EXHIBIT 10.6
FORM OF
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 31, 1996,
between CDW Holding Corporation, a Delaware corporation (the
"Company"), and the Grantee whose name appears on the signature
page hereof (the "Grantee").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the
"Board") has designated the Compensation and benefits Committee
of the Board (the "Committee") to administer the Company's Stock
Option Plan for Branch Employees (the "Plan"), and
WHEREAS, the Board has determined to grant to the
Grantee, under the Plan, a non-qualified stock option to Purchase
the aggregate number of shares of its Class A Common Stock, par
value $.01 per share (the "Common Stock") set forth on the
signature page hereof (the "Shares") at an exercise price of
$195.40 per Share;
NOW THEREFORE, to evidence the stock option so granted,
and to set forth its terms and conditions under the Plan, the
Company and the Grantee hereby agree as follows:
1. Confirmation of Grant, Option Price. The Company
hereby grants to the Grantee, effective as of the date hereof, an
option (the "Option") to purchase the Shares at an option price
of $195.40 per share (the "Option Price"). The Option is not
intended to be an incentive stock option under the U.S. Internal
Revenue code of 1986, as amended. This Agreement is subordinate
to, and the terms and conditions of the Option granted hereunder
are subject to, the terms and conditions of the Plan.
2. Exercisability. Except as otherwise provided in
this Agreement, the Option shall become available for exercise,
subject to the provisions hereof, in one-third installments on
each of the first, third and fifth anniversaries of the date of
this Agreement, provided that the Committee may accelerate the
exercisability of-any option, all options or any class of
Options, at any time and from time to time, shares eligible for
purchase may thereafter be purchased, subject to the provisions
hereof, and pursuant to and subject to the provisions contained
in the management stock Subscription Agreement (as defined in
Section 5) related to such Shares, at any time and from time to
time on or after such anniversary until the date one day prior to
the date on which the Option terminates.
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3. Termination of Option.
(a) Normal Termination Date. Unless an earlier
termination date is specified in Section 3(b), the Option shall
terminate on the tenth anniversary of the date hereof (the
"Normal Termination Date").
(b) Early Termination. If the Grantee's Active
Employment (as defined below) is voluntarily or, involuntarily
terminated for any reason whatsoever prior to the Normal
Termination Date, any portion of the Option that has not become
exercisable on or before the effective date of such termination
of employment shall terminate on such effective date. Any
portion of the Option that has become exercisable on or before
the date of the Grantee's termination, of Active Employment
shall, subject to the provisions of Section 4(c), remain
exercisable for whichever of the following periods is applicable,
and if not exercised within such period, shall terminate upon the
expiration of such period: (1) if the Grantee's Active
Employment is terminated for any reason other than an
Extraordinary Termination or for Cause, then any then
exercisable. Options held by such Grantee shall remain
exercisable for a period of sixty days after the earlier of the
expiration of the Second Purchase Period (as defined in Section
A(c)(0) and (y) receipt by the Grantee of written notice that The
Xxxxxxx & Dubilier Private Equity Fund IV Limited Partnership
(the "C&D Fund") does not intend to exercise its right to;
purchase pursuant to Section 4(c)(i). Notwithstanding anything
else contained in this Agreement, if the Grantee's Active
Employment is terminated by the Company for Cause, then all
Options (whether or not then exercisable) shall terminate and be
canceled immediately upon such termination, regardless of whether
then exercisable. Nothing in this Agreement shall be deemed to
confer on the Grantee any right to continue in the employ of the
Company or any of its direct or indirect subsidiaries, or to
interfere with or limit in any way the right of the Company or
any of its direct or indirect subsidiaries to terminate such
employment at any time.
4. Restrictions, on Exercise; Non-Transferability of
Option; Repurchase of Option.
