Exhibit 10.26
 
AutoZone, Inc.
2006 Stock Option Plan

STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT

AutoZone, Inc., a Nevada corporation (the “Company”), pursuant to its 2006 Stock
Option Plan (the “Plan”), hereby grants to the holder listed below
(“Participant”) an option (the “Option”) to purchase that number of shares of
the Company’s common stock, par value $.01 (“Stock”) set forth below. This
Option is subject to all of the terms and conditions set forth herein, in the
Stock Option Agreement attached hereto as Exhibit A (the “Stock Option
Agreement”) and the Plan, which are incorporated herein by reference. All
capitalized terms used in this Grant Agreement, but not defined, shall have the
meanings provided in the Plan.

Participant:
   
[____]
Grant Date:
   
[____]
 
Exercise Price per Share:
 
$
[____]
 
Total Number of Shares
    [____]
Subject to the Option:
   
[____]
 
Expiration Date:
   
[____]
 

Type of Option:o Incentive Stock Option  o Non-Qualified Stock Option

Vesting Schedule: The Option granted under this Agreement shall vest and become
exercisable in four (4) cumulative installments as follows:

(i) The first installment shall consist of one-fourth of the shares covered by
the Option and shall become exercisable on the first anniversary of the Grant
Date.

(ii) The second installment shall consist of one-fourth of the shares covered by
the Option and shall become exercisable on the second anniversary of the Grant
Date.

(iii) The third installment shall consist of one-fourth of the shares covered by
the Option and shall become exercisable on the third anniversary of the Grant
Date.

(iv) The fourth installment shall consist of one-fourth of the shares covered by
the Option and shall become exercisable on the fourth anniversary of the Grant
Date.]

By his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Stock Option Agreement and this Grant Notice.
Participant has reviewed the Stock Option Agreement, the Plan and this Grant
Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby
agrees to accept as binding, conclusive and final all discussions or
interpretations of the Committee upon any questions arising under the Plan or
relating to the Option.

        AUTOZONE, INC.     PARTICIPANT         By:     By:

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Print Name:
   

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Print Name:

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Title:
   

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EXHIBIT A TO STOCK OPTION GRANT NOTICE

STOCK OPTION AGREEMENT

 
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this
Stock Option Agreement (this “Agreement”) is attached, AutoZone, Inc., a Nevada
corporation (the “Company”), has granted to Participant an option under the
Company’s 2006 Stock Option Plan (the “Plan”) to purchase the number of shares
of Stock indicated in the Grant Notice.
 
ARTICLE I.

GENERAL
 
1.1 Defined Terms. Wherever the following terms are used in this Agreement they
shall have the meanings specified below, unless the context clearly indicates
otherwise. Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

(a) “Administrator” shall mean the Board or the Committee responsible for
conducting the general administration of the Plan in accordance with Article 8
of the Plan.

(b) “Cause” shall mean the willful engagement by Participant in conduct which is
demonstrably or materially injurious to the Company, monetarily or otherwise.
For this purpose, no act or failure to act by the Participant shall be
considered “willful” unless done, or omitted to be done, by the Participant not
in good faith and without reasonable belief that his action or omission was in
the best interest of the Company.

(c) “Termination of Employment” shall mean the time when the employee-employer
relationship between Participant and the Company or any Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death, disability or retirement; but
excluding terminations where there is a simultaneous reemployment or continuing
employment of Participant by the Company or any Subsidiary. The Administrator,
in its absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that, if this Option is an
Incentive Stock Option, unless otherwise determined by the Administrator in its
sole discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.

1.2 Incorporation of Terms of Plan. The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference. In the event
of any inconsistency between the Plan and this Agreement, the terms of the Plan
shall control.

ARTICLE II.

GRANT OF OPTION
 
2.1 Grant of Option. In consideration of Participant’s past and/or continued
employment with the Company or a Subsidiary and for other good and valuable
consideration, effective as of the Grant Date set forth in the Grant Notice (the
“Grant Date”), the Company irrevocably grants to Participant the Option to
purchase any part or all of an aggregate of the number of shares of Stock set
forth in the Grant Notice, upon the terms and conditions set forth in the Plan,
the Grant Notice and this Agreement. The Option shall be a Non-Qualified Stock
Option or an Incentive Stock Option, as designated in the Grant Notice and, in
the case of an Incentive Stock Option, as permitted by law.

2.2 Exercise Price. The exercise price of the shares of Stock subject to the
Option shall be as set forth in the Grant Notice, provided, however, that the
price per share of the shares of Stock subject to the Option shall not be less
than 100% of the Fair Market Value of a share of Stock on the Grant Date.
Notwithstanding the foregoing, if this Option is designated as an Incentive
Stock Option and Participant owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or any “subsidiary corporation” of the Company or any “parent
corporation” of the Company (each within the meaning of Section 424 of the
Code), the price per share of the shares of Stock subject to the Option shall
not be less than 110% of the Fair Market Value of a share of Stock on the Grant
Date.
 

