<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
[(Amendment No. ____)*]
Dynatech Corporation
--------------------
(Name of Company)
Common Stock
------------
(Title of Class of Securities)
268140 10 0
-----------------------
(CUSIP Number)
Franci J. Blassberg
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
(212) 909-6000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 21, 1998
-----------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of (S)(S) 240.13d-1(3), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See (S) 240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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Page 2 of __ Pages
CUSIP NO. 959910 10 0 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Clayton, Dubilier & Rice Fund V Limited Partnership
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 110,790,770
PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
110,790,770
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,790,770
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
92.1%
14 TYPE OF REPORTING PERSON
PN
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Page 3 of __ Pages
CUSIP NO. 959910 10 0 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CD&R Associates V Limited Partnership
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 110,790,770
PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
110,790,770
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,790,770
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
92.1%
14 TYPE OF REPORTING PERSON
PN
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Page 4 of __ Pages
CUSIP NO. 959910 10 0 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CD&R Investment Associates II, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7 SOLE VOTING POWER
NUMBER OF
SHARES -------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 110,790,770
REPORTING -------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
110,790,770
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,790,770
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
92.1%
14 TYPE OF REPORTING PERSON
CO
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Page 5 of __ Pages
CUSIP NO. 959910 10 0 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CD&R Cayman Investment Associates, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 110,790,770
PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
110,790,770
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,790,770
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
92.1%
14 TYPE OF REPORTING PERSON
CO
<PAGE>
Page 6 of __ Pages
CUSIP NO. 959910 10 0 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CD&R Investment Associates, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 110,790,770
PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
110,790,770
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
110,790,770
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
92.1%
14 TYPE OF REPORTING PERSON
CO
<PAGE>
Page 7 of __ Pages
Statement on Schedule 13D
The Statement on Schedule 13D (this "Schedule 13D") relates to the
beneficial ownership of the common stock, no par value (the "Shares"), of
Dynatech Corporation, a Massachusetts corporation (the "Company"). This
Statement is being filed on behalf of the Reporting Persons (as defined below).
ITEM 1. SECURITY AND COMPANY.
--------------------
The class of equity securities to which this statement relates is the
Shares issued by the Company, which has its principal executive office at 3 New
England Executive Park, Burlington, Massachusetts 01803.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
(a) Reference is made to Rows 1 and 6 of the cover pages for the names
and citizenship or place of organization, respectively, of the persons filing
this Schedule 13D (the "Reporting Persons" and individually a "Reporting
Person").
The following persons are directors or executive officers of CD&R
Investment Associates II, Inc. ("Associates II Inc."):
Joseph L. Rice, III
Charles Ames
Donald J. Gogel
William A. Barbe
Brian D. Finn
Charles P. Pieper
Kevin J. Conway
Michael G. Barbiarz
Christopher Mackenzie
The following persons are directors or executive officers of CD&R
Cayman Investment Associates, Inc. ("Associates Cayman Inc."):
Joseph L. Rice, III
Donald J. Gogel
The following persons are directors or executive officers of CD&R
Investment Associates, Inc. ("Associates Inc."):
Joseph L. Rice, III
Charles Ames
Donald J. Gogel
William A. Barbe
Kevin J. Conway
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Page 8 of __ Pages
(b) The business address for each of the following persons listed in
Item 2, is c/o Clayton Dubilier and Rice, Inc., 375 Park Avenue, New York, New
York 10125:
Messrs. Rice, Ames, Gogel, Barbe, Finn, Pieper, Conway and
Barbiarz.
The business address for Christopher Mackenzie is c/o Clayton Dubilier
and Rice, Ltd, 45 Berkeley Street, London WIAWEB:
The business address for each of the following persons listed in Item
2 is located at 1403 Foulk Road, Suite 106, Wilmington DE 19803:
Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V"),
CD&R Associates V Limited Partnership ("Associates V"), Associates II, Inc. and
Associates, Inc.
The business address for Associates Cayman Inc. is located at Ugland
House, South Church Street, Grand Cayman, Cayman Islands BWI.
Fund V is a private investment fund. Associates V is the general
partner of Fund V.Associates II, Inc. is the managing partner of Associates V.
Associates Cayman Inc. and Associates Inc. are also general partners of
Associates V.
(c) No person listed in Item 2 of this Schedule 13D has been convicted
during the last five years in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(d) No person listed in Item 2 of this Schedule 13D has been during
the last five years a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
is or has been subject to any civil judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation in respect to such laws.
(e) All natural persons listed in Item 2 of this Schedule 13D are
citizens of the United States, except for Christopher Mackenzie who is a citizen
of the United Kingdom. Fund V, Associates V, Associates II, Inc. and Associates
Cayman Inc. are organized under the laws of the Cayman Islands and Associates,
Inc. is organized under the laws of Delaware.
<PAGE>
Page 9 of __ Pages
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
-------------------------------------------------
On December 19, 1997, the Board of Directors of the Company approved
the acquisition by Fund V, by way of the merger (the "Merger") of CDRD Merger
Corporation, a Delaware corporation formed by Fund V ("MergerCo"), with and into
the Company, of 110,790,770 Shares, pursuant to the Agreement and Plan of
Merger, dated as of December 20, 1997, between the Company and MergerCo (the
"Merger Agreement"). A copy of the Merger Agreement is attached as Exhibit 1 to
this Schedule 13D and is incorporated herein by reference. The aggregate
purchase price of the 110,790,770 Shares was $277,000,000. Fund V obtained such
funds from a capital contribution from its partners.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
The Shares have been acquired by the Reporting Persons for investment
purposes. The Reporting Persons may sell some or all of the Shares either in the
open market or in private transactions depending on their evaluation of the
Company's business, prospects and financial condition, the market for the
Shares, other opportunities available to the Reporting Persons, prospects for
the Reporting Persons' own businesses, general economic conditions and stock
market conditions and other further developments. Depending on the same factors,
the Reporting Persons may decide to make additional purchases of Shares.
The Reporting Persons have no present plans or proposals which relate
to or would result in any of the actions described in Item 4(a) through (j) of
Schedule 13D under Rule 13d-1(a).
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY.
-------------------------------------
(a) Fund V is the direct beneficial owner of 110,790,770 Shares,
representing approximately 92.1% of the outstanding Shares (based on the number
of Shares outstanding on May 28, 1998).
(b) By virtue of its position as general partner of Fund V,
Associates V may be deemed to be the beneficial owner of all of the Shares in
which Fund V has direct beneficial ownership.
(c) By virtue of its position as a general partner of Associates V,
each of Associates Inc., Associates II, Inc. and Associates Cayman Inc. may be
deemed to be the beneficial owner of all of the Shares in which Fund V has
direct beneficial ownership.
(d) Each of Associates V, Associates Inc., Associates II Inc. and
Associates Cayman Inc. disclaims beneficial ownership of the Shares owned by
Fund V.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES
OF THE COMPANY.
--------------------------------------------------------------
At the closing of the Merger, Fund V, the Company and certain other
shareholders of the Company entered into a registration rights agreement, dated
as of May 21, 1998 (the "Registration
<PAGE>
Page 10 of __ Pages
Rights Agreement"), granting Fund V certain demand and piggy-back registration
rights with respect to the Shares. A copy of the Registration Rights Agreement
is attached as Exhibit 2 to this Schedule 13D and is incorporated herein by
reference.
In connection with the Merger, the Company and Fund V entered in
separate management equity agreements (collectively, the "Management Equity
Agreements), with 27 executives of the Company, including with John F. Reno,
Chairman, President and Chief Executive Officer of the Company, Allan M. Kline,
Corporate Vice President, Chief Financial Officer and Treasurer of the Company
and John R. Peeler, Corporate Vice President-Communications Test Business of the
Company. The Management Equity Agreements (i) restrict the ability of the
officer party thereto (the "Named Executive Officer") to transfer Shares
beneficially owned by him (other than certain permitted transfers for estate
planning purposes and transfers not exceeding in the aggregate a specified
amount of the Shares owned, or subject to options held by the Named Executive
Officer at the closing of the Merger), (ii) grant the Named Executive Officer
certain "tag along" rights which entitle the named Executive Officer to
participate in a proposed sale of Shares by Fund V prior to a Public Offering
(as defined in the Management Equity Agreements), (iii) grant Fund V certain
"drag along" rights which entitle Fund V to require the Named Executive Officer
to sell his Shares in a proposed sale of substantially all of Fund V's Shares
prior to a Public Offering, and (iv) grant the Company and Fund V the right,
following any termination of a Named Executive Officer's employment prior to a
Public Offering, to purchase the Named Executive Officer's Shares and options to
purchase Shares.
A copy of the Management Equity Agreement entered into with Mr. Reno
is attached as Exhibit 3 to this Schedule 13D. A copy of the form of Management
Equity Agreement entered into with Messrs. Kline and Peeler is attached as
Exhibit 4 to this Schedule 13D. A copy of the form of Management Equity
Agreement entered into with the other Named Executive Officers is attached as
Exhibit 5 to this Schedule 13D. Each such Exhibit is incorporated herein by
reference.
Except as described herein, none of the Reporting Persons have any
contracts, arrangements, understandings or relationships (legal or otherwise)
with each other or with any person with respect to any securities of the
Company, including but not limited to the transfer of any of the Shares,
finder's fees, joint ventures, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit 1 Agreement and Plan of Merger, dated December 20, 1997, between
the Company and MergerCo.
Exhibit 2 Registration Rights Agreement, dated as of October 15, 1991,
among Fund V, John F. Reno, The John F. Reno 1997 Qualified
Annuity Trust, The Suzanne D. Reno 1997 Qualified Annuity Trust
and the Company.
Exhibit 3 Management Equity Agreement with Mr. Reno.
Exhibit 4 Form of Management Equity Agreement with Messrs. Kline and
Peeler.
Exhibit 5 Form of Management Equity Agreement with certain other Officers.
Exhibit 6 Joint Filing Agreement, dated June 1, 1998, among Fund V,
Associates V, Associates Inc., Associates II Inc. and Associates
Cayman Inc.
<PAGE>
Page 11 of __ Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 1, 1998
CLAYTON, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V Limited
Partnership, the General Partner
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By:
------------------------------------
Name: Joseph L. Rice, III
Title: Chairman
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Page 12 of __ Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 1, 1998
CD&R ASSOCIATES V LIMITED
PARTNERSHIP
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By:
---------------------------------
Name: Joseph L. Rice, III
Title: Chairman
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Page 13 of __ Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 1, 1998
CD&R INVESTMENT ASSOCIATES II, INC.
By:
-------------------------------
Name: Joseph L. Rice, III
Title: Chairman
<PAGE>
Page 14 of __ Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 1, 1998
CD&R INVESTMENT ASSOCIATES, INC.
By:
----------------------------------------
Name: Joseph L. Rice, III
Title: Chairman
<PAGE>
Page 15 of __ Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 1, 1998
CD&R CAYMAN INVESTMENT ASSOCIATES, INC.
By:
-------------------------------
Name: Joseph L. Rice, III
Title: Managing Director
<PAGE>
Joint Filing Agreement
----------------------
In accordance with Rule 13d-1(f) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf of
each of them of a statement on Schedule 13D (including amendments thereto) with
respect to the common stock, no par value, of Dynatech Corporation and further
agree that this Joint Filing Agreement be included as an Exhibit to such joint
filings. In evidence thereof, the undersigned, being duly authorized, hereby
execute this Agreement this 1st day of June, 1998.
CLAYTON, DUBILIER & RICE CD&R INVESTMENT
FUND V LIMITED PARTNERSHIP ASSOCIATES, INC.
By: CD&R Associates V Limited By:
Partnership, the General Partner ---------------------------
Name: Joseph L. Rice, III
Title: Managing Director
By: CD&R Investment Associates
II, Inc., its managing general
partner
CD&R Cayman Investment
By: Associates, Inc.
----------------------------
Name: Joseph L. Rice, III By:
Title: Chairman --------------------------
Name: Joseph L. Rice, III
Title: Chairman
CD&R ASSOCIATES V LIMITED
PARTNERSHIP, THE GENERAL
PARTNER
By: CD&R Investment Associates II, Inc.,
its managing general partner
By:
----------------------------
Name: Joseph L. Rice, III
Title: Chairman
CD&R INVESTMENT ASSOCIATES
II, INC.
By:
----------------------------
Name: Joseph L. Rice, III
Title: Chairman
<PAGE>
EXHIBIT 1
Execution Copy
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
DYNATECH CORPORATION
and
CDRD MERGER CORPORATION
dated as of
December 20, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER.............................................................1
Section 1.1 The Merger................................................1
Section 1.2 Effective Time............................................2
Section 1.3 Closing...................................................2
Section 1.4 Articles of Organization; By-Laws.........................2
Section 1.5 Directors and Officers of the Surviving
Corporation.....................................................3
ARTICLE II
CONVERSION OF SHARES...................................................3
Section 2.1 Conversion of Capital Stock...............................3
Section 2.2 Exchange of Certificates..................................4
Section 2.3 Options...................................................7
Section 2.4 Dissenting Shares.........................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................8
Section 3.1 Organization..............................................8
Section 3.2 Capitalization............................................9
Section 3.3 Authorization; Validity of Agreement.....................11
Section 3.4 No Violations; Consents and Approvals....................12
Section 3.5 SEC Reports and Financial Statements.....................13
Section 3.6 Absence of Certain Changes...............................14
Section 3.7 Absence of Undisclosed Liabilities.......................14
Section 3.8 Information in Form S-4;
Proxy Statement; Exchange Act Schedules........................14
Section 3.9 Employee Benefit Plans; ERISA............................15
Section 3.10 Litigation; Compliance with Law.........................17
Section 3.11 Intellectual Property...................................18
Section 3.12 Contracts...............................................19
Section 3.13 Taxes...................................................22
Section 3.14 Environmental Matters...................................23
Section 3.15 Required Vote by Company
Stockholders...................................................24
Section 3.16 Brokers.................................................24
<PAGE>
Section 3.17 Opinions of Financial Advisors..........................24
Section 3.18 Assets..................................................25
Section 3.19 Real Property...........................................26
Section 3.20 Insurance...............................................26
Section 3.21 Labor Matters, etc......................................27
Section 3.22 Disclosure..............................................27
Section 3.23 Rights Agreement........................................27
Section 3.24 Takeover Statutes.......................................27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO............................28
Section 4.1 Organization.............................................28
Section 4.2 Authorization;
Validity of Agreement..........................................28
Section 4.3 Consents and Approvals; No Violations....................29
Section 4.4 Information in Form S-4;
Proxy Statement; Exchange Act Schedules........................30
Section 4.5 Financing................................................31
Section 4.6 Beneficial Ownership of Shares...........................31
Section 4.7 Brokers..................................................31
Section 4.8 Formation of MergerCo;
No Prior Activities. . . . . . . . . . . . . . 31
ARTICLE V
COVENANTS.............................................................32
Section 5.1 Interim Operations of the Company........................32
Section 5.2 No Solicitation by the Company...........................35
Section 5.3 Access to Information....................................37
Section 5.4 Further Action;
Reasonable Best Efforts........................................38
Section 5.5 Employee Benefits........................................39
Section 5.6 Shareholders' Meeting; Form S-4;
Proxy Statement................................................39
Section 5.7 Notification of Certain Matters.........................42
Section 5.8 Directors' and Officers'
Insurance and Indemnification..................................42
Section 5.9 Publicity................................................43
Section 5.10 Shareholder Litigation..................................43
Section 5.11 Recapitalization........................................43
Section 5.12 Conveyance Taxes........................................44
Section 5.13 Delisting...............................................44
Section 5.14 Affiliates..............................................44
Section 5.15 Letter as to Solvency...................................45
ARTICLE VI
CONDITIONS............................................................45
ii
<PAGE>
Section 6.1 Conditions to Each Party's
Obligation To Effect the Merger................................45
Section 6.2 Conditions to the Obligation of the
Company to Effect the Merger...................................46
Section 6.3 Conditions to Obligations
of MergerCo to Effect the Merger...............................46
ARTICLE VII
TERMINATION...........................................................47
Section 7.1 Termination..............................................47
Section 7.2 Effect of Termination....................................49
ARTICLE VIII
MISCELLANEOUS.........................................................49
Section 8.1 Fees and Expenses........................................50
Section 8.2 Amendment; Waiver........................................51
Section 8.3 Survival.................................................52
Section 8.4 Notices..................................................52
Section 8.5 Interpretation...........................................54
Section 8.6 Headings; Schedules......................................54
Section 8.7 Counterparts.............................................54
Section 8.8 Entire Agreement; Third Party
Beneficiaries..................................................54
Section 8.9 Severability.............................................55
Section 8.10 Governing Law...........................................55
Section 8.11 Assignment..............................................55
iii
<PAGE>
SCHEDULES
Schedule 2.3 Company Stock Options
Schedule 3.1(a) Active Subsidiaries
Schedule 3.1(b) Other Subsidiaries
Schedule 3.2 (a) Capitalization
Schedule 3.2 (b) Ownership
Schedule 3.4 (a) No Violations; Consents and
Approvals
Schedule 3.4 (b) Filings by the Company
Schedule 3.6 Absence of Certain Changes
Schedule 3.7 Absence of Undisclosed Liabilities
Schedule 3.9 (b) Employee Benefit Plans
Schedule 3.9 (c) Severance Benefits
Schedule 3.10 (a) Litigation
Schedule 3.10 (b) Compliance with Laws
Schedule 3.11 Intellectual Property
Schedule 3.12 (a) Contracts
Schedule 3.13 Taxes
Schedule 3.14 (c) Environmental Matters
Schedule 3.18 Assets
Schedule 3.18 (b) Certain Liens
Schedule 3.19 (a)(i) Formerly Owned Property
Schedule 3.19 (a)(ii) Leases
Schedule 3.20 Insurance Policies
Schedule 4.3 (b) Filings by the MergerCo
Schedule 5.1 (iii) Interim Operations
EXHIBITS
Exhibit A Form of Articles of Organization of
Surviving Corporation
Exhibit B Form of Affiliates' Letter
iv
<PAGE>
TABLE OF DEFINED TERMS
---------------------
Term Section
- ---- -------
Acquiring Person 3.23
Active Subsidiaries 3.1
Aggregate Merger Consideration Value 2.3
Antitrust Division 5.4(b)
Articles of Merger 1.2
Articles of Organization 3.1
Assets 3.18(a)
Balance Sheet 3.7
Certificate of Merger 1.2
Certificates 2.2(b)
CD&R 8.1(b)
Closing 1.3
Closing Date 1.3
Code 3.9(b)(v)
Collective Bargaining Agreement 3.21
Company Recitals
Company Acquisition Agreement 5.2(b)
Company Authorized Preferred Stock 3.2(a)
Company Common Stock 2.1
Company Intellectual Property 3.11
Company Real Property 3.19
Company Reports 3.5
Company SEC Documents 3.5
Company Stock Options 2.3
Company Stock Plans 2.3
Company Superior Proposal 5.2(b)
Company Takeover Event 5.2(a)
Company Takeover Proposal 5.2(a)
Competition Laws 5.4(b)
Confidentiality Agreement 5.3
Consolidated Group 3.13(b)
Delaware Secretary of State 1.2
DGCL Recitals
Disclosure Schedule 3.1
Dissenting Shares 2.4
Distribution Date 3.23
Effective Time 1.2
Employee Stock Purchase Plan 2.3
Environmental Law 3.14(d)
ERISA Plans 3.9(a)
Evaluation Material 5.3
Exchange Act 3.4(b)
Exchange Agent 2.2(a)
Expenses 8.1(b)
Fee 8.1(b)
v
<PAGE>
Form S-4 3.8(a)
Formerly Owned Property 3.19
FTC 5.4(b)
Fund Recitals
GAAP 3.5
Governmental Entity 3.4(b)
Hazardous Materials 3.14(d)
HSR Act 5.4(b
Identified Contracts 3.12(a)
Indemnified Parties 5.8(a)
Intellectual Property 3.11
Laws 3.4(a)
Leased Real Property 3.19
Leases 3.19
Lien 3.18
Litigation 3.10(a)
Massachusetts Secretary of State 1.2
Material Adverse Effect 3.1
Material Contracts 3.12(a)
MBCL Recitals
Merger 1.1
MergerCo Recitals
MergerCo Common Stock 2.1
MergerCo Disclosure Schedule 4.3(b)
Merger Consideration 2.1(a)
New Certificates 2.2(a)
NYSE 2.3
Owned Real Property 3.19
Permits 3.10(c)
Permitted Liens 3.18(b)
Person 3.1
Plans 3.9(a)
Proxy Statement 5.6(a)
Real Property 3.19
Recapitalized Common Stock 2.1(b)
Registration Period 5.13
Representative 5.3
Rights 2.1
Rights Agreement 3.2(a)
Schedule 13E-3 5.6(c)
SEC 3.5
Securities Act 3.4(b)
September 30, 1997 Balance Sheet 3.18
Shares 2.1
Special Committee Recitals
Special Meeting 5.6(a)
Stock Acquisition Date 3.23
Subsidiary 3.1
Surviving Corporation 1.1
vi
<PAGE>
Takeover Statute 3.24
Tax Returns 3.13(b)
Taxes 3.13(b)
Triggering Event 3.23
viii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of December 20, 1997, by and between
Dynatech Corporation a Massachusetts corporation (the "Company"), and CDRD
Merger Corporation, a Delaware corporation ("MergerCo") formed by Clayton,
Dubilier & Rice Fund V Limited Partnership ("Fund").
