AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4,1998
REGISTRATION NO. ______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
MICROTEST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 86-0485884
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4747 NORTH 22ND STREET, PHOENIX, ARIZONA 85016
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
NON-QUALIFIED STOCK OPTION AGREEMENTS BETWEEN
MICROTEST, INC. AND CHARLES V. MIHAYLO
(FULL TITLE OF PLAN)
STEVEN D. PIDGEON, ESQ.
SNELL & WILMER L.L.P.
ONE ARIZONA CENTER
PHOENIX, ARIZONA 85004-0001
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(602) 382-6000
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Approximate Date of Commencement of Proposed Sale: As soon as practicable after
the Registration Statement becomes effective.
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CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ---------------- ------------- -------------- ----------------- ------------
Common Stock 60,000 $3.8125 $228,750 $63.59
$.001 par value
================================================================================
- ----------
(1) In addition, pursuant to Rule 416(a) under the Securities Act of 1933,
this registration statement also covers an indeterminate number of
shares as may be required by reason of any stock dividend,
recapitalization, stock split, reorganization, merger, consolidation,
combination or exchange of shares or other similar change affecting the
stock.
(2) Estimated pursuant to Rule 457(h) solely for the purpose of calculating
the registration fee using the price at which each option may be
exercised pursuant to the provisions of the employment agreement
between Microtest, Inc. and Charles V. Mihaylo.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I, Items 1
and 2, will be delivered to participants in accordance with Form S-8 and Rule
428 under the Securities Act of 1933, as amended.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents have been filed by Microtest, Inc. (the
"Registrant") with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 and are hereby incorporated by reference into
this Registration Statement:
(a) the Registrant's latest annual report on Form 10-K for the
fiscal year ended December 31, 1997;
(b) the Registrant's quarterly reports on Form 10-Q for the fiscal
quarters ended March 28, 1998, June 27, 1998, and September
26, 1998; and
(c) the description of the Registrant's capital stock contained in
the Registrant's Registration Statement on Form 8-A filed with
the Securities and Exchange Commission pursuant to Section
12(g) of the Securities Exchange Act of 1934.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
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ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws require the Registrant to indemnify its
directors and officers to the fullest extent provided by Delaware law. The
Registrant also has entered into separate indemnification agreements with its
directors and certain officers which would require the Registrant, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers, other than liabilities
arising from fraud, actual dishonesty, willful misconduct or violation of
Section 16(b) of the Securities Exchange Act of 1934. The agreements would also
require the Registrant to advance directors and officers' expenses in certain
circumstances.
The Registrant currently maintains directors' and officers' liability
insurance.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The Exhibit Index is located on page 7.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually
or in the aggregate, represent a fundamental
change in the information set forth in the
registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
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provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration
statement is on Form S-3 or Form S-8 and the
information required to be included in a
post-effective amendment by those paragraphs is
contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on December 4, 1998.
MICROTEST, INC.
a Delaware corporation
By /s/ Richard G. Meise
-------------------------------
Richard G. Meise
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Richard G. Meise
- ---------------------- Chairman of the Board and December 4, 1998
Richard G. Meise Chief Executive Officer
/s/ Steven G. Mihaylo
- ---------------------- Director December 4, 1998
Steven G. Mihaylo
/s/ Roger C. Ferguson
- ---------------------- Director December 4, 1998
Roger C. Ferguson
/s/ William C. Turner
- ---------------------- Director December 4, 1998
William C. Turner
/s/ Dianne C. Walker
- ---------------------- Director December 4, 1998
Dianne C. Walker
/s/ Kent C. Mueller
- ---------------------- Director December 4, 1998
Kent C. Mueller
/s/ John J. O'Block
- ---------------------- Vice President of Operations, December 4, 1998
John J. O'Block Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer
and Principal Accounting Officer)
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EXHIBIT INDEX
EXHIBIT PAGE OR METHOD
NUMBER DESCRIPTION OF FILING
- ------ ----------- ---------
4.1 Employment Agreement between the Company and Page 8
Charles V. Mihaylo
4.2 Non-Qualified Stock Option Agreement Page 19
4.3 Non-Qualified Stock Option Agreement Page 25
5 Opinion regarding Legality Page 31
23.1 Consent of Independent Accountants Page 33
23.2 Consent of Snell & Wilmer L.L.P. See Exhibit 5
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EXHIBIT 4.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of June 9, 1997,
by and among MICROTEST, INC., a Delaware corporation ("Microtest" or the
"Company"), and CHARLES V. MIHAYLO, an individual ("Mihaylo").
