EXHIBIT 10.31
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
by and among
FS EQUITY PARTNERS IV, L.P.,
RIPPLEWOOD PARTNERS, L.P.,
RIPPLEWOOD ADVANCE AUTO PARTS
EMPLOYEE FUND I L.L.C.,
XXXXXXXX X. XXXXXXX,
THE XXXXXX XXXXXXX TRUST DATED JULY 13, 1964,
WA HOLDING CO.
AND
ADVANCE HOLDING CORPORATION
November 2, 1998
TABLE OF CONTENTS
Page
1. Definitions................................................................. 2
2. Rights Upon Issuance of Additional Securities............................... 5
2.1 Issuance Notice........................................................ 5
2.2 Response Notice........................................................ 5
2.3 Revised Issuance Notice................................................ 5
2.4 Pro Rata Share......................................................... 5
2.5 Termination and Assignment............................................. 6
3. Transfer of Shares by FS Stockholder, Sears Stockholder or Ripplewood
Stockholder; Rights of Inclusion............................................ 6
3.1 Right of Inclusion..................................................... 6
3.2 Third-Party Offer...................................................... 7
3.3 Allocation of Included Shares.......................................... 9
3.4 Consummation........................................................... 10
3.5 Termination and Assignment............................................. 11
4. Obligation to Sell Securities............................................... 12
4.1 Sale Obligation........................................................ 12
4.2 Termination and Assignment............................................. 12
5. Restrictions on Transfers of Securities; Right of First Offer............... 13
5.1 Transfer Restrictions.................................................. 13
5.2 Right of First Offer................................................... 16
5.3 Termination and Assignment............................................. 19
5.4 Taubman Option and Option Shares....................................... 19
6. Registration Rights; Acquisitions of Common Stock. ......................... 19
6.1 Registration Rights. .................................................. 19
6.2 Acquisition of Common Stock. .......................................... 20
7. Representation on the Board of Directors ................................... 20
7.1 The Board ............................................................. 20
7.2 Approval Right ........................................................ 21
7.3 Certain Actions of the Board .......................................... 22
7.4 Termination and Assignment ............................................ 25
8. Certain Covenants of the Company ......................................... 25
8.1 Audited Financial Statements ........................................ 25
8.2 Other Financial Information ........................................ 25
i
TABLE OF CONTENTS (continued)
Page
9. Copy of Agreement ...................................................... 26
10. Governing Law .......................................................... 26
11. Representations and Warranties ......................................... 26
12. Amendment and Waiver; Successors; After Acquired Shares ................ 26
13. Interpretation ......................................................... 27
14. Notices ................................................................ 27
15. Legends ................................................................ 27
16. Further Assurances ..................................................... 28
17. Injunctive Relief; Disputes ............................................ 28
18. Severability ........................................................... 29
19. Entire Agreement ....................................................... 29
20. Counterparts ........................................................... 29
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SCHEDULE 1 Ownership of Capital Stock by Stockholders Upon Consummation
of Transactions Contemplated by Merger Agreement ............... 32
EXHIBIT A Terms of the Registration Rights of the Common Stock .......... A-1
EXHIBIT B Irrevocable Proxy ............................................. B-1
ii
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement") is made
and entered into as of November 2, 1998 by and among Advance Holding
Corporation, a Virginia corporation (the "Company"), FS Equity Partners IV,
L.P., a Delaware limited partnership ("FSEP IV" or the "FS Stockholder"),
Ripplewood Partners, L.P. ("Ripplewood Partners"), Ripplewood Advance Auto Parts
Employee Fund I L.L.C. ("Ripplewood Employee Fund" and, together with Ripplewood
Partners, the "Ripplewood Stockholder"), Xxxxxxxx X. Xxxxxxx and the Xxxxxx
Xxxxxxx Trust dated July 13, 1964 (the "Trust") (Xx. Xxxxxxx and the Trust
collectively, the "Existing Stockholders" and each individually, an "Existing
Stockholder") and WA Holding Co., a Delaware corporation (the "Sears
Stockholder").
RECITALS
A. The Existing Stockholders, the FS Stockholder, Ripplewood Stockholder
and the Company entered into this Agreement effective as of April 15, 1998, to
establish certain rights, obligations and restrictions with respect to the
securities of the Company owned by them.
B. Pursuant to an Agreement and Plan of Merger dated as of August 16,
1998, by and among Sears, Xxxxxxx and Co., the Sears Stockholder, the Company,
Western Auto Supply Company, Advance Acquisition Corporation ("Newco"), Advance
Stores Company, Incorporated and certain stockholders of the Company, (i)
Western Auto Supply Company will merge with and into Newco with Newco as the
surviving corporation, and in partial consideration for the shares of Western
Auto Supply Company converted as a result of said merger Sears Stockholder will
receive from Newco that number of shares of Common Stock of the Company shown on
Schedule 1 to this Agreement and (ii) FS Stockholder, Ripplewood Stockholder and
Existing Stockholder will purchase additional shares of Common Stock of the
Company so that their total ownership of the Common Stock will be as shown on
Schedule 1 hereto.
C. In connection with the transactions contemplated by the Merger
Agreement, and as a condition to consummation of the transactions contemplated
thereby, the parties wish to amend and restate this Agreement to add Sears
Stockholder as a party and to further establish certain rights, obligations and
restrictions with respect to the securities of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
-----------
terms shall have the following meanings:
Additional Securities: All Securities which are issued and sold by
---------------------
the Company other than (i) the Initial Shares, (ii) any Securities issued or
issuable to all of the holders of Common Stock then outstanding on a
proportionate basis, (iii) any Securities issued or issuable to any Employees
pursuant to any equity incentive plan, individual agreement, bonus, award, stock
purchase plan, stock option plan or other stock agreement or arrangement which
in each event is approved by the Board (a "Benefit Plan"), (iv) any Securities
issued in exchange for debt securities of the Company or any Subsidiary,
provided, that the overall terms of the exchange transaction are fair and in the
best interests of the Company as determined in reasonable good faith by the
Board, and provided, further, that if a Stockholder or its Affiliates own debt
Securities being exchanged, all other Stockholders owning such debt securities
being exchanged shall have the right to participate in such exchange on the same
terms as the other Stockholders or their Affiliates, (v) any Securities issued
to any source of, or to any party arranging, financing for the Company or any
Subsidiary of the Company, provided, that the overall terms of the financing
transaction involving the issuance of debt and Securities are fair and in the
best interests of the Company as determined in reasonable good faith by the
Board and provided, further, in the event any Stockholder or any of its
Affiliates are participating in or providing such financing, that the other
Stockholders have the opportunity to participate in such financing and, if they
so participate, to purchase or otherwise receive on the same terms their Pro
Rata Share (as defined in Section 2.4) of any Securities (vi) any Securities
issued pursuant to a public offering registered under the Securities Act, (vii)
any Securities that are issued or issuable in connection with the acquisition by
the Company or a Subsidiary of any business, business assets or securities from
any Person, provided, that such Securities are not issued for less than their
fair market value, as determined in good faith by the Board and (viii) any
Securities that are issued or issuable upon the exercise of rights, options or
warrants to purchase Securities, or upon the conversion or exchange of
Securities convertible into or exchangeable for Securities, including the Option
Shares. Notwithstanding the foregoing, if Securities are issued to any
Stockholder(s) to finance an acquisition, such Securities shall be Additional
Securities.
Affiliate: Such term shall have the meaning given to such term
---------
pursuant to Rule 12b-2 of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934, as amended.
Board: The Board of Directors of the Company.
-----
Business means the sale of automotive parts and accessories at retail
--------
or wholesale or by catalog and the rendering of services relating thereto,
including, without limitation, carrying on or participating in the business of
any chain of automotive service facilities, supplying a dealer network with
automotive parts and accessories, or any wholesale or catalog operation or
retail chain that is engaged as a significant line of business in the
distribution or sale of automotive parts or accessories or rendering services
relating thereto.
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Common Stock: The Class A Common Stock, par value $0.01 per share, of
------------
the Company.
Employee: Any employee, independent director or consultant of the
--------
Company or any Subsidiary of the Company.
Existing Stockholders: Xxxxxxxx X. Xxxxxxx and the Trust.
---------------------
FS Principals: Xxxx X. Xxxxx, Xxxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxx,
-------------
J. Xxxxxxxxx Xxxxxxx, Xxxxxx X. Xxxxxx, Xxx X. Xxxxx, Xxxx X. Xxxx, Xxxxxxx X.
Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx.
Initial Shares: Shall mean the 27,436,318 shares of Common Stock
--------------
issued and outstanding on the date hereof and held beneficially and of record by
the Stockholders as set forth on Schedule 1, and any Option Shares shown on
Schedule 1.
Option Shares: Any shares of Common Stock issued pursuant to the
-------------
exercise of the Taubman Option.
Permitted Transferee: Permitted Transferee shall mean, (w) with
--------------------
respect to any Stockholder, a controlled Affiliate which shall include any
corporation, investment fund or partnership that is (i) a controlled Affiliate
of such Stockholder or (ii) with respect to the FS Stockholder, organized and
controlled by three or more of the FS Principals or (iii) with respect to the
Ripplewood Stockholder, organized and controlled by Xxxxxxx X. Xxxxxxx or (iv)
with respect to Stockholder, includes Sears, Xxxxxxx and Co. or any controlled
Affiliate thereof, (x) with respect to the FS Stockholder, for the period ending
one year from the date of this Agreement, any institutional investor, merchant
banking firm, or institutional limited partner of an FS Stockholder who
purchases shares from FS Stockholder within one year from the date hereof (an
"Unaffiliated Permitted Transferee"), provided that the number of Shares of
Common Stock transferred to such Unaffiliated Permitted Transferee would not
cause the FS Stockholder (in the aggregate) to own less than 25% of the Common
Stock, grant any approval rights over major transactions or to transfer any
other rights except in compliance with this Agreement, and provided, further,
that such Unaffiliated Permitted Transferee delivers an undertaking binding upon
such Unaffiliated Permitted Transferee reasonably satisfactory to the Sears
Stockholder, Ripplewood Stockholder, Xx. Xxxxxxx and their respective counsel to
be bound by all obligations of the FS Stockholder hereunder, except those
explicitly made not binding in this Agreement upon such Unaffiliated Permitted
Transferee, (y) with respect to the Trust, the beneficiaries of the Trust (the
"Trust Transferees"), subject to Section 5.1, and (z) with respect to Xx.
Xxxxxxx and any Permitted Transferee of the Trust pursuant to clause (y) or
their respective Permitted Transferees that are individual persons (an
"Individual Stockholder"), (i) such Individual Stockholder's spouse, children,
grandchildren or other living descendants, or a trust or family partnership of
which there are no principal (i.e., corpus) beneficiaries or partners other than
the grantor or one or more of such Individual Stockholder, the Individual
Stockholder's
3
spouse or described relatives and provided, in the case of a trust, that the
existing beneficiaries and/or trustee(s) and/or grantor(s) of such trust have
the power to act with respect to the trust's assets without court approval and,
in the case of a family partnership, that the partners thereof have the power to
act with respect to the partnership's assets without court approval and the
partnership is not permitted to (a) distribute assets to Persons who are not
among the relatives listed above or (b) have partners who are not among the
relatives listed above or (ii) a legal representative of such Individual
Stockholder in the event such Individual Stockholder becomes mentally
incompetent or to such Individual Stockholder's personal representative
following the death of such Individual Stockholder. No person shall be deemed a
Permitted Transferee if a transfer to such person would be an event defined as a
"change of control" in either the indenture governing the Company's Senior
Discount Debentures or the indenture governing Advance Stores Company,
Incorporated's Subordinated Debentures, each as in existence on the date hereof
and to the extent the same remain in effect (a "Change in Control Event").