WHEREAS, the Board of Directors of MergerCo has approved, and deems it
advisable and in the best interests of the stockholders of MergerCo to
participate in the recapitalization of the Company, upon the terms and subject
to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee"), has approved, and deems it advisable and in the best
interests of the shareholders of the Company to consummate, the recapitalization
of the Company, upon the terms and subject to the conditions set forth herein;
and
WHEREAS, in furtherance of such recapitalization, the Board of Directors of
MergerCo and the Board of Directors of the Company have each approved this
Agreement and the merger of MergerCo with and into the Company in accordance
with the terms of this Agreement, the Business Corporation Law of The
Commonwealth of Massachusetts (the "MBCL") and the Delaware General Corporation
Law (the "DGCL");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) Upon the terms and subject to the conditions of
----------
this Agreement and in accordance with the applicable provisions of the MBCL, at
the Effective Time (as defined in Section 1.2 hereof), MergerCo shall be merged
(the "Merger") with and into the Company and the separate corporate existence of
MergerCo
<PAGE>
shall cease. After the Merger, the Company shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the Commonwealth of
Massachusetts. The Merger shall have the effect as provided in the applicable
provisions of the MBCL and the DGCL. Without limiting the generality of the
foregoing, upon the Merger, all the rights, privileges, immunities, powers and
franchises of the Company and MergerCo shall vest in the Surviving Corporation
and all restrictions, obligations, duties, debts and liabilities of the Company
and MergerCo shall be the obligations, duties, debts and liabilities of the
Surviving Corporation.
Section 1.2 Effective Time. On or as promptly as practicable following the
--------------
Closing (as defined in Section 1.3), MergerCo and the Company will cause the
appropriate articles of merger (the "Articles of Merger") to be executed and
filed with the Secretary of State of the Commonwealth of Massachusetts (the
"Massachusetts Secretary of State") in such form and executed as provided in
Section 79 of the MBCL and the appropriate certificate of merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State of
the State of Delaware (the "Delaware Secretary of State") in such form and
executed as provided in Section 252(c) of the DGCL. The Merger shall become
effective on the date on which the Articles of Merger and the Certificate of
Merger have been duly filed with the Massachusetts Secretary of State and the
Delaware Secretary of State, respectively, or such time as is agreed upon by the
parties and specified in the Articles of Merger and the Certificate of Merger,
but not later than 30 days after such filings, and such time is hereinafter
referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the "Closing") will take
-------
place at 10:00 a.m., New York time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New
York 10022, unless another date or place is agreed to in writing by the parties
hereto.
Section 1.4 Articles of Organization; By-Laws. Pursuant to the Merger, (x)
---------------------------------
the restated articles of organization, as amended, of the Company in the form
attached as Exhibit A hereto, shall be the articles of
2
<PAGE>
organization of the Surviving Corporation until thereafter amended as provided
by applicable law and such articles of organization and (y) the By-laws of the
Company, as in effect immediately prior to the Effective Time, shall be the By-
laws of the Surviving Corporation until thereafter amended as provided by
applicable law, the articles of organization of the Surviving Corporation and
such By-laws.
Section 1.5 Directors and Officers of the Surviving Corporation.
---------------------------------------------------
(a) The directors of MergerCo immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's articles of organization and By-laws.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
---------------------------
virtue of the Merger and without any action on the part of the holders of any
shares of common stock, par value $.20 per share, of the Company (referred to
herein, together with the rights (the "Rights") associated therewith pursuant to
the Rights Agreement (as defined in Section 3.2(a)), the "Shares" or "Company
Common Stock") or the common stock, par value $.01 per share, of MergerCo (the
"MergerCo Common Stock"):
(a) Each issued and outstanding share of Company Common Stock (other than
(i) Shares to be cancelled in accordance with Section 2.1(c) and (ii)
--
Dissenting Shares covered by Section 2.4) shall be converted into the right to
receive (A) $47.75 in cash, payable to the holder thereof, without interest and
-
(B) 0.5 shares of Recapitalized Common Stock (as defined below) (collectively,
-
the "Merger Consideration"), upon surrender of the certificate formerly
representing such share of Company Common Stock in the
3
<PAGE>
manner provided in and otherwise in accordance with Section 2.2. All such shares
of Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in the manner
provided in and in accordance with Section 2.2.
(b) Each issued and outstanding share of MergerCo Common Stock shall be
converted into and become one fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation (the "Recapitalized
Common Stock").
(c) All shares of Company Common Stock that are held by the Company as
treasury stock or that are held by MergerCo shall be cancelled and retired and
shall cease to exist and no Merger Consideration shall be delivered in exchange
therefor.
Section 2.2 Exchange of Certificates.
------------------------
(a) Prior to the Effective Time, MergerCo shall designate the Company's
registrar and transfer agent, or The Chase Manhattan Bank (or any successor
thereto), or such other bank or trust company as may be approved in writing by
the Company (which approval shall not be unreasonably withheld), to act as
exchange agent for the holders of Shares in connection with the Merger, pursuant
to an agreement providing for the matters set forth in this Section 2.2 and such
other matters as may be appropriate and the terms of which shall be reasonably
satisfactory to the Company (the "Exchange Agent"), to receive the certificates
(the "New Certificates") representing the shares of the Recapitalized Common
Stock and the funds to which holders of Shares shall become entitled pursuant to
Section 2.1 (a). At the Effective Time, the Surviving Corporation will deposit
in trust with the Exchange Agent, for the benefit of holders of Company Common
Stock, (i) the funds necessary to complete the payments contemplated by Sections
-
2.1 (a) and 2.2(c) on a timely basis and (ii) the New Certificates.
--
(b) At the Effective Time, the Surviving Corporation will instruct the
Exchange Agent to promptly, and in any event not later than three business days
following the Effective Time, mail (and to make available
4
<PAGE>
for collection by hand) to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose Shares
were converted pursuant to Section 2.1 (a) into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
-
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as MergerCo and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
--
the Certificates in exchange for the Merger Consideration (which shall provide
that at the election of the surrendering holder, Certificates may be
surrendered, and payment therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by the Company, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for each share of Company
Common Stock formerly represented by such Certificate, to be mailed (or made
available for collection by hand if so elected by the surrendering holder)
within three business days of receipt thereof, and the Certificate so
surrendered shall forthwith be cancelled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate (other
than Certificates representing Dissenting Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration as contemplated by this Section 2.2.
(c) Notwithstanding the foregoing, no fractions of a share of Recapitalized
Common Stock shall be issued in the Merger, but in lieu thereof each holder of
Shares otherwise entitled to a fraction of a share of Recapitalized Common Stock
shall, upon surrender of his or her certificate
5
<PAGE>
or certificates, be entitled to receive an amount of cash (without interest)
determined by multiplying the fractional share interest to which such holder
would otherwise be entitled by an amount equal to $2.50.
(d) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article II,
provided that the Person (as defined in Section 3.1) to whom the Merger
- --------
Consideration is paid shall, as a condition precedent to the payment thereof,
give the Surviving Corporation a bond in such sum as it may direct or otherwise
indemnify the Surviving Corporation in a manner satisfactory to it against any
claim that may be made against the Surviving Corporation with respect to the
Certificate claimed to have been lost, stolen or destroyed.
(e) After the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no transfers on the stock transfer books of the
Surviving Corporation of Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
(f) Any portion of the funds deposited with the Exchange Agent (and the
proceeds of any interest and other income received by the Exchange Agent in
respect of all such funds) and any New Certificates that remain unclaimed by the
former stockholders of the Company six months after the Effective Time shall be
delivered to the Surviving Corporation. Any former shareholders of the Company
who have not theretofore complied with this Article II shall thereafter look
only to the Surviving Corporation for payment of any Merger Consideration that
may be payable upon surrender of any Certificates such shareholder holds, as
determined pursuant to this Agreement, without any interest thereon.
(g) None of MergerCo, the Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
6
<PAGE>
pursuant to applicable abandoned property, escheat or similar laws.
(h) Any payment made pursuant to this Section 2.2 shall be subject to and
made net of applicable withholding taxes.
Section 2.3 Options. The Board shall take all actions necessary or
-------
appropriate to cause all options to purchase Company Common Stock (individually,
a "Company Stock Option" and collectively, the "Company Stock Options") granted
to any current or former employee or director of the Company or any Subsidiary
under any of the Company's 1982 Incentive Stock Option Plan, 1992 Stock Option
Plan or 1994 Stock Option or Incentive Plan prior to the date hereof
(collectively, the "Company Stock Plans") and that are outstanding immediately
prior to the Effective Time to be fully vested and exercisable immediately prior
to the Effective Time in accordance with the terms of the Company Stock Plans
and the individual agreements evidencing such Company Stock Options. Each
Company Stock Option that is not exercised prior to the Effective Time shall,
subject to the consent of the holder thereof, be cancelled at the Effective Time
and, in consideration thereof, each holder of such a Company Stock Option will
be entitled to receive, for each share of Company Common Stock subject to such
Company Stock Option, an amount in cash equal to the excess, if any, of the sum
(such sum, the "Aggregate Merger Consideration Value") of (i) $47.75 and the
-
cash value of 0.5 shares of Recapitalized Common Stock, such cash value to be
$1.25, representing one half of the per share price paid by the Fund for a share
of common stock of MergerCo, over (ii) the per share exercise price for such
--
share of Company Common Stock, without interest. Amounts contributed on or prior
to March 31, 1998 for the purchase of Company Common Stock pursuant to the terms
of the Employee Stock Purchase Plan that have not theretofore been applied to
the purchase of such Company Common Stock in accordance with the terms of such
plan shall be applied to the purchase of such Company Common Stock immediately
prior to the Effective Time based on a purchase price per share equal to 85% of
the lesser of (x) the closing price per share of Company Common Stock on the New
York Stock Exchange ("NYSE") on October 1, 1997 and (y) the Aggregate Merger
Consideration Value, and the Employee Stock Purchase Plan shall be amended as
required by the proviso contained in Section 5.1(d)(ii) and shall be terminated
immediately following the consummation of the purchase of Company Common Stock
contemplated hereby. Each share of Company Common Stock issued in accordance
with the
7
<PAGE>
immediately preceding sentence shall be treated in the same manner as each
other share of Company Common Stock outstanding at the Effective Time. The
Company shall use its reasonable best efforts to obtain prior to the Effective
Time any consent of current or former employees and/or directors required to
effect the cancellation of options contemplated hereby. Notwithstanding the
foregoing, the Company Stock Options of the individuals listed on Schedule 2.3
(as such Schedule 2.3 may be amended from time to time after the date hereof and
prior to the Effective Time by MergerCo to include additional employees, with
the consent of each such additional employee) shall, in connection with the
Merger, be treated as set forth on Schedule 2.3. The amounts payable pursuant to
this Section 2.3 shall be paid as soon as reasonably practicable following the
Closing Date and shall be subject to and made net of all applicable withholding
taxes.
Section 2.4 Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by shareholders who have validly demanded
payment of the fair value for such shareholders' shares as determined by
appraisal in accordance with the MBCL (the "Dissenting Shares"), shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration provided in Section 2.1(a) of this Agreement, unless and until
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such holder's right to appraisal and payment under the MBCL. If such holder
shall have so failed to perfect or shall have effectively withdrawn or lost such
right, such holder's Shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the consideration provided for in Section 2.1 of this Agreement, without
any interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to MergerCo as of the date hereof that:
Section 3.1 Organization. Each of the Company and its Active Subsidiaries
------------
(as hereinafter defined) is a corporation or other entity duly organized,
validly existing, and in good standing under the laws of the
8
<PAGE>
jurisdiction of its incorporation or organization, and has all requisite
corporate power and authority to own, lease, use and operate its properties and
to carry on its business as it is now being conducted. Each of the Company and
its Subsidiaries (as hereinafter defined) is qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which it owns real property or in which the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed in the aggregate would not have or result in a
Material Adverse Effect. The term "Material Adverse Effect" shall mean any
change, effect, event, occurrence or state of facts that is, or would reasonably
be expected to be, materially adverse to the business, assets, liabilities,
results of operations or financial or other condition of the Company and its
Subsidiaries taken as a whole. None of the Company or any of its Subsidiaries is
in breach or violation of any of its certificate of incorporation, by-laws or
other organiza tional documents. The Company has previously delivered to
MergerCo a complete and correct copy of each of its restated articles of
organization, as amended (the "Articles of Organization") and By-Laws, as
currently in effect. "Active Subsidiary" shall mean each of the Subsidiaries of
the Company other than those Subsidiaries which conduct no business and hold no
more than de minimis assets. Schedule 3.1 (a) of the disclosure schedule
delivered by the Company to MergerCo on or prior to the date hereof (the
"Disclosure Schedule") sets forth a complete and correct list of the Active
Subsidiaries of the Company and their respective jurisdictions of incorporation
or organization and Schedule 3.1 (b) sets forth a complete and correct list of
each of the other Subsidiaries of the Company and their respective jurisdictions
of incorporation. "Subsidiary" shall mean with respect to any Person, any
corporation or other entity of which 50% or more of the securities or other
interests having by their terms ordinary voting power for the election of
directors or others performing similar functions with respect to such entity is
directly or indirectly owned by such Person. "Person" shall mean any natural
person, firm, individual, partnership, joint venture, business trust, trust,
association, corporation, company, unincorporated entity or Governmental Entity
(as defined in Section 3.4(b)).
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock and
9
<PAGE>
100,000 shares of preferred stock, par value $1.00, of the Company (the
"Company Authorized Preferred Stock"), of which 24,000 shares have been
designated as Series A Preferred Stock. At the close of business on December 18,
1997: (i) 16,852,774 shares of Company Common Stock were issued and outstanding;
(ii) 1,761,524 shares of Company Common Stock were issued and held by the
Company in its treasury; (iii) 24,000 shares of Series A Preferred Stock were
reserved for issuance pursuant to the Shareholders' Rights Agreement, dated
February 16, 1989, as amended and restated as of March 12, 1990 (the "Rights
Agreement"); (iv) 3,564,537 shares of Company Common Stock were reserved for
issuance pursuant to the Company Stock Plans, of which 2,132,200 shares are
subject to outstanding Company Stock Options; and (v) no shares of Company
Authorized Preferred Stock have been designated (except for the 24,000 shares of
Series A Preferred Stock referenced above) or issued. All outstanding shares of
capital stock of the Company are, and all shares thereof which may be issued
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as expressly provided
in this Agreement and except for changes since December 18, 1997 resulting from
the issuance of shares of Company Common Stock upon exercise of Company Stock
Options granted prior to the date hereof or pursuant to the Employee Stock
Purchase Plan as contemplated by Section 2.3, (x) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or other voting
securities of the Company, (B) any securities of Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (C) any warrants, calls,
options or other rights to acquire from Company or any of its Subsidiaries, and
any obligation of Company or any of its Subsidiaries to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the Company, and (y) there
are no outstanding obligations of Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any such securities or to issue, deliver
or sell, or cause to be issued, delivered or sold, any such securities, in each
case, other than those described in the second sentence of this Section 3.2(a).
Except as set forth in Schedule 3.2(a) of the Disclosure Schedule, there are no
existing or outstanding (i) options, warrants, calls, preemptive rights,
-
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock or
10
<PAGE>
other equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests, (ii)
--
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any capital stock of the Company or any Subsidiary
of the Company or (iii) voting trusts or similar agreements to which the Company
---
or any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of its Subsidiaries. The Company has delivered to
MergerCo prior to the execution of this Agreement a complete and correct copy of
the Rights Agreement (together with the amendment thereof contemplated by
Section 3.23).
(b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule, (i)
-
all of the outstanding shares of capital stock (or equivalent equity interests
of entities other than corporations) of each of the Company's Subsidiaries are
beneficially owned, directly or indirectly, by the Company and (ii) neither the
--
Company nor any of its Subsidiaries owns any shares of capital stock or other
securities of, or interest in, any other Person (other than any Subsidiaries
listed on Schedule 3.1), or is obligated to make any capital contribution to or
other investment in any other Person, provided that Schedule 3.2(b) shall not be
--------
required to set forth any cash equivalents held by the Company or any of its
Subsidiaries or any Person in which the Company or any of its Subsidiaries owns
less than 100 shares of publicly traded securities.
Section 3.3 Authorization; Validity of Agreement. The Company has the
------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of its stockholders as contemplated by Section 5.6
hereof, to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly recommended by the
Special Committee of the Board of Directors and duly authorized by the Board of
Directors of the Company and, other than approval and adoption of this Agreement
by the holders of two-thirds of the outstanding shares of Company Common Stock,
no other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and, assuming due authorization,
execution and delivery of this Agreement by MergerCo, is a valid and binding
obligation of
11
<PAGE>
the Company in accordance with its terms, except that such enforcement may
be subject to or limited by (i) bankruptcy, insolvency or other similar laws,
-
now or hereafter in ef fect, affecting creditors' rights generally, and (ii) the
--
effect of general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 3.4 No Violations; Consents and Approvals.
-------------------------------------
(a) Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby will (i)
-
violate any provision of the Articles of Organization or By-Laws of the Company,
(ii) except as set forth in Schedule 3.4(a) of the Disclosure Schedule, conflict
--
with, result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration, or to the imposition of
any Lien (as defined in Section 3.18(b))) under, or result in the acceleration
or trigger of any payment, time of payment, vesting or increase in the amount of
any compensation or benefit payable pursuant to, the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee or other evidence
of indebtedness, or any lease, license, contract, agreement, plan or other
instrument or obligation, to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their assets may be bound or
(iii) conflict with or violate any federal, state, local or foreign order, writ,
---
injunction, judgment, award, decree, statute, law, rule or regulation
(collectively, "Laws") applicable to the Company, any of its Subsidiaries or any
of their properties or assets; except in the case of clauses (ii) or (iii) for
such conflicts, violations, breaches or defaults which in the aggregate would
not have or result in a Material Adverse Effect or materially impair or delay
the consummation of the transactions contemplated hereby.
(b) Except as disclosed in Schedule 3.4(b) of the Disclosure Schedule, no
filing or registration with, declaration or notification to, or order,
authorization, consent or approval of, any federal, state, local or foreign
court, legislative, executive or regulatory authority or agency (a "Governmental
Entity") or any other Person is required in connection with the execution,
delivery and performance of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except (i)
-
12
<PAGE>
applicable requirements under Competition Laws (as defined in Section 5.4(b)),
(ii) applicable requirements under the Securities Exchange Act of 1934, as
--
amended (the "Exchange Act"), (iii) applicable requirements under the Securities
---
Act of 1933, as amended (the "Securities Act"), (iv) the filing of the Articles
of Merger with the Massachusetts Secretary of State and the filing of the
Certificate of Merger with the Delaware Secretary of State, (v) applicable
-
requirements under "blue sky" laws of various states,(vi) such other consents,
--
approvals, orders, authorizations, notifications, registrations, declarations
and filings the failure of which to be obtained or made in the aggregate would
not have or result in a Material Adverse Effect or materially impair or delay
the consummation of the transactions contemplated hereby.
Section 3.5 SEC Reports and Financial Statements. The Company has timely
------------------------------------
filed with the Securities and Exchange Commission (the "SEC"), any applicable
state securities authorities and any other Governmental Entity all forms and
documents required to be filed by it since January 1, 1993 (collectively, the
"Company Reports") and has heretofore made available to the Merger Sub (i) its
-
Annual Reports on Form 10-K for the fiscal years ended March 31, 1993, March 31,
1994, March 31, 1995, March 31, 1996 and March 31, 1997, respectively, (ii) its
--
Quarterly Reports on Form 10-Q for the periods ended June 30 and September 30,
1997, (iii) all proxy statements relating to meetings of stockholders of the
Company since January 1, 1993 (in the form mailed to stockholders) and (iv) all
--
other forms, reports and registration statements filed by the Company with the
SEC since January 1, 1993 (other than registration statements on Form S-8 or
Form 8-A, filings on Form T-1 or preliminary materials and registration
statements in forms not declared effective). The documents described in clauses
(i)-(iv) above (whether filed before, on or after the date hereof) are referred
to in this Agreement collectively as the "Company SEC Documents". As of their
respective dates, the Company Reports (a) did not contain any untrue statement
-
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in all
-
material respects with the applicable requirements of Law, including in the case
of SEC filings, the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The consolidated
financial statements included in the Company SEC Documents have been prepared in
accordance with United
13
<PAGE>
States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as otherwise noted therein
and except that the quarterly financial statements are subject to year end
adjustment and do not contain all footnote disclosures required by GAAP) and
fairly present in all material respects the consolidated financial position and
the con solidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein.
Section 3.6 Absence of Certain Changes. Except as disclosed in the Company
--------------------------
SEC Documents filed prior to the date hereof or as disclosed in Schedule 3.6 of
the Dis closure Schedule, since September 30, 1997, (i) the Company and its
-
Subsidiaries have conducted their respective operations only in the ordinary
course consistent with past practice, (ii) there has not been a Material Adverse
--
Effect and (iii) the Company and the Subsidiaries have not taken action that if
---
taken after the date hereof would constitute a violation of Section 5.1 (other
than clause (a) thereof).
Section 3.7 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
disclosed (a) in the Company's Annual Report on Form 10-K for the period ended
-
March 31, 1997, including as reflected or reserved against in the balance sheet
dated as of and as at March 31, 1997 constituting a portion of the financial
statements included therein (the "March 31, 1997 Balance Sheet") or in the notes
thereto, (b) in the Company SEC Documents filed prior to the date hereof or (c)
- -
in Schedule 3.7 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries had as of that date any liabilities or obligations (accrued,
contingent or otherwise) which would be material to the Company and its
Subsidiaries taken as a whole or which would be required to be set forth in an
audited consolidated balance sheet of the Company and its Subsidiaries as of
that date or the notes thereto prepared in accordance with GAAP.