RECITALS
A. Microtest desires to employ Mihaylo as its President, Chief
Operating Officer and Acting Chief Financial Officer effective immediately;
B. Mihaylo desires to be employed by Microtest to serve in such
capacities; and
C. Microtest and Mihaylo anticipate that Microtest will hire a
full-time Chief Financial Officer at a time deemed appropriate by Microtest, and
that Mihaylo will be relieved of those additional duties without reduction in
compensation provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree as follows:
1. Definitions. As used herein:
(a) "Company Confidential Information" shall mean
confidential, proprietary information or trade secrets of Microtest
including without limitation the following: (1) customer lists and
customer information as compiled by Microtest, including customer
orders, product usage, product volumes, pricing, customer technology,
sale and contract terms and conditions, contract expirations, and other
compiled customer information; (2) Microtest's internal practices and
procedures; (3) Microtest'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
Microtest'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
Microtest; (6) all information which Mihaylo has a reasonable basis to
consider confidential or which is treated by Microtest as confidential;
and (7) any and all information having independent economic value to
Microtest 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. Mihaylo acknowledges that such information is
Company Confidential Information whether disclosed to or learned by
Mihaylo or originated by Mihaylo during employment by Microtest. In the
event that information is not clearly and obviously publicly available,
all information about Microtest shall be presumed to be confidential.
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(b) "Microtest" shall mean Microtest and any other entity in
which it owns directly or indirectly 50% or more of the equity
interest, including without limitation Logicraft Information Systems,
Inc. and Optical Media International.
(c) "Microtest Stock" shall mean the Common Stock, $.001 par
value per share, of Microtest, Inc.
2. Term of Agreement. This Agreement shall commence as of the date
hereof and shall continue for a term of five (5) years, subject to the other
provisions hereof (the "Term"). The parties may extend the Term for additional
one-year terms by mutual written agreement. Except in the event of termination
for Cause, any party intending not to extend the Term or any one-year extension
thereof, shall provide written notice to the other party of its or his intention
not to extend at least ninety (90) days prior to the expiration of the Term or
any one-year extension thereof; provided, however, that the failure to give such
ninety-day notice shall not operate to extend the Term or any one-year extension
thereof for any period of time.
3. Positions with Microtest. During the Term, Mihaylo shall serve as
the President, Chief Operating Officer and Acting Chief Financial Officer of
Microtest. Mihaylo shall devote his full time, energy and skill to the affairs
of Microtest and shall faithfully and diligently perform all duties commensurate
with such positions, including, without limitation, those duties requested by
Microtest's Board of Directors or the Chairman and Chief Executive Officer.
Mihaylo shall be subject to and comply with all of Microtest's policies and
procedures.
4. Salary. Mihaylo shall be entitled to receive a minimum base salary
in the amount of $200,000 annually, payable in equal installments in accordance
with Microtest's general salary payment policies in effect during the term
hereof (the "Minimum Base Salary"). Mihaylo's Minimum Base Salary may, at the
sole discretion of Microtest's Board of Directors, be increased at such times
and in such amounts as the Board shall determine.
5. Signing Bonus. Within five (5) days after the date of this
Agreement, Microtest shall pay Mihaylo a bonus in the amount of $75,000 (the
"Signing Bonus"). If within one (1) year of the date of this Agreement either
Microtest terminates Mihaylo's employment for Cause (as defined below) or
Mihaylo voluntarily terminates his employment, then Mihaylo shall repay the
Signing Bonus in full.