Person: Any individual, corporation, entity, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
Public Market Sale: Any sale of Common Stock after the Initial Public
------------------
Offering which is made pursuant to Rule 144 promulgated by the SEC under the
Securities Act or which is made pursuant to a registration statement filed with
and declared effective by the SEC.
Public Offering: A public offering of shares of Voting Securities of
---------------
the Company registered under the Securities Act, but shall not include an
offering registered on Form S-4 or Form S-8 (or any substitute form that is
adopted by the SEC). The term "Initial Public Offering" shall mean an
underwritten Public Offering of Voting Securities which results in gross
proceeds to the Company in excess of $25 million from the sale of Voting
Securities.
SEC: The Securities and Exchange Commission.
---
Securities: Shall mean (i) Voting Securities, (ii) all rights,
----------
options, warrants to purchase such Voting Securities or the securities described
in the following clause and (iii) all other securities or capital stock of any
type whatsoever, including, without limitation, (A) non-voting common stock,
preferred stock, debt securities and securities that are, or may become,
convertible into or exchangeable for, or that entitle the holder to purchase,
Voting Securities and (B) preferred stock.
Securities Act: The Securities Act of 1933, as amended.
--------------
Stockholders: The FS Stockholder, the Sears Stockholder, the
------------
Ripplewood Stockholder and the Existing Stockholders.
Subsidiary: With respect to any Person, a corporation or other entity
----------
of which a majority of the shares of stock or other ownership interests are
owned, directly or indirectly, by
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such Person.
Taubman Option: The options to purchase 500,000 shares of Common
--------------
Stock as described in the option agreements dated as of April 15, 1998 ("Option
Agreements") issued one-half to Xxxxxxxx X. Xxxxxxx and one-half to the Trust by
the Company, as described in the Option Agreements.
Voting Securities: All Securities of the Company which possess
-----------------
general voting power to elect members of the Board (not including, unless the
context dictates otherwise, any options or warrants to purchase, or non-voting
securities convertible into, Voting Securities).
2. Rights Upon Issuance of Additional Securities. The Company
---------------------------------------------
hereby grants to each Stockholder the following rights with respect to
any and all proposed issuances or sales of Additional Securities by
the Company:
a. Issuance Notice. The Company shall give each
---------------
Stockholder written notice of the Company's intention to
issue and sell Additional Securities (the "Issuance
Notice"), describing the type of Additional Securities, the
price at which the Additional Securities will be issued and
sold and the general terms upon which the Company proposes
to issue and sell the Additional Securities, including the
anticipated date of such issuance or sale.
b. Response Notice. Each Stockholder shall have 30 days
---------------
from the date the Issuance Notice is received to agree to
purchase all or any portion of its Pro Rata Share (as
defined below in Subsection 2.4) of such Additional
Securities by giving written notice to the Company of its
desire to purchase Additional Securities (the "Response
Notice") and stating therein the quantity of Additional
Securities to be purchased. Such Response Notice shall
constitute the irrevocable agreement of such Stockholder to
purchase the quantity of Additional Securities indicated in
the Response Notice at the price and upon the terms stated
in the Issuance Notice. Any purchase by Stockholders of
Additional Securities shall be consummated on the later (i)
the closing date specified in the Issuance Notice or (ii)
the closing date on which Additional Securities described in
the applicable Issuance Notice are first issued and sold if
other Persons are also purchasing Additional Securities.
Each Stockholder that has elected to purchase its Pro Rata
Share of Additional Securities will have the right to
purchase all or any portion of the Additional Securities
unsubscribed for by the other Stockholders, up to its pro
rata share of such unsubscribed portion (determined by the
number of Voting
5
Securities owned by the party or parties who elect to
purchase such unsubscribed for portion) if oversubscribed.
c. Revised Issuance Notice. The Company shall have 120
-----------------------
days from the date of the Issuance Notice to consummate the
proposed issuance and sale of the Additional Securities that
are not being purchased by Stockholders at a price and upon
the terms that are not materially less favorable to the
Company than those specified in the Issuance Notice. If the
Company proposes to issue Additional Securities after such
120-day period or at a price and upon terms that are
materially less favorable to the Company than those
specified in the Issuance Notice it must again comply with
this Section 2.
d. Pro Rata Share. For purposes of this Section 2, the
--------------
Pro Rata Share of a Stockholder shall be a fraction, (i) the
numerator of which shall be the total number of shares of
Voting Securities then held by the Stockholder and (ii) the
denominator of which shall be the total number of shares of
Voting Securities then issued and outstanding and held by
parties to this Agreement.
e. Termination and Assignment. The rights provided to
--------------------------
each of the Stockholders under this Section 2 shall
terminate upon the later to occur of (i) the 180th day after
the consummation of an Initial Public Offering and (ii) such
time as less than 50% of the outstanding Common Stock is
held by the Stockholders and their Permitted Transferees
(the later of such times described in clauses (i) or (ii)
referred to herein as a "Liquidity Event"). A Stockholder's
rights under this Section 2 will terminate after such
Stockholder has transferred a number of Voting Securities
which represents 50% or more of the number of Voting
Securities (including the Common Stock purchasable upon
exercise of Existing Stockholders' options to acquire Voting
Securities under the Taubman Option and as appropriately
adjusted for any stock split, recapitalization or similar
transaction) held by such Stockholder on the date hereof
other than transfers to a Permitted Transferee or permitted
assignee. For purposes of the immediately preceding sentence
(i) Ripplewood Partners and Ripplewood Employee Fund shall
be deemed to be one Stockholder and (ii) the Existing
Stockholders shall be deemed to be one Stockholder. The
rights granted under this Section 2 shall not be assignable;
provided, however that a Stockholder may assign its rights
under this Section 2 relating to the shares which it is then
transferring to a
6
Permitted Transferee or any purchaser in a private
transaction of more than 25% of the shares of Common Stock
then held by such Stockholder (with (i) Ripplewood Partners
and Ripplewood Employee Fund and (ii) the Existing
Stockholders, each considered collectively for this
purpose).
3. Transfer of Shares by FS Stockholder, Sears Stockholder or
----------------------------------------------------------
Ripplewood Stockholder; Rights of Inclusion.
-------------------------------------------
a. Right of Inclusion.
------------------
i. The FS Stockholder agrees not to Transfer (as defined in
Section 5.1) all or any portion of the shares of Common Stock it
holds to any Person (individually, a "Third Party" and,
collectively, "Third Parties") unless the Sears Stockholder, the
Ripplewood Stockholder and each Existing Stockholder are given an
opportunity to sell to the Third Party such number of shares of
Common Stock owned by the Sears Stockholder, the Ripplewood
Stockholder and such Existing Stockholder as is determined in
accordance with Subsection 3.3 of this Section 3; provided,
--------
however, that the Sears Stockholder, the Ripplewood
-------
Stockholder and the Existing Stockholders shall have no rights
pursuant to this Section 3 with respect to Transfers by the FS
Stockholder or a Permitted Transferee of the FS Stockholder of
Common Stock to (i) any Permitted Transferee of the FS
Stockholder or Permitted Transferees of such Permitted Transferee
(except Transfers either to an Unaffiliated Permitted Transferee
(x) more than one year after the date hereof or (y) prior to one
year after the date hereof if after such Transfer, FS Stockholder
would own less than 25% of the Common Stock or would have granted
any approval rights over major corporate transactions or would
have transferred rights not in compliance with this Agreement) or
(ii) to any limited or general partner or employee of the FS
Stockholder or any Permitted Transferee of the FS Stockholder in
a transaction constituting either (x) a distribution or (y) on
isolated sale of less than 5% of the Common Stock for employment
incentive purposes.
ii. The Sears Stockholder agrees not to Transfer (as defined in
Section 5.1) all or any portion of the shares of Common Stock it
holds to any Person (individually, a "Third Party" and,
collectively, "Third Parties") unless the FS Stockholder, the
Ripplewood Stockholder and each Existing Stockholder are given an
opportunity to sell to the Third Party such number of shares of
Common Stock owned by the FS Stockholder, the Ripplewood
Stockholder and such Existing Stockholder as is determined in
accordance with Subsection 3.3 of this Section 3; provided,
--------
7
however, that the FS Stockholder, the Ripplewood Stockholder and
-------
the Existing Stockholders shall have no rights pursuant to this
Section 3 with respect to Transfers by the Sears Stockholder or a
Permitted Transferee of the Sears Stockholder of Common Stock to
any Permitted Transferee of the Sears Stockholder or Permitted
Transferees of such Permitted Transferee.
iii. The Ripplewood Stockholder agrees not to Transfer (as
defined in Section 5.1) all or any portion of the shares of
common stock it holds to any third party unless the FS
Stockholder is given an opportunity to sell to the third party
such number of shares of Common Stock owned by the FS Stockholder
as is determined in accordance with subsection 3.3 of this
Section 3; provided, however, that the FS Stockholder shall have
no rights pursuant to the Section 3 with respect to Transfers by
the Ripplewood Stockholder to any Permitted Transferee of the
Ripplewood Stockholder. To the extent the FS Stockholder
exercises its rights under this Section 3.1(c), the Existing
Stockholders and Sears Stockholder shall thereupon have the
rights described in Section 3.1(a).
b. Third-Party Offer.
-----------------
i. Prior to the consummation of any sale of all or any portion
of the shares of Common Stock held by the Sears Stockholder or FS
Stockholder ("Selling Stockholder") to a Third Party, the Selling
Stockholder shall cause each bona fide offer from such Third
Party to purchase such shares from the Selling Stockholder (a
"Third-Party Offer") to be reduced to writing and shall send
written notice of such Third-Party Offer (the "Initial Offer
Notice") to the other Stockholders. Each Third-Party Offer shall
include an offer to purchase shares of Common Stock from the
Stockholders holding rights under Section 3.1 in the amounts
determined in accordance with Subsection 3.3 of this Section 3,
at the same time, at the same price and on the same terms as the
sale by the Selling Stockholder to the Third Party, and according
to the terms and conditions of this Agreement. The Initial Offer
Notice shall be accompanied by a true copy of the Third-Party
Offer (including all material information available to the
Selling Stockholder relating thereto). If a Stockholder desires
to accept the offer contained in the Initial Offer Notice, such
Stockholder shall furnish written notice to the Selling
Stockholder, within 20 days after its receipt of the Initial
Offer Notice, indicating such Stockholder's irrevocable
acceptance of the offer included in the Initial Offer Notice and
setting forth the maximum number of shares of Common Stock such
Stockholder agrees to sell to the Third Party (the "Acceptance
Notice"). If a Stockholder does not furnish an Acceptance Notice
to the
8
Selling Stockholder in accordance with these provisions by the
end of such 20-day period, such Stockholder shall be deemed
to have irrevocably rejected the offer contained in the Initial
Offer Notice. All shares of Common Stock set forth in the
Acceptance Notices of the Stockholders together with the shares
of Common Stock proposed to be sold by the Selling Stockholder to
the Third Party are referred to collectively as "All Offered
Shares". Within five days after the date on which the Third Party
informs the Selling Stockholder of the total number of shares of
Common Stock which such Third Party has agreed to purchase in
accordance with the terms specified in the Initial Offer Notice,
the Selling Stockholder shall send written notice (the "Final
Notice") to the participating Stockholders setting forth the
number of shares of Common Stock each participating Stockholder
shall sell to the Third Party as determined in accordance with
Subsection 3.3 of this Section 3, which number shall not exceed
the maximum number specified by a Stockholder in its Acceptance
Notice. Within five days after the date of the Final Notice (or
such shorter period as may reasonably be requested by the Selling
Stockholder to facilitate the sale), the participating
Stockholders shall furnish to the Selling Stockholder (i) a
written undertaking to deliver, upon the consummation of the sale
of Common Stock to the Third Party as indicated in the Final
Notice, the certificates representing the shares of Common Stock
held by each Stockholder which will be transferred pursuant to
such Third-Party Offer (such shares shall be referred to herein
as the "Included Shares") and (ii) a limited power-of-attorney
authorizing the Selling Stockholder to transfer the Included
Shares pursuant to the terms of such Third-Party Offer. Each
Stockholder shall be required to make customary representations
and warranties in connection with such transfer with respect to
its own authority to transfer and its title to the shares of
Common Stock transferred. In any such transaction the Company
will cooperate with all Stockholders to facilitate the
transaction.
