EXHIBIT 4.2
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement is made as of this 9th day of
June, 1997 (which date is hereinafter referred to as the "Date of Grant") by and
among MICROTEST, INC., a Delaware corporation (hereinafter referred to as the
"Company") and Xxxxxxx X. Xxxxxxx (hereinafter referred to as "Employee"). If
Employee is presently or subsequently becomes employed by a subsidiary of the
Company, the term "Company" shall be deemed to refer collectively to Microtest,
Inc. and the subsidiary or subsidiaries which employ the Employee.
RECITALS
A. From time to time, the Company grants stock options to key employees
and officers of the Company as an incentive to encourage key employees and
officers to remain in its employment and to enhance the ability of the Company
to attract new employees whose services are considered unusually valuable by
providing an opportunity to have a proprietary interest in the success of the
Company; and
B. The Compensation Committee (the "Committee") of the Company's Board
of Directors believes that the granting of the Option herein described to
Employee is consistent with the stated purposes for the grant of a stock option;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and Employee agree
as follows:
1. Grant of Option. The Company hereby grants to Employee the right and
option (hereinafter referred to as the "Option") to purchase an aggregate of
175,000 shares (such number being subject to adjustment as provided in paragraph
number 12 hereof) of Microtest Common Stock (the "Stock") on the terms and
conditions herein set forth. This Option may be exercised in whole or in part
and from time to time only to the extent the Option is vested and as hereinafter
provided.
2. Vesting. The Option shall vest as follows:
(a) One-fifth of the shares shall vest twelve (12) months
after the Date of Grant;
(b) One-fifth of the shares shall vest twenty-four (24) months
after the Date of Grant;
(c) One-fiftth of the shares shall vest thirty-six (36) months
after the Date of Grant;
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(d) One-fifth of the shares shall vest forty-eight (48) months
after the Date of Grant;
(e) One-fifth of the shares shall vest forty-eight (60) months
after the Date of Grant;
Purchase Price. The price at which Employee shall be entitled to
purchase the Stock covered by the Option shall be $3.8125 per
share (the Fair Market Value on the Date of Grant).
4. Term of Option. The Option hereby granted shall be and remain in
force and effect for a period of ten (10) years from the Date of Grant, through
and including the normal close of business of the Company on June 9, 2007
(hereinafter referred to as the "Expiration Date"), subject to earlier
termination as provided in paragraphs 8 and 9 hereof.
5. Exercise of Option. The Option may be exercised by Employee at any
time and from time to time on or after twelve (12) months and one day after the
Date of Grant, and through the Expiration Date as to all or any part of the
shares of the Stock then vested by delivery to the Company of written notice of
exercise and payment of the purchase price as provided in paragraphs 5 and 6
hereof.
6. Method of Exercising Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company (the "Effective Date"). The notice shall state Employee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of Employee. Such notice shall be signed by the
Employee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Employee pursuant to paragraph 9 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option as provided herein
shall be fully paid and nonassessable upon delivery.
7. Method of Payment for Options. Payment for shares purchased upon the
exercise of the Option shall be made by the Employee in cash or such other
method permitted by the Committee in its sole discretion, including (i)
tendering shares, (ii) surrendering a stock award valued at Fair Market Value on
the date of surrender, (iii) authorizing a third party to sell the shares (or a
sufficient portion thereof) acquired upon exercise of a stock option and
assigning the delivery to the Company of a sufficient amount of the sale
proceeds to pay for all the shares acquired through such exercise, or (iv) any
combination of the above. For purposes of this Agreement, "Fair Market Value"
means with respect to Stock or any other property, the fair market value of such
Stock or other property as determined by the Committee in its discretion, under
one of the following methods: (i) the average of the closing bid and asked
prices for the Stock as reported on any national securities exchange on which
the Stock is then listed (which shall include the Nasdaq National Market) for
that date or, if
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no prices are so reported for that date, such prices on the next preceding date
for which closing bid and asked prices were reported; or (ii) the price as
determined by such methods or procedures as may be established from time to time
by the Committee.
8. Termination of Employment. In the event that Employee is terminated as an
employee of or consultant to the Company for any reason other than for Cause, as
defined below, then Employee may at any time within three (3) months next
succeeding the effective date of such termination exercise the Option to the
extent that Employee was entitled to exercise the Option at the date of
termination, provided that in no event shall the Option, or any part thereof, be
exercisable after the Expiration Date. If Employee's employment is terminated
for Cause, the Option shall lapse at the time of such termination. For purposes
of this Agreement, "Cause" means if the Committee, in its reasonable and good
faith discretion, determines that Employee (i) has developed or pursued
interests substantially adverse to the Company, (ii) materially breached any
employment, engagement or confidentiality agreement or otherwise failed to
satisfactorily discharge his or her duties, (iii) has not devoted all or
substantially all of his or her business time, effort and attention to the
affairs of the Company (or such lesser amount as has been agreed to in writing
by the Company), (iv) is convicted of a felony involving moral turpitude, or (v)
has engaged in activities or omissions that are detrimental to the well-being of
the Company.
9. Death of Employee. In the event of the death of Employee within a
period during which the Option, or any part thereof, could have been exercised
by Employee, including three (3) months after the date of Employee's death (the
"Option Period"), the Option shall lapse unless it is exercised within the
Option Period and in no event later than fifteen (15) months after the date of
Employee's death by the Employee's legal representative or representatives or by
the person or persons entitled to do so under Employee's last will and testament
or if the Employee fails to make a testamentary disposition of such Option or
shall die intestate, by the person or persons entitled to receive such Option
under the applicable laws of descent and distribution. An Option may be
exercised following the death of the Employee only if the Option was exercisable
by the Employee immediately prior to his or her death. In no event shall the
Option, or any part thereof, be exercisable after the Expiration Date. The
Committee shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this
paragraph 9 to exercise the Option.
