EXHIBIT 10.19
ADVANCE HOLDING CORPORATION
STOCK SUBSCRIPTION AGREEMENT
THIS STOCK SUBSCRIPTION AGREEMENT (this "Agreement") is made and
entered into as of ________, 1998, by and between Advance Holding Corporation, a
Virginia corporation (the "Company"), and ________________ ("Purchaser").
R E C I T A L S:
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A. The Company now desires to sell to Purchaser, who is an employee
of the Company and/or any directly or indirectly majority or wholly-owned
entities of the Company (individually, a "Subsidiary" and collectively, the
"Subsidiaries"), and Purchaser desires to purchase from the Company, Shares (as
hereinafter defined) of the Company, subject to the terms and conditions set
forth in this Agreement. The date on which such sale and purchase occur shall
be referred to herein as the "Closing Date."
B. In order to induce the Company to sell the Shares to the
Purchaser, Purchaser agrees to hold such shares subject to the restrictions and
interests created by this Agreement.
A G R E E M E N T:
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NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as follows:
1. Sales and Purchase of Shares. The Company hereby agrees to sell
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to Purchaser, subject to the conditions and restrictions contained in this
Agreement, and Purchaser hereby agrees to purchase from the Company,
_________________ (______) shares of common stock $0.01 par value per share
(individually, a "Share," and collectively, the "Shares") of the Company, at a
price of $10.00 per Share, for an aggregate purchase price of
___________________________ Dollars ($_______) (the "Purchase Price"). The
Purchase Price shall be payable by delivery of (a) cash or Purchaser's check in
the amount of ___________________ Dollars ($______), and (b) a secured
promissory note of Purchaser issued to the Company (in the form attached hereto
as Exhibit A) for _______________ Dollars ($______) of the Purchase Price due
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five years from the effective date hereof (the "Note"). Payment of all amounts
owed under the Note and compliance by Purchaser with the terms and conditions of
this Agreement and the Pledge Agreement (as hereinafter defined) shall be
secured
by a pledge of the Shares, in conjunction with which Purchaser shall execute a
Stock Pledge Agreement in the form attached hereto as Exhibit B (the "Pledge
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Agreement"). Purchaser shall deliver the cash or check, the Note and the Pledge
Agreement to the Company prior to the Closing Date, each dated as of the Closing
Date. In connection with the purchase of Shares hereunder, Purchaser
acknowledges that he or she has reviewed the memorandum regarding Section 83(b)
of the Internal Revenue Code of 1986, as amended, attached hereto as Exhibit C.
2. Restriction on Transfer of the Shares. Except as otherwise
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provided herein, Purchaser may not sell, transfer, assign, pledge, hypothecate
or otherwise dispose of (collectively, "Transfer") any of the Shares, or any
right, title or interest therein prior to the fifth anniversary of the Closing
Date and, thereafter, any Transfer must be in compliance with Section 4 and
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Section 9 hereof. All Transfers also must comply with Section 6 of the Pledge
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Agreement. Any purported Transfer or Transfers (including involuntary Transfers
initiated by operation of legal process) of any of the Shares or any right,
title or interest therein, except in strict compliance with the terms and
conditions of this Agreement, shall be null and void.
3. Repurchase Option Upon Termination.
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(a) In the event that Purchaser's employment or other
relationship with the Company and all of its Subsidiaries terminates for any
reason (including, without limitation, by reason of Purchaser's death,
disability, retirement, voluntary resignation or dismissal by the Company or any
of its Subsidiaries, with or without cause), the Company shall have the option
(the "Repurchase Option") to purchase from Purchaser all or any portion of the
Shares acquired by Purchaser under this Agreement for a period of six (6) months
after the effective date of such termination (the effective date of termination
is hereinafter referred to as the "Termination Date").
(b) The purchase price (the "Repurchase Price") for each Share to
be purchased pursuant to the Repurchase Option shall equal (a) the greater of
Purchase Price and Book Value (as defined herein) if the Termination Date occurs
within the two (2) year period commencing on the date hereof and (b) the greater
of the Purchase Price and the Fair Market Value (as defined herein) thereof
(subject to adjustment as set forth herein) thereafter. The "Book Value" of a
Share shall equal $10.00 per Share (subject to adjustment as set forth in
Section 3(c)) plus the net income or minus the net loss per share to the end of
the fiscal quarter immediately preceding the Termination Date, as determined by
the Board, acting in good faith and based upon the books and records of the
Company prepared in accordance with generally accepted accounting principles
consistently applied, which determination shall be final and binding. The "Fair
Market Value" of a Share shall be the fair market value of a Share as of the
Termination Date, as determined by the Board of Directors of the Company, acting
in good faith and based upon the best available evidence, which determination
shall be final and binding.
