EXHIBIT 10.28
THIS OPTION AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. THIS OPTION MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF BY THE ORIGINAL HOLDER HEREOF
EXCEPT IN ACCORDANCE WITH SECTION 1.8 HEREOF AND THE STOCKHOLDERS AGREEMENT (AS
DEFINED BELOW). THE SECURITIES ISSUABLE UPON EXERCISE OF THIS OPTION MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO (i) EFFECTIVE REGISTRATION STATEMENT(S) UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, (ii) RULE 144, RULE 144A OR ANY SUCCESSOR RULE UNDER THE
ACT AND ANY SIMILAR RULES UNDER APPLICABLE STATE LAW PERMITTING SUCH DISPOSITION
OF SECURITIES IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
(iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS RELATING TO THE DISPOSITION OF SUCH SECURITIES, PROVIDED THAT
THE HOLDER OF SUCH SECURITIES ISSUABLE HEREUNDER DELIVERS AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. THIS OPTION AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS OPTION ARE SUBJECT TO CERTAIN RESTRICTIONS WITH RESPECT TO
THE TRANSFER THEREOF AS SET FORTH IN THAT CERTAIN STOCKHOLDERS AGREEMENT DATED
AS OF APRIL 15, 1998 (AS THE SAME MAY BE AMENDED FROM TIME TO TIME, THE
"STOCKHOLDERS AGREEMENT"). IN ADDITION, THIS OPTION AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS OPTION ARE SUBJECT TO AN OBLIGATIONS TO SELL AS SET FORTH
IN SECTION 1.8 HEREOF AND IN THE STOCKHOLDERS AGREEMENT. A COPY OF SUCH
STOCKHOLDERS AGREEMENT MAY BE EXAMINED AT THE PRINCIPAL PLACE OF BUSINESS OF THE
COMPANY AND A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY WITHOUT CHARGE UPON
WRITTEN REQUEST THEREFORE.
ADVANCE HOLDING CORPORATION
A Virginia corporation
OPTION TO PURCHASE COMMON STOCK
This certifies that for value received the Arthur Taubman Trust dated
July 1, 1964 (the "Holder"), is entitled to subscribe for and purchase from
Advance Holding Corporation, a Virginia corporation (the "Company"), at the then
applicable Exercise Price (as defined in Section 1.1 below) at any time during
the Option Exercise Period (as defined in Section 1.2 below) an initial maximum
of 250,000 fully paid and nonassessable shares (the "Option Shares") of the
Company's Class A Common Stock, par value $0.01 per share (the "Common Stock"),
subject to the provisions and upon the terms and conditions hereinafter set
forth.
This Option is subject to the following terms and conditions:
ARTICLE 1
OPTION EXERCISE PRICE AND EXERCISE OF OPTION;
OBLIGATION TO SELL
SECTION 1.1 Exercise Price. This Option, when signed by the
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President or a Vice President of the Company and by the Secretary or Assistant
Secretary of the Company, shall entitle the Holder to purchase from the Company
the number of Option Shares set forth above, at a purchase price per Option
Share equal to the Exercise Price, or such adjusted number of shares at such
adjusted Exercise Price as may be established from time to time pursuant to the
provisions of Article 2 hereof, at any time during the Option Exercise Period
(as such term is defined in Section 1.2 below) in accordance with the procedures
set forth in Section 1.3 below.
The "Exercise Price" shall initially be $10.00 per Option Share and
shall increase by $2.00 on each anniversary of the date hereof during the Option
Exercise Period. Except as the context otherwise requires, the term Exercise
Price as used in this Option shall mean the purchase price upon exercise of this
Option to purchase one Option Share, reflecting all appropriate adjustments made
in accordance with the provisions of Article 2 hereof.
SECTION 1.2 Exercisability of Option. This Option shall be
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exercisable solely by the Holder, in whole or in part, and from time to time
during the period commencing on April 16, 1998 and terminating at 5:00 p.m., New
York time, on April 15, 2005 (the "Option Exercise Period").