Section 3.8 Information in Form S-4; Proxy Statement; Exchange
--------------------------------------------------
Act Schedules.
- -------------
(a) The registration statement on Form S-4 (including the Proxy Statement
(as defined in Section 5.6(a)) contained therein as a prospectus) to be filed
with the SEC by the Company in connection with the issuance of the Recapitalized
Common Stock of the Company following the Merger (the "Form S-4") at the time or
times it is filed with the SEC and at any time it is amended or supplemented
14
<PAGE>
and at the time it becomes effective under the Securities Act, and the
prospectus contained therein, as of its date, (i) will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading and (ii) will comply
in all material respects with the provisions of the Securities Act and the rules
and regulations thereunder; except that no representation is made by the Company
with respect to statements made in the Form S-4 based on information supplied by
MergerCo specifically for inclusion in the Form S-4.
(b) The Proxy Statement (and any amendment thereof or supplement thereto)
at the date mailed to Company stockholders and at the time of the Special
Meeting (as defined in Section 5.6(b)), (i) will not contain any untrue
-
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading and (ii) will comply
--
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder; except that no representation is made by the Company
with respect to statements made in the Proxy Statement based on information
supplied by MergerCo specifically for inclusion in the Proxy Statement.
(c) Any Schedule 14A or 13E-3 and any related schedules (and any amendment
or supplement to any of the foregoing) filed with the SEC at the date so filed
(i) will not contain any untrue statement of a material fact or omit to state
-
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading and (ii) will comply in all material respects with the provisions
--
of the Exchange Act and the rules and regulations thereunder; except that no
representation is made by the Company with respect to statements made in any
such document based on information supplied by MergerCo specifically for
inclusion therein.
Section 3.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) No material liability under Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee plans (or equivalent
legislation of a foreign jurisdiction) has been incurred by the Company or
15
<PAGE>
any of its Subsidiaries and, to the Company's best knowledge, no condition
exists or event has occurred that presents a risk to the Company or any of its
Subsidiaries of incurring any such material liability.
(b) Each bonus, incentive or deferred compensation, stock option or other
equity based, severance, termination, change in control, retention, employment,
medical, life, disability, other welfare, profit-sharing, retirement or other
material compensation or benefit plan, agreement or policy in respect of which
the Company or any of its Subsidiaries has any material liability has been filed
with the Company SEC Documents or is listed on Schedule 3.9(b) of the Disclosure
Schedule (collectively, the "Plans"). No such Plan is subject to section 302 of
ERISA or section 412 of the Code and no such Plan has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA or section 412 of the
Code), whether or not waived. Each such Plan that is intended to be "qualified"
within the meaning of section 401(a) of the Code has received a determination
letter from the Internal Revenue Service confirming its qualified status and no
condition exists or event has occurred since the date of such determination
letter that would adversely affect the qualified status of any such Plan. Each
Plan has been operated and administered in all respects in substantial
compliance with its terms and applicable Law, including but not limited to
ERISA, the Code and equivalent applicable legislation of a foreign jurisdiction.
There are no pending, or to the best knowledge of the Company, threatened claims
by or on behalf of any Plan, by any employee or beneficiary or otherwise
involving any such Plan or the assets thereof, except for claims the resolution
of which would not individually or in the aggregate have or result in a material
liability to the Company or a Subsidiary.
(c) Assuming that no amount is paid to any employee listed on Schedule
3.9(c)(i) as a severance benefit with respect to a termination of employment, no
payment, benefit or other amount paid, payable or required to be paid in respect
of any employee will fail to be deductible under section 280G of the Code.
Except as provided in Section 2.3 hereof or as set forth on Schedule 3.9(c)(ii)
of the Disclosure Schedule, (i) no current or former employee or director of the
Company or any Subsidiary is or will become entitled to any additional or new
compensation, benefits or other compensatory payment or an increase in the
amount of any compensation, benefits or other compensatory payment in connection
with or as a result of the consummation of the
16
<PAGE>
transactions contemplated by this Agreement and (ii) neither the vesting nor the
timing of the payment of any such compensation, benefit or other compensatory
payment in respect of any such employee or director has been or will be
accelerated in connection with or as a result of the consummation of the
transactions contemplated by this Agreement.
Section 3.10 Litigation; Compliance with Law.
-------------------------------
(a) Except as disclosed in the Company SEC Documents filed prior to the
date hereof or in Schedule 3.10(a) of the Disclosure Schedule, (i) there is no
-
suit, claim, action, arbitration, proceeding or investigation or other
Litigation (as defined below) pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries or any of their
properties or assets which, individually or in the aggregate, if determined
adversely to the Company or any such Subsidiary, would have or result in a
Material Adverse Effect, and (ii) neither the Company nor any of its
--
Subsidiaries is subject to any settlement or similar agreement with any
Governmental Entity, or to any order, judgment, decree, injunction or award of
any Governmental Entity or arbitrator, that individually or in the aggregate,
would have or result in a Material Adverse Effect. "Litigation" means any
action, cause of action, claim, demand, suit, proceeding, citation, summons,
subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, by or before any court, tribunal, arbitrator or
other Governmental Entity.
(b) Except as disclosed in the Company SEC Documents filed prior to the
date hereof, the operations of the Company and its Subsidiaries have not been
and are not being conducted, and no Real Property (as defined in Section 3.19)
is, in violation of any law, statute or regulation, any judgment, decree, order
or injunction of any Governmental Entity, any other Law, or any Permit (as
defined below), except where such violations in the aggregate would not have or
result in a Material Adverse Effect. Except as set forth in Schedule 3.10(b) of
the Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received any notice, or has knowledge of any claim, alleging any such violation.
(c) The Company and its Subsidiaries hold all licenses, permits, variances,
consents, authorizations, waivers, grants, franchises, concessions, exemptions,
orders, registrations and approvals of Governmental Entities
17
<PAGE>
or other Persons necessary for the ownership, leasing, operation, occupancy and
use of the Real Property and the conduct of their respective businesses as
currently conducted ("Permits"), except where the failure to hold such Permits
in the aggregate would not have or result in a Material Adverse Effect. There is
no Litigation pending or, to the knowledge of the Company, threatened, that
would result in the termination, modification or nonrenewal of any Permit, and
neither the Company nor any of its Subsidiaries has received notice that any
Permit will be terminated or modified or cannot be renewed in the ordinary
course of business, and there is no reasonable basis for any such termination,
modification or nonrenewal, except for such terminations, modifications or
nonrenewals as in the aggregate would not have or result in a Material Adverse
Effect. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
violate any Permit, or result in any termination, modification or nonrenewal
thereof, except for such violations terminations, modifications or nonrenewals
thereof as in the aggregate would not have or result in a Material Adverse
Effect.
Section 3.11 Intellectual Property. (a) The Company and its Subsidiaries
---------------------
own (beneficially and as of record), or possess valid and legally enforceable
licenses or rights to use, any and all United States and foreign patents, patent
applications, patent disclosures, mask works, software, trademarks, trade names,
copyrights and service marks, including applications to register and
registrations for any of the foregoing, as well as trade secrets, know-how and
other proprietary rights and information (collectively, "Intellectual Property")
necessary for the conduct of, or otherwise material to, their business and
operations as currently conducted or as proposed to be conducted (the "Company
Intellectual Property"), free and clear of any Liens (except for any Permitted
Liens, as defined in Section 3.18(b)). Except as disclosed in Schedule 3.11 of
the Disclosure Schedule, the conduct of the business of the Company and its
Subsidiaries as currently conducted does not infringe or conflict with any
Intellectual Property of any Person; and neither the Company nor any of its
Subsidiaries has received notice or has actual knowledge of any such current
infringement or conflict except where such infringements and conflicts as in the
aggregate would not have or result in a Material Adverse Effect. All of the
patents, patent applications and patent disclosures included in Company
Intellectual Property are valid, subsisting and enforceable. To the knowledge of
the
18
<PAGE>
Company, no Person is infringing or allegedly infringing any Intellectual
Property of the Company or its Subsidiaries except where such actual and alleged
infringements as in the aggregate would not have or result in a Material Adverse
Effect. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the loss of, or creation of
any Lien on, the rights of the Company or any Subsidiary with respect to the
Intellectual Property owned or used by them, except where such losses and such
Liens as in the aggregate would not have or result in a Material Adverse Effect.
Schedule 3.11 of the Disclosure Schedule contains a complete and correct list of
all patents, patent applications, patent disclosures, mask works, software
(other than any software that is commercially available for an amount less than
$50,000), trademarks, trade names, registered copyrights and service marks,
including applications to register and registrations for any of the foregoing,
included in Company Intellectual Property except that Schedule 3.11 need not
disclose any trademarks, trade names or service marks that are not (a)
-
registered or applied for and (b) not material to the business of the Company or
-
any of its Subsidiaries as currently conducted. Except as disclosed in Schedule
3.11 of the Disclosure Schedule, all software used by the Company or any of its
Subsidiaries, or sold, licensed or otherwise made available to any other Person
by the Company or any of its Subsidiaries, that in each case, contains or calls
on a calendar function, including but not limited to any function that is
indexed to a computer processing unit clock, provides specific dates or
calculates spans of dates, is and will be able to record, store, process and
provide true and accurate dates and calculations for dates and spans of dates
including and following January 1, 2000.
Section 3.12 Contracts. (a) Other than the contracts or agreements of the
---------
Company listed as exhibits to the Company's Annual Report on Form 10-K for the
year ended March 31, 1997 (the "Material Contracts"), Schedule 3.12(a) of the
Disclosure Schedule sets forth a complete and correct list of each of the
following contracts, commitments and agreements to which the Company or any of
its Subsidiaries is a party or by which any of them is bound (the contracts,
commitments and agreements of the types described below that are scheduled or
required to be scheduled, collectively, the "Identified Contracts"), in each
case, as such Identified Contract is in effect on the date hereof:
19
<PAGE>
(i) contracts, commitments and agreements governing the terms
of indebtedness for borrowed money, or guarantees of indebtedness, of,
or secured by assets of, the Company or any of its Subsidiaries;
(ii) shareholder, voting trust or similar contracts and
agreements relating to the voting of shares or other equity or debt
interests of the Company or any of its Subsidiaries;
(iii) contracts, commitments and agreements entered into since
1994 providing for the acquisition or disposition of assets having a
value in excess of $500,000, other than sales of inventories in the
ordinary course of business and sales of obsolete equipment;
(iv) leases, subleases and licenses or real property, occupancy,
use and other agreements relating to or constituting real property,
each with a term of one year or more and an annual payment obligation
in excess of $500,000;
(v) (a) joint venture agreements, partnership agreements and
-
other similar contracts, commitments and agreements involving a
sharing of profits and expenses; contracts, commitments and agreements
providing for a "strategic alliance" or "preferred vendor"
relationship; or (b) contracts, commitments or agreements with
-
distributors, brokers or sales agents except, in the case of (b), only
to the extent that any such distributors, brokers or sales agents are
responsible for revenues to the Company or any of its Subsidiaries in
excess of $500,000 per year;
(vi) contracts, commitments and agreements governing the terms
of indebtedness (other than trade payables in the ordinary course of
business) of third parties to the Company or by any of its
Subsidiaries, or guarantees by the Company or any of its Subsidiaries
of indebtedness of third parties;
(vii) contracts, commitments and agreements prohibiting or
materially restricting the ability of the Company or any of its
Subsidiaries to conduct its business, to engage in any business or
operate in any geographical area or to compete with any Person;
20
<PAGE>
(viii) contracts, commitments and agreements with "change of
control" provisions except to the extent that if a "change of control"
event occurred, it would not result in a termination or other
alteration of such contract, commitment or agreement that would have
or would reasonably be expected to have a material adverse effect on
the business of the Company or its Subsidiary that is a party thereto;
(ix) contracts, commitments, and agreements with any federal or
state Governmental Entity;
(x) exchange-traded or over-the-counter swap, forward, future,
option, cap floor or collar financial contract, or interest rate or
foreign currency protection contract, other than those listed in the
financial statements contained in the Company SEC Documents;
(xi) licenses, licensing arrangements and other contracts and
agreements either (x) providing, in whole or in part, for the use of,
-
or limiting the use of, any Intellectual Property or (y) relating to
-
the develop ment, support or maintenance of any Intellectual Property
(in each case, that is material to the business of the Company or any
of its Subsidiaries that is a party thereto and other than relating to
software that is commercially available for less than $50,000); and
(xii) contracts and agreements that are or will be material to
the business, operations, results of operations, condition (financial
or otherwise), assets or properties of the Company and its
Subsidiaries involving amounts in excess of $250,000.
(b) Each of the Identified Contracts and Material Contracts is in full
force and effect, and neither the Company nor any of its Subsidiaries, nor, to
the knowledge of the Company, any other Person, is in breach of, or default
under, any such contract, commitment or agreement, and no event has occurred
that with notice or passage of time or both would constitute such a breach or
default thereunder by the Company or any of its Subsidiaries, or, to the
knowledge of the Company, any other Person, except for such failures to be in
full force and effect and such conflicts, violations, breaches or defaults as in
the aggregate would not have or result in a Material Adverse
21
<PAGE>
Effect or materially delay the consummation of the transactions contemplated
hereby.
Section 3.13 Taxes.
-----
(a) Except as disclosed in Section 3.13 of the Disclosure Schedule: (i)
-
each of the Company, its Subsidiaries, and any Consolidated Group (as defined
below) has timely filed all material Tax Returns (as defined below) required to
be filed by it and has paid all Taxes (as defined below) shown thereon to be
owing, and each of the Company and its Subsidiaries has provided reserves in
accordance with GAAP in its most recent financial statements included in the
Company SEC Documents for any Taxes (as defined below) that have not been paid
for the periods covered by such financial statements; (ii) none of the Company
--
or its Subsidiaries has granted any extension or waiver of the statute of
limitations period applicable to any material Tax Return, which period (after
giving effect to such extension or waiver) has not expired; (iii) all Tax
---
periods of each of the Company and its Subsidiaries, and any Consolidated Group,
through and including March 31, 199_ are closed or no longer subject to audit;
(iv) no audits or other administrative proceedings or court proceedings are
--
presently pending with regard to any Taxes or Tax Return of any of the Company,
its Subsidiaries or any Consolidated Group as to which any taxing authority has
asserted in writing any claim which, if adversely determined, individually or in
the aggregate would have or result in a Material Adverse Effect; and (v) none of
-
the Company or any of its Subsidiaries has received any notice of deficiency or
assessment from any taxing authority with respect to liabilities for income or
any material other Taxes which has not been fully paid or finally settled.
(b) "Consolidated Group" shall mean any consolidated, combined, unitary or
aggregate group for Tax purposes of which the Company or any of its Subsidiaries
is a member. "Taxes" shall mean all federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including interest and penalties, and additions thereto. "Tax
Returns" shall mean all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns, and
any amendments to any of the foregoing, relating to Taxes.
22
<PAGE>
Section 3.14 Environmental Matters.
---------------------
(a) Each of the Company and its Subsidiaries has complied and is in
compliance in all respects with all applicable Environmental Laws (as defined
below) pertaining to any of the properties and assets of the Company or any of
its Subsidiaries (including the Real Property and the properties currently or
formerly owned or leased) and the use and ownership thereof, and to their
businesses and operations. No violation by the Company or any of its
Subsidiaries is being alleged or has been alleged of any applicable
Environmental Law relating to any of their respective properties and assets
including (the Real Property and the properties currently or formerly owned or
leased) or the use or ownership thereof, or to their respective businesses and
operations.
(b) Neither the Company nor any of its Subsidiaries nor any other Person
(including any tenant or subtenant) has caused or taken any action that will
result in, and neither the Company nor any of its Subsidiaries is subject to,
any liability or obligation on the part of the Company or any of its
Subsidiaries relating to (x) the environmental conditions on, under, or about
-
the Real Property or other properties or assets currently or formerly owned,
leased, operated or used by the Company or any of its Subsidiaries or any
predecessor thereto at the present time or in the past, including without
limitation, the air, soil and groundwater conditions at such properties or
(y) the past or present use, management, handling, transport, treatment,
-
generation, storage, disposal, discharge, leak, emission, or other manner of
release of any Hazardous Materials (as defined below).
(c) The Company has disclosed and made available to MergerCo all
information, including, without limitation, all studies, analyses and test
results, in the possession, custody or control of or otherwise known to the
Company or any of its Subsidiaries relating to (x) the environmental conditions
-
on, under or about the Real Property or other properties or assets currently or
formerly owned, leased, operated or used by the Company or any of its
Subsidiaries or any predecessor in interest thereto at the present time or in
the past, and (y) any Hazardous Materials used, managed, handled, transported,
-
treated, generated, stored, discharged, leaked, emitted, or otherwise released
by the Company or any of its Subsidiaries or any other Person on, under, about
or from any of the Real Property and the properties currently or formerly owned
or leased, or
23
<PAGE>
otherwise in connection with the use or operation of any of the properties and
assets of the Company or any of its Subsidiaries, or their respective businesses
and operations. Except as disclosed in Schedule 3.14(c), none of the current or
past operations of the Company or any of its Subsidiaries, or any by-product
thereof, and none of the currently or formerly owned or leased property or
assets of the Company or any of its Subsidiaries, including without limitation
the Real Property, is related to or subject to any Litigation related to any
Environmental Law.
(d) "Environmental Law" means any foreign, federal, state or local law,
regulation, rule, ordinance or case law relating to pollution or protection of
human health and safety or the environment, including, but not limited to, laws
relating to releases or threatened releases of Hazardous Materials into the
environment and including laws pertaining to the protection of the health and
safety of employees. "Hazardous Materials" means any substance or material that
is classified or regulated as "hazardous" or "toxic" pursuant to any
Environmental Law, including without limitation, asbestos, polychlorinated
biphenyls and petroleum.
Section 3.15 Required Vote by Company Stockholders. The affirmative vote
-------------------------------------
of the holders of two-thirds of the outstanding Shares entitled to vote hereon
is the only vote of any class of capital stock of the Company required by the
MBCL, the Articles of Organization or the By-Laws of the Company to adopt this
Agreement and approve the transactions contemplated hereby.
Section 3.16 Brokers. Except for Merrill Lynch & Co., Inc., a complete and
-------
accurate copy of the engagement letter of which has been provided to MergerCo,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon ar rangements made by or on behalf of the Company or any of
its Subsidiaries, that is or will be payable by the Company or any of its
Subsidiaries.
Section 3.17 Opinions of Financial Advisors. The Company has received from
------------------------------
Merrill Lynch & Co., Inc., and provided to MergerCo on or prior to the date
hereof, an executed copy of its opinion that the Merger Consideration to be
received by the holders of Shares in the Merger is fair, from a financial point
of view, to such holders. The Company has been authorized by the Financial
Advisor to
24
<PAGE>
include the Fairness Opinion in the Proxy Statement and has not been notified by
the Financial Advisor that the Fairness Opinion has been withdrawn or modified.
Section 3.18 Assets.
------
(a) The Company and its Subsidiaries own, or otherwise have sufficient and
legally enforceable rights to use, all of the properties and assets (real,
personal or mixed, tangible or intangible), reasonably necessary for the conduct
of, or otherwise material to, their business and operations (the "Assets"). The
Company and its Subsidiaries have good, valid and marketable title to, or in the
case of leased property have good and valid leasehold interests in, all Assets,
including but not limited to all such Assets reflected in the balance sheet
dated as of September 30, 1997, constituting a portion of the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1997 (the
"September 30, 1997 Balance Sheet") or acquired since the date thereof (except
as may have been disposed of in the ordinary course of business consistent with
past practices prior to the date hereof or in accordance herewith), in each case
free and clear of any Lien (as defined below), except Permitted Liens (as
defined below). All tangible Assets are reasonably adequate and suitable for the
purposes for which they are presently being used. Schedule 3.18(a) of the
Disclosure Schedule sets forth a complete and correct list of each of the
countries in which Assets are located.
(b) "Lien" means any mortgage, pledge, deed of trust, hypothecation, right
of others, claim, security interest, encumbrance, burden, title defect, title
retention agreement, lease, sublease, license, occupancy agreement, easement,
covenant, condition, encroachment, voting trust agreement, interest, option,
right of first offer, negotiation or refusal, proxy, lien, charge or other
restrictions of any nature whatsoever. "Permitted Liens" means (a) Liens
-
reserved against in the September 30, 1997 Balance Sheet, to the extent so
reserved, (b) Liens for Taxes not yet due and payable or that are being
-
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP or that are statutory Liens
for Taxes not yet delinquent, (c) those Liens that are set forth in Schedule
-
3.18(b) of the Disclosure Schedule and (d) those Liens that, in the aggregate
-
with all other Permitted Liens, do not and will not materially detract from the
value of the properties and assets of any of the Company and its Subsidiaries
materially interfere with the present
25
<PAGE>
use of any thereof or otherwise have a Material Adverse Effect.
