to be repaired, at its own cost, any and at damage to City fardies, buildrngs, or grounds to the extent caused by the Company or employees, subcontractors or agents of the Company. Such repairs shall be made immediately, but in no event later than thirty(30)days after the occurrence. If Company fails to make tamely repairs, the City may make any necessary repairs. Aft torts k=rred by the City for such repairs, as determined by the City, shall be reimbursed by the Company by cash payment upon demand or City may deduct such cost from any amounts due to the Company from the City. 17 RELATIONSHIP OF THE PARTIES. The relationship of the parties established by this Agreement is solely that of Wependent contractors, and noWng contained in this Agreement shall be construed to(1) give any party the power to direct or control the day4o-day activities of the other or(il) constitute swh parties as partners,joint ventures,co-owners or otherwise as parf+apm%in a joint or common undertaking; or @i) make either party an agent of the other for any purpose whatsoever. Neither party nor its agents or employees is the representative of the otter for any purpose, and neither has power or authority to act as agent or employee to represent,in act for,bind,or otherwise create or assume any obligation on behalf of the ocher. The Company shall be fugy and solely responsible for its ohm acts and ornissi and those of its employees, oftioers, agents and subcontractors. All personnel supplied by Company subcontractors shall be considered employees or agents of Company. The Company shall be responsible for the payment of all salaries, withholding taxes, worker's compensation, disability benefits and other compensation and related taxes for such persons. 4 t3 INDEMNIFICATION. The Company shall indemnify, defend and hold harmless the City and the City's officers, empbyees and agents from and against any and all losses,damages, costs,expenses(including AUT020W CONTRACT Eras 7 remmkile atbomeys'fees),obligations and other liabilities(mciuding settlement amounts)to the extent the some arise from; 16.1 any infringement of any copyright, trademark, paten, or other proprietary rights, or any misappropizatio n of any trade secrets, in connection with any software, documentation, services or other products supplied directly or indirectly by the Company in connection with this Agreement,or any allegation of any of the foregoing (collectively refier ed to as "Infeingernent cla iso), 18.2 any acgs)of gross negligence or willful misconduct by the Company or any of its agents, employees or subcontractors (or any allegations of any of the foregoing), including but not kmited is any liability caused by an accident or ether occurrence resulting in bodily W4urry, death, sickness or disease to any person(s) or damage or dent=Hon b:� any property,real or personal; 18.3 any acts or omissions of the Company with respect to the Services or any of the products or service provided by the Company under this Agreement(or any allegations of any of the foregoing);or 18.4 any claims by any persons or enttiies supplyhV labor or material to the Company In connewon with the performance of the Company's obligations under this Agreement. If an Infringement Claim occurs, the Company shall either.' (fj procure for the City the right to continue using the affected product or service; or(ui) repair or reps the Infringing product or service so that it becomes non-infringing, provided that the performance of the Services or any component thereof shall not be adversely affected by such replacement or mod fication. 19 SUBCONTRACTING. Should the Company choose to subcontract,the Company shall be the prime contractor and shall remain fuily responsible for performance of all obligations, which d is required to patform under this Agreement Any subcontract entered into by Company shall name the City as a third party beneficiary. 20 INSURANCE. 20.1Types of Insurance The Company shall obtain and maintain during the life of the Agreement, with an insurance Company rated not less than A by A.M. Best, authorizes to do business in the State of North Carolina the following insurance: Automoh&tiabpity. Successful Company shall be required to provide proof of bodrly injury and property damage liability covering aU owned, non-gowned and hired avtomobies for limits of not less than $1,000,000 bodily iNury each person, each accident and $1,000,000 property damage, or$1,000,000 combined single limit each occurnmuWaggregate. Commen~is1 Genord WbitaFfy. Successful Company shall be required to provide proof of bodily injury and property damage imbitity as strap protect the corMctou and any suit-contractor performing work under this contract from claims of bodily injury or property damage which arise from operation of services described in this RFP whether such operations are perlorrned by contractor,any sub-contractor or any one directly or indirectly employed by either. The amounts of such insurance shah not be less than $1,000,000 bodily injury each o=rencelaggregate and $1,000,000 property damage each ocrxrrrerrcelaggregafie or $1,000.000 bodily injury and property damage combined single limits each occurrence/aggregate. This insurance shall include coverage for productatcompWiled AUTOWE corirtucT t; e operations, personal injury liability and contractual liability assumed under the indemnity provision in Section 28 of this contract. The City shall be named as an additional Insured under the commercial general liability insurance for operations or services rendered under this contract Workert Compensation and Employers LAbW Meeting the statutory requirements of the State of North Carolina and Employers Liability -$=,000 per accident emit, $500,000 disease per policy limit, $100,000 disease each employee i1mJL providing coverage for employers and oamers. The Company shalt not commence any work in connection with this Agreement until it has obtained all of the foregoing types of insurance and the City has approved proof of such insurance. The Company shall not allow any subcontractor to oommerece work on its subcontract until all similar insurance required of the subcontractor has been obtained and approved. 20.2 Other Insurance Requirements. The City shall be exempt from,and in no way liable for any sums at money, which may represent a deductible in any Insurance policy.The payment of such deductible shag be the sole responsibility of the Company and/or subcontractor providing such insurance. The City shall be named as an additional insured for operations or services reordered under the general liability coverage. The Company's insurance stead be Rrbnary of any self-funding and/or insurance otherwise carried by the City for all loss or damages arising from the Company operations under this agmeanent. Certificates of such insurance will be furnished to the City and shall contain the provision tfrat the C4ty be given thirty(30)days written notice of any intent to amend or taenyinate by either the insured or the Ensuring Company. Shoutd any or all of the required insurance coverage be self-funded/self insured, a copy of the Certificate of Self-insurance or other documentation from the North Carolina Department of Insurance shall be furnished. If any part of the work under this Contract is sublet,the subconWactor shall be required to meet all insurance requirements set forltr in this Agreement, provided that types and amounts of insurance to be maintained by each subcortractor shall be adjusted to an amount reasonably necessary to cover the risks associated with such subcontractDes role in the project. The parties stipulate that the Company will maintain each type of insurance set forth above at a coverage level equal to at least half of the amount set forth above for such type of insurance, However, nothing contained herein shall relieve the Company from meeting all insurance requirements or otherwise being responsible for the subcontractor. 21 NOTICES. Any notice,consent or other communication required or contemplated by this Agreemni shall be in writing,and shalt be delivered in person, by U.S.mail,by overnight courier:by electronic mail or by telefax to the intended recipient at the address set ford~below: For The Com For Th e C ; AutoZone Stogy. Inc. Karen P.Ruppe 123 S.Front Street Pelpl.SM ChxIotte-Meaklenbum Procurement Services Mernphik TN 38103 600 E. Fourth St. Attn: Exec.VP--Commercial Charlotte,NC 2a216 Phone: 901-485-6864 Phone,7D4.336-2M2 AM ONE Ga05 9 Faac 901-M-6248 Faz 704--336-2258 E-nait jim.weavem@wtoxone.corn E-mare. kn=p_q cci. Aotte.ne.us Wlltti Copy To: we 70: AutaZone Storms,Inc. Cindy White 123 S.Front Street, Dept.8074 Assistant P'y Attorne Memphis,TN 38103 600 East Fourth Street 15th Floor Attn: General Counsel Charlotte, NC 28202 Phone:go 1-495-7865 Phone:71)4.336.21M 2 Fax: 901-496-8316 FaX 704.336.9864 E-mail- E-rt3ait:eftft.charlotte-nr Notice shall be effective upon the date of recent by the intended recipient, p vvided that any notice which is sent by telefax or electronic mail shall also be simufta wousiy sent by mil deposited with► the U.S. Postal Service or by overnight courtier. Each party may change its address for noti0ration purposes by giving the other party*T tten notice of the new address and the date upon which it shah become effective. 22 NON-DISCRIMINATION. 22.1 The Company agrees that it has adopted and will maintain and enforce a poboy of nondmcrimination on the basis of race, color, religion, sex, age, national origin, or disability. _ 22.2 The company agrees reasonably provide the City any Information and documentation that may be requested by the City from time to time regarding the soihcrtation and selection of subcontractors. 23 DRUG-FREE WORKPLACE. The City is a drug-flee workplace employer.The Mecklenburg City Board of Commissioners has also adopted a policy requiring Companies to provide a drugfree workplace in the performance of any City contract.The Company hereby certifies that it has or it will within thirty(30)days after execution of this Agreement 23.1 Establish policies and procedures which prohibit reporting tr?work under the influence of alcohol or the detectable presence of illegal drugs, narcotics, other intoxicants or non- prescribed drugs. 23.2 Establish policies and procedures which prohibit the sticitatfon. possession and use of drugs on Company or Customer premises. 23.3 Make a good With effort to confawe to maintain a drug-free workplace for employees;and 23.4 Require any party to which it subcontracts any portion of the work under the contract to comply with the above provisions. 24 MISCELLANEOUS. 24.1 Entire Agreement. This Agreement and the Contract Documents,including all Exhlbb, and Attachments, all of which are hereby incorporated herein by reference, constitute the entire agreement between the parties with respect to its su*ct matter, and there are no other representations,understandings,or agreements between the parties with respect to such AurazoiE corarru~r rim 10 subject matter. This Agreement supersedes all prior agrees rrts, negotiations, representations and proposals,written or oral, 24.2 Amendment No amendment or change to this Agreement shall be vahtd unless in writing and signed by both parties to this Agreement. 24.3 Governing Law and JuOWickorr. The parties acknowledge that this Agrfinent is made and entered irAD in Charlotte, North Carofina, and will be performed in Charlotte. North Carolina. The parties further, acknowledge and agree that North Carolina law shaft govern all the rights, obligations. duties and liabilities of the parties under this Agreement, and that North Carolina law shall govern the interpretation and enforcernent of this Agreement and any other matters relating to this Agreement(all without regard to North Carolina conflicts of law princlpias� The parties further agree that any and all legal actions or proceedings relating to this Agreement shall be brought in a state or federal hurt sitting in Mecklenburg City, North Carolina. By execution of this Agreement,the parties submit to the jurisdiction of said courts and hereby irrevocably waive any aid all objections, which they may have with respect to venue in any court sltfrng in Mecklenburg City,North Carolina. 24.4 Binding Nature and Assignment This Agreement shall bind the parties and their successors and permitted assigns.. Neither party may assign this Agreement without the prior written consent of the other. Any assignment attempted without the written consent of the other party shall be void. 24.5 Force Majeure. Neither party shall not be ruble for any failure or delay in the performance of Its obligations pursuant to this Agreement and such failure or delay shall not be deemed a defauft of this Agreement or grounds for termination hereunder if all of the fallowing conditions are satisfied: (a) if such Wure or delay. i. could not have been prevented by reasonable precaution; H. cannot reasonably be circumvented by the non-performing party thigh the use of alternate sources,work-around plans,or other means;and 1IL if,and to the extent,such failure or defy is Mused, directly or indirectly, by fire, flood, earthquake, hLatcane, elements of nature or acts of Got, acts of war, terrorism, riots, civil disorders, rebellions or revolutions or court order. (b) An event which satisfies all of the conditions set forth above shall be referred to as a'Force Majoure Event." Upon the occurrence of a Force Majeure Event, the Company shall be excused from any further performance of those of its obligations which are of wted by the Force Majeuro Event for as long as(a)such Force Majeure Event continues and (b) the Company continues to use commercially reasonable efforts to recommence performance whenever and to whatever extent possible without delay. (c) Upon the occurrence of a Force Majeure Event, the Company shall immediately notify the City by telephone(to be confirmed by written notice within twv(2)days of the inception of the farlare or delay) of the occurrence of a Force Majeure Event and shall describe In reasonable detail the nature of the Force Majeure Event If any Force Majeure Event prevents Company from performing its obligations for more than fire (5) days,the City shah have the right to terminate this Agreement by written notice to Company. AUTOZOW CONTRACT 8ll6106 11 Strikes, slowdovms, lockouts, walkouts, industrial disturbances and other labor disputes shall not constitute Faroe Majeure Events and shag not excuse the Company from the performance of its obligations under this Agreement. The parties also expressly acknowledge that Year 20o0 MWded interruptions in operations or in the supply of products or services necessary to fulfill the obligations of this Agreement are not excused under this provision. 24.6 Severability. The invalidity of one or more of the phrases,sentences,clauses or sections contained in this Agreement shall not affect the validity of the remaining portion of this Agreement so long as the material purposes of this Agreement can be determined and effectuated. If any provision of this Agreement Is held b be unenforceable,then both parties shall be relleved of all obligations arising under such provision, but only to the extent that such provision is unenforceable, and this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it eriforosabhe while preserving its intent. 24.7 Approvals. All approvals or consents required under this Agreement must be in writing. 24.8 Waiver. No delay or omission by either party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by either party of any covenant or breach of this Agreement shall not constitute or operate as a waiver of any succeeding breach of that covenant or of any other covenant. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party waiving the rights. - 24.9 interests of the Parties. The Company covenants that its officers, employees and shareholders have no interest and shall not acquire any interest,direct or indirect,which would corrliict in any manner or degree with the performance of services required to be performed under this Agreement. 24.10 Change in Control. in the event of a change in"Control" of the Company (as defined below), the Clty shall have the option of terminating this Agreement for default by written notice to the Company. The Company shall notify the City within test (10)days after it becomes aware that a change in Control will occur. As used in this Agreement, the term"Contror sitar mean the possession,direct or indirect,of either. the ownership of or ability to direct the voting of, as the case may be fifty-one percent (51%)or more of the equity interests,value or voting power in Company;or the power to direct or cause the direction of the management and policies of Company whether through the ownership of voting securities,by contract or otherwise. 24.11 Familarity and Compliance with laws ante Ordinances. The Company agrees to make itself aware of and comply with all local, state and federal ordinances, statutes, laws, rules and regulations applicable to the Services. Company further agrees that it will at all times during the term of this Agreement be in compliance with all applicable federal, state and/or local laws regarding employment practices. Such laws wig include, but shag not be limited to workers' compensation, the Fair tabor Standards Act(FLSA), the Americans v tit Disabilities Act(ADA).the Family and Medical Leave Art(FMLA)and all OSHA regulations applicable to the work.. 24.12 Taxes. UTOZOrE COMPACT 6✓1ES 12 The Company shall pay all applicable federal, state and local taxes which may be chargeable against the performance of the Services. 24.13 Non-Appropriation of Funds. If the City Commission does not appropriate the funding needed by the City to make payments under this Agreement for a given fiscal year, the City will not be obligated to pay amounts due beyond the end of the last fiscal year for which funds were appropria d. In such event, the City vAl promptly notify the Company of the non- appropriation and this Agreement will be terminated at the end of the last fiscal year for which funds were appropriated.No act or omission by the City which Is attributable to non-appropriation of funds shall constitute a breach of or default under this Agreement. 24.14 Walim of Right to Jury Trial. The City and Company waive and will waive al rights to have a trial by jury in any action, proceeding, clairn or counterclaim brought by either of them against the other an any matter whatsoever arising out of or in any way related to or connected with this Agreement, 24.15 Non-ExciusiVity. This Agmement is no"xclushm and shall not in any way prechnfe,the City from entering Wo surrlar agreements and/or arrangements with other Company or frorn acquiring similar,equal or Ike goods and/or services from other sources. The City makes no representation that it or any governmental entity will purchase any minimum quantities or dollar amounts. AMOZOFE COIMCT VAN 13 IN VWWSS WHEREOF. and in ackrmledgement that the parties hereto have too and undembod each end every provision hereof,the parties have caused this Agreement to be executed on the date first when above. ATTESTED: AUTOZONE STORES,IN . BY. BY: 1� � ..- TITLE TITLE- *rj�a�'" �GM�111StOt�AALP0ii1t TITLE: gVP (CORPORATE SEAL.) CITY OF .f3 LOTTE%— City Cterk nt City Manager (CITY SEAL) Approved As To Insurance Requirements: Risk Management ATOZO E CONTRAG-T 611fili6 U Exhibit A PRICING FORM RFP tM-2006.060 PRICE USTS(S) >O. CATEGORY MANUFACr RER(S) NUMBER DATE PERCENTAGE DISCOUNT AND COLMIN l Altersatars and Starters AC Delco WA NIA 2Wo 5°1a,10%, 15vo, wAml Fins Pasts NIA 209'° 5v.°,10%, 15°/a, Genco Beck/Aml NIA 20% 50%,10°/a, 15vo', W World Wide NIA 20% 2 Beging fbW14roller 5°la, 10°l0, 1 S°Ya, BCA Timken NIA 20% 5%,l0%, 1S°I°, Timkin BCA NIA 20°y° Federal Mogyt NIA 20% L&S NIA 20% 3 Batteriiea AC Delco JCl NIA 20% 4 Behs,Sews,clamps 5°I%,1 Q°/a,15%, Gates Goody= NIA 20°A 5%,10%, 15%, Good ear RjTdyot NIA 20% ideal s Brakes ads&shoes Bendix Morse NIA 20% 5%, 10%, 15%, Eaton Perf Friction NIA 200A 501., 1 o°y°,1 5°/a, Mentor Satisfied NIA 20% som" locyo, 15%, Raybes-tos Federal MoSW NIA 20% Perf Friction 5A Brakes(Drams&Rotors Guinte Aimco NIA 20% VjPAR Neotek NIA s4/°,1EM/a 1s/a, AaOZONE CONTRACT 6►1W06 15 200A 5%, 10%,15%, United lis NIA 20% 5%, 10%, 150%, 11r N/A 200/6 Perf:1' adon NIA 200/4 5B Brakes Cali rs 56A, l0%, 15%, VIPAR ARI NIA 20% 5%, 10%,15%, Fenwick NIA 20'Yo 50/e, 10°/%15%, All Parts NIA 209�0 6 and 1'herm+ostats Sisnt CST NIA 20% 7 Chemicals 51%, 10%, 15%, CRC CRC N/A 20% PMADDe N/A 20% 5%, 100/0,15%, Lucas NIA 201D'o 8 Coolant/Andfreme Zemx, PrestDnC,Old 56A 10"/a, 15%, S1lelzonelMotorcraft World N/A 20% 9 Electrical& ' u 5%, 1 MA,15%, AC Delco Wells NIA 20% 5%, 1 MA, 15%, Motorcraft GPS N/A 20% 5%,100/a,15%, Cole Herme AC Delay N/A 20% I 5a/o,10%, 15%, I Standard Robert Bosch NIA 201vo 10 Emission&Exlsaest 5%, 10%, 15%, AC Delco Arvin Maitor N/A 20% 5%,10'/°, 15°/a, Motoraaft Bosal N/A 20% 11 Faters 5%, 10%115%, AC Deico Chne Labs NIA 20% 5%, 10%, 150%, Motnrora$ Fram N/A 20% 501%10i6,1 S%, Wix .AC Delco N/A 200/0 12 Gasleft and Sear AC Delon Fel ro NIA 5 10%, 15°/ wmor-_CONTP= Bf1bA6 16 20% 5%, IO•�6,15°l0, National Beek AmleY NIA 20% 5%,10%,15°/O, CIR Timken NIA 20% 13 BeRtim&Air CasOftloubg 5%, 10%,15VA, AC Delco Cam rmsor Works N/A 20°/a 5°l°, 10%, Is%, IvSotortus$ Four Seasons N/A 20% SK 10% Aire N/A 200/0 X# lAmm,I&hfiuvMirrors 20°Y° 5%, 10yo, 15%, Federal gignal Sylvania N/A 2WS 5010, 10%, 15°!0, Grow GE NIA 20% 51/,,l 0%O, 15% Retrae Phillips NIA 20% 5%,10%, 15%, w4mer Victor NIA 200/6 5%, 10%, 15%, TTncklite Pilot N/A 200A Power Steering Pump and 5%, 10%, 15%, is Gears 20% 5%, 100/0, 15%, A-1 Cardone A-1 Cardone NIA 200A 5%,10%, 15%, lb Pam (foes&water 200� 5°lo,10°i6, 15°!0, AC Delco ACS N/A 200/0 5%, 10°1a,15°%, MotorcraR Bosch N/A 200/0 5%,10%,I s%, TRW Master N/A 200A 5°l0,10%, 15%, GM$ N/A 20% 17 Sine `and Suspension 5%, 100A.15%, 34009 Gabriel N/A 20% 5%, 10%, 1 SOA, Montoe Ouallis N/A 20% 5d/o, 10%, 15%, 5%, 100/0, 15°l0, 20% Motomaft FederalM l N/A 200/0 SOA, 10°%,15%0, McQuay t N/A 20°!0 A=ONE ONTMT BWAG 17 18 Univerni Joints R 5%•10%, 15%, Precision Anchor NIA 20% 5%, 10%,15%, Spicer Nespeo NIA 204/0 5%, 10* 15%, Beck Anday NIA 20% 5%,I p'1/a,15%, 19 MRS 20% 5%, 10°/a, 15%, Ansco Anco N/A 20`/c - Motorcra#t Basch NIA 20% 5%,10'/6, 15%, Trico 20% 5%, 10%,15% 20 Wheel AeceasorW Piews NIA 20°/0 10%,15°A, Mom superior NIA 20°/a 56A, lop/*, 159/°, Motormite NtA 200/6 The CompaWs pricing is determined by tha competition in arty given maftt Where Company is positioned in a market where there are multiple competitors the pricing will be less expensive to the consumer. The Company has developed multiple pricing"Zones"as a result of this process. Pricing is based on the Lowest Zone less tiered percentage discount based upon total combined U.S. Communities Propum net sales as follows: — 5%<S3MK — 10%$3MM—SIOM M — 15%S10MM-S20MM — 20"/6>S20MM AM* Go" 18 -Exhibit B Ct�MPAN.r PROPOSAL DATED MAY 7.2006 (Proposal is not attached but is incorporated herein) This Exhibit is incorporated into and made a part of the Master Agreement(the "Agreement") between the Meeldenburg City(the "City")and AutoZone Stares, Inc. (The"Company") Unless otherwise defined herein,capitalized terms In this Exhibit shall have the same meanings as are assigned to such terms in the main body of the Agreement MOMNB CANtR= 6tl6lO6 19 ]fthibit C DELI'4'ERY AM l?'B.EllG13T SCBWUUS 1. Standsrd Ia-Stock S flew them f 100 Vx) Delivery to locations within twelve (12) minutes or five (5) miles f= the Company's Commercial Store will be provided by local delivery trucks per the dune intervals below. Distaaoe frown Stare Expedhed.Dahwy Interval 0-3 Wes 30 Minutes or less 3-5 hTries 3045 Minutes >5 Miles Seht Baled De 2. f a§c_n l De1>aerT rime for StoekW Items ffd=Store.Hab.VDPI - Routing from a sister scare:If a part is not in stock brit found in a close sister store,them delivery tune will increase to the extent that it takes to sand a driver to that sister store to pick up said part. "Phis should not exceed 1 to 2 bo rs. - Routing froau a Hub stare;If a part is not in stock or is not available at a sister store,the hub store that supports the servicing AZ stare will be able to provide same day service if the part is ordered fiam our hub by approximately noon `Apprwrimately' is used dine w tlae doeren= in huh routes,acheAdes, etc, that is existing from marker to vrket. If the order is after 12:OOpm,then the part will not arrive 611 noon the next day. Vendor Disco Part(VDP): if the part needed is only available at our vendor, AZ will ship this pact iixam the vendor in question,next day to die AZ servicing store,as long as the order does not exceed 150 lbs. For single orders that require a VDF part over 150 Its., the delivery will be delivered L,TL,which would deliver in 3-5 days. 3. 8ta=Iqrd h*4t ock items foQocatio�s ouMe of twelve(12)min„gg or five(5)miles Locations that are outside of twelve (12) minutes or five (5) miles will be delivered by Third Party ground transportation and may pay applicable Shipping rates. These rates will be determined based upon that Third Party's standard shipping zone and per mile procedures. Presently, AuwZone uses Fed& Groctnd, and as it relates to the charge per mile with PedEx Ground,the rates charged will be based on the same rates that time Company has comt wftd with FedFz, and represent substantial savings over FedEx Ground published rates. Due W the Company's cwfuknrfalfty agreemew whh Fed&,rates cmmot be included in this Agreement. 1elivga Times - For USC locations that are outside of twelve(12)minirtes or five(5)miles,&Twang time will be 3-5 days in the continental United Stata - For USC locations in Alaska,Hawaii,or Puerto Rico,delivery time will be 11-14 days 4. rMedlted Delivery_for Nan-Sot Skot Locations Any item drat has to be expedited from either a stare or a Distribution Center, regardless of the delivery method,Will pay the Third Parry Shipping charges. Red ivgELTimes - Will be priced as needed to meet the need of the Customer location. MOZONE COPMACT 5r16106 20 Exhibft D RFP#260 2003-077 ' Park and AuWmcdve Parts,Surfacing,Site,Fumishings and Related Commodities and Services,is not attached but is incorporated herein. AUTOZONE CONTRACT Gmm 21 (M) (HARWT I`E. STATE OF NORTH CAROLINA Contract#0601343 COUNTY OF MECKLENBURG FIRST AMENDMENT TO AGREEMENT TO PROVIDE AUTOMOTIVE PARTS THIS FIRST AMENDMENT to the Agreement to provide Automotive Parts and Accessories for Light Duty Vehicles (the "Amendment") is made and entered into this 18th day of January, 2007 by and between the CITY OF CHARLOTTE, a North Carolina municipal corporation (the"City") and Autoz one Stores. Inc., a corporation doing business in the State of North:Carolina (the "Company"). STATEMENT OF BACKGROUND AND INTENT A_ The City and the Company entered into a -written Master Purchase Agreement dated June 26, 2006 (the "Agreement") pursuant to which the Company agreed to provide Automotive Parts and Accessories for Light fluty Vehicles to the City of Charlotte and all other government agencies that elect to access the Master Agreement through U.S. Communities. S. The parties now desire to amend the Agreement by making certain changes and clarifications to the term and/or pricing provisions of the Agreement. NOW. THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby amend the Agreement as follows. AGREEMENT 1. Defined terms used in this Amendment shall have the same meaning as are assigned to such terms in the Agreement. 2 Changes to Agreement. In order to effectuate the intent of the parties. the Agreement is hereby amended as follows: a. Pursuant to Section 3.16 of RFP #268-2006-060, the parties agree to acid new categories of products as follows to Exhibit A of the Agreement: Automotive Tools: available at AutoZone'S lowest zone pricing with no additional discount.. ALLDATA: electronic diagnostic and repair information and services are available at pace points outlined in Attachment A to this Amendment*1.. 3. Except to the extent specifically provided in the amendment contained herein, this Amendment shall not be interpreted or construed as waiving any rights, obligations, remedies of claims the parties may otherwise have under this Agreement Amendment#1 1-16-2007 4. In all other respects and expect as modified herein.. the ierms of the Agreement shall remain in force and effect. IN WITNESS WHEREOF, an in acknowledgement that the parties hereto have read and understood each and every provision hereof,the parties have each caused this Amendment to be executed by its duly authorized representative, all as of the date first set forth above. ATTESTED: ALITOZONE STORES,INC, Title: Title: By: Title: 1 --,Dry m 6 OL.1 ATTESTED: CITY OF CHARLOTTE Ow City Clerk 1. Title: KE-Y"t.'SINEE:S FYI Airen7n1em#1 ':8.200, Attachment A AUTOZONE ALLOATA PRICING DVD/On#ine Government and Library* a *ubscdpition prjce_l per each physical I Multi site i site ` single Site Multi site,2-1€1 .1 114 L All Makes I. S1,4S5,00 ( $1,500.00 $1,320.00 i Renewals _ �� $1.500,00 I S1,50D.Q4- -i $1,320-00 I Service Advisor(SA) 5,100iyr y_ --._11 DOJyr .'__.5100 r DVD Notes 1,Includes 1 "white"key 2_Does Not include Service Advisor 3 SA Requires current subscription to full program 4 One time charge for additional key(s)during continuous subscription period 5 If additional keys are ordered,they will all be"timer"keys(blue) 6_ Keys will"time-our'is subscription not renewed i. Multiple"timer"treys will be replaced with single white key when subscription lapses a. Multiy site must be purchased and pad for by one a nr_ 3 Must re-Durchase additional keys when subscription is renewed after a lapse _ Additional Keys or Nodes _ S . Hades for Online < 90 t?0 Per Node Per Month -_-_—v_—` _.— .--. . ......__,_...._...__....._ ..., � _ K+-ys for—DVl3 S Per Key I. One time charge for + -- s 85.00 i ! additional key(s),during continuous subscription period 2 Timer keys sent,will time out" i is subscription not renewed 3.Re-purchase of additional I , keys required if they lapse and then i ..._� l.renewal a later date.--------_----- Amendment t1 1-18-2007 STATE OF NORTH CAROLINA Contract#0601343 COUNTY OF MECKLENBURG SECOND AMENDMENT TO AGREEMENT TO PROVIDE AUTOMOTIVE PARTS THIS SECOND AMENDMENT to the Agreement to provide Automotive Parts and Accessories for Light Duty Vehicles (the "Amendment") is made and entered into this 1st day of December 2007 by and between the CITY OF CHARLOTTE, a North Carolina municipal corporation (the "City") and AutoZone Stores, Inc., a corporation doing business in the State of North Carolina (the"Company"). STATEMENT OF BACKGROUND AND INTENT A. The City and the Company entered into a written Agreement dated June 27, 2006 (the "Agreement") pursuant to which the Company agreed to provide Automotive Parts and Accessories for Light Duty Vehicles to the City of Charlotte and all other government agencies that elect to access the Master Agreement through U.S. Communities. B. The parties now desire to amend the Agreement by making certain changes and clarifications to the term and/or pricing provisions of the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby amend the Agreement as follows: AGREEMENT 1. Defined terms used in this Amendment which are not defined in this Amendment shall have the same meaning as are assigned to such terms in the Agreement. 2. Changes to Original Agreement. In order to effectuate the intent of the parties, the Original Agreement is hereby amended as follows: Participating public agencies electing to purchase the ALLDATA electronic diagnostic and repair services shall issue a purchase order directly to ALLDATA, LLC, an affiliate of the Company, for these services. Participating agencies will receive invoices from, and remit payments directly to, ALLDATA LLC for all associated ALLDATA services and products. 3. Except to the extent specifically provided in the amendment contained herein, this Amendment shall not be interpreted or construed as waiving any rights, obligations, remedies or claims the parties may otherwise have under this Agreement. Page 1 of 2 4. In all other respects and expect as modified herein, the terms of the Agreement shall remain in force and effect. IN WITNESS WHEREOF, an in acknowledgement that the parties hereto have read and understood each and every provision hereof, the parties have each caused this Amendment to be executed by its duly authorized representative, all as of the date first set forth above. AUTOZONE STORES, INC. By: _ vakA z Name: 6-Ate` A-f ' Title: Q �w. LQca`�+ k Date* �A 5)o--) B Name: Title: CC,MM-�l Clrrtt. Date: �ZI �jo-7 CITY gf-GHARLOTT- be�. Ci erk Page 2of2 Attachment "' Dlf )fi At 5 ice• March 4,2008 To Whom It May Concern: In February 2007,the City of Austin entered into an agreement with AutoZone,through the national, cooperative buying-program,US Communities. I am pleased to say . . . AutoZone has met, or exceeded, expectations,during its first year with the city. AutoZone has a"do what it takes" attitude: Delivery has been superb(35 minute average/per delivery for the last 12 months). Their approach &professionalism to the business has been refreshing(business reviews to discuss continuous improvement). Their Commercial Specialists are very knowledgeable in the automotive parts business, which helps us get the right product for the right application. AutoZone's availability and quality of automotive parts have met our needs. Many Thanks AutoZone, Hiram Kirkland /a/R/c KIRKL AND Fleet Operations Manager The City of Austin Fleet Services 1190 Hargrave St Austin, Texas 78702 512-974-1766 Attachment "" Epp ��yRG0o7,ty., U.S. m" !Pa•rdrs k.,; You army Founding CASponmrs MASTER INTERGOVERNMENTAL COOPERATME PURCHASING AGREEMENT This agreement is[Wade between certain govauncntagcncies that execute a Lead Public Agency Certificate("Lead Public Agencies"1 to be appended and trade a part hereof and other government agencies ("Participating Public Agencies")that agree to terms and conditions hercofthrough U-S.Communities registration to be appended and made a part hereof. RECITALS WHEREAS,after a competitive bidding and selection process In Lead Public Agencies,a number of Vendors have entered into blaster Agreements to provide a variety of goods,products and services based on national volutes (herein"Products"); WHEREAS,Master Agreements are rnade available by Lead Public Agencies through U.S.Communities and provide that Participating Public Agencies may purchase Products on the some terms,conditions and pricing as the Lead Public Agcncy,subject to any applicable local purchasing ordinances and the laws oftk State of purchase; WHEREAS,the parties desire to comply with the requirements and formalities of the Intergovernmental Cooperation Act as may be applicable to the laws of the State ofpurchase; WHEREAS,the parties hereto desire to conserve resaurccs and reduce procurement cost, WHEREAS,the parties hereto desire to improve the efficiency,effectiveness and economy of'the procurement of necessary Products; NOW,THEREFORE,in considerationof'thc nu:tuai promises contained in this agreement..and of the.mutual - benefits to result,the parties agree as follows: 1.That each partywril facilitate the cooperative procurement of Products. 