6. Bonus. Mihaylo shall be entitled to participate in an executive
bonus program. Such bonus program shall be agreed upon by Microtest's Chairman
and Chief Executive Officer prior to June 30, 1997, but shall be subject to the
approval of the Compensation Committee of the Board of Directors. Such bonus
program shall be attached as Exhibit A to this Agreement.
7. Options. Microtest shall grant Mihaylo (i) a non-qualified stock
option to acquire 175,000 shares of Microtest Stock in accordance with the
Company's standard non-qualified stock option agreement (the "Employment
Option"); and (ii) an additional non-qualified stock option to acquire 150,000
shares of Microtest Stock that will vest at the end of six years but which
vesting will be accelerated at the rate of 25,000 shares per year upon the
satisfaction of performance criteria
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established by Microtest (the "Performance Option"). Microtest shall file a
registration statement on Form S-8 with respect to the issuance of Microtest
Stock upon the exercise by Mihaylo of the Employment Option and the Performance
Option. Neither the Employment Option nor the Performance Option shall be
granted pursuant to Microtest's Long-Term Incentive Plan.
8. Benefit Plans. Mihaylo shall be afforded benefits (i.e., sick leave,
medical and other group benefits) similar to those afforded to executive
officers of Microtest. So long as Mihaylo elects not to participate in
Microtest's medical plan, Microtest shall pay to Mihaylo each month the
prevailing amount that otherwise would have been paid by Microtest on behalf of
Mihaylo for coverage under Microtest's medical plan. Mihaylo shall be entitled
to four (4) weeks of paid vacation per year. Nothing in this Agreement shall
restrict Microtest's ability to terminate or modify any benefit plan or
arrangement; provided, however, that Microtest shall not be entitled to
terminate or modify the medical plan payments and vacation arrangements
specifically provided to Mihaylo in this Section 8 without Mihaylo's prior
written consent. Any such termination or modification of any benefit plan or
vacation arrangements shall not serve to forfeit any accrued but unused benefits
earned by Mihaylo.
9. Expenses. Microtest shall pay for or reimburse Mihaylo for all
ordinary and necessary business expenses incurred or paid by Mihaylo in
furtherance of Microtest's business, subject to and in accordance with
Microtest's policies and procedures of general application. Microtest shall
provide Mihaylo with a monthly automobile allowance of $500.
10. Non-Competition. Mihaylo covenants and agrees that he will not,
during the term hereof and for one (1) year after any termination of employment,
within any jurisdiction in which Microtest does business:
(a) Directly or indirectly participate or assist in the
ownership, management, operation or control of any business similar to
or competitive with Microtest; provided, however, that Mihaylo 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 Mihaylo (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 Microtest; or
(c) Call on or directly or indirectly solicit or divert or
take away from Microtest any person, firm, corporation, or other entity
who is a customer or supplier of Microtest.
11. Confidentiality and Nondisclosure. It is understood that in the
course of Mihaylo's employment with Microtest, Mihaylo will become acquainted
with Company Confidential Information. Mihaylo recognizes that Company
Confidential Information has been developed or
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acquired at great expense, is proprietary to Microtest, and is and shall remain
the exclusive property of Microtest. Accordingly, Mihaylo agrees that he will
not, without the express written consent of Microtest, during Mihaylo's
employment with Microtest and thereafter or until such time as Company
Confidential Information becomes generally known, or readily ascertainable by
proper means, by persons unrelated to Microtest, disclose to others, copy, make
any use of, or remove from Microtest's premises any Company Confidential
Information, except as Mihaylo's duties for Microtest may specifically require.