SECTION 1.3 Procedure for Exercise of Option. During the Option
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Exercise Period, this Option may be exercised by the Holder by surrendering this
Option to the Company, or its agent, with the Election to Exercise Form attached
to this Option duly completed and executed, accompanied by payment in full to
the Company of the Exercise Price in effect at the time of such exercise for
each Option Share with respect to which this Option is being exercised. Such
Exercise Price shall be paid in full, by delivery of cash or check payable in
United States currency to the order of the Company or payment of the Exercise
Price by (i) the assignment and transfer by Holder to the Company of outstanding
shares of Common Stock theretofore held by Holder or (ii) the surrender of that
number of exercisable Options necessary (based on the amount that the aggregate
fair market value of the Option Shares covered by the Options being surrendered
exceeds the aggregate Exercise Price with respect to such Option Shares), to pay
the Exercise Price with respect to those Options being exercised. The date on
2.
which this Option is exercised in accordance with this Section 1.3 is sometimes
referred to herein as the "Date of Exercise" of this Option. The fair market
value of Option Shares or of Options being surrendered shall be on the Current
Market Price determined as set forth in Section 2.1(e).
SECTION 1.4 Issuance of Common Stock; Issue Tax. As soon as
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practicable after the Date of Exercise of this Option, the Company shall issue a
certificate or certificates for the number of Option Shares to which the Holder
is entitled, registered in the Holder's name and shall mail such certificate to
the Holder. All Option Shares issued upon the exercise of this Option shall be
validly authorized and issued, fully paid and nonassessable, and free from all
preemptive rights, taxes, liens and charges created by the Company in respect of
the issue thereof; provided however that all Option Shares shall be subject to
the provisions of that certain Stockholders Agreement dated as of April 15, 1998
(and as the same may be amended from time to time, the "Stockholders'
Agreement"). The issuance of certificates for Option Shares shall be made
without charge to the Holder for any issue tax in respect thereof. The Holder,
for all purposes, shall be deemed to have become the holder of record of the
Common Stock represented by the certificate for Option Shares on the Date of
Exercise of this Option resulting in the issuance of such Option Shares which
shall be the date of issuance, irrespective of the date of delivery of such
certificate for Option Shares.
SECTION 1.5 New Option. In the event that less than all of the
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Option Shares covered by this Option are purchased, the Company shall execute
and mail, by first-class mail, and within 20 days of the Date of Exercise, to
the Holder a new Option representing the right to purchase the number of Option
Shares not purchased upon exercise of the surrendered Option. In no event shall
a fraction of an Option Share be issued.
SECTION 1.6 Reservation of Shares. The Company shall at all times
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reserve and keep available for issuance upon the exercise of this Option, free
from preemptive rights, a number of its authorized but unissued shares of Common
Stock that will be sufficient to permit the exercise in full of this Option.
SECTION 1.7 Rights of Holder; Voting. This Option shall not
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entitle the Holder to any of the rights of a stockholder of the Company,
including without limitation the right to vote, to receive dividends and other
distributions, to receive any notice of, or to attend, meetings of stockholders
or any other proceedings of the Company (except as provided in Section 2.5).
SECTION 1.8 Obligation to Sell.
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(a) In addition to the rights of FS Stockholder (as defined in
the Stockholders Agreement) and the obligations of Holder (and any transferee
from Holder) as set forth in the Stockholders Agreement, if the FS Stockholder
sells to a buyer all of the shares of Common Stock held by the FS Stockholder
(whether such sale is by way of purchase, merger or
3.
other form of transaction), FS Stockholder may require the Holder to sell this
Option (and, as provided in the Stockholders Agreement, any holder of Option
Shares) to such buyer for the same per share consideration (less the then
aggregate Exercise Price of this Option, and otherwise pursuant to the terms and
conditions applicable to the FS Stockholder for the sale of its shares of Common
Stock. In the event the per share consideration for the Common Stock is less
than the Exercise Price applicable at the time a binding agreement with respect
to such transaction is entered into, this Option shall be canceled without
payment to the Holder. In addition, the FS Stockholder may require the Holder to
approve or consent to such sale and to execute such agreements, powers of
attorney, voting proxies or other instruments and to take such other actions as
the FS Stockholder may reasonably request in connection with such sale. The
Holder and each holder of Option Shares shall pay the reasonable, incremental
out-of-pocket expenses incurred by the FS Stockholder in connection with a sale
as a result of the Holder's participation therein.