Section 3.19 Real Property. There is no Owned Real Property (as defined
-------------
below). Schedule 3.19(a)(i) contains a complete and correct list of each parcel
of Formerly Owned Property (as defined below) setting forth the street address,
current owner, date of disposition to the current owner, and the legal
description of each parcel of Formerly Owned Property. Schedule 3.19(a)(ii) of
the Disclosure Schedule contains a complete and correct list of all Leases (as
defined below) setting forth the address, tenant for each Lease and the
documents of which each Lease is comprised. No material damage or destruction
has occurred since March 31, 1997 with respect to any of the Company Real
Property. "Company Real Property" means the Owned Real Property and the Leased
Real Property. "Formerly Owned Property" means any Real Property previously
owned by the Company or any of its Subsidiaries since 1990, but not owned by the
Company or any of its Subsidiaries as of the date of this Agreement. "Leases"
means the leases, subleases, licenses and use or occupancy agreements pursuant
to which the Company or any of its Subsidiaries is the lessee, sublessee,
licensee, user or occupant of Real Property. "Leased Real Property" means all
interests in Real Property pursuant to the Leases. "Owned Real Property" means
the real property owned by the Company and its Subsidiaries. "Real Property"
means real property and structures, facilities and improvements located thereon
or attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
Section 3.20 Insurance. Schedule 3.20 of the Disclosure Schedule contains a
---------
complete and correct list and summary description of all insurance policies
maintained at present or at any time during the past three calendar years by or
on behalf of any of the Company and its Subsidiaries. Such policies are in full
force and effect, and all premiums due thereon have been paid. The Company and
its Subsidiaries have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
adequate and suitable for the business and operations of the Company and its
Subsidiaries, and is on such terms (including without limitation as to
deductibles and self-insured retentions), covers such risks, contains such
deductibles and retentions, and is in such amounts, as the insurance customarily
carried by comparable companies of established reputation similarly situated and
carrying on the same or similar business and operations.
26
<PAGE>
Section 3.21 Labor Matters, etc. Neither the Company nor any of its
------------------
Subsidiaries is a party to or bound by and none of their respective employees is
subject to any collective bargaining agreement, memorandum of understanding or
other written document relating to the terms and conditions of employment for
any group of employees (any such agreement, memorandum or document, a
"Collective Bargaining Agreement"), and there are no labor unions or other
organizations representing or purporting or attempting to represent any
employees employed by any of the Company and its Subsidiaries. The Company and
its Subsidiaries have complied with all applicable Laws pertaining to the
employment or termination of employment of their respective employees,
including, without limitation, all such Laws relating to labor relations, equal
employment opportunities, fair employment practices, prohibited discrimination
or distinction and other similar employment activities, except for any failures
so to comply that individually or in the aggregate would not have or result in a
Material Adverse Effect.
Section 3.22 Disclosure. To the actual knowledge of the Company, this
----------
Agreement and each certificate or other instrument or document furnished by or
on behalf of the Company to MergerCo pursuant hereto, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein in light of the circumstances under which they were
made, not misleading.
Section 3.23 Rights Agreement. The Board of Directors of the Company has
----------------
contemporaneously with the execution of this Agreement amended the Rights
Agreement so that (i) none of CD&R, Fund or MergerCo will become an "Acquiring
Person" as a result of the consummation of the transactions contemplated by this
Agreement, (ii) no "Stock Acquisition Date", "Triggering Event" or "Distribution
Date" (as such terms are defined in the Rights Agreement) will have occurred as
a result of the consummation of the transactions contemplated by this Agreement,
and (iii) all outstanding Rights issued and outstanding under the Rights
Agreement and the Rights Agreement will terminate immediately prior to the
Effective Time and no shares of Recapitalized Common Stock issued on or after
the Effective Time will have any Rights associated with them under the Rights
Agreement.
Section 3.24 Takeover Statutes. No "Fair price," "Moratorium," "control
-----------------
share acquisition" or other similar
27
<PAGE>
anti-takeover statute or regulation enacted under state or federal laws in the
United States (each, a "Takeover Statute") including, without limitation,
Chapters 110C, 110D and 110F of the Massachusetts General Laws, applicable to
the Company or any of its Subsidiaries is applicable to the execution, delivery
and performance of this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO
MergerCo represents and warrants to the Company as of the date hereof and
as of the Closing Date as follows:
Section 4.1 Organization. MergerCo is a corporation duly organized,
------------
validly existing and in good standing under the laws of Delaware. MergerCo has
all requisite corporate power and authority to own, lease, operate or use its
properties and to carry on its business as now being conducted and is qualified
or licensed to do business and is in good standing in each jurisdiction in which
it owns real property or in which the nature of the business conducted by it
makes such qualification or licensing necessary. MergerCo is not in breach of
its certificate of incorporation or by-laws. MergerCo has previously delivered
to the Company complete and correct copies of the certificate of incorporation
and by-laws of MergerCo, as currently in effect.
Section 4.2 Authorization; Validity of Agreement.
------------------------------------
(a) MergerCo has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by MergerCo of this Agreement and the
consummation by MergerCo of the transactions contemplated hereby have been duly
authorized by its Board of Directors and, other than the approval and adoption
of this Agreement by the stockholders of MergerCo, no other corporate
proceedings on the part of MergerCo are necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by MergerCo and,
assuming due authorization, execution and delivery of this Agreement by the
Company, is
28
<PAGE>
a valid and binding obligation of MergerCo enforceable against it in accordance
with its terms, except that such enforcement may be subject to or limited by (i)
-
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors rights generally, and (ii) the effect of general principles
--
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) MergerCo has previously delivered to the Company a letter from Fund,
addressed to the Company, confirming Fund's agreement to vote to approve and
adopt this Agreement, in its capacity as a stockholder of MergerCo, upon its
purchase of MergerCo Common Stock.
Section 4.3 Consents and Approvals; No Violations.
-------------------------------------
(a) Neither the execution and delivery of this Agreement by MergerCo nor
the consummation by MergerCo of the transactions contemplated hereby will (i)
-
violate any provision of the certificate of incorporation or by-laws of
MergerCo, (ii) conflict with, result in a violation or breach of, or constitute
--
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, or any material lease,
contract, agreement or other instrument or obligation, to which MergerCo or any
of its Subsidiaries is a party or by which any of them or any of their assets
may be bound or (iii) conflict with or violate any Laws applicable to MergerCo,
---
any of its Subsidiaries or any of their properties or assets; except in the case
of clauses (ii) and (iii) for such conflicts, violations, breaches or defaults
which in the aggregate would not have a material adverse effect on the business,
assets, liabilities, results of operations or financial or other condition of
MergerCo and its Subsidiaries, taken as a whole, or materially impair or delay
the consummation of the transactions contemplated by this Agreement.
(b) Except as set forth in Schedule 4.3(b) of the disclosure schedule
delivered by MergerCo to the Company on or prior to the date hereof (the
"MergerCo Disclosure Schedule") and assuming that the representation and
warranty of the Company set forth in Section 3.4(b) is true and correct, no
filing or registration with, declaration or no-
29
<PAGE>
tification to, or order, authorization, consent or approval of, any Governmental
Entity is required in connection with the execution and delivery of this
Agreement by MergerCo or the consummation by MergerCo of the transactions
contemplated hereby, except (i) applicable requirements under Competition Laws
-
(as defined in Section 5.4(b)), (ii) applicable requirements under the Exchange
--
Act, (iii) applicable requirements under the Securities Act, (iv) the filing of
--- --
the Articles of Merger with the Massachusetts Secretary of State and the filing
of the Certificate of Merger with the Delaware Secretary of State, (v)
-
applicable requirements under "blue sky" laws of various states, (vi) applicable
requirements under Environmental Laws and (vii) such other consents, approvals,
---
orders, authorizations, notifications, registrations, declarations and filings
(x) required to be obtained or made by the Company or any of its Subsidiaries or
-
(y) the failure of which to be obtained or made would not have a material
-
adverse effect on the business, assets, liabilities, results of operations or
financial or other condition of MergerCo and its Subsidiaries, taken as a whole,
or materially impair or delay the consummation of the transactions contemplated
by this Agreement.
Section 4.4 Information in Form S-4; Proxy Statement; Exchange Act
------------------------------------------------------
Schedules.
- ---------
(a) None of the information supplied in writing by MergerCo specifically
for inclusion in the Form S-4 will, at the time or times the Form S-4 is filed
with the SEC and at any time it is amended or supplemented and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) None of the information supplied in writing by MergerCo specifically
for inclusion in the Proxy Statement (including any amendments or supplements
thereto) will, at the date mailed to stockholders and at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(c) None of the information supplied in writing by MergerCo specifically
for inclusion in any Schedule 14A
30
<PAGE>
or 13E-3 (and any amendment or supplement to any of the foregoing) will, at the
date such documents are filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.5 Financing. MergerCo has received and delivered to the Company
---------
(i) a commitment letter from Credit Suisse First Boston and J.P. Morgan
-
Securities, Inc. and Morgan Guaranty Trust Company of New York, addressed to
MergerCo, whereby such financial institutions have committed, upon the terms and
subject to the conditions set forth therein, to provide debt financing to the
Company in the amount of $370 million, and (ii) a letter from Credit Suisse
--
First Boston and/or J.P. Morgan Securities, Inc., addressed to MergerCo,
expressing confidence in its ability to place an additional $275 million in debt
financing for the Company, in each case, as in effect on the date hereof.
MergerCo has received, and delivered to the Company a letter, as in effect on
the date hereof, from the Fund, whereby the Fund has committed, upon the terms
and subject to the conditions set forth therein, to provide equity financing to
MergerCo up to $277 million.
Section 4.6 Beneficial Ownership of Shares. MergerCo does not "beneficially
------------------------------
own" (as defined in Rule 13d-3 under the Exchange Act) more than l% of the
outstanding shares of Company Common Stock or any securities convertible into or
exchangeable for Company Common Stock.
Section 4.7 Brokers. Except as otherwise previously disclosed by MergerCo
-------
to the Company in writing and except for Credit Suisse First Boston and J.P.
Morgan Securities Inc. and Morgan Guaranty Trust Company of New York, who will
provide financing in connection with the transactions contemplated by this
Agreement, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
MergerCo, that is or will be payable by the Company or any of its Subsidiaries.
Section 4.8 Formation of MergerCo; No Prior Activities. MergerCo was formed
------------------------------------------
solely for the purpose of engaging in the transactions contemplated by this
Agreement. As of the date hereof and the Effective Time, except for (i)
obligations or liabilities incurred in connection with its
31
<PAGE>
incorporation or organization and the transactions contemplated by this
Agreement, (ii) this Agreement and any other agreements or arrangements
contemplated by this Agreement or in furtherance of the transactions
contemplated hereby and (iii) the contribution by certain members of the
Company's management, immediately prior to the Effective Time, of certain shares
of Company Common Stock owned by them in exchange for shares of MergerCo Common
Stock, MergerCo has not incurred, directly or indirectly, through any subsidiary
or affiliate, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
---------------------------------
agrees that, except as (i) required by this Agreement, (ii) required by
--
applicable law, (iii) required by any Material Contract or Identified Contract
---
or by any Plan disclosed on Schedule 3.9(b), in each case to the extent such
requirement is specifically described on Schedule 5.1(iii) or (iv) agreed to in
--
writing by MergerCo, after the date hereof and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary course consistent with past practice and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
reasonable efforts to preserve its business organization and the business
organization of its Subsidiaries intact and maintain existing relations with
customers, suppliers, employees and creditors;
(b) the Company shall not amend its Articles of Organization or By-Laws;
(c) the Company shall not declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock (except for cash dividends on Company Common Stock in the ordinary course
of business consistent with past practice); and neither the Company nor any of
its Subsidiaries shall (i) issue, sell, grant, transfer, pledge, dispose of or
encumber any additional shares of, or securities convertible
32
<PAGE>
into or exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of capital stock of any class of the Company or
any of its Subsidiaries (except pursuant to the exercise of stock options
outstanding on the date hereof and stock issuable under the Employee Stock
Purchase Plan to the extent contemplated by this Agreement); (ii) incur any
--
long-term indebtedness (whether evidenced by a note or other instrument,
pursuant to a financing lease, sale-leaseback transaction, or otherwise) or
incur short-term indebtedness other than under lines of credit existing on the
date hereof, except for borrowings under existing credit facilities or lines of
credit in the ordinary course of business consistent with past practice; (iii)
---
redeem, purchase or otherwise acquire directly or indirectly any of its capital
stock or other securities; or (iv) enter into or amend in any material respect
--
any Lease, Material Contract or Identified Contract;
(d) neither the Company nor any of its Subsidiaries shall (i) except for
-
normal salary increases in the ordinary course of business consistent with past
practice, grant any increase in the compensation or benefits payable or to
become payable by the Company or any of its Subsidiaries to any officer or other
management employee of the Company or any Subsidiary; (ii) adopt, enter into or
--
amend or increase, or accelerate the payment or vesting of the amounts, benefits
or rights payable or accrued or to become payable or accrued under, any bonus,
incentive or deferred compensation, severance, termination, change in control,
retention, stock option or other equity based or other material employee
compensation or benefit plan, agreement or policy, provided that the Employee
--------
Stock Purchase Plan shall be (A) amended simultaneously with the execution of
-
this Agreement to preclude (1) any increases after the date hereof in the rate
of payroll deduction contributions that may be made thereunder and (2) any
employees who are not participating under such Employee Stock Purchase Plan as
of the date hereof to become participants thereunder and (B) subject to Section
-
2.3, terminated effective as of March 31, 1998; or (iii) enter into or amend in
---
any material respect any employment, severance, retention or collective
bargaining agreement or, except in accordance with the existing written policies
of the Company or existing contracts or agreements, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries;
33
<PAGE>
(e) neither the Company nor its Subsidiaries shall change the accounting
principles used by it unless required by GAAP (or, if applicable with respect to
Sub sidiaries, foreign generally accepted accounting prin ciples);
(f) neither the Company nor any of its Sub sidiaries shall acquire or agree
to acquire, by merging or consolidating with, by purchasing an equity interest
in or a portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or other wise acquire or agree to acquire any assets of any other
Person (other than the purchase of assets in the ordinary course of business
consistent with past practice);
(g) neither the Company nor any of its Subsidi aries shall sell, lease,
exchange, mortgage, pledge, trans fer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise dispose of, any of its
Assets, except in the ordinary course of business consistent with past practice;
(h) neither the Company nor its Subsidiaries shall enter into any material
arrangement, agreement or contract, or any material amendment, supplement,
waiver or other modification in respect of any existing arrangement, agreement
or contract, with any third party (other than customers in the ordinary course
of business) that provides for an exclusive arrangement with that third party or
is substantially more restrictive on the Company or its Subsidiaries or
substantially less advantageous to the Company or its Subsidiaries than
arrangements, agreements or contracts existing on the date hereof; and
(i) neither the Company nor any of its Subsidiaries shall compromise,
settle, grant any waiver or release relating to or otherwise adjust any
Litigation, except in the ordinary course of business consistent with past
practice, or involving a payment not in excess of $250,000, and following prior
notice to and consultation with MergerCo;
(j) neither the Company nor any of its Subsidiaries shall make any material
Tax election, amend any Tax Return or settle or compromise any material federal,
state, local or foreign Tax liability; and
34
<PAGE>
(k) neither the Company nor any of its Subsid iaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing.
Section 5.2 No Solicitation by the Company.
------------------------------
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any of its directors, officers or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or knowingly encourage
-
(including by way of furnishing non-public information), or take any other
action designed to facilitate, any inquiries or the making of any proposal which
constitutes a Company Takeover Proposal (as defined below) or (ii) participate
--
in any discussions or negotiations regarding any Company Takeover Proposal;
provided, however, that if and to the extent that, at any time prior to the time
- -------- -------
of the adoption of this Agreement by the Company's shareholders at the Special
Meeting, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to act
in a manner consistent with its fiduciary duties to the Company's shareholders
under applicable law, the Company may, in response to any Company Takeover
Proposal which was not solicited by it and which did not otherwise result from a
breach of this Section 5.2(a), and subject to providing prior notice of any such
proposal or any such request for non-public information and of its decision to
take such action to MergerCo and compliance with Section 5.2(c), (x) furnish
information with respect to the Company and its Subsidiaries to any person
inquiring about or making a Company Takeover Proposal pursuant to a customary
confidentiality agreement (as determined by the Company based on the advice of
its outside counsel) and (y) participate in discussions or negotiations
regarding such Company Takeover Proposal. For purposes of this Agreement,
"Company Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any Company Takeover Event. For purposes of this Agreement, "Company
Takeover Event" means any direct or indirect acquisition or purchase of a
business that constitutes 50% or more of the net revenues, net income or assets
of the Company and its Subsidiaries, taken as a whole, or 50% or more of any
class of equity securities of the Company, any tender offer or exchange offer
that if consummated would result in any person beneficially owning 50% or more
of any class of any
35
<PAGE>
equity securities of the Company, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company (or any Subsidiary whose business constitutes 50% or more
of the net revenues, net income or assets of the Company and its Subsidiaries
taken as a whole), other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 5.2, neither the Board of
Directors of the Company, the Special Committee nor any other committee shall
(i) withdraw or modify or propose publicly to withdraw or modify, in a manner
-
adverse to MergerCo, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend, or
--
propose publicly to approve or recommend any Company Takeover Proposal, or (iii)
---
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a "Company Acquisition
Agreement") related to any Company Takeover Proposal unless prior to the
adoption of this Agreement by the Company's shareholders at the Special Meeting,
the Board of Directors of the Company, to the extent that it determines in good
faith, following the recommendation of the Special Committee and after
consultation with outside counsel, that in light of a Company Superior Proposal
it is necessary to do so in order to act in a manner consistent with its
fiduciary duties. For purposes of this Agreement, a "Company Superior Proposal"
means any proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares of the Company's capital stock
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment, is more favorable to the Company's stockholders than the
Merger.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.2, the Company shall immediately advise MergerCo
orally and in writing of any request for information or of any Company Takeover
Proposal and the material terms and conditions of such request or Company
Takeover Proposal.
36
<PAGE>
(d) Nothing contained in this Section 5.2 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law; provided,
--------
however, that, neither the Company nor its Board of Directors nor any committee
- -------
thereof shall withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to this Agreement or the Merger or approve or recommend,
or propose publicly to approve or recommend, a Company Takeover Proposal except
to the extent permitted by Section 5.2(b).
Section 5.3 Access to Information. From the date of this Agreement until
---------------------
the Effective Time, the Company shall, and shall cause each of its Subsidiaries
to, afford to MergerCo and its authorized representatives reasonable access
during normal business hours upon reasonable prior notice to all of its books
and records, including but not limited to tax, financial and accounting books
and records. In addition, during such period, the Company shall, and shall cause
each of its Subsidiaries to, furnish promptly to MergerCo (a) a copy of each
-
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of the Exchange Act or other
applicable Law and (b) such other information concerning its business,
-
properties and personnel as MergerCo may reasonably request. MergerCo and its
authorized representatives will use all reasonable efforts to conduct all such
inspections in a manner which will minimize any material disruptions of the
business and operations of the Company and its Subsidiaries. Until the Effective
Time, MergerCo will hold any such information in accordance with the provisions
of the certain letter agreement, dated November 5, 1997, between CD&R and the
Company (the "Confidentiality Agreement"), and will cause such information to be
so held by its Representatives (as defined in the Confidentiality Agreement) of
MergerCo. Upon a termination of this Agreement pursuant to Section 7.1, MergerCo
and its Representatives shall return or destroy (and hold confidential) all
information provided pursuant to this Section 5.3 and all other Evaluation
Material (as defined in the Confidentiality Agreement) pursuant to the
procedures set forth in the Confidentiality Agreement.
37
<PAGE>
Section 5.4 Further Action; Reasonable Best Efforts.
---------------------------------------
(a) Upon the terms and subject to the conditions herein provided, each of
the parties hereto agrees to use its reasonable best efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using
reasonable best efforts to satisfy the conditions precedent to the obligations
of any of the parties hereto, to obtain all necessary authorizations, consents
and approvals, and to effect all necessary registrations and filings. Each of
the parties hereto will furnish to the other parties such necessary information
and reasonable assistance as such other parties may reasonably request in
connection with the foregoing and will provide the other parties with copies of
all filings made by such party with any Governmental Entity or any other
information supplied by such party to a Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
(b) MergerCo and the Company shall use their re spective reasonable best
efforts to resolve such objections, if any, as may be asserted with respect to
the transactions contemplated hereby under the laws, rules, guidelines or
regulations of any Governmental Entity. Without limiting the foregoing, each of
the Company and MergerCo shall, as soon as practicable, file (or cause its
respective "ultimate parent entity" within the meaning of the HSR Act to file)
Notification and Report Forms under the HSR Act (as defined below) with the
Federal Trade Commission (the "FTC") and Antitrust Division of the Department of
Justice (the "Antitrust Division") and shall use reasonable best efforts to
respond as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for ad ditional information or documentation. Each party
hereto shall use its reasonable best efforts to take or cause to be taken all
actions necessary, proper or advisable to obtain any consent, waiver, approval
or authorization relating to any Competition Law that is required for the
consummation of the transactions contemplated by this Agreement. "Compe tition
Laws" means statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization,
lessening of competition or restraint of trade and includes the
Hart-Scott-Rodino Antitrust Im-
38
<PAGE>
provements Act of 1976, as amended (the "HSR Act") and, to the extent
applicable, equivalent laws of the European Union or the Member States thereof,
and of other countries.
(c) Except as provided in Sections 3.23 with respect to the transactions
contemplated by this Agreement, the Board of Directors of the Company shall not
so long as this Agreement is in effect (a) amend the Rights Agreement in a
manner adverse to the interests of MergerCo, or (b) take any actions with
respect to, or make any determination under, the Rights Agreement, including,
but not limited to, any redemption of the Rights or any action that would have
the effect of facilitating a Company Takeover Proposal or Company Takeover
Event.