ii. Prior to the consummation of any sale of all or any portion
of the shares of Common Stock held by the Ripplewood Stockholder
to a Third Party, the Ripplewood Stockholder shall cause each
bona fide offer from such Third Party to purchase such shares
from the Ripplewood Stockholder (a "Ripplewood Third-Party
Offer") to be reduced to writing and shall send written notice of
such Ripplewood Third-Party Offer (the "Ripplewood Initial Offer
Notice") to the FS Stockholder (with a copy to Sears
Stockholder). Each Ripplewood Third-Party Offer shall include an
offer to purchase shares of Common Stock from the FS Stockholder,
in the amounts determined in accordance with Subsection 3.3 of
this Section 3, at the same time, at the same price and on the
same terms as the sale by the Ripplewood Stockholder to the Third
Party, and according to the terms
9
and conditions of this Agreement. The Ripplewood Initial Offer
Notice shall be accompanied by a true copy of the Ripplewood
Third-Party Offer (including all material information available
to the Ripplewood Stockholder relating thereto). If the FS
Stockholder desires to accept the offer contained in the
Ripplewood Initial Offer Notice, the FS Stockholder shall furnish
written notice to the Ripplewood Stockholder, within 20 days
after its receipt of the Ripplewood Initial Offer Notice,
indicating the FS Stockholder's irrevocable acceptance of the
offer included in the Ripplewood Initial Offer Notice and setting
forth the maximum number of shares of Common Stock the FS
Stockholder agrees to sell to the Third Party (the "Acceptance
Notice"). If the FS Stockholder does not furnish an Acceptance
Notice to the Ripplewood Stockholder in accordance with these
provisions by the end of such 20-day period, the FS Stockholder
shall be deemed to have irrevocably rejected the offer contained
in the Ripplewood Initial Offer Notice. All shares of Common
Stock set forth in the Acceptance Notice of the FS Stockholder
together with the shares of Common Stock proposed to be sold by
the Ripplewood Stockholder to the Third Party are referred to
collectively as "All Offered Shares". Within five days after the
date on which the Third Party informs the Ripplewood Stockholder
of the total number of shares of Common Stock which such Third
Party has agreed to purchase in accordance with the terms
specified in the Ripplewood Initial Offer Notice, the Ripplewood
Stockholder shall send written notice (the "Ripplewood Final
Notice") to the FS Stockholder setting forth the number of shares
of Common Stock the FS Stockholder shall sell to the Third Party
as determined in accordance with Subsection 3.3 of this Section
3, which number shall not exceed the maximum number specified by
the FS Stockholder in its Acceptance Notice. Within five days
after the date of the Ripplewood Final Notice (or such shorter
period as may reasonably be requested by the Ripplewood
Stockholder to facilitate the sale), the FS Stockholder shall
furnish to the Ripplewood Stockholder (i) a written undertaking
to deliver, upon the consummation of the sale of Common Stock to
the Third Party as indicated in the Ripplewood Final Notice, the
certificates representing the shares of Common Stock held by the
FS Stockholder which will be transferred pursuant to such
Ripplewood Third-Party Offer (such shares, including any shares
sold by other Stockholders exercising rights under Section
3.1(a), shall be referred to herein as the "Included Shares") and
(ii) a limited power-of-attorney authorizing the Ripplewood
Stockholder to transfer the Included Shares pursuant to the terms
of such Ripplewood Third-Party Offer. Each Stockholder shall be
required to make customary representations and warranties in
connection with such transfer with respect to its own authority
to transfer and its title to the shares of Common Stock
transferred. In any such transaction the Company will
10
cooperate with all Stockholders to facilitate the transaction.
The fact that other Shareholders will have Tag-Along Rights upon
an exercise of the FS Stockholders' Tag-Along Rights hereunder
shall not result in an extension of any time periods specified in
this Section 3.2(b).
c. Allocation of Included Shares. The maximum number of
-----------------------------
shares of Common Stock that may be sold by FS Stockholder,
Sears Stockholder, Ripplewood Stockholder and each Existing
Stockholder and all other holders of Common Stock who have
rights to participate in sales of Common Stock by the FS
Stockholder, Sears Stockholder or Ripplewood Stockholder
pursuant to written agreements by and between the FS
Stockholder, the Sears Stockholder, the Ripplewood
Stockholder or the Company and any such holder (the "Other
Tag-Along Rights Holders") in any sale governed by this
Section 3 shall be (i) All Offered Shares in the event the
Third Party has agreed to purchase All Offered Shares and
all shares of Common Stock that the Other Tag-Along Rights
Holders who have elected to participate in such sale seek to
include in such sale or (ii) such number of shares of Common
Stock equal to the product of (a) the total number of shares
of Common Stock which the Third Party has agreed to purchase
times (b) a fraction, the numerator of which is the number
of shares of Common Stock owned by the FS Stockholder, the
Sears Stockholder, the Ripplewood Stockholder, Existing
Stockholders or each Other Tag-Along Rights Holder who is
eligible to and has elected to participate in such sale, as
the case may be, on the date of the Final Notice or
Ripplewood Final Notice and the denominator of which is the
total number of shares of Common Stock owned on the date of
the Final Notice or Ripplewood Final Notice by all of the FS
Stockholder, the Sears Stockholder, the Ripplewood
Stockholder, the Existing Stockholders and the Other Tag-
Along Rights Holders who have elected to participate in such
sale; provided, however, that, in the event the FS
-------- -------
Stockholder, the Sears Stockholder, the Ripplewood
Stockholder, the Existing Stockholders or any Other Tag-
Along Rights Holder elects to sell a number of shares of
Common Stock which is less than the number of shares such
holder could sell pursuant to clause (ii) above, the shares
of Common Stock that the other such holders can sell in such
transaction shall be increased by an aggregate amount equal
to the number of shares which any of the FS Stockholder, the
Ripplewood Stockholder, the Existing Stockholders or any
Other Tag-Along Rights Holder could have sold in such
transaction but chose not to sell, and any such increase
11
shall be allocated among such other holders on a pro rata
basis based upon the number of shares of Common Stock owned
on the date of the Final Notice or Ripplewood Final Notice
by such other holders. The Company shall not grant to any
Person that is not a party to this Agreement on the date
hereof rights which are more favorable than or which would
interfere with (it being understood that the granting of
substantially similar rights to Other Tag-Along Rights
Holders shall not by itself be deemed to so interfere) those
granted to the Existing Stockholders pursuant to this
Section 3 without Xx. Xxxxxxx'x or his representative's
prior written consent. The Stockholders shall use reasonable
best efforts to cause the Company to amend existing
agreements under the Company's stock plans for management,
and adopt new forms of agreements, so that Management
Stockholders having Tag-Along Rights can exercise such
rights in a sale either by FS Stockholder or Sears
Stockholder.
d. Consummation. The Sears Stockholder, FS Stockholder
------------
or Ripplewood Stockholder shall have 90 days from the date
of the Final Notice or Ripplewood Final Notice,
respectively, in which to sell to the Third Party the shares
of Common Stock owned by the Sears Stockholder, FS
Stockholder or Ripplewood Stockholder and the Included
Shares of the other Stockholders having Tag-Along Rights on
terms which are not materially less favorable to the sellers
of shares of Common Stock than those specified in the
applicable Initial Offer Notice; provided, however, that in
-------- -------
the event there is a decrease in the price to be paid by the
Third Party for the shares of Common Stock to be sold from
the price set forth in the Initial Offer Notice or the
Ripplewood Initial Offer Notice, as applicable, which
decrease is acceptable to the Sears Stockholder, FS
Stockholder (in the case of a Third Party Offer) or
Ripplewood Stockholder (in the case of a Ripplewood Third
Party Offer), or other material change in terms which are
less favorable to the Sears Stockholder, FS Stockholder or
Ripplewood Stockholder, as the case may be, but which are
acceptable to the Sears Stockholder, FS Stockholder or
Ripplewood Stockholder, as the case may be, the Sears
Stockholder, FS Stockholder or Ripplewood Stockholder, as
the case may be, shall notify the participating Stockholders
of such decrease or change in terms, and each of the
participating Stockholders shall have five business days
from the date of receipt of the notice of such decrease or
change in terms to reduce the number of shares of Common
Stock it will sell to such Third Party as previously
indicated in the applicable Acceptance Notice and
12
the number of shares that all other participating
stockholders (including Other Tag-Along Rights Holders) may
transfer shall be increased in accordance with the
provisions of Section 3.3; and provided, further, that in
-------- -------
the event there is an increase in the price to be paid by
the Third Party for the shares of Common Stock to be sold
from the price set forth in the applicable Initial Offer
Notice or other material change in terms which are more
favorable to the Sears Stockholder, FS Stockholder or
Ripplewood Stockholder, as the case may be, the Sears
Stockholder, FS Stockholder or Ripplewood Stockholder, as
the case may be, shall notify the other Stockholders of such
increase or change in terms, and each of the Stockholders
who was eligible to but did not elect to participate to the
full extent of their rights hereunder shall have five
business days from the date of receipt of the notice of such
increase or change in terms to increase the number of shares
of Common Stock it will sell to such Third Party, and the
number of shares that all other participating stockholders
(including other Tag-Along Rights Holders) may transfer
shall be decreased proportionately if necessary. A Third
Party purchaser of shares of Common Stock which complies
with this Section 3 shall not be subject to the obligations
contained in this Section 3 with respect to future sales of
their shares. The Sears Stockholder, FS Stockholder or
Ripplewood Stockholder, as the case may be, shall cause to
be remitted to the participating Stockholders the total
sales price of the Included Shares of the participating
Stockholders sold pursuant thereto, which consideration
shall be in the same form and per share amount as the
consideration received by the Sears Stockholder, FS
Stockholder or Ripplewood Stockholder, as the case may be,
and as specified in the Initial Offer Notice (or Ripplewood
Initial Offer Notice, as applicable), net (i) in an exercise
of Tag-Along Rights by an Existing Stockholder, of the
reasonable, incremental out-of-pocket expenses incurred by
the FS Stockholder or Sears Stockholder in connection with
such sale as a result of the Existing Stockholders'
participation therein or (ii) in an exercise of Tag-Along
Rights by the Sears Stockholder, the Ripplewood Stockholder
or the FS Stockholder, of the pro rata portion (based on the
number of shares of Common Stock included by each
Stockholder compared to the aggregate number of shares of
Common Stock included in such sale) of the reasonable
out-of-pocket expenses incurred in connection with a sale
consummated pursuant to this Section 3. The Sears
Stockholder, FS Stockholder or Ripplewood Stockholder shall
furnish, or shall cause to be furnished, such other evidence
of the completion and time of
13
completion of such sale and the terms thereof as may be
reasonably requested by the participating Stockholders
including, without limitation, evidence of the expenses
incurred by the Sears Stockholder, FS Stockholder or
Ripplewood Stockholder, as the case may be, in connection
with such sale. If and to the extent that, at the end of 90
days following the date of the Final Notice (or Ripplewood
Final Notice, as applicable), the Sears Stockholder, FS
Stockholder or Ripplewood Stockholder, as the case may be,
has not completed the sale contemplated thereby, the Sears
Stockholder, FS Stockholder or Ripplewood Stockholder, as
the case may be, shall return to the participating
Stockholders all certificates representing the Included
Shares and all powers-of-attorney which the participating
Stockholders may have transmitted pursuant to the terms
hereof.
