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Exhibit 10.1
July 1, 2000
PERSONAL AND CONFIDENTIAL
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Xxxxxxx X. Xxxx
c/o Microtest, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000-0000
CHANGE OF CONTROL AGREEMENT
Dear Xxxxx:
Our Board of Directors believes that it is in the best
interests of Microtest, Inc. ("Microtest") and its shareholders to take
appropriate steps to allay any concerns you may have about your future
employment opportunities with Microtest and its subsidiaries (Microtest and its
subsidiaries are collectively referred to as the "Company"). As a result, the
Board has decided to offer to you the special package of benefits described
below.
Please bear in mind that these benefits are being offered only
to a few selected employees and we accordingly ask that you refrain from
discussing this special program with others. Also, please note that the special
benefits package described below will only be effective if you sign the extra
copy of this Change of Control Agreement (the "Agreement") which is enclosed and
return it to me on or before September 1, 2000. This Agreement supersedes any
such agreements entered into previously by you and Microtest, whether written or
oral.
1. TERM OF AGREEMENT.
This Agreement is effective immediately and will continue in
effect as long as you are actively employed by the Company, unless you and
Microtest agree in writing to its termination.
2. SEVERANCE PAYMENT.
If your employment with the Company is terminated without
"Cause" (as defined in Section 7) within two years following a Change of
Control, you will receive the "Severance Payment" described below. The Severance
Payment also will be payable if you elect to terminate your employment for any
or no reason within two years following a Change of Control.
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The "Severance Payment" is a lump sum payment equal to the sum
of: (a) 100% of your annualized base salary as of the day on which the Change of
Control occurs; plus (b) 100% of an amount equal to the average incentive
compensation paid or payable to you during, or for, the prior two calendar years
immediately preceding the calendar year in which the Change of Control occurs.
The Severance Payment will be paid in one lump sum within five
days following your termination of employment.
The Severance Payment will not be payable if your employment
is terminated for Cause, or if your employment is terminated by reason of your
"Disability" (as defined in Section 9(d)) or your death. In addition, the
Severance Payment will not be payable if your employment is terminated by you or
the Company for any or no reason before a Change of Control occurs or more than
two years after a Change of Control has occurred.
In order to receive the Severance Payment, you must execute
any release reasonably requested by Microtest of claims that you may have
pursuant to this Agreement (but not any other claims).
The Severance Payment will be payable without regard to
whether you look for or obtain alternative employment following your termination
of employment with the Company.
3. ACCELERATION OF OR PAYMENT FOR OPTIONS.
Except as otherwise noted below, if an agreement is entered
into that will result in a Change of Control, before the Change of Control
occurs the Compensation Committee of the Board (the "Committee") will accelerate
the exercisability of any options you hold to acquire Company stock pursuant to
their terms, that are not yet exercisable (the "Existing Options").
The Committee will not be obligated to accelerate the
exercisability of Existing Options (although it may if it so chooses) if any
party to the agreement expressly indicates, in a writing addressed to the
Committee, that it intends to use pooling of interest accounting for all or any
part of the transaction and the Committee, based on the advice of its advisors,
concludes (a) that pooling of interests accounting is available to such party
for all or any portion of the transaction, and (b) that the availability of
pooling of interests accounting will be jeopardized if the Committee accelerates
the exercisability of the Existing Options.
If you are employed by the Company on the day on which a
Change of Control occurs and at that time you hold any Existing Options that are
not accelerated pursuant to the preceding paragraphs, you may be entitled to
receive a special "Option Payment."
The Option Payment will only be payable if all of the
following conditions are met: (a) you are employed by the Company on the day on
which the Change of Control occurs; (b) the exercisability of the Existing
Options is not accelerated by action of the Committee or otherwise on a basis
that allows you to exercise your options prior to the Change of Control; (c)
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the Existing Options are not replaced by other options on the stock of the
acquirer (the "Replacement Options"), which the Committee, as constituted
immediately prior to the Change of Control, in its discretion, determines to be
comparable; and (d) Microtest does not continue as a publicly held corporation
required to be registered pursuant to the provisions of the Securities Exchange
Act of 1934 (the "Act") following the Change of Control, or if Microtest does
continue as a registered publicly held corporation, the Committee, as
constituted immediately prior to the Change of Control, determines, in its
discretion, that Microtest has undergone a fundamental change such that the
value of the Existing Options after the Change of Control is less than 75% of
the value of the Existing Options prior to the Change of Control.