2..That the procurement ofProducts subject to this agreement shall be conducted in accordance with and subject to the relevant statutes,ordinances,rules and regulations[bat.govern each pamy's procurement practices. .3.That the cooperative use of bids obtained by a patty to this agreement shall be in accordance with the terns and conditions of the bid except as modification of those terms and conditions is otherwise allowed or required by applicable law. 4.That the Lead Public_'[genies will make available,upon reasonable request and subject to convenience, information which may assist in improving the effectiveness,efficiency and economy of Participating Public Agencies procurement of Products. 5.That a procuring party will make timely'payments to the Vendor for Products received in accordance with the terms and conditions of the procurement.Payment for Products and inspections and acceptance of Products ordered by the procuring party shall be the exclusive obligation of such procuring party.Uisputes between procuring par'and Vendor are to be resolved in accord with the law and venue rules of the State of purchase.. 6.The procuring party shall not uusc this agreement as a method for obtaining additional concessions or reduced prices for similar products or services. The procuring party shall be responsible for the ordering of Products tinder this agreement.A non-procuring party shall not be liable in any fashion forany violation by a procuring party,and the procuring party shall hold non- procuring party harmless from any liability that may arisc from action or inaction of the procuring par. 3..The exercise of any rights or rancdics by the procuring par shall be the exclusive obligation of such procuring party. 9.This agreement shall remain in effect until termination by a party giving 30 days written notice to U.S. Communities at 2033 N.Main Street Suite 700,Walnut CrceL CA 94596. 10.This agreement shall take effect after execution of the Lead Public Agency Certificate or Participating Public AgencyRcgistnrtion,as applicable. EXAM PLE OF LEAD PUBLIC AGENCY CERTIFICATE I hereby ada=wle#..e,on behalf ofibc public agency identified(the"Lma'H Public Agency)thnt I hart read and agree W the general teraz sad cimAttions act forth m the enclased Mntaer trtergovemmentsl Cooperative Ptaeha m-o Agreement(MICPA)reguleft the use Otte Masi�r AgmeramAs aad parchese of Products tact fron time to time are made available by Lead Public Ageracyle Participaeing Public Aaeociea rminnwi$e tbtouah U.S,Communities.Copies of Master Agr"mer m and Vim,atnendments thereto made aysiiahle by Lead Public Agency Ain be provided to Suppliers and U.S.Ciiutmunidcs to faeilhate use by Paricilttrting Perblic Agi:mzies. t understmd that the purchase of one or mare products under the provisionsiof the NUCPA is at the sole and complee discretion of the Participating Public Agency, j r � 4'vihoci -d Sittrsaatra,I:cad GovemmenL Agency i Joc Sandoval,Divisiori Manager Purchasing&CanrraC Services oi Co'n'of Los Angeles LEAD PUBLIC AGENCY CERTIFICATE I hereby acknOwle dge,on behalf of the Counly of Fairfax,Vvtmnia(the"Laud Public:Agency')that,I have read and agree to the fpuend terms and oondid-Aw set fotth in the enclam d Mmift Intergovemmental Cooperative Purchasing Agreement(MICPAI regulating the use of tte Master Agreements and purchase of Products that from 6rrn to thrte are made available by Lead Public Agency to Participating Public Agawie;s nationwide through[f.S.Communities.Copies of Master A&neernenLs and any amendments thereto Male available by Lead Public Agency will be provide!to Vendors and VS.Communities to facilitate o e by Pmiieipating Public Agencies. I untkraand that the:pure base of one or more Products under the provisions of the WPA is at the sole and oumptete discretion of the ParticipatingPubk t'gaxn . vaned Sietatnue� —. Nano and 7ultret S;airer �"" LEAD PUBLIC AGENCY CERTMCATE i herby admaewledge,an behalf orm 239,Wichita Pab1Ee Schools,KS(the"Lead Pubho Agency")that I have read and ages to the geaaal tams and cmWjbons set forth m the enclosed Master Intergovernmental Coop®am Parchaaing Agreement (MICPA) teguletmg the are of the Masser Agreements and purchase of Products dW from timo to base are merle available by Lead Pttbfic Agency to Par icipat, Public Agencies mmonwWa ihtoagh U.S.Communities.Copies of Master Agmemenz and any amendm m thereto made available by Lead Pubhe Agency vnH be provided to Vendors and US. Communities to facilitate use by Pattieipatiag Public Agencies. I tmdaumod that ibe purchase of are or more Products under the provisions of the MiCPA is at the sole and compkft discretion of the Participating PabHe Agmuy_ 5iganture Darrea C. Muci RFP 02-04-011 DOE Approval 1113/03 Name and Tnk cfgigtw t)ete LEAD PUBLIC AGENCY CERTMCATE i twreby wAmawledge,on behalf of lira County of Ma[imp.Ariaorta(the"bead Public Agary')that,I have read and�grea to the general terau+s cod conditions snit farth in the enclosed Master inmgovemmental Caaperativc R rabeaing Agratanmit OAMPA?regulating the on of the Master Agreements and purchase or Products Omit from tams 10 time are made mailable by Load Public Agaaey to Patdoi Wft Public Agenein nationwide d rauo U.S.Commmiti=Capres of Master Agma mau mrd my aarendmettts 1hom made available by lead Public Agmwy will be provided to Vendms end U.S.Communities to facilhata use by PWJcIpating Public Agencies. I ondersmnd dm the pt chm of one or move Prvdacts under the provisions ofthe MICPA Is at the soie and complete diamtion of ike Pardo Public Agency, Audmized c nature Num aid Title a,?SiSvAr SA ' 3 Date LEAD PTMUC AGENCY CERTIWICA'['E I hereby acknowtedge,cu bcbalf of tic City of Charlotte(Mecklenburg County)(the"Lead Pi:blic Apncy)tbat I have read and agee to the general terms and conditions set forth in the enstesed ivLastor Intergovernmental Cooperatne Purcbming Agnzment (IvUC.OA) regulating the uscc. of titer Master Agreements and purchase of Products that from tune to time arc wade available by Load Public Agency to Parficoating Public Agencies nnuunwide through li_S.Corn munitiec Copmi of Masse-Agreements astd any smendmews th=&o tnadt available by Lead Ptsblic Agency will be nrovided to Vendors and U S Com rawities to faeiUmte use by Participating Public agencies. 1 understand that the purebate of one or more Products umda tbo prox isionc of the MTCPA is at the sole and complete discrete m of the Participating Public Agency. Aul?`:L�,nis.�i— Signamse -fG r Ni4 ?�attse and Title rs;Signer -C 3 LEAD PUBLIC AGENCY CER'I'llxICATE I henry wbwRledr-oat behalf of Harftmd Como Public Schools,Itch Ok ILead Public Al;=3`)that I have read and alpe w the general terms and canditioas sec fm&in the enclosed.master Is tal Coopmatm Haag Agmedme at(MCPA)mguba*the we of the Master Agreamcm and piarhmse of Pmdo=do fmm Um to time we made avidlable by Lead Public Agency w Par ictpating Public Ag man nationwide ibrooO U.S-Qmmmitics.Copies of Masao Agmmwms and aay amendments tbeseao made available by Lead Pobhc Agency w71t be provided to Vendors and US.C,ommmues to faeditme,use by PartickOft Public Agencies. I undastand that Ute purchase of one or mroae Products under the pram tithe MICP A is at the solo ad mete diserebw of the Paat➢cipadmg Public Ageacy. d S*Ram ,JoY,vj x g 11a, �@ amdTidea�5igaer Dad f _ LEAD PUBLIC AGENCY CERTIFICATE I heresy acknowledge,on behalf of USD 259,Wichita Public Schools,KS(the"Lead Public Agency")that 1 have read and agree to the gencnl terms and condition set forth in the cacloscd Master intergoverimtental Cooperative Purchasing Agreetnent (MICPA) reguwmg the use of the Master Agreements and purchase of Products that from firm;to time am toade avaiiabk by Lead Public Agency to ParticipaCutg Public Agencies nationwide through U.S.Communities.Copies of Master Agmaumm and any amendments thereto made available by Load Public Agency will be provided to Vendors and U.S, Commtunities to facilitate use by Participating Public Agencies. I understand that the purchase of am or more Products under the provisions of the MICPA is at the sole and complete discretion of the Participating Public Agency. Request for Proposal. t ROOFTNr- SUPPLIES AND RELATED SERVICES Authoriz'edSignahue No. U6-40021 Unified School District 259 - Wirhita (KS) Public Schools SOE Approval 06112/2006 Darren lluci, Division Director Nome and Title of Signer June 14, 2006 - hate LFAU PUBLIC AGENCY CERTIFICATE I hereby acknowledge.on behalf of the City of Lcr Angeles(thr."Lead Public Agency")that t have read and agree to the general terms and conditions set forth in the enclosed Master lnter�aovernmernnl Cooperativr Purchasing Agrretnent(MIICPA)regcdatirty the Lase of the Master Agreements and purchase.of Products that from time to time arc made available by Lcad Public Aaenry to Participating.Public Agencies natiornvide through US Communities. Copies of Master Aaf-v mcnts and any amendnTents thereto made available by lead Public agency will be pfovided Lo Suppliers and U.S.Comtnuniiics to facilitate use by Participating Public Agencies. I understand that the purchase of one or more Products twdv the provisions of the MICPA is at the soft and complete discretion of the Participating Public Azency. Authorized Signature,lead Govern gent Agcncy Dznt LEAD PUBLIC AGENCY CERTIFICATE I hereby acknowledge,on behaff of the Dallis County,M(tbe "Lead Public Agency")that i have mad and agree to the general trnns and conditions set forth in the enclosed Mastm intergovernmental Cooperative Purchasing Agreement(MICPA)regulating the use of the Masier Agreements and purchrsc of Products that from time to time are maL-available by Lead Public Agency to Participating Public Agencies nation%ide through U.S.Communities.Copies of Master Agreements and any amendments thoreto made available by Lead Public A;erwy will be provickcl to Suppliers and U.S.Communities to fscilitatc use by Participating Public Agencies. I undcrstond that the purahaae of one or most:Products under the provisions of rate MIC'PA is ac the sole and complete discretion of the Partimpatingt Public Agency. Authortzed Signatum,Lead tovervirtent Agency vorern_-Y a7 bate CALOORNIA STATEWIDE COMMUNUMS DLVELOPACENT AUTHORrrY CERTIFICATE I hereby acknowledge,on behalf of the California Statewide Communities Development Authority(the"Lead Public Agency),that I have read and agree to the general terms and conditions set forth in the enclosed Master Intargovernmental Cooperative Purchasing Agreement ("MICPA") regulating the use of the Master Agremnent and purchase of products(n this case, limnses)that from time to time ate made available by the Lead Public Agency to Participating Public Agencies through U.S. Communities. Copies of the Muster Agreement and any amendments thereto made available by Lead Public Agency will be provided to Supplier and U.S. Communities to facilitate use by Participating Public Agencies. I understand that the purchase of one or more products(in this case,licenses)under the provisions of the MICPA is at the sole and complete discretion of the Participating Public Agency. Authorized Signature,California Statewide Communities Development Authority 'Title x Date 1FB OB-030 SPECLAL PROVISIONS APPEN01Y ! +F-XHt917 C LEAD PUBLIC AGFNC`s`CERTIFICATE LEA©PrJBUC AGENCY CERTIFICATE i hereby acknowiedge,or,behalf of the pubhr-agercy identified Mhe"Lead Pubes Agency')that I have read and agree to the gsnerai terms and conditons set rofih in the encased Master K-argovemrrent,Cooperathre Pure sing Agreement(MICPA)reguleling the tad of the Masse, ATaements and punch se of Pmdxts thatfrom time to time are made available by Lem Pablic Agency 10 PartlepaRrig Pubyc Agencies natsonwiae thraugh Lf S.Communities.Copies of Master Aween:ents and any amendments thereto madearailable by Lead Pubis Agency will be orovxded to Suppliers and U.S.Communities to facilitate use by Participating Pub=rc Agencies i understand that!he purchase of we or mote PrWuc:s under tree provisions of tfie MtCPA s zi tno sote and=rroiete discretion of the Pa"tiaipatnp;16 xi;-.Agent:r ,'7Q�'ear Tistatdt,chief C?peratitg Drsri r FaMax County puoiic Schcois l ,�Date Atachment ` F AUTHORIZING STATE STATUTES State of Texas Statutes Government Code Title 7. Intergovernmental Relations Chapter 791 Interlocal Cooperation Contracts Subchapter C. Specific Interlocal Contracting Authority § 79 1.001 Government Purpose The purpose of this chapter is to increase the efficiency and effectiveness of local governments by authorizing them to contract, to the greatest possible extent,with one another and with agencies of the state. § 791.003 Government Defmitions (2) "Interlocal contract" means a contract or agreement made under this chapter. (4) "Local government"means a: (A) county, municipality, special district, or other political subdivision of this state or another state; (B) local government corporation created under Subchapter D, Chapter 431, Transportation Code; or (C)political subdivision corporation created under Chapter 304,Local Government Code; or (D) combination of two or more entities described by Paragraph(A), (B), or(C). (5) "Political subdivision" includes any corporate and political entity organized under state law § 791.025 Government Contracts for Purchases (a) A local government, including a council of governments, may agree with another local government or with the state or a state agency, including the General Services Commission, to purchase goods and services. (b) A local government, including a council of governments, may agree with another local government, including a nonprofit corporation that is created and operated to provide one or more governmental functions and services, or with the state or a state agency,including the General Services Commission,to purchase goods and any services reasonably required for the installation, operation, or maintenance of the goods. This subsection does not apply to services provided by firefighters,police officers,or emergency medical personnel. (c) A local government that purchases goods and services under-this section satisfies the requirement of the local government to seek competitive bids for the purchase of the goods and services. (d) In this section, "council of governments" means a regional planning commission created under Chapter 391, Local Government Code. ®® "" ,Ruachment RFP C8-�16:intoma�s�asY+cationa[rn Pats.S voes,Susing end her Worn Far Vehkb end E=p wd Parbi Fao'ffies AFFIDAVIT OF COMMUNICATION,NON-COLLUSION NON-CONFLICT OF INTEREST,AND ANTI-LOBBYING FOR:RFP 08-0016 ON-SITE VEHICLE AND EQUIPMENT MAINTENANCE PARTS FACILITIES State of Texas County of Tarrant Affiant, being first duly sworn„deposes and says: 1 Affiant hereby certifies: (a) that neither k, nor any of its officers, employees, agents or other representatives have communicated in any manner w1hh any City of Fort Worth employee or City Council mernloer, other than authorized point-of-contacts regarding any aspect of this solicitation except in public sessions and (b) neither affiantt, nor any of its officers, employees, agents or representatives have had any other improper contacts regarding this project, 2. Affiant does hereby state neither it nor any of its officers, employees, agents or other representatives in interest,has in any way colluded,conspired,or agreed,directly or indirectly with any person,contractor,or officer,valuable consideration for assistance in procuring or attempting to procure a contract or fix the prices in the attached proposal or the proposal of any other vendor, and further states that no such money or other reward will be herein 3_ Atfiant further states it has neither recommended nor suggested to the City of Fart Worth or any of _ its officials or employees, any of the terms or provisions set forth in its request for proposal and subsequent agreement. 4 Affiant further states its officers,employees,agents or other representatives have not,and will not attempt to lobby, directly or Indirectly, City Council members or other City of Fort Worth officials between proposal submission date and award and execution of contract. 5. Affiant further states no officer,employee,agent or other representative is a member of itre City of Fort Worth staff, or related to any employee of the City of Fort Worth except as noted herein below: Signature(rrtle: Subscribed and sworn to before me this day of 2008 My Commission Expires Notary Public Pursuant to the terms and conditions of our US Communities master agreement, AutoZone is contractually committed to remain fully compliant with all national, regional and local procurement rules, regulations, laws, statutes, and policy procedures. &tc chum. Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of AutoZone,Inc. We have audited AutoZone, Inc.'s internal control over financial reporting as of August 25, 2007,based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(the COSO criteria). AutoZone, Inc..'s management is responsible for maintaining effective internal control over financial reporting,and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of'internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.. We believe that our audit provides a reasonable basis for our opinion.. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements, Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures may deteriorate. In our opinion,AutoZone,Inc.maintained,in all material respects,effective internal control over financial reporting as of August 25,2007,based on the COSO criteria. We also have audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the consolidated balance sheets of AutoZone,Inc..as of August 25,2007 and August 26,2006 and the related consolidated statements of income,stockholders'equity,and cash flows for each of the three years in the period ended August 25,2007 of AutoZone,Inc.and our report dated October 22,2007 expressed an unqualified opinion thereon. /s/Ernst&Young LLP Memphis,Tennessee October 19,2007 32 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of AutoZone,Inc. We have audited the accompanying consolidated balance sheets of AutoZone, Inc. as of August 25, 2007 and August 26,2006 and the related consolidated statements of income,stockholders'equity, and cash flows for each of the three years in the period ended August 25, 2007.. These financial statements are the responsibility of the Company's management, Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for-our-opinion. In our opinion,the financial statements referred to above present fairly,in all material respects,the consolidated financial position of AutoZone,Inc..as of August 25,2007 and August 26,2006,and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 25,2007,in conformity with U.S..generally accepted accounting principles.. We also have audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States),the effectiveness of AutoZone,Inc.'s internal control over financial reporting as of August 25,2007,based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 22,2007 expressed an unqualified opinion thereon. /s/Ernst&Young LLP Memphis,Tennessee October 19,2007 33 Consolidated Statements of Income Year Ended August 25, August 26, August 27, 2007 2006 2005 (in thousands,except per share data) (52 Weeks) (52 Weeks) (52 Weeks) Net sales......................................................................................................... $ 6,169,804 $ 5,948,355 $ 5,710,882 Cost of sales,including warehouse and delivery expenses....................... 3,105,554 3,009,835 2,918,334 Operating,selling,general and administrative expenses.................,..,....., 2,008,984 1,928,595 1,816,884 Operating profit.................................................................................................... 1,055,266 1,009,925 975,664 Interest expense,net...........................................,.......,......................................... 119,116 107,889 102,443 Income before income taxes......................................,..................I..................... 936,150 902,036 873,221 Income taxes............................................................................................,............. 340,478 332,761 302,202 Net income...........................................................................................,........ ......... $ 595.672 $ 569 275 $ 57 .1(19 Weighted average shares for basic earnings per share.....,............................ 69,101 75,237 78,530 Effect of dilutive stock equivalents.........,.......................,....................................•.... 743 622 978 Adjusted weighted average shares for diluted earnings per share............ 69.844 75.859 79.508 Basic earnings per share..,.,.....,..,.................,................,....,........................,........ Diluted earnings per share....................................................................................... $ 8.53 7.50 7.18 See Notes to Consolidated Financial Statements. 34 Consolidated Balance Sheets August 25, August 26, Assets Current assets: Cash and cash _-' .............. __..........___- ................... -_- ...... S 86,654 $ 91,558 Accounts roocivoable_... ... ............. ....... ....._ ........................... ............... -_...... 59,876 80,308 Merchandise bneztodca_--........................... _____-_........................ --_-. 2,007,430 1,840,650 Other current assets.................. ..........................---.................................................... --_-116,425 -_--100.356� Total cur-rent assets.......-_... ........---_-__--_- ...... ..._- ................. 2,270,455 2,118,927 Property and equipment: Laod__-_......................._............................................................................................. 625,992 588,444 Buildings and iuprovconontx_ ....................... ...... -...........................................- 1,720,172 1,566,002 Equipnzeot--_---................ ...........................................-_-___ ........ _- ..... 780,199 729,428 Lcuobud improvements ............. 183,601 1.65,577 Construction io progress............................. ......................... .......................... ......................... _-_-85,581 _--�34,359 3,305,545 3,10,808 Less:Accumulated depreciation and uozncdzuboo__ ---........ _-1,212,703 1,132,500 2,177,842 2,051,308 Goodwill,net of accumulated amortization .........___............. ............. .......................... 302,645 302,645 Deferred income taxes-____ ..............- ......... .................... 21,331 20,643 Other long-term assets............. __-_............ ...........-___-__.................................... 32,136 �32,783 356,412356,071 Liabilities and Stockholders'Equity ' Current buhibdco: Accounts payable, __-_ ..................................... ..................... -___-............. ...... 1`870.688 1,899,867 Accrued expenses and nthcr_-....... .... ................-__..................... __....... -__- 307,633 280/419 Income taxes payable................................. ............. ......_-.............................................. 25,442 24,378 Deferred income taxes...................................................... �2,152 --_-50,101 Total current liabilities__ ............. ............ -_--_________...........___ 2285,895 2854,568 Long-term debt.,... _______ ...................--__-___- ................ __ 1,935/618 1,857157 Other babditieo__........... ____ ............ ...... -............... 179,996 145,053 Commitments and uoobngeouieo_-___-_-.......... ____............................................ -- -- Stockholders'equity: Preferred stock,authorized l,O00 shares;oo shares issued.........__........... ......... ......... -- -- Common stock,par value gOl per share,authorized 2OO'OOO shares;7l,25O shares issued and 85.96Oshares outstanding io2OO7 and 77,24O shares issued and 7l,O82 shares outstanding in2O06�...... 713 772 Audbtouupoid'in '.............. . 545,404 500,880 Retained eaonings-...............____............... ___...___....... 548.049 559,208 Accumulated other comprehensive loss...................................... ........... (9.550) (15.500) Treasury omuk at ........ _--8779,416l -__L575�83Il Total stockholders' *guty__- ........ ....... --............--........ -__489,528 See Notes m Consolidated Financial Statements. 35 � Consolidated Statements of Cash Flows Year Ended (in thousands) (52 Weeks) _(52 Weeks) ' (52 Weeks)_ Cash flows from operating activities: Net incume- ................... ___- .........................................................._ S 595,672 $ 569,275 S 571.019 Adjustments nm reconcile net income u,net cash provided operatingby odviti Depreciation and amortization of property and equipment..................... 159,411 139,465 135,597 Deferred rent liability ......................... -- -- 21'527 Amortization of debt origination fees..................................___... 1J19 1,559 2,343 l0000e tax benefit from exercise of stock oydoou .......................... - (16,523) (10.608) 31.828 Deferred income taxes __ .........................-_..... ......................... ......... 24,844 36,306 (16.628) Income from warranty negotiations.....................................___..........- -- -- (1J36) Share-based compensation expense. .......... 18,462 17,370 - - Changes in operating assets and liabilities: Accounts receivable...................__-_---______.................... 20,497 37,900 (42,485) Merchandise inventories-_-_ ............ __-__-_........... ......_. (160'780) (182,700) (124,560) Accounts payable and accrued ospuumeo-_____--______ 186228 184,986 109,341 Income taxes payable..... ....... ........--_-__-____................. 17.587 28,676 (67,343) Other-,net................ ......................-..._ ............................ ........... __ _-_-L1,913l608 __-29,1286 Net cash provided by operating activities-___- .........--__-...... 845,194 822,747 048.083 Cash flows fiona investing activities: Capitalexpenditures............... _................. ...... (224,474) (263,580) (283,478) _ Purchase of marketable securities ......... ............ ......... (94,615) (159,957) -- ' yrooeodyftnm sale of investments........... __-............... __-_-_-- 86,921 145,369Acquisitions -- -_-----__-___-___-_-----__- -- -- (3,090) Disposal of capitalassets......--_--_________-____-_. -_-_3,453� ---_9,945 3,797 Net cash used io investing activities----_-_-_____- ......... (228715) (268,323) (282.771) Cash flows from financing activities: N of)proceeds from commercial pup*r .......__............ 84,300 (51,993) (304,700) Proceeds from issuance of debt........ ............................... -- 200,000 300,000 Repayment of Senior Notes---___-_-____.................... _-__ -- (150,000) - Netproceeds fromsaleof common mook __-_-___--_-__- 58,952 38,253 64,547 Purchase ot treasury stock............................... __- ................................ (761,887) (578,066) (426,852) Income tax benefit fiom.exercise uf stock optious-__............................. 16,523 10,608 -- ofcuyital lease obligations.................. (11,360) -- -- Other............................................... ............ _-____................................ -__(6.478) ---_-_L349 Net cash used io financing activities.............__________-.... (621,393) (537,676) 867,354Q Net increase in .......... 16,748 Cash cash equivalents__beginning year................____-__-__ 91,558 74,810 76,852 Cash and cash equivalents at end of year............... -__-_______� �~_j���� S~�2U58 ��.�-����! Supplemental cash flow information: Interest paid,net of interest cost oupitubzud--__-____-___- Income taxes paid.................. --.............-_____......................._-_ Assets acquired through capital lease.... -_-____________� See Notes m Consolidated Financial Statements 36 Consolidated Statements of Stockholders'Equity Accumulated Common Additional Other Shares Common Paid4n Retained Comprehensive Treasury (in thousands) Issued Stock Capital Earnings Loss Stock Total Balance at August 28,2004... ,.. .. 89,393 $894 5414,231 5580,147 $(15,653) $(808,226) $171,393 Net income ..... .... ..... .. ........ 571,019 571,019 Minimum pension liability,net of taxes of(516,925)... ......... ... (25,293) (25,293) Foreign currency translation adjustment ........... ... ._. 5,160 5,160 Net gains on outstanding derivatives,net of taxes of'$1,589 2,717 2,717 Reclassification of derivative ineffectiveness into earnings,net of taxes of($1,740).... .. .... (2,900) (2,900) Reclassification of net gains on derivatives into earnings .... (612) (612) Comprehensive income 550,091 Purchase of 4,822 shares of treasury stock . . 1 (426,852) (426,852) Retirement of treasury stock... (10,000) (100) (48,300) (780,890) 829.290 - Sale of common stock under stock option and stock purchase plans... 1,718 17 64,530 64,547 Income tax benefit from exercise of stock options 31,928 31,928 Balance at August 27,2005._ 81,111 811 462,289 370,276 (36,581) (405,788) 391,007 Net income... .......... 569,275 569,275 Minimum pension liability,net of taxes of$14,624 .. . ..__ 22,532 22,532 Foreign currency translation adjustment......,.. (4,410) (4,410) Unrealized loss adjustment on marketable sennities,net of taxes of (181) (181) ($98).. ,. ..., Net gains on outstanding derivatives,net of taxes of$2,152 .. 3,752 3,752 Reclassification of net gains on derivatives into earnings.. .. (612) (612) Comprehensive income ..._ _ 590,356 Purchase of 6,187 shares of treasury stock ., (578,066) (578,066) Retirement of treasury stock (4,600) (46) (27,633) (380,343) 408,022 - Sale of common stock under stock option and stock purchase plans 729 7 38,246 38,253 Share-based compensation expense..... 17,370 17,370 Income tax benefit from exercise of stock options 10.608 10,608 Balance at August 26,2006 77,240 772 500,880 559,208 (15,500) (575,832) 469,528 Net income. .. 595,672 595,672 Minimum pension liability,net of taxes of$9,176 . ...... 14,218 14.218 Foreign currency translation adjustment . .,..... .... (3,240) (3,240) Unrealized gain adjustment on marketable securities,net of taxes $56 104 104 Net losses on outstanding derivatives net of taxes of($1,627) (2,813) (2,813) Reclassification of net gains an derivatives into earnings (612) (612) Comprehensive income ..._ 603,329 Cumulative effect of adopting SFAS 158,net of taxes of($1.089) (1,707) (I,707) Purchase of 6,032 shares of treasury stock. ... I 1 . (76L887) (761,887) Retirement of treasury stock (6,900) (68) (49,404) (608,831) 658,303 - Sale of common stock under stock option and stock purchase plans ....... ... . 910 9 58,943 58,952 Share-based compensation expense. 18,462 18,462 Income tax benefit from exercise of stock options 16,523 16,523 Balance at August 25,2007 2S $ 713 Q544 404 R 546 049 $1679.4161 S401?00 See Notes to Consolidated Financial Statements 37 Notes to Consolidated Financial Statements Note A—Significant Accounting Policies Business:AutoZone,Inc..and its wholly owned subsidiaries("AutoZone"or the"Company")is principally a retailer and distributor of automotive parts and accessories.At the end of fiscal 2007,the Company operated 3,933 domestic stores in the United States and Puerto Rico,and 123 stores in Mexico.Each store carries an extensive product line for cars,sport utility vehicles,vans and light trucks,including new and remanufactured automotive hard parts,maintenance items,accessories and non-automotive products. Many of the stores have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local,regional and national repair garages,dealers and service stations.The Company also sells the ALLDATA brand automotive diagnostic and repair software. On the web at www.autozone..com,the Company sells diagnostic and repair information,auto and light truck parts,and accessories. Fiscal Year:The Company's fiscal year consists of 52 or 53 weeks ending on the last Saturday in August. Basis of Presentation:The consolidated financial statements include the accounts of AutoZone,Inc..and its wholly owned subsidiaries.All significant intercompany transactions and balances have been eliminated in consolidation. Use of Estimates:Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare these financial statements.. Actual results could differ from those estimates. Cash Equivalents:Cash equivalents consist of investments with original maturities of'90 days or less at the date of purchase. Excluded from cash equivalents are investments in money market accounts,held by the Company's wholly owned insurance captive that was established during fiscal 2004. These investments approximated$5..2 million at August 25,2007,and$8.0 million at August 26,2006. They are included within the other current assets caption and are recorded at cost,which approximates market value,due to the short maturity of the investments. Also included in cash equivalents are proceeds due from credit and debit card transactions with settlement terms of less than 5 days.Credit and debit card receivables included within cash equivalents were$22.7 million at August 25, 2007 and$21.6 million at August 26,2006... Marketable Securities: During fiscal 2006,the Company began investing a portion of its assets held by the Company's wholly owned insurance captive in marketable debt securities.. The Company accounts for these securities in accordance with Statement of Financial Accounting Standards("SFAS")No.. 115,"Accounting for Certain Investments in Debt and Equity Securities"("SFAS 115")and accordingly,classifies them as available-for- sale. The Company includes the securities within the other current assets caption and records the amounts at fair market value,which is determined using quoted market prices at the end of the reporting period. Umrealized gains and losses on these marketable securities are recorded in accumulated other comprehensive income,net of tax.. The Company's available-for-sale financial instruments consisted of the following at: Amortized Gross Gross Fair Cost Unrealized Unrealized Market (in thousands) Basis Gains Losses Value August 25,2007...........