e. Termination and Assignment. Any Permitted Transferee
--------------------------
of the FS Stockholder (other than an Unaffiliated Permitted
Transferee) and any assignee of the FS Stockholder's rights
under Section 4 shall agree to be bound by this Section 3 to
the same extent as the FS Stockholder. Any Permitted
Transferee of the Ripplewood Stockholder shall agree to be
bound by this Section 3 to the same extent as the Ripplewood
Stockholder. Any Permitted Transferee of the Sears
Stockholder shall agree to be bound by this Section 3 to the
same extent as the Sears Stockholder. The obligations of the
FS Stockholder, Sears Stockholder and the Ripplewood
Stockholder and any Permitted Transferee or assignee
pursuant to the provisions of this Section 3 shall terminate
upon a Liquidity Event or, as to any such holder only, upon
a distribution without consideration of all of the shares of
Common Stock that such holder holds to its stockholders or
the limited or general partners or employees of such holder
or their Affiliates. The rights granted to the Stockholders
pursuant to this Section 3 may not be assigned, except that
these rights shall inure to the benefit of a Permitted
Transferee of a Stockholder (and its Permitted Transferees)
provided that such persons have agreed to be bound by
Sections 4 and 5 of this Agreement, and may be assigned to a
purchaser or transferee of more than 50% of the shares of
Common Stock then held by any Stockholder, and such rights
shall be further assignable to any purchaser of more than
50% of the shares of such transferee. No additional Tag-
Along Rights shall be granted without the approval of the
Company's Board of Directors and no such grant may be a Tag-
Along Right on sales by a specific Stockholder without its
consent, or a grant that would prevent a
14
Stockholder from participating pro rata in a sale in which
it could exercise Tag-Along Rights. Nothing in this section
shall be construed as granting rights of inclusion in any
Public Market Sale.
4. Obligation to Sell Securities.
-----------------------------
a. Sale Obligation. From and after April 1, 2000, or
---------------
earlier if consented to by Sears Stockholder, if the FS
Stockholder finds a third-party buyer to which it sells all
of the shares of Common Stock held by the FS Stockholder and
its Permitted Transferees and assignees (whether such sale
is by way of purchase, merger or other form of transaction),
upon the request of the FS Stockholder, each of the Existing
Stockholders and the Ripplewood Stockholder shall sell all
of the shares of Common Stock and the Taubman Option
beneficially owned by such Existing Stockholder and the
Ripplewood Stockholder to such third-party buyer pursuant to
the same terms and conditions negotiated by the FS
Stockholder for the sale of shares of Common Stock held by
the FS Stockholder and subject to the provisions of the
Taubman Option with respect to the consideration to be
received for such Option; provided, that an Existing
--------
Stockholder and the Ripplewood Stockholder shall have no
obligation to sell its shares of Common Stock and the
Taubman Option pursuant to this Section 4 unless the FS
Stockholder (including its Permitted Transferees and
assignees) sells all of the shares of Common Stock held by
them. Each of the Existing Stockholders and the Ripplewood
Stockholder agrees to such sale, and to execute such
agreements, powers of attorney, voting proxies or other
documents and instruments as may be necessary to consummate
such sale. Each of the Existing Stockholders and the
Ripplewood Stockholder further agrees to timely take such
other actions as the FS Stockholder may reasonably request
as necessary in connection with the approval of the
consummation of such sale, including voting all Voting
Securities in favor of such sale. Each Existing Stockholder
shall pay the reasonable incremental out-of-pocket expenses
incurred by the FS Stockholder in connection with the
inclusion of such Existing Stockholder in a sale consummated
pursuant to this Section 4. The Ripplewood Stockholder shall
pay its pro rata portion (based on the total value of the
consideration received by such Stockholder compared to the
aggregate consideration received by all Stockholders in the
transaction) of the reasonable out-of-pocket expenses
incurred by the FS Stockholder in connection with a sale
consummated pursuant to this Section 4.
15
b. Termination and Assignment. The obligations of the
--------------------------
Existing Stockholders and Ripplewood Stockholder pursuant to
this Section 4 shall be binding on any transferee of or
purchaser of shares of Common Stock or all or any part of
the Taubman Option from an Existing Stockholder or from the
Ripplewood Stockholder or from one of their Permitted
Transferees, and any subsequent transferee, except for a
transferee purchasing shares in a Public Market Sale, or any
subsequent transferee thereof, and an Existing Stockholder,
the Ripplewood Stockholder, Permitted Transferee or any
other transferee shall obtain and deliver to the FS
Stockholder a written commitment to be bound by such
provisions from each such transferee or Permitted Transferee
prior to any Transfer. Notwithstanding the immediately
preceding sentence, a Trust Transferee shall not be required
to deliver the written commitment referred to in such
sentence upon receipt of shares by way of distribution from
the trust; provided, however, that if such Trust Transferee
does not deliver such commitment within 30 days after
receipt of notice from the Company requesting delivery of
such documents (and referring specifically to this
Agreement) (such period, the "Document Delivery Period"),
the Company need not register such Transfer on its records
and the Company (or its designee) shall have a repurchase
right as to such shares pursuant to Section 5.1(c). The
Trust shall promptly notify the Company of the occurrence of
any event that would cause a distribution from the Trust.
The obligations pursuant to this Section 4 shall likewise be
binding on any transferee of or purchaser of shares from the
FS Stockholder (and any subsequent transferee), except for a
transferee purchasing shares in a Public Market Sale or any
subsequent transferee thereof, or an assignee of the rights
held by FS Stockholder under this Section 4, and the FS
Stockholder shall obtain an undertaking by such transferee
to be so bound. The obligations of the Existing Stockholders
and the Ripplewood Stockholder pursuant to this Section 4,
and the obligations of any such transferee and Permitted
Transferee, shall continue after the consummation of an
Initial Public Offering until the occurrence of a Liquidity
Event. The rights of FS Stockholder under this Section 4
shall not be assignable except to a purchaser of more than
50% of the shares of Common Stock then held by FS
Stockholder and its Permitted Transferees (with FSEP IV and
any Permitted Transferee therefrom considered collectively
for this purpose) that holds after such purchase more than
25% of the outstanding Common Stock or to a Permitted
Transferee of all of
16
FS Stockholder's stock and shall terminate in the event that
the FS Stockholder (or such Permitted Transferee or
permitted assignee) holds a number of shares of Common Stock
which represents less than 20% of the total number of shares
of Common Stock outstanding at any time (with FSEP IV, any
Permitted Transferee and/or permitted assignee considered
collectively for this purpose).
5. Restrictions on Transfers of Securities; Right of First Offer.
-------------------------------------------------------------
a. Transfer Restrictions.
---------------------
i. Transfer Restrictions Binding Existing Stockholders. No
---------------------------------------------------
Existing Stockholder shall, without the prior written approval of
FS Stockholder, Transfer any shares of Common Stock or any right,
title or interest therein except in a manner in compliance with
this Agreement, including (without limitation) Subsection 5.2; or
(i) pledge, hypothecate or encumber any shares of Common Stock,
(ii) sell, assign, transfer, gift or otherwise dispose of or
convey or distribute to its beneficiaries (in the case of the
Trust) ((i) and (ii) collectively, the "Transfer") any shares of
Common Stock, or any right, title or interest therein, except in
compliance with the Securities Act and all applicable state
securities laws; or (iii) Transfer any shares of Common Stock
(other than to a Permitted Transferee, provided the documents
enumerated in clauses (i) - (iii) below are delivered), or any
right, title or interest therein, until after April 1, 2000 (the
"Permitted Transfer Date") or, if earlier, upon consummation of
an Initial Public Offering by the Company, except pursuant to
this Agreement or due to involuntary dissolution of the Trust or
death. As long as it has any obligations under this Agreement, to
the extent permitted by its Declaration of Trust, the Trust shall
remain in full force and effect and shall not be dissolved or
revoked. After the Permitted Transfer Date, or at such earlier
date as required by law or the Declaration of Trust of the Trust,
the Existing Stockholders may Transfer shares of Common Stock to
a Permitted Transferee, without complying with Section 5.2,
provided that each of such transferees (i) executes a written
undertaking to be and becomes bound by this Agreement in the same
manner and to the same extent as the Existing Stockholders, (ii)
executes an irrevocable power of attorney appointing Xxxxxxxx X.
Xxxxxxx (or an individual designated by Xxxxxxxx X. Xxxxxxx if he
is unable to act due to death or disability) as such transferee's
attorney-in-fact with sole irrevocable power and authority to
make all decisions on behalf of and take all actions required to
be taken by such transferee in connection with this Agreement,
including (without limitation) any required sale of shares of
Common Stock pursuant to Section 4 hereof, and (iii) if requested
by FS Stockholder, delivers an
17
opinion of legal counsel reasonably satisfactory to FS
Stockholder that such undertaking is binding and enforceable.
Notwithstanding the immediately preceding sentence, a Trust
Transferee shall not be required to deliver the items referred to
in such sentence upon receipt of shares by way of distribution
from the Trust; provided, however, that if such Trust Transferee
-------- -------
does not deliver such items within the Document Delivery Period
the Company need not register such Transfer on its records and
the Company (or its designee) shall have a repurchase right as to
such shares pursuant to Section 5.1(c). The Trust shall promptly
notify the Company of the occurrence of any event that would
cause a distribution from the Trust.
ii. Conditions to Transfer. Any attempt to Transfer, pledge,
----------------------
hypothecate or encumber shares of Common Stock, or any right,
title or interest therein, not in compliance with this Agreement
shall be null and void, and the Company shall not give effect to
any such attempted transaction or Transfer. No Transfer shall be
effective which would cause a Change in Control Event. Any shares
of Common Stock Transferred pursuant to the terms and
requirements of this Agreement (including Sections 3, 4 and 5)
shall be Transferred free and clear of all mortgages, liens,
pledges, charges and security interests or encumbrances, or any
obligations or liabilities in connection therewith, other than
obligations under this Agreement of transferees. Each
Stockholder, on the execution and delivery of this Agreement,
agrees that such Stockholder will not Transfer any shares of
Common Stock prior to delivery to the Company of an opinion of
counsel in form and substance reasonably satisfactory to the
Company with respect to compliance with the Securities Act, or
until a registration statement with respect to such shares of
Common Stock under the Securities Act has become effective;
except that no opinion shall be required in the case of a
Transfer by any Stockholder to a Permitted Transferee or by FS
Stockholder or a Permitted Transferee to any limited or general
partner or employee of the FS Stockholder or any Permitted
Transferee. Except as expressly provided to the contrary herein,
all transferees of shares of Common Stock except for a transferee
acquiring shares in a Public Market Sale and transferees of such
Public Market Sale transferee will be bound by this Agreement in
the same manner and to the same extent as the transferor and
prior to any Transfer must deliver to the Company and the
Stockholders a written undertaking to be and become so bound.
