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EXHIBIT 10.26
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of
the Effective Date (as defined), between CSK Auto Corporation, a Delaware
corporation ("Issuer"), and Xxxxxxx Xxxxxxx ("Optionee").
R E C I T A L S
A. Issuer is in the process of undertaking an initial public offering
(the "Initial Public Offering") of its common stock, par value $.01 per share
("Common Stock"), pursuant to a registration statement under the Securities Act
of 1933, as amended (the "Act").
B. In connection with the consummation of the Initial Public Offering,
Issuer desires to grant Optionee the opportunity to acquire a greater
proprietary interest in Issuer to encourage Optionee's further contribution to
the success and progress of Issuer and CSK Auto, Inc., an Arizona corporation
("Employer").
C. The Board of Directors of Issuer has as of the Effective Date
granted to Optionee a non-qualified stock option to purchase shares of Common
Stock of Issuer subject to the terms and conditions of this Agreement.
AGREEMENTS
1. Definitions. Capitalized terms used herein shall have the following
meanings:
"Act" is defined in recital A.
"Affiliate" means, with respect to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person. For purposes of this definition,
"control" of a Person shall mean the power, directly or indirectly, (i) to vote
fifty percent (50%) or more of the securities having ordinary voting power for
the election of directors of such Person whether by ownership of securities,
contract, proxy or otherwise; or (ii) to direct or cause the direction of
management and policies of such person whether by ownership of securities,
contract, proxy or otherwise.
"Agreement" means this Stock Option Agreement.
"Approved Sale" means a transaction or a series of related
transactions with an acquiror which had not previously been a shareholder of
Employer or Issuer (other than as a result of purchasing shares in the public
market) which results in a bona fide, unaffiliated change of beneficial
ownership of (a) 80% of Employer's or Issuer's common equity securities or (b)
all or substantially all of either of their assets, whether pursuant to the sale
of the stock or assets of Employer or Issuer, or a merger or consolidation
involving Employer or Issuer.
"Cause" shall have the meaning given to it in the Employment
Agreement.
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"Common Stock" is defined in recital A.
"Effective Date" is the date of the closing of the Initial Public
Offering.
"Employer" is defined in recital B.
"Employment Agreement" means the employment agreement between Optionee
and Employer dated as of January 27, 1997.
"Exercise Price" is defined in Section 2.
"Fair Market Value" means (a) if the principal market for the Common
Stock is a national securities exchange, the average of the highest and lowest
sales prices per share of Common Stock on such day as reported by such exchange
or on a composite tape reflecting transactions on such exchange, (b) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is quoted on The Nasdaq National Market ("Nasdaq"), and (i) if
actual sales price information is available with respect to the Common Stock,
the average of the highest and lowest sales prices per share of Common Stock on
such day on Nasdaq, or (ii) if such information is not available, the average of
the highest bid and lowest asked prices per share of Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average of
the highest bid and lowest asked prices per share of Common Stock on such day as
reported on the OTC Bulletin Board Service or by National Quotation Bureau,
Incorporated or a comparable service; provided, however, that if clauses (a),
(b) and (c) of this definition are all inapplicable, or if no trades have been
made or no quotes are available for such day, the fair market value of the
Common Stock shall be determined by the Board of Directors of Issuer by any
method consistent with applicable regulations adopted by the Treasury Department
relating to stock options.
"Fiscal Year" means the fiscal year of Issuer.
"Good Reason" shall have the meaning given to it in the Employment
Agreement.
"Initial Public Offering" is defined in recital A.
"Initial Stockholders" means the 16 stockholders of Issuer that
purchased shares of Issuer on October 30, 1996 and who are entities organized
under the laws of the Cayman Islands with whom an affiliate of Investcorp Bank
E.C., a Bahrain corporation, has an administrative relationship, and persons who
acquire shares of Issuer from such stockholders and who are entities so
organized and administered.
"Issuer" is defined in the preamble.
"Lock-Up Period" means, in the case of any registered offering of
Common Stock subsequent to the Initial Public Offering, the 90-day period
commencing on the effective date of the registration statement relating to such
offering, or, in either case, such lesser period as may be agreed upon by Issuer
or Employer with the underwriters of such offering.
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"Option" is defined in Section 2.
"Optionee" is defined in the preamble.
"Option Shares" is defined in Section 2.
"Permanent Disability" is defined in the Employment Agreement.
"Permitted Transferee" is defined in Section 5.
"Person" means any natural person, partnership, corporation, trust or
incorporated organization.
