EXHIBIT 10.6
Form of Agreement
Messrs. Xxxxxx and Xxxxx
MANAGEMENT EQUITY AGREEMENT
MANAGEMENT EQUITY AGREEMENT, dated as of May __, 1998 (the
"Agreement"), among Dynatech Corporation, a Massachusetts corporation (the
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"Company"), Xxxxxxx, Dubilier & Rice Fund V Limited Partnership, a Cayman
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Islands limited partnership (the "Fund"), and the individual whose name appears
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on the signature page hereof (the "Employee"). Capitalized terms used herein
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have the respective meanings ascribed in Section 1.
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
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Agreement"), dated as of December 20, 1997, between the Company and CDRD Merger
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Corporation ("MergerCo"), MergerCo was merged with and into the Company (the
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"Merger") and the Company continued as the surviving corporation of the Merger;
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WHEREAS, at the effective time of the Merger (the "Effective Time"),
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pursuant to the Merger Agreement, (i) each then outstanding share of common
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stock, par value $.20 per share, of the Company (the "Prior Common Stock") was
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converted into the right to receive $47.75 in cash and .5 shares of common
stock, no par value, of the Company (the "Common Stock"), and (ii) except as
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described below, each then outstanding option to purchase shares of Prior Common
Stock held by current or former employees or directors of the Company or a
Subsidiary thereof was canceled in exchange for a payment in cash (the "Option
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Cancellation Payment") in respect of each share of Prior Common Stock covered by
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such options equal to $49.00, reduced by the exercise price per share of such
Prior Common Stock;
WHEREAS, in connection with the Merger, certain executives and other
key management employees of the Company and its Subsidiaries, including the
Employee, were offered the opportunity to convert all or a portion of their
options to purchase shares of Prior Common Stock that were outstanding
immediately prior to the Effective Time (the "Prior Options") into options to
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purchase shares of Common Stock (the "Converted Options") in lieu of receiving
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an Option Cancellation Payment in respect of such Converted Options;
WHEREAS, pursuant to the Amended and Restated Employment Agreement,
dated as of April __, 1998, between the Company and the Employee (the
"Employment Agreement"), the Employee agreed to the conversion of certain of his
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or her Prior Options into Converted Options subject to the consummation of the
Merger;
WHEREAS, the Employee wishes to convert each of his or her Prior
Options listed on Schedule A hereto into Converted Options to purchase the
number of shares of Common Stock listed opposite each such Prior Option on such
Schedule A (the Employee's Converted Options, the "Options" and the shares of
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Common Stock covered by the Options, the "Exercise Shares");
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WHEREAS, the Employment Agreement provides, among other things, for
the Company, the Fund and the Employee to enter into an agreement setting forth
certain terms and conditions applicable to the Options and the Exercise Shares
and the parties wish to enter into such agreement and to set forth the terms and
conditions applicable to the Options, the Exercise Shares and any shares of
Common Stock hereinafter acquired by the Employee;
WHEREAS, the parties intend that, except to the extent specifically
provided otherwise herein, the terms of this Agreement shall supersede each
Award Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
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have the following respective meanings:
"Award Agreement" With respect to each Option, the agreement between
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the Company and the Employee evidencing the original grant of the corresponding
Prior Option to the Employee and setting forth the original terms and conditions
applicable to such Prior Option.
"Board": The Board of Directors of the Company.
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"Cause": As defined in the Employment Agreement.
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"CD&R": Xxxxxxx, Dubilier & Rice, Inc., a Delaware corporation.
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"Code": The U.S. Internal Revenue Code of 1986, as amended.
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"Common Stock": As defined in the recitals to this Agreement.
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"Converted Option": As defined in the recitals to this Agreement.
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"Company": As defined in the introduction to this Agreement.
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"Control": With respect to any Person, the possession, directly or
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indirectly, severally or jointly, of the power to direct or cause the direction
of the management policies of such Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor, or
otherwise.
"Covered Securities": As defined in Section 6(a).
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"Date of Termination": As defined in the Employment Agreement.
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"Disability": As defined in the Employment Agreement.
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"Draft Sale Agreement": As defined in Section 4(a).
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"Effective Time": As defined in the recitals to this Agreement.
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"Employee": As defined in the introduction to this Agreement.
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"Employment Agreement": As defined in the recitals to this Agreement.
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"Excess Number": As defined in Section 3(b).
