EXHIBIT 4.1
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement is made as of this 7th day of
January, 1999 (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 Xxxx (hereinafter referred to as "Officer").
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 and officers 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 Officer
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 Officer agree
as follows:
1. GRANT OF OPTION. The Company hereby grants to Officer the right and
option (hereinafter referred to as the "Option") to purchase an aggregate of
200,000 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-third of the shares shall vest twelve (12) months after the
Date of Grant;
(b) One-third of the shares shall vest twenty-four (24) months after
the Date of Grant;
(c) One-third of the shares shall vest thirty-six (36) months after
the Date of Grant;
3. PURCHASE PRICE. The price at which Officer shall be entitled to purchase
the Stock covered by the Option shall be $2.9375 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 January 7, 2009
(hereinafter referred to as the "Expiration Date"), subject to earlier
termination as provided in paragraphs 8 and 9 hereof.
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5. EXERCISE OF OPTION. The Option may be exercised by Officer 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 Officer'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 Officer. Such notice shall be signed by the Officer 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 Officer 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 Officer 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 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 SERVICES. In the event that Officer's services are
terminated by the Company for any reason other than for Cause, as defined below,
then Officer may at any time within three (3) months next succeeding the
effective date of such termination (or such later date as the Committee may
determine) exercise the Option to the extent that Officer 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
Officer's services are 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 Officer
(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. DISABILITY OR DEATH OF OFFICER. In the event of the disability or death
of Officer, the Option may be executed to the extent that Officer was entitled
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to exercise it at the time of such event, provided that in no event shall the
Option, or any part thereof, be exercisable after the Expiration Date. The
Option may be exercised at any time within 12 months (or such later date as the
Committee may determine), by, as applicable, the Officer, the Officer's legal
representative or representatives, by the person or persons entitled to do so
under Officer's last will and testament or, if the Officer 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. 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. The term "Disability"
shall mean any illness or other physical or mental condition of Officer which
renders the Officer incapable of performing his customary and usual duties for
the Company, or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder which in
the judgment of the Committee is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary to
judge the nature and permanency of Officer's condition.
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 Officer during his
lifetime and while an Officer of the Company. No right or interest of Officer 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 Officer 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, Officer has
delivered to the 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 Officer 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 Officer under this Agreement.
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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 more of the Company's outstanding Stock or any
beneficial owner of 20% or more of the Company's outstanding Stock as of the
Effective Date of the Microtest, Inc. Long-Term Incentive Plan shall become the
beneficial owner of 50% or more of the Company's outstanding Stock; 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.
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 Officer, 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 Officer is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that Officer will not sell any shares received upon
exercise of the Option or any other shares of the Company that Officer 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."
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15. FEDERAL AND STATE TAXES. Upon exercise of the Option, or any part
thereof, Officer 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, Officer 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 Officer and the Company.
17. OBLIGATION TO EXERCISE. Officer shall have no obligation to exercise
any option granted by this Agreement.
18. DISCLAIMER OF ALL EMPLOYMENT TERMS. Officer acknowledges and agrees
that: (i) he serves the Company at the discretion of Company's Board of
Directors, and (ii) this Option Agreement in no way constitutes an employment
agreement between Officer and Company, nor does he have such an agreement.
Subject to the foregoing, Officer agrees to be bound by all employment policies
and procedures of Company, including, but not limited to, the Company's Employee
Handbook.
19. NON-COMPETITION. In consideration of this Option Agreement, Officer
covenants and agrees that he will not, during the term of his employment with
the Company and for one (1) year after any termination of his services, within
any jurisdiction in which the Company does business:
(a) Directly or indirectly participate or assist in the
ownership, management, operation or control of any business similar to
or competitive with Company; PROVIDED, HOWEVER, that Officer may own,
directly or indirectly, solely as an investment, securities of any
person which are traded on any national securities exchange or in the
over the counter market if Officer (x) is not a controlling person of,
or a member of a group which controls, such person or (y) does not,
directly or indirectly, own 1% or more of any class of securities of
such person; or
(b) Directly or indirectly solicit for employment any person who
is, or within the six month period preceding the date of such
solicitation was, an employee of Company; or
(c) Call on or directly or indirectly solicit or divert or take
away from Company any person, firm, corporation, or other entity who
is a customer or supplier of Company.