Upon completion of any Transfer in compliance with this
Agreement, the transferee shall become a Stockholder and entitled
to certain rights hereunder.
iii. Repurchase Option. If Voting Securities held by a Trust
-----------------
18
Transferee become subject to a repurchase option pursuant to
Section 4.2 or Section 5.1(a) above, upon notice of exercise
thereof from the Company (or its designee), such Voting
Securities shall be deemed to have been redeemed by the Company
or purchased by its designee for, and any certificates
representing such Voting Securities shall thereafter represent
the right to receive, 85% of their fair market value in cash
(which value shall be determined by an Appraising Firm (as
defined in Section 5.2)). The Company (or its designee) shall
have 60 days from the expiration of the Document Delivery Period
to deliver such notice and shall pay such amount promptly (within
90 days from the expiration of the Document Delivery Period) upon
delivering such notice, whereupon the Company shall reflect such
redemption or sale on the records of the Company. If such notice
and payment is not delivered within 210 days of the distribution
by the Trust, and if the Trust has complied with its notice
obligations hereunder, then the Company shall record the Transfer
to the Trust Transferee, notwithstanding the failure to deliver
the documents required by subsection (a). The Company's rights
under this paragraph (b) shall terminate on the date all rights
under Sections 4 and 5 hereof in favor of the FS Stockholder or
its Permitted Transferees have terminated.
iv. Transfer Restrictions Binding Ripplewood Stockholder. The
----------------------------------------------------
Ripplewood Stockholder shall not, without the prior written
approval of FS Stockholder, Transfer any shares of Common Stock
or any right, title or interest therein except in a manner in
compliance with this Agreement, including (without limitation)
Subsection 5.2; or: (i) pledge, hypothecate or encumber any
shares of Common Stock, except that the Ripplewood Employee Fund
may pledge shares of Common Stock subject to Section (e) of this
Section 5.1; (ii) Transfer any shares of Common Stock, or any
right, title or interest therein, except in compliance with the
Securities Act and all applicable state securities laws; or (iii)
Transfer any shares of Common Stock, or any right, title or
interest therein (other than to its Permitted Transferee or as
expressly permitted by and in compliance with this Agreement)
until April 1, 2000, or if earlier, upon consummation of an
Initial Public Offering by the Company.
v. The Ripplewood Employee Fund may pledge shares of Common
Stock to a lender in connection with the financing of its initial
investment in the Company, provided, that in connection with such
pledge:
(i) No foreclosure sale of the pledge Common Stock shall be
consummated unless the FS Stockholder or a person designated by the FS
Stockholder shall be given the right to acquire such pledged shares of Common
Stock pursuant to this clause (i). Upon the pledgee agreeing to sell the shares
of Common Stock, the pledgee shall give written
19
notice to the FS Stockholder of the agreement to sell, which notice shall
include a term sheet stating, among other material terms, the agreed upon sale
price that the purchaser is willing to pay the pledgee for such shares of Common
Stock. FS Stockholder or its designee shall thereafter have the right for a
period of 30 days following receipt of such notice to elect to purchase such
shares of Common Stock at the price and on the terms stated in the written
notice. The FS Stockholder or its designee shall exercise such rights by
delivering its irrevocable written election to purchase such shares prior to
2:00 p.m. Los Angeles time on the final day of said 30-day period. If the FS
Stockholder (or its designee) elects to purchase such shares of Common Stock, it
shall consummate such purchase within 60 days of the final day of the 30-day
period. If the FS Stockholder (or its designee) does not elect to purchase such
shares of Common Stock, the foreclosure sale may be completed if and only if the
transferee agrees in writing to be bound by the obligations of Ripplewood
Stockholder set forth in Section 3, 4, 5 and 7 of this Agreement.
(ii) A transferee of pledged securities in a
foreclosure sale shall not succeed to any rights hereunder of Ripplewood
Stockholders, including without limitation rights set forth in Sections 2, 3, 6
and 7 hereof.
(iii) Any pledgee of shares of Common Stock shall be
bound by Section 4 of this Agreement during such time it may hold shares of
Common Stock.
vi. Transfer Restrictions Binding Sears Stockholder. The
-----------------------------------------------
Sears Stockholder shall not, without the prior written approval
of FS Stockholder: (i) pledge, hypothecate or encumber any shares
of Common Stock; (ii) Transfer any shares of Common Stock, or any
right, title or interest therein, unless such Transfer is in
compliance with the Securities Act and all applicable State
Securities laws and in a manner in compliance with this
Agreement, including (without limitation) subsection 5.2; or
(iii) Transfer any shares of Common Stock, or any right, title or
interest therein (other than to its Permitted Transferee as is
expressly permitted by and in compliance with this Agreement)
until April 1, 2000, or if earlier, upon consummation of an
Initial Public Offering by the Company.
vii. Transfer Restrictions Binding FS Stockholder. The FS
--------------------------------------------
not, without the prior written approval of Sears Stockholder: (i)
pledge, hypothecate or encumber any shares of Common Stock; (ii)
Transfer any shares of Common Stock, or any right, title or
interest therein, unless such Transfer is in compliance with the
Securities Act and all applicable State Securities laws and in a
manner in compliance with this Agreement including (without
limitation) subsection 5.2; or (iii) Transfer any shares of
Common Stock, or any right, title or interest therein (other than
to its Permitted Transferees as expressly permitted by and in
compliance with this Agreement) until April 1, 2000, or, if
earlier,
20
upon consummation of an Initial Public Offering by the Company.
b. Right of First Offer.
--------------------
i. First Offer by Existing Stockholder. Except in the case of
-----------------------------------
a transaction governed by Section 7.3(g) each of the Existing
Stockholders hereby agrees not to Transfer, prior to April 15,
2001, or until an Initial Public Offering, if earlier, any of the
shares of Common Stock or the Taubman Option held by it to any
Person (other than its Permitted Transferees) unless FS
Stockholder and Sears Stockholder, pro rata based on such
stockholder's then-current ownership of Common Stock (or any
third person(s) designated by FS Stockholder or Sears
Stockholder, as the case may be, which may include their
Affiliates or the Company), is given the right to acquire such
shares of Common Stock pursuant to the provisions of this
Subsection 5.2. In addition, until a Liquidity Event, the
Existing Stockholders shall not Transfer any shares of Common
Stock to any Person who directly or indirectly carries on or
participates in any business in competition with the Business
(whether conducted by the Company or any Subsidiary or controlled
Affiliate of the Company) without complying with this Section
5.2.
ii. First Offer by Ripplewood Stockholder. Except in the case
-------------------------------------
of a transaction governed by Section 5.1(d) and (e) or 7.3(g) the
Ripplewood Stockholder agrees not to Transfer, until an Initial
Public Offering, any of the shares of Common Stock held by it to
any Person (other than its Permitted Transferees) unless FS
Stockholder and Sears Stockholder, pro rata based on such
Stockholder's then-current ownership of Common Stock (or any
third person(s) designated by FS Stockholder or Sears
Stockholder, as the case may be, which may include their
Affiliates or the Company) is given the right to acquire such
shares of Common Stock pursuant to the provisions of this
Subsection 5.2.
iii. First Offer by FS Stockholder. Except in the case of a
-----------------------------
transaction governed by Section 5.1(f) or 7.3(g), the FS
Stockholder agrees not to Transfer, until consummation of an
Initial Public Offering by the Company, any of the shares of
Common Stock held by it to any Person (other than its Permitted
Transferees) unless the Sears Stockholder (or any third person(s)
designated by Sears Stockholder, which may include Affiliates of
Sears Stockholder or the Company) is given the right to acquire
such shares of Common Stock pursuant to the provisions of
Subsection 5.2(e).
iv. First Offer by Sears Stockholder. Except in the case of a
--------------------------------
21
transaction governed by Section 5.1(g) or 7.3(g), the Sears
Stockholder agrees not to Transfer, until consummation of an
Initial Public Offering by the Company, any of the shares of
Common Stock held by it to any person (other than a Permitted
Transferee) unless the FS Shareholder (or any third person(s)
designated by FS Stockholder, which may include Affiliates of FS
Stockholder or the Company) is given the right to acquire such
shares of Common Stock pursuant to the provisions of Subsection
5.2(e).
v. First Offer Provisions. If a Stockholder while subject to
----------------------
the provisions of this Section 5.2 receives an offer from any
Person (other than its Permitted Transferees) to acquire any
shares of Common Stock, or decides to solicit or cause to be
solicited a proposal or proposals to acquire shares of Common
Stock, such Offering Stockholder shall first give each other
Stockholder having rights with respect to the shares of Common
Stock held by such Offering Stockholder under this Subsection 5.2
(the "Offeree") written notice (the "Stockholder Notice") of such
intention, which notice shall include a term sheet stating, among
other material terms, the minimum cash sales price (the "Target
Price") that such Stockholder would entertain for the shares of
Common Stock to be sold (the "Offered Securities"). The Offeree
(or its designee) shall have the right for a period of 20 days
following the delivery of the Stockholder Notice (the "Acceptance
Period") (provided, that if more than one Stockholder is an
--------
Offeree, the Acceptance Period shall be shortened to 15 days, and
if any Offeree declines to exercise its rights with respect to
the Stockholder Notice, those Offerees exercising their rights
may, by giving a written notice by the 20th day after the
Stockholder's Notice, purchase all, but not less than all, of the
portion of the shares of Common Stock not accepted by the
declining Offeree (the "Take-Up Right"), pro rata based on such
electing Offerees ownership of Common Stock) to accept the offer
to purchase all but not less than all of the Offered Securities
at the Target Price and upon the other terms provided with the
Stockholder Notice. The Offeree (or its designee) shall exercise
its rights under this Section 5.2 by delivering to such Offering
Stockholder an irrevocable written notice of its election prior
to 2:00 p.m. Los Angeles time on the final day of the Acceptance
Period. If the Offeree (or its designee) exercises its rights
under this Section 5.2, the sale of the Offered Securities shall
be consummated within 60 days of the final day of the Acceptance
Period (the "Purchase Period"). If the Offeree (or its designee)
does not elect to purchase the Offered Securities on such terms
(and the failure to deliver an irrevocable notice of acceptance
shall be conclusively deemed to be rejection of such opportunity)
or fails to consummate a purchase of the Offered Securities
within the Purchase Period, such Offering Stockholder shall have
the right (without limitation to other rights it may have) to
22
consummate the sale of the Offered Securities on terms not
materially more favorable to the purchaser than specified in the
Stockholder Notice for a period of 135 days (the "Consummation
Period") after the expiration of the Acceptance Period or, if
applicable, the Purchase Period, provided, that if necessary in
order to receive approval of such sale under antitrust laws, the
Purchase Period Consummation Period may be extended for a
reasonable period by written notice to the Stockholders. If such
Offering Stockholder does not complete such sale, transfer or
conveyance within the Consummation Period, such Offering
Stockholder shall not have the right to sell, transfer or convey
any of the Offered Securities without again complying with this
Subsection 5.2. In the event such Offering Stockholder intends to
sell the Offered Securities for consideration other than cash,
such Offering Stockholder shall notify the Offeree (or its
designee) of the terms and value of such non-cash consideration.