(a) Restrictions On Exercise. The Option may be
exercised only with respect to full shares of Common Stock. No
fractional shares of Common Stock shall be issued. Not-
withstanding any other provision of this Agreement, the Option
may not be exercised in whole or in part, and no certificates
representing Shares shall be delivered, (i) unless all requisite
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approvals and consents of any governmental authority of any kind
having jurisdiction Over the exercise of options shall have been
secured, (ii) unless the purchase of the shares upon the exercise
of the Option shall be exempt from registration under applicable
MS federal and state securities laws, and applicable non-U.S.
securities laws, or the Shares shall have been registered under
such laws, (iii) unless all applicable U.S. federal, state and
local and non-U.S. tax withholding requirements shall have been
satisfied and (iv) if such exercise would result in a violation
of the terms or provisions of or a default or an event of default
under any of the Financing Agreements (as such term is defined in
Section 9). The Company shall use commercially reasonable
efforts to obtain the consents and approvals referred to in
clause (i) of the preceding sentence, to satisfy the withholding
requirements referred to in clause (iii) of the preceding
sentence and to obtain the consent of the parties to the
Financing Agreements referred to in clause (iv) of the preceding
sentence so as to permit the option to be exercised.
(b) Non-Transferability of Option. Except as
contemplated by Section 4(c), the Option may be exercised only by
the Grantee or by his estate. Except as contemplated by Section
4(c), the Option is not assignable or transferable, in whole or
in part, and it may not, directly or indirectly, be offered,
transferred, sold, pledged,: assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation
by gift, operation of law or otherwise) other than by will or by
the laws of descent and distribution to the estate of the Grantee
upon his death, provided that the deceased Grantee's beneficiary
or the representative of his estate shall acknowledge and agree
in writing, in a form reasonably acceptable to the Company, to be
bound by the provisions of this Agreement and the Plan as if such
beneficiary or the estate were the Grantee.
(c) Repurchase of Option on Termination of Employment.
(i) Termination of Employment. If the Grantee's
Active Employment is terminated for any reason, the Company
or WESCO shall have an option to purchase all (but not less
than all) of the portion of the option that is exercisable
on the effective date of termination of Active Employment
(the "Covered Option"), and shall have 30 days from the date
of the Grantee's termination (the "First Purchase Period")
during which to give notice in writing to the Grantee (or If
his Active Employment was terminated by his death, his
estate) of its election to exercise or not to exercise:
such right to purchase the Covered Option. The Company and
WESCO hereby undertake to use reasonable efforts to act as
promptly as practicable following much termination to make
such election. If the Company or WESCO fails to give notice
that it intends to exercise its rights to purchase the
Covered Option within the First Purchase Period, the C& D
Fund shall have the right to purchase the Covered Option and
shall have until the expiration of the earlier of (x) 30
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days following the end of the First Purchase Period, or (y)
30 days from the date of receipt by the C&D Fund of written
notice that neither the Company nor WESCO does not intend to
exercise such right (the "Second Purchase Period"), to give
notice in writing to the Grantee (or his estate) of the C&D
Funds's exercise of its right to purchase the Covered
Option. If the rights to purchase the Covered Option of the
Company and the C&D Fund granted in this subsection are not
exercised as provided herein, the Grantee (or his estate)
shall be entitled to retain the Covered Option, subject to
all of the provisions of this Agreement.
(ii) Purchase Price, etc. All purchases pursuant to
this Section 4(c) by the Company or the C&D Fund shall be
for a purchase price and in the manner prescribed by Section
4(g), (h) and (i).
(d) Certain Definitions. As used in this Agreement
the following terms shall have the following meanings:
(i) "Active Employment" shall mean active employment
with the Company or any direct or indirect subsidiary of the
Company.
(ii) "Cause" shall mean (A) the willful failure by the
Grantee substantially to perform his employment related
duties (other than any such failure due to physical or
mental illness) after a demand for substantial performance
is delivered to the Grantee by the Director of Human
Resources, believes that the Grantee has not substantially
performed his employment-related duties, (B) the engaging by
the Grantee in willful and serious misconduct that is
injurious to the Company or any of its affiliates, (C) the
conviction of the Grantee of, or the entering by the Grantee
of a plea of nolo contendere to, a crime that constitutes a
felony, or (D) the breach (including but not limited to the
material or willful failure to cure a breach) by the Grantee
of any written covenant or agreement with the Company or any
of its affiliates not to disclose any information pertaining
to the Company or any of its affiliates or not to compete or
interfere with the Company or any of its affiliates.
(iii) "Retirement at Normal Retirement Age" shall mean
retirement at age 65 or later.