•................................................... 5 24 33 1 2 5 126 August 26,2006........... $g6.801 iL3 292 S46 22 The debt securities held at August 25,2007,had contractual maturities ranging from less than one year to approximately 2 years.. The Company did not realize any material gains or losses on its marketable securities during fiscal 2007. Prior to 2006,the Company did not invest in any securities required to be accounted for under SFAS 115. 38 Accounts Receivable: Accounts receivable consists of receivables from customers and vendors,and are presented net of an allowance for uncollectible accounts.AutoZone routinely grants credit to certain of its commercial customers.The risk of credit loss in its trade receivables is substantially mitigated by the Company's credit evaluation process,short collection terms and sales to a large number of customers,as well as the low revenue per transaction for most of its sales.Allowances for potential credit losses are determined based on historical experience and current evaluation of the composition of accounts receivable_Historically,credit losses have been within management's expectations and the allowances for uncollectible accounts were$17.7 million at August 25,2007, and$13.7 million at August 26,2006. The Company routinely sells the majority of its receivables to a third party at a discount for cash with limited recourse.AutoZone has recorded a$1.8 million recourse reserve related to the$55.3 million in outstanding factored receivables at August 25,2007. The recourse reserve at August 26,2006 approximated$1.0 million related to the$53.4 million in outstanding factored receivables. Merchandise Inventories:Inventories are stated at the lower of cost or market using the last-in,first-out(LIFO) method. Included in inventory are related purchasing,storage and handling costs. Due to price deflation on the Company's merchandise purchases,the Company's inventory balances are effectively maintained under the first-in, first-out method as the Company's policy is not to write up inventory for favorable LIFO adjustments,resulting in cost of sales being reflected at the higher amount. The cumulative balance of this unrecorded adjustment,which will be reduced upon experiencing price inflation on our-merchandise purchases,was$227.9 million at August 25, 2007,and$198.3 million at August 26,2006.. AutoZone.has entered into pay-on-scan("POS")arrangements with certain vendors,whereby AutoZone will not purchase merchandise supplied by a vendor until that merchandise is ultimately sold to AutoZone's customers. Title and certain risks of ownership remain with the vendor until the merchandise is sold to AutoZone's customers.. Since the Company does not own merchandise under POS arrangements until just before it is sold to a customer,such merchandise is not recorded in the Company's balance sheet. Upon the sale of the merchandise to AutoZone's customers,AutoZone recognizes the liability for the goods and pays the vendor in accordance with the agreed-upon terms. Although AutoZone does not hold title to the goods,AutoZone controls pricing and has credit collection risk and therefore,gross revenues under POS arrangements are included in net sales in the income statement. Sales of merchandise under POS arrangements approximated$170..0 million in fiscal 2007,$390.0 million in fiscal 2006, and$460.0 million in fiscal 2005.. Merchandise under POS arrangements was$22.4 million at August 25,2007 and $92.1 million at August 26,2006. Property and Equipment:Property and equipment is stated at cost.Depreciation and amortization are computed principally using the straight-line method over the following estimated useful lives:buildings,40 to 50 year's; building improvements,5 to 15 years;equipment,3 to 10 years;and leasehold improvements,over the shorter of the asset's estimated useful life or the remaining lease term,which includes any reasonably assured renewal periods. Depreciation and amortization include amortization of assets under capital lease. Impairment of Long-Lived Assets:In accordance with the provisions of Statement of Financial Accounting Standards No.. 144,"Accounting for the Impairment or Disposal of Long-Lived Assets"("SFAS 144"),the Company evaluates the recoverability of the carrying amounts of the assets covered by this standard annually and more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable..As part of the evaluation,the Company reviews performance at the store level to identify any stores with current period operating losses that should be considered for impairment.The Company compares the sum of the undiscounted expected future cash flows with the carrying amounts of the assets. If impairments are indicated,the amount by which the carrying amount of the assets exceeds the fair,value of the assets is recognized as an impairment loss where fair value is estimated based on discounted cash flows.No significant impairment losses were recorded in the three years ended August 25,2007. Goodwill: The cost in excess of fair value of identifiable net assets of businesses acquired is recorded as goodwill. In accordance with the provisions of Statement of Financial Accounting Standards No. 142,"Goodwill and Other Intangible Assets"("SFAS 142"),goodwill has not been amortized since fiscal 2001,but an analysis is performed at least annually to compare the fair value of the reporting unit to the carrying amount to determine if any impairment exists.The Company performs its annual impairment assessment in the fourth quarter of each fiscal year,unless circumstances dictate more frequent assessments.No impairment losses were recorded in the three years ended August 25,2007. 39 Derivative Instruments and Hedging Activities:AutoZone is exposed to market risk from,among other things, changes in interest rates,foreign exchange rates and fuel prices.From time to time,the Company uses various financial instruments to reduce such risks..To date,based upon the Company's current level of foreign operations, hedging costs and past changes in the associated foreign exchange rates,no derivative instruments have been utilized to reduce foreign exchange rate risk.All of the Company's hedging activities are governed by guidelines that are authorized by AutoZone's Board of Directors.Further,the Company does not buy or sell financial instruments for trading purposes.. AutoZone's financial market risk results primarily from changes in interest rates.At times,AutoZone reduces its exposure to changes in interest rates by entering into various interest rate hedge instruments such as interest rate swap contracts,treasury lock agreements and forward-starting interest rate swaps.The Company complies with Statement of Financial Accounting Standards Nos.133, 137, 138 and 149(collectively"SFAS 133")pertaining to the accounting for these derivatives and hedging activities which require all such interest rate hedge instruments to be recorded on the balance sheet at fair value_ All of the Company's interest rate hedge instruments are designated as cash flow hedges.Refer to"Note E—Derivative Instruments and Hedging Activities"for additional disclosures regarding the Company's derivative instruments and hedging activities. Cash flows related to these instruments designated as qualifying hedges are reflected in the accompanying consolidated statements of cash flows in the same categories as the cash flows from the items being hedged. Accordingly,cash flows relating to the settlement of interest rate derivatives hedging the forecasted issuance of debt have been reflected upon settlement as a component of financing cash flows.. The resulting gain or loss from such settlement is deferred to other comprehensive loss and reclassified to interest expense over the term of the underlying debt. This reclassification of the deferred gains and losses impacts the interest expense recognized on the underlying debt that was hedged and is therefore reflected as a component of operating cash flows in periods subsequent to settlement. The periodic settlement of interest rate derivatives hedging outstanding variable rate debt is recorded as an adjustment to interest expense and is therefore reflected as a component of operating cash flows.. Foreign Currency: The Company accounts for its Mexican operations using the Mexican peso as the functional currency and converts its financial statements from Mexican pesos to U.S..dollars in accordance with SFAS No.52, "Foreign Currency Translation." The cumulative loss on currency translation is recorded as a component of accumulated other comprehensive loss and approximated$15..8 million at August 25,2007 and$12.5 million at August 26,2006. Self-Insurance Reserves:The Company retains a significant portion of the risks associated with workers' compensation,employee health,general,products liability,property and automotive insurance..Through various methods,which include analyses of historical trends and utilization of actuaries,the Company estimates the costs of these risks..The actuarial estimated long-term portions of these liabilities are recorded at our estimate of their net present value.. Deferred Rent:The Company recognizes rent expense on a straight-line basis over the course of the lease term, which includes any reasonably assured renewal periods,beginning on the date the Company takes physical possession of the property(see"Note.J—Leases"). Differences between this calculated expense and cash payments are recorded as a liability in accrued expenses and other liabilities on the accompanying balance sheet..This deferred rent approximated$42.6 million as of August 25,2007 and$31..1 million as of August 26,2006, Financial Instruments:The Company has financial instruments,including cash and cash equivalents,accounts receivable,other current assets and accounts payable.The carrying amounts of these financial instruments approximate fair value because of their short maturities..A discussion of the carrying values and fair values of the Company's debt is included in"Note F—Financing,"marketable securities is included in"Note A-Marketable Securities,"and derivatives is included in"Note E—Derivative Instruments and Hedging Activities.." Income Taxes:The Company accounts for income taxes under the liability method.Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 40 Sales and Use Taxes: Governmental authorities assess sales and use taxes on the sale of goods and services.. The Company excludes taxes collected from customers in its reported sales results;such amounts are reflected as accrued expenses and other until remitted to the taxing authorities. Revenue Recognition:The Company recognizes sales at the time the sale is made and the product is delivered to the customer.Revenue from sales are presented net of allowances for estimated sales returns,which are based on historical return rates. A portion of the Company's transactions include the sale of auto parts that contain a core component.The core component represents the recyclable portion ofthe auto part.Customers are not charged for the core component of the new part if a used core is returned at the point of sale of the new part;otherwise the Company charges customers a specified amount for the core component.The Company refunds that same amount upon the customer returning a used core to the store at a later date. The Company does not recognize sales or cost of sales for the core component of these transactions when a used part is returned or expected to be returned from the customer. Vendor Allowances and Advertising Costs:The Company receives various payments and allowances from its vendors based on the volume of purchases and for services that AutoZone provides to the vendors.Monies received from vendors include rebates,allowances and promotional funds. The amounts to be received are subject to purchase volumes and the terms of the vendor agreements,which generally do not state an expiration date,but are subject to ongoing negotiations that may be impacted in the future based on changes in market conditions,vendor marketing strategies and changes in the profitability or sell-through of the related merchandise. The Company's level of advertising and other operating,selling,general and administrative expenditures are not dependent on vendor allowances. Rebates and other miscellaneous incentives are earned based on purchases or product sales and are accrued ratably over the purchase or sale of the related product,but only if it is reasonably certain that the required volume levels will be reached..These monies are recorded as a reduction of inventories and are recognized as a reduction to cost of sales as the related inventories are sold. For all allowances and promotional funds earned under vendor funding,the Company applies the guidance pursuant to the Emerging Issues Task Force Issue No.02-16,"Accounting by a Customer(Including a Reseller)for Cash Consideration Received from a Vendor"("EITF 02-16"),by recording the vendor funds as a reduction of inventories that are recognized as a reduction to cost of sales as the inventories are sold.. The Company's vendor,funding arrangements do not provide for any reimbursement arrangements that are for specific,incremental,identifiable costs that are permitted under EITF 02-16 for the funding to be recorded as.a reduction to advertising or other operating,selling,general and administrative expenses.. Advertising expense was approximately$85.9 million in fiscal 2007,$78.1 million in fiscal 2006,and$90.3 million in fiscal 2005.The Company expenses advertising costs as incurred. Warranty Costs:The Company or the vendors supplying its products provide its customers with limited warranties on certain products..Estimated warranty obligations for which the Company is responsible are based on historical experience,provided at the time of sale of the product,and charged to cost of sales. Shipping and Handling Costs:The Company does not generally charge customers separately for-shipping and handling. Substantially all the cost the Company incurs to ship products to our stores is included in cost of sales. Pre-opening Expenses:Pic-opening expenses,which consist primarily of payroll and occupancy costs,are expensed as incurred.. Earnings Per Share:Basic earnings per share is based on the weighted average outstanding common shares. Diluted earnings per share is based on the weighted average outstanding shares adjusted for the effect of common stock equivalents,which are primarily stock options. Stock options that were not included in the diluted computation because they would have been anti-dilutive were approximately 8,000 shares at August 25,2007, 700,000 shares at August 26,2006,and 1.0 million shares at August 27,2005. 41 Stock Options:At August 25,2007,the Company has stock option plans that provide for the purchase of the Company's common stock by certain of its employees and directors,which are described more fully in"Note B— Share-Based Payments." Effective August 28,2005,the Company adopted Statement of Financial Accounting Standards No. 123(R)"Share-Based Payment"("SFAS 123(R)")and began recognizing compensation expense for its share-based payments based on the fair value of the awards.. See"Note B—Share-Based Payments"for further discussion. Recent Accounting Pronouncements: The Financial Accounting Standards Board("FASB")issued FASB Interpretation No.48,"Accounting for Uncertainty in Income Taxes"("FIN 48")in June 2006. The interpretation clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109,"Accounting for Income Taxes." FIN 48 will be effective for AutoZone's fiscal year beginning August 26, 2007. The Company has not determined the effect,if any,that the adoption of FIN 48 will have on the Company's financial position and results of operations. In September 2006,the FASB issued FASB Statement No. 157,"Fair Value Measurements"("SFAS 157"). This new standard defines fair value,establishes a framework for measuring fair•value in generally accepted accounting principles(GAAP),and expands disclosures about fain value measurements. SFAS 157 will be effective for AutoZone in fiscal 2009. The Company is still in the process of evaluating the impact,if any,that SFAS 1.57 will have on the Company's financial position and results of operations. On September 29,2006,the FASB issued FASB Statement No,. 158,"Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans--An Amendment of FASB Statements No. 97,99, 106,and 132R" ("SFAS 158"). This new standard requires an employer to:(a)recognize in its statement of financial position an asset for a plan's overfunded status or a liability for a plan's underfunded status and(b)measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year(with limited exceptions). Those changes will be reported in comprehensive income.The Company adopted the recognition and disclosure provisions of SFAS 159 during 2007 and will adopt the measurement date provisions in 2009. Please refer to Note I (Pension and Savings Plan)for further description of this adoption.. In February 2007,the FASB issued FASB Statement No. 159,"The Fair Value Option for Financial Assets and Financial Liabilities"("SFAS 159").. This new standard permits entities to choose to measure many financial instruments and certain other,items at fair value.. SFAS 159 will be effective for AutoZone in fiscal 2009., The Company is still in the process of evaluating the impact,if any,that it will have on the Company's financial position and results of operations. Note B—Share-Based Payments Effective August 28,2005,the Company adopted SFAS 123(R)and began recognizing compensation expense for its share-based payments based on the fair value of the awards. Share-based payments include stock option grants and certain transactions under the Company's other stock plans. Prior to August 28,2005,the Company accounted for share-based payments using the intrinsic-value-based recognition method prescribed by Accounting Principles Board Opinion("APB")No.25,"Accounting for Stock Issued to Employees,"and SFAS No. 123,"Accounting for Stock-Based Compensation"("SFAS 123"),As options were granted at an exercise price equal to the market value of the underlying common stock on the date of grant,no stock-based employee compensation cost was reflected in net income prior to adopting SFAS 123(R). As the Company adopted SFAS 123(R)under the modified- prospective-transition method,results from prior periods have not been restated. In accordance with SFAS 123(R),share-based compensation expense recognized since August 27,2005, is based on the following: a)grant date fair value estimated in accordance with the original provisions of SFAS 123 for unvested options granted prior to the adoption date; b)grant date fair value estimated in accordance with the provisions of SFAS 123(R)for options grunted subsequent to the adoption date;and c)the discount on shares sold to employees under employee stock purchase plans post-adoption,which represents the difference between the grant date fair value and the employee purchase price. Total share-based expense(a component of operating,selling,general and administrative expenses)was$18..5 million related to stock options and share purchase plans for fiscal 2007 and$17.4 million in the previous year. 42 Beginning in fiscal 2006, excess tax benefits,tax deductions in excess of recognized compensation cost,are classified as a financing cash inflow in accordance with SFAS 123(R).. The following sentence illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 for fiscal 2005. For fiscal 2005,the Company had net income of $571.0 million,pro-forma stock-based employee compensation expense of$11.3 million,pro-forma net income of $559.8 million and pro-forma basic and diluted EPS of ST 12 and$7.03,respectively. The value of the options was estimated using the Black-Scholes-Merton multiple option pricing model for the option grants.. Under SFAS 123(R),forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ,or are expected to differ,from the previous estimate. Under,SFAS 123 and APB 25,the Company elected to account for forfeitures when awards were actually forfeited,at which time all previous pro forma expense disclosed for the forfeited awards ($7.3 million in fiscal 2005)was reversed to reduce pro forma expense for that period. AutoZone grants options to purchase common stock to certain of its employees and directors under various plans at prices equal to the market value of the stock on the dates the options were granted. Options have a term of 10 years or 10 years and one day from grant date. Director options generally vest three years from grant date. Employee options generally vest in equal annual installments on the first,second,third and fourth anniversaries of the grant date.. Employees and directors generally have 30 days after the service relationship ends,or one year after death,to exercise all vested options.. The fair value of each option grant is separately estimated for each vesting date.. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date.. The Company has estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes-Merton multiple-option pricing valuation model.. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense.. The weighted average for key assumptions used in determining the fair value of options granted and a summary of the methodology applied to develop each assumption are as follows: Year Ended August 25, August 26, August 27, 2007 2006 2095 Expected price volatility..... .._.............. .__................... ...........•..........................._. ......,... 26% 35% 36% Risk-fi-ee interest rates . . __ ..... 4.6% 4.1% 2.8% Weighted average expected lives in years..... _..... .... .. ......_...... ._ . 3.9 33 3.5 Forfeiture rate.._. .._.......... ........... ......... ... ........_ ...................... 10% 10% n/a Dividendyield............................................. .__.....,.._..... _...,_ .. ......,. 0% 0% 0% Expected Price Volatility-This is a measure of the amount by which a price has fluctuated or is expected to fluctuate.We use actual historical changes in the market value of our stock to calculate the volatility assumption as it is management's belief that this is the best indicator of future volatility.We calculate daily market value changes from the date of grant over a past period representative of the expected life of the options to determine volatility. An increase in the expected volatility will increase compensation expense. Risk-Free Interest Rate-This is the U.S.Treasury rate for the week of the grant having a term equal to the expected life of the option..An increase in the risk-free interest rate will increase compensation expense. Expected Lives-This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes..Options granted have a maximum term of ten years or ten years and one day.An increase in the expected life will increase compensation expense.. 43 Forfeiture Rate-This is the estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested.This estimate is based on historical experience..An increase in the forfeiture rate will decrease compensation expense. Dividend Yield-The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future.An increase in the dividend yield will decrease compensation expense. The Company generally issues new shares when options are exercised. A summary of outstanding stock options is as follows: Weigbted Average Number Exercise of Shares Price Outstanding August 28,2004..........................................,............................................................ 5,011,706 $ 54..42 Granted__...........___...................................................,.................,......................-........•.......... 1,099,465 77,74 Exercised...,......,.....................,........,.....................,..............,...,...,................,............................,.. (1,741,312) 38.85 Canceled.......,...........,,,................,........................................,..,........................................................ (532.373) 70.91 Outstanding August 27,2005..................................................................... ................ ......... 3,837,486 65..87 Granted.......................-.......................................................................................................................... 749,452 92.75 Exercised................................................................................................................•..._...:.....,...,.. (737,515) 54.48 Canceled................................,,....................................-.-......,................................,..---.-......... (493,881) 75.49 Outstanding August 26,2006..........-..................................,.......-..............................................., 3,355,542 70.73 Granted..... .................... .......... ....... ......... .........__.................... ...... 695,298 104,64 Exercised................................,..................-.................,....................•,-........,..,..,................,. (934,677) 66M Canceled....... ...............................................................-.................,............................,................... (159,398) 83.19 Outstanding August 25,2007-............................... ....... .........­.............. 2.956.765 79.24 The following table summarizes information about stock options outstanding at August 25,2007: Options Outstanding Options Exercisable Weighted Average Weighted Remaining Weighted Average Contractual Average Range of Exercise Number Exercise Life plumber Exercise Prices Outstanding Price in Years Exercisable Price $22.00-$75.64...................................... 1,181,091 $ 58.44 5.04 884,233 $ 52.67 $82.00-$89.18...........,............,,..,...........-.. 987,334 85.35 7.16 397,969 87.12 $89.30-$103.44..................,..................... 744,262 101.59 8.89 40,000 95.32 $116.35- 129.63........................................ 44,078 122.43 9.47 - - $22.00-$129.63 ..................................... 2 556.765 79.24 .78 1.312.202 $ 64.15 At August 25,2007,the aggregate intrinsic value of all outstanding options was$130 million with a weighted average remaining contractual term of 6.8 years,of which 1,312,202 of the outstanding options are currently exercisable with an aggregate intrinsic value of$77.6 million,a weighted average exercise price of'$64.•15 and a weighted average remaining contractual term of 5.1 years.. Shares reserved for future option grants approximated 4.6 million at August 25,2007.The weighted average grant date fair value of options granted was$29.04 during fiscal 2007 and$22.86 during fiscal 2006. The intrinsic value of options exercised was$47 million in fiscal 2007 and$27 million in fiscal 2006.. Under the AutoZone,Inc..2003 Director Compensation Plan,a non-employee director may receive no more than one-half of his or her director fees immediately in cash,and the remainder of the fees must be taken in common stock or may be deferred in units with value equivalent to the value of shares of common stock as of the grant date ("Stock Units").. At August 25,2007,the Company has$2.6 million accrued related to 21,323 director units issued 44 under the current and prior plans with 84,681 shares of common stock reserved for future issuance under the current plan. Under the AutoZone,Inc,2003 Director Stock Option Plan,each non-employee director receives an option to purchase 1,500 shares of common stock on January 1 of each year,and each director who owns common stock or Stock Units worth at least five times the annual retainer fee receives an additional option to purchase 1,500 shares.. In addition,each new director receives an option to purchase 3,000 shares upon election to the Board of Directors, plus a portion of the annual directors'option grant prorated for the portion of the year actually served in office. These stock option grants are made at the fair market value as of the grant date. At August 25,2007,there were 95,552 outstanding options with 287,948 shares of common stock reserved for future issuance under this plan. During June,2007,the Board of Directors approved certain changes to the Director Compensation Plan and Director Stock Option Plan. For further discussion on the changes,see the Proxy Statement for Annual Meeting of Stockholders on December 12,2007. The Company recognized$1.1 million in expense related to the discount on the selling of shares to employees and executives under various share purchase plans in fiscal 2007 and$884,000 in the prior year. The employee stock purchase plan,which is qualified under Section 423 of the Internal Revenue Code,permits all eligible employees to purchase AutoZone's common stock at 85%of the lower of the market price of the common stock on the first day or last day of each calendar quarter through payroll deductions.Maximum permitted annual purchases are$15,000 per employee or 10 percent of compensation,whichever is less. Under the plan,39,139 shares were sold to employees in fiscal 2007,51,167 shares were sold to employees in fiscal 2006,and 59,479 shares were sold in fiscal 2005.The Company repurchased 65,152 shares at fair value in fiscal 2007,62,293 shares at fair value in fiscal 2006,and 87,974 shares in fiscal 2005 from employees electing to sell their stock,Issuances of shares under the employee stock purchase plans are netted against repurchases and such repurchases are not included in share repurchases disclosed in"Note H-Stock Repurchase Program." At August 25,2007,385,897 shares of common stock were reserved for future issuance under this plan. Additionally,executives may participate in the Amended and Restated Executive Stock Purchase Plan,which permits all eligible executives to purchase AutoZone's common stock up to 25 percent of his or her annual salary and bonus.. Purchases under this plan were 1,257 shares in fiscal 2007, 811 shares in fiscal 2006,and 5,366 shares in fiscal 2005.. At August 25,2007,263,037 shares of common stock were reserved for future issuance under this plan.. On December 13,2006,stockholders approved the AutoZone,Inc,2006 Stock Option Plan and the AutoZone,Inc. Fourth Amended and Restated Executive Stock Purchase Plan.There have been no other material modifications to the Company's stock plans during fiscal 2007,2006,or 2005. Nate C-Accrued Expenses and Other Accrued expenses consisted of the following: August 25, August 26, (in thousands) 2007 2006 Medical and casualty insurance claims(current portion).......,.,..............•........,.......,..,..,......,................. S 521.037 $ 49,844 Accrued compensation;related payroll taxes and benefits..... ...................................... 101,467 101,089 Property and sales taxes........................................................................... ...._.................... 61,570 54,623 Accrued interest,....... ........... .... ................ 22,241 25,377 Accrued sales and warranty returns........................................................................................................ 8,634 8,238 Capitallease obligations,......,.....................................................,....................................,.,................•......... 16,015 - Other................. ......................................................................•...................................................._.................... 