12. Reasonableness of Scope; Remedies. Mihaylo acknowledges and agrees
that a breach by Mihaylo of the provisions of Sections 10 and 11 of this
Agreement will cause Microtest irreparable injury and damage that cannot be
reasonably or adequately compensated by damages at law. Mihaylo further
acknowledges and agrees that he has such skills and abilities that the
provisions of this Sections 10 and 11 will not prevent him from earning a
living. Mihaylo expressly agrees that Microtest shall be entitled to injunctive
or other equitable relief to prevent a threatened breach, breach or continued
breach of Sections 10 or 11 hereof in addition to any other remedies legally
available to it.
13. Extension During Breach. Mihaylo agrees that the time periods
described in Sections 10 and 11 shall be extended for a period equal to the
duration of any breach of this Agreement by Mihaylo.
14. Disclosure. Mihaylo agrees that upon the commencement by him of
employment with any third party during the period in which the terms of Sections
10 or 11 hereof are in effect, Mihaylo shall promptly disclose to each such new
employer the terms of Sections 10 and 11. Mihaylo further agrees and authorizes
Microtest to notify others, including customers of the Microtest and any such
future employers of Mihaylo, of the terms of this Agreement and of Mihaylo's
obligations hereunder.
15. No Conflicts of Interest.
(a) During the period of Mihaylo's employment with Microtest,
Mihaylo will not independently engage in the same or a similar line of
business as Microtest, or, directly or indirectly, serve, advise, or be
employed by any individual, firm, or corporation engaged in the same or
similar line of business.
(b) Mihaylo is not a promoter, director, employee, or officer
of, or consultant to, a business for profit, nor will Mihaylo become a
promoter, director, employee, or officer of, or consultant to, such a
business while employed by Microtest without first obtaining the prior
written approval of Microtest, which approval shall not be unreasonably
withheld. Mihaylo disclaims any such relationship or position with any
such business. Should Mihaylo become a promoter, director, employee, or
officer of, or a consultant to, a business organized for profit upon
obtaining such prior written approval, Mihaylo understands that Mihaylo
has a continuing obligation to advise Microtest at such time of any
activity of Microtest
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or such other business that presents Mihaylo with a conflict of
interest as an employee of Microtest.
(c) Should any matter of dealing in which Mihaylo is involved,
or hereafter becomes involved, on his own behalf or as an employee of
Microtest, appear to present a possible conflict of interest under any
Microtest policy then in effect, Mihaylo will promptly disclose the
facts to Microtest's Chairman and Chief Executive Officer so that a
determination can be made as to whether a conflict of interest does
exist. Mihaylo will take whatever action is requested of Mihaylo by
Microtest to resolve any conflict which it finds to exist.
16. Return of Microtest Materials and Company Confidential Information.
Upon Termination, Mihaylo shall promptly deliver to Microtest the originals and
all copies of any and all materials, documents, notes, manuals, or lists
containing or embodying Company Confidential Information, or relating directly
or indirectly to the business of Microtest, in the possession or control of
Mihaylo.
17. No Agreement With Others. Mihaylo represents, warrants, and agrees
that Mihaylo is not a party to any agreement with any other person or business
entity, including former employers, that in any way affects Mihaylo's employment
by Microtest or relates to the same subject matter of this Agreement or
conflicts with his obligations under this Agreement, or restricts Mihaylo's
services to Microtest. Mihaylo may devote an amount of his time and efforts as
is mutually agreed upon by Microtest's Chairman and Chief Executive Officer and
Mihaylo to assist Mihaylo's former employer, Inter-Tel, Incorporated, with a
period of transition following Mihaylo's departure; provided, however, that such
transition period shall not extend beyond January 1, 1998 unless Microtest
consents to any such extension, which consent shall not be unreasonably
withheld.