"Restated Certificate of Incorporation" means the restated certificate
of incorporation of Issuer filed with the Secretary of State of the State of
Delaware on October 30, 1996, and as the same from time-to-time may hereafter be
amended.
"Stockholders' Agreement" means the agreement dated as of October 30,
1996 among Issuer and all of its stockholders as of such date.
"Subsidiary" means any joint venture, corporation, partnership or other
entity as to which Issuer or Employer, whether directly or indirectly, has more
than 50% of the (i) voting rights or (ii) rights to capital or profits.
"Termination Date" means the date on which Optionee ceases to be
employed by Employer or any Affiliate of Employer for any reason; provided,
however, that Optionee shall not be considered to have ceased to be employed by
Employer or any Affiliate of Employer if he or she continues to be employed by
Issuer or any Subsidiary.
2. Grant of Option. As of the Effective Date, Issuer grants to Optionee the
right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of 216,635 shares of
Common Stock (the "Option Shares"), at the purchase price of $20.00 per Option
Share (as such amount may be adjusted as herein provided, the "Exercise Price"),
on the terms and conditions set forth herein; provided, however, that if a stock
split effected in connection with the Initial Public Offering is other than
17.105 to 1, the number of Option Shares shall be 12,665 multiplied by the
number used in place of "17.105" in effecting such stock split; and provided
further that if the Effective Date does not occur on or prior to May 31, 1998,
this Agreement shall terminate and shall be of no further force or effect.
3. Exercisability. Optionee's right to exercise the Option shall vest as
set forth on Exhibit 1 hereto.
4. Expiration.
(a) The vested portion of the Option shall expire upon the thirtieth
(30th) day following the seventh (7th) anniversary of the Effective Date unless
(i) at any time prior to a Approved Sale, Optionee is terminated without Cause,
Optionee ceases to be employed by
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Employer or a Subsidiary due to death or Permanent Disability or Optionee
resigns for Good Reason, in which case the vested portion of the Option shall
expire 180 days following the Termination Date, (ii) Optionee resigns other than
for Good Reason or is terminated for Cause from employment by Employer, in which
case the vested portion of the Option shall expire at 5:00 p.m. Phoenix time on
the second business day after the date of such termination.
(b) The unvested portion of the Option shall expire on the Termination
Date except in the case where Optionee is terminated from employment by Employer
without Cause, Optionee ceases to be so employed due to death or Permanent
Disability or Optionee resigns for Good Reason, in which case the unvested
portion of the Option shall terminate 180 days following the end of the Fiscal
Year during which the Termination Date occurred.
5. Nontransferability. The Option shall not be transferable by Optionee
otherwise than to his or her spouse, child, estate, personal representative,
heir or successor or to a trust for the benefit of Optionee or his or her
spouse, child or heir (a "Permitted Transferee"), and the Option shall be
exercisable, during Optionee's lifetime, only by him or her or by any of the
foregoing Permitted Transferees, or in the event of Optionee's Permanent
Disability, his or her guardian or legal representative. More particularly (but
without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as aforesaid), pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any attachment or similar process upon the Option that
would otherwise effect a change in the ownership of the Option, shall terminate
the Option; provided, however, that in the case of the involuntary levy of any
attachment or similar involuntary process upon the Option, Optionee shall have
thirty (30) days after notice thereof to cure such levy or process and reinstate
the Option. This Agreement shall be binding on and enforceable against any
person who is a Permitted Transferee of the Option pursuant to the first
sentence of this Section.
6. Effect of Merger; Adjustments.
(a) In the event of an Approved Sale that is a merger or other form of
corporate reorganization and notwithstanding any other provisions of this
Agreement, the unexercised portion of the Option shall be subject to the terms
of the agreement or plan of merger or reorganization effecting such merger or
reorganization and shall be converted, redeemed, exchanged, canceled or
otherwise treated as provided in such agreement or plan of merger or
reorganization, provided that Optionee shall be given at least 20 days' prior
notice of the proposed merger or reorganization and shall (notwithstanding
anything else herein to the contrary) be entitled to exercise the vested portion
of the Option at any time during such 20 day period up to and until the close of
business on the day immediately preceding the date of consummation of such
merger or reorganization (which exercise may be expressly contingent upon
completion of the Approved Sale if the unexercised portion of the Option were to
vest as a result of such Approved Sale) and upon exercise of the Option the
Option Shares shall be treated in the same manner as the shares of any other
stockholder of Issuer.