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"Exchange Act": The Securities Exchange Act of 1934, as amended, or
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any successor Federal statute, and the rules and regulations thereunder which
shall be in effect at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any, of any such
successor Federal statute, and the rules and regulations thereunder.
"Exercise Shares": As defined in the recitals to this Agreement.
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"Fair Market Value": As defined in Section 6(c).
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"First Option Period": As defined in Section 6(a).
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"Fund": As defined in the introduction to this Agreement.
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"Good Reason": As defined in the Employment Agreement.
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"Incentive Stock Options": As defined in Section 2(a).
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"Lock-Up Expiration Date" As defined in Section 2(d)(i).
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"Non-Qualified Options": As defined in Section 2(a).
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"Option": As defined in the recitals to this Agreement.
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"Original Termination Date": As defined in Section 2(c).
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"Person": Any natural person, firm, partnership, limited liability
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company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Prior Common Stock": As defined in the recitals to this Agreement.
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"Prior Option": As defined in the recitals to this Agreement.
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"Public Offering": An underwritten public offering of the Common
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Stock led by at least one underwriter of nationally recognized standing.
"Purchase Price": As defined in Section 6(c).
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"Qualifying Number": 5,539,539 shares of Common Stock (excluding any
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sales or transfers by the Fund to any employee of the Company or a Subsidiary of
the Company).
"Qualifying Sale": As defined in Section 3(b).
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"Repurchase Determination Date" The Date of Termination.
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"Rule 144": Rule 144 (or any successor provision) under the
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Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
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Securities Act.
"Sale Notice": As defined in Section 3(a).
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"Sale Percentage": As defined in Section 4(a).
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"Second Option Period": As defined in Section 6(a).
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"Section 4 Closing": As defined in Section 4(a).
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"Securities Act": The Securities Act of 1933, as amended, or any
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successor Federal statute, and the rules and regulations thereunder which shall
be in effect at the time. Any reference to a particular section thereof shall
include a reference to the corresponding section, if any, of any such successor
Federal statute, and the rules and regulations thereunder.
"Securities and Exchange Commission": The Securities and Exchange
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Commission or any other Federal agency at the time administering the Securities
Act or the Exchange Act.
"Shares": All shares of Common Stock now owned or from time to time
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acquired by the Employee, including, without limitation, any Exercise Shares
acquired by the Employee upon exercise of any Option.
"Special Registration": (a) The registration of shares of equity
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securities and/or options or other rights in respect thereof to be offered to
(i) directors, members of management, employees, consultants or sales agents,
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distributors or similar representatives of the Company or its direct or indirect
Subsidiaries, and/or (ii) directors or senior executives of corporations in
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which entities managed or sponsored by CD&R have made substantial equity
investments or other individuals with whom CD&R has a consulting or advisory
relationship or (b) the registration of equity securities and/or options or
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other rights in respect thereof solely on Form S-4 or S-8 or any successor form.
"Specified Termination": A termination by the Company or any
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Subsidiary that employs the Employee without Cause or a termination of the
Employee's employment by the Employee for Good Reason,
"Subsidiary": With respect to any Person, each corporation or other
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Person in which the first Person owns or Controls, directly or indirectly,
capital stock or other ownership interests representing 50% or more of the
combined voting power of the outstanding voting stock or other ownership
interests of such corporation or other Person.
"Take-Along Buyer": As defined in Section 4(a).
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"Take-Along Notice": As defined in Section 4(a).
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"Take-Along Offer": As defined in Section 4(a).
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"Take-Along Sale": As defined in Section 4(a).
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"Unforeseen Personal Hardship": Financial hardship arising from (x)
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extraordinary medical expenses or other expenses directly related to illness or
disability of the Employee, a member of the Employee's immediate family or one
of the Employee's parents or (y) payments necessary or required to prevent the
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eviction of the Employee from the Employee's principal residence or foreclosure
on the mortgage on that residence. The Board's reasoned and good faith
determination of Unforeseen Personal Hardship shall be binding on the Company
and the Employee.