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2.3 Consideration to the Company. In consideration of the grant of the Option by
the Company, Participant agrees to render faithful and efficient services to the
Company and its Subsidiaries, as applicable. Nothing in the Plan, the Grant
Notice or this Agreement shall confer upon Participant any right to continue in
the employ or service of the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and its Subsidiaries, which
rights are hereby expressly reserved, to discharge or terminate the services of
Participant at any time for any reason whatsoever, with or without Cause, except
to the extent expressly provided otherwise in a written agreement between the
Company or a Subsidiary and Participant.
 
ARTICLE III.
 
PERIOD OF EXERCISABILITY
 
3.1 Commencement of Exercisability.

(a) Subject to any limitations contained in this Stock Option Agreement, the
Option shall become vested and be exercisable in such amounts and at such times
as are set forth in the Grant Notice. Notwithstanding the exercise dates set
forth in the Grant Notice, the Option shall become immediately exercisable on
the date of Participant’s death.

(b) No portion of the Option which has not become vested and exercisable as of
Participant’s Termination of Employment shall thereafter become vested and
exercisable.

3.2 Duration of Exercisability. The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative. Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth
in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable pursuant to Section 3.3 below; provided, however, that no Option
which has not vested and become exercisable as of the date of a Participant’s
Termination of Employment shall thereafter vest and become exercisable.

3.3 Expiration of Option. The Option shall be forfeited and cancelled and may
not be exercised to any extent by anyone after the first to occur of the
following events:

(a) If this Option is designated as a Non-Qualified Stock Option, the expiration
of ten (10) years and one (1) day from the Grant Date;

(b) If this Option is designated as an Incentive Stock Option, the tenth
anniversary of the Grant Date;

(c) If this Option is designated as an Incentive Stock Option and, at the time
the Option was granted, Participant owned (within the meaning of Section 424(d)
of the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any “subsidiary corporation” of the Company or any
“parent corporation” of the Company (each within the meaning of Section 424 of
the Code), the fifth anniversary of the Grant Date;

(d) The expiration of thirty days from the date of Participant’s Termination of
Employment unless such Termination of Employment occurs by reason of (i)
Participant’s death, (ii) Participant’s retirement at normal retirement age, as
determined under the AutoZone, Inc. Associate’s Pension Plan, as it may be
amended from time to time (or, if such plan ceases to exist or be applicable, as
determined in the sole discretion of the Administrator) (in either case,
“Retirement”), or (iii) termination by the Company for Cause;

(e) The expiration of one year from the date of Participant’s Termination of
Employment by reason of Participant’s death;

(f) The commencement of business on the date of Participant’s Termination of
Employment by the Company for Cause; and

(g) The expiration of the term stated in the Grant Notice following
Participant’s Termination of Employment due to Retirement.
 

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3.4 Special Tax Consequences. Participant acknowledges that, to the extent that
the aggregate Fair Market Value (determined as of the time the Option is
granted) of all shares of Stock with respect to which Incentive Stock Options,
including the Option, are exercisable for the first time by Participant in any
calendar year exceeds $100,000, the Option and such other options shall instead
constitute Non-Qualified Stock Options to the extent necessary to comply with
the limitations imposed by Section 422(d) of the Code. Participant further
acknowledges that the rule set forth in the preceding sentence shall be applied
by taking the Option and other Incentive Stock Options into account in the order
in which they were granted, as determined under Section 422(d) of the Code and
the Treasury Regulations there under.
 
ARTICLE IV.

EXERCISE OF OPTION

4.1 Person Eligible to Exercise. Except as provided in Section 5.2(b) below,
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof. After the death of Participant, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3 above, be exercised by Participant’s personal representative or by
any person empowered to do so under the deceased Participant’s will or under
then-applicable laws of descent and distribution.

4.2 Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any
time prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3 above.

4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company (or any third party
administrator or other person or entity designated by the Administrator) of each
of the following prior to the time when the Option or such portion thereof
becomes unexercisable under Section 3.3 above:

(a) An exercise notice in a form specified by the Administrator, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator;
 
(b) The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding taxes, which may be in one or more of the forms of
consideration permitted under Section 4.4 below;

(c) Any other written representations as may be required in the Administrator’s
sole discretion to evidence compliance with any applicable law, rule or
regulation; and

(d) If the Option or portion thereof is exercised pursuant to Section 4.1 above
by any person or persons other than Participant, appropriate proof of the right
of such person or persons to exercise the Option, as determined in the sole
discretion of the Administrator.

Notwithstanding any of the foregoing, the Company shall have the right to
specify all conditions of the manner of exercise, which conditions may vary and
which may be subject to change from time to time in the sole discretion of the
Administrator.

4.4 Method of Payment. The Administrator shall determine the method(s) by which
the exercise price of the Option may be paid including, without limitation: (a)
cash, (b) shares of Stock having a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion
thereof, including shares of Stock that would otherwise be issuable or
transferable upon exercise of the Option, and/or (c) other property acceptable
to the Administrator (including through the delivery of a notice that the
Participant has placed a market sell order with a broker with respect to shares
of Stock then issuable upon exercise of the Option, and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price; provided that payment of
such proceeds is then made to the Company, at such time as may be required by
the Company, but not later than the settlement of such sale), and the methods by
which shares of Stock shall be delivered or deemed to be delivered to
Participants.
 