(b) The obligations of the Holder pursuant to this Section 1.8
shall be binding on any transferee of this Option, and each of the Holder and
any such transferee shall obtain and deliver to the FS Stockholder prior to any
transfers (other than transfers constituting a Public Market Sale, as defined in
the Stockholders Agreement) a written commitment, in form and substance
satisfactory to the FS Stockholder, from such transferee to be bound by such
provisions. As provided in the Stockholders Agreement, any holder of Option
Shares is bound by the Stockholders Agreement. Any transfer effected in
violation of this provision shall be void. The Holders' obligations pursuant to
this Section 1.8, and the obligations of any such transferee, shall survive the
termination of this Option pursuant to Section 4.5 below. All obligations
relating to this Option pursuant to this Section 1.8 shall expire in accordance
with the provisions of Section 4.2 of the Stockholders Agreement.
SECTION 1.9 The Company further agrees (i) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, and (ii) to promptly take all action as may from time to time be
required to permit the Holder to exercise this Option and the Company duly and
effectively to issue the Option Shares as provided herein upon the exercise
hereof. The Company shall cause the Option Shares to be listed or eligible to
be quoted for trading on the NASDAQ Stock Market or on any other stock exchange
or market on which Common Stock is then listed or eligible to be quoted for
trading.
4.
ARTICLE 2
ADJUSTMENTS AND NOTICE PROVISIONS
SECTION 2.1 Adjustment of Exercise Price. Subject to the
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provisions of this Article 2, the Exercise Price in effect from time to time
upon the exercise of this Option shall be subject to adjustment, as follows:
(a) In the event that the Company shall (i) declare a dividend
or make a distribution on the outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately after the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately before such dividend, distribution, subdivision,
combination or reclassification, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such dividend,
distribution, subdivision, combination or reclassification. Such adjustments
shall be made successively whenever any event specified above shall occur.
(b) In the event that the Company shall fix a record date for
the issuance of rights or warrants to all holders of Common Stock entitling them
to subscribe for or purchase shares of Common Stock for less than the Current
Market Price (as such term is defined in Section 2.1(e) below) of a share of
Common Stock on such record date, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate offering price of the total number of shares of such Common Stock
so offered to such holders would purchase at the Current Market Price (as
defined in Section 2.1(e) below) per share on such record date, and the
denominator of which shall be the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock offered
to such holders for subscription or purchase. Such adjustment shall be made
successively whenever such a record date is fixed. To the extent that any such
rights or warrants are not so issued or expire unexercised, the Exercise Price
then in effect shall be readjusted to the Exercise Price which would then be in
effect if such unissued or unexercised rights or warrants had not been issuable.
(c) In the event that the Company shall fix a record date for
the making of a distribution to all holders of shares of Common Stock (i) of
securities of any class other than Common Stock, (ii) of evidences of its
indebtedness, (iii) of assets (excluding cash dividends or
5.
distributions, and dividends or distributions referred to in Section 2.1(a)
above) or (iv) of rights, options or warrants to acquire securities of the
Company (excluding those rights, options or warrants referred to in Section
2.1(b) above), then in each such case the Exercise Price in effect immediately
after the record date shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding on such record date
multiplied by the Current Market Price per share on such record date, less the
aggregate fair market value as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, of said securities or evidences of indebtedness, assets, rights,
options or warrants so distributed to such holders, and the denominator of which
shall be the total number of shares of Common Stock outstanding on such record
date multiplied by such Current Market Price per share. Such adjustment shall be
made successively whenever such a record date is fixed. In the event that such
distribution is not so made, or rights, options or warrants described in clause
(iv) expire without being exercised, the Exercise Price then in effect shall be
readjusted to the Exercise Price which would then be in effect if such record
date had not been fixed or such rights, options or warrants had not been
distributed, as the case may be.
(d) In the event that the Company shall sell and issue shares of
Common Stock, or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding shares, rights, options, warrants or convertible or
exchangeable securities issued in any of the transactions described in Sections
2.1(a), (b) or (c) above), at a price per share of Common Stock (determined, in
the event of such rights, options, warrants or convertible or exchangeable
securities, by dividing (y) the total amount receivable by the Company in
consideration of the sale and issuance of such rights, options, warrants or
convertible or exchangeable securities, plus the total consideration payable to
the Company upon exercise, conversion or exchange thereof by (z) the total
number of shares of Common Stock covered by such rights, options, warrants or
convertible or exchangeable securities) lower than the Current Market Price on
the date the Company fixes the offering price of such shares, rights, options,
warrants or convertible or exchangeable securities, then the Exercise Price
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, (i) the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such sale and issuance plus (B) the number of
shares of Common Stock which the aggregate consideration received (determined as
provided below) for such sale or issuance would purchase at such Current Market
Price per share, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such sale and issuance.
