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Exhibit 10.2
MANAGEMENT STOCK OPTION AGREEMENT
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MANAGEMENT STOCK OPTION AGREEMENT, dated as of August 6, 1998,
between WESCO International, Inc., a Delaware corporation ("International"), 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 International (the "Board")
has adopted and approved the WESCO International, Inc. 1998 Stock Option Plan
(the "Plan") and designated the Compensation Committee of the Board (the
"Committee") to administer the Plan; and
WHEREAS, the Committee has determined to grant under the Plan
to the Grantee, an employee of WESCO Distribution, Inc. (the "Company"), a
non-qualified stock option to purchase an aggregate of ___________ shares (the
"Shares") of International's Class A Common Stock, par value $.01 per share (the
"Common Stock") at an exercise price of $621.08 per Share;
NOW, THEREFORE, to evidence the stock option so granted, and
to set forth its terms and conditions under the Plan, International and the
Grantee, intending to be legally bound, hereby agree as follows:
1. Confirmation of Grant; Option Price. International hereby
grants to the Grantee, effective as of the date hereof, an option (the "Option")
to purchase the Shares at an option price of $621.08 per share (the "Option
Price"). The Option shall consist of two parts, a part relating to ________ of
the Shares which is subject to time-based vesting (the "Time-Based Option") and
a part relating to _________ of the Shares which is subject to performance-based
vesting (the Performance-Based Option"). 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 Time-Based Options shall become available for exercise as
follows:
VESTING DATE PERCENTAGE OF TIME-BASED OPTIONS EXERCISABLE
------------ --------------------------------------------
June 5, 1999 25%
June 5, 2000 25%
June 5, 2001 25%
June 5, 2002 25%
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Except as otherwise provided in this Agreement, if the Grantee
remains in the employment of the Company until the earlier of (a) January 1,
2008 and the Grantee's sixty-fifth (65th) birthday, the Performance-Based
Options shall become fully vested and exercisable as of such date; provided,
however, that the vesting and exercisability of the Performance-Based Options
shall be accelerated, and the Performance-Based Options shall become available
for exercise, upon achievement by International of the following annual
financial performance targets:
PERCENTAGE OF
PERFORMANCE-BASED
FISCAL YEAR EBITDA EBITDA PERCENTAGE VESTING DATE OPTIONS EXERCISABLE
----------- ------ ----------------- ------------ -------------------
1998 $122.6M 4.0% June 5, 1999 25%
1999 $149.6M 4.3% June 5, 2000 25%
2000 $176.7M 4.6% June 5, 2001 25%
2001 $206.9M 4.8% June 5, 2002 25%
2002 $240.2M 5.0% June 5, 2003 Catch-up year
The accelerated vesting date for Performance-Based Options
will be June 5 in the year following achievement of the specified financial
targets. Both the EBITDA dollar target and the EDITDA Percentage target for a
particular fiscal year must be attained for the Performance-Based Options
allocated to that year to become available for exercise on an accelerated basis.
If International attains 100% of the EBITDA and EBITDA Percentage target for a
fiscal year, then all Performance-Based Options allocated to such year (as
reflected in the above table), as well as any Performance-Based Options
allocated to prior years which had not previously vested, shall become vested
and exercisable on an accelerated basis. No specific number of Performance-Based
Options is allocated to fiscal year 2002; if the EBITDA and EBITDA Percentage
targets are met for fiscal year 2002, any Performance-Based Options allocated to
prior years which had not previously vested shall become vested and exercisable
on an accelerated basis. Performance of International during years after 2002
shall have no effect on the vesting of Performance-Based Options. Once a
Performance-Based Option vests, it will not "unvest" due to future performance
below targeted EBITDA.
For purposes of this Agreement, "EBITDA" shall mean earnings
before interest, taxes, depreciation and amortization. For purposes of this
Agreement, "EBITDA Percentage" shall mean EBITDA for a fiscal year as a
percentage of International's net sales for that year. All determinations of
EBITDA and EBITDA Percentage shall be made by the Committee based upon
International's audited, consolidated financial statements and on a basis
consistent with International's historic accounting practices, provided,
however, that the effects (as determined by the Committee in its sole
discretion) of any extraordinary items and one-time events shall be excluded.