(iv) "Permanent Disability" shall mean a physical or
mental disability or infirmity that prevents the performance
of such Grantee's employment-related duties lasting (or
likely to last, based on competent medical evidence
presented to the Director of Human Resources) for a
continuous period of six months or longer. The Director of
Human Resource's reasoned and good faith judgment of
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Permanent Disability shall be final, binding and conclusive
on all parties hereto and shall be based on such competent
medical evidence as shall be presented to it by the Grantee
or by any physician or group of physicians or other
competent medical expert employed by the Grantee or the
Company to advise the Director of Human Resources.
(e) Notice of Termination. The Company shall give
written notice of any termination of the Grantee's Active
Employment to the C&D Fund, except that if such termination (if
other than as a result of death) is by the Grantee, the Grantee
shall give written notice of such termination to the Company and
the Company shall give written notice of such termination to the
C&D Fund.
(f) Public Offering. In the event that an
underwritten public offering in the United States of the common
Stock led by one or more underwriters at least one of which is an
underwriter of nationally recognized standing (a "Public
Offering") has been consummated, nether the Company nor the C&D
Fund shall have any rights to purchase the Covered Option
pursuant to this Section 4.
(g) Purchase Price. Subject to Section 9(c), the
purchase price to be paid to the Grantee (or his estate) for the
Covered Option (the "Purchase Price") shall be equal to the
difference between (A) the fair market value (the "Fair Market
Value") of the Shares which may be purchased upon exercise of the
Covered Option as of the effective date of the termination of
employment that gives rise to the right to repurchase and (B) the
aggregate exercise price of the Covered Option. Whenever
determination of the Fair Market Value of the Shares is required
by this Agreement, such Fair Market Value shall be such amount as
is determined in good faith by the Board. In making a
determination of Fair Market Value, the Board shall give due
consideration to such factors as it deems appropriate, including,
without limitation, the earnings and certain other financial and
operating information of the Company in recent periods the
potential value of the Company as a whole, the future prospects
of the Company and the industries in which it competes, the
history and management of the Company, the general condition of
the securities markets, the fair market value of securities of
companies engaged in businesses similar to those of the Company
and a valuation of the Shares. The valuation that is in effect
as of December 31, 1996, which was prepared by an independent
valuation firm chosen by the Board, shall be used to determine
the Purchase Price. The determination of Fair Market Value will
not give effect to any restrictions on transfer of the Shares or
the fact that such shares would represent a minority interest in
the Company. The fair Market Value as determined in good faith
by the Board in the absence of fraud shall be binding and
conclusive upon all parties hereto and the C&D Fund, and in any
event the Grantee agrees to accept and shall not challenge any
determination of Fair Market Value made by the Board, so long as
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the Fair Market Value thus determined is at least equal to
$195.40 per share. If the Company subdivides (by any stock
split, stock dividend or otherwise) the Common Stock into a
greater number of shares, or combines (by reverse stock split or
otherwise) the Common Stock into a smaller number of shares after
the Board shall have determined the Purchase Price for the Shares
(without taking into consideration such subdivision or
combination) and prior to the consummation of the purchase, the
Purchase Price shall be appropriately adjusted to reflect such
subdivision or combination, and the board's determination as to
an such adjustment in good faith shall be binding and conclusive
on all parties hereto and the C&D Fund.
(h) Payment. Subject to Section 9, the completion of
a purchase pursuant to this Section 4 shall take place at the
principal office of the Company on the tenth business day
following the receipt by the Grantee of the C&D Fund's or the
Company's notice of its exercise of the right to purchase the
Covered Option pursuant to Section 4(c). The Purchase Price
shall be paid by delivery to the Grantee of a certified or bank
check for the Purchase Price payable to the order of the grantee,
against delivery of such instruments as the Company may
reasonably request signed by the Grantee, free and clear of all
security interests, liens, claims, encumbrances, charges,
options, restrictions on transfer, proxies and voting and other
agreements of whatever nature.
(i) Application of the Purchase Price to Certain
Loans. The Grantee agrees that the Company and the C&D Fund shall
be entitled to apply any amounts to be paid by the Company or the
C&D Fund, as the case may be, to repurchase the Covered Option
pursuant to this Section 4 to discharge any indebtedness of the
Grantee to the Company or any of its direct or indirect
subsidiaries, or indebtedness that is guaranteed by the Company
or any of its direct or indirect subsidiaries, including, but not
limited to, any indebtedness of the Grantee incurred to purchase
any shares of Common Stock.