The Offeree (or its designee) may elect within 30 days of such
notice to have the fair market value of such non-cash
consideration determined, with the parties jointly selecting an
investment banking firm to resolve any dispute regarding the fair
market value of such non-cash consideration; in the absence of
agreement on such firm, a third investment banking firm
(designated by the firms proposed by the Offeree and Offering
Stockholder) shall determine such fair market value. The
investment banking firm so selected is referred to as the
"Appraising Firm." If the sum of the fair market value of the
non-cash consideration and the cash consideration (in the case of
a sale that is partially for cash) is less than the cash price
offered to Offeree (or its designee) pursuant to this Subsection
5.2, the Offeree (or its designee) may, within 20 days of the
determination of the fair market value of the non-cash
consideration, elect to purchase the Offered Securities proposed
to be sold for an amount in cash equal to the sum of (i) the fair
market value of the non-cash consideration and (ii) the cash
consideration, if any. Such purchase must be consummated within
60 days of the determination of fair market value. If such
Offering Stockholder receives a written offer for the Offered
Securities at any time during the Consummation Period which is
acceptable to such Offering Stockholder but is less than the
Target Price or is upon terms materially less favorable to such
Offering Stockholder than the terms provided to the Offeree (or
its designee) in the Stockholder Notice (the "Below Target Price
Offer"), such Stockholder shall promptly deliver a copy of such
written offer to the Offeree (or its designee). During the 20-day
period following delivery of such written offer (which period
shall be 15 days in the event there is more than one Offeree, and
such Offerees shall have a Take-Up Right), the Offeree (or its
designee) shall have the right to accept the offer to purchase
the Offered Securities on the terms reflected in such written
offer. The Offeree (or its designee)
23
shall, if it so desires, exercise such right by delivery to such
Offering Stockholder written notice of its election to purchase
all but not less than all of the Offered Securities prior to 2:00
p.m. Los Angeles time on the final day of such additional 20 day
period (or 15 day period, as the case may be) and the sale of the
Offered Securities shall be consummated within 60 days of the
delivery of such written notice, provided, that if necessary in
order to obtain approval of such sale under antitrust laws, such
60-day period may be extended for a reasonable period by written
notice to the Stockholders. If the Offeree (or its designee) does
not elect to accept the offer to purchase the Offered Securities
on such terms within such 20-day period or fails to consummate
the purchase of the Offered Securities within 60 days of the date
of the Offeree's (or its designee's) acceptance of the Below
Target Price Offer, such Stockholder shall have (without
limitation to any other rights it may have) 135 days to
consummate the sale of the Offered Securities at a price and upon
terms are not materially less favorable to such Stockholder than
the price and terms specified in the written offer delivered to
the Offeree (or its designee), provided, that if necessary in
order to receive approval of such sale under antitrust laws, the
135-day period may be extended for a reasonable period by written
notice to the Stockholders. In the event a Below Target Price
Offer involves any non-cash consideration, the procedures for
valuing such non-cash consideration set forth in Subsection 5.2
above shall be utilized to determine the fair market value of
such non-cash consideration and all time periods specified
herein, extended accordingly. Any sale consummated will be
subject to Section 3.1 hereof to the extent applicable.
c. Termination and Assignment. The rights granted to
--------------------------
Sears Stockholder and FS Stockholder under Subsection 5.2
shall be assignable to their Permitted Transferees (other
than an Unaffiliated Permitted Transferee) and any designee,
as provided in this Section 5, or to a purchaser acquiring
more than 50% of the outstanding Common Stock then held by
the FS Stockholder or Sears Stockholder. Any transferee of
shares of Common Stock from a Stockholder, other than a
purchaser of shares in a Public Market Sale or any
subsequent transferee thereof, shall be bound by the
provisions of this Section 5 and each Stockholder completing
a Transfer shall obtain and deliver to each other
Stockholder a written commitment by such transferee to be
bound by such provisions prior to any Transfer. Neither the
Ripplewood Stockholder nor the Existing Stockholder need
make a first offer if the Stockholders to whom such an offer
would be made own in the aggregate less than the lesser of
(i) 40% of the shares of Common Stock or (ii) 1.5 times the
number of shares owned by such
24
offering Stockholder.
x. Xxxxxxx Option and Option Shares. Any reference in
--------------------------------
this Agreement (including any reference in Section 4) to
shares of Common Stock shall include the Option Shares as
defined in the Option Agreement. After the Permitted
Transfer Date, the Taubman Option is transferable, but shall
be subject to the provisions of Sections 4, 5.1 and 5.2
hereof to the same extent as shares of Common Stock (subject
to appropriate adjustment to take account of the exercise
price thereof).
6. Registration Rights; Acquisitions of Common Stock.
-------------------------------------------------
a. Registration Rights. FS Stockholder, the Sears
-------------------
Stockholder, the Ripplewood Stockholder and the Existing
Stockholders shall be entitled to certain registration
rights with respect to their shares of Common Stock (the
"Registration Rights"). The terms of the Registration Rights
are set forth in Exhibit A attached hereto. The rights
granted to Stockholders under this Section 6.1 shall not be
assignable, except that a Stockholder may assign such rights
to a Permitted Transferee (provided, that any Permitted
Transferee of the Existing Stockholders shall deliver to the
Company a power-of-attorney appointing Xx. Xxxxxxx (or an
individual he designates if he is unable to act due to death
or disability), as such Permitted Transferee's attorney-in-
fact for purposes of exercising such Transferee's rights and
fulfilling such Transferee's obligations under this Section
6) or to any purchaser of more than 50% of the shares of
Common Stock then held by such Stockholder (with (i) the
Ripplewood Stockholder, and (ii) the Existing Stockholders,
each considered collectively for this purpose).
b. Acquisition of Common Stock. After consummation of
---------------------------
an Initial Public Offering, no Stockholder shall purchase or
permit its Affiliates to purchase or otherwise acquire, or
agree or offer to purchase or otherwise acquire (subject, in
the case of the Trust, to Section 5.1(a)), beneficial
ownership of additional shares of Common Stock or
Securities.
7. Representation on the Board of Directors.
----------------------------------------
a. The Board. At each annual or special meeting of
---------
stockholders of the Company, or in any written consent
executed in lieu of a stockholder meeting, at or pursuant to
which persons are
25
being elected to fill positions on the Board, the FS
Stockholder, the Sears Stockholder, the Ripplewood
Stockholder and the Existing Stockholders agree to exercise,
or cause to be exercised, voting rights with respect to the
shares of Voting Securities then held of record or
beneficially owned by them, in such a manner that (i) three
(3) candidates nominated by FS Stockholder, (ii) Xx. Xxxxxxx
or, in the event of his death or disability, his
representative designated in writing, (iii) one (1)
candidate nominated by the Ripplewood Stockholder, (iv) the
Chief Executive Officer of the Company and (v) three (3)
candidates nominated by the Sears Stockholder shall be
elected to fill and continue to hold positions on the Board.
Prior to an Initial Public Offering by the Company, the FS Stockholder
may require the Board to nominate, and the Stockholders to vote their shares in
favor of electing, up to two (2) independent members of the Board of Directors
(such persons being mutually acceptable to FS Stockholder and Sears
Stockholder), and each Stockholder shall take all actions necessary in
connection therewith. Upon consummation of an Initial Public Offering by the
Company, or as soon as practicable thereafter, the Company shall have at least
two (2) independent members of the Board of Directors (such persons being
mutually acceptable to FS Stockholder and Sears Stockholder), as may be required
by applicable law or stock exchange requirements or by the National Association
of Securities Dealers or underwriters in connection with the Initial Public
Offering, and each Stockholder shall take all actions necessary in connection
therewith. Xx. Xxxxxxx (or his representative) may not be removed from the Board
without cause. In addition, Xx. Xxxxxxx shall not be disqualified from being a
director by virtue of his age. The Board of Directors shall have no fewer than
nine (9) and no more than eleven (11) directors and the Stockholders shall vote
to have the Bylaws provide that the Company shall have no fewer than nine (9)
nor more than eleven (11) directors. Notwithstanding the preceding sentence, in
the event of an acquisition by the Company where more than 10% of the Voting
Securities are issued to the seller, and as an important element of the
transaction additional Board seats are required (an "Acquisition Event"), the
Stockholders will use reasonable best efforts to make such Board seats available
including, without limitation, taking all necessary actions to amend this
Agreement and the Bylaws and cause their respective nominees to the Board to
approve an increase in the size of the Board, necessary amendments to this
Agreement, and the election of new members of the Board.
Notwithstanding any other provisions of this Section 7.1: (i) at such
time as either of the FS Stockholder or the Sears Stockholder (including, in
each case, their Permitted Transferees) have sold more than one-third but less
than two-thirds of their Initial Shares, the FS Stockholder or the Sears
Stockholder, as the case may be, shall be entitled to designate no more than two
(2) members of the Board; (ii) at such time as either of the FS Stockholder or
the Sears Stockholder (including, in each case, their Permitted Transferees)
have sold two-thirds or more of their Initial Shares, the FS Stockholder or the
Sears Stockholder, as the case may be, shall be entitled to designate no more
than one (1) member of the Board; and (iii) at such time as
26
FS Stockholder or Sears Stockholder shall own less than 5% of the Common Stock,
such Stockholder's right to designate members of the Board shall terminate.
Sales to Permitted Transferees will not cause a reduction in rights under this
Section 7.1.
If, at any time from and after the date hereof until a Board Rights
Termination Event, a Stockholder shall give notice of its desire to remove any
director previously nominated by that party to serve on the Board, the
Stockholders agree to exercise or cause to be exercised voting rights with
respect to all Voting Securities held of record or beneficially owned by it or
them so as to remove such director of the Company. If at any time from and
after the date hereof, until a Board Rights Termination Event any director
previously nominated by FS Stockholder, Sears Stockholder, Xx. Xxxxxxx or the
Ripplewood Stockholder to serve on the Board ceases to be a director (whether by
reason of death, resignation, removal or otherwise), Sears Stockholder, FS
Stockholder, Xx. Xxxxxxx or the Ripplewood Stockholder, as the case may be,
shall be entitled to nominate a successor director to fill the vacancy created
thereby, and the Stockholders agree to exercise voting rights with respect to
the shares of Voting Securities held of record or beneficially owned by them so
as to elect such nominee as a director of the Company.
In furtherance of its obligations under this Section 7.1, and its
-----------
other obligations hereunder, effective on the date hereof the Ripplewood
Stockholder shall and hereby does grant to FSEP IV an irrevocable proxy to vote
the shares of the Ripplewood Stockholder in any manner that FSEP IV shall choose
consistent with the terms of this Agreement, in the form previously granted.
The irrevocable proxy shall be transferable to any Permitted Transferee (other
than Unaffiliated Permitted Transferees) of the FS Stockholder, and the
Ripplewood Stockholder shall execute and deliver a new irrevocable proxy if
necessary to effect such transfer. No Transfer by the Ripplewood Stockholder to
any Permitted Transferee or other transferee (or any subsequent transferee)
shall be effective unless such transferee first delivers a substantially
identical irrevocable proxy in favor of FSEP IV or its Permitted Transferee.
Any such irrevocable proxy shall expire upon consummation of an Initial Public
Offering.
b. Approval Right. Notwithstanding any other
--------------
provision of this Agreement to the contrary, until
April 15, 2001, the Company (including any successor to
the Company's business) may not Transfer any
significant portion of its assets to, or merge with or
into, AutoZone, Inc. or any Affiliate thereof and FS
Stockholder, including any Permitted Transferee,
assignee or designee of FS Stockholder and Sears
Stockholder, may not directly or indirectly transfer
any interest in or control over any Voting Securities
to AutoZone, Inc., or any Affiliate thereof, without
the prior written approval of Xx. Xxxxxxx.