Notwithstanding the foregoing, 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
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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.
3. Termination of Option.
(a) Normal Termination Date. Unless an earlier termination
date is specified in Section 3(b), the Option shall terminate at 5:00 P.M.
Eastern Standard Time on June 5, 2008 (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: (i) if the Grantee's Active Employment is terminated by reason of the
Grantee's death, Permanent Disability or Retirement at Normal Retirement Age
(each an "Extraordinary Termination"), then any Options held by the Grantee and
then exercisable shall remain exercisable solely until the first to occur of (A)
the first anniversary of the Grantee's termination of employment or (B) the
expiration of the term of the Option, and (ii) if the Grantee's Active
Employment is terminated for any reason other than an Extraordinary Termination,
then any then exercisable Options held by such Grantee shall remain exercisable
solely until the first to occur of (A) the expiration of sixty days after the
Grantee's termination of employment or (B) the expiration of the term of the
Option. Nothing in this Agreement shall be deemed to confer on the Grantee any
right to continue in the employ of International or any of its direct or
indirect subsidiaries, or to interfere with or limit in any way the right of
International 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. Notwithstanding 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 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 U.S. 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 Financing
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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) or as the Committee may otherwise determine in its sole discretion,
the Option may be exercised only be 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 International, 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 (x) without Cause, or (y) by reason of the
Grantee's death or Permanent Disability, on notice from the Grantee (or
his estate) in writing and delivered to the Company within 30 days
following the termination of employment, the Company shall 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").)
(ii) Purchase Price, etc. All purchases pursuant to this
Section 4(c) by the Company shall be for a purchase price and in the
manner prescribed by Sections 4(e), (f) and (g).
(d) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Active Employment" shall mean active employment with
International or any direct or indirect subsidiary of International.
(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 Board, which
notice identifies the manner in which the Board 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 International 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, (D) the
breach by the
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Grantee of any written covenant or agreement with International or any
of its affiliates not to disclose any information pertaining to
International or any of its affiliates or not to compete or interfere
with International or any of its affiliates or (E) the breach by the
Grantee of his obligation pursuant to Section 8 of his Management Stock
Subscription Agreement.
(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 Board) for a continuous
period of six months or longer. The Board's reasoned and good faith
judgment of 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 International to advise the Board.
(d) 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, the Grantee shall have no
rights to sell the Covered Option pursuant to this Section 4.
(e) 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 or obligation 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, which shall be
performed as promptly as practicable following each fiscal year by an
independent valuation firm chosen by the Board. 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. 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
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(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 any such adjustment in good faith shall be binding and
conclusive on all parties hereto.
(f) 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 Company's receipt of notice
by the Grantee of the election to sell 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.
(g) Application of the Purchase Price to Certain Loans. The
Grantee agrees that the Company shall be entitled to apply any amounts to be
paid by the Company 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.
(h) Withholding. Whenever Shares are to be issued pursuant to
the Option, International may require the recipient of the Shares to remit to
International 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, International shall have the
right to withhold from such payment an amount 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., International 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 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 or in part, by notice to the
Secretary of International 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,
International and the Grantee shall enter into a Management Stock
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Subscription Agreement (the "Management Stock Subscription Agreement")
substantially in the form attached hereto as Annex 1, or in such other form as
may be agreed upon by International 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 International full payment for
the Exercise Shares in United States dollars in cash, or cash equivalent
satisfactory to International, and in an amount equal to the product of the
number of Exercise Shares and $621.08 (the "Exercise Price") and (b) on the
Exercise Date, International shall deliver to 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, in lieu of cash, may 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.
International may require the Grantee to furnish or execute such other documents
as International 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.
