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EXHIBIT 10.04
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
June 19, 1996
Xx. Xxxxx Xxxxxx
Northern Automotive Corporation
000 Xxxx Xxxxxxxx Xxx.
Xxxxxxx XX 00000
Re: 1,212,000 share Participation
Dear Xxx:
This Amended and Restated Participation Agreement ("Agreement") amends and
restates in its entirety the letter agreement between you and Northern
Automotive Corporation (the "Company") dated March 4, 1992 relating to your
Participation Interest (as therein defined) with respect to shares of common
stock of the Company ("Common Stock"). This Agreement is being entered into
simultaneously with the separate grant to you of an option ("Option") to
purchase 1,212,000 shares of common stock of CSK Auto, Inc. (which is to be
merged with the Company) at an exercise price of $12.75 per share (as said
price may be adjusted from time to time in accordance with the terms of the
Option Agreement, the "Exercise Price").
1. Subject to the terms and conditions hereof, your Participation Interest
shall (only for the purposes described below) be equivalent to ownership of
1,212,000 shares of Common Stock assuming (for purposes of this Agreement)
that, on the date hereof, the Company's capital stock had been recapitalized
to have 30,300,000 shares of Common Stock outstanding (the "Assumed
Outstanding Stock").
2. Your right to the Participation Interest is fully vested as of the date
hereof regardless of whether or not, at the time of a Sale (as hereafter
defined), you are employed by the Company or the reason for or the party
terminating such employment.
3. In the event of the sale by the stockholders of the Company to a
non-affiliated entity of all or substantially all of the Common Stock (a "Stock
Sale"), or the sale to a non-affiliated entity of all or substantially all of
the assets of the Company (an "Asset Sale", and together with a Stock Sale,
collectively, a "Sale"), you shall, subject to the provisions of paragraph 4
below, be entitled to receive in cash an amount (but not in excess of the
aggregate Exercise Price for all shares which may be purchased pursuant to the
Option) equal to that percentage of the net aggregate proceeds of a Stock Sale
(which shall be defined as all consideration received by the stockholders of
the Company on such Sale on account of Common Stock less any transaction costs)
or the net amount, determined in good faith by the Board of Directors of the
Company ("Board"), which would be distributable to the stockholders on account
of Common Stock after an Asset Sale (giving
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effect to all liabilities including, without limitation, any income
taxes which would be payable in connection therewith including the
eventual liquidation of the Company) as your Participation Interest
represents of the then Assumed Outstanding Stock. In the event the
number of shares of the outstanding Common Stock is changed by reason of
split-ups, combination of shares, recapitalization, stock dividend or
the like, your Participation Interest and the Assumed Outstanding Stock
shall be appropriately adjusted. The Assumed Outstanding Stock shall be
increased (without any change in the number of shares represented by
your Participation Interest) by an amount equal to (i) the number of
shares represented by your Participation Interest and all other
participation interests and/or shares of Common Stock heretofore or
hereafter issuable to employees of the Company, and (ii) any and all
shares of Common Stock issued by the Company for fair consideration.
4. In the event of a Sale, you shall not be entitled to any payments
pursuant to paragraph 3 above unless you remain in the employ of the
Company or the purchaser of the assets, as the case may be, for at least
1 year following the Sale provided that (i) the management of the
Company or the purchaser of the assets has offered to continue your
employment on substantially the same terms for such 1 year period and
(ii) the Company has not waived this requirement. If your employment so
continues, you shall receive the first 50% of the amount payable under
paragraph 3 above within 30 days as provided in paragraph 7 below and
the balance (with interest at a rate per annum equal to the 1 year
Treasury xxxx rate on the closing date of the Sale) after the end of the
first year following the Sale as provided in paragraph 7 below, but only
if you have been continuously so employed. The Company shall have the
right, in the event any portion of the consideration received is not
cash, to deliver such consideration to you in payment in the same
proportion as received by the Company or the stockholders, as the case
may be.
5. In the event any part of the consideration involved in a Sale is not
cash, such consideration shall be valued as determined by the Board in
good faith. A merger of the Company with a non-affiliated entity shall
constitute a Stock Sale of such Company under paragraph 3, unless the
holders of capital stock of the Company immediately prior to the merger
hold stock possessing a majority of the voting power to elect directors
of the surviving corporation immediately following the merger.
6. A public offering of Common stock owned, directly or indirectly, by The
Carmel Trust ("Carmel") or a sale of all or less than all of the Common
Stock owned directly or indirectly by Carmel to a non-affiliated entity
shall also constitute a Sale, except that in each such event you shall
be entitled to receive an amount (but not in excess of the aggregate
Exercise Price for all shares which may be purchased pursuant to the
Option multiplied by the Applicable Percentage, as hereafter defined)
equal to (i) the percentage determined by dividing the aggregate number
of shares of Common Stock sold directly or indirectly by Carmel in such
offering or sale by the number of shares of Common Stock owned directly
or indirectly by Carmel immediately prior to such offering or sale (the
"Applicable Percentage"), multiplied by (ii) the percentage determined
by dividing your
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Participation Interest by the then Assumed Outstanding Stock, and then
multiplied by (iii) the product of (a) the net price per share of Common
Stock received by Carmel (after any transaction costs to the
stockholder), multiplied by (b) the then number of shares of Common
Stock outstanding. An example of the foregoing calculation is annexed
hereto. Upon any payment in accordance with this paragraph, the portion
of your Participation Interest for which you receive such payment shall
terminate and the maximum amount payable to you under paragraph 3 shall
be reduced by the amount paid under this paragraph.
7. The first payment due to you pursuant to paragraph 4 shall be made
within 30 days after receipt by the Company or its controlling
stockholder of the proceeds of the Sale and, under the conditions
provided in paragraph 4, the balance remaining within 30 days after the
end of the first year (or 30 days after such earlier date as the Company
or the purchaser of the assets, as applicable, shall fail to continue to
offer you employment in accordance with clause (i) of paragraph 4) and
upon such payment you shall have no further rights under this Agreement.
Payments due to you hereunder pursuant to paragraph 6 shall be made
within 30 days after receipt by the Company or its controlling
stockholder of the proceeds of the Sale.
8. Your employment is governed by a separate employment agreement with the
Company, the terms of which are not varied or expanded hereby, and,
accordingly, this agreement shall not give you any separate right to
remain in the Company's (or its affiliates') employ. Nothing in this
Agreement shall give you any rights as or equivalent to a stockholder of
the Company or any other rights, except as explicitly provided herein.
Your rights under this agreement cannot be transferred or assigned. This
Agreement constitutes the entire agreement with respect to the subject
matter hereof and may not be modified except in writing.
If the foregoing correctly sets forth our understanding, will you please so
indicate at the space provided below.
Very truly yours,
NORTHERN AUTOMOTIVE CORPORATION
AGREED AND ACCEPTED: By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, Chairman
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
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Example of Section 6 Calculation
Assumptions:
(i) 31,512,000 Common Shares are outstanding (including shares reflecting your
participation as contemplated by the last sentence of paragraph 3 of the
attached agreement and 30,300,000 shares owned by CSK Holdings), (ii) CSK
Holdings sells 6,000,000 of those shares for $10 per share, and (iii) you are
fully vested.
6,000,000 x 1,212,000 x ($10.00 x 31,512,000) = $2,400,000
---------- ---------- ----------
30,300,000 31,512,000
Holdings Your Amount Payable Payment to
Sells Vested for All You for the pro-rata
6,000,000 Percentage Outstanding Common Shares Portion of Your Interest
Shares of Outstanding
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