(j) Withholding. Whenever Shares are to be issued
pursuant to the Option, the Company may require the recipient of
the Shares to remit to the Company an amount sufficient to
satisfy any applicable U.S. federal, state and local and non-U.S.
tax withholding requirements. In the event any cash is paid to
the Grantee pursuant to this Section 4, the Company shall have
the right to withhold an amount form such payment sufficient to
satisfy any applicable U.S. federal, state and local and non-U.S.
tax withholding requirements. If shares of Common Stock are
traded on a U.S. national securities exchange or bid and ask
prices for shares of Common Stock are quoted on the Nasdaq
National Market ("NASDAQ") operated by the National Association
of Securities Dealers, Inc., the Company may, if requested by the
Grantee, withhold shares to satisfy applicable withholding
requirements, subject to the provisions of the Plan and any rules
adopted by the Board or the Committee regarding compliance with
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applicable law, including, but not limited to, Section 16(b) of
the U.S. Securities Exchange Act of 1934, as amended (the
"Exchange Act").
5. Manner of Exercise. To the extent that the Option
shall have become and remains exercisable as provided in Section
2 and subject to such reasonable administrative regulations as
the Board or the committee may have adopted, the Option may be
exercised, in whole r in part, by notice to the Secretary of the
Company in writing given 15 business days prior to the date on
which the Grantee will so exercise the Option (the "Exercise
Date"), specifying the number of Shares with respect to which the
Option is being exercised (the "Exercise Shares") and the
Exercise Date, provided that if shares of Common Stock are traded
on a U.S. national securities exchange or bid and ask prices for
shares of Common Stock are quoted over NASDAQ, notice may be
given five business days before the Exercise Date. On or before
the Exercise Date, the Company and the Grantee shall enter into a
Management Stock Subscription Agreement (the "Management Stock
Subscription Agreement") substantially n the form attached hereto
as Annex 1, or in such other form as may be agreed upon by the
Company and the Grantee, such Management Stock Subscription
Agreement to contain (unless a Public Offering shall have
occurred prior to the Exercise Date) provisions corresponding to
Section 4(c) hereof. In accordance with the Management Stock
Subscription Agreement, (a) on or before the Exercise Date, the
grantee shall deliver to the Company full payment for the
Exercise Shares in United states dollars in cash, or cash
equivalent satisfactory to the Company, and in an amount equal to
the product of the number of Exercise Shares and $195.40 (the
"Exercise Price") and (b) on the Exercise Date, the Company shall
deliver to WESCO to hold on behalf of the Grantee a certificate
or certificates representing the Exercise Shares, registered in
the name of the Grantee. If shares of Common Stock are traded on
a U.S. national securities exchange or bid and ask prices for
shares of Common Stock are quoted over NASDAQ, the Grantee may,
in lieu of cash, tender shares of Common Stock having a market
price on the Exercise date equal to the Exercise Price or may
deliver a combination of cash and shares of Common Stock having a
market price equal to the difference between the Exercise Price
and the amount of such cash as payment of the Exercise Price,
subject to such rules and regulations as may be adopted by the
Board or the Committee to provide for the compliance of such
payment procedure with applicable law, including Section 16(b) of
the Exchange Act. The Company may require the Grantee to furnish
or execute such other documents as the Company shall reasonably
deem necessary (i) to evidence such exercise, (ii) to determine
whether registration is then required under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), and (iii) to
comply with or satisfy the requirements of the Securities Act,
applicable state or non-U.S. securities laws or any other law.
Prior to a public offering, Holding shall deliver to WESCO to
hold on behalf of the Grantee, a certificate or certificates
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representing the shares of Common Stock acquired upon the
exercise thereof.
6. Grantee's Representation, Warranties and
Covenants.