Section 5.5 Employee Benefits. (a) Continuation of Employee Benefits. For
----------------- ---------------------------------
the period commencing at the Effective Time and ending on December 31, 1998, the
Surviving Corporation shall make available to employees of the Company and the
Subsidiaries employee benefits, other than equity based benefits, that are
substantially comparable in the aggregate to the aggregate employee benefits
made available to such employees immediately prior to the Effective Time,
provided that, nothing in this Section 5.5(a) shall be construed to preclude the
- --------
provision of a lesser level of benefits to any employee of the Company or any
Subsidiary who consents to such lesser level of benefits in writing.
(b) Certain Existing Agreements. From and after the Effective Time, the
---------------------------
Surviving Corporation shall honor, pay and perform all obligations under each
employment, severance and special termination agreement with any employee of the
Company or any Subsidiary in accordance with the terms thereof in effect as of
the date hereof (or as the same may be amended from time to time hereafter, with
the prior written approval of the Surviving Corporation).
Section 5.6 Shareholders' Meeting; Form S-4; Proxy Statement.
------------------------------------------------
(a) As promptly as practicable after the date hereof, the Company shall
prepare the Proxy Statement (as defined below), and the Company shall prepare
and file with the SEC, and MergerCo shall cooperate with the Company in such
preparation and filing, the Form S-4 in which the Proxy Statement, will be
included. The Company will use its best efforts, after consultation with
MergerCo, to respond promptly to any comments made by the SEC with respect to
the
39
<PAGE>
Form S-4 or the Proxy Statement and use its best efforts to have the Form S-4
declared effective under the Securities Act, as promptly as practicable
following such filing. The Company will use its best efforts to cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
shareholders as promptly as practicable after the Form S-4 is declared
effective. The Company shall include in the Proxy Statement the recommendation
of the Board and the Special Committee that shareholders of the Company approve
and adopt this Agreement and the transactions contemplated hereby.
(b) The Company shall, as soon as practicable following the date the Form
S-4 is declared effective under the Securities Act, in accordance with
applicable law and the Articles of Organization and the By-laws of the Company,
duly call, set a record date for, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as promptly as practicable
after the date the Form S-4 is declared effective under the Securities Act for
the purpose of considering and taking action upon this Agreement and such other
matters as may be appropriate at the Special Meeting. The Company shall, through
its Board of Directors, recommend that its shareholders approve the Merger and
shall use all reasonable efforts to solicit from shareholders of the Company
proxies in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
(c) The Company and MergerCo shall together prepare and file a Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") under the Exchange Act. Each
of MergerCo and the Company shall furnish all information concerning it, its
affiliates and the holders of its capital stock required to be included in the
Schedule 13E-3 and, after consultation with each other, shall respond promptly
to any comments made by the SEC with respect to the Schedule 13E-3.
(d) The information supplied by the Company for inclusion in the Form S-4,
the Proxy Statement or the Schedule 13E-3 shall not, at the time the Form S-4 is
declared effective under the Securities Act, or at the time the Proxy Statement
is mailed, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or, at the time of the Special Meeting, as then amended or
supplemented, or at the Effective Time, omit to state any material fact
necessary to
40
<PAGE>
correct any statement originally supplied by the Company for inclusion in the
Form S-4, the Proxy Statement or the Schedule 13E-3 which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its affiliates, or its, or its affiliates', respective
officers, directors or shareholders, should be discovered which should be set
forth in an amendment of, or a supplement to such Form S-4, Proxy Statement or
Schedule 13E-3, the Company shall promptly so inform MergerCo and will furnish
all necessary information to MergerCo relating to such event and an appropriate
amendment or supplement to such Form S-4, Proxy Statement or Schedule 13E-3 will
thereafter be filed with the SEC by the Company. All documents that the Company
is responsible for filing with the SEC in connection with the transactions
contemplated by this Agreement shall comply in all material respects, both as to
form and otherwise, with the Exchange Act and/or the Securities Act, as the case
may be, and the rules and regulations thereunder. The Company shall also take
any action required to be taken under any applicable state securities laws in
connection with the registration and qualification in connection with the Merger
of Recapitalized Common Stock following the Merger.
(e) The Company will immediately notify MergerCo of (i) the effectiveness
of the Form S-4, (ii) the receipt of any comments from the SEC and (iii) any
request by the SEC for any amendment to the Form S-4 or for additional
information. All filings with the SEC, including the Form S-4 and any amendment
thereto, and all mailings to the Company's stockholders in connection with the
Merger, including the Proxy Statement, shall be subject to the prior review,
comment and approval of MergerCo. No such filing or mailing shall be made
without the prior consent of MergerCo.
(f) The information supplied or to be supplied by MergerCo for inclusion in
the Form S-4, the Proxy Statement or the Schedule 13E-3 shall not, at the time
the Form S-4 is declared effective under the Securities Act, or at the time the
Proxy Statement is mailed, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or, at the time of the Special Meeting, as then
amended or supplemented, or at the Effective Time, omit to state any material
fact necessary to correct any statement originally supplied by MergerCo for
inclusion in the Proxy Statement or the Schedule 13E-3 which has become false or
misleading. If at any time prior to the
41
<PAGE>
Effective Time any event relating to MergerCo or any of its affiliates, or its
affiliates' respective officers, directors or shareholders should be discovered
which should be set forth in an amendment of, or a supplement to, such Form S-4,
Proxy Statement or Schedule 13E-3, MergerCo shall promptly so inform the Company
and will furnish all necessary information to the Company relating to such event
and an appropriate amendment or supplement to such Form S-4, Proxy Statement or
Schedule 13E-3 will thereafter be filed with the SEC by the Company. All
documents that MergerCo is responsible for filing with the SEC in connection
with the transactions contemplated by this Agreement shall comply in all
material respects, both as to form and otherwise, with the Exchange Act and the
rules and regulations thereunder.
(g) The Company shall use its reasonable best efforts to cause its
independent accountants to deliver two letters, one dated as of the date on
which the Form S-4 shall become effective under the Securities Act and one dated
as of the Closing Date, each addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
comfort letters delivered by independent public accounts in connection with
registration statements similar to the Form S-4.
Section 5.7 Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to MergerCo, and MergerCo shall give prompt notice to the Company, of (i)
-
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would cause any representation or warranty of the Company, or of
MergerCo, as the case may be, contained in this Agreement to be untrue or
inaccurate in any material respect at the Effective Time, (ii) any material
--
failure of the Company, or MergerCo, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder and (iii) any event, occurrence, fact, condition, change,
---
development or effect that, individually or in the aggregate, would have or
result in a Material Adverse Effect or a breach of Section 5.1.
Section 5.8 Directors' and Officers' Insurance and Indemnification.
------------------------------------------------------
(a) For a period of six years after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its Subsidiaries in
such capacities ("Indemnified Parties") against all losses,
42
<PAGE>
claims, damages, expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time to the
same extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in the Company's Articles of Organization
and By-Laws in effect at the date hereof (to the extent consistent with
applicable law).
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering the persons who are currently covered by the Company's
existing directors' and officers' liability insurance with respect to claims
arising from facts or events which occurred at or prior to the Effective Time,
on terms and conditions no less favorable to such directors and officers than
those in effect on the date hereof;
(c) The provisions of this Section 5.8 are intended for the benefit of, and
shall be enforceable by, the respective Indemnified Parties. Nothing in this
Section 5.8 shall limit or restrict the right or ability of the Surviving
Corporation to change its state of domicile to Delaware.
Section 5.9 Publicity. Neither the Company, MergerCo nor any of their
---------
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange if all reasonable efforts have been made to
consult with the other party.
Section 5.10 Shareholder Litigation. Each of the Company and MergerCo shall
----------------------
give the other the reasonable opportunity to participate in the defense of any
shareholder litigation against the Company or MergerCo, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
Section 5.11 Recapitalization. Each of the Company and MergerCo shall use
----------------
its best efforts to cause the transactions contemplated by this Agreement,
including the Merger, to be accounted for as a recapitalization and such
accounting treatment to be accepted by their respective accountants and by the
SEC, and each of the Company and
43
<PAGE>
MergerCo agrees that it shall take no action that would cause such accounting
treatment not to be obtained.
Section 5.12 Conveyance Taxes. MergerCo and the Company shall cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
by the Company or any of its Subsidiaries in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed on or
before the Effective Time.
Section 5.13 Delisting. Each of the parties agrees to cooperate with each
---------
other in taking, or causing to be taken, all actions necessary to delist the
Company Common Stock from the NYSE, provided that such delisting shall not be
effective until after the Effective Time of the Merger. Notwithstanding the
foregoing, the Surviving Corporation will not take any action, for at least five
years after the Effective Time (the "Registration Period"), to terminate the
registration of the Recapitalized Common Stock under Section 12 of the Exchange
Act other than in connection with a merger in which the Surviving Corporation is
not the surviving corporation unless less than 100 record holders of shares of
Recapitalized Common Stock and any other shares of capital stock of the
Surviving Corporation (or any successor entity by merger or otherwise, issued in
respect of such shares, whether as a result of stock splits, stock dividends,
reclassifications, recapitalizations or similar events) are non-affiliates of
the Surviving Corporation. The Surviving Corporation will continue to file
timely and accurately all reports required by Sections 13(a) and 15(d) of the
Exchange Act, until the earlier to occur of (x) the expiration of the
Registration Period and (y) such time as the Recapitalized Common Stock is no
longer registered under Section 12 of the Exchange Act.
Section 5.14 Affiliates. Prior to the Closing Date, the Company shall
----------
deliver to MergerCo a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to MergerCo on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit B hereto.
44
<PAGE>
Section 5.15 Letter as to Solvency. The parties hereto shall engage an
---------------------
appraisal firm to deliver a letter addressed to the Board of Directors of the
Company and the Company (and on which the Board of Directors shall be entitled
to rely) indicating that immediately after the Effective Time, and after giving
effect to the Merger and the financings contemplated by this Agreement and any
other transactions contemplated in connection with the Merger, the Surviving
Corporation will not (i) be insolvent or (ii) have unreasonably small capital
with which to engage in its business
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
sat isfaction on or prior to the Closing Date of each of the following
conditions (any or all of which may be waived by the parties hereto in writing,
in whole or in part, to the extent permitted by applicable law):
(a) No statute, rule, order, decree or regulation shall have been enacted
or promulgated by any Governmental Entity of competent jurisdiction (whether
temporary, preliminary or permanent) which is in effect and has the effect of
prohibiting the consummation of the Merger or making the Merger illegal;
(b) There shall be no order or injunction of a Governmental Entity of
competent jurisdiction (whether temporary, preliminary or permanent) in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger;
(c) The Form S-4 (including the Proxy Statement) in form and substance
consistent with the intent of the Parties set forth in Section 5.11 shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order, and any material "blue sky" and
other state securities laws applicable to the registration and qualification of
the Recapitalized Common Stock following the Merger shall have been complied
with.
45
<PAGE>
(d) The applicable waiting period under the HSR Act with respect to the
actions contemplated by this Agreement shall have expired or been terminated;
and
(e) Other than filing the Articles of Merger in accordance with the MBCL
and the Certificate of Merger in accordance with the DGCL, all authorizations,
consents and approvals of all Governmental Entities required to be obtained
prior to consummation of the Merger shall have been obtained, except for such
authorizations, consents, and approvals the failure of which to be obtained
would not have a Material Adverse Effect.
(f) The Board of Directors of the Company and the Company shall have
received the letter contemplated by Section 5.15.
Section 6.2 Conditions to the Obligation of the Company to Effect the
---------------------------------------------------------
Merger. The obligation of the Company to effect the Merger is further subject to
- -----
the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of MergerCo contained in this
Agreement shall be true and correct at and as of the date hereof, and true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification) at
and as of the Effective Time as if made at and as of such time; and
(b) MergerCo shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Effective
Time pursuant to the terms hereof.
Section 6.3 Conditions to Obligations of MergerCo to Effect the Merger. The
----------------------------------------------------------
obligations of MergerCo to effect the Merger are further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct at and as of the date hereof, and true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty
46
<PAGE>
without any materiality qualification) at and as of the Effective Time as if
made at and as such time;
(b) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof;
(c) MergerCo and the Company shall have received sufficient funds to pay
the Merger Consideration, repay or redeem all of the existing indebtedness of
the Company and its Subsidiaries, and otherwise enable MergerCo to consummate
the transactions contemplated hereby and to meet the working capital
requirements of the Surviving Corporation pursuant to financing arrangements and
definitive financing agreements completed to the satisfaction of MergerCo in its
reasonable judgment;
(d) The number of Dissenting Shares shall not exceed 5% of the issued and
outstanding shares of Company Common Stock;
(e) No event, occurrence, fact, condition, change, development or effect
shall exist or have occurred or come to exist or been threatened since September
30, 1997 that, individually or in the aggregate, has had or resulted in, or
could reasonably be expected to become or result in, a Material Adverse Effect;
(f) All outstanding Rights issued and outstanding under the Rights
Agreement shall have been terminated and the Rights Agreement shall have
terminated and be of no further force or effect, as contemplated by Section
3.23.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Notwithstanding anything herein to the contrary,
-----------
this Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after shareholder approval
thereof:
(a) By the mutual consent of the Boards of Directors of MergerCo and the
Company.
(b) By either the Company, on the one hand, or MergerCo, on the other hand,
if: (i) the Merger has not been
-
47
<PAGE>
consummated on or prior to June 30, 1998 or such other date, if any, as MergerCo
and the Company shall agree upon (provided that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to a party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such date);
or (ii) any Governmental Entity shall have issued a statute, order, decree or
--
regulation or taken any other action (which statute, order, decree, regulation
or other action the parties hereto shall use their best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the Merger
or making the Merger illegal and such statute, order, decree, regulation or
other action shall have become final and non-appealable.
(c) By the Company, (i) if holders of two-thirds of the outstanding Company
-
Common Stock fail to approve and adopt this Agreement and the transactions
contemplated hereby at the Special Meeting (including any postponement or
adjournment thereof), or (ii) if, prior to the Effective Time, either of the
--
Board of Directors of the Company or the Special Committee, shall have
withdrawn, or modified or changed in a manner adverse to MergerCo its approval
or recommendation of this Agreement or the Merger pursuant to Section 5.2;
provided in the case of (ii) that such termination shall not be effective until
- --------
the Company has made payment to CD&R (as defined in Section 8.1(b)) of the Fee
(as defined in Section 8.1(b)) and has either paid to MergerCo or deposited with
a mutually acceptable escrow agent $5 million for reimbursement to MergerCo of
Expenses (as defined in Section 8.1(b)), in each case in accordance with Section
8.1.
(d) By the Company, upon 15 days' prior written notice, in the event of a
material breach of any representation, warranty, covenant or agreement on the
part of MergerCo such that the condition set forth in Section 6.2(a) or 6.2(b)
would not be satisfied as of the Effective Time, which breach is not cured prior
to the expiration of such 15 day period (provided that if such breach is not
--------
curable, the Company may terminate this Agreement immediately under this Section
7.1(d)); except where the Company is in material breach of any representation,
warranty, covenant or agreement as provided in Section 7.1(e).
(e) By MergerCo, upon 15 days' prior written notice, in the event of a
material breach of any
48
<PAGE>
representation, warranty, covenant or agreement on the part of the Company such
that the condition set forth in Section 6.3(a) or 6.3(b) would not be satisfied
as of the Effective Time, which breach is not cured prior to the expiration of
such 15 day period (provided that if such breach is not curable, MergerCo may
--------
terminate this Agreement immediately under this Section 7.1(e)); except where
MergerCo is in material breach of any representation, warranty, covenant or
agreement as provided in Section 7.1(d).
(f) By MergerCo, if (i) holders of at least two- thirds of the outstanding
-
Company Common Stock fail to approve and adopt this Agreement and the
transactions contemplated hereby at the Special Meeting (including any
postponement or adjournment thereof); (ii) either the Board of Directors of the
--
Company or the Special Committee withdraws, modifies or changes its
recommendation of this Agreement or the Merger in a manner adverse to MergerCo
or shall have resolved to do any of the foregoing or the Board of Directors of
the Company shall have recommended to the shareholders of the Company any
Company Takeover Proposal or resolved to do so; or (iii) a tender offer or
---
exchange offer for outstanding shares of capital stock of the Company then
representing 20% or more of the combined power to vote generally for the
election of directors is commenced, and the Board of Directors of the Company
does not recommend that stockholders not tender their shares into such tender or
exchange offer.
Section 7.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given by the terminating party or parties to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of MergerCo or the Company, except as set forth in Section
8.1 hereof and except with respect to the requirement to comply with the
Confidentiality Agreement and return, destroy or hold Evaluation Material
pursuant to the procedures set forth therein or set forth in Section 5.3;
provided that nothing herein shall relieve any party from any liability or
obligation with respect to any wilful breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
49
<PAGE>
Section 8.1 Fees and Expenses. (a) Except as contemplated by this
-----------------
Agreement, all costs and expenses incurred in connection with this Agreement and
the con summation of the transactions contemplated hereby shall be paid by the
party incurring such expenses except that the Company shall bear and pay the
costs and expenses incurred in connection with (i) the preparation, filing,
-
printing and mailing of the Form S-4 and the Proxy Statement (including SEC
filing fees) and (ii) the filing of the Schedule 13E-3.
--
(b) The Company shall promptly pay Clayton, Dubilier & Rice, Inc. ("CD&R")
a termination fee of $24.5 million (the "Fee") (x) in the event that this
-
Agreement is terminated pursuant to Sections 7.1(c)(i), 7.1(e) or 7.1(f)(i) or
(iii), provided that (A) prior to the time this Agreement is terminated or the
--------
time of the Special Meeting, as the case may be, a Company Takeover Proposal
shall have been publicly announced or shall have become publicly known and (B)
during the term of this Agreement or within twelve months after the termination
of this Agreement a Company Takeover Event shall occur, (y) the Company
-
terminates this Agreement pursuant to Section 7.1(c)(ii), or (z) MergerCo
-
terminates this Agreement pursuant to Section 7.1(f)(ii). In addition, the
Company shall promptly pay MergerCo an amount equal to all Expenses in the event
of any termination of this Agreement other than a termination resulting from (i)
-
the failure by MergerCo to fulfill any of their material obligations under this
Agreement or (ii) the failure of the condition specified in Section 6.1(c) to be
--
satisfied because recapitalization accounting treatment is not available for the
transactions contemplated by this Agreement, including the Merger. All such
payments shall be in immediately available funds. In the event that the Company
shall pay MergerCo an amount in respect of Expenses as contemplated by the
proviso to Section 7.1(c), and such amount shall subsequently prove to exceed
the amount of Expenses actually incurred, MergerCo shall refund the excess to
the Company. The term "Expenses" means all documented out-of-pocket fees, costs
and other expenses, not to exceed $5 million, incurred or assumed by MergerCo or
incurred on its behalf in connection with this Agreement or any of the
transactions contemplated hereby, including but not limited to in connection
with the negotiation, preparation, execution and performance of this Agreement,
the structuring and financing of the Merger and the other transactions
contemplated hereby, or any commitments or agreements relating to such
financing.
50
<PAGE>
(c) The Company acknowledges that the agreements contained in this Section
8.1 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, MergerCo would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amount due pursuant to
this Section 8.1, and, in order to obtain such payment, MergerCo commences a
suit which results in a judgment against the Company for any of the Fees or
Expenses set forth in this Section 8.1, the Company shall pay to MergerCo its
costs and expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of such Fees and Expenses at the
rate on six-month U.S. Treasury obligations plus 300 basis points in effect on
the date such payment was required to be made.
(d) This Section 8.1 shall survive any termination of this Agreement.
Section 8.2 Amendment; Waiver.
-----------------
(a) This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors (and, in the case of the
Company, the Special Committee), at any time before or after approval by the
shareholders of the Company of the matters presented in connection with the
Merger, but after any such approval no amendment shall be made without the
approval of such shareholders if such amendment changes the Merger Consideration
or alters or changes any of the other terms or conditions of this Agreement if
such alteration or change would materially adversely affect the rights of such
shareholders. Except as otherwise provided in Section 2.3 with respect to
Schedule 2.3, this Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties may (i) extend the
-
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
--
warranties of the other parties contained herein or in any document, certificate
or writing delivered pursuant hereto or (iii) waive compliance with any of the
---
agreements or conditions of the other parties hereto contained herein. Any such
extension or waiver by the Company shall require the consent of the Special
Committee or the Board of Directors of the Company. Any agreement on the part of
any party to any such extension or waiver shall be valid only if
51
<PAGE>
set forth in an instrument in writing signed on behalf of such party. Any such
waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies herein
provided are cumulative and none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy or breach of any representation, warranty, covenant or agreement or
failure to fulfill any condition shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of the Company shall
not be affected or deemed waived by reason of any investigation made by or on
behalf of MergerCo (including but not limited to any of its advisors, counsel,
consultants or representatives) or by reason of the fact that MergerCo or any of
such advisors, counsel, consultants or representatives knew or should have known
that any such representation or warranty is or might be inaccurate.
Section 8.3 Survival. The respective representations and warranties of
--------
MergerCo and the Company contained herein or in any certificates or other
documents delivered prior to or as of the Effective Time shall not survive
beyond the Effective Time. The covenants and agreements of the parties hereto
(including the Surviving Corporation after the Merger) shall survive the
Effective Time without limitation (except for those which, by their terms,
contemplate a shorter survival period).