45,669 41,248 307 333 280 419 The Company retains a significant portion of the insurance risks associated with workers' compensation, employee health,general,products liability,property and automotive insurance.Beginning in fiscal 2004,a portion of these self-insured losses is managed through a wholly owned insurance captive.. The Company maintains certain levels for stop-loss coverage for each self-insured plan in order-to limit its liability for large claims The limits are per claim and are$1.5 million for workers' compensation,S500,000 for employee health, and$1.0 million for general, 45 products liability,property,and automotive, Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported.Estimates are based on calculations that consider historical lag and claim development factors. The Company or the vendors supplying its products provide its customers limited warranties on certain products that range from 30 days to lifetime warranties..In most cases,the Company's vendors are primarily responsible for warranty claims.Warranty costs relating to merchandise sold under-warranty not covered by vendors are estimated and recorded as warranty obligations at the time of sale based on each product's historical return rate.These obligations,which are often funded by vendor allowances,are recorded as a component of accrued expenses..For vendor allowances that are in excess of the related estimated warranty expense for the vendor's products,the excess is reclassified to inventory and recognized as a reduction to cost of sales as the related inventory is sold.. Changes in the Company's accrued sales and warranty returns during the fiscal year were minimal. Note D—Income Taxes The provision for-income tax expense consisted of the following: Year Ended August 25, August 26, August 27, (in thousands) 2007 2006 2005 Current: Federal.,.................................................................. $ 292,166 $ 272,916 $ 296,849 State......................................................... ....................................................... 23,468 23,539 21,981 315,634 296,455 318,830 Deferred: Federal.....,............................. ..................................... ...... 22,878 30,065 (11,271) State................................---......................................- .. .................,....,.............. 1,966 6,241 (5,357) 24.844 36,306 1( 6,6281 34 47 761 3 2 2 A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory tax rate of'35%to income before income taxes is as follows: Year Ended August 25, August 26, August 27, (in thousands) 2007 2006 2005 Federal tax at statutory U.S.income tax rate....................................................... $ 327,653 $ 315,713 $ 305,627 State income taxes,net........,............................................................................................ 16,532 19,357 10,806 Tax benefit on repatriation of foreign earnings....................................................... - - (16,351) Other........,..........................,........................................ ............................................................ (3,707) (2,309) 2,120 $ 340,478 2 76 3 The American Jobs Creation Act(the"Act"),signed into law in October 2004,provided an opportunity to repatriate foreign earnings,reinvest them in the United States,and claim an 85%dividend received deduction on the repatriated earnings provided certain criteria were met. During fiscal 2005,the Company determined that it met the criteria of the Act and began the process of repatriating approximately$36.1 million from its Mexican subsidiaries. As the Company had previously provided deferred income taxes on these amounts,the planned repatriation resulted in a$16A million reduction to income tax expense for fiscal 2005. During fiscal 2006,the Company completed the originally planned$36,7 million repatriation plus an additional$4.5 million in accumulated earnings. 46 Significant components of the Company's defened tax assets and liabilities were as follows: August 25, August 26, (in thousands) 2007 2006 Net deferred tax assets: Domestic net operating loss and credit carryforwards........................................-......,.... $ 18,573 $ 18,694 Foreign net operating loss and credit carryforwards...................................................... 6,257 4,017 Insurance reserves............................................................................................................ 13,683 13,748 Pension.................................................,...........,.............................................,.,....................... - 9,167 Accruedbenefits...............................................,.....................,............................................... 20,750 14,927 Other.... ................... ...................................................................................................... 15,640 _ 15,291_ Total deferred tax assets................................................................................................... 74,903 75,844 Less:Valuation allowances............................................................................................... (8.154) (8,698) Net deferred tax assets........................................... .................................... 66,749 67,146 Deferred tax liabilities: Property and equipment................................................................•......:................................ 8,296 13,118 Inventory.................... ..............,........,.,.............................................................................. 103,233 68,449 Derivatives..................................................................................................................................... 2.068 3,643 Pension............................................................................................................................................... 2,369 - Prepaidexpenses...........................................--............,,,.........,.......,............,......,....................... 10,192 9,821 Other................................................................................................................................................ 1.412 L576 Deferred tax liabilities............,...........................,,,..............................,....................,............. ........... 127,570 96,607 Net deferred tax liabilities....-..-...........................................................,.............,.................,............... 21 Deferred taxes are not provided for•earnings of non-U.S..subsidiaries as such earnings are intended to be permanently reinvested in the business.. For the years ended August 25,2007,and August 26,2006,the Company had deferred tax assets of$9.1 million and $9.0 million from federal tax net operating losses("NOLs")of$25.9 million and$25.7 million,and deferred tax assets of$1.8 million and$2.7 million from state tax NOLs of$51.3 million and$65.1 million,respectively. As of August 25,2001 the Company had deferred tax assets of$3.1 million from Non-U.S.NOLs of$7..9 million. The federal,state,and Non-U.S..NOLs expire between fiscal 2008 and fiscal 2027. The Company maintains a$7.2 million valuation allowance against certain federal and state NOLs resulting primarily from annual statutory usage limitations. For the years ending August 25,2007,and August 26,2006,the Company had deferred tax assets of $10.9 mullion for federal,state and Non-U.S..income tax credit canyforwards Certain tax credit carryforwards have no expiration date and others will expire in fiscal 2008 through fiscal 2017. A valuation allowance of$1.0 million has been established by the Company for credits subject to such expiration periods. Note E-Derivative Instruments and Hedging Activities AutoZone has utilized interest rate swaps to convert variable rate debt to fixed rate debt and to lock in fixed rates on future debt issuances.AutoZone reflects the current fair value of all interest rate hedge instruments in its consolidated balance sheets as a component of other assets. All of the Company's interest rate hedge instruments are designated as cash flow hedges. The Company had an outstanding interest rate swap with a fair value of$5..8 million at Aug st 25,2007 and$10.2 million at August 26,2006,to effectively fix the interest rate on the$300.0 million tern loan entered into during December 2004. At August 28,2004,the Company had an outstanding five- year forward-starting interest rate swap with a notional amount of$300 million..This swap had a fair value of$4..6 million at August 28,2004 and was settled during November 2004 with no debt being issued.. Consequently,$4.6 million was recognized in earnings during fiscal 2005. The related gains and losses on interest rate hedges are deferred in stockholders'equity as a component of other comprehensive income or loss.These deferred gains and losses are recognized in income as a decrease or increase to interest expense in the period in which the related cash flows being hedged are recognized in expense,However,to the extent that the change in value of an interest rate hedge instrument does not perfectly offset the change in the value of the cash flows being hedged,that ineffective portion is immediately recognized in income..The Company's hedge instruments have been determined to be highly effective as of August 25,2007.. 47 The following table summarizes the fiscal 2007 and 2006 activity in accumulated other comprehensive loss as it relates to interest rate hedge instruments: Before-Tax Income After-Tax (in thousands) Amount Tax Amount Accumulated net gains as of August 27,2005 ........................................................ $ 10,618 $ (1,589) $ 9,029 Net gains on outstanding derivatives..................................................... 5,904 (2,152) 3,752 Reclassification of net gains on derivatives into earnings........................... (6121 — 612) Accumulated net gains as of August 26,2006................................ .......•............ 15,910 (3,741) 12,169 Net losses on outstanding derivatives,.....,... ........... (4,440) 1,627 (2,813) Reclassification of net gains on derivatives into earnings.......................... 612 — 612 Accumulated net gains as of August 25,2007 ......................................••....••... S10858 2 1 4 8 744 The Company primarily executes derivative transactions of relatively short duration with strong creditworthy counterpaities..These counterparties expose the Company to credit risk in the event of non-performance.The amount of'such exposure is limited to the unpaid portion of amounts due to the Company pursuant to the terms of the derivative financial instruments,if any.Although there are no collateral requirements,if a downgrade in the credit rating of these counterparties occurs,management believes that this exposure is mitigated by provisions in the derivative agreements which allow for the legal right of offset of any amounts due to the Company from the counterparties with amounts payable,if any,to the counterparties by the Company..Management considers the risk of counterparty default to be minimal.. As of August 25,2007,the Company estimates$600,000 of gains currently included in accumulated other comprehensive income to be reclassed into earnings within the next 12 months. Note F—Financing The Company's long-term debt consisted of the following: August 25, August 26, fin thousands) 2007 2006 Bank Term Loan due December 2009,effective interest rate of 4,55%......................•.....,........... $ 300,000 $ 300,000 5.875%Senior Notes due October 2012,effective interest rate of 6.33%........................•................ 300,000 300,000 5.3%Senior Notes due November 2015,effective interest rate of4.86%...,............................. 300,000 300,000 4.75%Senior Notes due November 2010,effective interest rate of ................. 200,000 200,000 4.375%Senior Notes due.June 2013,effective interest rate of 5..65%......,......,.....,...•.._..,................ 200,000 200,000 6.95%Senior Notes due.June 2016,effective interest rate of 7.09%.......................,.......,................. 200,000 200,000 6..5%Senior Notes due.July 2008.................................................................................................... 190,000 190,000 Commercial paper,weighted average interest rate of 6.1%at August 25,2007, and 5.3%at August 26,2006.................................................................................................................... 206,700 122,400 Other..,_.........................................,.......................,.............................,..................._.... ...._. ._._.......__...__. 38.918 44.757 1 618 1 57 7 The Company maintains$1.0 billion of revolving credit facilities with a group of banks to primarily support commercial paper borrowings,letters of credit and other short-term unsecured bank loans. These facilities expire in May 2010,may be increased to$1.3 billion at AutoZone's election,may include up to$200 million in letters of credit,and may include up to$100 million in capital leases. As the available balance is reduced by commercial paper borrowings and certain outstanding letters of credit,the Company had$680.2 million in available capacity under these facilities at August 25,2007. The rate of interest payable under the credit facilities is a function of Bank of America's base rate or a Eurodollar rate(each as defined in the facility agreements),or a combination thereof. The$300.0 million bank term loan entered in December 2004 was amended in April 2006 to have similar terns and conditions as the$1.0 billion credit facilities,but with a December 2009 maturity,and was further amended in August 2007 to reduce the interest rate on Euro-dollar loans. That credit agreement with a group of banks provides for a term loan,which consists of,at the Company's election,base rate loans,Eurodollar loans or a combination thereof. The interest accrues on base rate loans at a base rate per annum equal to the higher of the prime rate or the Federal Funds Rate plus 112 of 1%. Interest accrues on Eurodollar loans at a defined Eurodollar rate plus the 48 applicable percentage,which can range from 30 basis points to 90 basis points,depending upon the Company's senior unsecured(non-credit enhanced)long-term debt rating.Based on AutoZone's ratings at August 25,2007,the applicable percentage on Eurodollar loans is 35 basis points..The Company may select interest periods of one,two, three or six months for Eurodollar loans,subject to availability.Interest is payable at the end of the selected interest period,but no less frequently than quarterly.AutoZone entered into an interest rate swap agreement on December 29,2004,to effectively fix,based on current debt ratings,the interest rate of the term loan at 4.4%.AutoZone has the option to extend loans into subsequent interest period(s)or convert them into loans of another interest rate type.. The entire unpaid principal amount of the term loan will be due and payable in full on December 23,2009,when the facility terminates.The Company may prepay the term loan in whole or in part at any time without penalty,subject to reimbursement of the lenders'breakage and redeployment costs in the case of prepayment of Eurodollar borrowings. During April 2006,the$150.0 million Senior Notes maturing at that time were repaid with an increase in commercial paper. On June 8,2006,the Company issued$200.0 million in 6.95%Senior Notes due 2016 under its existing shelf registration statement filed with the Securities and Exchange Commission on August 17,2004. That shelf registration allowed the Company to sell up to$300 million in debt securities to fund general corporate purposes,including repaying,redeeming or repurchasing outstanding debt,and for working capital,capital expenditures,new store openings,stock repurchases and acquisitions. The remainder of the shelf registration was cancelled in February,2007., The Company's borrowings under its Senior Notes arrangements contain minimal covenants,primarily restrictions on liens. Under its other,borrowing arrangements,covenants include limitations on total indebtedness,restrictions on liens,a minimum fixed charge coverage ratio and a provision where repayment obligations may be accelerated if AutoZone experiences a change in control(as defined in the agreements).All of the repayment obligations under the Company's borrowing arrangements may be accelerated and come due prior to the scheduled payment date if covenants are breached or an event of default occurs. As of August 25,2007,the Company was in compliance with all covenants and expects to remain in compliance with all covenants.. All of the Company's debt is unsecured. Scheduled maturities of long-term debt are as follows: Amount Fiscal Year (in thousands) 2008..........,......................,....................,............,..........................,-........•...•..,...................,.,,.,.....•...,..............................., $435,618 2009......................................................._......,...................,.....,......,..................-......................... .................... .............,. — 2010..............................................................................-......................................,...............,..:.................,..........-....-.... 300,000 2011......................................................................,......................................-.......,........,..................,......,....,,...................... 200,000 2012........................................................................................ ..................... ..... — Thereafter..................................................................................................................................•....,...........,.......................... 1.000,000 935 61 The maturities for fiscal 2008 are classified as long-term in the fiscal 2007 consolidated balance sheet as the Company has the ability and intention to refinance them on a long-term basis. The fair value of the Company's debt was estimated at$1.928 billion as of August 25,2007,and$1.825 billion as of August 26,2006,based on the quoted market prices for the same or similar issues or on the current rates available to the Company for debt of the same remaining maturities..Such fair value is less than the carrying value of debt by $7.6 million at August 25,2007,and S323 million at August 26,2006, Note G—Interest Expense Net interest expense consisted of the following: Year Ended August 25, August 26, August 27, (in thousands) 2007 2006 2005 Interest expense...................................... ................................................................ $123,311 $l 12,127 $ 104,684 Interestincome...................................._ ........._...... ........,......................._............... (2,819) (2,253) (1,167) Capitalized interest...-..,...,.... f1.376) 1985 (1.079) 11—� 07 889 10 443 49 Note H—Stock Repurchase Program During 1998,the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company's Board of Directors, The program was most recently amended in June 2007 to increase the repurchase authorization to$5.9 billion from$5.4 billion.. From January 1999 to August 25,2007,the Company has repurchased a total of 99.3 million shares at an aggregate cost of $5.4 billion. The following table summarizes our share repurchase activity for the following fiscal years: Year Ended August 25, August 26, August 27, (in thousands) 2007 2006 2005 Amount...................................................................................................... $761,887 $578,066 $426,852 Shares..............._............................,...,.........................,............................,......._... 6,032 6,187 4,822 Note 1—Pension and Savings Plans Prior to January 1,2003,substantially all full-time employees were covered by a defined benefit pension plan.The benefits under the plan were based on years of service and the employee's highest consecutive five-year average compensation..On January 1,2003,the plan was frozen.Accordingly,pension plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. On January 1,2003,the Company's supplemental defined benefit pension plan for certain highly compensated employees was also frozen..Accordingly,plan participants will earn no new benefits under the plan formula and no new participants will join the pension plan. In September 2006,the FASB issued SFAS No. 158,"Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans,an amendment of FASB Statements No. 87, 88, 106,and 132(R)"("SFAS 158"). SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans(collectively postretirement benefit plans)to:recognize the funded status of their'postretirement benefit plans in the statement of financial position;recognize the gains or losses and prior service costs or credits as a component of other comprehensive income,net of tax,that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No..87,"Employers'Accounting for Pensions"(SFAS 87);measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position;and provide additional disclosures about certain effects on net periodic benefit cost for the next fiscal year-that arise from delayed recognition of the gains or losses,prior service costs or credits,and transition asset or obligation. For the fiscal year ending August 25,2007,we adopted the recognition and disclosure provisions of SFAS 158.The effect of adopting SFAS 158 on the Company's financial condition at August 25,2007 has been included in the accompanying consolidated financial statements as described below.. SFAS 158's provisions regarding the change in the measurement date of postretirement benefit plans will require the Company to change its measurement date, beginning in fiscal year 2009,from May 31 to its fiscal year end date. SFAS 158 requires the Company to recognize the funded status,which is the difference between the fair value of plan assets and the projected benefit obligations,of its postretirement benefit plans in the August 25,2007 Consolidated Statement of Financial Position,with a corresponding adjustment to accumulated other comprehensive income(AOCI),net of tax..The adjustment to AOCI at adoption represents the net unrecognized actuarial losses and unrecognized prior service costs,both of which were previously netted against the plans'funded status in the Company's Consolidated Statements of Financial Position pursuant to the provisions of SFAS 87.These amounts will be subsequently recognized as net periodic pension expense pursuant to the Company's historical accounting policy for amortizing such amounts. 50 The effects of adopting the provisions of SFAS 158 on our Consolidated Statement of Financial Position at August 25,2007 are presented in the following table: Pension Balances Recorded Prior to Effective of Adopting Adopting (in thousands) SFAS 158 SFAS 158 As Reported Other non-curr-ent assets........,........................................I.................... $ 8,780 $ (2,796) $ 5,984 Current liabilities............................................................................ 2,991 - 2,991 Deferred income tax liability,net. ........................................... 2,255 (1,089) 1,166 Accumulated other comprehensive loss.-...........................-------- $ 746 $ 1,707 $ 2,453 The investment strategy for pension plan assets is to utilize a diversified mix of domestic and international equity portfolios,together with other investments,to earn a long-term investment return that meets the Company's pension plan obligations. Active management and alternative investment strategies are utilized within the plan in an effort to minimize risk,while realizing investment returns in excess of market indices.. The weighted average asset allocation for our pension plan assets was as follows at June 30: 2007 2006 Current Target Current Target Domestic equities...........................,.................................... 30.7% 33..5% 32.0% 27.0% Intemational equities....................................................... 27.8 23.0 24.5 309 Alternative investments................................................. 27.7 30.5 30.5 27.9 Real estate..............................................................,........... 11.2 11.0 11.0 122 Cash and cash equivalents....,.........;................................ 2.6 (�/2�./0� 2.0 7(�(2�.(0� ..... 1 QW/0 ��l% 1�Q.O% �% The measurement date for the Company's defined benefit pension plans is May 31 of each fiscal year. 51 � The following table scts forth the plans' funded status and amounts recognized in the Company's financial statements: August (in thousands) 2007") 2006 Change in Projected Benefit Obligation: Projected benefit obligation at beginning ofyear 154.942 $178,325 Interest cmm'- __ ....... 9.593 9'190 Actuarial -_ - (550) (26,783) Benefits paid............. -'_-__--_-_______.................. _- Benefit obligations at end vfyear.._-____-_.......___ .............. -__ Change in plan assets: Fuir-vulu*ofpkmmmctsuthogiuoing $126,892 $107.55/ Actual return oo plan assets_--_-- .......... --_-__-____--_ 27,797 17,600 Employer contributions 10.573 6.187 Benefits paid. .............. __ (2,921) (3,790 uuonumumivernpouoes__-- Fair-value mr plan assets at end mayem____ ................. ....... .................. _- Reconciliation wf funded status: Funded(umdudundrd)status of the nbmo -__--__—_-_-__-_- $157 ($28,050 Contributions from measurement date mfiscu year-end......_----__-__ 2,836 3,017 Unrecognized net actuarial losses.......__--__-__-__-_--_---- ' 21,464 unuouxtioou prior service cost 105 Net amount recognizou----___-__------__--_-___- Amount Recognized hu the Statement vf Financial Position: Noncuirent other assets $5,984 - Cun ent UobOiti*s._---_----______-___-____-_-___ (2,991) (7,006 Long-term liabilities-_-_--______--________'---__-_- ' (21.044) Intangible assets...... ........-_-__-_--_--__---_-----___- ' 105 Accumulated other comprehensive loss ...... � Net uonount recognized-........ _-__-__ .........--_-_ -__-� Amount Recognized in AOCl and not yet reflected in Net Periodic Benefit Cost, Net actuarial loss- ....... -�_-�-----___�_ _-�__'-_� -_'- '- '-.._ ($I830) Prior service 000t_-_-- --_----'-� -_-- ___� -_� ........... ---� ' _- llf-91 *OCl_--_--_ '- �-�---_'---'_�---- -� ....... --- __ �~~~~ (3,989) Amount Recognized in AOCl and not yet reflected in Net Periodic Benefit Cost and expected twbw amortized immemyear'onot periodic benefit cost: Net actuarial|oox_-- - ' --�-�_'' -'_'' -�.-- _- -_�--- -_�- -- %97 Prior service cost. ' -_'- -�----- '-'-_- - -- --�-' -�- - - 99 Amount reco8oiz*d_-_' ,`mumnouuo the provisions o/SFAS/5x adopted m,August z5.aoor 52 Year,Ended August 25, August 26, August 27, (in thousands) 2007 2006 2005 Components of net periodic benefit cost: Interest cost........................................................................................... .... 9,593 $ 9,190 $ 8,290 Expected return on plan assets...................-.1.............. ..........11..........................-.... (10,343) (8,573) (8,107) Amortization of prior service cost-,.....................­­...........__1.........I_...-.,...__ (54) (627) (644) Recognized net actuarial losses...................._._.............................................. 751 5.645 1,000 Net periodic benefit cost....... ..............................­1.1...... ............ $ 532 The actuarial assumptions were as follows: 2007 2006 2005 Weighted average discount rate......................................................... ........ 6.25% 6a5% f�_ Expected long-term rate of return on assets.............._.... ......... 8.00% 8.0-0 OA &0-0 OA As the plan benefits are frozen,increases in future compensation levels no longer impact the calculation and there is no service cost.. The discount rate is determined as of the measurement date with the assistance of actuaries,who calculate the yield on a portfolio of high-grade corporate bonds with cash flows that generally match our expected benefit payments in future years. The expected long-term rate of return on plan assets is based on the historical relationships between the investment classes and the capital markets,updated for current conditions. Prior service cost is amortized over the estimated average remaining service period of active plan participants as of the date the prior service base is established,and the unrecognized actuarial loss is amortized over the estimated remaining service period of 7.81 years at August 25,2007, The Company makes annual contributions in amounts at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974.The Company contributed$13.4 million to the plans in fiscal 2007,$9.2 million to the plans in fiscal 2006,and no contributions to the plans in fiscal 2005. Based On current projections,we expect to contribute approximately$3.0 million to the plan in fiscal 2008;however,a change to the expected cash funding may be impacted by a change in interest rates or a change in the actual or expected return on plan assets.. Based on current assumptions about future events,benefit payments are expected to be paid as follows for each of the following plan years. Actual benefit payments may vary significantly from the following estimates: Amount Plan Year Endim!December 31 (in thousands) 2007.......................-............... ....................... ........................_._............................... $ 3,506 2008..................................................._..............-......................... .......................__.... ................... ....... . . 4,114 2009._...._........................ ...... ..................._. .................... ...... ............ 4,742 2010........... ....___.............................................. .................................................. ....... 5,318 2011 ........................ ........ ....................... ............................................ ........................... ....... ...... 5,847 2012-2016 .................................................... ..................................................... 39,101 The Company has a 401(k)plan that covers all domestic employees who meet the plan's participation requirements.. The plan features include Company matching contributions,immediate 100%vesting of Company contributions and a savings option to 25%of'qualified earnings.The Company makes matching contributions,per pay period,up to a specified percentage of employees'contributions as approved by the Board of Directors..The Company made matching contributions to employee accounts in connection with the 401(k)plan of$9.5 million in fiscal 2007,$8.6 million in fiscal 2006,and$8A million in fiscal 2005. Note J-Leases The Company leases some of its retail stores,distribution centers,facilities,land and equipment,including vehicles Most of these leases are operating leases and include renewal options,at the Company's election,and some include options to purchase and provisions for percentage rent based on sales. Rental expense was$152.5 million in fiscal 2007,$143.9 million in fiscal 2006,and$150.6 million in fiscal 2005.Percentage rentals were insignificant. 53 The Company has a fleet of vehicles used for delivery to our commercial customers and travel for members of field management. The majority ofthese vehicles are held under capital lease. At August 25,2007,the Company had capital lease assets of$54.4 million,net of accumulated amortization of$11.2 million,and capital lease obligations of$55.1 million. The$16.0 million current portion of these obligations was recorded as a component of other current liabilities and the$39.1 million long-term portion was recorded as a component of other long-term liabilities in the consolidated balance sheet. Based on clarifications from the Securities and Exchange Commission,during fiscal 2005,the Company completed a detailed review of its accounting for rent expense and expected useful lives of leasehold improvements. The Company noted inconsistencies in the periods used to amortize leasehold improvements and the periods used to straight-line rent expense_ The Company revised its policy to record rent for all operating leases on a straight-line basis over the lease term,including any reasonably assured renewal periods and the period of time prior to the lease term that the Company is in possession of the leased space for the purpose of installing leasehold improvements. Differences between recorded rent expense and cash payments are recorded as a liability in accrued expenses and other long-term liabilities on the balance sheet. This deferred rent approximated$42..6 million on August 25,2007 and$31.1 million on August 26,2006. Additionally,all leasehold improvements are amortized over the lesser of their useful life or the remainder of the lease term,including any reasonably assured renewal periods,in effect when the leasehold improvements are placed in service. During the quarter ended February 12,2005,the Company recorded an adjustment in the amount of$40.3 million pre-tax($25A million after-tax),which lowered fiscal 2005 diluted earnings per share by$0.32. This adjustment included the impact on prior years,to reflect additional amortization of leasehold improvements and additional rent expense as if this new policy had always been followed by the Company_ The impact of the adjustment on any prior year would have been immaterial. Minimum annual rental commitments under non-cancelable operating leases and capital leases were as follows at the end of fiscal 2007: (amounts in thousands) Operating Capital Fiscal Year Leases Leases 2008....................................................................................................... $171,163 $16,015 2009.................................................................,............................................. 155,446 15,535 2010............,..................,...........,.........................,.......................... ,................ 136,524 13,393 2011 ....,............................,......,..,.............-...................................... ......... 117,452 10,404 2012.................................,........,............................,................................... 97,.532 7,163 Thereafter............................,,.............................._...................................... 