18. Termination for Cause. Microtest shall have the right to terminate
Mihaylo for Cause if the Board or Chairman and Chief Executive Officer
determines that any of the following events have occurred:
(a) Mihaylo fails to satisfactorily perform his duties
hereunder, engages in gross misconduct or otherwise materially breaches
this Agreement;
(b) Mihaylo refuses or fails to follow any lawful direction of
Microtest's Board of Directors, Chairman or Chief Executive Officer or
violates any lawful rule or regulation established by Microtest from
time to time regarding the conduct of its business; or
(c) Mihaylo is charged with or convicted of committing a
felony or crime involving moral turpitude, or engages in conduct
involving fraud, dishonesty, embezzlement, theft or conduct that is
detrimental to Microtest or that could reasonably be expected to have
an adverse impact on the standing or reputation of Mihaylo or
Microtest.
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Microtest shall provide written notice of its intent to terminate this Agreement
for Cause hereunder, stating the grounds or nature of the reasons for such
termination. With respect to a purported violation of subsection (a) or (b)
above that is curable in such time period, Microtest shall afford Mihaylo an
opportunity to cure or disprove the purported violation for the ten-day period
following such notice; provided, however, that Mihaylo shall be entitled to such
ten-day period to cure or disprove any purported violations only one time during
the Term. Upon a termination for Cause, Mihaylo shall be entitled to receive
only such compensation and benefits as are due Mihaylo through the effective
date of such termination.
19. Termination Upon Voluntary Resignation. In the event Mihaylo
voluntarily resigns his employment with Microtest, Mihaylo shall be entitled to
receive only such compensation and benefits as are due Mihaylo through the
effective date of such resignation.
20. Termination Upon Death of Mihaylo. If during the term of this
Agreement Mihaylo dies, then this Agreement shall terminate and Microtest shall
pay to the estate of Mihaylo only the compensation and benefits (including any
life insurance benefits provided to Mihaylo's estate under Microtest's standard
policies as in effect) due Mihaylo through the date of his death.
21. Termination Upon Disability of Mihaylo. If during the term of this
Agreement Mihaylo is unable to perform the services required of Mihaylo pursuant
to this Agreement for a continuous period of ninety (90) days due to disability
or incapacity by reason of any physical or mental illness, then Microtest shall
have the right to terminate this Agreement at the end of such three-month period
by giving written notice to Mihaylo. Mihaylo shall be entitled to receive only
his normal compensation and benefits through the date of his termination.
22. Termination by Microtest Other than for Cause, Death, Disability or
Voluntary Resignation. Microtest shall have the right to terminate Mihaylo other
than for Cause, death, disability or voluntary resignation upon thirty (30) days
prior written notice to Mihaylo. In the event Microtest elects to terminate
Mihaylo for any reason other than for Cause, death, disability or voluntary
resignation of Mihaylo, Mihaylo shall be entitled to receive (i) the Minimum
Base Salary due Mihaylo for one year following the date of such termination,
which shall be payable at the same time and amounts as if he continued in the
employ of Microtest, and (ii) any accrued bonus if the executive bonus program
for Mihaylo at that time provides for accrued bonuses, which shall be payable
upon the expiration of the 30-day period referenced above.
23. 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 12 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.
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24. Severability; Reformation. If any court or arbiter determines that
any of the restrictive covenants in this Agreement, or any part thereof, is or
are invalid or unenforceable, the remainder of the restrictive covenants shall
not thereby be affected and shall be given full effect, without regard to
invalid portions. If any of the provisions of this Agreement should ever be
deemed to exceed the temporal, geographic or occupational limitations permitted
by applicable laws, those provisions shall be and are hereby reformed to the
maximum temporal, geographic or occupational limitations permitted by law. If
the court or arbiter refuses to reform this Agreement as provided above, the
parties hereto agree to modify the provisions held to be unenforceable to
preserve each party's anticipated benefits thereunder.
25. Attorneys' Fees. In the event of any action, proceeding or
arbitration arising from or relating to this Agreement or the alleged breach
hereof, the party prevailing therein shall recover its or his reasonable
attorneys' fees and costs.
26. Notices. Any notice, election or communication to be given under
this Agreement shall be in writing and delivered in person, by telecopier, or
deposited, certified or registered, in the United States mail, postage prepaid,
addressed as follows:
If to Microtest: Microtest, Inc.