Section 8.4 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given upon (a) transmitter's confirmation of a
-
receipt of a facsimile transmission, (b) confirmed delivery by a standard
-
overnight carrier or when delivered by hand or
52
<PAGE>
(c) the expiration of five business days after the day when mailed in the United
-
States by certified or registered mail, postage prepaid, addressed at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to the Company, to:
Dynatech Corporation
Corporate Headquarters
3 New England Executive Park
Burlington, Massachusetts 01803
Facsimile: (617) 229-8850
Telephone: (781) 272-6100
Attention: General Counsel
and
Attention: Mark V. B. Tremallo, Esq.
with a copy to:
Hale & Dorr LLP
60 State Street
Boston, Massachusetts 02109
Facsimile: (617) 526-5000
Telephone: (617) 526-6000
Attention: Peter Tarr
and with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Facsimile: (617) 951-7050
Telephone: (617) 951-7000
Attention: John E. Beard, Esq.
(b) if to MergerCo, to:
CDRD Merger Corporation
c/o the Clayton, Dubilier & Rice
Fund V Limited Partnership
1043 Foulk Road, Suite 106
Wilmington, Delaware 19803
53
<PAGE>
with a copy to
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Facsimile: (212) 407-5252
Telephone: (212) 407-5200
Attention: Brian D. Finn
and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: Franci J. Blassberg, Esq.
Section 8.5 Interpretation. When a reference is made in this Agreement to
--------------
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "made available" when used in this Agreement shall mean
that the information referred to has been made available to the party to whom
such information is to be made available. The words "affiliates" and
"associates" when used in this Agreement shall have the respective meanings
ascribed to them in Rule 12b-2 under the Exchange Act. The phrase "beneficial
ownership" and words of similar import when used in this Agreement shall have
the meaning ascribed to it in Rule 13d-3 under the Exchange Act.
Section 8.6 Headings; Schedules. The headings contained in this Agreement
-------------------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Disclosure of any matter pursuant to any
Schedule to the Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
Section 8.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
Section 8.8 Entire Agreement; Third Party Beneficiaries. This Agreement,
-------------------------------------------
together with the
54
<PAGE>
Confidentiality Agreement, (a) constitutes the entire agreement, and supersedes
all prior agreements and understandings (written and oral), among the parties
with respect to the subject matter hereof and (b) except for the provisions of
Sections 5.8, 5.13 and 8.1(b), are not intended to confer upon any person other
than the parties any rights or remedies.
Section 8.9 Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the State of New York, except to the extent that
it is mandatorily governed by the laws of the Commonwealth of Massachusetts.
Section 8.11 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; provided, that MergerCo may assign this Agreement
--------
to any Subsidiary of MergerCo. This Agreement will be binding upon, inure to the
benefit of and be enforceable by, the parties and their respective successors
and assigns.
55
<PAGE>
IN WITNESS WHEREOF, MergerCo and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
DYNATECH CORPORATION
By:
----------------------------
Name:
Title:
[Seal]
By:
----------------------------
Name:
Title:
CDRD MERGER CORPORATION
By:
----------------------------
Name:
Title:
[Seal]
By:
----------------------------
Name:
Title:
56
<PAGE>
Schedule 2.3
- ----------------------------------------------------------------------
Number of Options
Number of Options to be Rolled-Over
Employee to be Cashed-Out into Recapitalized
Name/Current Pursuant to Common Stock
Option Holdings Section 2.3 -----
- --------------- -----------
- ----------------------------------------------------------------------
John F. Reno
413,000 Options -0- 413,000 Options
- ----------------------------------------------------------------------
John Peeler
166,400 Options 28,800 Options 137,600 Options
- ----------------------------------------------------------------------
Allan M. Kline
66,000 Options -0- 66,000 Options
- ----------------------------------------------------------------------
<PAGE>
EXHIBIT 2
================================================================================
DYNATECH CORPORATION
REGISTRATION RIGHTS AGREEMENT
Dated as of May 21, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Background............................................................1
2. Definitions...........................................................1
3. Registration..........................................................4
3.1. Registration on Request......................................4
(a) Requests..............................................4
(b) Obligation to Effect Registration.....................5
(c) Registration Statement Form...........................5
(d) Expenses..............................................6
(e) Inclusion of Other Securities.........................6
(f) Effective Registration Statement......................6
(g) Pro Rata Allocation...................................7
3.2. Incidental Registration......................................7
3.3. Registration Procedures......................................9
3.4. Underwritten Offerings......................................13
(a) Underwritten Offerings Exclusive.....................13
(b) Underwriting Agreement...............................13
(c) Selection of Underwriters............................14
(d) Incidental Underwritten Offerings....................14
(e) Hold Back Agreements.................................14
3.5. Preparation; Reasonable Investigation.......................15
3.6. Other Registrations.........................................15
3.7. Indemnification.............................................16
(a) Indemnification by the Company.......................16
(b) Indemnification by the Sellers.......................17
(c) Notices of Claims, etc...............................17
(d) Other Indemnification................................18
(e) Other Remedies.......................................18
(f) Officers and Directors...............................19
4. Miscellaneous........................................................19
4.1. Amendments and Waivers......................................19
4.2. Nominees for Beneficial Owners..............................19
i
<PAGE>
PAGE
----
4.3. Successors, Assigns and Transferees.....................20
4.4. Notices.................................................20
4.5. No Inconsistent Agreements..............................21
4.6. Remedies; Attorneys' Fees...............................21
4.7. Stock Splits, etc.......................................21
4.8. Term....................................................22
4.9. Severability............................................22
4.10. Headings................................................22
4.11. Counterparts............................................22
4.12. Governing Law...........................................22
4.13. No Third Party Beneficiaries............................22
4.14. Consent to Jurisdiction.................................22
4.15. Waiver of Jury Trial....................................23
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
------------------------------
REGISTRATION AND RIGHTS AGREEMENT, dated as of May 21, 1998,
among Dynatech Corporation, a Massachusetts corporation (the "COMPANY"),
-------
Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands limited
partnership (the "FUND"), Mr. John F. Reno (the "MANAGER"), The John F. Reno
---- -------
1997 Qualfied Annuity Trust, under Trust Agreement, dated as of the 28th day of
November, 1997, between John F. Reno as Grantor and John F. Reno and John D.
Hamilton, Jr. as Trustees (the "John F. Reno Trust") and The Suzanne M. Reno
1997 Qualfied Annuity Trust, under Trust Agreement, dated as of the 28th day of
November, 1997, between Suzanne D. Reno as Grantor and John F. Reno and John D.
Hamilton, Jr. as Trustees (together with the John F. Reno Trust, the "Trusts").
1. BACKGROUND. (a) Pursuant to an Agreement and Plan of Merger,
----------
dated as of December 20, 1997 (the "MERGER AGREEMENT"), between the Company and
----------------
CDRD Merger Corporation, a Delaware corporation ("MERGERCO"), formed by the
--------
Fund, MergerCo has merged with and into the Company (the "MERGER") and shares of
------
MergerCo common stock owned by Fund have been converted into 110,740,720 shares
of common stock, no par value (the "COMMON STOCK"), of the Company.
------------
(b) Pursuant to the Merger Agreement, and pursuant to the
Employment Agreements, dated as of December 20, 1997, between the Company and
the Manager, shares of MergerCo common stock owned by the Manager and the Trusts
have been converted into 799,758 shares of Common Stock.
(c) The Company or the Fund may in the future issue or sell
directly or pursuant to option or other rights, additional shares of Common
Stock to Directors of the Company or directors or senior executives of
corporations in which entities managed or sponsored by CD&R (as defined below)
have made substantial equity investments or other individuals with whom CD&R has
a consulting or advisory relationship ("INDIVIDUAL INVESTORS").
--------------------
2. DEFINITIONS. For purposes of this Agreement, the following
-----------
terms have the following respective meanings:
"ADDITIONAL SALE": See Section 4(a).
---------------
<PAGE>
"AFFILIATE": With respect to any Person, any other Person
---------
directly or indirectly Controlling, Controlled by or under common Control with
such first Person. "Control" means the power to direct the affairs of a Person
by reason of ownership of voting securities, by contract or otherwise. Any
director, member of management or other employee of the Company or any of its
Subsidiaries who would not otherwise be an Affiliate shall not be deemed to be
an Affiliate of the Fund.
"BOARD": The Board of Directors of the Company.
-----
"BUSINESS DAY": A day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City are authorized or required to close.
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
"COMMON STOCK": See Section 1(a).
------------
"COMPANY": See the introduction to this Agreement.
-------
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended,
------------
or 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.
"FUND": See the introduction to this Agreement.
----
"INDIVIDUAL INVESTORS": See Section 1(c).
--------------------
"MANAGER": See the introduction to this Agreement.
-------
"MERGER": See Section 1(a).
------
"MERGER AGREEMENT": See Section 1(a).
----------------
"MERGERCO": See Section 1(a).
--------
"NASD": National Association of Securities Dealers, Inc.
----
"NASDAQ": The NASD Automated Quotation System.
------
2
<PAGE>
"OFFER": See Section 4(a).
-----
"OFFERED SECURITIES": See Section 4(b).
------------------
"PERSON": Any natural person, firm, partnership, association,
------
corporation, company, trust, business trust, governmental entity or other
entity.
"PROPORTIONATE SHARE: See Section 4(b).
-------------------
"PUBLIC OFFERING": An underwritten public offering of Common
---------------
Stock led by at least one underwriter of nationally recognized standing.
"REGISTRABLE SECURITIES": (a) The Common Stock (i) received by
---------------------- - -
the Fund, the Manager and the Trusts as a result of the Merger or (ii) issued to
--
Individual Investors pursuant to a stock subscription agreement or other
agreement that provides that such Common Stock shall be Registrable Securities,
(b) any shares of Common Stock issued pursuant to the terms of, and under the
-
circumstances set forth in, Section 4, and (c) any securities issued or issuable
-
with respect to any Common Stock referred to in the foregoing clauses (w) upon
-
any conversion or exchange thereof, (x) by way of stock dividend or stock
-
split, (y) in connection with a combination of shares, recapitalization, merger,
-
consolidation or other reorganization or (z) otherwise, in all cases subject to
-
the last paragraph of Section 3.3. As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities when (a) a
-
registration statement (other than a Special Registration pursuant to which such
securities were issued by the Company) with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (b) such securities shall have been distributed to the public in
-
reliance upon Rule 144, (c) such securities shall have been otherwise
-
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force, or (d) such securities shall have ceased to be outstanding.
-
"REGISTRATION EXPENSES": All expenses incident to the Company's
---------------------
performance of its obligations under or compliance with Section 3, including,
but not limited to, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws, all fees and expenses associated
with listing securities on exchanges or NASDAQ, all fees and other expenses
associated with filings with the NASD (including, if required, the fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for the
3
<PAGE>
Company and of its independent public accountants, and the expenses of any
special audits made by such accountants required by or incidental to such
performance and compliance, but not including (a) fees and disbursements of
-
counsel retained by the holders of Registrable Securities or (b) any
-
underwriting discounts or commissions or any transfer taxes payable in respect
of the sale of Registrable Securities by the holders thereof.
"REQUISITE PERCENTAGE OF STOCKHOLDERS": The holder or holders of
------------------------------------
at least (a) as to the initial request under Section 3.1, 50% (by number of
-
shares) of the Registrable Securities at the time outstanding or (b) as to any
-
other request, 20% (by number of shares) of the Registrable Securities at the
time outstanding.
"RULE 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
"RULE 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
"SECURITIES ACT": The Securities Act of 1933, as amended, or 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.
"SECURITIES AND EXCHANGE COMMISSION": The Securities and
----------------------------------
Exchange Commission or any other Federal agency at the time administering the
Securities Act or the Exchange Act .
"SPECIAL REGISTRATION": (a) The registration of shares of equity
-------------------- -
securities and/or options or other rights in respect thereof to be offered to
directors, members of management, employees, consultants or sales agents,
distributors or similar representatives of the Company or its direct or indirect
Subsidiaries, and/or Individual Investors or (b) the registration of equity
-
securities and/or options or other rights in respect thereof solely on Form S-4
or S-8 or any successor form.
4
<PAGE>
3. REGISTRATION.
------------
3.1. REGISTRATION ON REQUEST.
-----------------------
(a) REQUESTS. Subject to the provisions of Section 3.6, at any
--------
time or from time to time, the Requisite Percentage of Stockholders shall have
the right to make written requests that the Company effect registrations under
the Securities Act of all or part of the Registrable Securities of the holder or
holders making such request, which requests shall specify the intended method of
disposition thereof by such holder or holders.
(b) OBLIGATION TO EFFECT REGISTRATION. Upon receipt by the
---------------------------------
Company of any request for registration pursuant to Section 3.1(a), the Company
will promptly give written notice of such requested registration to all holders
of Registrable Securities, and thereupon will use its best efforts to effect the
registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register pursuant to Section 3.1(a), and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 30 days after the Company has given such written
notice (which request shall specify the intended method of disposition
of such Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(x) the Company shall not be required to effect a registration
requested pursuant to Section 3.1(A) if (a) with respect to the first
-
three such requests, the aggregate number of Registrable Securities
referred to in clauses (i) and (ii) of the preceding sentence to be
included in such registration shall be less than 22,300,000 shares and
(B) thereafter, the number of Registrable Securities to be so included
-
shall be less than 11,150,000, PROVIDED, that in no event shall the
--------
Company be required to effect a registration requested pursuant to
Section 3.1(a) if the Board determines, in its good faith judgment,
after consultation with a firm of nationally recognized underwriters
that the aggregate net proceeds from the disposition of the Registrable
Securities for which registration has been so requested would be less
than $15,000,000.00; and
5
<PAGE>
(y) if the Board determines in its good faith judgment, after
consultation with a firm of nationally recognized underwriters, that
there will be an adverse effect on a then contemplated Public Offering,
the Requisite Percentage of Stockholders shall be given notice of such
fact and shall be deemed to have withdrawn such request and such
registration shall not be deemed to have been effected or requested
pursuant to this Section 3.1.
(c) REGISTRATION STATEMENT FORM. Each registration requested
---------------------------
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), the choice of
such form to be made by holders holding at least a majority (by number of
shares) of the Registrable Securities as to which registration has been
requested pursuant to this Section 3.1, unless the use of a specific or
different form is required by law.
(d) EXPENSES. The Company will pay all Registration Expenses in
--------
connection with the first five registrations effected pursuant to a request
under Sec tion 3.1(a). The Registration Expenses in connection with each other
registration, if any, requested under Section 3.1(a) shall be apportioned among
the holders whose Registrable Securities are then being registered, on the basis
of the respective amounts (by number of shares) of Registrable Securities then
being registered. However, in the case of each registration requested under
Section 3.1(a), the Company shall pay all amounts in respect of (a) any
allocation of salaries of personnel of the Company and its Subsidiaries or other
general overhead expenses of the Company and its Subsidiaries or other expenses
for the preparation of financial statements or other data normally prepared by
the Company and its Subsidiaries in the ordinary course of its business, (B)
-
the expenses of any officers' and directors' liability insurance, (C) the
-
expenses and fees for listing the securities to be registered on each exchange
on which similar securities issued by the Company are then listed or, if no such
securities are then listed, on an exchange selected by the Company or on NASDAQ
and (D) all fees associated with filings required to be made with the NASD
-
(including, if required, the fees and expenses of any "qualified independent
underwriter" and its counsel). Notwithstanding the provisions of this Section
3.1(d) or of Section 3.2, each seller of Registrable Securities shall pay all
Registration Expenses to the extent required to be paid by such seller by
applicable law.
(e) INCLUSION OF OTHER SECURITIES. The Company shall not register
-----------------------------
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to Section
3.1(a) unless permitted to do so by the written consent of holders holding at
least a majority (by num-
6
<PAGE>
ber of shares) of the Registrable Securities proposed to be sold in such
registration which consent shall not unreasonably be withheld, it being
understood and agreed that such holders shall not be deemed to be unreasonable
if they in their good faith judgment believe that the inclusion of the
securities of any such other Person will adversely affect the price or
marketability of the shares such holders of Registrable Securities or the
Company propose to sell in such registration.
(f) EFFECTIVE REGISTRATION STATEMENT. A registration requested
--------------------------------
pursuant to Section 3.1(a) will not be deemed to have been effected unless it
has become effective for the period specified in Section 3.3(b). Notwithstanding
the preceding sentence, a registration requested pursuant to Section 3.1(a)
which does not become effective after the Company has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
holder or holders of Registrable Securities requesting the registration shall be
deemed to have been effected by the Company at the request of such holder or
holders.
(g) PRO RATA ALLOCATION. If the holders of a majority (by number
-------------------
of shares) of the Registrable Securities for which registration is being
requested pursuant to Section 3.1(a) determine, based on consultation with the
managing underwriters or, in an offering which is not underwritten, with an
investment banker, that the number of securities to be sold in any such
offering should be limited due to market conditions or otherwise, holders of
Registrable Securities proposing to sell their securities in such registration
shall share pro rata in the number of securities being offered (as determined by
the holders holding a majority (by number of shares) of the Registrable
Securities for which registration is being requested in consultation with the
managing underwriters or investment banker, as the case may be) and registered
for their account, such sharing to be based on the number of Registrable
Securities as to which registration was requested by such holders and the number
of securities that the Company proposed to sell for its own account in such
offering, respectively.
3.2. INCIDENTAL REGISTRATION. If the Company at any time proposes
-----------------------
to register any of its equity securities (as defined in the Exchange Act) under
the Securities Act (other than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and the registration
form to be used may be used for the registration of Registrable Securities, it
will at such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and, upon the written request of any holder
of Registrable Securities given to the Company within 30 days after the Company
has given any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under
7
<PAGE>
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent required to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered, PROVIDED that:
--------
(a) if such registration shall be in connection with the first
public offering of Common Stock following the Merger, the Company shall
not include any Registrable Securities in such proposed registration if
the Board shall have determined, after consultation with the managing
underwriters for such offering, that it is not in the best interests of
the Company to include any Registrable Securities in such registration,
PROVIDED that, if the Board makes such a determination, the Company
--------
shall not include in such registration any securities not being sold for
the account of the Company;
(b) if, at any time after giving written notice of its intention
to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Board shall determine for any reason not to register such securities,
the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities that was
previously notified of such registration and, thereupon, shall not
register any Registrable Securities in connection with such registration
(but shall nevertheless pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities to request that a registration be
effected under Section 3.1; and
(c) if the Company shall be advised in writing by the managing
underwriters (or, in connection with an offering which is not
underwritten, by an investment banker) that in their or its opinion the
number of securities requested to be included in such registration
(whether by the Company, pursuant to this Section 3.2 or pursuant to any
other rights granted by the Company to a holder or holders of its
securities to request or demand such registration or inclusion of any
such securities in any such registration) exceeds the number of such
securities which can be sold in such offering,
(i) the Company shall include in such registration the
number (if any) of Registrable Securities so requested to be
included which in the opinion of such underwriters or investment
banker, as the case may be, can be sold and shall not include in
such registration any securities (other than securities being
sold by the Company, which shall have priority in being included
in such registration) so requested to be included other than
8
<PAGE>
Registrable Securities unless all Registrable Securities
requested to be so included are included therein, and
(ii) if in the opinion of such underwriters or investment
banker, as the case may be, some but not all of the Registrable
Securities may be so included, all holders of Registrable
Securities requested to be included therein shall share pro rata
in the number of shares of Registrable Securities included in
such public offering on the basis of the number of Registrable
Securities requested to be included therein by such holders,
PROVIDED that, in the case of a registration initially requested
--------
or demanded by a holder or holders of securities other than
Registrable Securities, pursuant to a contractual registration
obligation, the holders of the Registrable Securities requested
to be included therein and the holders of such other securities
shall share pro rata (based on the number of shares if the
requested or demanded registration is to cover only Common Stock
and, if not, based on the proposed offering price of the total
number of securities included in such public offering requested
to be included therein),
and the Company shall so provide in any registration agreement
hereinafter entered into with respect to any of its securities.
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Section
3.2. No registration effected under this Section 3.2 shall relieve the Company
from its obligation to effect registrations upon request under Section 3.1.
