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EXHIBIT 10.9
PHASE METRICS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. Optionee is to render valuable services to the Corporation, and this
Agreement is intended to document the stock option grant which the Corporation
has this day made to Optionee as an incentive for him to continue in the
Corporation's Service.
B. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
a. Should Optionee cease to remain in Service for any
reason (other than death or Disability) while this option is outstanding, then
Optionee shall have a period of
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three (3) months (commencing with the date of such cessation of Service) during
which to exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.
b. Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or persons
to whom the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be outstanding
upon the earlier of (i) the expiration of the twelve (12)- month period measured
from the date of Optionee's death or (ii) the Expiration Date.
c. Should Optionee cease Service by reason of Disability
while this option is outstanding, then Optionee shall have a period of six (6)
months (commencing with the date of such cessation of Service) during which to
exercise this option. However, should such Disability be deemed to constitute
Permanent Disability, then the period during which this option is to remain
exercisable shall be extended by an additional six (6) months so that the
exercise period shall be the twelve (12)-month period following the date of
Optionee's cessation of Service by reason of such Permanent Disability. In no
event shall this option be exercisable at any time after the Expiration Date.
d. During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service.
e. Upon the expiration of the applicable post-Service
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any otherwise exercisable Option
Shares for which the option has not been exercised. However, this option shall
immediately, upon Optionee's cessation of Service, terminate and cease to be
outstanding with respect to any and all Option Shares for which this Option is
not otherwise at that time exercisable.
6. SPECIAL TERMINATION OF OPTION.
a. This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program
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of the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the same
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
b. If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
c. This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have
any shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
a. In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(1) Execute and deliver to the Corporation a Purchase
Agreement for the Option Shares for which the option is exercised.
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(2) Pay the aggregate Exercise Price for the purchased
shares in cash or check made payable to the Corporation.
Should the Common Stock be registered under Section 12(g) of
the 1934 Act at the time the option is exercised, then the Exercise
Price may also be paid as follows:
(a) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(b) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise
Price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (b) to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to
the Corporation in connection with the option exercise.
(3) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
(4) Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in order
for it to comply with the applicable requirements of Federal and state
securities laws.
(5) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
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satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
b. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
c. In no event may this option be exercised for any
fractional shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN FIRST REFUSAL RIGHTS OF THE
CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE
TERMS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
a. The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
b. The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.
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12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which one hundred percent
(100%) of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
E. CORPORATION shall mean Phase Metrics, Inc., a California
corporation.
F. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation, subject to the Corporation's control and direction as to both the
work to be performed and the manner and method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
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J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Board to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate, including the
Corporation's earnings history, book value and prospects in the light of
market conditions generally.
X. XXXXX DATE shall mean the date of grant of the option as specified
in the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
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P. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
Q. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
R. SERVICE shall mean the Optionee's performance of services for the
Corporation in the capacity of an Employee or non-employee Board member or as an
independent consultant pursuant to the terms and conditions of the Consulting
Services Agreement between the Optionee and the Corporation dated _____________.
S. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
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ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement attached as Exhibit A
to the Notice of Stock Option Grant evidencing the stock option (the "Option")
which the Corporation granted to Optionee on _____________, 1996 to purchase
______________ shares of the Corporation's Common Stock under the Corporation's
1995 Stock Option Plan at an exercise price of $15.00 per share. All capitalized
terms used in this Addendum, to the extent not otherwise specifically defined
herein, shall have the meanings assigned to such terms in the Stock Option
Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed or replaced with a comparable option in accordance
with Paragraph 6 of the Option Agreement, the Option shall not accelerate upon
the occurrence of that Corporate Transaction, and the Option shall accordingly
continue, over Optionee's period of Service after the Corporate Transaction, to
become exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, should Optionee
cease Service by reason of an Involuntary Termination within twelve (12) months
following a Corporate Transaction in which the acquisition price payable per
share of Common Stock (determined on a fully-diluted basis as if all the
Corporation's outstanding securities exercisable or convertible into Common
Stock were in fact exercised or converted immediately prior to such Corporate
Transaction) is an amount not less than the minimum price per share indicated in
Paragraph 2 below for the fiscal year of the Corporation in which such Corporate
Transaction occurs, then the Option, to the extent outstanding at the time but
not otherwise fully exercisable, shall automatically accelerate so that the
Option shall become immediately exercisable for all the Option Shares at the
time subject to the Option and may be exercised for any or all of those Option
Shares as fully vested shares. The Option shall remain so exercisable until the
earlier of (i) the Expiration Date or (ii) the sooner termination of the Option
in accordance with Paragraph 5 of the Stock Option Agreement.
2. The minimum acquisition price payable per share of Common
Stock (determined on a fully-diluted basis in the manner indicated above) which
will serve as a requisite condition to the acceleration of the Option under
Paragraph 1 shall be determined in accordance with the table below on the basis
of the fiscal year of the Corporation in which the Corporate Transaction is
effected:
Fiscal Year Minimum
of Acquisition Price
Acquisition Per Share
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1996 $10.00
1997 or later $14.00
3. For purposes of this Addendum, Optionee will be deemed to
cease Service by reason of an Involuntary Termination if such cessation of
Service occurs:
- involuntarily upon Optionee's dismissal or discharge by
the Corporation for reasons other than fraud, any unauthorized use or disclosure
of the Corporation's trade secrets and other proprietary information, or any
other intentional misconduct adversely affecting the business or affairs of the
Corporation in a material manner, or
- voluntarily upon Optionee's resignation following (A) a
change in Optionee's position with the Corporation which materially reduces
Optionee's level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and any non-discretionary
and objective-standard incentive payment or bonus award) by more than fifteen
percent (15%) or (C) a relocation of Optionee's principal place of employment by
more than fifty (50) miles from Optionee's principal place of employment
immediately prior to the Corporate Transaction, provided and only if such
change, reduction or relocation is effected by the Corporation without
Optionee's consent.
IN WITNESS WHEREOF, Phase Metrics, Inc. has caused this Addendum to
be executed by its duly-authorized officer, and Optionee has executed this
Addendum, all as of the Effective Date specified below.
PHASE METRICS, INC.
By: _____________________________________
Title: __________________________________
_________________________________________
OPTIONEE
EFFECTIVE DATE: _____________________, 1996
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