4747 North 22nd Street
Phoenix, Arizona 85016-4708
FAX: (602) 952-6604
Attn: Richard G. Meise
with copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Mihaylo: Charles V. Mihaylo
3112 East Palo Verde
Phoenix, Arizona 85016
FAX: (602)
with copy to: Folk & Associates, P.C.
One Columbus Plaza, Suite 810
3636 North Central Avenue
Phoenix, Arizona 85012
FAX: (602) 263-8274
Attn: P. Douglas Folk, Esq.
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or to such other address as Microtest or Mihaylo may, from time to time,
designate in writing by notice hereunder. Notices delivered hereunder shall be
deemed to have been duly given: when delivered by hand, if personally delivered;
three (3) business days after being deposited in the mail, postage prepaid, if
delivered by mail; and when receipt is acknowledged, if telecopied.
27. Entire Agreement. This Agreement and any other document which is
specifically referred to in this Agreement constitute and embody the full and
complete understanding and agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior understandings or agreements,
whether oral or in writing.
28. Binding Nature. This Agreement shall be binding upon and inure to
the benefit of Microtest and its successors and assigns, and upon Mihaylo and
his heirs and legal representatives.
29. Captions; Headings. The captions and paragraph headings included in
this Agreement are for convenience of reference only and do not constitute a
part of this Agreement.
30. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same document.
31. Withholding. Mihaylo acknowledges and agrees that payments made to
Mihaylo by Microtest pursuant to the terms of this Agreement may be subject to
tax withholding and that Microtest may withhold against payments due Mihaylo any
such amounts as well as any other amounts payable by Mihaylo to Microtest.
32. Release. Receipt of any of the benefits to be provided to Mihaylo
under this Agreement following termination of Mihaylo's employment hereunder
shall be subject to Mihaylo's compliance with any reasonable and lawful policies
or procedures of Microtest relating to employee severance including the
execution and delivery by Mihaylo of a release reasonably satisfactory to
Microtest of any and all claims that Mihaylo may have against Microtest or any
related person, except for the continuing obligations provided herein, and an
agreement that Mihaylo shall not disparage Microtest.
33. Assignment by Microtest. Nothing in this Agreement shall preclude
Microtest from consolidating or merging into or with, or transferring all or
substantially all of Microtest's assets to, another corporation or entity that
assumes this Agreement and all obligations and undertakings of Microtest
hereunder. Upon such consolidation, merger or transfer of assets and assumption,
the term "Microtest" as used herein shall mean such other corporation or entity,
and this Agreement shall continue in full force and effect.
34. Assignment by Mihaylo. This Agreement, or any right or interest
hereunder, may not be assigned by Mihaylo, his beneficiaries or legal
representatives, without Microtest's prior written consent; provided, however,
that nothing in this Section 34 shall preclude Mihaylo from designating a
beneficiary to receive, or assigning to a trust or other entity established by
Mihaylo for estate or financial planning purposes, any benefit hereunder upon
Mihaylo's death, or shall preclude the
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executors, administrators or other legal representatives of Mihaylo or his
estate from assigning any right or interest hereunder to the person or persons
entitled to such right or interest.
35. Modification. No modification, supplement, amendment or waiver of
this Agreement shall be binding unless executed in writing by all parties
hereto. A waiver of any of the provisions of this Agreement shall be not be
deemed to or constitute a waiver of any other provision hereof, nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
36. Governing Law. This Agreement has been executed and delivered in
the State of Arizona, and its validity, interpretation, performance and
enforcement shall be governed by the laws of that state without regard to
conflict of law principles.