2. Certain Terms Applicable to Options.
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(a) Confirmation of Option Conversion. The Company and the Employee
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hereby confirm that, pursuant to the Employment Agreement, as of the Effective
Time, each Prior Option to purchase the number of shares of Prior Common Stock
set forth on Schedule A hereto at the exercise price set forth on such Schedule
A was converted into the corresponding Option set forth on Schedule A to
purchase the number of shares of Common Stock at the exercise price per share
set forth on Schedule A. The Company and the Employee further confirm that only
the Options set forth on Schedule B hereto (the "Incentive Stock Options") are
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intended to and will qualify immediately after the Effective Time as incentive
stock options under the Code and, accordingly, all of the remaining Options
(such remaining Options, the "Non-Qualified Options") are not intended to and
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will not qualify immediately after the Effective Time as incentive stock options
under the Code. The Employee further acknowledges and agrees that, in the case
of certain Prior Options that qualified as incentive stock options prior to the
Effective Time, in connection with and following the conversion of such Prior
Options described herein, such Options, as so converted, will no longer qualify
as incentive stock options and, as a result, upon the exercise thereof by the
Employee, the excess, if any, of the fair market value (as of the date of
exercise) of the Exercise Shares purchased upon such exercise over the exercise
price paid by the Employee will be taxable to the Employee as ordinary income
pursuant to Section 83 of the Code.
(b) Vesting. Subject to Section 2(c), Section 2(d) or 2(e),
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whichever is applicable, and Section 4(c), the Employee's right to exercise the
Options will become vested as of the Effective Time. Notwithstanding the
foregoing, in the event of the Employee's termination of employment prior to a
Public Offering, the Employee's right
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to exercise the Options will be suspended during the First Option Period and the
Second Option Period, except that, in the case of any such Options whose
Original Termination Date is prior to the expiration of the Second Option
Period, the Employee will be permitted to exercise such Options during the 30
days immediately preceding such Original Termination Date unless the Company or
the Fund shall have delivered written notice to the Employee of its election to
purchase such Options.
(c) Termination of Options; Original Termination Date. Subject to
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Section 2(d) or 2(e), whichever is applicable, and Section 4(c), each Option
shall ter minate and be canceled on the normal expiration date of the
corresponding Prior Option set forth on Schedule C hereto (the "Original
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Termination Date").
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(d) Termination of Non-Qualified Options; Early Termination. With
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respect to each Non-Qualified Option, such Non-Qualified Option shall expire
prior to its Original Termination Date under the following circumstances.
(i) In the event of the termination of the Employee's employment with the
Company or any Subsidiary thereof that employs the Employee prior to the
Original Termination Date of such Non-Qualified Option as a result of the
Employee's death, the Employee's Disability, a termination of the
Employee's employment by the Company or such Subsidiary without Cause or a
termination of the Employee's employment by the Employee for Good Reason,
such Non-Qualified Option shall expire on the earlier of
(x) its Original Termination Date and
(y) the later of (A) the six month anniversary of the date of the
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expiration of any initial lock-up period imposed on sales of Common
Stock in connection with the first Public Offering occurring after the
date hereof (such expiration date, the "Lock-Up Expiration Date"), and
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(B) the first anniversary of the Date of Termination.
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(ii) In the event of the termination of the Employee's employment with the
Company or any Subsidiary thereof that employs the Employee prior to the
Original Termination Date of such Non-Qualified Option as a result of the
termination of the Employee's employment (i) by the Employee without Good
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Reason or (ii) by the Company or such Subsidiary with Cause, such Non-
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Qualified Option shall expire on the earliest of
(x) its Original Termination Date,
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(y) the later of (1) the 90th day following the Lock-Up Expiration
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Date, and (2) the 30th day following the Date of Termination, and
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(z) the first anniversary of the Date of Termination.
(e) Termination of Incentive Stock Options; Early Termination. With
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respect to each Incentive Stock Option, in the event of the termination of
the Employee's employment with the Company or any Subsidiary thereof that
employs the Employee prior to the Original Termination Date of such
Incentive Stock Option, such Incentive Stock Option shall expire on the
date specified in the Award Agreement evidencing such Incentive Stock
Option.
(f) Manner of Exercise. Subject to such reasonable administrative
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regulations as the Board may adopt, vested Options may be exercised, in whole or
in part, by notice to the Clerk of the Company in writing given at least 5
business days prior to the date as of which the Employee will so exercise the
Options (the "Exercise Date"). As a condition to the exercise a of any of the
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Options, the Company may require the Employee to furnish or execute such other
documents as the Company shall reasonably deem necessary (i) to evidence such
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exercise, or (ii) to comply with or satisfy the requirements of the Securities
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Act, applicable state or non-U.S. securities laws or any other law.
