EXHIBIT 10.38
ADVANCE STORES COMPANY, INCORPORATED
SECURED PROMISSORY NOTE
$1,300,000.00 September 20, 2001
FOR VALUE RECEIVED, the undersigned Garnett E. Smith ("Borrower")
hereby promises to pay to the order of Advance Stores Company, Incorporated, a
Virginia Corporation ("Payee"), the principal sum of One Million, Three Hundred
Thousand Dollars ($1,300,000.00) together with interest on the unpaid balance of
such principal amount from the date hereof at the rate of interest equal to the
rate of interest reported by The Wall Street Journal as the "prime rate," as it
may change from time to time. Any change in the interest rate to be paid on
this Promissory Note resulting from a change in the prime rate shall be
effective as of the date of such change. Accrued interest to be paid on this
Secured Promissory Note (this "Promissory Note") shall be payable in arrears
commencing on March 1, 2002 (with respect to interest accrued through the
preceding December 31) and continuing on each succeeding March 1 thereafter with
respect to interest accrued during the previous year ending December 31 until
this Note is paid in full. The principal balance of, and all accrued and unpaid
interest on, this Promissory Note shall be payable in full by Borrower on that
date which is five (5) years from the date hereof.
Payments of principal and interest on this Promissory Note shall be
made in legal tender of the United States of America and shall be made at such
place as Payee shall have designated to Borrower (and may be made by payroll
deduction by mutual consent of Payor and Payee). If the date set for any
payment of principal or interest on this Promissory Note is a Saturday, Sunday
or legal holiday, then such payment shall be due on the next succeeding business
day.
As of the date hereof, Borrower has purchased certain shares of common
stock, par value $0.01 per share (the "Shares"), of the Payee pursuant to the
terms of that certain Advance Holding Corporation Stock Subscription Agreement
(the "Stock Subscription Agreement") dated April 15, 1998, by and between
Advance Holding Corporation and Borrower. Payment of this Promissory Note shall
be secured by the Shares as provided in that certain Stock Pledge Agreement of
even date herewith by and between Payee and Borrower (the "Pledge Agreement").
The principal balance of, and accrued and unpaid interest on, this
Promissory Note may be prepaid at any time, in whole or in part, without premium
or penalty. Any such prepayment shall be first applied to the payment of any
accrued and unpaid interest and then to the unpaid balance of the principal
amount. In the event of a Transfer (as defined in the Stock Subscription
Agreement) by Borrower (or Permitted Transferees (as defined in the Stock
Subscription Agreement)) of Shares to anyone (other than to a Permitted
Transferee), Borrower shall pay the principal balance of, and accrued but unpaid
interest on, this Promissory Note in accordance with the provisions of Section 6
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of the Pledge Agreement.
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In the event Borrower shall (i) fail to make complete payment of any
installment of accrued interest under this Promissory Note on the date such
installment of accrued interest is due (but Payee shall give Borrower notice of
nonpayment and at least five (5) days to cure such nonpayment); (ii) fail to
make complete payment of principal when due under this Promissory Note; (iii)
fail to make the prepayment of principal and accrued interest on this Promissory
Note upon a sale of Shares as required by the fourth paragraph hereof; or (iv)
commit a material breach of or default under the Stock Subscription Agreement or
the Pledge Agreement, Payee may accelerate this Promissory Note and declare the
entire unpaid principal amount of this Promissory Note and all accrued and
unpaid interest hereon to be immediately due and payable and, thereupon, the
unpaid principal amount and all such accrued and unpaid interest shall become
and be immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind (all of which are hereby expressly waived by
Borrower). The failure of Payee to accelerate this Promissory Note shall not
constitute a waiver of any of Payee's rights under this Promissory Note as long
as Borrower's default under this Promissory Note or breach of or default under
the Stock Subscription Agreement or the Pledge Agreement continues.
The provisions of this Promissory Note shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia without
regard to the conflicts of law rules thereof. In the event that Payee is
required to take any action to collect or otherwise enforce payment of this
Promissory Note, Borrower agrees to pay such reasonable attorneys' fees, court
costs and other expenses as Payee may incur as a result thereof, whether or not
suit is commenced.
The terms and provisions of this Promissory Note shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of the parties hereto and the successors and assigns of Payee and
any assignee or transferee of this Promissory Note. In the event of such
transfer or assignment, the rights and privileges conferred upon Payee shall
automatically extend to and be vested in such assignee or transferee, all
subject to the terms and conditions hereof. Borrower's obligations, rights or
any interest hereunder may not be delegated or assigned without the written
consent of Payee.
All notices, requests, demands or other communications under this
Promissory Note shall be delivered in accordance with the provisions of Section
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13(b) of the Pledge Agreement to the address(es) set forth therein.
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IN WITNESS WHEREOF, this Promissory Note has been duly executed and
delivered by Borrower on the date first above written.
BORROWER:
/s/ Garnett E. Smith
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Garnett E. Smith
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