37. Construction. This Agreement shall be construed fairly as to both
parties and not in favor of or against either party, regardless of which party
prepared this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MICROTEST, INC., a Delaware corporation
By:
------------------------------------
Its:
-----------------------------------
--------------------------------------
CHARLES V. MIHAYLO
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EXHIBIT A
BONUS PROGRAM
Mihaylo shall be entitled to a bonus for 1997 and 1998 based upon the
achievement of earnings before income tax ("EBIT") goals. The EBIT goals for
1997 and 1998 shall be $___________ and $___________, respectively.
If Microtest's EBIT for 1997 is equal to or greater than $____________,
Mihaylo shall earn a bonus equal to ___% of Microtest's EBIT for 1997. If
Microtest's EBIT for 1997 is equal to or greater than $____________, then
Mihaylo shall earn an additional bonus equal to ___% of Microtest's EBIT for
1997.
If Microtest's EBIT for 1998 is equal to or greater than $____________,
Mihaylo shall earn a bonus equal to ___% of Microtest's EBIT for 1998. If
Microtest's EBIT for 1998 is equal to or greater than $____________, then
Mihaylo shall earn an additional bonus equal to ___% of Microtest's EBIT for
1998.
In no event shall the bonus payable to Mihaylo for either 1997 or 1998
hereunder exceed $_______________.
Any bonus earned by Mihaylo shall be paid by Microtest within ten (10)
days after the completion of Microtest's audited financial statements for 1997
and 1998, as applicable.
A bonus program will be established by mutual agreement of Microtest
and Mihaylo for years after 1998. The goals to be achieved and bonuses to be
earned by Mihaylo under such bonus program shall be agreed to at the beginning
of each year by Mihaylo, Microtest's Chairman and Chief Executive Officer and
Microtest's Compensation Committee.
10
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 Charles V. Mihaylo (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
------------------------------
Chairman of the Board and
Chief Executive Officer
6
EXHIBIT 4.3
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 Charles V. Mihaylo (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
150,000 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 shares shall vest 72 months after the Date of Grant
unless otherwise accelarated by Board of Director approval.
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
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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 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
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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 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.
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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.
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
4
<PAGE>
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.
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.
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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
--------------------------------
Chairman of the Board and
Chief Executive Officer
6
EXHIBIT 5
December 4, 1998
MICROTEST, INC.
4747 North 22nd Street
Phoenix, AZ 85016
Re: Non-Qualified Stock Option Agreements between Charles V.
Mihaylo and Microtest, Inc. (the "Company")
Ladies and Gentlemen:
We have acted as counsel to the Company in connection with its
Registration Statement on Form S-8 (the "Registration Statement"), filed by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to the registration of 60,000 shares of the Company's
Common Stock, $.001 par value (the "Shares") issuable pursuant to options
granted in connection with the above-referenced agreement. It is our opinion
that:
1. The Company has been duly organized and is validly existing as
a corporation under the laws of the State of Delaware.
2. The Shares, when issued and sold in accordance with the terms
of the agreement, will be validly issued, fully paid, and
non-assessable.
In rendering this opinion, we have reviewed and relied upon such
documents and records of the Company as we have deemed necessary and have
assumed the following:
(i) the genuineness of all signatures and the authenticity of
documents submitted to us as originals, and the conformity to originals of all
documents submitted to us as copies;
(ii) the accuracy, completeness, and genuineness of all
representations and certifications with respect to factual matters, made to us
by officers of the Company and public officials; and
(iii) the accuracy and completeness of Company records.
The opinions expressed herein are limited solely to the laws of the
State of Delaware. We express no opinion on the laws of any other jurisdiction
or the applicability or effect of any such laws or principles.
The opinions expressed herein are based upon the law and other matters
in effect on the date hereof, and we assume no obligation to revise or
supplement this opinion should such law be
<PAGE>
changed by legislative action, judicial decision, or otherwise, or should any
facts or other matters upon which we have relied be changed.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
SNELL & WILMER L.L.P.
2
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Microtest Inc. on Form S-8, of our report dated February 4, 1998, appearing in
the Annual Report on Form 10-K of Microtest Inc. for the year ended December 31,
1997.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
December 4, 1998