3. Tag-Along Rights. So long as there has not been a Public
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Offering, the Fund hereby agrees not to make any sale or transfer of Common
Stock owned by the Fund which would constitute a Qualifying Sale, except
pursuant to the following provisions of this Section 3:
(a) At least 30 days prior to making any sale or transfer of Common
Stock which would constitute a Qualifying Sale, the Fund will deliver a written
notice (the "Sale Notice") to the Company and the Employee. The Sale Notice
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will fully disclose the identity of the prospective transferee and the terms and
conditions of the proposed Qualifying Sale. The Fund agrees not to consummate
any such proposed Qualifying Sale until at least 30 days after the Sale Notice
has been delivered to the Employee, unless the Fund has received notice from the
Employee indicating whether or not the Employee has elected to participate in
such Qualifying Sale and the number of shares to be sold by the Employee has
been finally determined pursuant hereto prior to the expiration of such 30-day
period. The Employee may elect to participate in the proposed Qualifying Sale
by delivering written notice to the Fund and the Company within 30 days after
receipt of the Sale Notice. If the Employee elects to participate in such
proposed Qualifying Sale, the Employee will be entitled to sell in such
Qualifying Sale, at the same price and on the same terms as the Fund, a number
of Shares equal to
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the product of (i) the quotient determined by dividing (A) the percentage of the
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then outstanding Common Stock represented by the Shares then held by the
Employee by (B) the aggregate percentage of the then outstanding Common Stock
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represented by the Common Stock then held by the Fund and the aggregate Common
Stock held by those employees of the Company or a Subsidiary (including the
Employee) who elect to participate such proposed Qualifying Sale pursuant to the
terms of their respective management equity agreements and (ii) the number of
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shares of Common Stock such transferee has agreed to purchase in the proposed
Qualifying Sale (or, in the case of a Qualifying Sale within the meaning of
clause (ii) of Section 3(b), the Excess Number of shares which such transferee
has agreed to purchase).
(b) The term "Qualifying Sale" shall mean (i) any sale or transfer of
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Common Stock proposed to be made by the Fund at any time after the Fund has sold
or transferred in the aggregate at least the Qualifying Number of shares of
Common Stock or (ii) in the event that prior to the sale or transfer by the Fund
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of an aggregate of the Qualifying Number of shares of Common Stock, the Fund
proposes to sell or transfer a number of shares of Common Stock which when
combined with any prior sales or transfers of such shares by the Fund exceeds
the Qualifying Number, the sale or transfer of a number of shares (the "Excess
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Number") equal to the excess of (A) the sum of any shares previously sold or
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transferred by the Fund and the aggregate number of shares proposed to be sold
or transferred in such contemplated sale, over (B) the Qualifying Number of
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shares. In determining whether there is a Qualifying Sale, equi table
adjustments shall be made to reflect any stock split, stock dividend, stock com
bination, recapitalization or similar transaction.
(c) The obligation of the Fund and the rights of the Employee
pursuant to this Section 3 will not apply to any sale or transfer by the Fund
pursuant to a distribution to the public (whether pursuant to a Public Offering
or pursuant to Rule 144 or otherwise (but not pursuant to Rule 144A under the
Securities Act or any successor provision)). Any shares referred to, or covered
by any sale, transfer or dis tribution referred to, in the preceding sentence
shall not be included in the computation of Qualifying Sale.
(d) The Fund acknowledges that the Employee would be irreparably
damaged in the event of a breach or a threatened breach by the Fund of any of
its obligations under this Section 3 and the Fund agrees that, in the event of a
breach or a threatened breach by the Fund of any such obligation, the Employee
shall, in addition to any other rights and remedies available to him or her in
respect of such breach, be entitled to an injunction from a court of competent
jurisdiction (without any requirement to post bond) granting it specific
performance by the Fund of its obligations under this Section 3. In the event
that the Employee shall file suit to
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enforce the covenants contained in this Section 3 (or obtain any other remedy in
respect of any breach thereof) and prevails in such suit the Employee shall be
entitled to recover from the Company the costs incurred by the Employee in
conducting the suit, including reasonable attorney's fees and expenses.