(a) Investment Intention. The Grantee represents and
warrants that the Option has been, and any Exercise Shares will
be acquired by him solely for his own account for investment and
not with a view to or for sale in connection with any
distribution thereof. The Grantee agrees that he will not,
directly or indirectly, offer transfer, sell, pledge, hypothecate
or otherwise dispose of all or any portion of the Optionor any of
the Exercise shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of all or any portion of the
Option or any of the Exercise Shares), except in compliance with
the Securities Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder,
and in compliance with applicable state securities or "blue sky"
laws. The Grantee further understands, acknowledges and agrees
that none of the Shares may be transferred, sold, pledged,
hypothecated or otherwise disposed of unless the provisions of
the related Management Stock Subscription Agreement shall have
been complied with or have expired.
(b) Legend. The Grantee acknowledges that any
certificate representing the Exercise Shares shall bear an
appropriate legend, which will include, without limitation, the
following language:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT, DATED AS OF ________, AND NEITHER THIS
CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE
OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH MANAGEMENT STOCK SUBSCRIPTION AGREEMENT,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
ENTITLED TO THE BENEFITS OF AND ARE BOUND BY THE OBLIGATIONS
SET FORTH IN A REGISTRATION AND PARTICIPATION AGREEMENT,
DATED AS OF FEBRUARY28, 1994, AMONG THE COMPANY AND CERTAIN
STOCKHOLDERS OF THE COMPANY, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED,
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
(i)(A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE
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EFFECT THAT SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS
OF SECTION 5 OF SUCH ACT OR (C) A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION, REASONABLY SATISFACTORY
TO COUNSEL FOR THE COMPANY, SHALL HAVE BEEN OBTAINED WITH
RESPECT TO SUCH DISPOSITION AND (ii) SUCH DISPOSITION IS
PURSUANT TO REGISTRATION UNDER ANY APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM."
(c) Securities Law Matters. The Grantee acknowledges
receipt of advice from the Company that (i)the Exercise Shares
have not been registered under the Securities Act or qualified
under any state securities or "blue sky" laws, (ii)it is not
anticipated that there will be any public market for the Exercise
Shares, (iii)the Exercise Shares must be held indefinitely and
the Grantee must continue to bear the economic risk of the
investment in the Exercise Shares unless the Exercise Shares are
subsequently registered under the Securities Act and such state
laws or an exemption from registration is available, (iv)Rule
144 under the Securities Act ("Rule 144") is not presently
available with respect to the sales of any securities of the
Company and the Company has made no covenant to make Rule 144
available, (v)when and if the Exercise Shares may be disposed of
without registration in reliance upon Rule 144, such disposition
can be made only in limited amounts in accordance with the terms
and conditions of such Rule, (vi)the Company does not plan to
file reports with the commission or make public information
concerning the Company available unless required to do so by law
or by the terms of its Financing Agreements (as hereinafter
defined), (vii)if the exception afforded by Rule 144 is not
available, sales of the Exercise Shares may be difficult to
effect because of the absence of public information concerning
the Company, (viii)a restrictive legend in the form heretofore
set forth shall be placed on the certificates representing the
Exercise Shares and (ix)a notation shall be made in the
appropriate records of the Company indicating that the Exercise
Shares are subject to restrictions on transfer set forth in this
Agreement and, if the Company should in the future engage the
services of a stock transfer agent, appropriate stop-transfer
restrictions will be issued to such transfer agent with respect
to the Exercise Shares.
(d) Compliance with Rule 144. If any of the Exercise
Shares are to be disposed of in accordance with Rule 144 under
the Securities Act, the Grantee shall transmit to the Company an
executed copy of Form 144 (if required by Rule 144) no later than
the time such form is required to be transmitted to the
Commission for filing and such other documentation as the Company
may reasonably require to assure compliance with Rule 144 in
connection with such disposition.
(e) Ability to Bear Risk. The Grantee covenants that
he will not exercise all or any portion of the Option unless
(i)the financial situation of the Grantee is such that he can
afford to bear the economic risk of holding the Exercise Shares
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for an indefinite period and (ii)he can afford to suffer the
complete loss of his investment in the Exercise Shares.