While the Committee has the discretion to determine whether
Replacement Options are "comparable" to Existing Options for purposes of clause
(c) of the preceding paragraph, it may not consider Replacement Options to be
comparable to Existing Options unless, at a minimum, the Replacement Options are
exercisable as rapidly as the Existing Options and the Replacement Options are
structured to preserve the aggregate positive spread between the aggregate
exercise price for the Existing Options and the aggregate "Deal Value" of the
Microtest stock subject to the Existing Options.
For purposes of this Section, the "Deal Value" of the
Microtest stock is the value placed on the Microtest stock by the parties for
purposes of the transaction that results in the Change of Control. If no single
transaction results in the Change of Control, or if the parties to such
transaction do not expressly agree to a value to be assigned to the Microtest
stock for purposes of such transaction, the Deal Value of the Microtest stock
shall be the value that the Committee determines to be the inherent value of the
Microtest stock as of the date on which the Change of Control occurs.
For purposes of clause (d) of the fourth paragraph of this
Section, the Committee may use any option pricing model it chooses to compare
the value of the Existing Options before and after the Change of Control.
The Option Payment for each share of stock subject to an
Existing Option will be an amount equal to the Deal Value of the Microtest stock
less the option price for such share as designated in the relevant option
agreement.
The Option Payment for all shares subject to an Existing
Option shall be paid in one lump sum within 30 days following the occurrence of
the last event that entitles you to receive the Option Payment. Any option for
which an Option Payment is made will be automatically cancelled upon payment of
the Option Payment.
The Option Payment will be made only for "Existing Options."
As a result, no Option Payment will be made with respect to an option that is
exercisable prior to the day on which the Change of Control occurs, since the
term "Existing Option" does not include exercisable options.
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Any determinations made in good faith by the Committee for
purposes of this Agreement shall be final and binding on all parties.
4. BENEFITS CONTINUATION.
If your employment is terminated by the Company without Cause,
or if you elect to terminate your employment with the Company for any or no
reason, within two years following a Change of Control, you will continue to
receive life, disability, accident and group health insurance benefits, and
other payments (e.g. allowances and other payments) substantially similar to
those which you were receiving immediately prior to your termination of
employment for a period of twenty-four (24) months following your termination of
employment. Such benefits shall be provided on substantially the same terms and
conditions as they were provided prior to the Change of Control.
Benefits otherwise receivable pursuant to this Section also
shall be reduced or eliminated if and to the extent that you receive comparable
benefits from any other source (for example, another employer).
5. INCENTIVE COMPENSATION.
If you are employed by the Company on the day on which a
Change of Control occurs, the incentive compensation to which you will be
entitled for the calendar year in which the Change of Control occurs will equal
at least the "Minimum Incentive Compensation Amount." The "Minimum Incentive
Compensation Amount" will equal the incentive compensation to which you would
have been entitled if the year were to end on the day on which the Change of
Control occurs, based upon performance up to that date. In measuring financial
performance, financial results through the date of the Change of Control will be
annualized.
6. CHANGE OF CONTROL DEFINED.
For purposes of this Agreement, the term Change of Control
shall mean and include any one or more of the following:
(1) 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
(2) 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);
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(3) the shareholders of the Company shall approve any
plan or proposal for liquidation or dissolution of the
Company;
(4) any person (as such term is used in Section 13(d)
and 14(d)(2) of the Exchange Act), other than any employee
benefit plan of the Company or any subsidiary of the Company
or any entity holding shares of capital stock of the Company
for or pursuant to the terms of any such employee benefit plan
in its role as an agent or trustee for such plan, shall become
the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of 20% or more of the Company's outstanding
Stock or any beneficial owner of 20% or more of the Company's
outstanding Stock as of the Effective Date of this Agreement
shall become the beneficial owner of 50% or more of the
Company's outstanding Stock; or
(5) during any period of two consecutive years,
individuals who at the beginning of such period shall fail to
constitute a majority thereof, 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.