27
c. Certain Actions of the Board.
----------------------------
i. Without the approval of Xx. Xxxxxxx or his representative,
the Company shall not (i) issue any capital stock for
consideration having a value less than the fair market value of
such capital stock (as determined in reasonable good faith by the
Board), unless such capital stock is issued in connection with a
financing transaction the overall terms of which are fair and in
the best interests of the Company, as determined in reasonable
good faith by the Board and provided, in the event that a
Stockholder or any of its Affiliates is participating in or
providing such financing the Existing Stockholders have the
opportunity to participate in such financing and, if they so
participate, to purchase or otherwise receive on the same terms
their Pro Rata Share (as defined in Section 2.4) of such
Securities, or in connection with a debt exchange, the overall
terms of which the Board determines in reasonable good faith are
fair and in the best interests of the Company, (ii) enter into
any transaction or series of related transactions with any
Affiliates of the FS Stockholder or of the Ripplewood
Stockholder, or the Sears Stockholder except on terms (as
determined in reasonable good faith based on full and fair
disclosure by the Board) no less favorable to the Company than
are available from an unaffiliated third party, or (iii) execute
any amendment to the Articles of Incorporation or the Bylaws of
the Company, which would adversely affect the rights and
obligations of Xx. Xxxxxxx or his representative thereunder, as
the case may be, except for amendments which are applicable to
holders of Voting Securities generally and do not
disproportionately disadvantage the Existing Stockholders, or
execute any amendment to this Agreement which adversely affects
the rights and obligations of the Existing Stockholders and their
Permitted Transferees and representatives, provided that this
Agreement may be amended to add new parties hereto who are
purchasers of Securities (including an amendment granting
additional registration rights to such purchasers on terms
permitted hereunder), and this Agreement and the Bylaws may be
amended pursuant to Section 7.1 with respect to an Acquisition
Event.
ii. Without a meeting of the Board of Directors of the Company
(as opposed to a committee thereof) having been called and
convened for the purpose of discussing any such action, the
Company shall not (i) commence a voluntary case or consent to the
entry of an order for relief against it in an involuntary case
under Chapter 7 or Chapter 11 of the United States Bankruptcy
Code, (ii) acquire (including by merger) stock or assets of
another business (other than assets acquired in the ordinary
course of business), from any seller or group of related sellers
in one transaction or in a series of related transactions, for
consideration having a fair market value in excess of $25
million, (iii) effect an Initial Public
28
Offering, (iv) engage in any debt financing whereby the Company
and any of its subsidiaries, taken together, incur in excess of
$100 million of debt, determined as of the time of such
financing, other than pursuant to the terms of any credit
facility then outstanding for purposes of working capital, or
acquisitions or expenditures considered pursuant to clause (ii)
of this Section 7.3(b), (v) hire or terminate the employment of
an executive officer of the Company, (vi) other than pursuant to
employee plans approved by the Board of Directors, issue any
additional equity securities, (vii) sell assets not in the
ordinary course of business (including by merger or sale of stock
of a subsidiary), to any buyer or group of related buyers in one
transaction or in a series of related transactions, for
consideration having a fair market value in excess of $25
million, (viii) participate in a merger, share exchange, or other
business combination transaction having a fair market value in
excess of $25 million or (ix) exercise its postponement rights
pursuant to Section 2.1(d) of Exhibit A.
iii. Without the approval of the director nominated by the
Ripplewood Stockholder, the Company shall not (i) enter into any
transaction or series of related transactions with any Affiliates
of the FS Stockholder, except on terms (as determined in
reasonable good faith based on full and fair disclosure by the
Board) no less favorable to the Company than are available from
an unaffiliated third party or (ii) execute any amendment to the
Articles of Incorporation or the Bylaws of the Company, which
would adversely affect the rights and obligations of the
Ripplewood Stockholder thereunder, except for amendments which
are applicable to holders of Voting Securities generally and do
not disproportionately disadvantage the Ripplewood Stockholder,
or execute any amendment to this Agreement which adversely
affects the rights and obligations of the Ripplewood Stockholder
and their Permitted Transferees and representatives, provided
that this Agreement may be amended to add new parties hereto who
are purchasers of Securities (including an amendment granting
additional registration rights to such purchasers on terms
permitted hereunder), and this Agreement and the Bylaws may be
amended pursuant to Section 7.1 with respect to an Acquisition
Event.
iv. Except with respect to the matters set forth in Section
7.3(c), the director nominated by the Ripplewood Stockholder (the
"Ripplewood Director") shall, until the consummation of an
Initial Public Offering, cast any vote at a meeting of the Board
of Directors together with a majority of the directors nominated
by and affiliated with the FS Stockholder (the "FS Directors")
and shall execute and deliver to the Secretary of the Company any
written consent of the Board executed by all of the FS Directors.
Except as set forth in the preceding sentence, the Ripplewood
Stockholder
29
shall not take any action as a Director except as required by law
or as directed by a majority of the FS Directors. Notwithstanding
the foregoing, but subject to the next paragraph, the Ripplewood
Director shall not be required to vote or act in a manner that he
or she believes in good faith based on the advice of counsel
would violate applicable law, provided that in such circumstance
the Ripplewood Director shall abstain from voting or acting
altogether.
In the event (i) the Ripplewood Director shall fail to comply with the
agreement in Section 7.3(d), (ii) the Ripplewood Director shall exercise his or
her right to abstain pursuant to the last sentence of Section 7.3(d), or (iii)
Section 7.3(d) shall be determined (other than at the instance of the FS
Stockholder or its affiliates) to be invalid, illegal or unenforceable in whole
or in part in any respect, or the Ripplewood Director, Ripplewood Stockholder or
their affiliates shall assert such invalidity, illegality or unenforceability,
then, in any such case, the FS Stockholder shall be entitled to remove the
Ripplewood Director from the Board, and the Board shall be entitled to appoint
another director in its sole discretion, and the Ripplewood Director shall
immediately resign from the Board without casting any further votes or taking
any further actions as a Director. In addition, if clause (i) or (iii) of the
preceding sentence is applicable, then, without, further action by any party to
this Agreement, the Stockholders' Obligation to elect a nominee of the
Ripplewood Stockholder to the Board shall be of no further force and effect; if
clause (ii) of the preceding sentence is applicable, then at any time after the
FS Stockholder shall have replaced the Ripplewood Director on the Board and the
Board has had a reasonable opportunity to reconsider the vote or action with
respect to which the Ripplewood Director abstained, promptly upon the Ripplewood
Stockholder's or Ripplewood Director's request, the Ripplewood Stockholder shall
be entitled to be reappointed a Director under Section 7.1.
v. Without the affirmative approval of a majority of the
directors nominated by the FS Stockholder, the Company shall not
(i) enter into any transaction or series of related transactions
with any Affiliates of the Sears Stockholder, except on terms (as
determined in reasonable good faith based on full and fair
disclosure by the Board) no less favorable to the Company than
are available from an unaffiliated third party; (ii) execute any
amendment to the Articles of Incorporation or the Bylaws of the
Company, which would adversely affect the rights and obligations
of the FS Stockholder thereunder, except for amendments which are
applicable to holders of Voting Securities generally and do not
disproportionately disadvantage the FS Stockholder; (iii) execute
any amendment to the Articles of Incorporation or Bylaws having
the effect of creating super majority voting requirements for
meetings or consents of stockholders or directors; or (iv)
execute any amendment to this Agreement which adversely affects
the rights and obligations of the FS Stockholder and its
Permitted Transferees and representatives, provided that this
Agreement may be amended to add new parties hereto who are
purchasers of
30
Securities (including an amendment granting additional
registration rights to such purchasers on terms permitted
hereunder), and this Agreement and the Bylaws may be amended
pursuant to Section 7.1 with respect to an Acquisition Event.
vi. Without the approval of a majority of the directors
nominated by the Sears Stockholder, the Company shall not (i)
enter into any transaction or series of related transactions with
any Affiliates of the FS Stockholder, except on terms (as
determined in reasonable good faith based on full and fair
disclosure by the Board) no less favorable to the Company than
are available from an unaffiliated third party; (ii) execute any
amendment to the Articles of Incorporation or the Bylaws of the
Company, which would adversely affect the rights and obligations
of the Sears Stockholder thereunder, except for amendments which
are applicable to holders of Voting Securities generally and do
not disproportionately disadvantage the Sears Stockholder; (iii)
execute any amendment to the Articles of Incorporation or Bylaws
having the effect of creating super majority voting requirements
for meetings or consents of stockholders or directors; or (iv)
execute any amendment to this Agreement which adversely affects
the rights and obligations of the Sears Stockholder and its
Permitted Transferees and representatives, provided that this
Agreement may be amended to add new parties hereto who are
purchasers of Securities (including an amendment granting
additional registration rights to such purchasers on terms
permitted hereunder), and this Agreement and the Bylaws may be
amended pursuant to Section 7.1 with respect to an Acquisition
Event.
vii. Subject to Sections 7.2 and 7.3(a) if, after a meeting of
the Board of Directors duly called and noticed (or for which
notice was waived), the Board of Directors approves in good faith
either (i) a sale of substantially all of the assets of the
Company or its operating subsidiaries or (ii) a sale of
substantially all of the capital stock of the Company or (iii) a
merger or other business combination transaction in which
substantially all of the shares of capital stock of the Company
will be converted into the right to receive cash or other
securities, then subject to receipt by the Company of an opinion
from a nationally-recognized investment banking firm that the
transaction is fair, from a financial point of view, to the
Company's stockholders, each Stockholder shall vote all of its
shares in favor of such transaction, waive any dissenting rights
it may have in connection with such transaction, execute such
agreements, powers of attorney, voting proxies or other documents
and instruments as may be necessary to consummate such
transaction, and timely take such other actions as the Board of
Directors may reasonably request as necessary in connection with
the approval of or consummation of such transaction. The Company
31
shall use reasonable best efforts to amend existing agreements under
its stock plans for management, and to adopt new forms of agreements,
so that this Section 7.3(g) will be binding on management stockholders
and option holders. Each Stockholder agrees that no Transfer of its
Securities shall be effective unless the Transferee (other than a
Transferee in a Public Market Sale) agrees to be bound by this Section
7.3(g). The provisions of this Section 7.3(g) shall terminate at such
time as the Stockholders (including any additional parties hereto) no
longer are designating or have the right to designate a majority of
the members of the Board of Directors.
d. Termination and Assignment. The rights contained in Section
--------------------------
7.1 shall not be assignable other than by FS Stockholder or Sears
Stockholders to a Permitted Transferee or by the Ripplewood
Stockholder to a Permitted Transferee or by Xx. Xxxxxxx to a
Permitted Transferee (of the type described in clause (w) of the
definition thereof). Xx. Xxxxxxx'x or his representative's rights
under Sections 7.1 and 7.3 shall terminate if Xx. Xxxxxxx and his
Permitted Transferees own less than 2.5% of the issued and
outstanding shares of Common Stock.