3.3. REGISTRATION PROCEDURES. If and whenever the Company is
-----------------------
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company will promptly:
(a) subject to clauses (x), (y) and (z) of Section 3.1(b),
prepare and file with the Securities and Exchange Commission within 120
days, after receipt of a request pursuant to Section 3.1 a registration
statement with respect to such securities, make all required filings
with the NASD and use best efforts to cause such registration statement
to become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith and such other documents as may
be necessary to
9
<PAGE>
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all
of such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement, but in no event for a period of more than
six months after such registration statement becomes effective;
(c) furnish to counsel (if any) selected by the holders of a
majority (by number of shares) of the Registrable Securities covered by
such registration statement and to counsel for the underwriters in any
underwritten offering copies of all documents proposed to be filed with
the Securities and Exchange Commission (including all documents to be
filed on a confidential basis) in connection with such registration,
which documents will be subject to the review of such counsel;
(d) furnish to each seller of such securities, without charge,
such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case, including all
exhibits and documents filed therewith (other than those filed on a
confidential basis), except that the Company shall not be obligated to
furnish any seller of securities with more than two copies of such
exhibits and documents), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus) in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request in order to facilitate the disposition of
the securities owned by such seller;
(e) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, and do
any and all other acts and things which may be necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions
of the securities owned by such seller, except that the Company shall
not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it is not so
qualified, subject itself to taxation in any jurisdiction wherein it is
not so subject, or take any action which would subject it to general
service of process in any jurisdiction wherein it is not so subject;
(f) furnish to each seller a signed counterpart, addressed to the
sellers, of
10
<PAGE>
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the
registration statement, and
(ii) a "comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's
financial statements included in the registration statement,
subject to such seller having executed and delivered to the
independent public accountants such certificates and documents as
such accountants shall reasonably request,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(g) (i) notify each seller of any securities covered by such
-
registration statement if such registration statement, at the time it or
any amendment thereto became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and, as promptly as practicable, prepare and file with the
Securities and Exchange Commission a post-effective amendment to such
registration statement and use best efforts to cause such post-effective
amendment to become effective such that such registration statement, as
so amended, shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and (ii) notify each
--
holder of Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, if the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
and, as promptly as is practicable, prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
11
<PAGE>
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement of the Company complying with the
provisions of Section 11 (a) of the Securities Act and Rule 158 under
the Securities Act;
(i) notify each seller of any securities covered by such
registration statement (i) when such registration statement, or any
-
post-effective amendment to such registration statement, shall have
become effective, or any amendment of or supplement to the prospectus
used in connection therewith shall have been filed, (ii) of any request
by the Securities and Exchange Commission to amend such registration
statement or to amend or supplement such prospectus or for additional
information, (iii) of the issuance by the Securities and Exchange
---
Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use
of any preliminary prospectus, and (iv) of the suspension of the
--
qualification of such securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such
purposes;
(j) use its best efforts (i) (A) to list such securities on any
-
securities exchange on which the Common Stock is then listed or, if no
Common Stock is then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange or (B)
-
if such listing is not practicable or the Board determines that
quotation as a NASDAQ National Market System security is preferable, to
secure designation of such securities as a NASDAQ "national market
system security" within the meaning of Rule 11Aa2-1 under the Exchange
Act or, failing that, to secure NASDAQ authorization for such
securities, and, without limiting the foregoing, to arrange for at least
two market makers to register as such with respect to such securities
with the NASD, (ii) to provide a transfer agent and registrar for such
--
Registrable Securities not later than the effective date of such
registration statement and (iii) to obtain a CUSIP number for the
---
Registrable Securities; and
(k) use every reasonable effort to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
registration statement or of any order preventing or suspending the use
of any preliminary prospectus.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time
12
<PAGE>
reasonably request in writing and as shall be required by law in connection
therewith. Each such holder agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such holder not materially misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Com pany pursuant to Section 3.3(g), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such holder
shall have received, in the case of clause (i) of Section 3.3(g), notice from
the Company that such registration statement has been amended, as contemplated
by Section 3.3(g), and, in the case of clause (ii) of Section 3.3(g), copies of
the supplemented or amended prospectus contemplated by Sec tion 3.3(g). If so
directed by the Company, each holder of Registrable Securities will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the Company
shall give any such notice, the period mentioned in Section 3.3(b) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and in cluding the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.3(g).
Notwithstanding any other provision of this Agreement, the
parties hereto acknowledge that the Company shall have no obligation to prepare
or file any registration statement prior to the time that financial information
required to be included therein is available for inclusion therein.
3.4. UNDERWRITTEN OFFERINGS. The provisions of this Section 3.4
----------------------
do not establish additional registration rights but instead set forth procedures
applicable, in addi tion to those set forth in Sections 3.1 through 3.3, to any
registration which is an underwritten offering.
13
<PAGE>
(a) UNDERWRITTEN OFFERINGS EXCLUSIVE. Whenever a registration
--------------------------------
requested pursuant to Section 3.1 is for an underwritten offering, only
securities which are to be distributed by the underwriters may be included in
the registration.
(b) UNDERWRITING AGREEMENT. If requested by the underwriters for
----------------------
any underwritten offering by holders of Registrable Securities pursuant to a
registration re quested under Section 3.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in sub stance and form to the holders of a
majority (by number of shares) of the Registrable Securities to be covered by
such registration and to the underwriters and to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in agreements of this type, including, but not limited to,
indemnities to the effect and to the extent provided in Section 3.7, provisions
for the delivery of officers' certificates, opinions of counsel and accountants'
"comfort" letters and hold-back arrangements. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. No such holder of Registrable Securities
shall be required by the Company to make any representations or warranties to,
or agreements with, the Company or the underwriters other than as set forth in
Section 3.4(e) and representations, warranties or agreements regarding such
holder and such holder's intended method of distribution.
(c) SELECTION OF UNDERWRITERS. Whenever a registration requested
-------------------------
pursuant to Section 3.1 is for an underwritten offering, the holders of a
majority of the shares requested to be included in such registration will have
the right to select one or more underwriters to administer the offering at least
one of which shall be an underwriter of nationally recognized standing
reasonably satisfactory to the Company. If the Company at any time proposes to
register any of its securities under the Securities Act for sale for its own
account and such securities are to be distributed by or through one or more
underwriters, the Company will have the right to select one or more underwriters
to administer the offering at least one of which shall be an underwriter of
nationally recognized standing.
(d) INCIDENTAL UNDERWRITTEN OFFERINGS. Subject to the provisions
---------------------------------
of the proviso to the first sentence of Section 3.2, if the Company at any time
proposes to regis-
14
<PAGE>
ter any of its equity securities under the Securities Act (other than pursuant
to Section 3.1 or pursuant to a Special Registration), whether or not for its
own account, and such securities are to be distributed by or through one or more
underwriters, the Company will give prompt written notice to all holders of
Registrable Securities of its intention to do so and, if requested by any holder
of Registrable Securities, will arrange for such underwriters to include the
Registrable Securities to be offered and sold by such holder among those to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of the
underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Regis trable Securities. No such
holder of Registrable Securities shall be required by the Company to make any
representations or warranties to, or agreements with, the Company or the
underwriters other than as set forth in Section 3.4(e) and representations,
warranties or agreements regarding such holder and such holder's intended method
of distribution.
(e) HOLD BACK AGREEMENTS. 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), or is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1 or 3.2, each holder
of Registrable Securities, if required by the managing underwriter, agrees by
acquisition of such Registrable Securities 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 Registrable Securities,
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 each holder of Registrable Securities further agrees
that, if required by the managing 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, and the Company agrees to
cause each holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased or
acquired from the Company at any time other than in a Public Offering to enter
into a similar agreement with the Company. The Company will continue to file
timely and accurately all reports required by Sections 13(a) and 15(d) of the
Exchange Act, until the earlier to occur of (x) the fifth anniversary of the
date hereof
15
<PAGE>
and (y) such time as the Common Stock is no longer registered under Section 12
of the Exchange Act.
3.5. PREPARATION; REASONABLE INVESTIGATION. In connection with
-------------------------------------
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
holders of such Registrable Securities so to be registered and their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Securities and Exchange
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have issued audit reports on its financial statements as shall
be necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
3.6. OTHER REGISTRATIONS. If and whenever the Company is required
-------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any registration statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
six months shall have elapsed from the effective date of such previous
registration.
3.7. INDEMNIFICATION.
---------------
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
------------------------------
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, the Company will indemnify and hold harmless the seller of
such securities, its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering or sale of such
securities and each other person, if any, who con trols such seller or any such
participating person within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any and all losses, claims,
damages or liabilities, joint or several, to which such seller or any such
director, officer, employee, participating person or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
-
statement of a fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
16
<PAGE>
prospectus, final prospectus or summary prospectus contained therein or related
thereto, or any amendment or supplement thereto, or (ii) any omission or alleged
omission to state a fact required to be stated in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or necessary to make the statements therein not
misleading; and the Company will reimburse such seller and each such director,
officer, employee, participating person and controlling person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding, PROVIDED
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such seller or participating person expressly for use in the
preparation thereof and PROVIDED, FURTHER, that the Company shall not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the prospectus and the
seller of Registrable Securities thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of Registrable
Securities to the person asserting such loss, claim, damage, liability or
expense after the Company had furnished such seller with a sufficient number of
copies of the same or if the seller received notice from the Company of the
existence of such untrue statement or alleged untrue statement or omission or
alleged omission and the seller continued to dispose of Registrable Securities
prior to the time of the receipt of either (a) an amended or supplemented
prospectus which completely corrected such untrue statement or omission or (b) a
notice from the Company that the use of the existing prospectus may be resumed.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
employee, participating person or controlling person and shall survive the
transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. In the event of any
------------------------------
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, each of the prospective sellers of such securities, will
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall sign such registration statement, each other
person who participates as an underwriter, broker or dealer in the offering or
sale of such securities and each other person, if any, who controls the Company
or any such participating person within the meaning of Section 15
17
<PAGE>
of the Securities Act or Section 20 of the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which the Company
or any such director, officer, employee, participating person or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
-
untrue statement of a fact contained in any registration statement under which
such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein or related
thereto, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company by such seller expressly for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement or (ii) any omission or alleged omission to
--
state a fact with respect to such seller required to be stated in any such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement or necessary to make the statements therein
not misleading; and the seller will reimburse the Company and each such
director, officer, employee, participating person and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, PROVIDED that the liability of each such seller will be in
--------
proportion to and limited to the net amount received by such seller (after
deducting any underwriting discount and expenses) from the sale of Registrable
Securities pursuant to such registration statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, participating person or controlling
person and shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 3.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party hereunder, give written notice to the latter of the
commencement of such action, PROVIDED that the failure of any indemnified party
--------
to give notice as provided therein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 3.7. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof,
18
<PAGE>
PROVIDED that if such indemnified party and the indemnifying party reasonably
- --------
determine, based upon advice of their respective independent counsel, that a
conflict of interest may exist between the indemnified party and the
indemnifying party with respect to such action and that it is advisable for such
indemnified party to be represented by separate counsel, such indemnified party
may retain other counsel, reasonably satisfactory to the indemnifying party, to
represent such indemnified party, and the indemnifying party shall pay all
reasonable fees and expenses of such counsel. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of such
indemnified party, which consent shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(e) OTHER REMEDIES. If for any reason the foregoing indemnity is
--------------
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
-
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the offering of Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each such party) or (ii) if the alloca tion
--
provided by clause (i) above is not permitted by applicable law, or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other but also the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 3.7(e) except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 3.7 if such indemnification were enforceable under applicable law.
19
<PAGE>
(f) OFFICERS AND DIRECTORS. As used in this Section 3.7, the
----------------------
terms "officers" and "directors" shall include the partners of the holders of
Registrable Securities which are partnerships and the trustees and
beneficiaries of the holders of Registrable Securities which are trusts.
4. MISCELLANEOUS.
-------------
4.1. AMENDMENTS AND WAIVERS. This Agreement may be amended, and
----------------------
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the holder
or holders of at least 66% of the shares then constituting Registrable
Securities PROVIDED that this Agreement may not be amended in a manner adversely
--------
affecting any holder of Registrable Securities which does not adversely affect
all holders of Registrable Securities without the consent of such holder. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 5.1, whether or not such
Registrable Securities shall have been marked to indicate such consent. No
amendment , modification or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in writing. Any such
waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party or
parties granting such waiver in any other respect or at any other time.
4.2. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
4.3. SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
-----------------------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent holder of any Registrable
Securities, subject to the provisions respecting the
20
<PAGE>
minimum numbers or percentages of shares of Registrable Securities required in
order to be entitled to certain rights, or take certain actions, contained
herein.
4.4. 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
Manager, as the case may be, at the following addresses or to such other address
as the Company, the Fund or the Manager, 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
Burlington, Massachusetts 01803
ATTENTION: General Counsel
---------
(ii) if to the Manager or the Trusts, to the address of the
--
Manager set forth on the signature page hereof.
(iii) if to the Fund, to:
---
The Clayton & Dubilier Private Equity
Fund V Limited Partnership
Foulkstone Plaza, Suite 102
1403 Foulk Road
Wilmington, Delaware 19803
ATTENTION: Joseph L. Rice, III
---------
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:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
ATTENTION: Joseph L. Rice, III
---------
21
<PAGE>
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, MA 02109
ATTENTION: Peter B. Tarr, Esq.
---------
4.5. NO INCONSISTENT AGREEMENTS. The Company will not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities by this
Agreement.
4.6. REMEDIES; ATTORNEYS' FEES. Each holder of Registrable
-------------------------
Securities, in addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any provision of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
4.7. STOCK SPLITS, ETC. Each party hereto agrees that it will
-----------------
vote to effect a stock split (forward or reverse, as the case may be) with
respect to any Registrable Securities in connection with any registration of
such Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that in their or its opinion such a stock split would facilitate or increase the
likelihood of success of the offering. Each party hereto agrees that any number
of shares of Common Stock referred to in this Agreement shall be equitably
adjusted to reflect any stock split, stock dividend, stock combination,
recapitalization or similar transaction.
4.8. TERM. This Agreement shall be effective as of the date
----
hereof and shall continue in effect thereafter until the earliest of (a) its
-
termination by the consent of the parties hereto or their respective successors
in interest, (b) the date on which no
-
22
<PAGE>
Registrable Securities remain outstanding, (c) the dissolution, liquidation or
-
winding up of the Company and (d) the tenth anniversary of the date hereof.
-
4.9. SEVERABILITY. If any provision of this Agreement is
------------
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
Sections or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
4.10. HEADINGS. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
4.11. COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
4.12. GOVERNING 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
4.13. NO THIRD PARTY BENEFICIARIES. Except as provided in
----------------------------
Sections 3.7 and 5.3, nothing in this Agreement shall confer any rights upon any
person or entity other than the parties hereto, each such party's respective
successors and permitted assigns.
4.14. CONSENT TO JURISDICTION. Each party irrevocably submits to
-----------------------
the exclusive jurisdiction of (a) the Supreme Court of the State of New York,
-
New York County, and (b) the United States District Court for the Southern
-
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby (and agrees
not to commence any such suit, action or proceeding except in such courts). Each
party further agrees that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address set forth above shall be
effective service of process for any such suit, action or proceeding. Each party
irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or proceeding in (i) the Supreme Court of the
-
23
<PAGE>
State of New York, New York County, and (ii) the United States District Court
for the Southern District of New York, that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
4.15. WAIVER OF JURY TRIAL. Each party hereby waives, to the
--------------------
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any suit, action or proceeding arising out of this Agreement
or any transaction contemplated hereby. Each party (a) certifies that no
-
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
-
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 5.15.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
DYNATECH CORPORATION
By:
----------------------
Name:
Title:
CLAYTON, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V
Limited Partnership, its
general partner
By: CD&R Investment Associates II,
Inc., a general partner
By:
--------------------------------
Name: Joseph L. Rice, III
Title: Chairman
24
<PAGE>
MR. JOHN F. RENO
------------------------------
Address
--------------------
--------------------
--------------------
THE JOHN F. RENO 1997 QUALIFIED ANNUITY
TRUST UNDER TRUST AGREEMENT DATED AS
OF THE 28TH DAY OF NOVEMBER, 1997
By:
----------------------------------
Name: John F. Reno
Title: Trustee
By:
----------------------------------
Name: John D. Hamilton, Jr.
Title: Trustee
THE SUZANNE M. RENO 1997 QUALIFIED
ANNUITY TRUST UNDER TRUST AGREEMENT
DATED AS OF THE 28TH DAY OF NOVEMBER,
1997
By:
----------------------------------
Name: John F. Reno
Title: Trustee
By:
----------------------------------
Name: John D. Hamilton, Jr.
Title: Trustee
25
<PAGE>
EXHIBIT 10.5
MANAGEMENT EQUITY AGREEMENT
(Reno)
MANAGEMENT EQUITY AGREEMENT, dated as of May __, 1998 (the
"Agreement"), among Dynatech Corporation, a Massachusetts corporation (the
---------
"Company"), Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman
- --------
Islands limited partnership (the "Fund"), and the individual whose name appears
----
on the signature page hereof (the "Employee"). Capitalized terms used herein
--------
have the respective meanings ascribed in Section 1.
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
------
Agreement"), dated as of December 20, 1997, between the Company and CDRD Merger
- ---------
Corporation ("MergerCo"), MergerCo was merged with and into the Company (the
--------
"Merger") and the Company continued as the surviving corporation of the Merger;
- -------
WHEREAS, at the effective time of the Merger (the "Effective Time"),
--------------
pursuant to the Merger Agreement, (i) each then outstanding share of common
-
stock, par value $.20 per share, of the Company (the "Prior Common Stock") was
------------------
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
------------ --
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
------
Cancellation Payment") in respect of each share of Prior Common Stock covered by
- --------------------
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
-------------
purchase shares of Common Stock (the "Converted Options") in lieu of receiving
-----------------
an Option Cancellation Payment in respect of such Converted Options;
<PAGE>
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
- ---------------------
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
-------
Common Stock covered by the Options, the "Exercise Shares");
---------------
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
-----------
have the following respective meanings:
"Award Agreement" With respect to each Option, the agreement between
---------------
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.
-----
"Cause": As defined in the Employment Agreement.
-----
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
"Code": The U.S. Internal Revenue Code of 1986, as amended.
----
2
<PAGE>
"Common Stock": As defined in the recitals to this Agreement.
------------
"Converted Option": As defined in the recitals to this Agreement.
----------------
"Company": As defined in the introduction to this Agreement.
-------
"Control": With respect to any Person, 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.
"Covered Securities": As defined in Section 6(a).
------------------
"Date of Termination": As defined in the Employment Agreement.
-------------------
"Disability": As defined in the Employment Agreement.
----------
"Draft Sale Agreement": As defined in Section 4(a).
--------------------
"Effective Time": As defined in the recitals to this Agreement.
--------------
"Employee": As defined in the introduction to this Agreement.
--------
"Employment Agreement": As defined in the recitals to this Agreement.
--------------------
"Excess Number": As defined in Section 3(b).
-------------
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
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.
---------------
"Fair Market Value": As defined in Section 6(c).
-----------------
"First Option Period": As defined in Section 6(a).
-------------------
"Fund": As defined in the introduction to this Agreement.
----
3
<PAGE>
"Good Reason": As defined in the Employment Agreement.
-----------
"Incentive Stock Options": As defined in Section 2(a).
-----------------------
"Lock-Up Expiration Date" As defined in Section 2(d)(i).
-----------------------
"Non-Qualified Options": As defined in Section 2(a).
---------------------
"Option": As defined in the recitals to this Agreement.
------
"Original Termination Date": As defined in Section 2(c).
-------------------------
"Person": Any natural person, firm, partnership, limited liability
------
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Prior Common Stock": As defined in the recitals to this Agreement.
------------------
"Prior Option": As defined in the recitals to this Agreement.
------------
"Public Offering": An underwritten public offering of the Common
---------------
Stock led by at least one underwriter of nationally recognized standing.
"Purchase Price": As defined in Section 6(c).
--------------
"Qualifying Number": 5,539,539 shares of Common Stock (excluding any
-----------------
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).
---------------
"Repurchase Determination Date" The Date of Termination.
-----------------------------
"Rule 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
"Sale Notice": As defined in Section 3(a).
-----------
4
<PAGE>
"Sale Percentage": As defined in Section 4(a).
---------------
"Second Option Period": As defined in Section 6(a).
--------------------
"Section 4 Closing": As defined in Section 4(a).
-----------------
"Securities Act": The Securities Act of 1933, as amended, or 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.
"Securities and Exchange Commission": The Securities and Exchange
----------------------------------
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
------
acquired by the Employee and all shares of Common Stock held in any family
trusts established 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
-------------------- -
securities and/or options or other rights in respect thereof to be offered to
(i) directors, members of management, employees, consultants or sales agents,
-
distributors or similar representatives of the Company or its direct or indirect
Subsidiaries, and/or (ii) directors or senior executives of corporations in
--
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
-
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
---------------------
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
----------
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.
5
<PAGE>
"Take-Along Buyer": As defined in Section 4(a).
----------------
"Take-Along Notice": As defined in Section 4(a).
-----------------
"Take-Along Offer": As defined in Section 4(a).
----------------
"Take-Along Sale": As defined in Section 4(a).
---------------
"Unforeseen Personal Hardship": Financial hardship arising from (x)
---------------------------- -
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
-
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.
-----------------------------------
(a) Confirmation of Option Conversion. The Company and the Employee
---------------------------------
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
-----------------------
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
---------------------
will not qualify immediately after the Effective Time as incentive stock options
under the Code.
(b) Vesting. Subject to Section 2(c), Section 2(d) or 2(e),
-------
whichever is applicable, and Section 4(c), (i) the Employee's right to exercise
-
the Non-Qualified Options will become vested as of the Effective Time and (ii)
--
the Employee's right to exercise each Incentive Stock Option will become vested
on the date or dates and subject to the conditions set forth in the Award
Agreement evidencing such Incentive Stock Option except that those Incentive
Stock Options listed on Schedule C hereto shall 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 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
6
<PAGE>
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
-------------------------------------------------
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 D hereto (the "Original
--------
Termination Date").
- ----------------
(d) Termination of Non-Qualified Options; Early Termination. With
-------------------------------------------------------
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
-
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
-----------------------
(B) the first anniversary of the Date of Termination.
-
(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
-
Reason or (ii) by the Company or such Subsidiary with Cause, such Non-
--
Qualified Option shall expire on the earliest of
(x) its Original Termination Date,
7
<PAGE>
(y) the later of (1) the 90th day following the Lock-Up Expiration
-
Date, and (2) the 30th day following the Date of Termination, and
-
(z) the first anniversary of the Date of Termination.