Such adjustment shall be made successively whenever such an issuance is made but
no adjustment shall be made with respect to the issuance of an underlying
security for which an adjustment in respect of the related right, option,
warrant or convertible or exchangeable security has been made. For the purposes
of such adjustment, the shares of Common Stock which the holder of any such
rights, options, warrants or convertible or exchangeable securities shall be
entitled to subscribe for or
6.
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such rights,
options, warrants or convertible or exchangeable securities, plus the
consideration or premium stated in such rights, options, warrants or convertible
or exchangeable securities to be paid for the shares of Common Stock covered
thereby. In the event that the Company shall sell and issue shares of Common
Stock, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent or services, then in determining the "price per share of Common
Stock" and the "consideration received by the Company" for purposes of the first
sentence of this Section 2.1(d), the Board of Directors of the Company shall
determine, in reasonable good faith, the fair value of said property or
services, and such determination, which shall be described in a duly adopted
board resolution certified by the Company's Secretary or Assistant Secretary, in
the absence of fraud or bad faith, shall be binding upon the Holder. In case the
Company shall sell and issue rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per share of Common Stock" and
the "consideration received by the Company" for purposes of the first sentence
of this Section 2.1(d), the Board of Directors of the Company shall determine,
in reasonable good faith, whose determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants or convertible or
exchangeable securities then being sold as part of such unit, and such
determination, in the absence of fraud or bad faith, shall be binding upon the
Holder. For purposes of this Agreement, the term "subsidiary" shall mean any
entity or person a majority of whose equity interests are owned by the Company,
by a subsidiary of the Company or by the Company and one or more subsidiaries.
To the extent any options, warrants or convertible securities subject to this
Section 2.1(d) expire without being exercised or converted, the Exercise Price
in effect at such time shall be readjusted to the Exercise Price which would
then be in effect if such security had not been issued.
(e) For the purpose of any computation under Sections 2.1(b),
(c) or (d) above, the "Current Market Price" at any date (the "Computation
Date") shall be deemed to be the average of the daily closing prices of the
Common Stock for 20 consecutive trading days ending the tenth trading day before
such date. The closing price for each day shall be the last reported sale price
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or listed
if that is the principal market for the Common Stock or if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the
closing bid price as reported by the Nasdaq National Market or its successor, if
any, or such other generally accepted source of publicly reported bid and asked
quotations as the Company may reasonably designate. If the price of the Common
Stock is not so reported or the Common Stock is not
7.
publicly traded, the Current Market Price per share as of any Computation Date
shall be determined by the Board of Directors in reasonable good faith on such
basis as it considers appropriate, and such determination, which shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, in the absence of fraud or bad faith, shall be
binding upon the Holder.
(f) All calculations under this Section 2.1 shall be made to the
nearest cent.
(g) For the purposes of all calculations under this Section 2.1,
shares of Common Stock or other securities held in the treasury of the Company
shall not be deemed to be outstanding, and the sale or other disposition of any
shares of Common Stock or other securities held in the treasury of the Company
shall be deemed an issuance thereof.
(h) For purposes of adjusting the Exercise Price pursuant to
Sections 2.1(a), (b), (c) or (d) hereof, in no event shall the Exercise Price be
adjusted to a price which is less than the par value of Common Stock; provided,
however, that in the event such full adjustment would have been made but for
this Section 2.1(h), the Exercise Price shall be adjusted to the par value and
the number of shares issuable upon exercise of this Option shall still be
adjusted in accordance with Section 2.3 below as though such full adjustment in
the Exercise Price had been made.