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(b) Subject to Section 6(a), in the event of any one or more
reorganizations, recapitalizations, mergers, acquisitions, stock splits, reverse
stock splits, stock dividends or similar events, an appropriate adjustment shall
be made in the number and kind of shares or other securities subject to the
Option, and the Exercise Price for each Option Share or other unit of any
securities subject to this Agreement. No fractional interests shall be issued on
account of any such adjustment unless the Board of Directors of the Issuer
specifically determines to the contrary; provided, however, that in lieu of
fractional interests, Optionee, upon the exercise of the Option in whole or
part, shall receive cash in an amount equal to the amount by which the Fair
Market Value of such fractional interests exceeds the Exercise Price
attributable to such fractional interests.
7. Exercise of the Option. Prior to the expiration thereof, Optionee may
exercise the vested portion of the Option from time to time in whole or in part.
Upon electing to exercise the Option, Optionee shall deliver to the Secretary of
Issuer a written and signed notice of such election setting forth the number of
Option Shares Optionee has elected to purchase and shall at the time of delivery
of such notice tender cash or a cashier's or certified bank check to the order
of Issuer for the full Exercise Price of such Option Shares and any amount
required pursuant to Section 15 hereof. The Issuer may, in its discretion, also
permit payment of the Exercise Price in such form or in such manner as may be
permissible under any applicable law.
8. Restrictions on Transfers of Option Shares. Prior to the termination of
the Lock-Up Period following a secondary offering, the Option Shares shall not
be transferable or transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) except that Optionee may transfer the
Option Shares to a Permitted Transferee. This Agreement shall be binding on and
enforceable against any person who is a Permitted Transferee of the Option
Shares. The stock certificates issued to evidence Option Shares upon exercise of
the Option hereunder shall bear legends referring to this Agreement and the
restrictions contained herein.
9. Compliance with Legal Requirements.
(a) No Option Shares shall be issued or transferred pursuant to this
Agreement unless and until all legal requirements applicable to such issuance or
transfer have, in the opinion of counsel to Issuer, been satisfied. Such
requirements may include, but are not limited to, registering or qualifying such
Shares under any state or federal law, satisfying any applicable law relating to
the transfer of unregistered securities or demonstrating the availability of an
exemption from applicable laws, placing a legend on the Option Shares to the
effect that they were issued in reliance upon an exemption from registration
under the Act and may not be transferred other than in reliance upon Rule 144 or
Rule 701 promulgated under the Act, if available, or upon another exemption from
the Act, or obtaining the consent or approval of any governmental regulatory
body. Issuer shall use its best efforts to comply with all legal requirements
applicable to the issuance or transfer of Option Shares.
(b) Optionee understands that Issuer intends for the offering and sale
of Option Shares to be effected in reliance upon Rule 701 or another available
exemption from registration under the Act and intends to file a Form 701 as
appropriate, and that Issuer is under no obligation
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to register for resale the Option Shares issued upon exercise of the Option. In
connection with any such issuance or transfer, the person acquiring the Option
Shares shall, if requested by Issuer, provide information and assurances
satisfactory to counsel to Issuer with respect to such matters as Issuer
reasonably may deem desirable to assure compliance with all applicable legal
requirements. Issuer hereby covenants and agrees to register all of the Option
Shares on a Form S-8 (or any successor form thereto) following the Initial
Public Offering.
10. Capitalizations, Exchanges, Etc. Affecting Shares; Dilution.
(a) The provisions of this Agreement shall apply to any and all shares
of capital stock of Issuer or any successor or assign of Issuer that may be
issued in respect of, in exchange for, or in substitution of, the Option Shares
by reason of any stock dividend, stock split, stock issuance, reverse stock
split, combination, recapitalization, reclassification, merger, consolidation or
otherwise, other than an Approved Sale, and in connection with the occurrence of
any such events, proportionate adjustments shall be made in the number of Option
Shares which may be acquired hereunder and the exercise price of each Option
Share.
(b) Except as may be specifically provided herein or in the Restated
Certificate of Incorporation, nothing herein shall prohibit or restrict Issuer
from taking any corporate action or engaging in any corporate transaction of any
kind, including, without limitation, the issuance and sale of additional shares
of capital stock of Issuer, any merger, consolidation, liquidation or sale of
assets, or create in Optionee or his or her Permitted Transferee any rights to
acquire or receive additional shares of capital stock of Issuer or otherwise to
be protected against dilution.
11. Subject to Restated Certificate of Incorporation and Stockholders'
Agreement. Optionee acknowledges that the Option Shares are subject to the terms
of the Restated Certificate of Incorporation and the Stockholders' Agreement.