4. Take-Along Rights.
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(a) Take-Along Notice. If the Fund intends to effect a sale (a
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"Take-Along Sale") prior to a Public Offering of not less than 90% of the shares
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of Common Stock it then holds to a non-Affiliate third party (a "Take-Along
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Buyer") and elects to exercise its rights under this Section 4, the Fund shall
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deliver written notice (a "Take-Along Notice") to the Company and the Employee,
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which notice shall (i) state (w) that the Fund wishes to exercise its rights
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under this Section 4 with respect to such transfer, (x) the name and address of
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the Take-Along Buyer, (y) the per share amount and form of consideration the
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Fund proposes to receive for its shares of Common Stock and the percentage of
its Common Stock proposed to be sold by the Fund (the "Sale Percentage") and (z)
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drafts of purchase and sale documentation setting forth the terms and conditions
of payment of such consideration and all other material terms and conditions of
such transfer (the "Draft Sale Agreement"), (ii) contain an offer (the "Take-
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Along Offer") by the Take-Along Buyer to purchase from the Employee a percentage
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of the Shares equal to the Sale Percentage, on and subject to the same price,
terms and conditions offered to the Fund and (iii) state the anticipated time
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and place of the closing of such transfer (a "Section 4 Closing"), which
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(subject to such terms and conditions) shall occur not fewer than 15 days nor
more than 90 days after the date such Take-Along Notice is delivered, provided
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that if such Section 4 Closing shall not occur prior to the expiration of such
90-day period, the Fund shall be entitled to deliver another Take-Along Notice
with respect to such Take-Along Offer. Upon request of the Fund, the Company
shall provide the Fund with a current list of the names and addresses of each
employee of the Company or a Subsidiary who is party to a management equity
agreement.
(b) Conditions to Take-Along. Upon delivery of a Take-Along Notice,
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the Employee shall have the obligation to transfer a number of his Shares equal
to the Sale Percentage multiplied by the number of Shares then held by the
Employee pursuant to the Take-Along Offer, as such offer may be modified from
time to time, provided that the Fund transfers the Sale Percentage of its shares
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of Common Stock to the Take-Along Buyer at the Section 4 Closing and that all
shares of Common Stock sold by the Fund and the Employee to be sold pursuant to
the Take-Along Sale are sold to the Take-Along Buyer at the same price, and on
the same terms and conditions, and provided further that the Employee shall only
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be required to make, in connection with a Take-Along Sale, representations and
warranties that survive the closing of such Sale
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with respect to his authority, his title to his Shares, certain conflicts,
approvals and litigation relating to him, and shall not be required to make any
representations or warranties with respect to the Company or its business that
survive that Closing of such Sale or with respect to any other employee. Within
five Business Days prior to the closing contemplated by the Take-Along Notice,
the Employee shall (i) deliver to the Fund certificates representing the Shares
to be sold pursuant to the Take-Along Sale, duly endorsed for transfer or
accompanied by duly executed stock powers, and (ii) exe cute and deliver to the
Fund a power of attorney and a letter of transmittal and custody agreement in
favor of the Fund and in form and substance reasonably satisfactory to the Fund
appointing the Fund as the true and lawful attorney-in-fact and custodian for
the Employee, with full power of substitution, and authorizing the Fund to
execute and deliver a purchase and sale agreement substantially in the form of
the Draft Sale Agreement and otherwise in accordance with the terms of this
Section 4(b) and to take such actions as the Fund may reasonably deem necessary
or appropriate to effect the sale and transfer of the Shares to the Take-Along
Buyer, upon receipt of the purchase price therefor set forth in the Take-Along
Notice at the Section 4 Closing, free and clear of all security interests,
liens, claims, encumbrances, options, and voting agreements of whatever nature,
together with all other documents delivered with such Notice and required to be
executed in connection with the sale thereof pursuant to the Take-Along Offer.
The Fund shall hold such shares and other documents in trust for the Employee
for release against payment to the Employee of such Employee's net proceeds in
accordance with the contemplated transaction. If, within 15 days after delivery
to the Fund, the Fund has not completed the sale of all of the shares of Common
Stock owned by the Fund and the Employee to the Take-Along Buyer and another
Take-Along Notice with respect to such Take-Along Offer has not been sent to the
Employee, the Fund shall return to the Employee all certificates representing
the Shares and all other documents that the Employee delivered in connection
with such sale. The Fund shall be permitted to send only two Take-Along Notices
with respect to any one Take-Along Offer. Promptly after the Section 4 Closing,
the Fund shall furnish such other evidence of the completion and time of
completion of such sale and the terms thereof as may reasonably be requested by
the Employee.
(c) Effect of Take-Along On Options.