(f) Registration; Restrictions on Sale upon Public
Offering. In respect of any Shares purchased upon exercise of
all or any portion of the Option, the Grantee shall be entitled
to the rights and subject to the obligations created under the
Registration and Participation Agreement, dated as of
February28, 1994 as the same may be amended, modified or
supplemented from time to time (the "Registration Agreement"),
amount the Company and certain stockholders of the Company, to
the extent set forth therein. Such Shares shall be entitled to
the benefits of the Registration Agreement applicable to
Registrable Securities (as defined therein). The Grantee agrees
that, in the event that the Company files a registration
statement under the Securities Act with respect to an
underwritten public offering of any shares of its capital stock,
the Grantee will not effect any public sale or distribution of
any shares of the Common Stock (other than as part of such
underwritten public offering) during the 20 days prior to and the
180 days after the effective date of such registration statement.
(g) Section 83(b) Election. The Grantee agrees that,
within 20 days of any Exercise Date, he shall give notice to the
Company as to whether or not he has made in election pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended,
with respect to the Exercise Shares purchased on such date, and
acknowledges that he will be solely responsible for any and all
tax liabilities payable by him in connection with his receipt of
the Exercise Shares or attributable to his making or failing to
make such an election.
7. Representations and Warranties of the Company.
The Company represents and warrants to the Grantee that (a) the
Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware,
(b)this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally
binding obligation of the Company enforceable against the Company
in accordance with its terms, and (c) the Shares, when issued,
delivered and paid for, upon the exercise of the Option in
accordance with the terms hereof and the Management Stock
Subscription Agreement, will be duly authorized, validly issued,
full paid and nonassessable, and free and clear of any liens or
encumbrances other than those created pursuant to this Agreement,
the Management Stock Subscription Agreement or otherwise in
connection with the transactions contemplated hereby.
8. Change in Control
(a) Accelerated Vesting and Payment. Unless the
Committee shall otherwise determine in the manner set forth in
Section 8(b), in the event of a Change in Control, the Option
shall be cancelled in exchange for a payment in cash of an amount
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equal to the excess, if any, of the Change in Control Price over
the exercise price for the Option.
(b) Alternative Options. Notwithstanding Section
8(a), no cancellation, acceleration of exercisability, vesting or
cash settlement or other payment shall occur with respect to the
Option if the Committee reasonably determines in good faith,
prior to the occurrence of a Change in Control, that the Option
shall be honored or assumed, or new rights substituted therefor
(such honored, assumed or substituted Option being hereinafter
referred to as an "Alternative Option") by the New Employer,
provided that any such Alternative Option must:
(i) provide the Grantee with rights and entitlements
substantially equivalent to or better than the rights, terms
and conditions applicable under the Option, including, but
not limited to, an identical or better exercise and vesting
schedule, identical or better timing and methods of payment
and, if the Alternative Options or the securities underlying
them are not publicly traded, identical or better rights to
require the Company or the New Employer to repurchase the
Alternative Options;
(ii) have substantially equivalent economic value to
the Option (determined at the time of the Change in
Control); and
(iii) have terms and conditions which provide that in
the event that the Grantee suffers an Involuntary
Termination within two years following a Change in Control:
(A) any conditions on the Grantee's rights under,
or any restriction on transfer or exercisability
applicable to, each such Alternative Option shall be
waived or shall lapse, as the case may be; or
(B) the Grantee shall have the right to surrender
such Alternative Option within 30 days following such
termination in exchange for a payment in cash equal to
the excess of the Fair Market Value of the equity
security subject to the Alternative Option over the
price, if any, that the Grantee would be required to
pay to exercise such Alternative Option.
(c) Certain Definitions.
(i) "Change in Control" means the first to occur of
the following events after the date hereof:
(A) the acquisition by any person, entity or
"group" (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended), other than the
Company, WESCO, the Subsidiaries, any employee benefit
plan of the Company, WESCO or the Subsidiaries, or the
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C&D Fund, of 50% or more of the combined voting power
of the Company's or WESCO's then outstanding voting
securities;
(B) the merger or consolidation of the Company or
WESCO s a result of which persons who were stockholders
of the Company or WESCO, as the case may be,
immediately prior to such merger or consolidation, do
not, immediately thereafter, own, directly or
indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors
of the merged or consolidated company;
(C) the liquidation or dissolution of the Company
or WESCO; and
(D) the sale, transfer or other disposition of
all or substantially all of the assets of the Company
or WESCO to one or more persons or entities that are
not, immediately prior to such sale, transfer or other
disposition, affiliates of the Company or WESCO.