(i) For purposes of adjusting the Exercise Price pursuant to
Sections 2.1(b), (c) or (d) hereof, the following issuances of securities shall
be exempt from such provisions: all securities (whether Common Stock or
warrants, options or convertible or other securities convertible into or
exchangeable for Common Stock) which are issued and sold by the Company
constituting (i) the Initial Shares (as defined in the Stockholders Agreement),
(ii) 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 approved by the Board, (iii)
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 the FS Stockholder (as
defined in the Stockholder's Agreement) or its Affiliates and the Holder each
own debt securities being exchanged, then the Holder shall have been given the
right to participate in such exchange on the same terms as the FS Stockholder or
its Affiliates; (iv) 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, that in
the event FS Stockholder or any of its Affiliates is participating in or
providing such financing that the Holder has an opportunity to participate, and
if he so participates, to purchase or otherwise receive on the same terms his
pro rata share of any securities, (v) any securities issued pursuant
8.
to a public offering registered under the Securities Act, and (vi) any
securities that are issued or issuable in connection with the acquisition by the
Company of any business, business assets or securities from any person other
than an affiliate of Freeman, Spogli & Co.
SECTION 2.2 No Adjustments Required. No adjustment in the Exercise
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Price in accordance with the provisions of Section 2.1 hereof, shall be made if
such adjustment would amount to a change in such Exercise Price of less than
$0.01, provided, however, that the amount by which any adjustment is not made by
reason of the provisions of this Section 2.2 shall be carried forward and taken
into account at the time of any subsequent adjustment in the Exercise Price.
SECTION 2.3 Adjustment to Number of Shares. Upon each adjustment
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of the Exercise Price pursuant to Section 2.1 hereof, this Option shall
thereupon evidence the right to purchase that number of Option Shares
(calculated to the nearest share) obtained by multiplying the number of Option
Shares purchasable immediately prior to such adjustment upon exercise of this
Option by the Exercise Price in effect immediately prior to such adjustment and
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment.
SECTION 2.4 Reorganization, Etc.. Subject to Section 1.8(a) and
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the Stockholders Agreement, in case of any capital reorganization of the Company
in which the outstanding shares of Common Stock are changed into or exchanged
for different securities of the Company or any distribution is made with respect
to such shares of Common Stock, other than in the cases referred to in Section
2.1 hereof, or the consolidation or merger of the Company with or into another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any change whatsoever in or
distribution with respect to, the outstanding Common Stock of the Company) or
the sale of the assets, property or business of the Company as an entirety or
substantially as an entirety (collectively such actions being hereinafter
referred to as "Reorganizations"), there shall thereafter be deliverable upon
exercise of this Option (in lieu of the number of shares of Common Stock
theretofore deliverable) the number of shares of stock or other securities or
property to which a holder of the number of Option Shares which would otherwise
have been deliverable upon the exercise of this Option would have been entitled
upon such Reorganization if this Option had been exercised in full immediately
prior to such Reorganization. In the event of any Reorganization, appropriate
adjustment, as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a duly adopted board
resolution certified by the Company's Secretary or Assistant Secretary, shall be
made in the application of the provisions herein set forth with respect to the
rights and interests of the Holder so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of this Option. Subject to
Section 1.8(a) and the Stockholders Agreement, the Company shall not effect any
such Reorganization, unless upon or prior to the consummation thereof the
successor corporation, or if the Company shall be the surviving corporation in
any such Reorganization and is not the issuer of the shares of stock or other
9.
securities or property to be delivered to holders of shares of the Common Stock
outstanding at the effective time thereof, then such issuer shall assume by
written instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to purchase
in accordance with the foregoing provisions. In the event of a sale or
conveyance or other transfer of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise this Option shall terminate 30 days after the Company gives written
notice to the Holder that such sale or conveyance or other transfer has been
consummated.
SECTION 2.5 Notice of Certain Actions. In the event the Company
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shall: (a) declare any dividend payable in capital stock to all holders of
Common Stock or make any other distribution to all holders of Common Stock (b)
offer to all holders of Common Stock rights to subscribe for or purchase any
shares of any class of stock or any other rights or options or (c) effect any
reclassification of Common Stock or any capital reorganization, or any
consolidation or merger, or any sale, transfer or other disposition of its
property, assets and business substantially as an entirety, or the liquidation,
dissolution or winding up of the Company, in a transaction which gives the
Holder rights under Section 2.1 or Section 2.4; then, in each such case, the
Company shall cause written notice of such proposed action to be mailed to the
Holder. Such notice shall specify the date on which the books of the Company
shall close, or a record be taken, for determining holders of Common Stock
entitled to receive such stock dividend or other distribution or such rights or
options, or the date on which such reclassification, subdivision, combination,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution, winding up or exchange shall take place or commence,
as the case may be, and the date as of which it is expected that holders of
record of Common Stock shall be entitled to receive securities or other property
deliverable upon such action, if any such date has been fixed. Such notice
shall be mailed, in the case of any action covered by Sections 2.5(a) or (b)
above, at least fifteen (15) calendar days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and, in the case of any action covered by Section 2.5(c) above, at
least fifteen (15) calendar days prior to the earlier of the date upon which
such action is to take place or any record date to determine the holders of
Common Stock which are entitled to receive such securities or other property.