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(i) Accelerated Vesting and Payment. Subject to Section 4(c)(ii), in
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the event of the consummation of a Take-Along Sale, each Option held by the
Employee immediately prior to the closing of such Take-Along Sale shall be
canceled in exchange for a payment, in cash, of an amount (such amount, the
"Cancellation Payment Amount") equal to the product of (i) the excess, if
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any, of the price per share of Common Stock paid in connection with such
Take-Along Sale over the exercise price under such Option, multiplied by
(ii) the
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number of Exercise Shares covered by such Option immediately prior to such
the consummation of such Take-Along Sale. Payment of the Cancellation
Payment Amount shall be made as soon as reasonably practicable, but in no
event later than 30 days, following the closing of the Take-Along Sale.
(ii) Alternative Options. Notwithstanding Section 4(c)(i), no
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settlement or other payment shall be made with respect to any Option in the
event that the transaction constituting the Take-Along Sale is to be
accounted for using the "pooling of interest" method of accounting. In
such event, each Option held by the Employee immediately prior to the
closing of the Take-Along Sale shall become fully vested immediately prior
to the consummation of such transaction and the Employee shall have the
right, subject to compliance with all applicable securities laws, to (i)
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exercise all of the Options then held by him or (ii) provided such
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opportunity is made available by the Take-Along Buyer, exchange such
Options for fully vested options to purchase common stock of the Take-Along
Buyer (or the direct or indirect parent of the Take-Along Buyer) having
substantially equivalent economic value to the Options being exchanged
therefor, as determined by the Board immediately prior to the consummation
of the Take-Along Sale. Any Options not exercised or exchanged shall
expire upon the consummation of the Take-Along Sale.
(d) Remedies. The Employee acknowledges that the Fund would be
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irreparably damaged in the event of a breach or a threatened breach by the
Employee of any of his obligations under this Section 4 and the Employee agrees
that, in the event of a breach or a threatened breach by the Employee of any
such obligation, the Fund shall, in addition to any other rights and remedies
available to it in respect of such breach, be entitled to an injunction from a
court of competent jurisdiction (without any requirement to post bond) granting
it specific performance by the Employee of his or her obligations under this
Section 4. In the event that the Fund shall file suit to enforce the covenants
contained in this Section 4 (or obtain any other remedy in respect of any breach
thereof), the prevailing party in the suit shall be entitled to recover, in
addition to all other damages to which it may be entitled, the costs incurred by
such party in conducting the suit, including reasonable attorney's fees and
expenses.
5. Restrictions on Transfer.
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(a) Restrictions on Transfer. The Employee shall not be permitted to
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sell, transfer, pledge, encumber or otherwise dispose of any Option or Shares
except (i) subject to Section 6, any transfer of Options or Shares, upon the
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death of the Employee, to the Employee's estate, (ii) any transfer of Shares,
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but not Options, by the Employee to a family trust or partnership solely for
estate planning purposes or (iii)
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transfers of Shares, but not Options, by the Employee that do not exceed, in the
aggregate, 25% of the sum of the Shares beneficially owned by the Employee and
the Exercise Shares issuable upon exercise of the Options held by the Employee,
in each case, as of the date of this Agreement, provided in the case of the
transfer of any Options or Shares under subsection (i) or (ii) hereof that the
executor of the Employee's estate, the trustee of any such family trust or the
general partner of any such family partnership, as applicable, shall agree, by
execution of an instrument in form and substance reasonably satisfactory to the
Company, to be bound by all of the provisions of this Agreement.
(b) Duration. The transfer restrictions under Section 5(a) shall
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terminate with respect to the Shares upon the earliest of (i) the fifth
-
anniversary of the date of the consummation of the Merger, (ii) the Lock-Up
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Expiration Date and (iii) the termination, for any reason, of the Employee's
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employment with the Company or one of its Subsidiaries. The transfer
restrictions under Section 5(a) shall terminate with respect to the Options only
upon the death of the Employee, it being understood that the Options shall be
exercisable during the lifetime of the Employee only by the Employee.
6. Repurchases by the Company or the Fund Upon Termination of
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Employment or Unforeseen Personal Hardship of the Employee.