634,135 - Total minimum payments required............................................... $1,312,252 62,510 Less:interest................... ........................................... (7,422) Present value of minimum capital lease payments....................... $55 088 In connection with the Company's December 2001 sale of the TruckPro business,the Company subleased some properties to the purchaser for an initial term of not less than 20 year's.The Company's remaining aggregate rental obligation at August 25,2007 of$25.3 million is included in the above table,but the obligation is entirely offset by the sublease rental agreement. Note K—Commitments and Contingencies Construction commitments,primarily for new stores,totaled approximately$23.8 million at August 25,2007, The Company had$113.3 million in outstanding standby letters of credit and$11.3 million in surety bonds as of August 25,2007,which all have expiration periods of less than one year.A substantial portion of the outstanding standby letters of credit(which are primarily renewed on an annual basis)and surety bonds are used to cover reimbursement obligations to our workers'compensation carriers..There are no additional contingent liabilities 54 associated with these instruments as the underlying liabilities are already reflected in our consolidated balance sheet, The standby letters of credit and surety bonds arrangements have automatic renewal clauses. Note L—Litigation AutoZone,Inc..is a defendant in a lawsuit entitled"Coalition for a Level Playing Field,L.L.C.,ct al.,v..AutoZone, Inc.et al.,"filed in the U.S.District Court for the Southern District of New York in October 2004.The case was filed by more than 200 plaintiffs,which are principally automotive aftermarket warehouse distributors and jobbers (collectively"Plaintiffs'),against a number of defendants,including automotive aftermarket retailers and aftermarket automotive parts manufacturers. In the amended complaint,the plaintiffs allege,inter alia,that some or all of the automotive aftermarket retailer defendants have knowingly received,in violation of the Robinson-Patman Act(the"Act"), from various of the manufacturer defendants benefits such as volume discounts,rebates,early buy allowances and other allowances,fees,inventory without payment,sham advertising and promotional payments,a share in the manufacturers'profits,benefits of pay on scan purchases,implementation of radio frequency identification technology,and excessive payments for services purportedly performed for the manufacturers. Additionally,a subset of plaintiffs alleges a claim of fraud against the automotive aftermarket retailer defendants based on discovery issues in a prior litigation involving similar Robinson-Patman Act claims..In the prior litigation, the discovery dispute,as well as the underlying claims,were decided in favor,of AutoZone and the other automotive aftermarket retailer defendants who proceeded to trial,pursuant to a unanimous jury verdict which was affirmed by the Second Circuit Court of Appeals.In the current litigation,plaintiffs seek an unspecified amount of damages (including statutory trebling),attorneys'fees,and a permanent injunction prohibiting the aftermarket retailer defendants from inducing and/or knowingly re eiving discriminatory prices from any of the aftermarket manufacturer defendants and from opening up ny further stores to compete with plaintiffs as long as defendants allegedly continue to violate the Act The Corn iany believes this suit to be without merit and is vigorously defending against it..Defendants have filed mo 'ons to dismiss all claims with prejudice on substantive and procedural grounds..Additionally,the Defend& is have sought to enjoin plaintiffs from filing similar lawsuits in the future.If granted in their entirety,these disposi ive motions would resolve the litigation in Defendants'favor.. On June 22,2005,the Attorney General of the State of California,in conjunction with District Attorneys for San Bernardino,San Joaquin and Monterey Count s,filed suit in the San Bernardino County Superior-Court against AutoZone,Inc. and its California subsidiaries. Fhe San Diego County District Attorney later joined the suit.. The lawsuit alleges that AutoZone failed to follow arious state statutes and regulation governing the storage and handling of used motor oil and other-materials ollected for recycling or used for cleaning AutoZone stores and parking lots. The suit sought$12 million in p, alties and injunctive relief. On June 1,2007,AutoZone and the State entered into a Stipulated Final.Judgment y Consent. The Stipulated Final Judgment amended the suit to also allege weights and measures(pricing)violatiot 3. Pursuant to this Judgment,AutoZone is enjoined from committing these types of violations and agreed to pay civil penalties in the amount of$1.8 million,including$1..5 million in cash and a$300,000 credit for work performed to insure compliance. The Company currently,and from time to time is involved in various other legal proceedings incidental to the conduct of its business.Although the amount o liability that may result from these other proceedings cannot be ascertained,the Company does not currently bepieve that,in the aggregate,these matters will result in liabilities material to the Company's financial condition, esults of operations or cash flows.. 55 Note M—Segment Reporting The Company manages its business on the basis of one reportable segment.. See"Note A—Significant Accounting Policies"for a brief description of the Company's business.As of August 25,2007,the majority of the Company's operations were located within the United States..Other operations include ALLDATA and the Mexico locations, each of which comprises less than 3%of consolidated net sales.The following data is presented in accordance with Statement of Financial Accounting Standards No. 131.,"Disclosures about Segments of an Enterprise and Related Information:" August 25, August 26, August 27, (in thousands) 2007 2006 2005 Primary business focus: Domestic Retail.................................................................................. $ 5,160,511 $ 4,989,266 $ 4,795,648 Domestic Commercial......................................--............................ 705,567 708,715 718,150 Other.............,..,.........................................,...,.,,..,................................. 303,726 250,374 197,084 Net sales...,...,.....,......................................................................................, $ 6.169.804 $ 5.948.355 5.710.882 56 Quarterly Summary(i) (unaudited) Sixteen Twelve Weeks Ended Weeks Ended November 18, February 10, May 5, August 25, (in thousands,except per share data) 2006 2007 2007 2007 Net sales........................,........................... $ 1,393,069 $ 1,300,357 $ 1,473,671 $ 2,002,707 Increase(decrease)in domestic comparable store sales........................ 0.3% (0.3)% 0 4% (02)% Gross profit..............,............................... 685,295 639,212 735,399 1,004,344 Operating profit........................................ 222,996 188,923 264,977 378,369 Income before income taxes.................. 195,903 162,105 237,862 340,279 Net income............................................... 123,889 103,016 151,591 217,175 Basic earnings per shar•e..................._...... 134 1_46 2.19 3.26 Diluted earnings per share................ 1..73 1.45 2.17 123 November 19, February 119 May 6, August 26, On thousands,except per share data) 2005 2006 2006 2006 Net sales....................................................... $ 1,338,076 $ 1,253,815 $ 1,417,433 $ 1,939,031 Increase(decrease)in domestic comparable store sales............,.................., 0.8% 0.4% 2.1% (0.9)% Gross profit................................................ 655,529 616,190 704,041 962,761 Operating profit...............................,......... 205,293 178,345 253,169 373,118 Income before income taxes............. 181,554 154,012 228,248 338,222 Net income.................................................... 114,374 97,022 144,428 213,451 - Basic earnings per share............................... 1.49 1.26 1.90 2.94 Diluted earnings per share......................... 1..48 1..25 1.89 2.92 (1) The sum of quarterly amounts may not equal the annual amounts reported due to rounding and due to per share amounts being computed independently for each quarter while the full year is based on the annual weighted average shares outstanding.. 57 Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A.Controls and Procedures As of August 25,2007,an evaluation was performed under the supervision and with the participation of AutoZone's management,including the Chief Executive Officer and the Chief Financial Officer,of the effectiveness of the design and operation of our-disclosure controls and procedures as of August 25,2007.Based on that evaluation,our management,including the Chief Executive Officer and the Chief Financial Officer,concluded that our disclosure controls and procedures were effective.During or subsequent to the fiscal year ended August 25,2007,there were no changes in our internal controls that have materially affected or are reasonably likely to materially affect internal controls over financial reporting. Item 9B.Other Information Not applicable.. 58 PART III Item 10.Directors,Executive Officers and Corporate Governance The information set forth in Part I of this document in the section entitled"Executive Officers of the Registrant,"is incorporated herein by reference in response to this item. Additionally,the information contained in AutoZone, Inc.'s Proxy Statement dated October 22,2007,in the sections entitled"Proposal I—Election of Directors"and "Section 16(a)Beneficial Ownership Reporting Compliance,"is incorporated herein by reference in response to this item.. The Company has adopted a Code of Ethical Conduct for Financial Executives that applies to its chief executive officer,chief financial officer,chief accounting officer and persons performing similar functions. The Company has filed a copy of this Code of Ethical Conduct as Exhibit 14.1 to this Form 10-K., The Company has also made the Code of Ethical Conduct available on its investor relations website at http://www.autozoneinc.com. Item 11.Executive Compensation The information contained in AutoZone,Inc.'s Proxy Statement dated October 22,2007,in the section entitled "Executive Compensation,"is incorporated herein by reference in response to this item.. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information contained in AutoZone,Inc.'s Proxy Statement dated October 22,2007,in the sections entitled "Security Ownership of Management"and"Security Ownership of Certain Beneficial Owners,"is incorporated herein by reference in response to this item. Item 13.Certain Relationships and Related Transactions,and Director Independence Not applicable, Item 14.Principal Accountant Fees and Services The information contained in AutoZone,Inc..'s Proxy Statement dated October 22,2007,in the section entitled "Proposal 2—Ratification of Independent Registered Public Accounting Firm,"is incorporated herein by reference in response to this item.. 59 PART IV Item 15.Exhibits,Financial Statement Schedules The following information required under this item is filed as part of this report (a) Financial Statements The following financial statements,related notes and reports of independent registered public accounting firm are filed with this Annual Report in Part II,Item 8: Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Statements of Income for the fiscal year's ended August 25,2007,August 26,2006, and August 27,2005 Consolidated Balance Sheets as of August 25,2007,and August 26,2006 Consolidated Statements of Cash Flows for the fiscal years ended August 25,2007,August 26,2006, and August 27,2005 Consolidated Statements of Stockholders'Equity for the fiscal years ended August 25,2007,August 26,2006, and August 27,2005 Notes to Consolidated Financial Statements (b) Exhibits The Exhibit Index following this document's signature pages is incorporated herein by reference in response to this item. (c)Financial Statement Schedules Schedules are omitted because the information is not required or because the information required is included in the financial statements or notes thereto. 60 SIGNATURES Pursuant to the requirements of Section 13 or 15(d)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. AUTOZONE,INC. By: /s/William C.Rhodes,III William C.Rhodes,III Chairman,President and Chief Executive Officer (Principal Executive Officer) Dated:October 22,2007 Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/William C.Rhodes,III Chairman,President and Chief Executive Officer October 22,2007 William C.Rhodes,III (Principal Executive Officer) Chief Financial Officer and Executive Vice October 22,2007 /s/William T.Giles President,Finance,Information Technology and William T.Giles Store Development (Principal Financial Officer) /s/Charlie Pleas,III Senior Vice President,Controller October 22,2007 Charlie Pleas,III (Principal Accounting Officer) /s/Charles M.Elson Director October 22,2007 Charles M.Elson /s/Sue E.Gove Director October 22,2007 Sue E.Gove /s/Earl G.Graves,Jr. Director October 22,2007 Earl G.Graves,Jr. /s/N. Gerry House Director October 22,2007 N.,Gerry House /s/J.R.Hyde,III Director October 22,2007 J.R.Hyde,III /s/W.Andrew McKenna Director October 22,2007 W.Andrew McKenna /s/George R.Mrkonic,Jr. Director October 22,2007 George R.Mrkonic,Jr, /s/Theodore W.Ullyot Director October 22,2007 Theodore W.Ullyot 61 EXHIBIT INDEX 3.1 Restated Articles of Incorporation of AutoZone,Inc. Incorporated by reference to Exhibit 3.1 to the Form 10-Q for the quarter ended February 13, 1999. 3.2 Fourth Amended and Restated By-laws of AutoZone,Inc•Incorporated by reference to Exhibit 99.2 to the Form 8-K dated September 28,200T 4.1 Senior Indenture,dated as of'July 22, 1998,between AutoZone,Inc.and the First National Bank of Chicago.Incorporated by reference to Exhibit 4.1 to the Form 8-K dated.July 17, 1998. 4.2 Fourth Amended and Restated AutoZone,Inc.Employee Stock Purchase Plan.Incorporated by reference to Exhibit 99.1 to the Form 8-K dated September 28,2007. 43 Indenture dated as of August 8,2003,between AutoZone,Inc. and Bank One Trust Company,N.A. Incorporated by reference to Exhibit 4..1 to the Form S-3(No..333-107828)filed August 11,2003. *10..1 Fourth Amended and Restated Director Stock Option Plan.Incorporated by reference to Exhibit 10..1 to the Form 10-Q for,the quarter ended May 4,2002. *10.2 Second Amended and Restated 1998 Director Compensation Plan..Incorporated by reference to Exhibit 10.2 to the Form 10-K for the fiscal year ended August 26,2000., *10.3 Third Amended and Restated 1996 Stock Option Plan. Incorporated by reference to Exhibit 103 to the Form 10-K for the fiscal year ended August 30,2003. *10.4 Form of Incentive Stock Option Agreement.Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended November-23,2002. *10.5 Form of Non-Qualified Stock Option Agreement.Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended November 23,2002. *10..6 AutoZone,Inc.Executive Deferred Compensation Plan.Incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended February 12,2000.. *10.7 Form of Amended and Restated Employment and Non-Compete Agreement between AutoZone,Inc..and various executive officers..Incorporated by reference to Exhibit 10 1 to the Form 10-Q for the quarter ended November 22, 1999. *10.8 Form of Employment and Non-Compete Agreement between AutoZone,Inc.,and various officers. Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended November 18,2000 *10.9 AutoZone,Inc. 2003 Director Stock Option Plan..Incorporated by reference to Appendix C to the definitive proxy statement dated November 1,2002,for the annual meeting of stockholders held December 12,2002. *10.10 AutoZone,Inc.. 2003 Director Compensation Plan.. Incorporated by reference to Appendix D to the definitive proxy statement dated November 1,2002,for the annual meeting of stockholders held December 12,2002. *10.11 Amended and Restated AutoZone,Inc..Executive Deferred Compensation Plan.Incorporated by reference to Exhibit 10..1 to the Form 10-Q for the quarter ended February 15,2003. *10.12 Amended and Restated Employment and Non-Compete Agreement between Steve Odland and AutoZone, Inc.,dated October 23,2003.Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter, ended November 22,2003. 10.13 Amended and Restated Five-Year Credit Agreement dated as of May 17,2004.among AutoZone,Inc.,as borrower,the several lenders from time to time party thereto,and Fleet National Bank,as Administrative 62 Agent and Citicorp USA,Inc.,as Syndication Agent.. Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended May 8,2004., 10.14 AutoZone,Inc.2005 Executive Incentive Compensation Plan. Incorporatcd by reference to Exhibit A to the Company's Proxy Statement dated October 27,2004,for the Annual Meeting of Stockholders held December 16,2004. 10.15 Credit Agreement dated as of December 23,2004,among AutoZone,Inc.,as Borrower,the Several Lenders from time to time party thereto,Fleet National Bank,as Administrative Agent,Wachovia Bank, National Association,as Syndication Agent,Wachovia Capital Markets,LLC,as Joint Lead Arranger and Sole Book Manager,Banc of America Securities LLC as Joint Lead Arranger,and Calyon New York Branch,BNP Paribas and Regions Bank as Co-Documentation Agents.Incorporated by reference to Exhibit 10.1 to Form 8-K dated December 23,2004(filed with the Securities and Exchange Commission on December 29,2004). 10.16 Lenders'consent to extend the termination date of the Company's Amended and Restated 5-Year Credit Agreement dated as of May 17,2004 for an additional period of one year,to May 17,2010.Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended May 7,2005. 1017 Lenders'consent to extend the termination date of the Company's Amended and Restated 364-Day Credit agreement dated as of May 17,2004 for an additional period of 364 days,to May 15,2006.Incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended May 7,2005, *1018 Description of severance agreement between AutoZone,Inc.and William C.Rhodes,III. Incorporated by reference to Exhibit 10.22 to the Form 10-K for the fiscal year ended August 27,2005,and the Form 8-K dated September 28,2007. 10.19 Agreement dated as of October 19,2005,between AutoZone,Inc.and Michael E..Longo. Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended May 6,2006.. 10.20 Offer letter dated April 13,2006,to William T.,Giles. Incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended May 6,2006. 1021 First Amendment dated as of May 5,2006,to the Credit Agreement dated as of December 23,2004, among AutoZone,Inc.,as Borrower,the Several Lenders from time to timc party thereto,Bank of America,NA,as Administrative Agent,and Wachovia Bank,National Association,as Syndication Agent.. Incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended May 6,2006. 10.22 Second Amendment dated as of August 3,2007,to the Credit Agreement dated as of December 23,2004, (as amended by the First Amendment to Credit Agreement dated as of May 5,2006)among AutoZone, Inc.,as Borrower,the Several Lenders from time to time party thereto,Bank of America,NA,as Administrative Agent,and Wachovia Bank,National Association,as Syndication Agent.. Filed as Exhibit 10.22 to the Form 10-K for the fiscal year ended August 25,2007.. 10.23 Four-Year Credit Agreement dated as of May 5,2006,among AutoZone,Inc..as Borrower,the Several Lenders from time to time party thereto,Bank of America,N.A..,as Administrative Agent,and Citicorp USA,Inc..as Syndication Agent. Incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended May 6,2006. 10.24 Second Amended and Restated Five-Year Credit Agreement dated as of May 5,2006,among AutoZone, Inc.as Borrower,the Several Lenders from time to time party thereto,Bank of America,N.A. as Administrative Agent and Swingline Lender,and Citicorp USA,Inc.as Syndication Agent Incorporated by reference to Exhibit 10.5 to the Form 10-Q for the quarter ended May 6,2006. 10.25 AutoZone,Inc.2006 Stock Option Plan..Incorporated by reference to Appendix A to the definitive proxy statement dated October 25,2006,for the annual meeting of stockholders held December 13,2006, 10.26 Form of Stock Option Agreement. Filed as Exhibit 10.26 to the Form 10-K for the fiscal year ended August 25,2007. 63 10.27 AutoZone,Inc.Fourth Amended and Restated Executive Stock Purchase Plan..Incorporated by reference to Appendix B to the definitive proxy statement dated October 25,2006,for the annual meeting of stockholders held December 13,2006., 10.28 Agreement dated January 19,2007,between AutoZone,Inc..and Bradley W.Bacon.Incorporated by reference to Exhibit 99.1 to the Form 8-K dated January 19,2007. 10.29 Offer letter dated March 19,2007,to Larry Roesel.Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended May 5,2007. 12.1 Computation of Ratio of Earnings to Fixed Charges. 14.1 Code of Ethical Conduct. Incorporated by reference to Exhibit 14.1 of the Form 10-K for-the fiscal year ended August 30,2003, 21.1 Subsidiaries of the Registrant.. 23.1 Consent of Ernst&Young LLP. 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)and 15d-14(a)under the Securities Exchange Act of 1934,as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)and 15d-14(a)under the Securities Exchange Act of 1934,as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.. 3.12 Certification of Principal Financial Officer Pursuant to 18 US-C..Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.. * Management contract or compensatory plan or-arrangement. 64 EXHIBIT 12.1 Computation of Ratio ofEamings to Fixed Charges (in thousands,except ratios) Fiscal Year Ended August 2007 2006 2005 2004 2003 (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) Earnings: Income before income taxes $ 936,150 $ 902,036 $ 873,221 $ 905,902 $ 833,007 Fixed charges 170,852 156,976 144,930 130,278 121,129 Less: Capitalized interest (1,376) (1,985) (1,079) (813) (791) Adjusted earnings $1,105,626 $1,057,027 $1,017,072 $1,035,367 $ 953,345 Fixed charges: Gross interest expense $ 121,592 $ 110,568 $ 102,341 $ 89,600 $ 79,301 Amortization of debt expense 1,719 1,559 2,343 4,230 7,334 Interest portion of rent expense 47,541 44,849 40,246 36,448 34,494 Total fixed charges $ 170,952 $ 156,976 $ 144,930 $ 130,278 $ 121,129 Ratio of earnings to fixed charges 6.5 6.7 7.0 7.9 7.9 65 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT STATE OR COUNTRY OF ORGANIZATION NAME OR INCORPORATION ALLDATA LLC Nevada AutoZone de Mexico,S.de R.L.de C.V. Mexico AutoZone Development Corporation Nevada AutoZone Northeast,Inc..fka ADAP,Inc. New Jersey AutoZone Stores,Inc. Nevada AutoZone Texas,L.P. Delaware AutoZone West,Inc..fka Chief Auto Parts Inc. Delaware AutoZone.com,Inc., Virginia AutoZone Parts,Inc. Nevada AutoZone Puerto Rico,Inc. Puerto Rico In addition,fourteen subsidiaries operating in the United States and five subsidiaries operating outside of the United States have been omitted as they would not,considered in the aggregate as a single subsidiary,constitute a significant subsidiary as defined by Rule 1-02(w)of'Regulation S-X. 66 Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements of AutoZone,Inc.of our reports dated October 19,2007,with respect to AutoZone,Inc.'s consolidated financial statements and the effectiveness of internal control over financial reporting of'AutoZone,Inc.,included in this Annual Report(Form 10-K)for the year ended August 25,2007: Registration Statement(Form S-8 No.333-19561)pertaining to the AutoZone,Inc 1996 Stock Option Plan Registration Statement(Form S-8 No.333-42797)pertaining to the AutoZone,Inc.Amended and Restated Employee Stock Purchase Plan Registration Statement(Form S-8 No.333-48981)pertaining to the AutoZone,Inc. 1998 Director Stock Option Plan Registration Statement(Form S-8 No 333-48979)pertaining to the AutoZone,Inc. 1998 Director Compensation Plan Registration Statement(Form S-3 No.333-58565)pertaining to the registration to sell S200 million of debt securities Registration Statement(Form S-8 No.333-88245)pertaining to the AutoZone,Inc.Second Amended and Restated 1996 Stock Option Plan Registration Statement(Form S-8 No.333-88243)pertaining to the AutoZone,Inc.Amended and Restated 1998 Director Stock Option Plan Registration Statement(Form S-8 No.333-88241)pertaining to the AutoZone,Inc.Amended and Restated Director Compensation Plan Registration Statement(Form S-8 No 333-75142)pertaining to the AutoZone,Inc.Third Amended and Restated 1998 Director Stock Option Plan Registration Statement(Form S-8 No.333-75140)pertaining to the AutoZone,Inc.Executive Stock Purchase Plan Registration Statement(Form S-3 No..333-83436)pertaining to a shelf registration to sell 15,000,000 shares of common stock owned by certain selling stockholders Registration Statement(Form S-3 No.33.3-100205)pertaining to a registration to sell$500 million of debt securities Registration Statement(Form S-8 No..333-103665)pertaining to the AutoZone,Inc.2003 Director Compensation Plan Registration Statement(Form S-8 No..333-103666)pertaining to the AutoZone,Inc.2003 Director Stock Option Plan Registration Statement(Form S-3 No.333-107928)pertaining to a registration to sell$500 million of'debt securities Registration Statement(Form S-8 No 333-139559)pertaining to the AutoZone,Inc.2006 Stock Option Plan Registration Statement(Form S-3 No..333-118308)pertaining to a registration to sell$200 mullion of debt securities /s/Ernst&Young LLP Memphis,Tennessee October 19,2007 67 Exhibit 31.1 CERTIFICATION PURSUANT TO RULES 13a-14(a)AND 15d-14(a)UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I,William C_Rhodes,I1I,certify that: 1. I have reviewed this Annual Report on Form 10-K ofAutoZone,Inc.("registrant's; 2. Based on my knowledge,this 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 report; 3. Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report; 4. The registrant's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f))for the registrant and have: (a) Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter,in the case of an annual report)that has materially affected,or is reasonably likely to materially affect,the registrant's internal control over financial reporting;and 5. The registrant's other certifying officer(s)and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's board of directors(or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,process,summarize and report financial information;and (b) Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 22,2007 /s/WILLIAM C.RHODES,III William C Rhodes,III Chairman,President and Chief Executive Officer (Principal Executive Officer) 68 Exhibit 31.2 CERTIFICATION PURSUANT TO RULES 13a-14(a)AND 15d-14(a)UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I,William T.Giles,certify that: 1. I have reviewed this Annual Report on Form 10-K of AutoZone,Inc.("registrant"); 2 Based on my knowledge,this 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 report; 3. Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report; 4.. The registrant's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e))and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f))for the registrant and have: (a) Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation;and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case ofan annual report)that has materially affected,or is reasonably likely to materially affect,the registrant's internal control over financial reporting;and 5 The registrant's other certifying officer(s)and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrant's auditors and the audit committee of the registrant's board of directors(or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,process,summarize and report financial information;and (b) Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 22,2007 1sl WILLIAM T.GILES William Giles Chief Financial Officer,Executive Vice President, Finance,Information Technology and Store Development (Principal Financial Officer) 69 Exhibit 32.1 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 Annual Report of AutoZone,Inc.(the"Company")on Form 10-K for the fiscal year ended August 25,2007,as filed with the Securities and Exchange Commission on the date hereof(the"Report"),I, William C.Rhodes,III,certify,pursuant to 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that: (i) the Report fully complies with the requirements of Section 13(a)or Section 15(d)of the Securities Exchange Act of 1934;and (ii) the information contained in the Report fairlypresents,in all material respects,the financial condition and results of operations of the Company. October 22,2007 /s/WILLIAM C.RHODES,III William C..Rhodes,III Chairman,President and Chief Executive Officer (Principal Executive Officer) 70 Exhibit 32.2 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 Annual Report of AutoZonc,Inc.(the"Company")on Form 10-K for the fiscal year ended August 25,2007,as filed with the Securities and Exchange Commission on the date hereof(the"Report"),I, William T.Giles,certify,pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002,that: (i) the Report fully complies with the requirements of Section 13(a)or Section 15(d)of the Securities Exchange Act of 1934;and (ii) the information contained in the Report fairly presents,in all material respects,the financial condition and results of operations of the Company. October 22,2007 /s/WILLIAM T.GILES William T.Giles Chief Financial Officer,Executive Vice President,Finance,Information Technology and Store Development (Principal Financial Officer) 71 HIM -IMNIIIIIIIIII I OEM Corporate Information The CEO Team Our leadership team is comprised of 42 individuals who work tirelessly to support the AutoZone that exists today. We lead as a team, and we win as a team. Through their support and guidance, the Company is well positioned for future growth. Officers Vice Presidents Rodney C Halsell Customer Satisfaction Customer Satisfaction Supply Chain William C Rhodes, Illt Craig L Barnes Diana H Hull Chairman, President and Merchandising Assistant General Counsel and Chief Executive Officer L Dan Barzel Assistant Secretary Executive Vice Presidents Merchandising Domingo Hurtado Customer Satisfaction Jon A. Bascom President, Mexico William T Gilest Information Technology Kenneth S. Klein Chief Financial Officer, Information Rebecca W. Ballou Merchandising Technology and Store Development Assistant General Counsel and Jeffrey W.Lagges Harry L.Goldsmitht Assistant Secretary President,ALLDATA General Counsel and Secretary B.Craig Blackwell Mitchell C Major Robert D Olsent Operations Supply Chain Store Operations, Commercial Kenneth L Brame Grant E McGee and Mexico Chief Information Officer Commercial James A Shea' Michael T Broderick Ann A Morgan Merchandising, Marketing and Operations Human Resources Suppiy Chain Brian L Campbell J Scott Murphy Senior Vice Presidents Treasury, Investor Relations and Tax Strategic Planning and Customer Satisfaction Philip B Daniele Business Development Timothy W Briggsr Operations Jeffrey H Nix Human Resources Brett D Easley Information Technology William W Gravest Merchandising Raymond A Pohlman Supply Chain Mark A Finestone Government and Community Relations Lisa R. Kranct Merchandising Elizabeth S Rabun Marketing Wm David Gilmore Loss Prevention Thomas B. Newbernt Store Development Anthony Dean Rose,Jr Store Operations Eric S Gould Merchandising Charlie Pleas, Illt Commercial Brett L Shanaman Controller James C Griffith Marketing Larry M Roesel' Operations Richard C Smith Commercial William R Hackney Operations Operations Solomon A.Woldeslassie tRequired to file under Section 16 of the Suppiy Chain Securities Exchange Act of 1934. Charles M. ElsDn 2'' Dr. N. Gerry House( -,, William C. Rhodes, III Wo�- ;J!ard Jr President and ----D Chair-iran. President and C`-O Pmf�--so i uf ':or of -ieverna',n-e Institute for Sluden', Achievemont AutoZone, Inc. pity of Doi a,%,D-a J. R. Hyde, III Theodore W. Uliyot,2* Sue E. Gove" AutoZone Founder I LxEcu'llve Vice President and :;hairmari M 2 r I,.,;j,e i n r 17, LP X, Inc. Earl G. Graves,Jr-�!21 W. Andrew McKenna:i'� 11 Presdcr-. and G_O PriVaie I,nvcstor (2) compensat"on commitreo 11-arl S. Graves Publishing '(3) NDmina!inc,i and Corporate George R. Mrkonic, Jr.(1,P) Governance cs,mMitree Retired President/Vice Chairman Comm flleo Chair Eorbers Group, Inc. L eaLl Director .cmpu-,Crshare lrives"D,cervices Investor Rejatiors S'ocki-ioldeiS obtain free of charge ,-).0. Ecx 43C69 htt)/hn!vAw.autc)zoriein:3.,orTi -a Copy of AutoZonc's annual report on P[O%!Id,1--,nco- Rhode lsiacd 32940-3069 Ccni War, Site: Form 10-K, its quarterly reports on Form (877)282-1168 http/hvww.autozone.corn 'O-Q FIS i V,1: n -InC Securities and , L - 1781) 575-2723 Exchange Ccmmiss!or and quarterly ,It Ip://W`,QV!.'-`-1'TID Jt�-rS-)Y,2.XM press relepses,by contacting Irnrestor f,evj York Stock Exchange Relall':)ns, P.C. Box 2'98, Memphis Ticker Symbol. AZC Tennessee 3811011. e-mailing Investor. I he Annual Meet-igof Stockno.ders reb,iorsQ)aut,3z--)r)e.com or phoning of AutoZone will be held at B 30 E-m,, (901)495-7185. CST on December 12. 2CO7, at the Ernst&Younc LLP Copies of all documents 'iied by J. R. Hyde, III Stogie Support Center, Memphis, Tennessee AutoZone vvi-,r) .he Securities and 123 South Front Street, Memphis, Exchange Commission, including Tennessee. Form 'O-K and Form 10- . are also AutoZone s Code of Ethical Conduct is avai�ab'�e at the SEC's EDGAR server available on its nvesG:�r relations Web at h1tp://www.sec.gDv. site at http/,/wo!waitozorei-ic.corT- As of August 215. 2007. there were 3,6D4 stockholders of record, excluding the number of beneficial owners whose Sih-3reS were represented by security posi:ior listings. AutoZone continues to be a true American success story and one of the highest rated retailers based on return on invested capital in the United States. It is an honor to share this Annual Report update with you,our customers, AutoZoners,and stockholders.We look forward to sharing our continued success with you well into the future. desiqnc, -oby cu-ra-i 6 co�nor,,Inc.r v--arrarl-connors.com WOW! CUSTOMER SERVICE DRIVES OUR GROWTH LIVINI 123 South Front ua = Houston.TX 4�x q t ' .K :mow nn (orlc.na:; 77 UI(()1 ti103't i31: u�nrr,.W .7 _ THFJOURNFY CONTINUES Street-- • .