10. Nontransferability. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraphs 8 and 9 above, only by Employee
during his lifetime and while an Employee of the Company. No right or interest
of employee in the option may be pledged, encumbered, or hypothecated to or in
favor of any party other than the Company, or shall be subject to any lien,
obligation, or liability of Employee to any other party other than the Company.
11. Delivery of Shares. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Committee,
Employee has delivered to the
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Committee an Investment Letter in form and content satisfactory to the Company
as provided in paragraph 14 hereof.
12. Adjustments. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to the Option shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of Stock or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, there
shall be substituted for each such share of Stock then subject to the Option the
number and class of shares of Stock into which each outstanding share of Stock
shall be so exchanged, all without any change in the aggregate purchase price
for the shares then subject to the Option.
13. Change of Control. A Change of Control shall, in the sole
discretion of the Committee:
(a) cause the Option to become fully exercisable and all
restrictions to lapse and allow Employee the right to exercise the
Option prior to the occurrence of the event otherwise terminating the
Option over such period as the Committee, in its sole and absolute
discretion, shall determine; or
(b) cause the Option to terminate, provided that the surviving
or resulting corporation shall tender an option or options to purchase
its shares or exercise such rights on terms and conditions, as to the
number of shares and rights and otherwise, which shall substantially
preserve the rights and benefits of Employee under this Agreement.
For purposes of this Agreement, "Change in Control" means and includes each of
the following: (i) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving entity, or
pursuant to which Stock would be converted into cash, securities, or other
property, other than a merger of the Company in which the holders of the
Company's Stock immediately prior to the merger have the same proportionate
ownership of beneficial interest of common stock or other voting securities of
the surviving entity immediately after the merger; (ii) there shall be
consummated any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of assets or earning power aggregating more than
40% of the assets or earning power of the Company and its subsidiaries (taken as
a whole); (iii) the shareholders of the Company shall approve any plan or
proposal for liquidation or dissolution of the Company; (iv) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than any
employee benefit plan of the Company or any subsidiary of the Company or any
entity holding shares of capital stock of the Company for or pursuant to the
terms of any such employee benefit plan in its role as an agent or trustee for
such plan, shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 20%; or (v) during any period of two consecutive
years, individuals who were directors of the Company at the beginning of such
period shall fail to constitute a majority of the Company's Board of Directors,
unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
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14. Securities Act. The Company shall have the right, but not the
obligation, to cause the shares of Stock issuable upon exercise of the Option to
be registered under the appropriate rules and regulations of the Securities and
Exchange Commission. The Company shall not be required to deliver any shares of
Stock pursuant to the exercise of all or any part of the Option if, in the
opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933 or any other applicable federal or state securities laws or
regulations. The Committee may require that Employee, prior to the issuance of
any such shares pursuant to exercise of the Option, sign and deliver to the
Company a written statement ("Investment Letter") stating (i) that Employee is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that Employee will not sell any shares received upon
exercise of the Option or any other shares of the Company that Employee may then
own or thereafter acquire except either (a) through a broker on a national
securities exchange or (b) with the prior written approval of the Company; and
(iii) containing such other terms and conditions as counsel for the Company may
reasonably require to assure compliance with the Securities Act of 1933 or other
applicable federal or state securities laws and regulations. Such Investment
Letter shall be in form and content acceptable to the Committee in its sole
discretion. If shares of Stock or other securities issuable pursuant to the
exercise of the Option have not been registered under the Securities Act of 1933
or other applicable federal or state securities laws or regulations, such shares
shall bear a legend restricting the transferability thereof, such legend to be
substantially in the following form:
"The shares represented by this certificate have not been registered or
qualified under federal or state securities laws. The shares may not be
offered for sale, sold, pledged or otherwise disposed of unless so
registered or qualified, unless an exemption exists or unless such
disposition is not subject to the federal or state securities laws, and
the availability of any exemption or the inapplicability of such
securities laws must be established by an opinion of counsel, which
opinion and counsel shall both be reasonably satisfactory to the
Company."
15. Federal and State Taxes. Upon exercise of the Option, or any part
thereof, the Employee may incur certain liabilities for federal, state or local
taxes and the Company may be required by law to withhold such taxes for payment
to taxing authorities. Upon determination by the Company of the amount of taxes
required to be withheld, if any, with respect to the shares to be issued
pursuant to the exercise of the Option, Employee shall pay all Federal state and
local tax withholding requirements by having the Company withhold Stock (to the
extent that Stock is issued pursuant to the Award) having a Fair Market Value on
the date that tax is to be determined equal to the tax otherwise required to be
withheld.
16. Administration. This Option Agreement shall at all times be
administered by the Committee and decisions of the majority of the Committee
with respect thereto and to this Option Agreement shall be final and binding
upon Employee and the Company.
17. Obligation to Exercise. Employee shall have no obligation to
exercise any option granted by this Agreement.
18. Governing Law. This Option Agreement shall be interpreted and
administered under the laws of the State of Arizona without regard to conflict
of law principles.
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19. Amendments. This Option Agreement may be amended only by a written
agreement executed by the Company and Employee. The Company and Employee
acknowledge that changes in federal tax laws enacted subsequent to the Date of
Grant, and applicable to stock options, may provide for tax benefits to the
Company or Employee. In any such event, the Company and Employee agree that this
Option Agreement may be amended as necessary to secure for the Company and
Employee any benefits that may result from such legislation. Any such amendment
shall be made only upon the mutual consent of the parties, which consent (of
either party) may be withheld for any reason.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed and Employee has hereunto set his or her hand as of the date first
written above.
MICROTEST, INC.
By
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Chairman of the Board and
Chief Executive Officer
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