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EXHIBIT 10.05
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
June 19, 1996
Mr. Art Xxxxx
Northern Automotive Corporation
000 Xxxx Xxxxxxxx Xxx.
Xxxxxxx XX 00000
Re: 303,000 share Participation
Dear Art:
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 November 8, 1991 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 303,000 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
303,000 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
Participation
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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:
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Art Xxxxx
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Example of Section 6 Calculation
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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
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30,300,000 31,512,000
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Holdings Your Amount Payable Payment to
Sells Vested for All You for the pro-rate
6,000,000 Percentage Outstanding common Shares Portion of Your
Shares of Outstanding Interest
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