(c) The Repurchase Price for any Shares to be purchased pursuant
to the Repurchase Option shall be increased or decreased appropriately to
reflect any distribution of stock or other securities of the Company or any
successor or assign of the Company which is
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made in respect of, in exchange for or in substitution of the Shares by reason
of any split, reverse split, combination, recapitalization, reclassification,
merger, consolidation or otherwise.
(d) The Repurchase Option shall be exercised by the Company by
delivery to Purchaser, within the six-month period specified above, of a written
notice specifying (a) the number of Shares to be purchased and (b) a day, which
shall not be more than 30 days after the date such notice is delivered, on or
before which Purchaser shall surrender the certificate or certificates
representing the Shares to be purchased pursuant to the Repurchase Option (duly
endorsed in blank for Transfer) at the principal office of the Company in
exchange for a check, payable to Purchaser in the amount equal to the Repurchase
Price, calculated as provided in this Section 3, multiplied by the number of the
Shares to be purchased. If Purchaser fails to so surrender such certificate or
certificates on or before such date, from and after such date the Shares which
the Company elected to repurchase shall be deemed to be no longer outstanding,
and Purchaser shall cease to be a stockholder with respect to such Shares and
shall have no rights with respect thereto except only the right to receive
payment of the Repurchase Price, without interest, upon surrender of the
certificate or certificates therefor (duly endorsed in blank for Transfer).
Notwithstanding the foregoing in this Section 3(d), in the event any principal,
interest, fees, expenses or other amounts due on or in connection with the Note
(the "Outstanding Amount") are owed to the Company by Purchaser, the Repurchase
Price for the number of the Shares to be repurchased hereunder shall be reduced
(to an amount not less than zero) by such Outstanding Amount, which reduction
shall be specified in reasonable detail in the Company's written notice of
election to exercise the Repurchase Option. If the Outstanding Amount exceeds
the Repurchase Price for the number of the Shares to be repurchased, Purchaser
shall remain obligated and liable to the Company for the unpaid balance thereof.
(e) This Repurchase Option shall terminate upon an underwritten
public offering of Common Stock by the Company registered under the Act (as
defined below) (other than an offering registered on Form S-4 or Form S-8 or any
substitute for such forms) resulting in gross proceeds to the Company in excess
of $25 million (an "Initial Public Offering").
4. Right of First Refusal.
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(a) Sales; Notice. At any time on or after the fifth anniversary
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of the Closing Date, Purchaser may Transfer for cash (and only for such form of
consideration) any or all of the Shares to any third party subject to the
provisions of Section 4, Section 7(c), Section 9 and Section 12(a) hereof, and
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subject to Section 6 of the Pledge Agreement. Prior to any such intended
Transfer, Purchaser shall first give at least thirty (30) days' advance written
notice (the "Notice") to the Company specifying (i) Purchaser's bona fide
intention to sell such Shares; (ii) the name(s) and address(es) of the proposed
transferee(s); (iii) the number of Shares Purchaser proposes to Transfer
(individually, an "Offered Share," and collectively, the "Offered Shares"); (iv)
the price for which Purchaser proposes to Transfer each Offered Share (the
"Proposed Purchase Price"); (v) such evidence as the Company may reasonably
request to demonstrate the
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ability of the proposed transferee(s) to pay the Proposed Purchase Price; and
(vi) all other material terms and conditions of the proposed transfer.
(b) Election by the Company. Within twenty (20) days after
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receipt of the Notice, the Company may elect to purchase any or all of the
Offered Shares at the price and on the terms and conditions set forth in the
Notice by delivery of written notice of such election to Purchaser, specifying a
day, which shall not be more than twenty (20) days after such notice is
delivered, on or before which Purchaser shall surrender (if Purchaser has not
already done so) the certificate or certificates representing the Offered Shares
(duly endorsed in blank for transfer) at the administrative office of the
Company. Within twenty (20) days after delivery of such notice to Purchaser, the
Company shall deliver to Purchaser a check, payable to Purchaser or to such
person as Purchaser shall request, in the amount equal to the product of the
Proposed Purchase Price multiplied by the number of Offered Shares (the "First
Refusal Price") in exchange for the Offered Shares. If Purchaser fails to so
surrender such certificate or certificates on or before such date, from and
after such date the Offered Shares shall be deemed to be no longer outstanding,
and Purchaser shall cease to be a Shareholder with respect to such Shares and
shall have no rights with respect thereto except only the right to receive
payment of the First Refusal Price, without interest, upon surrender of the
certificate or certificates therefor (duly endorsed in blank for Transfer).