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(a) Termination of Employment. If, prior to a Public Offering, the
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Employee's active employment with the Company or any Subsidiary thereof that
employs the Employee is terminated for any reason whatsoever, the Company shall
have an option to purchase all or a portion of the Options, to the extent vested
as of the Date of Termination, and/or Exercise Shares then held by the Employee
(or, if his employment was terminated by his death, his estate) (such vested
Options and Exercise Shares, the "Covered Securities") and shall have 60 days
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from the Repurchase Determination Date, or, in the case of any Covered
Securities that are Incentive Stock Options, 30 days from the Repurchase
Determination Date (such 60-day or 30-day period, whichever is applicable, being
hereinafter referred to as the "First Option Period") during which to give
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notice in writing to the Employee (or his estate) of its election to exercise or
not to exercise its option to purchase any of the Covered Securities, in whole
or in part. The Company hereby undertakes to use reasonable efforts to act as
promptly as practicable following the Repurchase Determination Date to make such
election. If the Company fails to give notice that it intends to exercise its
option to purchase any of the Covered Securities within the First Option Period
or the Company gives notice that it does not intend to exercise such option or
that it intends to exercise such option with respect to only a portion of the
Covered Securities, the Fund shall have the right to purchase all or a portion
of the Covered Securities that will not be repurchased by the Company and shall
have until the expiration of the earlier of
13
(x) 60 days (or, in the case of any Covered Securities that are Incentive Stock
Options, 30 days) following the last day of the First Option Period or (y) 60
days (or, in the case of any Covered Securities that are Incentive Stock
Options, 30 days) from the date of receipt by the Fund of written notice from
the Company indicating whether it will exercise its option to purchase any of
the Covered Securities (such 60-day or 30-day period, whichever is applicable,
being hereinafter referred to as the "Second Option Period"), to give notice in
writing to the Employee (or his estate) of the Fund's exercise of its option to
purchase any Covered Securities, in whole or in part. If the options of the
Company and the Fund to purchase the Covered Securities pursuant to this Section
6(a) are not exercised with respect to all of the Covered Securities as provided
herein, the Employee (or his estate) shall be entitled to retain the Covered
Securities which will not be so purchased, subject to all of the provisions of
this Agree ment (including without limitation Section 4).
(b) Unforeseen Personal Hardship. In the event that the Employee,
----------------------------
while in the employment of the Company or any Subsidiary, experiences Unforeseen
Personal Hardship, the Board will carefully consider any request by the Employee
that the Company repurchase the Employee's Shares, but the Company shall have no
obligation to repurchase such Shares. The Board shall consider such request
with re spect to Unforeseen Personal Hardship as soon as practicable after
receipt by the Company of a written request by the Employee, such request to
include sufficient details of the Employee's Unforeseen Personal Hardship to
permit the Board to review the request and the circumstances in an informed
manner.
(c) Purchase Price. All purchases pursuant to this Section 6 by the
--------------
Company or the Fund shall be for a purchase price and effected in the manner
prescribed by Sections 6(c) and 6(d). For purposes of any purchase of Covered
Securities pursuant to this Section 6, the purchase price per Covered Security
to be paid to the Employee (or his estate) for such Covered Security (the
"Purchase Price") shall equal the fair market value (the "Fair Market Value") of
--------------- -----------------
a share of Common Stock as of the Repurchase Determination Date or, in the case
of a repurchase of any Shares as a result of Unforeseen Personal Hardship, as of
the date such Shares are repurchased, reduced in the case of the purchase of any
Covered Security that is an Option by the exercise price applicable under such
Option.
Whenever determination of the Fair Market Value of a share of Common
Stock is required to be made pursuant to this Agreement, such Fair Market Value
shall be such amount as is determined in good faith by the Board on the basis of
an independent valuation of the Common Stock and such other factors as the Board
deems appropriate, including, without limitation, the earnings and certain other
financial and operating information of the Company and its Subsidiaries in
recent periods, the poten-
14
tial value of the Company and its Subsidiaries as a whole, the future prospects
of the Company and its Subsidiaries and the industries in which they compete,
the history and management of the Company and its Subsidiaries, the general
condition of the securities markets, the fair market value of securities of
companies engaged in businesses similar to those of the Company and its
Subsidiaries and the trading price of the Common Stock. The determination of
Fair Market Value will not give effect to any restrictions on transfer of the
Covered Securities, the fact that such Covered Securities would represent a
minority interest in the Company or the fact that the Covered Securities are not
registered for resale under the Securities Act. The Fair Market Value as
determined in good faith by the Board and in the absence of fraud shall be
binding and conclusive upon all parties hereto. If the Company at any time
subdivides (by any stock split, stock dividend or otherwise) the Common Stock
into a greater number of shares, or combines (by reverse stock split or
otherwise) the Common Stock into a smaller number of shares, the Purchase Price
shall be appropriately adjusted to reflect such subdivision or combination.