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4.5 Conditions to Issuance of Shares of Stock. The shares of Stock deliverable
upon the exercise of the Option, or any portion thereof, may be either
previously authorized but unissued shares of Stock or issued shares of Stock
which have then been reacquired by the Company. The Company shall not be
required to issue or deliver any shares of Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following
conditions:

(a) The admission of such shares of Stock to listing on all stock exchanges on
which such Stock is then listed;

(b) The completion of any registration or other qualification of such shares of
Stock under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Administrator shall, in its sole discretion, deem necessary or
advisable;

(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its sole discretion,
determine to be necessary or advisable;

(d) The receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or more
of the forms of consideration permitted under Section 4.4 above; and

(e) The lapse of such reasonable period of time following the exercise of the
Option as the Administrator may from time to time establish for reasons of
administrative convenience.

4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any
shares of Stock purchasable upon the exercise of any part of the Option unless
and until such shares of Stock shall have been issued by the Company to such
holder (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company). No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
shares of Stock are issued, except as provided in Section 7.1 of the Plan.
 
ARTICLE V.

OTHER PROVISIONS

5.1 Administration. The Administrator shall have the power to interpret the
Plan, the Grant Notice and this Option Agreement and to adopt such rules for the
administration, interpretation and application of the Plan, the Grant Notice and
this Option Agreement as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Administrator in good faith shall be final and
binding upon Participant, the Company and all other interested persons. No
member of the Committee or the Board or any delegate thereof shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, the Grant Notice or this Option Agreement.

5.2 Option Not Transferable.

(a) Subject to Section 5.2(b), no right or interest of Participant in the Option
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Company or a Subsidiary, or shall be subject to any lien, obligation,
or liability of Participant to any other party other than the Company or a
Subsidiary. Except as otherwise provided by the Administrator, the Option shall
not be assigned, transferred, or otherwise disposed of by Participant other than
by will or the laws of descent and distribution.

(b) After the death of Participant, any exercisable portion of the Option may,
prior to the time when the Option becomes unexercisable under Section 3.3 above,
be exercised by Participant’s personal representative or by any person empowered
to do so under the deceased Participant’s will or under then-applicable laws of
descent and distribution.
 

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5.3 Adjustments. Participant acknowledges that the Option is subject to
modification and termination upon the occurrence of certain events as provided
in this Agreement and in Article 7 of the Plan.
 
5.4 Notices. Any notice to be given in connection with the this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the
Company at the address given beneath the signature of the Company’s authorized
officer on the Grant Notice, and any notice to be given to Participant shall be
addressed to Participant at the most current address on file with the Company’s
Human Resources department. By a notice given pursuant to this Section 5.4,
either party may hereafter designate a different address for notices to be given
to that party. Any notice which is required to be given to Participant shall, if
Participant is then deceased, be given to the person entitled to exercise his or
her Option pursuant to Section 4.1 above. Any notice shall be deemed duly given
on the date hand-delivered, on the day following deposit with a reputable
overnight carrier, or two days after such notice is sent by certified mail
(return receipt requested), in any case, to the addresses specified herein.

5.5 Captions. Captions are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.

5.6 Governing Law; Severability. The laws of the State of Nevada shall govern
the interpretation, validity, administration, enforcement and performance of the
terms of this Agreement without reference to the conflicts of laws principles
thereof.

5.7 Conformity to Securities Laws. Participant acknowledges that the Plan and
the Option are intended to conform to the extent necessary with all applicable
federal, state, local and foreign securities laws and any and all official
interpretations, regulations and rules promulgated there under. Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as conforms to such laws,
rules and regulations. To the extent permitted by applicable law, the Plan and
the Option shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

5.8 Amendments, Suspension and Termination. Participant acknowledges that the
Plan and the Option are subject to amendment, suspension and/or termination as
provided in Article 10 of the Plan.

5.9 Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth in Section 5.2 above, this Agreement
shall be binding upon Participant and his or her heirs, executors,
administrators, successors and assigns.

5.10 Notification of Disposition. If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any
disposition or other transfer of any shares of Stock acquired under this
Agreement if such disposition or transfer is made (a) within two years after the
applicable Grant Date, or (b) within one year after Participant exercises the
Option. Such notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of indebtedness or
other consideration, by Participant in such disposition or other transfer.

5.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Grant Notice or this Agreement, if Participant is
subject to Section 16 of the Exchange Act, then the Plan, the Grant notice and
this Agreement shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

5.12 Not a Contract of Employment. Nothing in this Agreement or in the Plan
shall confer upon Participant any right to continue to serve as an employee or
other service provider of the Company or any of its Subsidiaries.
 

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5.13 Entire Agreement. The Plan, the Grant Notice and this Agreement (including
all Exhibits thereto) constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Participant with respect to the subject matter hereof.

5.14 Section 409A. Without limiting the generality of Section 1.2 above, Section
11.14 of the Plan regarding Code Section 409A is hereby expressly incorporated
by reference by reference into this Agreement.
 

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