20. CONFIDENTIALITY AND NONDISCLOSURE. It is understood that in the course
of Officer's term of service with Company, Officer will become acquainted with
Company Confidential Information. Officer recognizes that Company Confidential
Information has been developed or acquired at great expense, is proprietary to
Company, and is and shall remain the exclusive property of Company. Accordingly,
Officer agrees that he will not, without the express written consent of Company,
during Officer's term of service with Company and thereafter or until such time
as Company Confidential Information becomes generally known, or readily
ascertainable by proper means, by persons unrelated to Company, disclose to
others, copy, make any use of, or remove from Company's premises any Company
Confidential Information, except as Officer's duties for Company may
specifically require.
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For purposes of this Agreement, "Company Confidential Information" shall mean
confidential, proprietary information or trade secrets of Company including
without limitation the following: (1) customer lists and customer information as
compiled by Company, including customer orders, product usage, product volumes,
pricing, customer technology, sale and contract terms and conditions, contract
expirations, and other compiled customer information; (2) Company's internal
practices and procedures; (3) Company's financial condition and financial
results of operation to the extent not generally available to the public; (4)
supply of materials information, including sources and costs; (5) information
relating to designs, formulas, developmental or experimental work, know-how,
products, processes, computer programs, source codes, data bases, designs,
schematics, inventions, creations, original works of authorship, or other
subject matter related to Company's research and development, strategic
planning, manufacturing, engineering, purchasing, finance, marketing, promotion,
distribution, and selling activities, whether now existing, or acquired,
developed, or made available anytime in the future to Company; (6) all
information which Officer has a reasonable basis to consider confidential or
which is treated by Company as confidential; and (7) any and all information
having independent economic value to Company that is not generally known to, and
not readily ascertainable by proper means by, persons who can obtain economic
value from its disclosure or use. Officer acknowledges that such information is
Company Confidential Information whether disclosed to or learned by Officer or
originated by Officer during employment by Company. In the event that
information is not clearly and obviously publicly available, all information
about Company shall be presumed to be confidential.
21. REASONABLENESS OF SCOPE; REMEDIES. Officer acknowledges and agrees that
a breach by Officer of the provisions of Sections 19 and 20 of this Agreement
will cause Company irreparable injury and damage that cannot be reasonably or
adequately compensated by damages at law. Officer further acknowledges and
agrees that he has such skills and abilities that the provisions of this
Sections 19 and 20 will not prevent him from earning a living. Officer expressly
agrees that Company shall be entitled to injunctive or other equitable relief to
prevent a threatened breach, breach or continued breach of Sections 19 or 20
hereof in addition to any other remedies legally available to it.
22. ARBITRATION. Any dispute between the parties, whether arising out of or
in connection with this Agreement, shall be determined by arbitration, which,
other than the relief provided in Section 21 hereof, shall be the exclusive
remedy of the parties. Any such dispute shall be submitted to and be resolved in
accordance with the rules and regulations of the American Arbitration
Association. The arbitration shall be held in Phoenix, Arizona. The arbitrators
shall state in writing the reasons for the award. The arbitrators shall award
compensatory damages to the prevailing party. The arbitrators shall have no
authority to award consequential or punitive or statutory damages, and the
parties hereby waive any claim to those damages to the fullest extent allowed by
law.
23. 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.
24. AMENDMENTS. This Option Agreement may be amended only by a written
agreement executed by the Company and Officer. The Company and Officer
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 Officer. In any such event, the Company and Officer agree that this
Option Agreement may be amended as necessary to secure for the Company and
Officer 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.
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IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly
executed and Officer has hereunto set his or her hand as of the date first
written above.
MICROTEST, INC.
By
----------------------------
Chairman of the Board
OFFICER
/s/ Xxxxxxx Xxxx
------------------------
Xxxxxxx Xxxx
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