8. Certain Covenants of the Company.
--------------------------------
a. Audited Financial Statements. So long as any Stockholder
----------------------------
owns 5% or more of the Company's Voting Securities, the Board of
Directors shall engage a nationally recognized firm reasonably
acceptable to the FS Stockholder and the Sears Stockholder to
audit the annual financial statements of the Company, and copies
of such audited annual financial statements shall be delivered to
the Stockholders as promptly as possible after completion, and no
more than 90 days after the fiscal year end.
b. Other Financial Information. Within 45 days after the last
---------------------------
day of each fiscal quarter (other than the fourth quarter), the
financial statements of the Company, prepared in accordance with
past practice, for such quarter and for the elapsed portion of
the fiscal year then ended shall be delivered to the
Stockholders. In addition, each Stockholder holding 5% or more
(and, in the case of Xx. Xxxxxxx, 2.5% or more) of the Company's
Voting Securities shall be entitled to receive monthly financial
statements and other financial or business information it may
reasonably request regarding the operation of the business.
9. Copy of Agreement. A copy of this Agreement and all amendments hereto
-----------------
shall be filed with the Secretary of Company and shall be kept at the
32
principal executive offices of Company.
10. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the Commonwealth of
Virginia without regard to the conflicts of laws rules thereof.
11. Representations and Warranties. Each Stockholder represents and
------------------------------
warrants (a) that such Stockholder has full power, capacity, right and
authority, and any requisite approvals or consents to enter into and
perform this Agreement; (b) that this Agreement and the performance of
its obligations hereunder have been duly authorized, and that this
Agreement has been duly executed and delivered by such Stockholder and
is a valid and binding agreement, enforceable against such Stockholder
in accordance with its terms; (c) that such Stockholder owns
beneficially and of record the shares of Common Stock and the rights,
options or warrants to purchase any capital stock of the Company set
forth opposite its name on Schedule 1 hereto, free and clear of any
lien, claim, charge, option, security interest, restriction or
encumbrance and (d) that such Stockholder does not own beneficially or
of record any other securities or rights, options or warrants to
purchase any securities of the Company. The Trust further represents
and warrants that it is a trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of Virginia. The
sole living Trust beneficiaries are: Xxxxxxxx X. Xxxxxxx (during his
lifetime) and, upon the death of Xxxxxxxx X. Xxxxxxx, his children
then living (presently his children are Xxxx X. Xxxxxxx and Xxxx X.
Xxxxxxx). The execution, delivery and performance of this Agreement
will not violate any trust document establishing or governing the
Trust.
12. Amendment and Waiver; Successors; After Acquired Shares. Except
-------------------------------------------------------
in order to add additional parties who are purchasers of Securities
(including the granting of Registration Rights to such parties on
terms permitted hereunder) or in connection with an Acquisition Event,
this Agreement may be amended, modified or supplemented, and
compliance with any provision hereof may be waived, only with the
written consent of each of the FS Stockholder and the Sears
Stockholder, the written consent of the Existing Stockholders holding
a majority of the shares of Common Stock then held by the Existing
Stockholders, and to the extent the terms of the specific rights
(including, without limitation, their Registration Rights, board
rights or Tag-Along Rights) of the Ripplewood Stockholder would be
prejudiced thereby, the written consent of the Ripplewood Stockholder,
and any amendment, modification, supplement or waiver so consented to
in writing shall be binding upon the parties hereto and their
successors and Permitted Transferees and assigns (if any), provided,
that to the extent either the FS Stockholder or Sears Stockholder or
their respective Permitted Transferees hold less than 10% of Common
Stock, any such amendment shall only require such Stockholder's
written consent if and to the extent the terms of their
33
respective specific rights (including, without limitation, their
Registration Rights, board rights or Tag-Along Rights) would be
prejudiced thereby. This Agreement shall be binding on the parties
hereto and, their successors, transferees, assigns, heirs and personal
representatives; provided however, that unless expressly permitted
herein to an assignee or Permitted Transferee, this Agreement and the
rights granted hereunder shall not be assignable without the written
consent of all of the parties hereto, which consent may be withheld in
each such party's sole discretion. If any right hereunder is not
assignable, it shall not be transferred to any subsequent holder of
shares of Common Stock by reason of the transfer of shares to such
holder. The Agreement shall apply to all shares of Common Stock now
owned or hereafter acquired by any Stockholder, and the term "Common
Stock" includes any securities into which Common Stock may hereafter
be changed or which may hereafter be issued to holders of shares of
Common Stock. No party hereto nor their Affiliates will take any
action indirectly (such as the sale of a subsidiary) that would
otherwise be prohibited if taken directly by a party. Without the
consent of the other Stockholders holding a majority of the Common
Stock not held by Sears Stockholder, Sears, Xxxxxxx and Co. shall not
transfer any voting equity interest in Sears Stockholder to a non-
Affiliate unless the Securities owned by Sears Stockholder are first
transferred to Sears, Xxxxxxx and Co. or a controlled Affiliate
thereof.
13. Interpretation. The headings of the Sections contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect the meaning or
interpretation of this Agreement.
14. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally or delivered by telecopier
(with receipt confirmed), on the date of such delivery or
transmission, (i) if to Company, at its principal business address,
attention Chief Executive Officer, (ii) if to the FS Stockholder, at
Xxxxxxx Xxxxxx & Co. Incorporated, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx
0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx,
telecopier: (000) 000-0000, (iii) if to Xx. Xxxxxxx at 0000 Xxxxxxx
Xxx., XX, Xxxxxxx, XX 00000, with a copy to Xxxxxxx X. Xxxxxxxx, Esq.,
Flippin, Densmore, Xxxxx, Xxxxxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxx 0000, Xxxxxxx, Xxxxxxxx 00000; (iv) if to the Trust at
c/o Xxxxxxxx X. Xxxxxxx at 0000 Xxxxxxx Xxx., XX, Xxxxxxx, XX 00000,
with a copy to Xxxxxxx X. Xxxxxxxx, Esq., Flippin, Densmore, Xxxxx,
Xxxxxxxxxx & Xxxxxx, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000; (v) if to the Ripplewood Stockholder at Ripplewood
Holdings L.L.C., 0 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Attention: Xxxx Xxxxxx, facsimile: (000) 000-0000, with a copy to
Debevoise & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX, Attention:
Xxxxxx X. Xxxxxxxxxx, Xx., facsimile (000) 000-0000; and (vi) if to
the Sears Stockholders at Sears, Xxxxxxx and Co., 0000 Xxxxxxx Xxxx,
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000,
34
Attention: Assistant General Counsel Corporate and Securities,
facsimile: (000) 000-0000, with a copy to Xxxxx, Xxxxx & Xxxxx, 000
Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000, Attention Xxxxx X.
Xxxxx, facsimile: (000) 000-0000 (or at such other address or
facsimile number for any party as shall be specified by like notice
provided that notices of a change of address or telecopier number
shall be effective only upon receipt thereof).
15. Legends. All certificates evidencing shares of Common Stock which
-------
are issued to any of FSEP IV, the Ripplewood Stockholder, the Sears
Stockholder and the Existing Stockholders shall bear the following
legend (in addition to any other legend required to be placed
thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE
TRANSFER, PLEDGE, HYPOTHECATION, DISTRIBUTION AND VOTING THEREOF
AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT DATED AS OF _______________, 1998, WHICH MAY BE
REVIEWED AT THE PRINCIPAL PLACE OF BUSINESS OF THE CORPORATION
AND A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION WITHOUT
CHARGE UPON WRITTEN REQUEST THEREFOR."
All certificates evidencing shares of Common Stock which are issued to the
Trust shall be legended as follows (in addition to the above legend and any
other legend required by law to be placed thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN ADDITIONAL RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO
THE TRANSFER THEREOF RELATING TO THE XXXXXX XXXXXXX TRUST DATED
JULY 13, 1964 AS SET FORTH IN SECTIONS 5.1(A) AND (B) OF THAT
CERTAIN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF
__________, 1998, WHICH MAY BE REVIEWED AT THE PRINCIPAL PLACE OF
BUSINESS OF THE CORPORATION AND A COPY OF WHICH MAY BE OBTAINED
FROM THE CORPORATION WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFOR."
16. Further Assurances. The Stockholders shall exercise, or cause to
------------------
be exercised, voting rights with respect to Voting Securities held of
record or beneficially owned by them in a manner so that, and shall
otherwise take any necessary actions in order that, the covenants and
understandings of the parties set forth in this Agreement shall be
implemented. Each party hereto agrees to perform any further acts and
execute and deliver any documents which may be reasonably necessary to
carry out the intent of this Agreement and to make
35
appropriate changes to the procedures set forth herein to implement
such rights to the extent necessary to conform to the Virginia Stock
Corporation Act or other applicable law. Each Stockholder further
agrees that it will not take any action (such as amending the articles
of incorporation or bylaws of the Company) that would materially
interfere with or prevent the exercise of any rights of the other
Stockholders under this Agreement. The Company covenants and agrees
that it will act in good faith to preserve for each of the
Stockholders the benefits of this Agreement and that it will take no
voluntary action to impair the benefit hereof or to avoid or seek to
avoid the observance or performance of any of the terms to be observed
or performed hereunder or to deny to any of the Stockholders any of
the benefits or protections contemplated hereby.
17. Injunctive Relief; Disputes. It is acknowledged that it will be
---------------------------
impossible to measure in money the damages that would be suffered if
the parties hereto fail to comply with any of the obligations herein
imposed on them and that, in the event of any such failure, an
aggrieved party hereto will be irreparably damaged and will not have
an adequate remedy at law. Any such party shall, therefore, be
entitled to injunctive relief, including specific performance, to
enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the
parties hereto shall raise the defense that there is an adequate
remedy at law.
18. Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect to the maximum
extent permitted by applicable law. Upon such determination that any
term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that this
Agreement be enforced as originally contemplated to the greatest
extent possible.
19. Entire Agreement. This Agreement (and Exhibits hereto), together
----------------
with the Company's Articles of Incorporation and Bylaws as in effect
on the date hereof constitute the entire agreement and understanding
among the parties pertaining to the subject matter hereof and
supersede any and all prior agreements, whether written or oral,
relating hereto.
20. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
21. Term. This Agreement shall terminate and be of no further force and
----
effect on the date that is ten years from the date hereof, provided that
subject to Section 7.4,
36
Xx. Xxxxxxx'x rights under Section 7.1 shall survive termination of this
Agreement so long as he shall live.
37
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ADVANCE HOLDING CORPORATION
By: /s/ J. O'Xxxx Xxxxxxxx
-------------------------------------------------------
Its: Senior Vice President and Chief Financial Officer
----------------------------------------------------
XXXXXXXX X. XXXXXXX
/s/ Xxxxxxxx X. Xxxxxxx
----------------------------------------------------------
THE XXXXXX XXXXXXX TRUST DATED JULY 13, 1964
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------------------
Trustee
RIPPLEWOOD PARTNERS, L.P.
a Delaware limited partnership
By: /s/ Xxxx Xxxxxx
--------------------------------------------------------
Its:______________________________________________________
RIPPLEWOOD ADVANCE AUTO PARTS
EMPLOYEE FUND I L.L.C.,
a Delaware limited liability company
By: /s/ Xxxx Xxxxxx
-------------------------------------------------------
Its:______________________________________________________
38
FS EQUITY PARTNERS IV, L.P.
a Delaware limited partnership
By: FS Capital Partners, LLC
Its: General Partner
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Its_____________________________________
WA HOLDING CO., formerly
WESTERN AUTO HOLDING CO.,
a Delaware corporation
By: /s/ Xxx Xxxxx
-------------------------------------
Its_____________________________________
For purposes of the last sentence of Section 12 only:
SEARS, XXXXXXX AND CO.,
a New York corporation
By: /s/ Xxx Xxxxx
-------------------------------------
Its _____________________________________
39