SECTION 2.6 Notice of Adjustments. Whenever any adjustment is made
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pursuant to this Article 2, the Company shall cause written notice certified by
the Chief Financial Officer of the Company of such adjustment to be mailed to
the Holder within thirty (30) days thereafter, such notice to include in
reasonable detail (a) a description of the events precipitating the adjustment
and (b) the computation of any adjustments, the Exercise Price, the number of
Option Shares or securities or other property purchasable upon exercise of this
Option after giving effect to such adjustment. The Company shall provide to the
Holder such additional information, including worksheets used in the calculation
of any adjustment made pursuant to this Article 2, as the Holder may reasonably
request for the purpose of confirming the accuracy of such adjustment.
10.
SECTION 2.7 Fractional Shares. The Company shall not be required
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upon the exercise of this Option to issue fractional Option Shares which may
result from adjustments in accordance with this Article 2 to the Exercise Price
or number of Option Shares purchasable under this Option, or otherwise. With
respect to any fraction of an Option Share called for upon the exercise of this
Option, the Company shall pay a cash adjustment to the Holder in respect of such
final fraction in an amount equal to the same fraction of the market value of a
share of Common Stock, as determined by the Board of Directors on the basis of
the closing market price per share of Common Stock on the business day next
preceding the date of such exercise, or, if the Common Stock is not publicly
traded, on such other basis as the Board of Directors in good faith deems
appropriate. The Holder, by such Holder's acceptance of this Option, shall
expressly waive any right to receive any fractional Option Shares upon exercise
of this Option. All calculations under this Section 2.7 shall be made to the
nearest hundredth of a share.
SECTION 2.8 Other Adjustments. If any event occurs as to which the
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foregoing provisions of this Article 2 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors, fairly protect the purchase rights of the Holder of this Option in
accordance with the essential intent and principles of such provisions, then
such Board of Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of such Board, to protect such
purchase rights as aforesaid, but in no event shall any such adjustment under
this Section 2.8 have the effect of increasing the Exercise Price or decreasing
the number of shares of Common Stock subject to purchase upon exercise of this
Option, or otherwise adversely affect the Holder. Under no circumstances (other
than (x) a reverse stock split, (y) a recapitalization or similar transaction in
which all holders of Common Stock (and securities exercisable for or convertible
into Common Stock, with respect to such exercise or conversion provisions) are
treated equally and (z) a merger, in each case in which each outstanding share
of Common Stock is converted into less than one share of Common Stock
(including, in the case of a merger, of the entity surviving such merger), shall
any adjustment pursuant to this Article 2 have the effect of raising the
Exercise Price or lowering the number of Option Shares issuable upon exercise of
this Option.
ARTICLE 3
FORM AND REGISTRATION OF
OPTIONS AND OPTION SHARE CERTIFICATES
SECTION 3.1 Form of Options and Option Share Certificates. This
---------------------------------------------
Option and certificates for Option Shares shall be issued in registered form
only, and may have such letters, numbers or other marks of identification or
designation stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Option and such legends, summaries, or endorsements as, in any particular case,
11.
may be required, in the opinion of counsel for the Company, to comply with any
law or with any rule or regulation of any regulatory authority or agency.
SECTION 3.2 Execution of Option and Option Share Certificates.
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This Option shall be executed on behalf of the Company by its President or Vice
President, either manually or by facsimile signature printed thereon, under its
corporate seal, affixed or in facsimile, attested by the manual or facsimile
signature of its Secretary or Assistant Secretary. In case any authorized
officer of the Company who shall have signed this Option shall cease to be such
officer of the Company either before or after delivery thereof by the Company,
the signature of such person on this Option, nevertheless, shall be valid and
may be issued and delivered to those persons entitled to receive this Option
represented thereby with the same force and effect as though the person who
signed such Option had not ceased to be such officer of the Company.
