AUTOZONE, INC. Director Stock Option Plan


EXHIBIT 10.3

AUTOZONE, INC.

SECOND

AMENDED AND RESTATED

1998 DIRECTOR STOCK OPTION PLAN


            This
Second Amended and Restated 1998 Director Stock Option Plan shall be effective
as of the 21st day of March, 2000, the date of its adoption
by the Board of Directors of AutoZone, Inc.

1. PURPOSE OF THE PLAN.

            Under
this 1998 Director Stock Option Plan (the "Plan) of AutoZone, Inc. (the
"Company"), non-qualified options to purchase shares of the Company's capital
stock shall be granted to Non-Employee Directors of the Company. The Plan
is designed to enable the Company to attract and retain Non-Employee Directors
of the highest caliber and experience, and to increase their ownership
of the Company's capital stock.

2. STOCK SUBJECT TO PLAN.

            The
maximum number of shares of stock for which options ("Options") granted
hereunder may be exercised shall be 70,000 shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), subject to the adjustments
provided in Section 7. All shares of stock subject to Options shall be
treasury shares of Common Stock. Shares of stock subject to the unexercised
portions of any Options which expire or terminate or are canceled may again
be subject to Options granted hereunder.

3. PARTICIPATING DIRECTORS.

            Each
member of the Board of Directors of the Company (the "Board") who is not,
at the time that eligible directors are granted Options pursuant to Section
5 hereof, an employee or officer of the Company or any of its subsidiaries
(a "Non-Employee Director"), shall be eligible to participate in the Plan.

4. ADMINISTRATION.

(a) The Plan shall be administered by a committee (the "Committee")
which shall consist of two or more directors who are not Non-Employee Directors,
appointed by and holding office at the pleasure of the Board. Appointment
of Committee members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering written notice to
the Board. Vacancies on the Committee shall be filled by the Board.
(b) It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have
the power to interpret the Plan and the Options and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
The Board shall have no right to exercise any of the rights or duties of
the Committee under the Plan.

(c) The Committee shall act by a majority of its members in office.
The Committee may act either by vote at a meeting or by a memorandum or
other written instrument signed by a majority of the Committee.

(d) All expenses and liabilities incurred by members of the Committee
in connection with the administration of the Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons, and the Committee, the Company and
its officers and directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons. All actions taken and all interpretations
and determinations made by the Committee in good faith shall be final and
binding on each Non-Employee Director who has been granted an Option hereunder
(sometimes referred to hereinafter as an "Optionee"), the Company and all
other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith
with respect to the Plan or the Options, and all members of the Committee
shall be fully protected by the Company with respect to any such action,
determination or interpretation.

5. GRANT OF OPTIONS.

        During the existence of the
Plan, Options shall be granted as follows:

(a) On January 1 of each year, each Non-Employee Director as of such
date shall be granted an Option to purchase 1,500 shares of Common Stock
(subject to the adjustments provided in Section 7); provided, however,
that (i) with respect to the calendar year beginning January 1, 1998, each
Non-Employee Director who is an Non-Employee Director on the effective
date of the Plan shall be granted an Option to purchase 1,000 shares of
Common Stock (subject to the adjustments provided in Section 7) as of the
effective date of the Plan, and (ii) each new Non-Employee Director who
is elected a director after January 1, 2000, shall be granted an initial
Option to purchase 3,000 shares of Common Stock as of the date of his or
her election as a director and a pro-rata portion of that year's annual
grant set forth in (i);
(b) Beginning on January 1, 2001, and on each January 1 thereafter,
each Non-Employee Director who, as of December 31 of the prior year, beneficially
owns shares of Common Stock having an aggregate Fair Market Value (as determined
below) greater than or equal to five (5) times such Non- Employee Director's
annual director fee (not including meeting fees) payable by the Company
for such year, shall be granted an Option to purchase 1,500 shares of Common
Stock (subject to the adjustments provided in Section 7). For purposes
of this Plan, the "Fair Market Value" of a share of Common Stock shall
mean, as to any particular day, the average of the highest and lowest prices
quoted for a share of Common Stock trading on the New York Stock Exchange
on that day, or if no such prices were quoted for the shares of Common
Stock on the New York Stock Exchange for that day for any reason, the average
of the highest and lowest prices quoted on the last Business Day (as defined
below) on which prices were quoted. The highest and lowest prices for the
shares of Common Stock shall be those published in the edition of The Wall
Street Journal or any successor publication for the next Business Day.
For purposes of this Plan, the term "Business Day' shall mean a day on
which the Company's executive offices in Memphis, Tennessee, are open for
business and on which trading is conducted on the New York Stock Exchange.