(ii) "Change in Control Price" means the price per
share of Common Stock offered in conjunction with any
transaction resulting in a Change in Control (as determined
in good faith by the Board of Directors if any part of the
offered price is payable other than in cash).
(iii) "Involuntary Termination" means a termination by
the New Employer for any reason.
(iv) "New Employer" means the Grantee's employer, or
the parent or a subsidiary of such employer, immediately
following a Change in Control.
(v) "Subsidiary" means any corporation a majority of
whose outstanding voting securities is owned, directly or
indirectly, by WESCO or the Company.
9. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any
other provision of this Agreement, the Company shall not be
permitted to repurchase the Option from the Grantee if (i) such
repurchase would result in a violation of the terms or provisions
of, or result in a default or an event of default under, (A) the
Credit Facility, dated as of February 24, 1995 as the same may be
amended, modified or supplemented from time to time (the "Credit
Facility"), among WESCO, the lenders party thereto, Barclays Bank
PLC, as administrative agent and Shawmut Capital Corporation, as
collateral agent and (B) any indenture to be entered into with
respect to debt securities to be issued by WESCO in connection
with or subsequent to the Acquisition as the same may be amended,
modified or supplemented from time to time (an "Indenture") or
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(C) any other financing or security agreement or document entered
into in connection with the Acquisition, or the financing of the
Acquisition or in connection with the operations of the Company
or its subsidiaries from time to time, as each may be amended,
modified or supplemented from time to time (the Credit Facility,
any Indenture and such other agreements and documents, are
hereinafter referred to as the "Financing Agreements"), or
(ii)such repurchase would violate any of the terms or provisions
of the Certificate of Incorporation of the Company, or (iii) the
Company has no funds legally available therefor under the General
Corporation Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a
repurchase by the Company otherwise permitted under Section 4(c)
is prevented solely by the terms of Section 9(a), (i) such
repurchase will be postponed and will take place without the
application of further conditions or impediments (other than as
set forth in Section 4 hereof or in this Section 9) at the first
opportunity thereafter when the Company has funds legally
available therefor and when such repurchase will not result in
any default, event of default or violation under any of the
Financing Agreements or in a violation of any term or provision
of the Certificate of Incorporation of the Company and (ii) such
repurchase commitment shall rank against other similar repurchase
commitments with respect to shares of Common Stock or options in
respect thereof according to priority in time of the effective
date of the termination of employment in connection with any
repurchase pursuant to an exercise of the option of the Company
under Section 4(c)(i), the date upon which the Company receives
written notice of such exercise, provided that any such
repurchases as to which a common date determines priority under
this clause (ii) shall be of equal priority and shall share
prorata in any repurchase payments made pursuant to clause
(i)above and provided, further, that (x) any repurchase
commitment arising from Permanent Disability, death or Retirement
at Normal Retirement Age or, in the case of shares of Common
Stock, any repurchase commitment made by the Board pursuant to
Section 6(b) of the Management Stock Subscription Agreement shall
have priority over any other repurchase commitment and (y) all
Section references in this clause (ii) shall be deemed to refer
to the corresponding Section of this Agreement or the Management
Stock Subscription Agreement, as the case may be, and to any
similar provision of any other management stock option or stock
subscription agreement to which the Company is or becomes a
party.
(c) Purchase Price Adjustment. In the event that a
repurchase of the Covered Option from the Grantee is delayed
pursuant to this Section 9, the purchase price for such Option
when the repurchase of such Option eventually takes place as
contemplated by Section 9(b) shall be the sum of (i) the Purchase
Price of such Covered Option determined in accordance with
Section 4(g) at the time that the repurchase of such Option would
have occurred but for the operation of this Section 9, plus
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(ii)an amount equal to interest on such Purchase Price for the
period from the date on which the completion of the repurchase
would have taken place but for the operation of this Section 9 to
the date on which such repurchase actually takes place (the
"Delay Period") at a rate equal to the weighted average costs of
the Company's bank indebtedness obligations outstanding during
the Delay Period.