7. CAUSE DEFINED.
For purposes of this Agreement, the term "Cause" shall be
limited to discharge resulting from a determination by the Board, in its
reasonable and good faith discretion, that you (a) have been convicted of a
felony involving moral turpitude; (b) have repeatedly failed or refused, after
written notice from the Company, in a material respect to follow reasonable
policies or directives established by the Company, (c) have willfully and
persistently failed, after written notice from the Company, to attend to
material duties or obligations imposed upon you by confidentiality, employment
or engagement agreements executed with the Company, (d) have performed an act or
failed to act, which if you were prosecuted and convicted, would constitute a
felony involving $1,000 or more of money or property of the Company.
8. ADDITIONAL PAYMENT.
If the present value of any "parachute payment" made to you
under this Agreement (together with payments under any other agreement) would
cause the payment to be characterized as an "excess parachute payment" as such
terms are defined in Section 280G of the Internal Revenue Code ("Code), the
Company shall make an additional payment to you in an amount equal to the excise
tax you are required to pay under Section 4999 of the Code plus any additional
income tax liability resulting from such payment.
9. TERMINATION NOTICE AND PROCEDURE.
Any termination by the Company or you of your employment shall
be communicated by written Notice of Termination to you if such Notice of
Termination is
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delivered by the Company and to the Company if such Notice of Termination is
delivered by you, all in accordance with the following procedures:
(a) The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances alleged to provide a basis for
termination.
(b) Any Notice of Termination by the Company shall be in
writing signed by the Chairman of the Board of Microtest, specifying in detail
the basis for such termination.
(c) If the Company shall furnish a Notice of Termination for
Cause and you in good faith notify the Company that a dispute exists concerning
such termination within the 15-day period following your receipt of such notice,
you may elect to continue your employment during such dispute. If it is
thereafter determined that (i) Cause did exist, your "Termination Date" shall be
the earlier of (A) the date on which the dispute is finally determined, either
by mutual written agreement of the parties or pursuant to the alternative
dispute resolution provisions of Section 16 or (B) the date of your death, or
(ii) Cause did not exist, your employment shall continue as if the Company had
not delivered its Notice of Termination and there shall be no Termination Date
arising out of such notice.
(d) If the Company shall furnish a Notice of Termination by
reason of Disability and you in good faith notify the Company that a dispute
exists concerning such termination within the 15-day period following your
receipt of such notice, you may elect to continue your employment during such
dispute. The dispute relating to the existence of a Disability shall be resolved
by the opinion of the licensed physician selected by Microtest; provided,
however, that if you do not accept the opinion of the licensed physician
selected by Microtest, the dispute shall be resolved by the opinion of a
licensed physician who shall be selected by you; provided further, however, that
if Microtest does not accept the opinion of the licensed physician selected by
you, the dispute shall be finally resolved by the opinion of a licensed
physician selected by the licensed physicians selected by Microtest and you,
respectively. If it is thereafter determined that (i) a Disability did exist,
your Termination Date shall be the earlier of (A) the date on which the dispute
is resolved or (B) the date of your death, or (ii) a Disability did not exist,
your employment shall continue as if the Company had not delivered its Notice of
Termination and there shall be no Termination Date arising out of such notice.
For purposes of this Agreement, "Disability" shall be given the meaning ascribed
to such term in your Employment Agreement at the time the Disability
determination is being made. If there is no Employment Agreement that defines
"Disability," "Disability" shall mean your inability to perform your customary
duties for the Company due to a physical or mental condition that is considered
to be of long-lasting or indefinite duration.
(e) If you do not elect to continue employment pending
resolution of a dispute regarding a Notice of Termination by the Company and it
is finally determined that the reason for termination set forth in such Notice
of Termination did not exist, the Company will be deemed to have terminated you
other than by reason of Disability or Cause.
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(f) For purposes of this Agreement, a transfer from Microtest
to one of its subsidiaries or a transfer from a subsidiary to Microtest or
another subsidiary shall not be treated as a termination of employment.
10. SUCCESSORS.
Microtest will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Microtest or any of its
subsidiaries to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Microtest or any subsidiary would be required
to perform it if no such succession had taken place. Failure of Microtest to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation in the same amount and on the same terms to which you would be
entitled hereunder if you elect to terminate your employment following a Change
of Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Termination
Date. As used in this Agreement, "Microtest" shall mean Microtest as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
11. BINDING AGREEMENT.
This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
12. NOTICE.
For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to Microtest shall be directed to the
attention of the Chairman of the Board of Microtest with a copy to the Secretary
of Microtest, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
13. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by you and the Chairman of the Board of Microtest. No waiver by
either party hereto at any time of any breach
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by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Arizona without regard to its conflicts of law
principles. All references to sections of the Act or the Code shall be deemed
also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Company that arise
prior to the expiration of this Agreement shall survive the expiration of the
term of this Agreement.