• •• •• www . . - com Exhibit B Inventory Report ,-Nameof-Report Report Provider ReportFrequency Parts on order by City Service Center AutoZone Dail Parts inventory by City Service Center AutoZone Monthly Weekly Parts usage by City Service Center AutoZone Weekly Monthly Parts usage by City Service AutoZone Monthly Center Non AutoZone product frequency report AutoZone Monthly Parts Reorder List AutoZone Weekly AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 V EXECUTION COPY 25 Exhibit C USC Agreement AutoZone Contract for Supplies,Parts and Material at ESD Facilities CRR 10.06.08 V EXECUTION COPY 26 STATE OF NORTH CAROLiNA CITY OF MECKLENBURG CONTRACT NO. 0601343 MASTER PURCHASE AGREEMENT This Master Purchase Agreement(the"Agreement)is entered into as of this 26th day of June 2006(the "Effective Date"), by and between AutoZone Stores, Inc., for itself and on behalf of its affiliates (collectively, the "Company"), and the City of Charlotte, a political subdivision of the State of North Carolina(the"City"). Statement of Background and Intent A. The City issued a `Request for Proposals for Automotive Parts and Accessories for Light Duty Vehicles'Number 269-2006-060,dated March 28,20063 requesting proposals from qualified firms to provide the City and other Participating Public Agencies with Automotive Parts and Accessories, hereafter referred to as ("Products"). This Request for Proposals, together with all Exhibits, Appendices and Addenda,is referred to herein as the"RFP B. In response to the RFP, the Company submitted.to the City a proposal dated May 2, 2006. This proposal, together with Automotive farts and Accessories for Light Duty Vehicles, all attachments and any separately sealed confidential trade secrets,is referred to herein as the'Proposal.' C, The City and the Company have negotiated and now desire to enter into an Agreement for the Company to provide Automotive Parts and Accessories to the City and other participating public agencies in accordance with the terns and conditions setforth herein. D. Charlotte-Mecktenburg (herein "Lead Public Agency'), in cooperation with the V,S. Communities Purchasing & Finance Agency(herein"U.S, Communities"), and on behalf of other public agencies that elect to access the Master Agreement (herein 'Participating Public Agencies'), competitively solicited and awarded the Master Agreement to Company.Lead Public Agency has designated U.S. Communities as the administrative and marketing conduit for the distribution of the Master Agreement to Participating Public Agencies. Company shall sign and return to U.S. Communities the Administration Agreement attached hereto and incorporated herein as Exhibit E. Lead Public Agency is acting as the"Contracting Agent"for the Participating Public Agencies, and shall not be held liable or responsible for any costs, damages,liability or other obligation incurred by the Participafng Public Agencies. Company shall deal directly with each Participating Public Agency concerning the placement of orders, issuance of the purchase order,contractual disputes, invoicing, payment and all other matters relating or referring to such Participating Public Agency's access to the Master Agreement. The Master Agreement shall be construed to be in accordance with and government by the taws of the State in which the.Participating Public Agency exists. Participating Public Agencies are required to register on-line with U.S. Communities at www.uscommuni ies.ora. The registration allows the Participating Public Agency to.enter into a Master Intergovernmental Cooperative. Purchasing Agreement ("MICIPA'), which is intended to allow the Participating Public Agencies to meet applicable legal requirements and facilitate access to the Master Agreement and the Company. AUTOZOW CONTRACT MAW r NOW,THEREFORE,for good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,and in further consideration of the covenants and conditions contained in this Agreement, the parties agree as follows: AG REEM ENT 1. INCORPORATION OF EXHIBITS. The parties acknowledge and agree that the following Exhibits are hereby incorporated into and made a part of this Agreement by reference: E hibftA:, Contract Pricing and Discounts Exhibit B: Company's Proposal Exhibit C: Delivery and Freight Schedules Exhibit D: RFP 9269-2006-060 Exhibit E: U.S.Communities Administrative Agreement Extubit F: U.S.Communities Supplier Standards and Commitments Any conflict between language in an Exhibit to this Agreement and the main body of this Agreement shall be resolved in favor of the main body of this Agreement z DEFINITIONS. The following terms shall have the following meanings for purposes of this Agreement(including all Exhibits): 2.1. "AFFILIATES" shalt mean all departments or units of the City, Mecklenburg County, and all other public agencies. 2.2. "AGREEMENT"shall mean this Agreement including all Attachments and Exhibits,City of Charlotte's RFP No. 269-2006-060, all subsequent Addenda issued in connection with the RFP, the Company's proposal dated May 2, 20D6 in response to the RFP as referenced and incorporated herein as though fully set forth, 2.3, 'CONTRACTING AGENT refers to the City of Charlotte,North Carolina. 2A. "EFFECTIVE DATE"refers to the date this Agreement is fully executed by all parties to the Agreement. 2.5. "EQUIPMENT MANAGEMENT" refers to the City of Charlotte, Equipment Maintenance Division. 2.6. "LEAD PUBLIC AGENCY" refers to Charlotte Mecklenburg Procurement Services Division 2.7. "PRODUCTS"shall mean the Automotive Parts and Accessories for Light Duty Vehicles and related services to be provided by the Company as identified and described in this Agreement,including Exhibits. 2.8. "PARTICIPATING PUBLIC AGENCY" shall mean any and all govemment agencies, except Federal, that have the authority to purchase from another public agency's competitively solicited contract including Counties, Cities, Towns, Villages, Special Districts, Public Schools, Community Colleges, universities, State Agencies and Non profit agencies providing services an behalf of government agencies. ALrrxkONE COKMOT 612N66 2 2.9. `SERVICES' shall include all services that the Company provides or is required to provide under this Agreement. 2.10. SPECIFICATIONS ANDr REQUIREMENTS.The term"Specifications and Requiremer* shall mean all definitions, descriptions, requirements, criteria, warranties, and performance standards relating to the Products and Services that are set forth or referenced in this Agreement,including the Exhibits. 3. TERM. The initial term of this Agreement will be for five(5)years from the Effective Date with an option to renew for two (2) additional one-year temts. This Agreement may be extended only by a written amendment signed by both parties, 4. DESCRIPTION 011 GOODS AND SERVICES. The Company shall provide Automotive Parts and Accessories per bid specifications and in accordance with each and every one of the conditions, covenants, stipulations, terms and provisions contained in this Agreement 5. CONTRACT PRICING. 5.1 The City agrees to pay the Company for materials, supplies, equipment, apparatus and services delivered in accordance with the terms and conditions of this Agreement based on a fixed percentage discount from the current Company Lowest Zone Price fist as identified and incorporated into this Agreement as Exhibit A. 5.2 The Company agrees the'fixed percentage discount will remain firm for entire contract term. 5.3 The Company shall advise the Charlotte-Mecldenburg Procurement Services Division in writing of any proposed price increases no later than sixty (60)days prior to the effective date of any such increases.The Company must provide documented evidence of material. and labor price Increases that directly impact current Products prices.No adjustments shall be made to compensate a Company for inefficiency in operation, quantity of product ordered,or for additional profit. 5.4 The C)ty agrees to accept any price increase that is documented after thorough review and verification,and amend this Agreement it such is in the best interest of the City. 5.5 The Company shall be.responsible for furnishing and delivering approved price lists and most current version of AZ Parts Connect (AZPC) software to the City and other participating public entities upon request 5.6 The Company agrees that during the term of the Agreement, no State or Local public agency with the same payment terms,volume,delivery terms and other conditions set forth in the Master Agreement will receive the products provided under this Agreement at a lower net price. The Company.will provide U.S. Communities and the Participating Public Agencies with such lower pricing on a going forward basis.This commitment shall not apply to special andlor one-time offers,liquidation sales and discounted product(s), 6. DEUVFRY AND FREIGHT. All orders scull be shipped F.0.13, Destination and the Company or third party carrier shall be responsible for any damage or loss in transit. All orders placed by the City or any Participating Public Agency shall be delivered by the methods and within the times specified in Exhibit C. 7. IWOiCES. Each invoice sent by the Company shall detail all Services and Deliverables performed and delivered which are necessary to entitle the Company to the requested payment under the terms of this Agreement The Company shall mail all invoices for the City or Charlotte to: AUTOZONECONTRACT 60M 3 City of Charlotte Finance Department Accounts Payable Boo East 4'Street f dt'Floor Charlotte, NC 28202 The City will pay all accurate, properly submitted, uncontested invoices within thirty(30)days of receipt: Proposals may include an incentive discount for early payment. Invoices must include state and local sales tax.to no event shall the City be liable for any late fees or interest charges. 8. WARRANTY AND PRODUCT COMPLIANCE. 8.1 All Product provided to the City must be new, unused or remanufactured, of the latest design and technology and from the most current product lines, and meet aft tndustry standards and other laws and requirements regarding Automotive Parts in the state of North Carolina or in accordance with the laws and applicable purchasing policies of the State and locality where the Participating Agency exists. 8.1 Company warrants that if any components of the products fail due to defects in workmanship or materials,within one year from date of delivery. Company will repair or replace,free of charge,all parts found defective. 9. GENERAL WARRANTIES. Company represents and warrants that: 9.1 It is a corporation duly incorporated,validly existing and in good standing under the laws of the state of North Carolina,and is qualified to do business in North Carolina; 9.2 It has all the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement; 9.3 The execution,delivery, and performance of this Agreement have been duly authorized by Company, 9.4 No approval, authorization or consent of any governmental or regulatory authority is required to be obtained or made by it in order for it to enter into and perform its obligations under this Agreement; 9.5 In connection with its obligations under this Agreement,it shall comply with all applicable federal,state and local laws and regulations and shall obtain all applicable permits and licenses;and 9.6 The Company shau not violate any agreement with any third party by entering into or performing this Agreement. lo. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Company represents warrants and covenants than 10.1 The Services shall satisfy all requirements set forth in this Agreement; including but not limited to the attached Exhibits; 10.2 All work performed by the Company andfor its subcontractors pursuant to this Agreement shall meet industry accepted standards, and shall be performed in a professional and workmanlike manner by staff with the necessary skills,experience and knowledge; AUiOZONE CONTRACT &Qo"fOG 4 10.3 Neither the Products,nor any Services provided by the Company under this Agreement will infringe or misappropriate any patent, copyright,trademark or trade secret rights of any third party;and Ii. TERMINATION. 11.1 Termination Without Cause. The City may terminate this Agreement at any time without cause by giving sixty (60) days prior written notice to the Company. 11.2 Termination for Default by Either Party, By giving written notice to the other party, either party may terminate this Agreement upon the occurrence of one or more of the following events: a. The other parry violates or fails to perform any covenant, provision, obligation, term or condition contained in this Agreement, provided that, unless otherwise stated in this Agreement, such failure or violation shall not be cause for termination if both of the following conditions are satisfied: (i) such default is reasonably susceptible to cure; and (ii)the other party cures such default within thirty(30) days of receipt of written notice of default from the non-defaulting party,or b. The other party attempts to assign, terminate or cancel this Agreement contrary to the terms hereof,or c. The other party ceases to do business as a going concern,makes an assignment for the benefit of creditors,admits In writing its inability to pay debts as they become due, files a petition in bankruptcy or has an involuntary bankruptcy petition filed against it (except in connection with a reorganization under which the business of such party is continued and performance of all its obligattions under this Agreement shall continue), or if a receiver, trustee or liquidator is appointed for it or any substantial part of other party's assets or properties. d. Any notice of default shall identify this Section of this Agreement and shall state the party's intent to terminate this Agreement If the default is not cured within the specified period. 11.3 Additional Grounds for-Default Termination by the City. By giving written notice to the Company, the City may also terminate this Agreement upon the occurrence of one or more of the fallowing events(which shall each constitute grounds for termination without a cure period and without the occurrence of any of the other events of default previously listed): a. The Company makes or allows to be made any material written misrepresentation or provides any matedalty misleading written information in connection with this Agreement, Company's proposal, or any covenant, agreement, obligation, berm or condition contained in this Agreement;or b. The Company takes or fails to take any action which constitutes grounds for immediate termination under the terms of this Agreement, including but not limited to failure to obtain or maintain the insurance policies and endorsements as required by this Agreement, or failure to provide the proof of insurance as required by this Agreement 11 A No Suspension. In the event that either party disputes in good faith an allegation of default by the other party, notwithstanding anything to the contrary in this Agreement, the City and the Company agrees that it will not terminate this Agreement or suspend or limit the Services AUrOZONECONTRACT WSW 5 or payment therefore unless(i)the parties agree in writing,or(if) an order of a court of competent jurisdiction determines otherwise. 11.5 Cancellation of Orders and Subcontracts. In the event this Agreement is terminated by either party for any reason prior to the end of the term,the City and the Company shall mutually agree upon a date for all services to cease. The Company shall proceed to conclusion, any order that has been,or is placed during the agreed upon grace period. As soon as practical after the agreed upon Termination date,the Company shall submit a statement to the City showing in-detail the services performed under this Agreement To the date of termination. . 11.E Authority to Terminate. The City Manager or City Manager's designee is authorized to terminate this Agreement on behalf of the City.Two officers of the Company.must sign any document terminating the Agreement on behalf of Company. 11.7 No Effect on Taxes,Fees, Charges,or Reports. Any termination of this Agreement shall not relieve the Company or the City of the obligation to pay any fees,taxes or other charges then due to the other party,nor relieve the Company of the obligation to file any daily, monthly, quarterly or annual reports covering the period to termination. 11.8 Other Remedies. Upon termination of this Agreement, each party may seek all iegaJ and equitable remedies to which it-is entitled. The remedies set forth herein shall be deemed cumulative and not exclusive and may be exercised successively or ,concurrently, in addition to any other available remedies. 12 TRANSITION SERVICES UPON TERMINATION. Upon termination or expiration of this Agreement,the Company shall provide reasonable efforts to assist the City with the orderly transfer of the Services,functions and operations provided by the Company hereunder to another provider or to the City as determined by the City in its sole discretion.Prior to termination or expiration of this Agreement,the City may require the Company to perform and,if so required,the Company shall perform certain transition services necessary to migrate the work of the Company to another provider or to the Clty Itself as described below(the "Transition Services").Transition Services may include but shall not be limited to the following: (a) Pre-Migration Services. i. Working with the City to jointly develop a mutually agreed upon Transttiori Services Plan to Facilitate the termination of the Services;and Jr. Notifying all affected Agencies and subcontractors of the Company. (b) Migration Services. I. Performing the Transition Service Man activities. (c) Throughout Process and Past-Migration Services. i. Answering questions regarding the Services on an as-needed basis;and ii. Providing such other reasonable services needed to effectuate an orderly transition to a new Company. This Section 12 pertains to the City of Charlotte only. The City will not be responsible for,or assist in,the transition services for any other participating agency. AurozavECaMRALr rrlsas 6 12 AUDiT. The Company shall maintain accurate and complete financial records of its activities and operations relating to this Agreement in accordance with generally accepted accounting principles. During the term of this Agreement and for a period of one(1)year after termination or expiration of this Agreement for any reason,the City shall have the right to audit, either itself or through a third party,the books and records(including but not limited to the technical records)of the Company in connection with this Agreement,to ensure the Company's compriance with all the terms and conditions of this Agreement or the City's payment obligations. The Company will be responsible for ail cost associated with the audit if the discrepancy Is ten percent(10916)or more. 14 COMPANY WILL NOT SELL OR DISCLOSE DATA. The Company W treat as Confidential information all data provided by the City in connection with this Agreement.City data processed by the Company shall remain the exclusive property of the City.The Company will not reproduce,copy,duplicate,disclose,or in any way treat the data supplied by the City in any manner except that contemplated by this Agreement. 15 COMPUANCE WITH LAWS AND CODES. The Company shall ensure that the Services are in compliance with all local, state and federal laws and regulations.In performing the Services,the Company shall comply with all local,state and federal laws and regulations. 16 WORK ON CITY'S PREMISES. The Company will ensure that its employees and agents shall,whenever on the City's premises, shall obey ail Instructions and directions issued by the City with respect to work on the City's premises. The Company agrees that its personnel and the personnel of its subcontractors will comply with all rules,regulations and security procedures of the City when on the City's premises. The Company shall repair, or cause to be repaired, at its own cost, any and all damage to City facilities, buildings, or grounds to the extent caused by the Company or employees, subcontractors or agents of the Company. Such repairs shall be made immediately, but in no event later than thirty(30)days after the occurrence. If Company fails to make timely repairs, the City may make any necessary repairs. Alt costs incurred by the City for such. repairs, as determined by the City, shall be reimbursed by the Company by cash payment upon demand or City may deduct such cost from any amounts due to the Company from the City. 17 RELATIONSHIP OF THE PARTIES. The relationship of the parties established by this Agreement is solely that of independent contractors,and nothing contained in this Agreement shall be construed to(i)give any party the power to direct or control the day-to-day activities of the other, or(il)constitute such parties as partners,joint ventures,co-owners or otherwise as participants in a joint or common undertaking; or(11) make either party an agent of the other for any purpose whatsoever. Neither party nor its agents or employees is time representative of the other for any purpose,and neither has power or authority to act as agent or employee to represent,to act for,bind,or otherwise create or assume any obligation on behalf of the other.The Company shall be fully and solely responsible for its own acts and omissions and those of its employees, officers, agents and subcontractors. All personnel supplied by Company subcontractors shall be considered employees or agents of Company. The Company shall be responsible for the payment of all salaries,withholding taxes, worker's compensation, disability benefits and other compensation and related taxes for such persons. is INDEMNIFICATION. The Company shall indemnify, defend and hold harmless the City and the Cty's officers, employees and agents from and against any and all losses,damages,costs,expenses(including Aurozaae CONTRACT srzaos 7 reasonable attomeys'fees),obligations and other liabilities(including settlement amounts)to the extent the some arise from: 18.1 any infringement of any copyright,trademark, patent, or other proprietary-rights, or any misappropriation of any trade secrets, in connection with any software, documentation, services or other products supplied directly or indirectly by the Company in connection with this Agreement, or any allegation of any of the foregoing (collectively referred to as 'Infringement Claims'; 16.2 any act(s)of grass negligence or wiiffrll misconduct by the Company or any of its agents, employees or subcontractors (or any allegations of any of the foregoing), including but not limited to any liability caused by an accident or other occurrence resulting in bodily injury, death, sickness at disease to any person(s) or damage or destruction to any property,real or personal; 18.3 any aids or omissions of the Company with respect to the Services or any of the.products or services provided by the Company under this Agreement(or any allegations of any of the foregoing);or 18A any claims by any persons or entities supplying labor or material to the Company in connection with the performance of the Company's obligations under this Agreement If an Infringement Clain occurs, the Company shall either: () procure for the City the right to' continue using the affected product or service; or(10 repair or replace the infringing product or service so that it becomes non-infringing, provided that the performance of the Services or any component thereof shall not be adversely affected by such replacement or modification. 19 SUBCONTRACTING. Should the Company choose to subconrrac° the Company shall be the prime contractor and shall remain fully responsible for performance of all obligations, which it is required to perform under this Agreement.Any subcontract entered into by Company shall name the City as a third party beneficiary. 20 INSURANCE 20.1Types of Insurance The Company shall obtain and maintain during the life of the Agreement, with an insurance Company rated not less than A by A.M.Best,authorized to do business in the State of North Carolina the following insurance: Automobile Uabdity. Successful Company shall be required to provide proof of bodily injury and property damage liability covering al owned, non-owned and hired automobiles for limits of not less than$1,000,000-bodily injury each person, each accident and$1,000,000 property damage,or$1,Q00,000 combined.single limit each occurrencelaggregate. Commercial General Uabifify. Successful Company shall be required to provide proof of bodily injury and property damage liability as shall protect the contractor and any sub-contractor performing work under this contract from claims of bodily Injury or property damage which arise from operation of services described in this RFP whether such operations are performed by contractor,any sub-contractor or any one directly or Indirectly employed by either. The amounts of such insurance shall not be less than $1,000,000 bodily injury each oceurrencetaggregate and $1,000,000 property damage each occurrencetaggregate or $1,000,000 bodily injury and property damage combined single limits each occurrencetaggregate. This insurance shall include coverage for products/completed AUTozONE CONTRACT VxW a operations, personal injury liability and contractual liability assumed under the indemnity provision in Section 28 of this contract. The City shall be named as an additional insured under the commensal general Iiablity Insurance for operations or services rendered under this contract Worker's Compensation and Employers Lrebtfity. Meeting the statutory requirements of the State of North Carolina and Employers liability -V00,000 per accident limn $500,000 disease per policy limit,$100,000 disease each employee funit,providing coverage for employers and owners. The Company shaft not commence any work in connection with this Agreement until it has obtained all of the foregoing types of insurance and the City has approved proof of such insurance. The Company shall not allow any subcontradtor to commence work on Its subcontract until all similar insurance required of the subcontractor has been obtained and approved. 202 Other Insurance Requirements. The City shall be exempt from,and in no way liable for any sums of money,which may represent a deductible in any Insurance policy.The payment of such deductible shall be the sole responsibility of the Company and/or subcontractor providing such insurance. The City shall be named as an additional insured for operations or services rendered under the general liability coverage. The Companys insurance shall be primary of any self-funding and/or insurance otherwise carried by the City for all loss or damages arising from the Company operations under this agreement Certificates of such insurance will be famished to the City and shall contain the provision that the City be given thirty(30)days written notice of any intent to amend or terminate by either the insured or the insuring Company. Should any or all of the required insurance coverage be self-fundedlseit-insured, a copy of the Certificate of Self-Insurance or other documentation from the North Carolina Department of Insurance shall be furnished. if any part of the work under this Contract is sublet,the suboontractor shall be required to meet all insurance requirements set forth in this Agreement, provided that types and amounts of insurance to be maintained by each subcontractor shall be adjusted to an amount reasonably necessary to cover the risks associated with such subcontractor's role in the project. The parties stipulate that the Company will maintain each type of insurance set forth above at a coverage level equal to at least half of the amount set forth above for such type of insurance. However, nothing contained herein shall relieve the Company from meeting all insurance requirements or otherwise being responsible for the subcontractor. 21 NOTICES. Any notice,consent or other communication required or contemplated by this Agreement shall be in writing,and shall be delivered in person, by U.S.mail,by overnight courier; by electronic man or by tetefax to the Intended reci Tent at the address set forth below: For The Comparw, For The C : AutoZone Stores, Inc. Karen P.Ruppe 123 S.Front Street,Dept.$060 Charlotte-MealenbuM Procurement Services Memphis,TN 38103 • 600 E.Fourth St. Attn: Exec.VP--Commercial Charlotte,NC 28216 Phone: 901.49"864 Phone:704-336-2992 AurozoN£CONTRACT 6=6 9 Fax: 901-495-8248 Fax:704-336-2258 E-mail: jim.weaver@autozone.com E-mail:kruope-Oci.chag2tte.nc.us With Copy To: With Dow To- AutoZone Stores,Inc. Cindy Wililte 123 S.Front Street,Dept.8074 Assistant Pq Attom Mein his.TN 38103 600 East Fourth Street.15'Floor Attn: General Counsel Charlotte,NC 28202 Phone:901-495 7965 Phone:704.336.3012 Fax. 901-495-8316 Fax: 704.336.8854 E-mail: E-coati:cwhite ft.charlotte.ne.us Notice shall be effective upon the date of receipt by the intended recipient, provided that any notice which is sent by telefax or electronic mail shall also be sfmultaneously sent by mail deposited with the U.S. Postal Service or by overnight courier. Each party may change its address for notification purposes by giving the other party written notice of the new address and the date upon which it shall become effective. 22 NON-DISCRIMINATION. 22.1 The Company agrees that it has adopted and will maintain and enforce a policy of nondiscrimination on the basis of race, color, religion, sex, age, national origin, or disability. 222 The Company agrees reasonably provide the City any information and documentation that may be requested by the City from time to time regarding the solicitation and selection of subcontractors. 23 DRUG-FREE WORKPLACE. The City is a drug-free workplace employer.The Mecklenburg City Board of Commissioners has also adopted a policy requiring Companies to provide a drug-free workplace in the performance of any City contracL The Company hereby certifies that it has or it wilt within thirty(30)days after execution of this Agreement 23.1 Establish policies and procedures which prohibit reporting to work under the influence of alcohol or the detectable presence of Illegal drugs, narcotics, other intoxicants or non- prescribed drugs. 23.2 Establish policies and procedures which prohibit the solicitation, possession and use of drugs on Company or Customer premises. 23.3 Make a good faith effort to continue to maintain a drug-free workplace for employees;and 23A Require any party to which it subcontracts any portion of the work under the contract to comply vault the above provisions. 24 MISCELLANEOUS. 24.1 Entire Agreement. This Agreement and the Contract Documents,including all Exhibits,and Attachments,all of which are hereby incorporated herein by reference, constitute the entire agreement between the parries with respect to its subject matter, and there are no other representations,understandings,or agreements between the parties with res pect to such Atr OMNE WNTRACT 6►8 M t0 subject matter. This Agreement supersedes all prior agreements, negotiations, representations and proposals,written or oral. 24.2 Amendment No amendment or change to this Agreement shall be valid unless in writing and signed by both parties to this Agreement. 24.3 Governing Law and Jurisdiction. The parties acknowledge that this Agreement Is made and entered into in Charlotte, North Carolina, and will be performed in Charlotte, North Carolina. The parties turther acknaMedge and agree that North Carolina law shall govern all the-rights, obligations, duties and fiabifities of the parties under this Agreement and that North Carolina taw shah govern the interpretation and enforcement of this Agreement and any other matters relating to this Agreement(all without regard to Forth Carolina conflicts of law principles). The parties further agree that any and ail legal actions or proceedings relating to this Agreement shall be brought in a state or federal court sitting in Mecklenburg City, North Carolina, By execution of this Agreement, the parties submit to the jurisdiction of said courts and hereby irrevocably waive any and all objections, which they may have with respect to venue in any court sitting in Mecklenburg City,North Carolina. 24.4 Binding Nature and Assignment. This Agreement shalt bind the parties and their successors and permitted assigns. Nefther party may assign this Agreement without the prior written consent of the other. Any assignment attempted without the written consent of the other party shall be void. 24.5 Force Majeure. Neither party shah not be liable for any failure or delay in the performance of its obligations pursuant to this Agreement and such failure or delay shall not be deemed a default of this Agreement or grounds for termination hereunder if all of the following conditions are satisfied. (a) if such failure or delay. I. could not have been prevented by reasonable precaution; h, cannot reasonably be circumvented by the ran-performing parry through the use of alternate sources,work-around plans,or other means;and iPL 1,and to the extent,such failure or delay is caused, directly or indirectly, by fue,Rood,earthquake, hurricane,elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions or court order. (b) An event which satisfies all of the conditions set forth above shall be referred to as a"Force Majeure Event'Upon the occurrence of a Force Majeure Event,the Company shah be excused from any further performance of those of its obligations which are affected by the Force Majeure Event for as long as(a)such Force Majeure Event continues and (b) the Company continues to use commercially reasonable efforts to recommence performance whenever and to whatever extent possible without delay. (c) Upon the occurrence of a Force Majeure Event,the Company shall immediately notify the City by telephone(to be confirmed by written notice within two(2)days of the inception of the failure or delay) of the occurrence of a Force Majeure Event and shall describe in reasonable detail the nature of the Force Majeure Event if any Force Majeure Event prevents Company from performing its obligations for more than five(5)days,the City shall have the right to terminate this Agreement by written notice to Company. M=ONE CONMCr 6l26106 11 Strikes, slowdowns, lockouts, walkouts, industrial disturbances and other labor disputes shall not constitute Force Majeure Events and shall not excuse the Company from the performance of its obligations under this Agreement. The panties also expressly acknowledge that Year 2000-retated interruptions in operations or in the supply of products or services necessary to fulfill the obligations of this Agreement are not excused under this provision. 