(e) Termination of Incentive Stock Options; Early Termination. With
---------------------------------------------------------
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
------------------
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
-------------
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
-
exercise, or (ii) to comply with or satisfy the requirements of the Securities
--
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
----------------
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
-----------
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
8
<PAGE>
the product of (i) the quotient determined by dividing (A) the percentage of the
then outstanding Common Stock represented by the Shares then held by the
Employee by (B) the aggregate percentage of the then outstanding Common Stock
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
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
--------------- -
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
--
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
------
Number") equal to the excess of (A) the sum of any shares previously sold or
- ------ -
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
-
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
9
<PAGE>
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.
-----------------
(a) Take-Along Notice. If the Fund intends to effect a sale (a
-----------------
"Take-Along Sale") prior to a Public Offering of not less than 90% of the shares
- ----------------
of Common Stock it then holds to a non-Affiliate third party (a "Take-Along
----------
Buyer") and elects to exercise its rights under this Section 4, the Fund shall
- -----
deliver written notice (a "Take-Along Notice") to the Company and the Employee,
-----------------
which notice shall (i) state (w) that the Fund wishes to exercise its rights
- -
under this Section 4 with respect to such transfer, (x) the name and address of
-
the Take-Along Buyer, (y) the per share amount and form of consideration the
-
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)
--------------- -
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-
-------------------- -- ----
Along Offer") by the Take-Along Buyer to purchase from the Employee a percentage
- -----------
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
---
and place of the closing of such transfer (a "Section 4 Closing"), which
-----------------
(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
--------
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,
------------------------
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
--------
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
-------- -------
be required to make, in connection with a Take-Along Sale, representations and
warranties that survive the closing of such Sale
10
<PAGE>
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.
-------------------------------
(i) Accelerated Vesting and Payment. Subject to Section 4(c)(ii), in
-------------------------------
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
-
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
11
<PAGE>
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
-------------------
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)
-
exercise all of the Options then held by him or (ii) provided such
--
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
--------
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.
------------------------
(a) Restrictions on Transfer. The Employee shall not be permitted to
------------------------
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
-
death of the Employee, to the Employee's estate, (ii) any transfer of Shares,
--
but not Options, by the Employee to a family trust or partnership solely for
estate planning purposes or (iii)
12
<PAGE>
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
--------
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
--
Expiration Date and (iii) the termination, for any reason, of the Employee's
---
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
----------------------------------------------------------
Employment or Unforeseen Personal Hardship of the Employee.
- ----------------------------------------------------------
(a) Termination of Employment. If, prior to a Public Offering, the
-------------------------
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
------------------
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
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
<PAGE>
(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
<PAGE>
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 ap propriately 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 reg istration, provided that the
Employee further agrees that, if required by the managing
15
<PAGE>
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
Burlington, Massachusetts 01803
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 Clayton & Dubilier Private Equity
Fund V Limited Partnership
Foulkstone Plaza, Suite 102
1403 Foulk Road
Wilmington, Delaware 19803
Attention: Brian D. Finn
---------
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:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Attention: Joseph L. Rice, III
---------
16
<PAGE>
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, 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
<PAGE>
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
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CLAYTON, 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
___________________________________________
John F. Reno
19
<PAGE>
EXHIBIT 10.6
Form of Agreement
Messrs. Peeler and Kline
MANAGEMENT EQUITY AGREEMENT
MANAGEMENT EQUITY AGREEMENT, dated as of May __, 1998 (the
"Agreement"), among Dynatech Corporation, a Massachusetts corporation (the
---------
"Company"), Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman
- --------
Islands limited partnership (the "Fund"), and the individual whose name appears
----
on the signature page hereof (the "Employee"). Capitalized terms used herein
--------
have the respective meanings ascribed in Section 1.
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
------
Agreement"), dated as of December 20, 1997, between the Company and CDRD Merger
- ---------
Corporation ("MergerCo"), MergerCo was merged with and into the Company (the
--------
"Merger") and the Company continued as the surviving corporation of the Merger;
- -------
WHEREAS, at the effective time of the Merger (the "Effective Time"),
--------------
pursuant to the Merger Agreement, (i) each then outstanding share of common
-
stock, par value $.20 per share, of the Company (the "Prior Common Stock") was
------------------
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
------------ --
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
------
Cancellation Payment") in respect of each share of Prior Common Stock covered by
- --------------------
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
-------------
purchase shares of Common Stock (the "Converted Options") in lieu of receiving
-----------------
an Option Cancellation Payment in respect of such Converted Options;
<PAGE>
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
- ---------------------
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
-------
Common Stock covered by the Options, the "Exercise Shares");
---------------
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
-----------
have the following respective meanings:
"Award Agreement" With respect to each Option, the agreement between
---------------
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.
-----
"Cause": As defined in the Employment Agreement.
-----
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
"Code": The U.S. Internal Revenue Code of 1986, as amended.
----
2
<PAGE>
"Common Stock": As defined in the recitals to this Agreement.
------------
"Converted Option": As defined in the recitals to this Agreement.
----------------
"Company": As defined in the introduction to this Agreement.
-------
"Control": With respect to any Person, 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.
"Covered Securities": As defined in Section 6(a).
------------------
"Date of Termination": As defined in the Employment Agreement.
-------------------
"Disability": As defined in the Employment Agreement.
----------
"Draft Sale Agreement": As defined in Section 4(a).
--------------------
"Effective Time": As defined in the recitals to this Agreement.
--------------
"Employee": As defined in the introduction to this Agreement.
--------
"Employment Agreement": As defined in the recitals to this Agreement.
--------------------
"Excess Number": As defined in Section 3(b).
-------------
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
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.
---------------
"Fair Market Value": As defined in Section 6(c).
-----------------
"First Option Period": As defined in Section 6(a).
-------------------
"Fund": As defined in the introduction to this Agreement.
----
3
<PAGE>
"Good Reason": As defined in the Employment Agreement.
-----------
"Incentive Stock Options": As defined in Section 2(a).
-----------------------
"Lock-Up Expiration Date" As defined in Section 2(d)(i).
-----------------------
"Non-Qualified Options": As defined in Section 2(a).
---------------------
"Option": As defined in the recitals to this Agreement.
------
"Original Termination Date": As defined in Section 2(c).
-------------------------
"Person": Any natural person, firm, partnership, limited liability
------
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Prior Common Stock": As defined in the recitals to this Agreement.
------------------
"Prior Option": As defined in the recitals to this Agreement.
------------
"Public Offering": An underwritten public offering of the Common
---------------
Stock led by at least one underwriter of nationally recognized standing.
"Purchase Price": As defined in Section 6(c).
--------------
"Qualifying Number": 5,539,539 shares of Common Stock (excluding any
-----------------
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).
---------------
"Repurchase Determination Date" The Date of Termination.
-----------------------------
"Rule 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
"Sale Notice": As defined in Section 3(a).
-----------
4
<PAGE>
"Sale Percentage": As defined in Section 4(a).
---------------
"Second Option Period": As defined in Section 6(a).
--------------------
"Section 4 Closing": As defined in Section 4(a).
-----------------
"Securities Act": The Securities Act of 1933, as amended, or 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.
"Securities and Exchange Commission": The Securities and Exchange
----------------------------------
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
------
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
-------------------- -
securities and/or options or other rights in respect thereof to be offered to
(i) directors, members of management, employees, consultants or sales agents,
-
distributors or similar representatives of the Company or its direct or indirect
Subsidiaries, and/or (ii) directors or senior executives of corporations in
--
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
-
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
---------------------
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
----------
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).
----------------
5
<PAGE>
"Take-Along Notice": As defined in Section 4(a).
-----------------
"Take-Along Offer": As defined in Section 4(a).
----------------
"Take-Along Sale": As defined in Section 4(a).
---------------
"Unforeseen Personal Hardship": Financial hardship arising from (x)
---------------------------- -
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
-
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.
-----------------------------------
(a) Confirmation of Option Conversion. The Company and the Employee
---------------------------------
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
-----------------------
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
---------------------
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),
-------
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
6
<PAGE>
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
-------------------------------------------------
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
--------
Termination Date").
- ----------------
(d) Termination of Non-Qualified Options; Early Termination. With
-------------------------------------------------------
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
-
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
-----------------------
(B) the first anniversary of the Date of Termination.
-
(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
-
Reason or (ii) by the Company or such Subsidiary with Cause, such Non-
--
Qualified Option shall expire on the earliest of
(x) its Original Termination Date,
7
<PAGE>
(y) the later of (1) the 90th day following the Lock-Up Expiration
-
Date, and (2) the 30th day following the Date of Termination, and
-
(z) the first anniversary of the Date of Termination.
(e) Termination of Incentive Stock Options; Early Termination. With
---------------------------------------------------------
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
------------------
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
-------------
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
-
exercise, or (ii) to comply with or satisfy the requirements of the Securities
--
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
----------------
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
-----------
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
8
<PAGE>
the product of (i) the quotient determined by dividing (A) the percentage of the
- -
then outstanding Common Stock represented by the Shares then held by the
Employee by (B) the aggregate percentage of the then outstanding Common Stock
-
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
--
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
--------------- -
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
--
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
------
Number") equal to the excess of (A) the sum of any shares previously sold or
- ------ -
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
-
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
9
<PAGE>
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.
-----------------
(a) Take-Along Notice. If the Fund intends to effect a sale (a
-----------------
"Take-Along Sale") prior to a Public Offering of not less than 90% of the shares
- ----------------
of Common Stock it then holds to a non-Affiliate third party (a "Take-Along
----------
Buyer") and elects to exercise its rights under this Section 4, the Fund shall
- -----
deliver written notice (a "Take-Along Notice") to the Company and the Employee,
-----------------
which notice shall (i) state (w) that the Fund wishes to exercise its rights
- -
under this Section 4 with respect to such transfer, (x) the name and address of
-
the Take-Along Buyer, (y) the per share amount and form of consideration the
-
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)
--------------- -
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-
-------------------- -- ----
Along Offer") by the Take-Along Buyer to purchase from the Employee a percentage
- -----------
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
---
and place of the closing of such transfer (a "Section 4 Closing"), which
-----------------
(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
--------
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,
------------------------
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
--------
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
-------- -------
be required to make, in connection with a Take-Along Sale, representations and
warranties that survive the closing of such Sale
10
<PAGE>
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.
-------------------------------
(i) Accelerated Vesting and Payment. Subject to Section 4(c)(ii), in
-------------------------------
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
-
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
11
<PAGE>
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
-------------------
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)
-
exercise all of the Options then held by him or (ii) provided such
--
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
--------
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.
------------------------
(a) Restrictions on Transfer. The Employee shall not be permitted to
------------------------
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
-
death of the Employee, to the Employee's estate, (ii) any transfer of Shares,
--
but not Options, by the Employee to a family trust or partnership solely for
estate planning purposes or (iii)
12
<PAGE>
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
--------
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
--
Expiration Date and (iii) the termination, for any reason, of the Employee's
---
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
----------------------------------------------------------
Employment or Unforeseen Personal Hardship of the Employee.
- ----------------------------------------------------------
(a) Termination of Employment. If, prior to a Public Offering, the
-------------------------
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
------------------
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
-------------------
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
Burlington, Massachusetts 01803
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 Clayton & Dubilier Private Equity
Fund V Limited Partnership
Foulkstone Plaza, Suite 102
1403 Foulk Road
Wilmington, Delaware 19803
Attention: Brian D. Finn
---------
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:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Attention: Joseph L. Rice, III
---------
16
<PAGE>
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, 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
<PAGE>
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
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CLAYTON, 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
<PAGE>
EXHIBIT 10.7
MANAGEMENT EQUITY AGREEMENT
MANAGEMENT EQUITY AGREEMENT, dated as of May __, 1998 (the
"Agreement"), among Dynatech Corporation, a Massachusetts corporation (the
---------
"Company"), Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman
- --------
Islands limited partnership (the "Fund"), and the individual whose name appears
----
on the signature page hereof (the "Employee"). Capitalized terms used herein
--------
have the respective meanings ascribed in Section 1.
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
------
Agreement"), dated as of December 20, 1997, between the Company and CDRD Merger
- ---------
Corporation ("MergerCo"), MergerCo was merged with and into the Company (the
--------
"Merger") and the Company continued as the surviving corporation of the Merger;
- -------
WHEREAS, at the effective time of the Merger (the "Effective Time"),
--------------
pursuant to the Merger Agreement, (i) each then outstanding share of common
-
stock, par value $.20 per share, of the Company (the "Prior Common Stock") was
------------------
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
------------ --
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
------
Cancellation Payment") in respect of each share of Prior Common Stock covered by
- --------------------
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
-------------
purchase shares of Common Stock (the "Converted Options") in lieu of receiving
-----------------
an Option Cancellation Payment in respect of such Converted Options;
<PAGE>
WHEREAS, pursuant to the letter agreement, dated as of May __, 1998,
from the Company to the Employee (the "Letter Agreement"), the Employee agreed
----------------
to the conversion of certain of his 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
-------
Common Stock covered by the Options, the "Exercise Shares");
---------------
WHEREAS, the Letter 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
-----------
have the following respective meanings:
"Award Agreement" With respect to each Option, the agreement between
---------------
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.
-----
"Cause": As defined in the Letter Agreement.
-----
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
"Code": The U.S. Internal Revenue Code of 1986, as amended.
----
2
<PAGE>
"Common Stock": As defined in the recitals to this Agreement.
------------
"Converted Option": As defined in the recitals to this Agreement.
----------------
"Company": As defined in the introduction to this Agreement.
-------
"Control": With respect to any Person, 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.
"Covered Securities": As defined in Section 6(a).
------------------
"Disability": As defined in the Letter Agreement.
----------
"Draft Sale Agreement": As defined in Section 4(a).
--------------------
"Effective Time": As defined in the recitals to this Agreement.
--------------
"Employee": As defined in the introduction to this Agreement.
--------
"Excess Number": As defined in Section 3(b).
-------------
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
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.
---------------
"Fair Market Value": As defined in Section 6(c).
-----------------
"First Option Period": As defined in Section 6(a).
-------------------
"Fund": As defined in the introduction to this Agreement.
----
"Good Reason": As defined in the Letter Agreement.
-----------
"Incentive Stock Options": As defined in Section 2(a).
-----------------------
3
<PAGE>
"Letter Agreement": As defined in the recitals to this Agreement.
----------------
"Lock-Up Expiration Date" As defined in Section 2(d)(i).
-----------------------
"Non-Qualified Options": As defined in Section 2(a).
---------------------
"Option": As defined in the recitals to this Agreement.
------
"Original Termination Date": As defined in Section 2(c).
-------------------------
"Person": Any natural person, firm, partnership, limited liability
------
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Prior Common Stock": As defined in the recitals to this Agreement.
------------------
"Prior Continuation Period": A period of time equal to four weeks
-------------------------
plus two weeks for each year of service with the Company or Subsidiary by the
Employee.
"Prior Option": As defined in the recitals to this Agreement.
------------
"Public Offering": An underwritten public offering of the Common
---------------
Stock led by at least one underwriter of nationally recognized standing.
"Purchase Price": As defined in Section 6(c).
--------------
"Qualifying Number": 5,539,539 shares of Common Stock (excluding any
-----------------
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).
---------------
"Repurchase Determination Date" (a) the Trigger Date, or (b) in the
----------------------------- - -
case of a Specified Termination only, the date which is the last day of a period
beginning on the Trigger Date and lasting for the Prior Continuation Period.
"Rule 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
4
<PAGE>
"Sale Notice": As defined in Section 3(a).
-----------
"Sale Percentage": As defined in Section 4(a).
---------------
"Second Option Period": As defined in Section 6(a).
--------------------
"Section 4 Closing": As defined in Section 4(a).
-----------------
"Securities Act": The Securities Act of 1933, as amended, or 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.
"Securities and Exchange Commission": The Securities and Exchange
----------------------------------
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
------
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
-------------------- -
securities and/or options or other rights in respect thereof to be offered to
(i) directors, members of management, employees, consultants or sales agents,
-
distributors or similar representatives of the Company or its direct or indirect
Subsidiaries, and/or (ii) directors or senior executives of corporations in
--
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
-
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
---------------------
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
----------
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.
5
<PAGE>
"Take-Along Buyer": As defined in Section 4(a).
----------------
"Take-Along Notice": As defined in Section 4(a).
-----------------
"Take-Along Offer": As defined in Section 4(a).
----------------
"Take-Along Sale": As defined in Section 4(a).
---------------
"Trigger Date": As defined in the Letter Agreement.
------------
"Unforeseen Personal Hardship": Financial hardship arising from (x)
---------------------------- -
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
-
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.
-----------------------------------
(a) Confirmation of Option Conversion. The Company and the Employee
---------------------------------
hereby confirm that, pursuant to the Letter 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
-----------------------
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
---------------------
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.
6
<PAGE>
(b) Vesting. Subject to Section 2(c), Section 2(d) or 2(e),
-------
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 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
-------------------------------------------------
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
--------
Termination Date").
- ----------------
(d) Termination of Non-Qualified Options; Early Termination. With
-------------------------------------------------------
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
-
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
-----------------------
(B) the first anniversary of the Trigger Date.
-
(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 by the Employee without Good
Reason, such Non-Qualified Option shall expire on the earliest of
7
<PAGE>
(x) its Original Termination Date,
(y) the later of (1) the 90th day following the Lock-Up Expiration
-
Date, and (2) the 30th day following the Trigger Date, and
-
(z) the six month anniversary of the Trigger Date.
(iii) 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
a termination of the Employee's employment by the Company or such
Subsidiary for Cause, such Non-Qualified Option shall expire immediately
upon the Trigger Date.
(e) Termination of Incentive Stock Options; Early Termination. With
---------------------------------------------------------
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
------------------
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
-------------
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
-
exercise, or (ii) to comply with or satisfy the requirements of the Securities
--
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
----------------
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
-----------
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
8
<PAGE>
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 the product of (i) the quotient determined by dividing (A)
- -
the percentage of the then outstanding Common Stock represented by the Shares
then held by the Employee by (B) the aggregate percentage of the then
-
outstanding Common Stock 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 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
--------------- -
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
--
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
------
Number") equal to the excess of (A) the sum of any shares previously sold or
- ------ -
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
-
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.
9
<PAGE>
(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 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.
-----------------
(a) Take-Along Notice. If the Fund intends to effect a sale (a
-----------------
"Take-Along Sale") prior to a Public Offering of not less than 90% of the shares
- ----------------
of Common Stock it then holds to a non-Affiliate third party (a "Take-Along
----------
Buyer") and elects to exercise its rights under this Section 4, the Fund shall
- -----
deliver written notice (a "Take-Along Notice") to the Company and the Employee,
-----------------
which notice shall (i) state (w) that the Fund wishes to exercise its rights
- -
under this Section 4 with respect to such transfer, (x) the name and address of
-
the Take-Along Buyer, (y) the per share amount and form of consideration the
-
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)
--------------- -
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-
-------------------- -- ----
Along Offer") by the Take-Along Buyer to purchase from the Employee a percentage
- -----------
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
---
and place of the closing of such transfer (a "Section 4 Closing"), which
-----------------
(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
--------
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,
------------------------
the Employee shall have the obligation to transfer a number of his Shares equal
to the
10
<PAGE>
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
--------
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
-------- -------
be required to make, in connection with a Take-Along Sale, representations and
warranties that survive the closing of such Sale 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) execute 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.
11
<PAGE>
(c) Effect of Take-Along On Options.
-------------------------------
(i) Accelerated Vesting and Payment. Subject to Section 4(c)(ii), in
-------------------------------
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
-
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 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
-------------------
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)
-
exercise all of the Options then held by him or (ii) provided such
--
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
--------
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.
12
<PAGE>
5. Restrictions on Transfer.
------------------------
(a) Restrictions on Transfer. The Employee shall not be permitted to
------------------------
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
-
death of the Employee, to the Employee's estate, (ii) any transfer of Shares,
--
but not Options, by the Employee to a family trust or partnership solely for
estate planning purposes or (iii) transfers of Shares, but not Options, by the
---
Employee that do not exceed, in the aggregate, 33% 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
--------
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
--
Expiration Date and (iii) the termination, for any reason, of the Employee's
---
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
----------------------------------------------------------
Employment or Unforeseen Personal Hardship of the Employee.
- ----------------------------------------------------------
(a) Termination of Employment. If, prior to a Public Offering, the
-------------------------
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 Trigger Date, 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 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 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
13
<PAGE>
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 (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 Agreement (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. Notwithstanding the foregoing, in the event of a purchase of any
Covered Security following a Specified Termination,
14
<PAGE>
provided that the Trigger Date occurs prior to the two year anniversary of the
date the Merger is consummated, the purchase price for such Covered Security
shall equal the greater of (x) $2.50 and (y) the Fair Market Value of a share of
- -
Common Stock as of the Repurchase Determination Date, reduced in the case 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 per iods, the potential 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 ap propriately 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
15
<PAGE>
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 reg istration, provided that the
Employee further agrees that, if required by the managing 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
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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
Burlington, Massachusetts 01803
Attention: General Counsel
---------
(ii) if to the Employee, to the Employee at the address set forth on
the signature page hereof.
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<PAGE>
(iii) if to the Fund, to:
The Clayton & Dubilier Private Equity
Fund V Limited Partnership
Foulkstone Plaza, Suite 102
1403 Foulk Road
Wilmington, Delaware 19803
Attention: Brian D. Finn
---------
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:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Attention: Joseph L. Rice, III
---------
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, 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
17
<PAGE>
sentence, no action taken pursuant to this Agreement, including, without
limitation, 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 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.
18
<PAGE>
(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.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CLAYTON, 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
20