14. VALIDITY.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16. ALTERNATIVE DISPUTE RESOLUTION.
All claims, disputes and other matters in question between the
parties arising under this Agreement shall, unless otherwise provided herein
(such as in Sections 8 and 9(d)), be decided by arbitration in Phoenix, Arizona,
in accordance with the Model Employment Arbitration Procedures of the American
Arbitration Association (including such procedures governing selection of the
specific arbitrator or arbitrators), unless the parties mutually agree
otherwise. The Company shall pay the costs of any such arbitration. The award by
the arbitrator or arbitrators shall be final, and judgment may be entered upon
it in accordance with applicable law in any state or Federal court having
jurisdiction thereof.
17. EXPENSES AND INTEREST.
If a good faith dispute shall arise with respect to the
enforcement of your rights under this Agreement or if any arbitration or legal
proceeding shall be brought in good faith to enforce or interpret any provision
contained herein, or to recover damages for breach hereof, and you are the
prevailing party, you shall recover from the Company any reasonable attorneys'
fees and necessary costs and disbursements incurred as a result of such dispute
or legal proceeding, and prejudgment interest on any money judgment obtained by
you calculated at the rate of interest announced by the Wall Street Journal from
time to time as its prime rate from the date that payments to you should have
been made under this Agreement. It is expressly provided that
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the Company shall in no event recover from you any attorneys' fees, costs,
disbursements or interest as a result of any dispute or legal proceeding
involving the Company and you.
18. PAYMENT OBLIGATIONS ABSOLUTE.
Microtest's obligation to pay you the compensation and to make
the arrangements in accordance with the provisions herein shall be absolute and
unconditional and shall not be affected by any circumstances; provided, however,
that Microtest may apply amounts payable under this Agreement to any debts owed
to Microtest by you on your Termination Date. All amounts payable by Microtest
in accordance with this Agreement shall be paid without notice or demand. If
Microtest has paid you more than the amount to which you are entitled under this
Agreement, Microtest shall have the right to recover all or any part of such
overpayment from you or from whomsoever has received such amount.
19. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between you and
the Company concerning the subject matter discussed in this Agreement and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether written or oral, by any
officer, employee or representative of the Company. Any prior agreements or
understandings with respect to the subject matter set forth in this Agreement
are hereby terminated and cancelled.
20. DEFERRAL OF PAYMENTS.
To the extent that any payment under this Agreement, when
combined with all other payments received during the year that are subject to
the limitations on deductibility under Section 162(m) of the Code, exceeds the
limitations on deductibility under Section 162(m) of the Code, such payment
shall, in the discretion of Microtest, be deferred to the next succeeding
calendar year. Such deferred amounts shall be paid no later than the 60th day
after the end of such next succeeding calendar year, provided that such payment,
when combined with any other payments subject to the Section 162(m) limitations
received during the year, does not exceed the limitations on deductibility under
Section 162(m) of the Code. Interest shall be paid on deferred amounts at the
rate of interest announced by the Wall Street Journal from time to time as its
prime rate from the date that the payments to you would have been made if not
deferred until such payments are actually received.
21. PARTIES.
This Agreement is an agreement between you and Microtest. In
certain cases though, obligations imposed upon Microtest may be satisfied by a
Microtest subsidiary. Any payment made or action taken by a Microtest subsidiary
shall be considered to be a payment made or action taken by Microtest for
purposes of determining whether Microtest has satisfied its obligations under
this Agreement.
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If you would like to participate in this special benefits
program, please sign and return the extra copy of this letter which is enclosed.
Sincerely,
MICROTEST, INC.
By: /s/ Xxxx Xxxxxxx
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Its: Chairman of the Board
Enclosure
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ACCEPTANCE
I hereby accept the offer to participate in this special
benefit program, and I agree to be bound by all of the provisions noted above.
/s/ Xxxxxxx X. Xxxx
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