10. No Rights as Stockholder. The Grantee shall have
no voting or other rights as a stockholder of the Company with
respect to any Shares covered by the Option until the exercise of
the Option and the issuance of a certificate or certificates to
him for such Shares. No adjustment shall be made for dividends
or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11. Capital Adjustments. The number and price of the
Shares covered by the Option shall be proportionately adjusted to
reflect any stock dividend, stock split or share combination of
the Common Stock or any recapitalization of the Company. Subject
to any required action by the stockholders of the Company and
Section 8 hereof, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Option shall
pertain to the securities and other property, if any, that a
holder of the number of shares of Common Stock covered by the
Option would have been entitled to receive in connection with
such event.
12. Miscellaneous.
(a) Notices. All notices and other communications
required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been given if delivered
personally or sent by certified or express mail, return receipt
requested, postage prepaid, or by any recognized international
equivalent of such delivery, to the Company, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to
such other address as the Company, the C&D Fund or the Grantee,
as the case may be, shall specify by notice to the others:
(i) if to the Company, to it at:
CDW Holding Corporation
c/o WESCO Distribution, Inc.
Commerce Court, Suite 000
Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Chairman
(ii) if to the Grantee, to the Grantee at the address
set forth on the signature page hereof.
(iii) if to the C&D Fund, to:
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The Xxxxxxx & Dubilier Private Equity
Fund IV Limited Partnership
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx & Dubilier Associates
IV Limited Partnership,
Xxxxxx X. Xxxx, III
All such notices and communications shall be deemed to have been
received on the date of delivery or on the third business day
after the mailing thereof. Copies of any notice or other
communication given under this Agreement shall also be given to:
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Xxxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X.X. Xxxxxxx, Esq.
The C&D Fund also shall be given a copy of any notice or other
communication between the Grantee and the Company under this
Agreement at its address as set forth above.
(b) Binding Effect; Benefits. This Agreement shall be
binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and assigns. Except as
provided in Section 4, nothing in this Agreement, express or
implied, is intended or shall be construed to give any person
other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision
contained herein.
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof,
may, by written notice to the other parties (A)extend the time
for the performance of any of the obligations or other actions of
the other parties under this Agreement, (B)waive compliance with
any of the conditions or covenants of the other parties contained
in this Agreement and (C)waive or modify performance of any of
the obligations of the other parties under this Agreement;
provided that any waiver of the provisions of Section4 must be
consented to in writing by the C&D Fund. Except as provided in
the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or
on behalf of any party or beneficiary, shall be deemed to
constitute a waiver by the party or beneficiary taking such
action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any
16
party hereto or beneficiary hereof of a breach of any provision
of this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach and no failure by a party
or beneficiary to exercise any right or privilege hereunder shall
be deemed a waiver of such party's or beneficiary's rights or
privileges hereunder or shall be deemed a waiver of such party's
or beneficiary's rights to exercise the same at any subsequent
time or times hereunder.
(ii) Amendment. This Agreement may not be amended,
modified or supplemented orally, but only by a written instrument
executed by the Grantee and the Company, and (in the case of any
amendment modification or supplement that adversely affects the
rights of the C&D Fund hereunder) must be consented to by the C&D
Fund in writing.
(d) Assignability. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by the Company or the Grantee
without the prior written consent of the other parties and the
C&D Fund. The C&d Fund may assign from time to time all or any
portion of its rights under Section4 to one or more persons or
other entities designated by it.
(e) Applicable Law. This Agreement shall be governed
by and construed in accordance with the law of the State of
NewYork, regardless of the law that might be applied under
principles of conflict of laws, except to the extent that the
corporate law of the State of Delaware specifically and
mandatorily applies.
(f) Section and Other Headings, etc. The section and
other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation
of this Agreement. In this Agreement all references to "dollars"
or "$" are to UnitedStates dollars.
(g) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and
the same instrument.
(h) Delegation by the Board. All of the powers,
duties and responsibilities of the Board specified in this
Agreement may, to the full extent permitted by applicable law, be
exercised and performed by any duly constituted committee thereof
17
to the extent authorized by the Board to exercise and perform
such powers, duties and responsibilities.
IN WITNESS WHEREOF, the Company and the Grantee have
executed this Agreement as of the date first above written.
CDW HOLDING CORPORATION
By:______________________________
Name:
Title:
THE GRANTEE:
By:______________________________
Address of the Grantee:
Total Number of Shares
of Common Stock for the
Purchase of Which an
Option Has Been Granted:
