AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of
this 1st day of November, 1998 by and between Dynatech Corporation, a
Massachusetts corporation ("Employer"), and John R. Peeler ("Executive").
W I T N E S S E T H :
WHEREAS, Executive is currently employed by Employer as its Corporate
Vice President and has been employed by Telecommunications Technics Corporation,
a wholly-owned subsidiary of Employer ("TTC"), as its President and Chief
Executive Officer;
WHEREAS, pursuant and subject to the terms of the Agreement and Plan
of Merger, dated as of December 20, 1997 (the "Merger Agreement"), by and
between Employer and CDRD Merger Corporation, a Delaware corporation
("MergerCo"), Employer will be merged with and into MergerCo (the "Merger") and
Employer will be the surviving corporation to the Merger;
WHEREAS, Executive and Employer are currently parties to an Amended
and Restated Employment Agreement, dated as of May 21, 1998 (the "Prior
Agreement") which sets forth the terms and conditions of Executive's employment
with Employer following the Merger;
WHEREAS, Employer wishes to secure the continued services of Executive
and Executive desires to accept such continued employment, in each case, on the
terms and conditions set forth herein;
WHEREAS, Employer and Executive wish to amend and restate the Prior
Agreement in its entirety, as set forth herein (as so amended and restated, the
"Amended Agreement");
WHEREAS, Employer and Executive acknowledge and agree that Executive
has had and will continue to have a prominent role in the management of the
business, and the development of the goodwill, of Employer and its Affiliates
(as defined below) and has established and developed and will continue to
establish and develop relations and contacts with the principal customers and
suppliers of Employer and its Affiliates in the United States, Europe, the
Pacific Rim and the rest of the world, all of which constitute valuable goodwill
of, and could be used by Executive to compete unfairly with, Employer and its
Affiliates;
WHEREAS, (i) in the course of his employment with Employer, Executive
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has obtained and will continue to obtain confidential and proprietary
information and trade secrets concerning the business and operations of Employer
and its Affiliates in the United States, Europe, the Pacific Rim and the rest of
the world that could be used to compete unfairly with Employer and its
Affiliates; (ii) the covenants and restrictions contained in Sections 8 through
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13, inclusive, are intended to protect the legitimate interests of Employer and
its Affiliates in their respective goodwill, trade secrets and other
confidential and proprietary information; and (iii) Executive desires to be
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bound by such covenants and restrictions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and for other good and valuable
consideration, Employer and Executive hereby agree to amend and restate the
Employment Agreement as follows:
1. Agreement to Continue Employment. Upon the terms and subject to
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the conditions of this Amended Agreement, Employer hereby continues the
employment of Executive, and Executive hereby accepts such continued employment
by Employer.
2. Term; Position and Responsibilities.
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(a) Term of Employment. Unless Executive's employment shall sooner
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terminate pursuant to Section 7, Employer shall employ Executive for a term
commencing on the date of the consummation of the Merger (the "Commencement
Date") and ending on the fifth anniversary of the Commencement Date (the
"Initial Term"). Effective upon the expiration of the Initial Term and of each
Additional Term (as defined below), Executive's employment hereunder shall be
deemed to be automatically extended, upon the same terms and conditions, for an
additional period of one year (each, an "Additional Term"), in each such case,
commencing upon the expiration of the Initial Term or the then current
Additional Term, as the case may be, unless Employer, at least 60 days prior to
the expiration of the Initial Term or such Additional Term, shall give written
notice (a "Non-Extension Notice") to Executive of its intention not to extend
the Employment Period (as defined below) hereunder, provided that a Non-
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Extension Notice shall not constitute a notice to Executive of the termination
of his employment by Employer unless such notice specifically provides for such
termination of employment and the specific date thereof. The period during
which Executive is employed pursuant to this Amended Agreement, including any
extension thereof in accordance with the preceding sentence, shall be referred
to as the "Employment Period".
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(b) Position and Responsibilities. During the Employment Period,
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Executive shall serve as Corporate Vice President of Employer and President and
Chief Executive Officer of all of Employer's communications test businesses and
have such duties and responsibilities as are customarily assigned to individuals
serving in such position and such other duties consistent with Executive's title
and position as the Board of Directors of Employer (the "Board") specifies from
time to time. For purposes of the preceding sentence, Itronix Corporation shall
not be deemed to be a communications test business. Executive shall devote all
of his skill, knowledge and working time (except for (i) vacation time as set
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forth in Section 6(c) and absence for sickness or similar disability and (ii) to
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the extent that it does not interfere with the performance of Executive's duties
hereunder, (A) such reasonable time as may be devoted to service on boards of
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directors of other corporations and entities, subject to the provisions of
Section 9, and the fulfillment of civic responsibilities and (B) such reasonable
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time as may be necessary from time to time for personal financial matters) to
the conscientious performance of the duties and responsibilities of such
position. During the Employment Period, Employer shall use its reasonable best
efforts to cause Executive to be nominated and elected to serve as a member of
the Board of Directors, without additional compensation.
3. Base Salary. As compensation for the services to be performed by
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Executive during the Employment Period, Employer shall pay Executive a base
salary at an annualized rate of $280,000, payable in installments on Employer's
regular payroll dates. The Board shall review Executive's base salary annually
during the period of his employment hereunder and, in its sole discretion, the
Board may increase (but may not decrease) such base salary from time to time
based upon the performance of Executive, the financial condition of Employer,
prevailing industry salary levels and such other factors as the Board shall
consider relevant. (The annual base salary payable to Executive under this
Section 3, as the same may be increased from time to time and without regard to
any reduction therefrom in accordance with the next sentence, shall hereinafter
be referred to as the "Base Salary".) The Base Salary payable under this
Section 3 shall be reduced to the extent that Executive elects to defer such
Base Salary under the terms of any deferred compensation, savings plan or other
voluntary deferral arrangement that may be maintained or established by
Employer.
4. Incentive Compensation Arrangements.
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(a) Annual Incentive Compensation. During the Employment Period,
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Employer shall maintain an annual incentive compensation program for its senior
executives in which Executive shall be entitled to participate in accordance
with the terms thereof as in effect from time to time, at a level commensurate
with his position and duties with Employer, which program shall be operated in
accordance with Employer's customary corporate practices and shall provide for
an annual bonus based on such per-
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formance targets as may be established from time to time by the Compensation
Committee of the Board.
(b) Roll-Over of Certain Options; Retention of Equity.
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(i) Prior to the Merger, Executive was the beneficial owner of
22,344 shares (together with the rights associated therewith pursuant to the
Shareholders' Rights Agreement, dated as of February 16, 1989, as amended and
restated as of March 12, 1990, the "Previously Owned Shares") of the common
stock, par value $.20 per share, of Employer (the "Prior Common Stock") and held
options to purchase 166,400 additional shares of Prior Common Stock, of which
the options to purchase 28,800 shares of Prior Common Stock listed on Exhibit A
hereto were treated as described in Section 2.3 of the Merger Agreement and the
remaining options (such remaining options, the "Prior Options") to purchase
137,600 shares of Prior Common Stock were treated as described in Section
4(b)(iii) below.
(ii) At the effective time of the Merger (the "Effective Time"), all
of the Previously Owned Shares were converted into the right to receive the
Merger Consideration, within the meaning and in accordance with the terms of the
Merger Agreement.
(iii) At the Effective Time, each Prior Option was automatically
converted into a fully vested and exercisable option (the "Recapitalized
Option") to purchase a number of shares (such shares, the "Recapitalized Option
Shares") of common stock, par value $.20 per share, of the corporation surviving
the Merger (the "Recapitalized Common Stock") equal to the sum of:
(x) the quotient of
(I) the product of (A) the number of shares of Prior Common
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Stock subject to such Prior Option immediately prior to the
Effective Time, multiplied by (B) the cash consideration per
-
share of Prior Common Stock paid pursuant to the Merger
Agreement to holders of Prior Common Stock, divided by
(II) the price per share of Recapitalized Common Stock paid
by the CD&R Fund (as defined below) for the shares of
MergerCo which were exchanged for the shares of the
Company's Recapitalized Common Stock upon the consummation
of the Merger, and
(y) the product of (I) the number of shares of Prior Common Stock
-
subject to such Prior Option immediately prior to the Effective Time,
multiplied by (II) the number of shares of Recapitalized Common Stock
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transferred
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pursuant to the Merger Agreement to holders of Prior Common Stock for
each such share of Prior Common Stock.
Each Recapitalized Option shall have an exercise price per Recapitalized Option
Share equal to the quotient of:
(x) the aggregate exercise price for all shares of Prior Common Stock
subject to the corresponding Prior Option, divided by
(y) the number of Recapitalized Option Shares subject to such
Recapitalized Option immediately following the conversion thereof
contemplated hereby.
Each of the Company and Executive agree that the foregoing adjustment in the
number of shares and the exercise prices applicable in respect of Recapitalized
Options is intended to comply with the procedures for adjusting the number of
shares subject to stock options (and the corresponding exercise prices) in a
corporate transaction under Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code") and the regulations thereunder, regardless of whether such
Section is applicable to such Recapitalized Options. The method used to
determine fair market value of the Company's stock for purposes of such
adjustment as a result of the Merger was the arm's length negotiated value
assigned to the Recapitalized Common Stock in connection with the Merger (the
"Merger Method"), which is one of several acceptable valuation methods expressly
set forth in Treas. Reg. (S)1.425-1(b)(7).
(iv) Each Nonqualified Recapitalized Option (as defined below) and
each Disqualified Recapitalized Option (as defined below) shall provide that it
shall expire on the normal expiration date specified in the option award
agreement evidencing the corresponding Prior Option that applies if Executive's
employment continues at least until such date (such date, the "Original
Termination Date"), provided that (x) in the event of the termination of
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Executive's employment with Employer prior to an applicable Original Termination
Date as a result of Executive's death, Executive's Disability (as defined
below), a termination of Executive's employment by Employer Without Cause (as
defined below) or a termination of Executive's employment by Executive for Good
Reason (as defined below), each then outstanding Nonqualified Recapitalized
Option and Disqualified Recapitalized Option shall expire on the earlier of (I)
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its Original Termination Date and (II) the later of (A) the six month
-- -
anniversary of the date of the expiration of any initial lock-up period imposed
on sales of Recapitalized Common Stock in connection with the first underwritten
public offering of any shares of Recapitalized Common Stock led by one or more
underwriters, at least one of which is of nationally recognized standing (such
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expiration date, the "Lock-Up Expiration Date"), and (B) the first anniversary
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of the applicable Date of Termination (as defined below) and (y) in the event of
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the termination of Executive's employment with Employer prior to such Original
Termination Date for any reason other than the reasons described in the
immediately preceding clause (x), each then outstanding Nonqualified
Recapitalized Option and Disqualified Recapitalized Option shall expire on the
earliest of (I) its Original Termination Date, (II) the later of (1) the 90th
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day following the Lock-Up Expiration Date and (2) the 30th day following the
-
applicable Date of Termination and (III) the first anniversary of the applicable
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Date of Termination.
Each Recapitalized Vested ISO and each Recapitalized Accelerated ISO
that is not a Disqualified Recapitalized Option shall provide that it shall
expire on the expiration date specified in the option award agreement evidencing
the corresponding Prior ISO, including without limitation, any such early
expiration date applicable in the case of a termination of Executive's
employment.
For purposes of this Section 4(b)(iv), the following terms shall have
the meanings set forth below.
(A) "Disqualified Recapitalized Option" means those Recapitalized
Accelerated ISOs having an aggregate exercise price exceeding the
excess of
(1) $100,000 over
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(2) the aggregate exercise price of all Recapitalized Vested
-
ISOs, the corresponding Prior ISO of which became vested and
exercisable in calendar year 1998 prior to the Effective Time
(B) "Nonqualified Recapitalized Option" means each Recapitalized
Option that is a successor option to a Prior Option that, immediately
prior to the Effective Time, is intended to be a nonqualified stock
option.
(C) "Prior ISO" means each Prior Option that, immediately prior to
the Effective Time, is intended to qualify as an "incentive stock
option" under section 422 of the Code.
(D) "Recapitalized Accelerated ISO" means each Recapitalized Option
that is a successor option to a Prior ISO that becomes vested solely
as a result of the acceleration of the vesting of Prior Options in
connection with, and as of the Effective Time of, the Merger.
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(E) "Recapitalized Vested ISO" means each Recapitalized Option that
is a successor option to a Prior ISO that became vested and
exercisable prior to the Effective Time and not in connection with the
Merger.
(v) Executive, Employer and Clayton, Dubilier & Rice Fund V Limited
Partnership (the "CD&R Fund") shall enter into a separate agreement (the
"Ancillary Agreement"), to become effective as of the Effective Time, that will
provide, among other things, that:
(A) during the Employment Period, the CD&R Fund will vote its shares of
Recapitalized Common Stock in favor of the election of Executive to serve
as a member of the Board;
(B) Executive shall not be permitted, at any time during his employment
with Employer, to sell, transfer or otherwise dispose of any shares of
Recapitalized Common Stock beneficially owned by him (including any
Recapitalized Option Shares), other than (I) transfers upon death to
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Executive's estate, (II) transfers to family trusts or partnerships for
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estate planning purposes or (III) de minimis transfers during the
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Employment Period not exceeding, in the aggregate, 25% of the sum of the
aggregate shares of Recapitalized Common Stock beneficially owned by
Executive as of the Commencement Date and the aggregate Recapitalized
Option Shares subject to the Recapitalized Options held by Executive as of
the Commencement Date, provided, in the case of any transfer pursuant to
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the foregoing clause (I) or (II), that the executor of Executive's estate
or the trustee or general partner of any such trust or partnership, as
applicable, shall agree, in form and substance reasonably satisfactory to
Employer, to be bound by all of the provisions of the Ancillary Agreement;
(C) following any termination of Executive's employment with Employer,
Employer and the CD&R Fund shall have successive rights to repurchase any
Recapitalized Options and/or Recapitalized Option Shares then beneficially
owned or held by Executive for a purchase price equal to the then fair
market value of the Recapitalized Option Shares or the Recapitalized Option
Shares then subject to the Recapitalized Options, as applicable (reduced by
the option exercise price in the case of a purchase of Recapitalized
Options), such fair market value to be determined in good faith by the
Board on the basis of an independent valuation of the Recapitalized Common
Stock, provided, that the determination of such fair market value will not
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give effect to (x) any restrictions on transfer of such shares,
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(y) the fact that such shares are not registered for resale by Executive
-
under the Securities Act of 1933, as amended, or (z) the fact that such
-
shares would represent a minority interest in Employer;
(D) in the event of certain qualifying sales of Recapitalized Common Stock
by the CD&R Fund, Executive shall have the right to sell a pro rata portion
of the shares of Recapitalized Common Stock then owned by him, on the same
terms and conditions as the CD&R Fund; and
(E) in the event of the sale by the CD&R Fund of substantially all of the
Recapitalized Common Stock then beneficially owned by it (other than any
such sale to an Affiliate of the CD&R Fund), the CD&R Fund shall have the
right to require Executive to sell the same percentage of the Recapitalized
Common Stock then beneficially owned by him as will be sold by the CD&R
Fund, on the same terms and conditions as the CD&R Fund, and Employer shall
have the right to cause any Recapitalized Options then held by Executive to
be canceled in exchange for a payment in respect of each Recapitalized
Option Share covered by such Recapitalized Options equal to the excess, if
any, of the price per share of Recapitalized Common Stock paid to holders
of Recapitalized Common Stock in connection with such sale over the
applicable option exercise price.
(F) The transfer restrictions described in the foregoing subparagraph (B)
shall terminate on the earlier of (I) the fifth anniversary of the
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Commencement Date and (II) the Lock-Up Expiration Date. The rights and
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obligations of Executive and Employer under the foregoing subparagraphs
(C), (D) and (E) of this Section 4(b)(v) shall terminate on the closing
date following the effective date of the first registration statement filed
under the Securities Act by Employer after the Commencement Date with
respect to an underwritten public offering of any shares of Employer's
capital stock led by one or more underwriters, at least one of which is of
nationally recognized standing.
(c) In the event that, due to the adjustment provided in this Section
4 with respect to the number of shares of the Recapitalized Common Stock subject
to Recapitalized Options, the amount of Covered Federal Taxes (as defined below)
payable by Executive solely in respect of the Recapitalized Options exceeds the
amount of such Covered Federal Taxes that would have been incurred by Executive
solely in respect of the Recapitalized Options had the proper adjustment
applicable to such Recapitalized Options been finally determined for Federal
income tax purposes to be a method of adjustment other than the Merger Method
and, as a result, the amount of Covered Federal Taxes payable by Executive
exceeds the amount of such Covered Federal Taxes otherwise
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payable by Executive, to be determined after first taking into account the
provisions of Section 7(i)(i)-(v) hereof (such excess hereinafter referred to as
the "Excess Liability"), the Company shall, in addition to any other amounts
payable to Executive under this Agreement, pay to Executive an amount equal to
the sum of (i) such Excess Liability and (ii) any and all Covered Federal Taxes
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and any other Federal taxes and any state or local income and employment taxes,
if any, incurred by Executive by reason of the payment required to be made under
this Section 4(c). For purposes of this Section 4(c), Covered Federal Taxes
shall mean any tax imposed on Executive under any provision of the Code as in
effect on the date hereof (or any successor provision thereto), other than any
income, employment, estate or gift tax.
5. Employee Benefits. During the Employment Period, Executive shall
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be entitled to participate in all of Employer's profit sharing, pension,
savings, deferred compensation, supplemental savings, life, medical, dental and
disability insurance plans, as the same may be amended and in effect from time
to time, applicable to senior executives of Employer, provided that Executive
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shall not be entitled to participate in any severance plan of Employer or
otherwise receive any severance benefits under any other type of plan. The
benefits referred to in this Section 5 shall be provided to Executive on a basis
that is commensurate with Executive's position and duties with Employer
hereunder and shall be substantially comparable, in the aggregate, to the
benefits (exclusive of severance and equity or other incentive compensation
benefits) provided to Executive immediately prior to the Commencement Date.
6. Perquisites and Expenses.
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(a) General. During the Employment Period, Executive shall be
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entitled to participate in all special benefit or perquisite programs generally
available from time to time to senior executives of Employer, including
Employer's programs providing for reimbursement of certain automobile expenses,
club social dues and fees for tax return preparation, financial planning and
investment advisory services, on the terms and conditions in effect from time to
time under each such program.
(b) Business Travel, Lodging, etc. Employer shall reimburse Executive
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for reasonable travel, lodging, meal and other reasonable expenses incurred by
him in connection with his performance of services hereunder upon submission of
evidence, satisfactory to Employer, of the incurrence and purpose of each such
expense and otherwise in accordance with Employer's business travel
reimbursement policy applicable to its senior executives as in effect from time
to time.
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(c) Vacation. During the Employment Period, Executive shall be
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entitled to a number of weeks of paid vacation, without carryover accumulation,
determined in accordance with the terms of Employer's vacation policy applicable
to senior executives as in effect from time to time. As soon as reasonably
practicable following the Commencement Date, Employer shall pay Executive a cash
amount equal to $44,423, which shall be in full and complete satisfaction of all
then unpaid vacation pay accrued by Executive with respect to periods of
employment completed prior to November 30, 1997.
7. Termination of Employment.
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(a) Termination Due to Death or Disability. In the event that
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Executive's employment hereunder terminates due to death or is terminated by
Employer due to Executive's Disability (as defined below), no termination
benefits shall be payable to or in respect of Executive except as provided in
Section 7(f)(ii). For purposes of this Amended Agreement, "Disability" shall
mean a physical or mental disability that prevents the performance by Executive
of his duties hereunder lasting (or likely to last, based on competent medical
evidence presented to the Board) for a continuous period of six months or
longer. The reasoned and good faith judgment of the Board as to Executive's
Disability shall be based on such competent medical evidence as shall be
presented to it by Executive or by any physician or group of physicians or other
competent medical experts employed by Executive or Employer to advise the Board.
(b) Termination by Employer for Cause. Executive's employment with
---------------------------------
Employer may be terminated by Employer for Cause (as defined below), provided
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that Executive shall be permitted to attend a meeting of the Board within 30
days after delivery to him of a Notice of Termination (as defined below)
pursuant to this Section 7(b) to explain why he should not be terminated for
Cause and, if following any such explanation by Executive, the Board determines
that Employer does not have Cause to terminate Executive's employment, any such
prior Notice of Termination delivered to Executive shall thereupon be withdrawn
and of no further force or effect. "Cause" shall mean (i) the willful failure
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of Executive substantially to perform his duties hereunder (other than any such
failure due to Executive's physical or mental illness) or other willful and
material breach by Executive of any of his obligations hereunder, after a
written demand for substantial performance has been delivered, and a reasonable
opportunity to cure has been given, to Executive by the Board, which demand
identifies in reasonable detail the manner in which the Board believes that
Executive has not substantially performed his duties or has breached his
obligations, (ii) Executive's dishonesty or engaging in willful and serious
--
misconduct, which misconduct has caused or is reasonably expected to result in
direct or indirect material injury to Employer or any of its Affiliates or (iii)
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Executive's conviction of, or entering a plea of guilty or nolo contendere to, a
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crime that constitutes a felony.
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(c) Termination Without Cause. A termination "Without Cause" shall
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mean a termination of Executive's employment by Employer other than due to
Disability as described in Section 7(a) or for Cause as described in Section
7(b).
(d) Termination by Executive. Executive may terminate his employment
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for any reason. A termination of employment by Executive for "Good Reason"
shall mean a termination by Executive of his employment with Employer within 30
days following the occurrence, without Executive's consent, of any of the
following events: (i) the assignment to Executive of (x) a title that is
- -
different from, and a diminution from, the title specified in Section 2 or (y)
-
duties that are significantly different from, and that result in a substantial
diminution of, the duties specified in Section 2 or that he is to assume on the
Commencement Date, (ii) the failure of Employer to obtain the assumption of this
--
Amended Agreement by any Successor (as defined below) to Employer as
contemplated by Section 14, (iii) a reduction in the rate of Executive's Base
---
Salary, (iv) a material reduction in the aggregate level of employee and
--
executive benefits provided to Executive pursuant to Section 5 hereof, (v)
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Employer's delivery to Executive of a Non-Extension Notice or (vi) a relocation
--
of Executive's principal place of business to a location beyond a radius of 30
miles from the location of such place of business on the Commencement Date,
provided that, within 30 days following the occurrence of any of the events set
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forth therein, Executive shall have delivered written notice to Employer of his
intention to terminate his employment for Good Reason, which notice specifies in
reasonable detail the circumstances claimed to give rise to Executive's right to
terminate his employment for Good Reason, and Employer shall not have cured such
circumstances to the reasonable satisfaction of Executive.
(e) Notice of Termination. Any termination of Executive's employment
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hereunder by Employer pursuant to Section 7(a), 7(b) or 7(c), or by Executive
pursuant to Section 7(d), shall be communicated by a written Notice of
Termination addressed to the other. A "Notice of Termination" shall mean a
notice stating that Executive's employment with Employer has been or will be
terminated and setting forth the provisions hereof pursuant to which such
employment has or will be terminated.
(f) Payments Upon Certain Terminations.
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(i) In the event of a termination of Executive's employment by
Employer Without Cause or a termination by Executive of his employment for Good
Reason during the Employment Period, Employer shall pay to Executive his full
Base Salary through the Date of Termination and an amount equal to the pro rata
amount of annual incentive compensation for the portion of the fiscal year
preceding the Date of Termination that would have been payable to Executive
pursuant to Section 4(a) if he had
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remained employed for the entire fiscal year, determined on the basis of the
actual performance achieved by Employer through the Date of Termination and the
performance objectives established for such fiscal year, pro rated to reflect
the calculation of such annual incentive compensation for the portion of the
fiscal year preceding the Date of Termination. In addition, in the event of any
such termination, Employer shall pay or, in the case of the Continued Benefits
(as defined below), provide to Executive (or, following his death, to
Executive's designated beneficiary or beneficiaries), as liquidated damages,
(A) his Average Base Salary (as defined below), which shall be
payable in installments on Employer's regular payroll dates, for the period
beginning on the Date of Termination (as defined below) and ending on the
second anniversary of the Date of Termination (such period, the "Severance
Period") and
(B) on the last day of each calendar month included in the Severance
Period, an amount equal to one-twelfth of the Average Annual Bonus (as
defined below); and
(C) continued coverage for Executive and his eligible dependents
under Employer's medical insurance plans referred to in Section 5 (the
"Continued Benefits") during the period commencing on the Termination Date
and ending on the earlier of (i) Executive's 65th birthday and (ii) the
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date of Executive's death, subject to timely payment by Executive of all
premiums, contributions and other co-payments required to be paid by senior
executives of Employer under the terms of such plans as in effect from time
to time;
provided that Employer may, at any time, pay to Executive, in a single lump sum
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and in satisfaction of Employer's obligations under clauses (A) and (B) of this
Section 7(f)(i), an amount equal to the present value (as determined by Employer
using a discount rate equal to the then prevailing applicable federal short-term
rate under section 1274(d) of the Internal Revenue Code of 1986, as amended) of
the sum of the installments of the Average Base Salary and Average Annual Bonus
then remaining to be paid to Executive pursuant to clauses (A) and (B) above.
Executive shall not have a duty to mitigate the costs to Employer
under this Section 7(f)(i), except that (i) payments of Base Salary and Average
-
Annual Bonus will be reduced, but not below zero, by the amount of any
compensation earned by Executive (whether paid currently or deferred) during any
portion of the Severance Period from any subsequent employer or other Person (as
defined in Section 17(k) below) for which Executive performs services, including
but not limited to consulting services, and (ii) Continued Benefits shall be
--
reduced or canceled if comparable medical benefit
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coverage is provided or offered to Executive by any subsequent employer or other
Person for which Executive performs services, including but not limited to
consulting services, at any time after the Date of Termination.
The term "Average Annual Bonus" means the average of the annual
bonuses paid to Executive pursuant to Employer's annual incentive compensation
plan for each of the three fiscal years of Employer ending immediately prior to
the Date of Termination or, if fewer, each of such fiscal years during which
Executive was at any time employed by Employer and the term "Average Base
Salary" means the average of the annual base salary rate of Executive in effect
immediately prior to the Date of Termination and as of the last day of each of
the two fiscal years of Employer ending immediately prior to the Date of
Termination or, if fewer, each of such fiscal years during which Executive was
at any time employed by Employer; provided that if Executive's employment is
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terminated by Executive pursuant to clause (iii) of the definition of Good
Reason, Executive's annual base salary rate in effect immediately prior to any
reduction thereof shall be substituted for Executive's annual base salary rate
in effect immediately prior to the Date of Termination in calculating the
Average Base Salary.
(ii) If Executive's employment shall terminate upon his death or
Disability or if Employer shall terminate Executive's employment for Cause or
Executive shall terminate his employment without Good Reason during the
Employment Period, Employer shall pay Executive his full Base Salary through the
Date of Termination and, in the case of any such termination upon Executive's
death or Disability, Executive shall be entitled to receive (x) a cash payment
-
equal to the pro rata amount of annual incentive compensation for the portion of
the fiscal year preceding the Date of Termination (exclusive of any time between
the onset of a physical or mental disability that prevents the performance by
Executive of his duties hereunder and the resulting Date of Termination) that
would have been payable to Executive pursuant to Section 4(a) if he had remained
employed for the entire fiscal year, determined on the basis of the actual
performance achieved by Employer through the Date of Termination and the
performance objectives established for such fiscal year, pro rated to reflect
the calculation of such annual incentive compensation for the portion of the
fiscal year preceding the Date of Termination and (y) such death or Disability
-
benefits, as applicable, as are provided under the terms of any employee and
executive death benefit and disability plans and programs referred to in Section
5 or 6(a).
(iii) Except as specifically set forth in this Section 7(f), Executive
shall be entitled to receive all amounts payable and benefits accrued under any
otherwise applicable plan, policy, program or practice of Employer in which
Executive was a participant during his employment with Employer (including,
without limitation,
13
Employer's 401(k) Savings Plan and Supplemental 401(k) Savings Plan) in
accordance with the terms thereof, provided that Executive shall not be entitled
to receive any payments or benefits under any such plan, policy, program or
practice providing any bonus or incentive compensation or severance compensation
or benefits (and the provisions of this Section 7(f) shall supersede the
provisions of any such plan, policy, program or practice).
(g) Date of Termination. As used in this Amended Agreement, the term
-------------------
"Date of Termination" shall mean (i) if Executive's employment is terminated by
-
his death, the date of his death, (ii) if Executive's employment is terminated
--
by Employer for Cause, the date on which Notice of Termination is given as
contemplated by Section 7(e) or, if later, the date of termination specified in
such Notice, and (iii) if Executive's employment is terminated by Employer
---
Without Cause, due to Executive's Disability or by Executive for any reason, the
date that is 30 days after the date on which Notice of Termination is given as
contemplated by Section 7(e) or, if no such Notice is given, immediately upon
the termination of Executive's employment.
(h) Resignation upon Termination. Effective as of any Date of
----------------------------
Termination under this Section 7 or otherwise as of the date of Executive's
termination of employment with Employer, Executive shall resign, in writing,
from all Board memberships and other positions then held by him with Employer
and its Affiliates.
(i) Limit on Payments by the Company.
--------------------------------
(i) Notwithstanding any provision of this Amended Agreement other
than Section 7(i)(vi) below , in the event that any amount or benefit paid,
payable or distributed to Executive pursuant to this Amended Agreement which is
a parachute payment as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), taken together with any amounts or benefits
otherwise paid, payable or distributed to Executive by Employer or any Affiliate
thereof which are parachute payments as defined in Section 280G of the Code
(collectively, the "Covered Payments"), would be an "excess parachute payment"
as defined in Section 280G of the Code, and would thereby subject Executive to
the tax (the "Excise Tax") imposed under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the provisions of this Section 7(i)
shall apply to determine the amounts payable to Executive pursuant to Section
7(f) of this Amended Agreement.
(ii) Immediately following delivery of any Notice of Termination, the
Company shall notify Executive of the aggregate present value of all termination
benefits to which he would be entitled under this Amended Agreement and any
other plan,
14
program or arrangement as of the projected Date of Termination, together with
the projected maximum payments, determined as of such projected Date of
Termination that could be paid without Executive being subject to the Excise
Tax.
(iii) If the aggregate value of all parachute payments to be paid or
provided to Executive under this Amended Agreement and any other plan, agreement
or arrangement with Employer or any Affiliate thereof exceeds the amount of
parachute payments which can be paid to Executive without Executive incurring an
Excise Tax, then the amounts payable to Executive under Section 7(f) shall be
reduced (but not below zero) to the maximum amount which may be paid hereunder
without Executive becoming subject to such an Excise Tax (such amount to be
referred to as the "Payment Cap"). In the event that Executive receives reduced
payments and benefits hereunder, Executive shall have the right to designate
which of the payments and benefits otherwise provided for in Section 7(f) of
this Amended Agreement he will receive in connection with the application of the
Payment Cap.
(iv) For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of such Excise Tax,
(A) (x) whether any amount or benefit paid, payable or distributed
to Executive is a "parachute payment" within the meaning of Section
280G of the Code, and (y) whether there are "parachute payments" in
excess of the "base amount" (as defined under Section 280G(b)(3) of
the Code) shall be determined in good faith by Employer's independent
certified public accountants or tax counsel selected by such
accountants (the "Accountants"), provided however that payments or
benefits made or provided to Executive pursuant to Sections 3 through
6 of this Amended Agreement in respect of periods of Executive's
employment with Employer (other than any amount attributable to the
acceleration of any Prior Options) shall not be treated as parachute
payments, and
(B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.
(v) If Executive receives reduced payments and benefits as a result
of the provisions of this Section 7(i) (or this Section 7(i) is determined not
to be applicable to Executive because the Accountants conclude that Executive is
not subject to any Excise Tax) and it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding (a "Final
Determination") that, notwithstanding the good
15
faith of Executive and Employer in applying the terms of this Amended Agreement,
the aggregate "parachute payments" within the meaning of Section 280G of the
Code paid to Executive or for his benefit are in an amount that would result in
Executive's being subject to an Excise Tax, then any amounts actually paid to or
on behalf of Executive which are treated as excess parachute payments shall be
deemed for all purposes to be a loan to Executive made on the date of receipt of
such excess payments, which Executive shall have an obligation to repay to
Employer on demand, together with interest on such amount at the applicable
Federal rate (as defined in Section 1274(d) of the Code) from the date of the
payment hereunder to the date of repayment by Executive. If Executive receives
reduced payments and benefits by reason of this Section 7(i) and it is
established pursuant to a Final Determination that Executive could have received
a greater amount without exceeding the Payment Cap, then Employer shall promptly
thereafter pay Executive the aggregate additional amount which could have been
paid without exceeding the Payment Cap, together with interest on such amount at
the applicable Federal rate (as defined in Section 1274(d) of the Code) from the
original payment due date to the date of actual payment by Employer.
(vi) Notwithstanding anything else contained in this Section 7(i) to
the contrary, nothing in this Section 7(i) shall be construed to limit the
Company's obligation to make any payment to Executive with respect to any
Excess Liability determined pursuant to Section 4(c) above.
8. Unauthorized Disclosure. During the period of Executive's
-----------------------
employment with Employer and the ten year period following any termination of
such employment, without the prior written consent of the Board or its
authorized representative, except to the extent required by an order of a court
having jurisdiction or under subpoena from an appropriate government agency, in
which event, Executive shall use his best efforts to consult with the Board
prior to responding to any such order or subpoena, and except as required in the
performance of his duties hereunder, Executive shall not disclose any
confidential or proprietary trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including but not
limited to data and other information relating to members of the Board or the
Board of Directors of any of Employer's Affiliates or to management of Employer
or any of its Affiliates), operating policies or manuals, business plans,
financial records, packaging design or other financial, commercial, business or
technical information (a) relating to Employer or any of its Affiliates or (b)
- -
that Employer or any of its Affiliates may receive belonging to suppliers,
customers or others who do business with Employer or any of its Affiliates
(collectively, "Confidential Information") to any third person unless such
Confidential Information has
16
been previously disclosed to the public or is in the public domain (other than
by reason of Executive's breach of this Section 8).
9. Non-Competition. During the period of Executive's employment with
---------------
Employer and, following any termination thereof, the period ending on the second
anniversary of the Date of Termination (such periods, collectively, the
"Restriction Period"), Executive shall not, directly or indirectly, become
employed in an executive capacity by, engage in business with, serve as an agent
or consultant to, or become a partner, member, principal or stockholder (other
than a holder of less than 5% of the outstanding voting shares of any publicly
held company) of, any Person that competes or has a reasonable potential for
competing, anywhere in the world, with any part of the business of Employer or
any of its Subsidiaries (as defined below). For purposes of this Section 9, the
phrase employment "in an executive capacity" shall mean employment in any
position in connection with which Executive has or reasonably would be viewed as
having powers and authorities with respect to any other Person or any part of
the business thereof that are substantially similar, with respect thereto, to
the powers and authorities assigned to the Corporate Vice President or any
superior executive officer of Employer or to the President or Chief Executive
Officer of TTC in the By-Laws of Employer or TTC, as applicable, as in effect on
the date hereof, a copy of the relevant portions of which have been delivered to
Executive on or before the date hereof, and which Executive hereby confirms that
he has reviewed.
Notwithstanding the foregoing, in the event that, as a result of the
operation of the provisions of Section 7(i), payments of Average Base Salary and
Average Annual Bonus otherwise required to be paid to Executive for the entire
Severance Period are paid to Executive for a period of less than two years
following the applicable Date of Termination, the Restriction Period shall
expire as of the later of (i) the date such payments of Average Base Salary and
-
Average Annual Bonus cease (or, if Employer elects to pay Executive a lump sum
amount pursuant to Section 7(f)(i), the date such payments would have ceased had
such payments continued to be made in installments) and (ii) the first
--
anniversary of the Date of Termination.
10. Non-Solicitation of Employees. During the Restriction Period,
-----------------------------
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the world, (i) solicit for employment,
-
employ or otherwise interfere with the relationship of Employer or any of its
Affiliates with any natural person throughout the world who is or was employed
by or otherwise engaged to perform services for Employer or any of its
Affiliates at any time during which Executive was employed by Employer (in the
case of any such activity during such time) or during the six-month period
preceding such solicitation, employment or interference (in the case of any such
activity after the Date of Termination), other than any such solicitation or
17
employment on behalf of Employer or any of its Affiliates during Executive's
employment with Employer, or (ii) induce any employee of Employer or any of its
--
Affiliates who is a member of management to engage in any activity which
Executive is prohibited from engaging in under any of Sections 8, 9, 10 or 11 or
to terminate his employment with Employer.
11. Non-Solicitation of Customers. During the Restriction Period,
-----------------------------
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the world, solicit or otherwise attempt
to establish any business relationship of a nature that is competitive with the
business or relationship of Employer or any of its Affiliates with any Person
throughout the world which is or was a customer, client or distributor of
Employer or any of its Affiliates at any time during which Executive was
employed by Employer (in the case of any such activity during such time) or
during the twelve-month period preceding the Date of Termination (in the case of
any such activity after the Date of Termination), other than any such
solicitation on behalf of Employer or any of its Affiliates during Executive's
employment with Employer.
12. Return of Documents. In the event of the termination of
-------------------
Executive's employment for any reason, Executive shall deliver to Employer all
of (a) the property of each of Employer and its Affiliates and (b) the non-
- -
personal documents and data of any nature and in whatever medium of each of
Employer and its Affiliates, and he shall not take with him any such property,
documents or data or any reproduction thereof, or any documents containing or
pertaining to any Confidential Information.
13. Injunctive Relief with Respect to Covenants; Forum, Venue and
-------------------------------------------------------------
Jurisdiction. Executive acknowledges and agrees that the covenants, obligations
- ------------
and agreements of Executive contained in Sections 8, 9, 10, 11, 12 and 13 relate
to special, unique and extraordinary matters and that a violation of any of the
terms of such covenants, obligations or agreements will cause Employer
irreparable injury for which adequate remedies are not available at law.
Therefore, Executive agrees that Employer shall be entitled to an injunction,
restraining order or such other equitable relief (without the requirement to
post bond) as a court of competent jurisdiction may deem necessary or
appropriate to restrain Executive from committing any violation of such
covenants, obligations or agreements. These injunctive remedies are cumulative
and in addition to any other rights and remedies Employer may have. Employer
and Executive hereby irrevocably submit to the exclusive jurisdiction of the
courts of Massachusetts and the Federal courts of the United States of America,
in each case located in Boston, Massachusetts, in respect of the injunctive
remedies set forth in this Section 13 and the interpretation and enforcement of
Sections 8, 9, 10, 11, 12 and 13 insofar as such interpretation and enforcement
relate to any request or application for injunctive relief in
18
accordance with the provisions of this Section 13, and the parties hereto hereby
irrevocably agree that (a) the sole and exclusive appropriate venue for any suit
-
or proceeding relating solely to such injunctive relief shall be in such a
court, (b) all claims with respect to any request or application for such
-
injunctive relief shall be heard and determined exclusively in such a court, (c)
-
any such court shall have exclusive jurisdiction over the person of such parties
and over the subject matter of any dispute relating to any request or
application for such injunctive relief, and (d) each hereby waives any and all
-
objections and defenses based on forum, venue or personal or subject matter
jurisdiction as they may relate to an application for such injunctive relief in
a suit or proceeding brought before such a court in accordance with the
provisions of this Section 13.
Notwithstanding any other provision hereof, (i) Executive's
-
obligations under Sections 9, 10 and 11 are subject to timely payment by
Employer of the amounts, if any, required to be paid to Executive pursuant to
Section 7(f) (taking into account any reduction in such amounts permitted under
Section 7(i)) and (ii) Employer's obligations to pay Executive any amount
--
pursuant to Section 7(f) is subject to Executive's compliance with his
obligations under Sections 9, 10 and 11.
14. Assumption of Agreement. Employer shall require any Successor
-----------------------
thereto, by agreement in form and substance reasonably satisfactory to
Executive, to expressly assume and agree to perform this Amended Agreement in
the same manner and to the same extent that Employer would be required to
perform it if no such succession had taken place.