24.6 Severabillty. The invalidity of one or more of the phrases,sentences,clauses or sections contained in this Agreement shall not affect the validity of the remaining portion of this Agreement so long as the material purposes of this Agreement can be determined and effectuated. If any provision of this Agreement is held to be unenforceable,then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is unenforceable, and this Agreement shall be deemed amended by modifying such provision to the extent necessary to make iE enforceable while preserving Its,intent. 24.7 Approvals. All approvals or consents required under this Agreement must be in writing. 24.8 Waiver. No delay or omission by either party to exercise any right or power it has-under this Agreement shall impair or be construed as a waiver of such right or power.A waiver by either party of any covenant or breach of this Agreement shall not constitute or operate as a waiver of any succeeding breach of that covenant or of any other covenant. No waiver of any provision of this Agreement shall be effective unless In writing and signed by the party waiving the rights. 24.9 interests of the Parties. The Company covenants that its officers, employees and shareholders have no interest .and shall not acquire any interest,direct or indirect,which would conflict in any manner or degree with the performance of services required to be performed under this Agreement. 24.10 Change in Control, in the event of a change in"Contror of the Company (as defined below), the City shall have the option of terminating this Agreement for default by written notice to the Company.The Company shall notify the City within ten (10)days after it becomes aware that a change in-Control will occur.As used in this Agreement,the term'Control° shall mean the possession,direct or indirect,of either. the ownership of or ability to direct the voting of, as the case may be fifty-one percent (61%)or more of the equity interests,value or voting power in Company;or the power to direct or cause the direction of the management and poliiciies of Company whether through the ownership of voting securities,by contract or otherwise. 24,11 Familiarity and Compliance with Laws and Ordinances. The Company agrees to make itself aware of and comply with an local,state and federal ordinances, statutes, laws, rules and regulations applicable to the Services. Company further agrees that it will at all times during the term of this Agreement be in compliance with all applicable federal, state and/or local laws regarding employment practices. Such laws will include, but shall not be limited to workers' compensation, the Fair Labor Standards Act(FLSA), the Americans with Disabilities Act(ADA),the Family and Medical Leave Act(FMLA)and all OSHA regulations applicable to the work. 24.12 Taxes. A1lrOZrN1E CONTRACT bfl&OS 12 The Company shall pay all applicable federal, state and local taxes which may be chargeable against the performance of the Services. 24.13 Non-Appropriation of Funds. if the City Commission does not.appropfmte the funding needed by the City to make payments under this Agreement for a given fiscal year,the City will not be obligated to pay arrrounts due beyond the.end of the last fiscal year for which funds were appropriated. In such event, the City will promptly notify the Company of the non- appropriation and this Agreement will be terminated at the end of the last fiscal year for which funds were appnoprated. No act or omission by the City which is attributable to non-appropriation of funds shall constitute a breach of or default under this Agreement 24.14 Waiver of Right to Jury Trial. The City and Company waive and will waive all rights to have a trill by Jury in any action, proceeding, claim or counterofaim brought by either of them against the other on any matter whatsoever arising out of or in any way related to or connected with this Agreement. 24.16 Mon-ExclusiVity. This Agreement is non-exciusive and shall not in any way preclude the City From entering into similar agreements and/or arrangements with other Company or from acquiring similar,equal or like goods andior services from other sources, The City makes no representation that it or any governmental enfity will purchase any minimum quantities or dollar amounts. AvrozCM cOHMcr srs t3 IN WITNESS WHEREOF, and in acknawledgement that the parties hereto have read and understood each and every provision hereof,the parties have caused this Agreement to be executed on the date first written above. ATTESTED: AUTOZONE/SATORES,IN . BY: BY: l�` if TITLE: T1TLE TITLE: <t i dr✓� a- C y �APPROVEDASTOLBMI-FORM TITLE D (CORPORATE SEAL). CITY OF LO'Tt'E:_ City Clerk Ass rant City Manager (CITY SEAL) Approved As To Insurance Requirements: Risk Management AUTOZO E CONTRACT 6126163 14 Exhibit A PRICING FORM RFP#M-2005480 PRICE LiSTS(S) DISCOUNT ITEM ! CATEGORY MANUFACTURER(S)URER(S) NUMBER/AATE pERCEIVTAGE AND COLUMN 1' Alternators and Starters 5%,I0%, 15%� AC Delco UFA N/A 20% 5%,100/0, BeckhAmky Units Parts N/A 2Wo 50/c,10%,150/c, Genco Beck/Arnle N/A 20% 5%, 10°!0, 15°/'o, Wagner World Wide N/A 200/0 2 Bearin 4 roller BCA Timken 'N/A 20% 5%,10%,1 s%, Timken BCA N/A 20% Federal Mogul N/A 20'/0 5%,10%,15°!0, L&S N/A 20% 3 . Batteries 5%,10%,15%, AC Delco JCI N/A 2011/c a Belts,Hoses,Clamps. Gates Goodyear NIA 20% 5%10%, 15%, Goo ear Ra dyot N/A 20% Ideal 5 Bra oes ads&Shoes Bendix Morse NIA 20% Eaton Perf Friction N/A 20% 5%,10%,15%, Mentor Satisfied N/A Ra hestos Federal Mogul N/A 20% Per€Friction 5A Brakes rums&Rotors 501, 10910, 15%, Guinte Aimco N/A 20% VIPAIt Neotek AL)TOMNE CONTRACT erms 1s 20% 5%,10%, 15%, United Quallis N/A 200/0 5%,10%, 155/6, Master N/A 200/4 Perf.Friction N/A 20% 5$ Brakes Cali ers 5°!0, 10%, 15%, VIPAR ARI NIA 20% 5%,10%,15%, Fenwick NIA 20% 5%,10°1o,15°!0, All Farts N/A 20% 6 C s and Thermostats i 5%,10%, I S°!o, ' l Stant CST N/A 20% 7 Chemicals 5%, CRC CRC NIA 20°/a Preston N/A 20% 5%,l 0%,1 No, Lucas N/A 20% S CoolanVAntifreeze Zerex, PresWne,Old 5%,10%, 15%, Shelzone/Motorcraft World N/A 20% 9 Electrical&Igmition AC Delco Wells N/A 200/,D 5%,10%, 15%, Motorcmft PIPS NIA 20% Cole Htersee AC Delco NIA 20% 5%, 10%,15%, Standard Robert Bosch N/A 2011/6 10 Emission&Exhaust AC Delco Arvin Mentor NIA 20% 50/0, 10%, 15°/a, MoW=afl Bosal NIA 20% 1.1 FUters AC Delco hamp Labs N/A 20% 5%,Iwo,15%, Motorcrafi: Frain N/A 20°!0 5%, 10%,15 Wix AC Delco N/A 20% 12 Gaskets and Seals AC Delco Felnro N/A 5%, 10%,15%, AUTUMECONTRACT son 16 20%a National Beck Aml NIA 20% OR Timken N/A 20% 13 Heafte&Air Condbloning AC Delco Compressor Works W/A 20% Matorcraft Four Seasons NIA 20Q/o Ready Aire ' NIA 20% 14 Lamm lightiuZ,Mirrors 20% 5%, 100/0, 15%, Foderal Si a} Sylvania N/A 200/0 5%,]0%,15%, Grote GE NIA 20% 5%,]0°l0, 15%, Rem Phillips N/A 20°/a Wa er victor NIA 200/0 5%,10%, 15°/0, Trucklite Pilot NIA 200/0 Power Steering Pumps and -5%, 10%, 15%, 15 Gears 20% A-1 Cardone A-1 Cardone N/A 20% 5%, 10%,15%, 16 1 Pumps(fuel&water 20% AC Delco ACS N/A 209K Motorcraft Bosch NIA 200/0 5%,10%, 15%, TRW Master NIA 2011/6 GMB NIA 20% 17 Steer' s and Sns ensian Moog Gabriel NIA 20% 5%, 100/c, 15°/a Montoe Quallis NIA 200/0 10%, • 1501c, 5%, 10%, I S%, 201/0, Motorcraft FedemlMogul NIA 20% 5%, 10%,15%, AcQuay NIA 20°/a AUTOZONE CONTRACT 601M 17 18 1'3aivetsal Joints Precision Anchor NIA 20% 5%,Ime,15110, Spicer Tina o N/A 20% 5%,1Wo,15%, Beck Anil N/A 2011/a 19 W' ers 20% Ansco Anco N/A 20% 5%,I0%,15%, Motorcrafl Bosch N/A 200/0 501,,10%,15/0, Trico 20% 5%,10%,15%, 20 Wiseel Armories News N/A 20% M-0-09 Superior , N/A 20°l0 5%,106/61 151y0, Motormite NIA 20% The Company's pricing is determined by the competition in any given market. Where Company is positioned in a market where there are multiple competitors the pricing will be less expensive.to the consumer. The Company has developed multiple pricing"Zones"as a result of this process. Pricing is based on the Lowest Zone less tiered percentage discount based upon total combined U.S. Communities Program net sales as follows, — 5%<$3MM — 10%S3MM—$101!'J<lM — 15%S10MM-NO1MM — M%a$201MM AUTOZONE CONTRACT 6l26J06 Is Exhibit B COMPANY'S PROPOSAL DATED MAY 1.2006 (Proposal is not attached but is incorporated herein) This Exhibit is incorporated fnto and made a part of the Master Agreement(the "Agreement")between the Mecklenburg City(the"City")and AutoZone Stores, Inc.(The"Company")Unless otherwise defined herein,capitalized terns in this Exhibit shall have the same meanings as are assigned to such terms in the main body of the Agreement. AUTOMNE CONTRACT Um Te Exhibit C DELIVERY AND MEIGHT SCII UIXS 1. Standard In-Shack Ite is Aess than 100 Ibs) Delivery to locations within twelve (12) minutes or five (5) miles from the Company's Commercial Store will be provided by local delivery trucks per the time intervals below: Distance from Store Expected Relive Interval 0-3 Miles 30 Minutes or less 3-5.Ides 30-45 Minutes >5 Miles Scheduled Deliv 2. Optional Deftery"fame for Stocked Items(Sister Shore.Hub, VDP� — Routing from a sister store:If a part is not in stook but found in a close sister store,then delivery time will increase to the extent that it takes to send a driver to that sister store to pick up said part. This should not exceed 1 to 2 hours. — Routing from a Hub store:If a part is not in stock or is not available at a sister store,the hub store that supports the servicing AZ store will be able to provide same day service if the part is ordered from our hub by approximately noon. 'Approximarely"'is used due to the di,,fferences in hub roves,schedules,etc that is existing from market to market. If the order is after 12;0017m,then the part will not arrive till noon the next day. Vendor Direct Part(VDP): If the part needed is only available at our vendor,AZ will ship this part from the vendor in question,next day to the AZ servicing store,as long as the order does not exceed 150 tbs. For single orders that require a VDP part over 150 lbs.,the delivery will be delivered LTL,which would deliver in 3—5 days. 3. Standard in-stock items for locations outside of twelve(12)minutes or five(5)males Locations that are outside of twelve (12)minutes or five(5) miles will be delivered by Third Party ground transportation and may pay applicable Shipping rates. These rates will be determined based upon that Third Parry's standard shipping zone and per mile procedures. Presently, AutoZone uses Fed& Ground, and as it relates to the charge per mile with FedEx Ground,the razes charged will be based on the same rates that the Company has contracted with FedEx, and,represent substanfial savings over FedEx Ground published rages. Due to the Company's confidentiality agreemeru with FedEx,rates cannot be included in this Agreement. I)elivM Times — For USC locations that are outside of twelve(12)minutes or five(5)miles,delivery time will be 3-5 days in the continental United States — For USC locations in Alaska,Hawaii,or Puerto Rico,delivery time will be I 1-14 days 4. Lat>edi ted Delivery for Non Hot Shot Locations Any item that has to be expedited from either a store or a Distribution Center,regardless of the delivery method,will pay the Third Party Shipping charges. Delivery Tunes Will be priced as needed to rneetGe need of the Customer iocation. AUTOZONE CONTRACT 612M 20 Exhibit D RFP 92692003.077 Park and Automotive Parts,Surfacing;Site Furnishings and Related Commodities and Secvices.1s not attached but is incorporated herein. AIJTCZM CONTRACT USM 21 • CHARLOTTE STATE OF NORTH CAROLINA Contract#0601343 COUNTY OF MECKLENBURG FIRST AMENDMENT TO AGREEMENT TO PROVIDE AUTOMOTIVE PARTS THIS FIRST AMENDMENT to the Agreement to provide Automotive Parts and Accessories for Light Duty Vehicles (the"Amendment')is made and entered into this 18th day of January.2007 by and between the CITY OF CHARLOTTE, a North Carolina municipal corporation (the"City") and AutoZone Stores, Inc., a corporation doing business in the State of North Carolina(the "Company") STATEMENT OF BACKGROUND AND INTENT A. The City and the Company entered into a written Master Purchase Agreement dated June 26, 2006 (the "Agreement") pursuant to which the Company agreed to provide Automotive Parts and Accessories for tight Duty Vehicles to the City of Charlotte and all other government agencies that elect to access the Master Agreement through U.S. Communities. B, The parties now desire to amend the Agreement by making certain changes and clarifications to the term and/or pricing provisions of the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein,the parties hereby amend the Agreement as follows: AGREEMENT 1. Defined terms used in this Amendment shall have the same meaning as are assigned to such terms in the Agreement. 2. Changes to Agreement. In order to effectuate the intent of the parties, the Agreement is hereby amended as follows: a Pursuant to Section 3.16 of RFP #269-2006-060, the parties agree to add new categories of products as follows to Exhibit A of the Agreement: r Automotive Tools: available at AutoZone's lowest zone pricing with no additional discount. Y ALLDATA: electronic diagnostic and repair information and services are available at price points outlined in Attachment A to this Amendment#1. 3. Except to the extent specifically provided in the amendment contained herein, this Amendment shalt not be interpreted or construed as waiving any rights, obligations, remedies or claims the parties may otherwise have under this Agreement. Amendment#1 1-18-200'? 4. in all other respects and expect as modified herein, the terms of the Agreement shall remain in force and effect, IN WITNESS WHEREOF, an in acknowledgement that the patties hereto have read and understood each and every provision hereof, the parties have each caused this Amendment to be executed by its duly authorized representative, all as of the date first set forth above. ATTESTED: AUTOZONE STORES,INC, Title: Title: By: Title:.- bm rn -C�a,\ ATTESTER: CITY OF CHARLOTTE City Clerk s Title: KEY BUSINESS EXECUTIVE Amendment#1 ,-1 B_2007 Attachment A AUTOZONE ALLDATA PRICING D3 1( 0060 G vei t eetit artcl-Lib "Stft�sar#ptti+t Pace pet.each;pfiysrcal`:` ,. { IUIttlti site.;.. '` site. S.ir► le Site- Mutt(-Ite 2-10 !41+ All Makes $1,995.00 $1,500.00 - $1,320,00 Renewals $1,500.00 $1500.00 $1,320.00 Service Advisor(SA) $1001yr 51001yr DVD Notes 1.Includes 1 "white"key u i 2.Does Not include Service Advisor � 3,SA Requires current subscription to full program 4.One time charge for additional key(s)during continuous subscription period 5.if additional keys are ordered,they will all be"timer"keys(blue) S.Keys will"time-out"is subscription not renewed 7.Multiple"timer"keys will be replaced with single white key when subscription lapses fi j 8.Multi-site must be purchased and paid for by one agency 9.Must re-purchase additionaE ke s when subscription is renewed after a la s�e______ Atfdtitaais or Nudes Nodes for Online 10.00 _ Per Node Per Month Keys for DVD - � Per Key I.One time charge for ! ; 85.00 additional key(s),during f continuous subscription period j 2.Timer keys sent,will:time out" j is subscription not renewed j i 3.Re-purchase of additional } keys required If they lapse and then renew at a later date Amendment#1 1-1 B-2007 STATE OF NORTH CAROLINA Contract#0601343 COUNTY OF MECKLENBURG SECOND AMENDMENT TO AGREEMENT TO PROVIDE AUTOMOTIVE PARTS THIS SECOND AMENDMENT to the Agreement to provide Automotive Parts and Accessories for Light Duty Vehicles (the "Amendment") is made and entered into this 1st day of December 2007 by and between the CITY OF CHARLOTTE, a North Carolina municipal corporation (the "City") and AutoZone Stores, Inc., a corporation doing business in the State of North Carolina (the"Company"). STATEMENT OF BACKGROUND AND INTENT A. The City and the Company entered into a written Agreement dated June 27, 2006 (the "Agreement") pursuant to which the Company agreed to provide Automotive Parts and Accessories for Light Duty Vehicles to the City of Charlotte and all other government agencies that elect to access the Master Agreement through U.S. Communities. B. The parties now desire to amend the Agreement by making certain changes and clarifications to the term and/or pricing provisions of the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby amend the Agreement as follows: AGREEMENT 1. Defined terms used in this Amendment which are not defined in this Amendment shall have the same meaning as are assigned to such terms in the Agreement. 2. Changes to Original Agreement. in order to effectuate the intent of the parties, the Original Agreement is hereby amended as follows: Participating public agencies electing to purchase the ALLDATA electronic diagnostic and repair services shall issue a purchase order directly to ALLDATA, LLC, an affiliate of the Company, for these services. Participating agencies will receive invoices from, and remit payments directly to, ALLDATA LLC for all associated ALLDATA services and products. 3. Except to the extent specifically provided in the amendment contained herein, this Amendment shall not be interpreted or construed as waiving any rights, obligations, remedies or claims the parties may otherwise have under this Agreement. Page 1 of 2 4. In all other respects and expect as modified herein, the terms of the Agreement shall remain in force and effect. IN WITNESS WHEREOF, an in acknowledgement that,the parties hereto have read and understood each and every provision hereof, the parties have each caused this Amendment to be executed by its duly authorized representative, all as of the date first set forth above. AUTOZONE STORES, INC. By: Name: Title: \3 l Date* B 12-4 Name: -i�� 5i' Title: (cc�om;� Cij¢ . Date: ��{ �-10- CITY ARLOTTE,. . Ci erk Page 2 of 2 STATE OF NORTH CAROLiNA Contract#0601343 COUNTY OF MECKLENBURG i THIRD AMENDMENT TO AGREEMENT TO PROVIDE AUTOMOTIVE PARTS THIS THIRD AMENDMENT to the Agreement to provide Automotive Parts and Accessories for Light Duty Vehicles (the"Amendment") is made and entered into this 1st day of May, 2008 by and between the CITY OF CHARLOTTE, a North Carolina municipal corporation (the"City") and AutoZone Stores, Inc., a corporation doing business in the State of North Carolina (the "Company"). STATEMENT OF BACKGROUND AND INTENT A. The City and the Company entered into a written Master Purchase Agreement dated June 27, 2006, as amended, (the "Agreement") pursuant to which the Company agreed to provide Automotive Parts and Accessories for Light Duty Vehicles to the City of Charlotte and all other government agencies that elect to access the Master Agreement through U.S. Communities. B. The parties now desire to amend the Agreement by making certain changes and clarifications to the term and/or pricing provisions of the Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby amend the Agreement as follows: AGREEMENT 1. Defined terms used in this Amendment shall have the same meaning as are assigned to such terms in the.Agreement. 2. Changes to Agreement. In order to effectuate the intent of the parties, the Agreement is hereby amended as follows: a. Pursuant to Section 3.16 of RFP #269-2006.060, the parties agree to add new categories of services as follows to Exhibit A of the Agreement:. Integrated Business Solution (°IBS") service offering that allows Company to provide onsite service in the management of the parts warehouse, inventory, delivery, inventory management, billing, warranty repair reimbursement and the acquisition of multiple parts categories to the customer-owned onsite faciiity. Based upon the size, scope and scale of the operation, Company will provide an onsite review for each Participating Public Agency that elects to utilize these services in order to best define the proposed service offer. All IBS services may require additional agreements to be entered beNveen Company and the relevant Participating Public Agency. b. The parties agree that categories of products set forth in Exhibit A of the Agreement is hereby deleted in its entirety and replaced with the updated and expanded core fist of products attached hereto as Exhibit A-1. Exhibit A-1 also incorporates new and current manufacturer numbers and Company SKU numbers used to identify parts. 3. Except to the extent specifically provided in the amendment contained herein, this Amendment shall not be interpreted or construed as waiving any rights, obligations, remedies or claims the parties may otherwise have under this Agreement. 4. In all other respects and expect as modified herein, the terms of the Agreement shall remain in force and effect. IN WITNESS WHEREOF, an in acknowledgement that the parties hereto have read and understood each and every provision hereof, the parties have each caused this Amendment to be executed by its duty authorized representative, all as of the date first set forth above. ATTESTED: AUTOZONE STORES, INC. (r,By: By: Title: Title: Co By: Title: t ATTESTED: CITY OF CHARLOTTE By: &64144 j B i' City Clerk ti C A.QuW � € Core Bid SKU List Charlotte-Mecklenburg ExhlbitA-1. 10 Apr-0e Core.81d SKU L1st Core Bid List Net Pricing ITEM PART# MN DESC PRODUCT DESC Lowest Zone Price Discount 532566 V3387A VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2A9 1.99 200/6 532566 V3614 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 1.99 ,` 20514 532668 V49@7 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49• 1.99 20% 532569 VSA VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 -A.99 20% 532570 V5 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 1:99r•. 20% 532572 V16 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 1.99,.. 20% 532573 V2 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2A9 1.99.1. 20% 532575 V3980 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 1.99 20% 532576 V3600 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49, 1.99. 20% 831654 V3675 VALUCRAFT OIL FILTER VALUCRAFT OIL FILTER 2.49 „1.99 - 20% 61887 56607 STP OIL FILTERS OIL FILTER 4.19 3.19 20°A 62562 S3675 STP OIL FILTERS OIL FILTER 4.19 3.19 20% 759797 OL-16 OURALAST WIPERS DURALAST WIPER BLADE 16" 5.89,; 4.39 20% 759798 DL-17 DURALAST WIPERS DURALAST WIPER BLADE 17" 5.99 :: 4.39: 20% 759800 DL-18 DURALAST WIPERS DURALAST WIPER BLADE 18". 5.99 4:39.1 20% 759802 OL-19 DURALAST WIPERS DURALAST WIPER BLADE 19" 5.99 4.39:: 200/0 759804 DL-20 DURALAST WIPERS DURALAST WIPER BLADE 20" 5.99 4.79 20% 759805 DL-21 DURALAST WIPERS DURALAST WIPER BLADE 21" 6.99 4;79. 20% 759806 DL-22 DURALAST WIPERS DURALAST WIPER BLADE 22" 6.99- :4.79 20% 759807 OL-24 DURALAST WIPERS DURALAST WIPER BLADE 24" 7.99 5:79 20% 769801 DL-28 DURALAST WIPERS DURALAST WIPER BLADE 2W 9.99 7.99 20% 7580 6580 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 26.99 21.69 20% 529475 OG369 DURALAST GOLD PADS DURALAST GOLD PAD 29.99 23.99 20% 86270 54010 DURALAST BRAKE ROTOR OURALAST BRAKE ROTOR 30.99 24.79 20% 113362 54027 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 39.99 28:44 20% 426507 54105 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 67.99 31.41 20% 113365 54030 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 33.99 27.19 20% 186287 55040 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 31.99 25.59 20% 186284 55034 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 35.98 28.79 20% 112972 58-8 COMMERCIAL AUTO BATT DURALAST PROF BATTERY .99.99 49.99 20% 112967 34-B COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.99 50.99 20% 231755 64060 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 55.99. 44.79-,. 201 1112963 78-B COMMERCIAL AUTO BATT OURALAST PROF BATTERY 99.99 56.99 20% 112974 75-0 COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.99' 55.99 20% 112964 24-13 COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.99 56.99 20% Page 1 Core Bid SKU List 112965 24F-B COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.99 56.99 20% 113364 $4029 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 49.99 39.99 20% 112961 75DT-B COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.991- - 58.90 20% 112962 65-8 COMMERCIAL AUTO BATT DURALAST PROF BATTERY 99.99 . 69.99 20% 26404 8001 C.V.DRIVE AXLES CV DRIVE AXLE 59.99.'•:_.. ..47.99 20% 132384 9574 C.V.DRIVE AXLES CV DRIVE AXLE 59.99 47.99 20% 266356 54052 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 44.99 ::35.99 1 20% 292009 9471 C.V.DRIVE AXLES CV DRIVE AXLE c58.99 -47.99.. 20% 190145 54031 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 80.99 ..64.79 1 20% 426506 54103 DURALAST BRAKE ROTOR DURALAST BRAKE ROTOR 45.99 -26.79 20% 160978 MT0093-1 EXPANSION VALVES AC ORIFICE TUBE 1.99 .1.59 20% 161034 MT0098-1 EXPANSION VALVES AC ORIFICE TUBE 0.99. 0.79 20% 161075 MT0094-1 EXPANSION VALVES AC ORIFICE TUBE 2.99 2.39 20% 12904 835979 IDLER PULLEYS IDLER PULLEY 18.90 12.79,J 20% 106604 835975 IDLER PULLEYS IDLER PULLEY 18.99 15.19;. 20% 634107 231048 IDLER PULLEYS IDLERlTENSIONER PULLEY 33.99 - .,27.19 20% 310933 DL1650-6-5 CS DURALAST ALTERNAT REMAN DURALAST CS ALT 118.98 `95:99 20% 352089 DL1643-15-2 CS DURALASTALTERNAT REMAN DURALAST ALTERNATO 129.99 .103.99 20% 429200 DL3602-16-10 DL DOMESTIC ALTERNAT REMAN DURALAST ALTERNATO 174.99 139.99- 20% 832171 DL2420-16-12 DL DOMESTIC ALTERNAT DURALAST REMAN ALTERNATO 279.99 223.99 20% 955074 DLG3660-6-10 DL GOLD DOMES ALTERN DURALAST GOLD ALTERNATOR -199.99 159.99' 20% 18327 75-DL DURALAST BATTERIES DURALAST BATTERY 64,99 . 51.99 20% 160691 65-DL DURALAST BATTERIES DURALAST BATTERY 74.99 69.99 _. 20% 31693 340T-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 79.99 .63.99 20% 53433 65-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 84.99. 67.99 20% 53435 75DT-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 84.99 67.99 20% 53438 78-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 84.99 67.99 20% 115785 27-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 84.99 67.99. 20% 232746 75-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY .78.99 63A9 20% 561276 34-DLG DURALAST GOLD BATTER DURALAST GOLD BATTERY 79.99 63.99 .1 20% 95963 LCS8881 BATTERY TERMINALS BAT TERM-TOP POST 1.99• 1.59 20% 8170 BWB-1 MISC BATTERY ACC LARGE FELT PROTECTORS 1.19 0.95 20% 12317 5707 REAR WHEEL BEARINGS REAR WHEEL BEARING 10.99 8.79 20% 11966 2081 SEALS REAR WHEEL SEAL 4.99 .3.99 20% 12027 4148 SEALS FRONT WHEEL SEAL 4.99 3.99 20% 12030 4160 SEALS FRONT WHEEL SEAL 7.99 6.39 20% 12056 4739 SEALS FRONT WHEEL SEAL 2.99 2.39 . 20% 12057 4740 SEALS FRONT WHEEL SEAL :.3.99 3,.19 20% 12123 8660S SEALS REAR WHEEL SEAL 3.99 3.19 20% 12133 9150S SEALS FRONT WHEEL SEAL 7.99 6.39 20% 12143 9864S SEALS REAR WHEEL SEAL 8.99 '::7.19 20% 693028 SET2 WHEEL BEARING SETS WHEEL BEARING SET 10.99 8.79 20% Page 2 Core Bid SKU List 693226 SET12 WHEEL BEARING SETS WHEEL BEARING SET 8.99 7.19 20% 765727 15101 WHEEL BEARINGS WHEEL BEARING CONE 6.99 6.59, 20% 887545 65146 DISCONTINUED ITEMS 3/8X50 FLEXSTEEL AIR HOS 99.99:, 79.99 20% 22134 975K7 DL MULTI V-SELTS DURALAST POLY V BELT 19.99. 15.99 20% 130255 975K6 DL MULTI V-BELTS DURALAST POLY V BELT 17.99 14.39 20% 152301 91 OKS DL MULTI V-BELTS DURALAST POLY-V BELT 18.99 15.19. 20% 360909 980K6 DL MULTI V-BELTS DURALAST POLY-V BELT 24.99 19.99• 20% 579980 868K6 DL MULTI V-BELTS DURALAST POLY-V BELT 18.99 15:19 20% 884502 915K6 DL MULTI V-SELTS DURALAST POLY-V BELT 23.99 19:19 : 20% 4371 6817 GAS CAPS FUEL CAP 6.99 - 5.59 20% 157229 5502 GAS CAPS LOCKING FUEL CAP 14.99` 11.99 20% 157233 6832 GAS CAPS FUEL CAP 9.99. 7.99:. 20% 139921 4061020 GY MULTI V-BELTS GATORBACK POLY-V BELT 25.99'..' '20.79 20% 139932 4060915 GY MULTI V-BELTS GATORBACK POLY-V BELT 30.99, 24.79 20% 190709 4040515 GY MULTI V-BELTS GATORBACK POLY-V BELT 13.99 °111.19 20% 190806 4060910 GY MULTI V-BELTS GATORBACK POLY-V BELT 22.99 18.39 20% 190809 4060960 GY MULTI V-BELTS GATORBACK POLY V BELT .29.99 23.99 20% 190836 4070976 GY MULTI V-BELTS' GATORBACK POLY-V BELT 26.99 21:59" 20% 190838 4Q81035 GY MULTI V-BELTS GATORBACK POLY-V BELT 22.99' 18:39.: 20% 190861 4080585 GY MULTI V-BELTS HD GATORBACK POLY-V BELT 23.99' 19.19 20% 469353 4040332 GY MULTI V-BELTS GATORBACK POLY-V BELT 16.99 .13.59 20% 202311 17442 GY V-BELTS GATORBACK WBELT 11.99 9.59.. 20% 4950 65004 HEATER HOSES BULK HTR HOSE BLK 50 X 518 1.19 0.95 20% 4951 65009 HEATER HOSES BULK HTR HOSE BLK 50 X 3/4 1:19 0.95 20% 22122 S-4374 MOLDED HEATER HOSt: MOLDED HEATER HOSE 4.99 3.99 1 20% 689595 65023 MOLDED HEATER HOSE HEATER HOSE RED 518 X50 59.99- 47.99 20% 689597 65026 MOLDED HEATER HOSE HEATER HOSE RED 314 X50 69.99.. 55.99 20% 4438 7016 RADIATOR GAPS RADIATOR CAP 3.99' 3.19 20% 4437 7616 RADIATOR CAPS RADIATOR CAP 6.19 4718 20% 82373 7038 RADIATOR CAPS RADIATOR CAP 3.99 3.19 20% 779792 57240 RADIATOR HOSES(MOLD& HI MILER RAD 2-1/2 X 36 99.99 79.99 20% 779822 59324 RADIATOR HOSES(MOLDR HD WIRE HOSE 1-1/2 X 30 489.99 :391.99 20% 202484 28413 SPECILITY BELTS HD V-SELT 17.99 14.39 20% 202495 28493 SPECILITY BELTS HD V-BELT 17.99 14.39 . 20% 136573 CD-245 TIMING BELTS _TIMING BELT DURALAST 21.99; 17.59., 20% 4943 65112 VACUUM HOSES VACUUM HOSE 50 X 7/32 0.89 0.71 20% 425658 915K6 VC MULTI V-BELTS VALUCRAFT POLY-V BELT •16.99 13.59 20% 374139 80099 DURALAST BRAKE DRUMS DURALAST BRAKE DRUM 29.99 23.99 20% 717991 8898 DURALAST BRAKE DRUMS DURALAST BRAKE DRUM 28.99 23.19 209/. 525011 30604501 DURALAST BRAKE ROTOR PERF FRICTION ROTOR 126.99 7 101`.59 20% 727933 599 DURALAST BRAKE SHOES DURALAST BRAKE SHOE 14.99 .11.99 20% 529476 DG370 DURALAST GOLD PADS DURALAST GOLD PAD 35.99 28.79 20% Page 3 Core Bid SKU List 582207 DG655 DURALAST GOLD PADS BRAKE PAD SET 39.99 31.99 20°/9 582224 OG748 DURALAST GOLD PADS DURALAST GOLD PAD 38.99 31.19 20% 27754 MKD601 DURALAST SEMI METALL DURALAST BRAKE PAD 18.99 15.19 20% 90015 MKD205 DURALAST SEMI METALL DURALAST BRAKE PAD 19.99 15.99 20% 90044 MKD309 DURALAST SEMI METALL DURALAST BRAKE PAD 20.99. 16.79 20% 90056 MKD606 DURALAST SEMI METALL DURALAST BRAKE PAD 20.99 . 16.79 . 20% 94208 MKD598 DURALAST SEMI METALL DURMAST BRAKE PAD 19.99. 15.99 . 20% 199345 MKD411 OURALAST SEMI METALL DURALAST BRAKE PAD 69.99 55.99 20% 199360 MKD655 DURALAST SEMI METALL BRAKE PAD SET 25.99 20.79 20% 199360 MKD748 DURALAST SEMI METALL BRAKE PAD SET 24.99 19.99 20% 347925 MKD802 DURALAST SEMI METALL BRAKE PAD SET 19.99 - 15.99 20% 357293 MKD473 DURALAST SEMI METALL BRAKE PAD SET 17.99. 14.39 20% 429026 MKD931 DURALAST SEMI METALL DURALAST BRAKE PAD 21.99... 17.59 1 20% 23187 34014 NEW WHEEL CYLINDERS WHEEL CYLINDER 11.99 .9.59 20% 77814 34029 NEW WHEEL CYLINDERS WHEEL CYLINDER 9.99 ' - - -7.99:'s 20% 189662 33864 NEW WHEEL CYLINDERS WHEEL CYLINDER 7.9911 6.39 20% 710319 33709 NEW WHEEL CYLINDERS WHEEL CYLINDER 11.99' 9.59 20% 732743 33961 NEW WHEEL CYLINDERS WHEEL CYLINDER 10.99 8.79 20% 842024 781 PARKING BRAKE SHOE PARKING BRAKE SHOE 87.99. 70.39 20% 614561 0655-20 PERFORMANCE FCT N LN PERFORMANCE DISC PAD 59.99 47.99 20% 614589 0699-20 PERFORMANCE FCT N LN PERFORMANCE DISC PAD 54.99 : 43.99 20% 614630 0931-20 PERFORMANCE FCT N LN PERFORMANCE DISC PAD 69.99• 47.99 20% 614631 0932-20 PERFORMANCE FCT N LN- PERFORMANCE DISC PAD 59.99 47.99 20% 617317 0370-20 PERFORMANCE FCT N LN PERFORMANCE DISC PAD 54.99 43.99 20% 828521 M9-14 LUBRICANTS SILICONE SPRAY 3.29 2.63 200 524512 VCPSF32 POWER STEERING FLUID PWR STEERING FLUID-VC 2.79. 2.23 20% 132337 8776 C.V.DRIVE AXLES CV DRIVE AXLE 107.99. _86.39 20% 132338 8777 C.V.DRIVE AXLES CV DRIVE AXLE 69.99 55.99 20% 186858 2-0053DL U-JOINTS U-JOINT 8.99 7.19 20% 187104 2-48000L �- U-JOINTS U-JOINT 8.99 7.18. 20% 282404 15717 OXYGEN SENSORS BOSCH 02 SENSOR 47.99 38.39 20% 282405 15718 OXYGEN SENSORS BOSCH 02 SENSOR 43.99 35.19 20% 130262 8001 !'ROTOR MOUNTS MOTOR MOUNT 49.99 39.99_. 20% 7780 PF61S AC OIL FILTERS AC OIL FILTER 3.49 2.79 :°. 20% 152744 PF46S AC OIL FILTERS AC OIL FILTER 3.49 2.79 20% 2B7664 PF47S AC OIL FILTERS AC OIL FILTER 3.49 2.79.. 20% 287706 PF52S AC OIL FILTERS AC OIL FILTER 3.49 2.79 20% 246489 CA8039 FRAM AIR FILTERS FRAM AIR FILTER 17.19 13.75 20°Jo 247076 CA5056 FRAM AIR FILTERS FRAM AIR FILTER .6.59- .5.27 20°/9 688628 CA9687 FRAM AIR FILTERS FRAM AIR FILTER 11.39 9.11 20% 168610 PH3614 FRAM OIL FILTERS FRAM OIL FILTER 3.79 103 20% 188611 PH16 FRAM OIL FILTERS FRAM OIL FILTER .3.79 3.03 20`Yo Page 4 Care Bid SKU List 188612 PH2 FRAM OIL FILTERS FRAM OIL FILTER 3.79 3.03. 20% 188621 PH3506 FRAM OIL FILTERS FRAM OIL FILTER 3.79 3.03 20% 188622 PH3000 FRAM OIL FILTERS FRAM OIL FILTER 3.79., 3.03 20% 188628 PH3980 FRAM OIL FILTERS FRAM OIL FILTER 3.79. 3.03 20% 188638 PHBA FRAM OIL FILTERS FRAM OIL FILTER 3.79,: 3.03. 20% 275008 PH3387A FRAM OIL FILTERS FRAM OIL FILTER 3.792-. 3.03., 20% 344333 FF815 FUEL FILTERS FUEL FILTER 8.09- 6.47 20% 3336 FF745 FUEL FILTERS FUEL FILTER _7.09 5.67. 