(d) Closing of Purchase; Payment of Purchase Price. The closing of a
----------------------------------------------
purchase pursuant to this Section 6 shall take place at the principal office of
the Company on the tenth business day following whichever of the following is
applicable: (i) the receipt by the Employee (or his estate) of the notice of the
-
Company or the Fund, as the case may be, of its exercise of its option to
purchase any of the Covered Securities pursuant to Section 6(a) or (ii) the
--
Board's determination (which shall be delivered to the Employee) that the
Company is authorized to purchase a stated number of Shares as a result of
Unforeseen Personal Hardship pursuant to Section 6(b). At the closing, (i) the
-
Company or the Fund, as the case may be, shall pay to the Employee (or his
estate) an amount equal to the Purchase Price and (ii) the Employee (or his
--
estate) shall deliver to the Company or the Fund, as applicable, such
certificates or other instruments representing the Covered Securities so
purchased, appropriately endorsed by the Employee (or his estate), as the
Company or the Fund, as applicable, may reasonably require.
7. Lock-Up Agreement. If and whenever the Company proposes to
-----------------
register any of its equity securities under the Securities Act, whether or not
for its own account (other than pursuant to a Special Registration), the
Employee agrees not to effect (other than pursuant to such registration) any
public sale or distribution, including, but not limited to, any sale pursuant to
Rule 144 or Rule 144A, of any Shares, any other equity securities of the Company
or any securities convertible into or exchangeable or exercisable for any equity
securities of the Company, during the 20 day period prior to or the 90 day
period following the effective date of such registration, provided that the
Employee further agrees that, if required by the managing
15
underwriter for such registered offering, he shall not effect any such public
sale or distribution during the 180 day period following the effective date of
such registration.
8. Miscellaneous.
-------------
(a) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to the Company, the Fund or the
Employee, as the case may be, at the following addresses or to such other
address as the Company, the Fund or the Employee, as the case may be, shall
specify by notice to the others:
(i) if to the Company, to it at:
Dynatech Corporation
3 New England Executive Park
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
---------
(ii) if to the Employee, to the Employee at the address set forth on
the signature page hereof.
(iii) if to the Fund, to:
The Xxxxxxx & Dubilier Private Equity
Fund V Limited Partnership
Xxxxxxxxxx Xxxxx, Xxxxx 000
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
---------
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or on the third business day after the
mailing thereof. Copies of any notice or other communication given under this
Agreement shall also be given to:
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, III
---------
16
and
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
---------
(b) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
(c) Waiver; Amendment.
-----------------
(i) Waiver. Any party hereto may by written notice to the other
------
parties (A) extend the time for the performance of any of the obligations
-
or other actions of the other parties under this Agreement, (B) waive
-
compliance with any of the conditions or covenants of the other parties
contained in this Agreement, and (C) waive or modify performance of any of
-
the obligations of the other parties under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limi tation, any investigation by or on
behalf of any party, shall be deemed to con stitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure
by a party to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time
or times hereunder.
(ii) Amendment. This Agreement may be amended, modified or
---------
supplemented only by a written instrument executed by each of the parties
hereto.
(d) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or the Employee without the prior written consent of
the other parties. The
17
Fund may assign from time to time all or any portion of its rights hereunder to
one or more persons or other entities designated by it.
(e) Withholding. Whenever Shares are to be issued pursuant to the
-----------
Options, the Company may require the recipient of the Shares to remit to the
Company an amount in cash sufficient to satisfy any applicable U.S. federal,
state and local and non-U.S. tax withholding requirements as a condition to the
issuance of such Shares. In the event any cash is paid to the Employee or the
Employee's estate pursuant to Sec tion 4 or 6, the Company shall have the right
to withhold an amount from such payment sufficient to satisfy any applicable
U.S. federal, state and local and non-U.S. tax withholding requirements.
(f) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
(g) Section and Other Headings, etc. The section and other headings
-------------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XXXXXXX, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V Limited Partnership,
its general partner
By: CD&R Investment Associates, Inc.,
a general partner
By:
-----------------------------------
Name:
Title:
DYNATECH CORPORATION
By:
---------------------------------------
Name:
Title:
THE EMPLOYEE
Name of Executive
------------------------------------------
Address
19