SECTION 3.3 Holder Sole Owner. Only the Holder shall be entitled
-----------------
to be treated as the registered holder of this Option as the owner in fact
thereof for all purposes (notwithstanding any notation of ownership or other
writing thereon made by anyone) and the Company shall not be bound to recognize
any equitable or other claim to or interest in this Option on the part of any
other person. Upon request by the Holder, the Company shall register the
transfer of this Option that is effected in accordance with the provisions of
this Option and the Stockholders Agreement.
SECTION 3.4 Mutilated, Lost, Stolen or Destroyed Option and Option
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Share Certificates. In case any of this Option shall be mutilated, lost, stolen
- ------------------
or destroyed, the Company shall, upon the written request of the holder thereof,
issue and deliver to such holder, in replacement therefor, a new Option, as the
case may be, of like tenor and representing an equivalent right or interest. If
this Option or an Option Share certificate being replaced is mutilated, this
Option shall be surrendered to the Company for cancellation. If this Option
being replaced is lost, stolen or destroyed, the holder of this Option, shall
furnish to the Company such security or indemnity as may be reasonably required
by it to save it harmless from any loss as a result of such replacement and
evidence satisfactory to the Company of such loss, theft or destruction.
SECTION 3.5 Restrictions on Dispositions. The Holder, by
----------------------------
acceptance hereof, represents and warrants to the Company that this Option is
being acquired and any Option Shares will be purchased by such Holder for such
Holder's own account and not with a view to the distribution thereof in
violation of the Securities Act of 1933, as amended (the "Act") or any state
securities laws. The Holder may only offer, sell, transfer, pledge, hypothecate
or otherwise dispose of this Option or the Option Shares subject to the
provisions of Section 1.8 hereof and the Stockholders Agreement (including
Article V thereof, restricting transfer for a two-year period and maintaining
certain restrictions thereafter). This Option may only be exercised by the
Holder and, upon such exercise, Option Shares will be issued only in the name of
the Holder.
12.
SECTION 3.6 Legends. This Option shall be subject to a stop-
-------
transfer order.
The Option Shares issued upon exercise of this Option shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Option Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) EFFECTIVE
REGISTRATION STATEMENT(S) UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, (ii) RULE 144, RULE 144A OR ANY
SUCCESSOR RULE UNDER THE ACT AND ANY SIMILAR RULES UNDER
APPLICABLE STATE LAWS PERMITTING SUCH DISPOSITION OF
SECURITIES IN COMPLIANCE WITH THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS RELATING TO THE DISPOSITION OF SUCH SHARES, PROVIDED
THAT THE REGISTERED HOLDER OF SUCH SHARES DELIVERS AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS WITH
RESPECT TO THE TRANSFER THEREOF AS SET FORTH IN THAT
CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF APRIL 15, 1998
(AS THE SAME MAY BE AMENDED FROM TIME TO TIME, THE
"STOCKHOLDERS AGREEMENT"). A COPY OF SUCH STOCKHOLDERS
AGREEMENT MAY BE EXAMINED AT THE PRINCIPAL PLACE OF
BUSINESS OF THE COMPANY AND A COPY OF WHICH MAY BE OBTAINED
FROM THE COMPANY WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFORE."
Option Share certificates without legend shall be issued if such Option Shares
are sold pursuant to an effective registration statement under the Act and any
applicable state securities laws or if the Company has received an opinion from
counsel, reasonably satisfactory to counsel for the
13.
Company, that such legend is no longer required under the Act or any applicable
state securities laws and if the provisions of Section 1.8 and the Stockholders
Agreement are no longer in effect with respect to such Option Shares. Each
instrument representing any other securities issued in respect of this Option
upon any capital reorganization, merger, consolidation or sale, shall (unless
such securities have been registered or are exempt from registration under the
Securities Act of 1933, as amended) be stamped or otherwise imprinted with a
legend substantially in the form set forth above.