(c) Each Non-Employee Director as of March 21, 2000, shall be granted
an Option to purchase 500 shares of Common Stock (subject to the adjustments
provided in Section 7) as of such date.

            Notwithstanding
any other provision of the Plan, no Option shall be granted unless sufficient
shares (subject to said adjustments) are then available therefor under
Sections 2 and 7. In consideration of the granting of an Option, the Optionee
shall be deemed to have agreed to remain as a Director of the Company for
a period of at least one year after the date upon which the Option was
granted (the "date of grant"). Nothing in the Plan shall, however, confer
upon any Optionee any right to continue as a director of the Company or
shall interfere with or restrict in any way the rights of the Company or
the Company's stockholders, which are hereby expressly reserved, to remove
any Optionee at any time for any reason whatsoever, with or without cause,
to the extent permitted by the Company's bylaws and applicable law.

6. OPTION PROVISIONS.

            Each
Option shall be evidenced by an agreement between the Company and the Non-Employee
Director and shall contain the following terms and provisions, and such
other terms and provisions as the Committee may authorize:

(a) The exercise price of each Option shall be equal to the aggregate
Fair Market Value of the shares of Common Stock subject to the Option on
the date of grant;
(b) Payment for shares of Common Stock purchased upon any exercise of
the Option shall be made in full at the time of such exercise (i) in cash,
(ii) by delivery of shares of Common Stock already owned by the Optionee,
duly endorsed for transfer to the Company, (iii) by delivery of a notice
that the Optionee has placed a market sell order with a broker approved
by the Company with respect to shares of Common 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, or (iv) by a combination of any of the foregoing
methods of payment. For purposes of exercising the Option, the value of
any shares of Common Stock delivered in payment shall be the Fair Market
Value of such shares of Common Stock on the last Business Day prior to
deliver;

(c) Subject to subsection (d) below and Section 7 hereof, the Option
shall become fully vested and exercisable on the third anniversary of the
date of grant;

(d) The Option shall terminate and may not be exercised to any extent
by anyone after the first to occur of the following events:

(i) the expiration of ten years from the date of grant;
(ii) the expiration of five years from the date upon which the Non-Employee
Director ceases to be a director of the Company if the Non-Employee Director
has reached the age of 70 on or before such date ("Normal Retirement Age");

(iii) the expiration of 90 days from the date of the Non-Employee Director's
death;

(iv) the date that the Non-Employee Director ceases to be a director
of the Company (for a reason other than the death of the Non-Employee Director)
if the Non-Employee Director has not reached Normal Retirement Age;

(v) subject to Section 7(b) hereof, the effective date of a Corporate
Transaction (as defined below), unless the Committee waives this provision
in connection with such transaction.

 

In the event that a Non-Employee Director ceases to be a director of the
Company prior to the time that the Option has become vested and exercisable
pursuant to subsection (c) above, the Option shall continue to vest and
become exercisable pursuant to subsection (c) above until such time as
the Option terminates pursuant to this subsection (d).

(e) Notwithstanding any other provision herein, the Option may not be
exercised prior to the admission of the shares of stock issuable upon exercise
of the Option to listing on notice of issuance on any stock exchange on
which shares of the same class are then listed; nor unless and until, in
the opinion of counsel for the Company, such securities may be issued and
delivered without causing the Company to be in violation of or incur any
liability under any Federal, state or other securities law, any requirement
of any securities exchange listing agreement to which the Company may be
a party, or any other requirement of law or of any regulatory body having
jurisdiction over the Company; and

(f) The Option shall not be transferable by the Optionee other than
by will or the laws of descent and distribution, may not be pledged or
hypothecated, and shall be exercisable during the Optionee's lifetime only
by the Optionee or by his or her guardian or legal representative.

7. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR LIQUIDATION
OF THE COMPANY AND OTHER CORPORATE EVENTS.

(a) Subject to subsection (d) below, in the event that the Committee
determines that any dividend or other distribution (whether in the form
of cash, Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin- off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited
to, a Corporate Transaction, as defined below), or exchange of Common Stock
or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion, affects
the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits
intended to be made available under the Plan or with respect to any Option,
then the Committee shall, in such manner as it may deem equitable, adjust
any or all of:

 
(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options may be granted under the Plan
(including, but not limited to, adjustments of the limitations in Section
2 on the maximum number and kind of shares which may be issued under the
Plan);
(ii) the number and kind of shares of Common Stock (or other securities
or property) subject to outstanding Options; and

(iii) the grant or exercise price with respect to any Option.

 

(b) Subject to subsection (d) below, in the event of any Corporate Transaction
(as defined below), the Plan shall terminate, and all outstanding Options
shall terminate, unless provisions shall be made in writing in connection
with such Corporate Transaction for the continuance of the Plan and/or
for the assumption of Options theretofore granted, or the substitution
for such Options of options covering the stock of a successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. If the Plan and unexercised Options would otherwise terminate
pursuant to the foregoing sentence, then, for such period of time prior
to the consummation of such Corporate Transaction as the Company shall
designate, all outstanding Options shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in Section 6(c)
hereof or the provisions of such Option;

(c) For purposes of the Plan, the term "Corporate Transaction" shall
mean any of the following stockholder-approved transactions to which the
Company is a party:

 

(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change
the State in which the Company is incorporated, form a holding company
or effect a similar reorganization as to form whereupon this Plan and all
Options are assumed by the successor entity;
(ii) the sale, transfer, exchange or other disposition of all or substantially
all of the assets of the Company, in complete liquidation or dissolution
of the Company in a transaction not covered by the exceptions to clause
(i) above; or

(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.

 

(d) No adjustment or action described in this Section 7 shall be authorized
or occur to the extent such adjustment or action would result in short-swing
profits liability under Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or violate the exemptive conditions of
Rule 16b-3 of the Exchange Act unless the Committee determines that the
Option is not to comply with such exemptive conditions.

8. TAX WITHHOLDING.

            The
Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Optionee of any sums required by federal,
state or local tax laws to be withheld with respect to the issuance, vesting
or exercise of any Option. The Committee may in its discretion and in satisfaction
of the foregoing requirement allow such Optionee to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Option (or
allow the return of shares of Common Stock) having an aggregate Fair Market
Value equal to the sums required to be withheld.

9. LOANS.

            The
Committee may, in its absolute discretion, extend one or more loans to
Optionees in connection with the exercise of an Option. The terms and conditions
of any such loan shall be set by the Committee.

10. DURATION, TERMINATION AND AMENDMENT OF PLAN.

            The
Plan shall become effective upon its adoption by the Board. Unless sooner
terminated, the Plan shall expire ten (10) years from the date the Plan
is adopted by the Board, so that no Option may be granted hereunder after
that date although any option outstanding on that date may thereafter be
exercised in accordance with its terms. The Board may alter, amend, suspend
or terminate this Plan, provided that no such action shall deprive an Optionee,
without his or her consent, of any Option previously granted pursuant to
the Plan or of any of the Optionee's rights under such Option.

11. COMPLIANCE WITH LAWS.

            This
Plan, the granting and vesting of Options under this Plan and the issuance
and delivery of shares of Common Stock and the payment of money under this
Plan or under Options granted hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including
but not limited to state and federal securities laws and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary
or advisable in connection therewith. Any securities delivered under this
Plan shall be subject to such restriction, and the person acquiring such
securities shall, if requested by the Company, provide such assurances
and representations to the Company as the Company may deem necessary or
desirable to assure compliance with all applicable legal requirements.
To the extent permitted by applicable law, the Plan and Options granted
or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules or regulations.

12. TITLES.

            Titles
are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of this Plan.

13. GOVERNING LAW.

            This
Plan and any agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of Nevada without regard
to the conflicts of laws rules thereof.