Notwithstanding the foregoing, if any Outstanding Amount is owed to the Company
by Purchaser, the First Refusal Price shall be reduced (to an amount not less
than zero) by such Outstanding Amount, which reduction shall be specified in
reasonable detail in the Company's written notice of election to purchase the
Offered Shares. If the Company does not elect to purchase all of the Offered
Shares, Purchaser shall be entitled to Transfer the Offered Shares, subject to
Section 9 of this Agreement and Section 6 of the Pledge Agreement, to the
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transferee(s) named in the Notice at the Proposed Purchase Price, or at a higher
price, and on the terms and conditions set forth in the Notice; provided,
however, that such Transfer must be consummated within ninety (90) days after
the date of the Notice and any proposed Transfer after such ninety (90) day
period may be made only by again complying with the procedures set forth in this
Section 4. This right of first refusal terminates upon an Initial Public
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Offering.
5. Permitted Transfers. Subject to and upon full compliance with
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Section 6 of the Pledge Agreement, Purchaser may, at any time or times, transfer
any or all of the Shares: (a) inter vivos to Purchaser's spouse or issue, a
trust for their benefit, or pursuant to any will or testamentary trust; or (b)
upon Purchaser's death, to any person in accordance with the laws of descent
and/or testamentary distribution (such persons described in clauses (a) and (b)
hereof are collectively referred to herein as "Permitted Transferees").
Notwithstanding the foregoing in this Section 5, Shares shall not be Transferred
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pursuant to this Section 5 until the Permitted Transferee executes a valid
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undertaking, in form and substance reasonably satisfactory to the Company, to
the effect that the Permitted Transferee and the Shares so Transferred shall
thereafter remain subject to all of the provisions of this Agreement (including
the Repurchase Option) and the Pledge Agreement, as though the Permitted
Transferee were a party to this Agreement and the Pledge Agreement, bound in
every respect in the same way as Purchaser. Transfers made in
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accordance with this Section 5 shall not be subject to the provisions of Section
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4 of this Agreement.
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6. Security for Performance. The Company and Purchaser hereby
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acknowledge (a) that Purchaser has agreed to pledge the Shares to secure the
payment of all obligations existing under the Note whether for principal,
interest, fees, expenses or otherwise and/or to ensure Purchaser's compliance
with the terms and conditions of this Agreement and the Pledge Agreement and (b)
that in connection with such pledge, Purchaser shall enter into the Pledge
Agreement as of the Closing Date requiring that the certificates evidencing the
Shares (the "Certificates") be held by the Company as security for the payment
of all obligations existing under the Note, whether for principal, interest,
fees, expenses or otherwise, and for Purchaser's compliance with the terms and
conditions of this Agreement and the Pledge Agreement. Subject to compliance
with the terms and conditions of this Agreement and of the Pledge Agreement,
Purchaser shall exercise all rights and privileges of the registered holder of
the Shares held by the Company pursuant to the Pledge Agreement and shall be
entitled to receive any dividend or other distribution thereon.
7. Investment Representations. Purchaser represents and warrants to
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the Company as follows:
(a) Purchaser's Own Account. Purchaser is acquiring the Shares
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for Purchaser's own account and not with a view to or for sale in connection
with any distribution of the Shares.
(b) Access to Information. Purchaser (i) is familiar with the
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business of the Company and its Subsidiaries; (ii) has had an opportunity to
discuss with representatives of the Company and its Subsidiaries the condition
of and prospects for the continued operation and financing of the Company and
its Subsidiaries and such other matters as Purchaser has deemed appropriate in
considering whether to invest in the Shares; and (iii) has been provided access
to all available information about the Company and its Subsidiaries reasonably
requested by Purchaser.