Optionee hereby agrees to comply with the terms of the Stockholders' Agreement.
12. No Interest in Shares Subject to Option. Neither Optionee (individually
or as a member of a group) nor any beneficiary or other person claiming under or
through Optionee shall have any right, title, interest, or privilege in or to
any shares subject to this Agreement except as to such Option Shares, if any, as
shall have been issued to such person upon exercise of this Option or any part
of it.
13. Not an Employment Contract. Nothing in this Agreement or any other
instrument executed pursuant thereto shall confer upon Optionee any right to
continue in the employ of Employer or any Subsidiary or shall affect the right
of Employer or any Subsidiary to terminate the employment of Optionee with or
without Cause.
14. Governing Law. All terms of and rights under this Agreement shall be
governed by and construed in accordance with the internal law of the State of
New York, without giving effect to principles of conflicts of law.
15. Taxes. The Issuer may, in its discretion, make such provisions and take
such steps as it may deem necessary or appropriate for the withholding of all
federal, state, local and other
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taxes required by law to be withheld with respect to the issuance or exercise of
the Option including, but not limited to, deducting the amount of any such
withholding taxes from any other amount then or thereafter payable to Optionee,
requiring Optionee to pay to Issuer the amount required to be withheld or to
execute such documents as the Issuer deems necessary or desirable to enable it
to satisfy its withholding obligations. Optionee shall have the right to satisfy
the withholding obligation in whole or in part by the delivery of shares of the
Issuer previously issued to Optionee or by the withholding of the delivery of
Option Shares otherwise to be received upon the Option exercise.
16. Notices. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, telexed or telecopied to, or, if mailed,
when received by, the other party, if to Issuer at its principal executive
offices addressed to the attention of Issuer's Secretary, and if to Optionee at
his or her address as it appears on the books of his or her employer (or at such
other address as shall be given in writing by Optionee or his or her Permitted
Transferee to Issuer).
17. Amendments and Waivers. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by the party to be
charged.
18. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior oral and written and all contemporaneous oral discussions, agreements
and understandings of any kind or nature.
19. Headings. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
20. Further Assurances. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.
21. Arbitration. The parties shall endeavor to settle all disputes by
amicable negotiations. Any claim, dispute, disagreement or controversy that
arises among the parties relating to this Agreement that is not amicably settled
shall be resolved by arbitration, as follows:
(a) Any such arbitration shall be heard in The City of New York, New
York, before a panel consisting of one (1) to three (3) arbitrators, each of
whom shall be impartial. Upon the written Request for Arbitration by either
party hereto to commence arbitration hereunder, the parties shall attempt to
mutually agree as to the number and identity of the arbitrators within thirty
(30) days of such Request. Except as the parties may otherwise agree, all
arbitrators (if not selected by the parties hereto within thirty (30) days of a
written Request for Arbitration) shall be appointed pursuant to the commercial
arbitration rules of the American Arbitration Association. In determining the
number and appropriate background of the arbitrators, the appointing authority
shall give due consideration to the issues to be resolved, but his or her
decision as to the number of arbitrators and their identity shall be final.
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(b) An arbitration may be commenced by any party to this Agreement by
the service of a written request for arbitration upon the other affected
parties. Such request for arbitration shall summarize the controversy or claim
to be arbitrated.
(c) All attorneys' fees and costs of the arbitration shall in the first
instance be borne by the respective party incurring such costs and fees, but the
arbitrators shall award costs and attorneys' fees to the prevailing party. The
parties hereby expressly waive punitive damages, and under no circumstances
shall an award contain any amount that in any way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
(e) It is intended that controversies or claims submitted to
arbitration under this Section 21 shall remain confidential, and to that end it
is agreed by the parties that neither the facts disclosed in the arbitration,
the issues arbitrated, nor the views or opinions of any persons concerning them,
shall be disclosed to third persons at any time, except to the extent necessary
to enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.
(f) Any arbitration under this Section 21 shall be conducted pursuant
to the commercial arbitration rules of the American Arbitration Association.
22. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
CSK AUTO CORPORATION
By:
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Name:
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Title:
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Xxxxxxx Xxxxxxx
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EXHIBIT 1
The Option shall vest as follows:
April 1, 2000 72,212 Option Shares
April 1, 2001 72,212 Option Shares
April 1, 2002 72,211 Option Shares
; provided, however, that in the event of an Approved Sale, the Option shall
vest fully on the date of the closing of such Approved Sale.
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EXHIBIT 1 1