15. Entire Agreement; Termination of Prior Agreement. This Amended
------------------------------------------------
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof. All prior correspondence and proposals (including
but not limited to summaries of proposed terms) and all prior promises,
representations, understandings, arrangements and agreements relating to such
subject matter (including but not limited to those made to or with Executive by
any other Person and those contained in the Prior Agreement or any other prior
employment, consulting or similar agreement entered into by Executive and
Employer or any predecessor thereto or Affiliate thereof) are merged herein and
superseded hereby.
Executive and Employer each acknowledges and agrees that the Prior
Agreement is hereby terminated in its entirety and shall be of no further force
or effect, without any payment or other consideration to or in respect of
Executive.
19
16. Indemnification. Employer hereby agrees that, notwithstanding
---------------
the fact that Employer is a Massachusetts corporation, Employer shall indemnify
and hold harmless Executive to the fullest extent permitted by Delaware law, as
if Employer were a Delaware corporation, from and against any and all
liabilities, costs, claims and expenses, including all costs and expenses
incurred in defense of litigation (including attorneys' fees), arising out of
the employment of Executive hereunder, it being understood that there shall be
no indemnification in respect of any claim arising out of or based upon
Executive's gross negligence or willful misconduct. Costs and expenses incurred
by Executive in defense of such litigation (including attorneys' fees) shall be
paid by Employer in advance of the final disposition of such litigation upon
receipt by Employer of (a) a written request for payment, (b) appropriate
- -
documentation evidencing the incurrence, amount and nature of the costs and
expenses for which payment is being sought, and (c) an undertaking adequate
-
under Massachusetts law made by or on behalf of Executive to repay the amounts
so paid if it shall ultimately be determined that Executive is not entitled to
be indemnified by Employer under this Amended Agreement, including but not
limited to as a result of such exception.
17. Miscellaneous.
-------------
(a) Binding Effect; Assignment. This Amended Agreement shall be
--------------------------
binding on and inure to the benefit of Employer, and its successors and
permitted assigns. This Amended Agreement shall also be binding on and inure to
the benefit of Executive and his heirs, executors, administrators and legal
representatives. This Amended Agreement shall not be assignable by any party
hereto without the prior written consent of the other, except as provided
pursuant to this Section 17(a). Employer may effect such an assignment without
prior written approval of Executive upon the transfer of all or substantially
all of its business and/or assets (by whatever means), provided that the
--------
Successor to Employer shall expressly assume and agree to perform this Amended
Agreement in accordance with the provisions of Section 14.
(b) Governing Law. This Amended Agreement shall be governed by and
-------------
construed in accordance with the laws of Massachusetts without reference to
principles of conflicts of laws.
(c) Taxes. Employer may withhold from any payments made under this
-----
Amended Agreement all applicable taxes, including but not limited to income,
employment and social insurance taxes, as shall be required by law.
(d) Amendments. No provision of this Amended Agreement may be
----------
modified, waived or discharged unless such modification, waiver or discharge is
approved
20
by the Board or a Person authorized thereby and is agreed to in writing by
Executive. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this Amended
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 waiver of any provision of this Amended Agreement shall be
implied from any course of dealing between or among the parties hereto or from
any failure by any party hereto to assert its rights hereunder on any occasion
or series of occasions.
(e) Severability. In the event that any one or more of the
------------
provisions of this Amended Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
(f) Notices. Any notice or other communication required or permitted
-------
to be delivered under this Amended Agreement shall be (i) in writing, (ii)
- --
delivered personally, by courier service or by certified or registered mail,
first-class postage prepaid and return receipt requested, (iii) deemed to have
---
been received on the date of delivery or, if so mailed, on the third business
day after the mailing thereof, and (iv) addressed as follows (or to such other
--
address as the party entitled to notice shall hereafter designate in accordance
with the terms hereof):
(A) If to Employer, to it at:
Dynatech Corporation
Corporate Headquarters
3 New England Executive Park
Burlington, MA 01803
Attention: General Counsel
---------
(B) if to Executive, to him at his residential address as currently
on file with Employer.
Copies of any notices or other communications given under this Amended Agreement
shall also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention:
---------
21
Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention:
---------
Franci J. Blassberg, Esq.
and
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention:
---------
Peter Tarr, Esq.
(g) Voluntary Agreement. Executive represents that he is entering
-------------------
into this Amended Agreement voluntarily and that his employment hereunder and
compliance with the terms and conditions of this Amended Agreement will not
conflict with or result in the breach by him of any agreement to which he is a
party or by which he may be bound.
(h) Counterparts. This Amended Agreement may be executed in
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(i) Headings. The section and other headings contained in this
--------
Amended Agreement are for the convenience of the parties only and are not
intended to be a part hereof or to affect the meaning or interpretation hereof.
(k) Certain Definitions.
-------------------
"Affiliate": with respect to any Person, means any other Person that,
---------
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the first
Person is a Subsidiary, or another Subsidiary of a Person of which the first
Person is also a Subsidiary.
22
"Control": with respect to any Person, means the possession, directly
-------
or 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.
"Person": any natural person, firm, partnership, limited liability
------
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Subsidiary": with respect to any Person, each corporation or other
----------
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.
23
"Successor": of a Person means a Person that succeeds to the first
---------
Person's assets and liabilities by merger, liquidation, dissolution or otherwise
by operation of law, or a Person to which all or substantially all the assets
and/or business of the first Person are transferred.
IN WITNESS WHEREOF, Employer has duly executed this Amended Agreement
by its authorized representative, and Executive has hereunto set his hand, in
each case effective as of the date first above written.
DYNATECH CORPORATION
By: /s/ John F. Reno
-----------------------------------
Name: John F. Reno
Title: Chief Executive Officer
Executive:
/s/ John R. Peeler
--------------------------------------
Name: John R. Peeler*
24