(c) Shares Not Registered. Purchaser understands that the Shares
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have not been registered under the Act or registered or qualified under the
securities laws of any state and that Purchaser may not Transfer the Shares
unless they are subsequently registered under the Act and registered or
qualified under applicable state securities laws, or unless an exemption is
available which permits Transfers without such registration and qualification.
8. Partial Termination. This Agreement shall terminate with respect
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to those Shares which are (a) acquired by the Company pursuant to Section 3(b)
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hereof upon such acquisition; or (b) acquired by the Company pursuant to Section
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4 hereof, upon such acquisition.
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9. Obligation to Sell Securities.
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(a) If FS Equity Partners IV, L.P., a Delaware limited
partnership, ("FSEP IV") finds a third-party buyer for all shares of common
stock of the Company held by it (whether such sale is by way of purchase,
exchange, merger or other form of transaction), upon the request of FSEP IV, the
Purchaser shall sell all of Purchaser's Shares for the same per share
consideration (which may be less than the Purchase Price per share paid by
Purchaser), and otherwise pursuant to the terms and conditions applicable to the
FSEP IV for the sale of its shares of its common stock of the Company.
(b) Purchaser hereby consents to any sale, transfer,
reorganization, exchange, merger, combination or other form of transaction
described in Section 9(a) and agrees to execute such agreements, powers of
attorney, voting proxies or other documents and instruments as may be necessary
or desirable to consummate such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction. Purchaser further agrees to
timely take such other actions as FSEP IV may reasonably request in connection
with the approval of the consummation of such sale, transfer, reorganization,
exchange, merger, combination or other form of transaction, including voting as
a stockholder to approve any such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction and waiving any appraisal
rights that Purchaser may have in connection therewith.
(c) The obligations of Purchaser pursuant to this Section 9 shall
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be binding on any transferee (other than a transferee in a Public Market Sale,
as defined below) of any of the Shares and Purchaser and any of his transferees
shall obtain and deliver to FSEP IV a written commitment to be bound by such
provisions from a subsequent transferee prior to any Transfer (other than
Transfers constituting a Public Market Sale). The Purchaser's obligations
pursuant to this Section 9, and the obligations of any such transferee, shall
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survive the partial termination of this Agreement pursuant to Section 8 hereof.
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Any transfer effected in violation of this provision shall be void. The term
"Public Market Sale" means any sale of Common Stock after the Initial Public
Offering which is made pursuant to Rule 144 promulgated under the Securities Act
or which is made pursuant to a registration statement filed with the declared
effective by the Securities and Exchange Commission.
10. Tag Along Rights. If FSEP IV finds a third-party buyer (other
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than a buyer that is an investment fund or partnership affiliated with FSEP IV,
a general or limited partner of FSEP IV, or, for the period ending one year from
the date hereof, an unaffiliated institutional investor or merchant banking firm
(each, a "FS Permitted Transferee") or is a transferee in a Public Market Sale),
for all or part of the shares of Common Stock held by FSEP IV (whether such sale
is by way of purchase, exchange, merger or other form of transaction), the
Purchaser shall have the right to sell, on the terms set forth in a written
notice (the "Offering Notice") delivered by FSEP IV to the Purchaser describing
the terms of the proposed sale (including the minimum sale price for the shares
of Common stock that FSEP IV plans to sell), that amount of the Shares he then
owns which constitute the same percentage of his Shares as the percentage of
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Common Stock sold by FSEP IV. Each such right shall be exercisable by delivering
written notice to FSEP IV within 15 days after receipt of the Offering Notice.
Failure to exercise such right within such 15-day period shall be regarded as a
waiver of such rights. The obligations of FSEP IV under this Section 10 shall
terminate upon an Initial Public Offering.
11. Miscellaneous.
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(a) Legends on Certificates. Any and all certificates now or
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hereafter issued evidencing the Shares shall have endorsed upon them a legend
substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THAT CERTAIN STOCK PURCHASE AGREEMENT
DATED AS OF ________, 1998, BY AND BETWEEN ADVANCE HOLDING
CORPORATION, A VIRGINIA CORPORATION, AND THE ORIGINAL PURCHASER
HEREOF, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF ADVANCE HOLDING CORPORATION."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances. Each party hereto agrees to perform any
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further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Agreement.