20% 266937 FF686 FUEL FILTERS FUEL FILTER 8109 6.47 :: 20% 344390 FF679 FUEL FILTERS FUEL FILTER 7.09 5.67, 20% 347906 FF830 FUEL FILTERS FUEL FILTER 18.09 14.47 20% 347907 FF831 FUEL FILTERS FUEL FILTER 18.09 14AT. 20% 580 883 FF779 FUEL FILTERS FUEL FILTER 49.99' 39.99 200% 889501 FF756 FUEL FILTERS FUEL FILTER 8.09 6.47 20% 830819 FF3504 FUEL FILTERS LF FUEL FILTER 5.99 4.79 20% 830826 FF4508 FUEL FILTERS LF FUEL FILTER 7.09 5.67 20% 70645 LFP3191 OF AGRICULTURE/HD LUBE FILTER 13.99 11.19 20% 17144 LFF8020 OF AGRICULTURE 1HD LUBER-FINER FUEL FILT 21.99 1,7.59 20% 77553 LFW4071 OF AGRICULTURE/HD L-FINER COOLANT FILTER 14.99 11.99; 20% 77574 LFF15 OF AGRICULTURE IHD CHAMP FUEL FILTER 12.99 10.39,: 20% 869678 LFF4783 OF AGRICULTURE/HD LUBER-FINER FUEL FILTER 16.99 .13.59 20% 106099 M1-204 MOBIL 1 OIL FILTERS MOBIL 1 OIL FILTER 9.99' 7.99 20% 140248 FL4008 MOTORCRAFT OIL FILTE MOTORCRAFT OIL FILTER 3.49 2.79. 20% 140249 FL820S MOTORCRAFT OIL FILTE MOTORCRAFT OIL FILTER 3.69 2.95' 20% 141394 FL1995 MOTORCRAFT OIL FILTE MOTORCRAFT OIL FILTER 9.99 7.99' 20% 287870 FL1A MOTORCRAFT OIL FILTE MOTORCRAFT OIL FILTER 3.99. "3.19 - 200/. 830790 PCVI126 PCV VALVES LF PCV VALVE 2.29: .tw 20% 66664 SA6466 STP AIR FILTERS AIR FILTER 14.09 -11.27 20% 7792 SA7440 STP AIR FILTERS AIR FILTER 16.99. 13.59.. 2006 7786 SA7421 STP AIR FILTERS AIR FILTER 7A9 5.99 20% 7789 SA7365 STP AIR FILTERS AIR FILTER 5.29 4.23 2010 22168 SA3901 STP AIR FILTERS AIR FILTER 5.29. 4.23; 20% 66659 SA8038 STP AIR FILTERS AIR FILTER 14.09 11.27 209 89273 SA8039 STP AIR FILTERS AIR FILTER 14.99 11.99 1 20% 114884 SA6479 STP AIR FILTERS - -AIR FILTER -5.29 4.23 20% 115188 SA326 STP AIR FILTERS AIR FILTER -,.4.29 3A3 20% 117259 SA6366 STP AIR FILTERS AIR FIL"(ER 5.29 -4.23 20% 117689 SA5056 STP AIR FILTERS AIR FILTER 5.29 4.23 20% 143915 SA8243 STP AIR FILTERS AIR FILTER 9.39 7.51 20% 195375 SA8765 STP AIR FILTERS AIR FILTER 12.19 9.75 20% 296999 SA9055 SIP AIR FILTERS AIR FILTER 7.49 5.99 20% 7812 S5 STP OIL FILTERS OIL FILTER 3.29 2.63 20% Page 5 Core Bid SKU List 22166 S3786 STP OIL FILTERS OIL FILTER 10,29, 8,23.:_ 20% 61465 52808 STP OIL FILTERS OIL FILTER 3.29 2:63' 20% 61648 S3614 STP OIL FILTERS OIL FILTER 3.29 2.63 20% 61713 S3387A STP OIL FILTERS OIL FILTER 3.29 2.63:-. 20% 61747 S4907 STP OIL FILTERS OIL FILTER .3.29 2.63 20% 62406 S2870A STP OIL FILTERS OIL FILTER 3.29 2.63 20% 62448 S3600 STP OIL FILTERS OIL FILTER 3.29 2.63 20% 62505 S3980 STP OIL FILTERS OR FILTER 3.29 2.63 20% 62570 S2827 STP OIL FILTERS OIL FILTER 3.29 2.63.. 20% 62844 S8A STP OIL FILTERS OIL FILTER 3,29. 2.63 20% 66716 S3506 STP OIL FILTERS OIL FILTER 3.29: 2.63 20% 337824 S76 SIP OIL FILTERS OIL FILTER 3 29 2.63 20% 337832 S2 STP OIL FILTERS OIL FILTER 3.29, 2.63 20% 442158 39549 STP OIL FILTERS OIL FILTER 10.09 ;8.07. . 20% 831642 $10060 STP OIL FILTERS OIL FILTER 3.79 3.03 = 20% 21819 E3270 MSTER PART ELEC FPS ELECTRIC FUEL PUMP 73.99 59.19 20% 67369 DS14229 REAR AXLE HOUSING GA AXLE HOUSING GASKET 6.99 5.69 200 137710 T0318627 TRANS PAN GASKETS TRANSMISSION OIL PAN SET 6.49 5.19 20% 68322 35064 WATER OUTLET WATER OUTLET GASKET 0,99 0.79 20% 225125 35489 WATER OUTLET WATER OUTLET GASKET 4.99 3,99 20% 265900 35614 WATER OUTLET_ WATER OUTLET 1.99 1.59 20% 225523 35468 WATER PUMP GASKETS WATER PUMP GASKET 1.49- 1:19 20% 416041 77178 INT KNOBS&DOORHANDLE INT DOOR HNDL-LH FMC 6.99 5.59. . 20% 721365 65116 UH FUEIJOIL&LUBE OIL DIP STICK 3.99 3.19 A 20% 2943 611-109.1 WHEEL NUT WHEEL NUT BAGGED 1.49 -1.19 20"% 000571 611-196.1 WHEEL NUT WHEEL NUT 1.99 1.69 20% 615450 15119 DURALAST THERMOSTATS DURALAST THERMOSTAT 8.99 7.19 20% 615463 15359 DURALAST THERMOSTATS DURALAST THERMOSTAT 6.49 5.19. 20% 615479 15839 DURALAST THERMOSTATS DURALAST THERMOSTAT 5.99 : 4.79 20% 1298051 PM538 ELECTRIC FAN MOTORS RADIATOR FAN MOTOR 23.99 -19A9, 20% 102432 922789 FAN CLUTCHES FAN CLUTCH 54.99 43.99 . 20% 12419 AWP-624 NEW DOM WATER PUMPS NEW WATER PUMP 24.99 ? 19.99 20% 61165 CWP-9126 NEW DOM WATER PUMPS NEW WATER PUMP 61.99 49.59 20% 01202 BWP-838 NEW DOM WATER PUMPS NEW WATER PUMP 41.99 33.59 20% 197246 BWP-9016 NEW DOM WATER PUMPS NEW WATER PUMP 37.99 .30.39 20% 230387 CWP-9020 NEW DOM WATER PUMPS NEW WATER PUMP 49.99 39.99 1 20% 417262 3779 VALUCRAFT THERMOSTAT VALUCRAFT THERMOSTAT 7.99 6.39 20% 524768 815001 WATER OUTLETS WATER OUTLET 14.99. 11.99 - 20% 618469 CP003 C.O.P INSULATORS COIL-ON-PLUG INSULATOR .6.99 5.59 ..: 20% 433972 C1417 COIL ON PLUG COIL 48.99 ' 3919 . 20% 494921 4694 DURALAST IGN WIRES DURALAST IGN WIRE SET 29.99 23.99 20% 539339 4713 DURALAST IGN WIRES DURALAST IGN WIRE SET 34.99.. 27.99 1 20% Page 6 Core Bid SKU List 129601 UDS419 HLIGIMDIMMER SWITCH DIMMER SWITCH 3.99 3.19 20% 293268 SW1794 HLIGHTIDIMMER SWITCH DOOR LIGHT SWITCH 19.99 15.99:: 20% 472332 MR78 RELAYS ACCESSORY RELAY 10.99 8.79 20% 18715 CR924 WELLS DISTRIBUTR CAP DISTRIBUTOR CAP 9.99 7.99 20% 84749 DR942 WELLS DISTRIBUTR CAP DISTRIBUTOR CAP 14.99 11.99 20% 119305 F954 WELLS DISTRIBUTR CAP DISTRIBUTOR CAP 13.99 11:19.=. 20% 184646 DR978 WELLS DISTRIBUTR CAP DISTRIBUTOR CAP 29.99 23.99:= 20% 184647 DR980 WELLS DISTRIBUTR CAP DISTRIBUTOR CAP 35.99 28.79 20% 342421 254 WELLS IGNITION COIL COIL PIGTAIL 14.99 11.99 20% 18833 F999 WELLS ROTORS ROTOR 3.99 3.19 20% 84889 DR901 WELLS ROTORS ROTOR 5.99 4.79:. 20% 160283 F981 WELLS ROTORS ROTOR 4.99 3.99 20% 184651 DR975 WELLS ROTORS IGNITION ROTOR 9.99 7.99 20% 367797 F492 WELLS STARTER SOLENO STARTER SOLENOID 9.99 7.99 20% 536913 5054867 STEERING WHL COVERS SWC ERGO GRIP GREY .14.99 11.99- 20% 870572 FL30A AUXILIARY LIGHTING HD ALTERNATING FLASHER 6.99 5.59 20°% 870573 C561 R AUXILIARY LIGHTING 6 OVAL STOP TL LT CLR 23.99 19.19 20% 870574 G204R8 AUXILIARY LIGHTING 6 OVAL STOP TL LT KIT 8.99 ::7.19 20% 870575 C501 R AUXILIARY LIGHTING 2 ROUND LED CLR MKR RED 8.99 7.19 20% 59020 1157LL BAYONETS BULBS LONG LIFE BULB 3.49 2.79. 20% 575118 1166 BAYONETS BULBS MINI BULB 2.99 2.39' 200/0 876881 37 COMMERCIAL BULBS MINIATURE LIGHT 1.99 1.59 1 20% 876882 795RD COMMERCIAL BULBS MINIATURE LIGHT 7.99 fi.39 20% 8413 EL12 ELECTRONIC FLASHERS ELECTRONIC FLASHER 8.88 7.19. 20% 247231 EP27 ELECTRONIC FLASHERS ELECTRONIC FLASHER 12.99 10.39 20% 372987 552 FLASHERS THERMAL FLASHER 2.99 2.39 20% 4322 H3-55W FOGIDRIVING BULBS HALOGEN FOG BULB 5.99 4.79 20% 54170 H1-55W FOGIDRIVING BULBS HALOGEN CAPSULE 6.99 5.59 20% 32347 BP-ATC-10-RP FUSES ATC BLADE FUSE 10AMP 2.99 2.39 1 20% 32348 BP-ATC-15-RP FUSES ATC BLADE FUSE 15AMP 2.99 2.39 20% 32349 BP-ATC-20-RP FUSES ATC BLADE FUSE 20AMP 2.99 2.39 20% 32350 BP-ATC-25-RP FUSES ATC BLADE FUSE 25AMP 2.99 2.39. 20% 32351 BP-ATCC30-RP FUSES ATC BLADE FUSE 30AMP 2.99 2.39 20% 32354 BP-ATC-5-RP FUSES ATC BLADE FUSE 5AMP 2.99. ' 139... 20% 32358 BP-ATM-IO-RP FUSES ATM BLADE FUSE 10AMP 3.99 3.19 20% 32362 BP-ATM-25-RP FUSES ATM BLADE FUSE 25AMP 3.99.:: 3.19 20% 32430 BP-MAX-30-RP FUSES MAX BLADE FUS.E30AMP 2.99. 2.39 20% 306688 MAX30BP FUSES 30 AMP MAXI FUSE 2.49' 1.99 20% 22474 912 HIGH MOUNT BULBS MINI BULB 2.99 2.39 20% 22450 74 SAGNAUINSTRMNT BULB MINI BULB 2.99 2.39. 20% 575043 194 SIGNAL ANSTRMNT BULB MINI BULB 2.99 2.39 20% 799 9007 STANDARD CAPSULES HALOGEN CAPSULE 9.99 7.99 20% Page 7 Core Bid SKU List 377770 9004 STANDARD CAPSULES HALOGEN CAPSULE 9.99 . 1.99 20% 377838 9006 STANDARD CAPSULES" HALOGEN CAPSULE 9.99 7.99 20% 72J045 9007-2 STANDARD CAPSULES HALOGEN TWIN CAPSULE 16.99 13.69 20% 876880 4411 VALUCRAFT SEALEDBEAM INCANDESCENT SEALED BEAM 12.99 10.39 20% 89678 3057LL WEDGE BULBS LONG LIFE BULB 4.49 3,59 200/0 89681 3157LL WEDGE BULBS LONG LIFE BULB 4A9 :3.59.' 20% 40947 H6054XV XTRAVISION SEALBEAMS XTRAVISION HEADLAMP .8.99 7:19. 200/6 40948 H4656XV X T RAVISION SEALBEAMS XTRAVISION HEADLAMP 8.99 7:19. 20% 123882 H6024XV XTRAVISION SEALBEAMS XTRAVISION HEADLAMP 14.99 11.99, 20% 816770 5293 12VOLT RADIO NAVIGAT LAMP KIT BK[ON CRYSTAL 239.99 191:99. 20% 737466 37469 EXTERIOR ACCESSORIES RANGER WIND DEFLR 93-0 61.99' 49.59 20% 815298 37463 EXTERIOR ACCESSORIES IN CHNL F150 STD CB 0405 61.99 49.59. 20% 763764 76223 OEM REPLACEMENT REVLV EMRGCY WARNLAMP YE 113.99. =91.19 . 20% 653591 AGSF32PMF4 OEM PARTS FORD OE SP/PLG ASY 5.99 4.79 20% 658599 E7TZIS190B OEM PARTS FORD OE RET ASY-FRT WHL HB G 10.99° 8.79 20% 694400 PF47 OEM PARTS FORD OE FILTER '.8.99 7,19. 20% 636690 CA311 SEAT COVERS SOLID BENCH 149.99 119.99 20% 952626 85720 HEAVY DUTY SHOCKS FLEETLINE SHOCK 62.99 50.39 20% 838241 77955 MC MONOTUBE SHOCKS MONOTUBE SHOCK ABSOR 56.99 45,59 20% 78499 61555 PRO-GUARD PROGUARD SHOCK 19.99 15.99'. 20% 220145 69675 ULTRA CAR SHOCKS ULTRA SHOCK 21.99 IT 59 20% 220236 69606 ULTRA CAR SHOCKS ULTRA SHOCK 21.99 '17.59 20% 258160 69625 ULTRA CAR SHOCKS ULTRA SHOCK 21.99 17,59, 20% 62861 G63376 ULTRA LT ULTRA LT SHOCK 23.99 19.19, 20% 2444291 G63808 ULTRA LT ULTRA LT SHOCK 29.99 23.99 20% 186209 41-993 AC-PLATINUM PLUG AC DBL PLATINUM PLUG 5.99 4.79 20% 186210 41-940 AC-PLATINUM PLUG AC DBL PLATINUM PLUG 6.49 5.19 20% 391388 41-101 AC-PLATINUM PLUG AC IRIDIUM SPARK PLUG 6.99- 5.59 20% 617922 41-985 AC-PLATINUM PLUG AC IRIDIUM SPARK PLUG 6.99 "5.59 20% 22175 1 AC-RAPID FIRE AC PERFORMANCE PLATINUM 4.99 3.99. 20% 298613 12 AC-RAPID FIRE AC PERFORMANCE PLATINUM 4.99 3.99 20% 107029 R43TS AC-RESISTOR AC SPARK PLUG 2.09 1.67 20% 107128 R44T AC-RESISTOR AC SPARK PLUG 2.09 1.67 :. 20% 107219 R44XLS AC-RESISTOR AC SPARK PLUG 2.09. 1.67 20% 107284 R45T AC-RESISTOR AC SPARK PLUG 2.09 1.67 20% 107300 R45TS AC-RESISTOR- AC SPARK PLUG 2.09 1.67 20% 304766 CR43TS AC-RESISTOR AC SPARK PLUG -2.09 1.87 20% 231187 60G AC GLOW PLUG AC GLOW PLUG 8.99 7.19 20% 105700 764 AUTOLITE AUTOLITE SPARK PLUG 1.59 1.27 20% 105833 25 AUTOLITE AUTOLITE SPARK PLUG 1.59 1.27 20% 117670 24 AUTOLITE AUTOLITE SPARK PLUG 1.59. 1.27 20% 117687 5224 AUTOLITE AUTOLITE SPARK PLUG 1.59 .1,.27 20% Page 8 Core Bid SKU List 514733 103 AUTOLITE AUTOLITE SPARK PLUG 1.59 1.27 200/0 117704 APP764 AUTOLITE DBL PLAT AUTOLITE DBL PLAT.PLUG 3.99 .3.19 20% 434627 APP104 AUTOLITE DBL PLAT AUTOLITE DBL PLAT.PLUG 3.99 3.19 20% 434628 APP103 AUTOLITE DBL PLAT AUTOLITE DBL PLAT.PLUG 3.99 3.19 20% 33433 1112 AUTOLITE GLOW PLUGS AUTOLITE GLOW PLUG 18.99 15.19 20% 117698 AP764 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.69 2:15 20% 117699 AP765 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 1 2.69 2.15 20% 509375 AP104 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.69 2.15. 209/6 609378 AP24 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.89 2.15 20% 509379 AP25 AUTOUTE PLAT P..UG AUTOLITE PLATINUM PLUG .2.09 2.15 20% 509384 AP3924 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.69 2.15 : 209/0 509391 AP5224 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.69 2.15 20% 5093921 AP605 AUTOLITE PLAT PLUG AUTOLITE PLATINUM PLUG 2.69 2.15 20% 870933 4002 BOSCH PLATINUM PLUS BOSCH PLATINUM PLUS 2.99 2.39 20% 305599 405 CHAMPION RESISTOR PL CHAMP SPARK PLUG RN14YC 1.69 1.36 20% 305656 412 CHAMPION RESISTOR PL CHAMP SPARK PLUG RC12LYC 1.69 1:35 20% 305684 415 CHAMPION RESISTOR PL CHAMP SPARK PLUG RN9YC 1.69; 1.35. 20% 305821 14 CHAMPION RESISTOR PL. CHAMP SPARK PLUG RJ12YC 1.69 1.35 20% 306076 71 CHAMPION RESISTOR PL CHAMP SPARK PLUG RC12YC 1.69 1.35 20% 517598 436 CHAMPION RESISTOR PL CHAMP SPARK PLUG 1.69 1.35 1 20% 289058 SP-415 MOTORCRAFT-RESISTO MOTORCRAFT SPARK PLUG 1.99 1..59 20% 289066 SP-419 MOTORCRAFT-RESISTO MOTORCRAFT SPARK PLUG 1.99 1.59 20% 289074 SP-420 MOTORCRAFT-RESISTO MOTORCRAFI-SPARK PLUG 1.99 1.59 20% 289157 SP-435 MOTORCRAFT-RESISTO MOTORCRAFT SPARK PLUG 1.99 1.69 20% 289199 SP-450 MOTORCRAFT-RESISTO MOTORCRAFT SPARK PLUG 1.99 t,59 20% 84914 SP-432 MOTORCRAFT PLATINUM MOTORCRAFT PLATINUM PLUG 4.99. 3.99 20% 464328 SP-504 MOTORCRAFT PLATINUM MOTORCRAFT PLATINUM PLUG 4.99 .3.99- 20% 534149 SP-479 MOTORCRAFT PLATINUM MOTORCRAFT PLATINUM PLUG 3.09 2.47 20% 534649 SP-500 MOTORCRAFT PLATINUM MOTORCRAFT PLATINUM PLUG 4.99 3.99 20% 534651 SP-493 MOTORCRAFT PLATINUM MOTORCRAFT PLATINUM PLUG 3.09 2.47 20% 94330 OL9990S DL DOMESTIC STARTERS REMAN DURALAST STARTER 139.99 111.99- 20% 8842 5086 POWER STEERING PUMPS REMAN PS PUMP 86.99 69.59, 20% 8901 5162 POWER STEERING PUMPS REMAN PS PUMP 122.99 98.39 20% 8989 6391 POWER STEERING PUMPS REMAN PS PUMP 56.99 45:59 1 20% 260936 7125 POWER STEERING PUMPS REMAN PS PUMP 48.99 39.19. 20% 6538 FA1171 BALL JOINTS DOM VEH BALL JOINT 28.99 ..23.19 20% 89629 FA2001 BALL JOINTS DOM VEH BALL JOINT 38.99 31.19- 20% 89630 FA2002 BALL JOINTS DOM VEH BALL JOINT 18.99 15.19 20% 2360871 FA2100 BALL JOINTS DOM VEH BALL JOINT 21.99 17.59 20% 258631 FA2098 BALL JOINTS DOM VEH BALL JOINT 28.99 .23.19, 20% 3052001 FA2093 BALL JOINTS DOM VEH BALL JOINT 36.99 29.59 20% 71340 FA1555 IDLER ARMS-DOM VEH PITMAN ARM 16.99 13.59 Page 9 Core Bid SITU List 743146 FA1174 IDLER ARMS-DOM VEH IDLER ARM 32.99 26,39" 20% 329091 ES3364 TIE ROD ENDS DOM VEH TIE ROD END 26.99 21.59 20% 334924 ES3465 TIE ROD ENDS DOM VEH w TIE ROD END 32.99 26.39 20% 334926 ES3459 TIE ROD ENDS DOM VEH TIE ROD END 2Z98 18.39„ 20% 2942 611-110.1 LUG NUTS WHEEL NUT BAGGED 1.69 1.35 " 20% 89029 811-016.1 LUG NUT& WHEEL NUT BAGGED 0.99 0:79- 207A 89037 811422.1 LUG NUTS WHEEL NUT 1.99, 1.59 20% 90449 611-074.1 LUG NUTS WHEEL NUT 1.99 1.59 20% 87718 610-254,1 WHEEL STUDS WHEEL BOLT BAGGED 1.49 1.19 20% 15966 TF207 TRANSMISSION FILTER TRANSMISSION FILTER 12.99`. 10.39 2a% 15968 TF350 TRANSMISSION FILTER TRANSMISSION FILTER 15AO ..12.39 20% 66101 TF320 TRANSMISSION FILTER TRANSMISSION FILTER 8.99 .' :. :719L 20% 66705 TF326 TRANSMISSION FILTER TRANSMISSION FILTER 19.99 15.99;' 20% 143885 TF403 TRANSMISSION FILTER TRANSMISSION FILTER 9.99 7.99 2006 296985 TF190 TRANSMISSION FILTER TRANSMISSION FILTER 15.49 12.39 ; 20% 602508 91-16 ANCO AERO ADV BLADES 16"AEROVANTAGE BLADE 6.99 5.69 20% 602532 91-19 ANCO AERO ADV BLADES 19"AEROVANTAGE BLADE 6.99 5.59. 20% 20452 C-22-UB ANCO CONTOUR UNIVER CONTOUR UNIV WIPER BLADE 19.99 15.99 , 200 10422 N22R ANCO QUICK REFILLS 22"NARROW&TRAPEZOID 5.99 4.79 20% 379636 N20R ANCO QUICK REFILLS 20"NARROW&TRAPEZOID 5.99 4-.79_ 20% 380170 N18R ANCO QUICK REFILLS 18"NARROW&TRAPEZOID 4.99 .3.99, 20% 53465 41918 BOSCH MICRO-E BLADES BOSCH EXCEL PLUS WIPERI8 11.99. 9.59 20% 53467 41920 BOSCH MICRO-E BLADES BOSCH EXCEL PLUS WIPER20 14.99 11.99 20% 53469 41922 BOSCH MICRO-E BLADES BOSCH EXCEL PLUS WIPER22 14.99 11.99 20% 861188 OLW-20 DURALAST WINTERBLADE DURALAST WINTER BLADE 20 7.99 6.39 20% 661189 DLW-22 DURALAST VJgNTERBLADE DURALAST WINTER BLADE 22 9.99 7.99 20% 570503 RX30218 RAIN X RAINX WB 18"WIPER BLADE 9.99 7.99 20% 570505 RX30220 RAIN X RAINX WB 20"WIPER BLADE 10,99 8.79 200 570508 RX30222 RAIN X RAINX WB 22"WIPER BLADE 11.99: 9.59 200 t V k t a.CATEGORY MANUFACTURER{S} PRICE LISTS Sy NUMBER DISCOUNT PERCENTAGE DATE AND COLUMN 1 Alternators and Starters AC Delco MPA _ N/A.... 5%,10%,15%,20% Beck/Arnley Units Parts N/A. 5%,10%,15%,20% Genco BecklArnley NIA 5%,10°h,15°k,20°fo Wagner World Wide NIA 5%,10%,15%,20% 2 Bearings lball,railer? BCA Timken NIA 5%,10%,15%,20% Timken BOA INIA 5%,10%,15%120% Page 10 Core Bid•SKU List Federal Mogul N/A 5%,10%,15%,20% L&S N/A 5%,10%,15%,20% 3 Satterles AC Delco JCI NIA 5%,10°/n,15%,20% 4 Betts Roses,Clamps Gates Goodyear N/A 5%,10%,15%,20% Goodyear Raydyot N/A 5%,1011/0,15%,200A Ideal 5 Brakes(Pads&Shoes) Bendix Morse NIA 5%,10°/a,15%,20% Eaton Per Friction N/A 5%,104A,15%.,20% Mentor Satisfied NIA 5%.10%,15%,20% Raybestos Federal Mogul NIA 5%,10%,15%,20% Pert Friction 5A Brakes(Drums&Rotors) Guinte Aimco NIA 5%,10%,15%,20% VIPAR Neotek NIA 5%,10%,15%,20% United Quallis N/A 5%, I OIA,15%,20% Master N/A 5%,10%,15%,20% Perf,Friction NIA 5%,10%,15%,20%e 58 Brakes(Calipers) VIPAR ARI NIA 5%,10%,15%,20% Fenwick N/A 5%,10%,15%,20% All Parts INIA 5%,10%,15%,20% 6 Caps and Thermostats Stant CST NIA 5%,10%,15%,20% 7 Chemicals CRC CRC NIA 5%,10%,15%,20% Prestone NIA 5'/0,10%,15%,20% Lucas N/A 5%,10%,15%,20% 8 Coolant/Antifreeze Sheizone/Motorcraft Zerex,Prestone,Old World NIA 5%,101/5,15%,20% 9 Electrical&Ignition AC Delco Wells N/A 5'/0,10%,15%,20% Motorcraft GPS N/A - 5%,10%,15%,20% Cote Nersee AC Delco NIA 5%,10%,15%,20% Standard Robert Bosch NIA 5%,10%,15%,20°h 10 Emission&Exhaust AC Delco Arvin Meritor NIA 5%,10%,15%,20% Motorcraft Bosal NIA 5%a110%,15%,20% li Filters AC Delco lChamp Labs I NIA 5%,10%,15%,20% Page 11 Core Bid SKU List Motorcraft Fram N/A 5%,10%,15%,20% Wix AC Deico NIA 5%,10%,15%,20% 12 Gaskets and Seats AC Deico Felpro NIA 5%,10%,15%,20% National Beck Arnie N/A 5%,10%,150/6,20% C/R Timken N/A 5%,10%,15%,20% 13IHeaUng&Air Conditioning AC Delco Compressor Works N/A 5%,10%,15%,20% Motorcraft Four Seasons N/A 5%,10%,15%,20% Ready Aire N/A 5%,10%,15%,20% 14 Lam s,Lighting,Mirrors Federal Signal Sylvania N/A 5%110%1 15%,20% Grote GE N/A 5%, 10%,15%,20% Retrac Phillips N/A 6%,10%,15%,20% Wagner Victor NIA 20% Trucklite Pilot NIA 5%,10%,15%,20% 15 Power Steering Pumps and Gears A-1 Cardone A-1 Cardone NIA 5%,10%,15%,20% 16 Pumps(Fuel&water) AC Delco ACS NIA 50/.,10%,15%,20% Motorcraft Bosch N/A 5%,10%,15%,20% TRW Master NIA 5%,10%,15%,20% GMB N/A 5%, 10%,15%,20% V Steering and Suspension Moog Gabriel NIA 5%,10%,15%,20% Montoe Quallis NIA 5%,10%,15%,20% Motorcraft FederalMogul NIA 5%,10%,15%,20% McQuay NIA 5%,10%,15%,20% 18 Universal Joints Precision Anchor NIA 5%,10%,15%,20% Spicer Neapco N/A 5%1 10%,15%,20% Beck Amley y NIA 5%,10%,15%,20% is Wipers Ansco Anco NIA 5%,10%,15%,20% Motorcraft Bosch NIA.-- 5%,10%,15%,20% MCC, 5%,10%,15%,20% 20 Wheel Accessories Plews NIA 5%.10%,15%,20% Moog 18uperior N/A 5%,10%,15%,20% Motormite INIA 5%,10%,15%,20% Page 12 Exhibit D Lifted Inventory On Saturday, September 27, 2008, a joint inventory was completed involving the City of Fort Worth and AutoZone to determine the amount of inventory to be lifted by Auto7one. The amount of the Lifted Inventory is not to exceed $767,318.91. Adjustments reducing that arnount will be made for all Lifted Inventory invoiced to and purchased by the City of Fort Worth between the completion of the inventory and the effective date of this Contract as well as for items of Lifted Inventory which Contractor reasonably determines do not comply with all Applicable Laws,including,but not limited to, environmental laws. Auto7_one Contract,for Supplies.Para and Material a:ESD Facilities CRR 10.06.08V EXF.CUT IONCOPY 27 USAGE AGREEMENT This agreement represents an understanding of liabilities assumed by FleetPride, Inc., an Alabama corporation (hereafter known as "User"),and to the City of Fort Worth(hereafter known as "City") for the usage of the Service Centers owned by the City and listed on Exhibit A attached hereto(the"Service Centers"), and shall be for the sole purpose of allowing User to provide 'Heavy Equipment Inventory through AutoZone Texas, L.P, pursuant to City Contract No. '�A l . User acknowledges that it is a subcontractor of AutoZone Texas, L.P. ("AutoZone")and has no direct contractual relationship with the City. In consideration of the privilege of the use of the Service Centers for the above stated reason, User SHALL RELEASE, INDEMNIFY, HOLD HARMLESS, REIMBURSE AND DEFEND CITY, ITS OFFICERS, AGENTS,AND/OR EMPLOYEES FROM ANY LOSS, DAMAGE, LIABILITY OR EXPENSE FOR DAMAGE TO OFFICERS,AGENTS OR EMPLOYEES OF USER, TO THE EXTENT THE SAME ARISE OUT OF THE INTENTIONAL OR NEGLIGENT ACTS,ERRORS OR OMISSIONS OF USER OR ITS OFFICERS,AGENTS,EMPLOYEES OR SUBCONTRACTORS IN THE PERFORMANCE OF ITS OBLIGATIONS PURSUANT TO THE SUPPLY AND SERVICES AGREEMENT BY AND BETWEEN AUTOZONE AND USER DATED rUZA,d�)-P-r 15 , 2008 (THE "SERVICE AGREEMENT"). Both parties agree that User shall not be responsible for the installation of any parts purchased or supplied by User. City agrees that it shall release User from any claims or action brought against User for the installation of such parts, provided that User shall be responsible to the extent that User has caused or contributed to, either by its own intentional or negligent acts, any loss or damage relating to such installation. Upon learning of a claim, lawsuit, or other liability which User is required hereunder to indemnify,the City shall provide User with prompt notice of same. The obligations of the User and City under this agreement shall survive until the expiration or termination of the Service Agreement. City makes no representations nor warranties to User that the Service Centers are suitable for Users purpose. User shall discontinue its use of the Service Centers upon (a) the City's delivery of a written request, signed by an authorized City representative, that User stop performing services from the Service Centers, or (b) upon termination of City Contract No. '3-1-1 19(p . User understands and agrees that by signing of this Agreement, City does not waive its defense of governmental immunity, where applicable, or any other defenses recognized by the State of Texas. [Signature Page Follows] OFFICIAL RECORD CITY SECRETARY FT.WORTH,TX CHI-1673558 In Witness Hereof,User's signature below acknowledges acceptance of these liabilities. CITY OF FORT WORTH, TEXAS FLEETPRIDE, INC. By: � Karen L.Montgomery Name: Assistant City Manager/CFO Title: V.P. 600ea.-60M Date Signed: Date: 10-is Z oo,8 ATTEST: USER'S WITNESS: Mari Hendrix City Secretary APPROVED AS TO FORM AND LEGALITY: NA,6 Assistant ity Attorney tollylCIAL RECORDIT SECRETARY FT.WORTH,TX Usage Agreement Signature Page Exhibit A Parts Distribution Centers Address Southside Service Center 4100 Columbus Trail, Ft.Worth, Texas 76133 James Avenue Service Center and 6021 James Avenue, Fort Worth, Texas 76115 James Avenue Heavy Water Service Center 2201 West Daggett Street, Ft.Worth,Texas 76104 Brennan Service Center 2500 Brennan Avenue, Ft.Worth, Texas 76106 OFFICIAL RECORD CITY SECRETARY FT.WORTH,TX CHI-1673558 City of Fort Worth, Texas Mayor and Council Communication COUNCIL ACTION: Approved on 9/16/2008 DATE: Tuesday, September 16, 2008 LOG NAME: 13P08-0016 REFERENCE NO.: P-10844 SUBJECT: Authorize the City Manager to Execute a Contract to Supply Parts, Staffing and Management for the City's Parts Distribution and Maintenance Centers with AutoZone Texas, LP, for a Projected Cost Not to Exceed $5,120,000.00 in Fiscal Year 2008-2009 RECOMMENDATION: Authorize the City Manager to execute a Contract to supply parts, staffing and management for the City's Parts Distribution and Maintenance Centers with AutoZone Texas, LP, for a projected cost not to exceed $5,120,000.00 in Fiscal Year 2008-2009. DISCUSSION: The Equipment Services Department (ESD) is responsible for the acquisition, preventive maintenance, repairs, and fueling for the City's mixed fleet of vehicles, off-road equipment, and related equipment. On March 7, 2008, the City issued a Request for Proposals for prospective contractors to provide parts, supplies, staffing, and management for ESD's Parts Distribution and Maintenance Centers. Proposals were received on April 10, 2008, and reviewed by an evaluation committee comprised of 12 City staff members from the ESD, Environmental Management, Finance, Fire, Police, Transportation and Public Works and Water Departments. AutoZone Texas, LP, (AutoZone) was determined to have submitted the best and most responsive proposal. ESD recommends that AutoZone be awarded the contract to supply parts, staffing and management for the City's Parts Distribution and Maintenance Centers. AutoZone will provide all parts, staffing, and systems for parts management at each of ESD's Parts Distribution and Maintenance Centers to meet the following performance requirements: - 90 percent of automotive, light duty and heavy duty supplies and parts to be provided upon demand, 95 percent within 24 hours or less; and all supplies, materials and parts provided within 72 hours or less; and • 75 percent of off road and specialized equipment supplies and parts to be provided upon demand, 90 percent within 5 days or less, 95 percent within 10 days or less. PRICE ANALYSIS - AutoZone will be paid for materials, supplies, equipment and services per the US Communities pricing contract Tier III discounts of 15 percent for over 800,000 plus parts in the AutoZone parts supply chain. Gross profit margin of 10 percent will be added on parts outside the AutoZone supply chain. AutoZone provides an incentive program to its onsite staff for obtaining the best possible discounts on parts bought outside the AutoZone supply chain by giving bonuses that increase with the size of the discount obtained for the City. AutoZone distribution centers are operated as nonprofit with no overhead cost factored into the gross profit margin calculations. AutoZone will provide 28 staffing members to be distributed among the City's Parts Distribution and Maintenance Centers for parts management which is an increase of an additional six employees over the Logname: 13P08-0016 Page 1 of 2 current staffing levels. The fixed fee cost for staffing will be $702,000.00 for a savings of about $200,000.00 per year over the current cost. Year two and subsequent year costs are subject to annual adjustments based on the vendor making written request and changes in the Consumer Price Index, Employment Calculator. ADVERTISEMENT: This Request for Proposal was advertised in the Fort Worth Star-Telegram on March 5 and 12, 2008. The Purchasing Division solicited 25 vendors from the City's purchasing database system and Demandstar.com plan holders for this service. Two proposals were received. M/WBE - A waiver of the goal for M/WBE subcontracting requirements was requested by the Purchasing Division and approved by the M/WBE Office because the purchase of goods or services is from sources where subcontracting or supplier opportunities are negligible. AGREEMENT TERMS - This agreement shall include an initial two year term to begin on or about October 1, 2008, and have three options for one year renewal. Renewal does not require specific City Council approval, provided the City Council has appropriated sufficient funds to satisfy the City's obligation during the renewal term. FISCAL INFORMATION/CERTIFICATION: The Finance Director certifies that funds are available in the operating budget, as appropriated, of the Equipment Services Fund. BQN\08-0016\KDK TO Fund/Account/Centers FROM Fund/Account/Centers Submitted for City Manager's Office by: Karen Montgomery (6222) Originating Department Head: Lena Ellis (8517) Additional Information Contact: Jack Dale (8357) Logname: 13P08-0016 Page 2 of 2 FORT WORTH October 6, 2008 AutoZone Texas L.P. 123 S. Front Street, Dept. 9011 Memphis, Tennessee 38103 ATTN: Executive Vice President—Commercial To Whom It May Concern: On Monday, October 6, 2008,AutoZone staff member, Eric Schultz,requested the City of Fort Worth's consent to allow FleetPride to serve as a subcontractor to AutoZone at the City of Fort Worth Parts Distribution Centers,pursuant to section 61 of the"Contract for the Provision of Parts, Supplies, Staffing, and Management for the City of Fort Worth" between AutoZone and the City of Fort Worth prior consent must be acknowledged by the City of Fort Worth. This letter is written to acknowledge receipt of that request and to grant consent for AutoZone to use FleetPride as a subcontractor for services related to the Parts Distribution Centers at the City of Fort Worth provided FleetPride execute the Usage Agreement. This consent shall not be construed or implied as providing FleetPride with a direct or indirect contractual relationship with the City. Please notify the Director of Equipment Services as to the effective dates of the subcontractor relationship. Thanks, Wayne Corum Director of Equipment Services City of Fort Worth cc: Law Department, City of Fort Worth City Secretary, City of Fort Worth General Counsel, AutoZone EQUIPMENT SERVICES DEPARTMENT THE CITY OF FORT WORTH * 4100 COLUMBUs TRAIL * FORT WORTH, TExAs 76133-7578 817-392-5100 * FAx 817-392-5119 i��Printed on recycled paper Mills, Stephanie From: Corum,Wayne 1 Sent: Monday,June 16, 2014 8:05 AM To: Mills, Stephanie Subject: Re: Missing Contract L J ! That is correct. (� V Thanks, n Wayne CorumNJ Sent from my iPhone On Jun 16, 2014, at 7:01 AM, "Mills, Stephanie"<Stephanie.M ills@fortworthtexas.gov>wrote: Thank you Wayne. This M&C C-25382 was officially approved by City Council on 1/10/2012, because of that, I need to clarify that there is not an Amendment 4 and that there will not be one? Stephanie Mills Administrative Technician City Secretary's Office 817-392-6090 stephanie.mills@fortworthtexas.gov City of Fort Worth— Working together to build a strong community. <image002.jpg> From: Corum, Wayne Sent: Friday, June 13, 2014 11:55 AM To: Lacker, Judy Cc: Mills, Stephanie; Tidwell, Allison Subject: RE: Missing Contract Judy— Amendment#4 may have been drafted in an M&C as a contingency plan but never taken to City Council for action because we were able to finalize the contract with NAPA(see attached). NAPA took over the parts operation on January 1, 2012. The attached Amendment#3 extended the AutoZone contract to the end of their operation on December 31, 2011. Wcuyn&Coru*w Director Equipment Services Department City of Fort Worth From: Lacker, Judy Sent: Friday,June 13, 2014 11:22 AM 1 To: Corum, Wayne Cc: Mills, Stephanie; Tidwell, Allison Subject: Missing Contract Wayne, The CSO says they do not have the contract listed below. They have four renewals and three amendments, but do not have Amendment No.4. Do you have the completed contract? C-25382 1/10/2012 Authorize Execution of Amendment No. 4 to City Secretary Contract No. 37796 for the Parts Distribution and Service Centers Contract with AutoZone Texas, LP, to Extend the Contract Term No Later than February 29, 2012 Judy L. Lacker Assistant to Sarah J. Fullenwider, City Attorney; Peter Vaky, Deputy City Attorney; Melinda Ramos, Senior Assistant City Attorney; Charlene Sanders, Assistant City Attorney City Attorney's Office 1000 Throckmorton Street Fort Worth, Texas 76102 817-392-7600 Judy.Lacker@FortWorthTexas.gov City of Fort Worth— Working together to build a strong community <1mage003.jpg> RECIPIENTS-PLEASE CONTACT ME PRIOR TO FORWARDING MESSAGES DESIGNATED AS ATTORNEY-CLIENT COMMUNICATIONS. This e-mail and any files transmitted with it are confidential and are intended solely for the use of the individual or entity to which they are addressed. This communication may contain material protected by the attorney-client privilege. If you are not the intended recipient or the person responsible for delivering the e-mail to the intended recipient, be advised that you have received this e-mail in error and that any use, dissemination, forwarding, printing, or copying of this e-mail is strictly prohibited. If you have received this e-mail in error, please immediately notify Judy Lacker at the City of Fort Worth City Attorney's Office (817)392-8006. 2 M&C Review Page 1 of 2 Official site of the City of Fort Worth,Texas CITY COUNCIL AGENDA FoR TWORTH COUNCIL ACTION: Approved on 1/10/2012 DATE: 1/10/2012 REFERENCE ,C-25382 LOG NAME: 21AUTOZONEAMENDMENT4 NO.. CODE: C TYPE: CONSENT PUBLIC NO HEARING: SUBJECT: Authorize Execution of Amendment No. 4 to City Secretary Contract No. 37796 for the Parts Distribution and Service Centers Contract with AutoZone Texas, LP, to Extend the Contract Term No Later than February 29, 2012 (NO COUNCIL DISTRICT) RECOMMENDATION: It is recommended that the City Council authorize the execution of Amendment No. 4 to City Secretary Contract No. 37796 for the parts distribution and service centers contract with AutoZone Texas, LP, to extend the contract term no later than February 29, 2012. Contract negotiations with the selected vendor, per Request for Proposal No. 11-0024, are continuing until a selected vendor can meet negotiated terms. DISCUSSION: On September 16, 2008, M&C P-10844 authorized the execution of City Secretary Contract No. 37796 to supply parts, staffing and management for the City's Parts Distribution and Maintenance Centers with AutoZone Texas, LP (AutoZone). On February 9, 2010, M&C C-24081 amended City Secretary Contract No. 37796 to reduce the staffing requirement from at least 26 to at least 25 personnel. On October 12, 2010, M&C C-24537 amended City Secretary Contract No. 37796 to reduce staffing from 25 to 16 personnel with a proportionate reduction in the management fee to $37,440.00 per month and to extend the contract term through September 21, 2011. On Septemer 20, 2011, M&C C-25186 amended the contract to extend the term through December 31, 2011. On June 16, 2011, the City released a Request for Proposal (RFP) for a contractor to supply parts, staffing and management for the City's Parts Distribution and Maintenance Centers. Proposals were received from five vendors on July 21, 2011. AutoZone chose not to submit a proposal but offered to extend the current contract to provide sufficient time for the City to negotiate with the newly selected contractor. The City's RFP evaluation committee is comprised of staff from the Police, Fire, Transportation and Public Works, Water and Equipment Services departments. The committee recommended two finalists. The Equipment Services Department has not reached an Agreement on terms with the selected vendor and additional time is requested to finalize negotiations with the selected vendor. This extension allows sufficient time to negotiate a contract in the best interests of the City with the selected parts vendor. AGREEMENT TERMS - The term of the Agreement shall be extended through no later than February 29, 2012. M/WBE -A waiver of the goal for M/WBE subcontracting requirements was requested by the Equipment Services Department and approved by the M/WBE Office because the purchase of goods or services is from sources where subcontracting or supplier opportunities are negligible. FISCAL INFORMATION/CERTIFICATION: The Financial Management Services Director certifies that this action will have no material effect on City funds. httn://anns.cfwnet.ori2/council packet/me review.aso?ID=16206&councildate=1/10/2012 6/17/2014 M&C Review Page 2 of 2 TO Fund/Account/Centers FROM Fund/Account/Centers Submitted for City Manager's Office by: Charles Daniels (6199) Originating Department Head: Wayne Corum (5118) Additional Information Contact: Wayne Corum (5118) ATTACHMENTS http://apps.cfwnet.org/council packet/mc review.asn?ID=16206&(-,rnmc;IrintP=1/10001) C,11 7001 n