ARTICLE 4
OTHER MATTERS
SECTION 4.1 Notices. Any notice or demand which, by the provisions
-------
hereof, is required or which may be given to or served upon the parties hereto
shall be in writing and, if by telegram, telecopy or telex, shall be deemed to
have been validly served, given or delivered when sent, if by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three business days after deposit in the United States mails, as
registered or certified mail, with proper postage prepaid and addressed to the
party or parties to be notified, at the following addresses (or such other
address(es) as a party may designate for itself by like notice): (i) if to the
Holder, at Eugenia Taubman, Trustee under the Arthur Taubman Trust dated July
13, 1984, c/o Nicholas F. Taubman, 2818 Avenham Avenue, Roanoke, Virginia
24014, with a copy to Flippin, Densmore, Morse, Rutherford & Jessee, 300 First
Campbell Square, Drawer 1200, Roanoke, Virginia 24006, Attention: Douglas W.
Densmore, Facsimile No. (540) 510-3050; (ii) if to a registered holder of any
Option Shares, at the most current address given by such holder to the Company
in accordance with the provisions of this Section 4, and (iii) if to the
Company, at Advance Holding Corporation, c/o Freeman Spogli & Co., Incorporated,
599 Lexington Avenue, New York, NY 10022, Attn: John M. Roth, Facsimile No.
(212) 758-7499, with a copy to Riordan & McKinzie, 300 S. Grand Ave., 29/th/
Floor, Los Angeles, CA 90071, Attention: Richard J. Welch, Facsimile No. (213)
229-8550.
SECTION 4.2 Defects in Notice. Failure to file any certificate or
-----------------
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Option shall not affect in any way the rights of the Holder or
any holder of Option Shares or validity of any adjustment made pursuant to
Article 2 hereof, or any transaction giving rise to any such adjustment, or the
legality or validity of any action taken or to be taken by the Company.
SECTION 4.3 Supplements and Amendments. This Option may only be
--------------------------
amended or supplemented, and any waiver or departure from the provisions hereof
may only be given, with the written consent of the Company and the Holder and,
with respect to Section 1.8, the FS Stockholder.
14.
SECTION 4.4 Successors. All of the covenants and provisions of
----------
this Option by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of each of them and each of their respective successors and
assigns hereunder, including any holder of the Option Shares.
SECTION 4.5 Termination. This Option shall terminate at 5:00 p.m.,
-----------
New York time on April 15, 2005. Notwithstanding the foregoing, this Option
shall terminate on any earlier date when it has been exercised in full. The
provisions of Sections 1.8 and 3 shall survive both such terminations.
SECTION 4.6 Governing Law. This Option and the rights and
-------------
obligations of the parties hereunder shall be construed in accordance with and
be governed by the laws (without giving effect to the conflicts of laws
principles thereof) of the Commonwealth of Virginia.
SECTION 4.7 Standing. Nothing in this Option expressed and nothing
--------
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the registered holder of this Option any right, remedy or claim
under or by reason of this Option or of any covenant, condition, stipulation,
promise or agreement contained herein.
SECTION 4.8 Headings. The descriptive headings of the articles and
--------
sections of this Option are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, this Option has been duly executed by the Company
under its corporate seal as of the 15th day of April, 1998.
ADVANCE HOLDING CORPORATION,
a Virginia corporation
By: /s/ Garnett E. Smith
_______________________________
And By: /s/ J. O'Neil Leftwich
_______________________________
15.
ELECTION TO EXERCISE FORM
(To be executed only upon partial
or full exercise of the within Option)
The undersigned, the Holder of the within Option, irrevocably
exercises the within Option for and purchases _______ shares of Common Stock of
Advance Holding Corporation and agrees to make payment thereof in the amount of
$__________, all at the price and on the terms and conditions specified in the
within Option and requests that a certificate for the shares of Common Stock of
Advance Holding Corporation hereby purchased be issued in the name of
_________________ and if such shares of Common Stock shall not include all the
shares of Common Stock issuable as provided in the within Option, that a new
Option of like tenor for the number of shares of Common Stock of Advance Holding
Corporation not being purchased hereunder be issued in the name of
__________________.
Dated: __________, _____
By: ________________________________
Holder
Signature Guaranteed:
____________________________
By: ________________________
Title:
NOTICE: The signature on this Election to Exercise Form must be that of
Nicholas F. Taubman or the Trustee of the Arthur Taubman Trust dated
July 1, 1964 (or, following the distribution of this option from such
Trust, a beneficiary thereof). The signature on this Election of
Exercise Form must be guaranteed by a commercial bank or trust company
in the United States or a member firm of any national securities
exchange.