(c) Notices. Except as otherwise provided herein, all notices,
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requests, demands and other communications under this Agreement shall be in
writing, and if by telegram or telecopy, shall be deemed to have been validly
served, given or delivered when sent, or if by personal delivery or messenger or
courier service, or by registered or certified mail, shall be deemed to have
been validly served, given or delivered upon actual delivery, at the following
addresses, telephone and facsimile numbers (or such other address(es), telephone
and facsimile numbers a party may designate for itself by like notice):
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If to the Company:
Advance Holding Corporation
c/o Freeman Spogli & Co. Incorporated
599 Lexington Avenue, Suite 1800
New York, New York 10022
Attention: John M. Roth
Telephone: (212) 758-2555
Telecopy: (212) 758-7499
If to Purchaser:
________________
________________
________________
(d) Amendments. This Agreement may be amended only by a written
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agreement executed by both of the parties hereto and by FSEP IV.
(e) Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the Commonwealth of Virginia.
(f) Disputes. In the event of any dispute among the parties
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arising out of this Agreement, the prevailing party shall be entitled to recover
from the nonprevailing party the reasonable expenses of the prevailing party
including, without limitation, reasonable attorneys' fees.
(g) Entire Agreement. This Agreement constitutes the entire
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agreement and understanding among the parties pertaining to the subject matter
hereof and supersedes any and all prior agreements, whether written or oral,
relating hereto.
(h) Recapitalizations or Exchanges Affecting the Company's
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Capital.
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The provisions of this Agreement shall apply to any and all stock or other
securities of the Company or any successor or assign of the Company, which may
be issued in respect of, in exchange for or in substitution of, the Shares by
reason of any split, reverse split, recapitalization, reclassification,
combination, merger, consolidation or otherwise, and such Shares or other
securities shall be encompassed within the term "Shares" for purposes of this
Agreement and the Pledge Agreement.
(i) No Rights as an Employee. Nothing in this Agreement shall
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affect in any manner whatsoever the rights of the Company or any of its
Subsidiaries to terminate
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Purchaser's employment for any reason, with or without cause, subject to the
terms and conditions of any employment agreement to which Purchaser may be a
party.
(j) Disclosure. The Company shall have no duty or obligation to
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affirmatively disclose to Purchaser, and Purchaser shall have no right to be
advised of, any material information regarding the Company or any of its
Subsidiaries at any time prior to, upon or in connection with the Company's
repurchase of the Shares under this Agreement at the cessation or termination of
Purchaser's employment with the Company and/or any of its Subsidiaries.
(k) Successors and Assigns. The Company may assign with absolute
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discretion any or all of its rights and/or obligations and/or delegate any of
its duties under this Agreement to any of its affiliates, successors and/or
assigns and this Agreement shall inure to the benefit of, and be binding upon,
such respective affiliates, successors and/or assigns of the Company in the same
manner and to the same extent as if such affiliates, successors and/or assigns
were original parties hereto. Without limiting the foregoing, the Company may
assign the Repurchase Option and/or the right of first refusal provided for in
Section 3 and Section 4 of this Agreement, respectively, to any of its
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affiliates, successors and/or assigns. FSEP IV may assign its rights under
Section 9 to any FS Permitted Transferee or to a purchaser of shares of Common
Stock then owned by FSEP IV. For purposes of this Agreement, the term "Shares"
shall include shares of capital stock or other securities of the Company or any
successor or assign of the Company, which are issued in respect of, in exchange
for or in substitution of the Shares by reason of any split, reverse split,
recapitalization, reclassification, combination, merger, exchange or
consolidation. Unless specifically provided herein to the contrary, Purchaser
may not assign any or all of its rights and/or obligations and/or delegate any
or all its duties under this Agreement without the prior written consent of the
Company and FSEP IV. Upon an assignment of any or all of Purchaser's rights
and/or obligations and/or a delegation of any or all of its duties under this
Agreement in accordance with the terms of this Agreement, this Agreement shall
inure to the benefit of, and be binding upon, Purchaser's respective affiliates,
successors and/or assigns in the same manner and to the same extent as if such
affiliates, successors and/or assigns were original parties hereto.
(l) Headings. Introductory headings at the beginning of each
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section and subsection of this Agreement are solely for the convenience of the
parties and shall not be deemed to be a limitation upon or description of the
contents of any such section and subsection of this Agreement.
(m) Counterparts. This Agreement may be executed in two
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counterparts, each of which shall be deemed an original and both of which, when
taken together, shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
Advance Holding Corporation,
a Virginia corporation
By:______________________________
Garnett E. Smith
President
PURCHASER:
_________________________________
[ ]
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