6. Grantee's Representations, 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 Option or 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
AUGUST 6, 1998, AND NEITHER THIS CERTIFICATE NOR THE
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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 AN
AMENDED AND RESTATED REGISTRATION AND PARTICIPATION AGREEMENT 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 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 International 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 International and
International 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) International does not plan to
file reports with the Commission or make public information concerning
International available unless required to do so by law or by the terms of any
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 International,
(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
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made in the appropriate records of International indicating that the Exercise
Shares are subject to restrictions on transfer set forth in this Agreement and,
if International 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 International 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
International 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 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 Amended and Restated Registration and
Participation Agreement, as the same may be amended, modified or supplemented
from time to time (the "Registration Agreement"), among International and
certain stockholders of International, 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 International 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.
7. Representations and Warranties of International. The
Company represents and warrants to the Grantee that (a) International 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 International and constitutes a valid and legally binding
obligation of International enforceable against International in accordance with
its terms, and (c) the Shares, when issued, delivered and paid for, upon
exercise of the Option in accordance with the terms hereof and the Management
Stock Subscription Agreement, will be duly authorized, validly issued, fully
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 equal to the excess, if any, of the Change in Control Price
over the exercise price for the Option.
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(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 International 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 restrictions 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 June 5, 1998:
(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 International, the Company, the
Subsidiaries, any employee benefit plan of International, the
Company or the Subsidiaries, or the Cypress Fund, of 50% or
more of the combined voting power of International's or the
Company's then outstanding voting securities;
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(B) the merger of consolidation of International or
the Company as a result of which persons who were stockholders
of International or the Company, 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 International
or the Company; and
(D) the sale, transfer or other disposition of all or
substantially all of the assets of International or the
Company to one or more persons or entities that are not,
immediately prior to such sale, transfer or other disposition,
affiliates of International or the Company.
(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 the
Company or International.
9. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any other
provision of this Agreement, the Company shall not be permitted or obligated 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 (the "Credit Facility") among
International, the Company, WESCO Distribution - Canada, the lenders party
thereto, The Chase Manhattan Bank, as U.S. administrative agent, syndication
agent and Canadian collateral agent and ▇▇▇▇▇▇ Commercial Paper Inc., as
documentation agent and (B) any indenture to be entered into with respect to
debt securities issued by International as the same may be amended, modified or
supplemented from time to time (an "Indenture") or (C) any other financing or
security agreement or document entered into 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.
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(b) Delay of Repurchase. In the event that a repurchase by the
Company otherwise permitted or required 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 obligation shall rank against other similar repurchase obligations
with respect to shares of Common Stock or options in respect thereof according
to priority in time of the date upon which the Company receives written notice
of such exercise, provided that any such repurchase obligations as to which a
common date determines priority shall be of equal priority and shall share pro
rata in any repurchase payments made pursuant to clause (i) above and provided,
further, that (x) any repurchase commitment arising from Permanent Disability or
death 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 obligation 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 (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 cost 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 International 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 International. Subject to any required action by the
stockholders of International and Section 8 hereof, in any merger,
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13
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.
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14
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 International, the Cypress Fund or
the Grantee, as the case may be, at the following addresses or to such other
address as International, the Cypress Fund or the Grantee, as the case may be,
shall specify by notice to the others:
(i) if to International, to it at:
WESCO International, Inc.
Commerce Court, Suite ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chairman
(ii) if to the Grantee, to the Grantee at the address set
forth on the signature page hereof.
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.
(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 Section 4 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,
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15
covenants or agreements contained herein. The waiver by any
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 International.
(d) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by International or the Grantee without the prior written consent of
the other parties.
(e) Applicable Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, 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 United States 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 to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
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IN WITNESS WHEREOF, International and the Grantee have
executed this Agreement as of the date first above written.
WESCO INTERNATIONAL, INC.
By:____________________________
Name:
Title:
THE GRANTEE:
By:____________________________
Name:
Address of the Grantee:
Total Number of Shares
of Common Stock for the
Purchase of Which an
Option Has Been Granted: _________________________________
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