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 XXXXXXX X. XXXXXXX, an individual ("Mihaylo").
RECITALS
A. Microtest desires to employ Mihaylo as its President, Chief
Operating Officer and Acting Chief Financial Officer effective immediately;
X. Xxxxxxx 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 xxxxx Xxxxxxx (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.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
FAX: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
with copy to: Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
FAX: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to Mihaylo: Xxxxxxx X. Xxxxxxx
0000 Xxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
FAX: (602)
with copy to: Folk & Associates, P.C.
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
FAX: (000) 000-0000
Attn: P. Xxxxxxx Xxxx, 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.
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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:
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Its:
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XXXXXXX X. XXXXXXX
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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.
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