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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 27, 1997
Commission File No. 1-8045
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GenRad, Inc.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-1360950
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7 Technology Park Drive, Westford, Massachusetts 01886-0033
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 589-7000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
27,287,569 shares of the Common Stock, $1 par value, were outstanding on October
23, 1997.
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<PAGE>
GENRAD, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
----
Part I. Financial Information:
Consolidated Statement of Operations .............................. 1
Consolidated Balance Sheet ........................................ 2-3
Consolidated Statement of Cash Flows .............................. 4
Notes to Consolidated Financial Statements ........................ 5-6
Management's Discussion and Analysis of
Financial Condition and Results of Operation ....................7-10
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K........................... 11
Signatures.......................................................... 12
<PAGE>
PART I. FINANCIAL INFORMATION
GENRAD, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sales:
Sales of products $ 47,474 $ 35,227 $ 139,009 $ 106,120
Sales of services 11,396 10,925 33,411 28,754
-------------- -------------- -------------- ---------------
Total sales 58,870 46,152 172,420 134,874
-------------- -------------- -------------- ---------------
Cost of sales:
Cost of products sold 19,263 15,389 61,680 48,062
Cost of services sold 6,776 6,865 19,357 15,857
------------- -------------- -------------- --------------
26,039 22,254 81,037 63,919
------------- -------------- -------------- --------------
Gross profit 32,831 23,898 91,383 70,955
Selling, general and
administrative 16,813 13,686 50,327 39,124
Research and development 4,938 4,175 14,183 12,644
-------------- -------------- -------------- ---------------
Total operating expenses 21,751 17,861 64,510 51,768
-------------- -------------- -------------- ---------------
Operating income 11,080 6,037 26,873 19,187
Other (expense) income:
Interest, net (181) (1,079) (189) (3,118)
Other, net (231) 352 (287) 400
-------------- -------------- -------------- ---------------
Total other expense (412) (727) (476) (2,718)
-------------- -------------- -------------- ---------------
Income before income taxes 10,668 5,310 26,397 16,469
Income tax provision (benefit) 1,063 300 (2,846) (1,201)
-------------- -------------- -------------- ---------------
Net Income $ 9,605 $ 5,010 $ 29,243 $ 17,670
============== ============== ============== ===============
Net income per common and common
equivalent shares:
Primary $ 0.33 $ 0.21 $ 1.03 $ 0.74
============== ============== ============== ===============
Fully diluted $ 0.33 $ 0.21 $ 1.01 $ 0.74
============== ============== ============== ===============
Weighted average common and common
equivalent shares used in computing
per share amounts:
Primary 29,212,000 24,029,000 28,498,000 23,723,000
============== ============== ============== ===============
Fully diluted 29,452,000 24,240,000 28,976,000 23,951,000
============== ============== ============== ===============
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
1
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 22,617 $ 10,557
Accounts receivable, net 63,582 49,142
Inventories:
Raw materials 12,895 10,632
Work in process 6,377 4,075
Finished goods 4,612 5,543
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Total inventories 23,884 20,250
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Other current assets 4,765 4,501
Total current assets 114,848 84,450
Property, plant and equipment:
Buildings and leasehold improvements 12,266 2,908
Machinery and equipment 55,367 64,058
Service parts 11,185 13,189
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78,818 80,155
Accumulated depreciation (47,716) (60,987)
------------ ------------
Property, plant and equipment, net 31,102 19,168
------------ ------------
Deferred tax asset 7,874 2,480
Intangible assets 7,506 8,486
Other assets 1,587 1,181
------------ ------------
$ 162,917 $ 115,765
============ ============
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
2
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (continued)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
-------------- -------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable $ 11,601 $ 7,171
Accrued liabilities 9,109 15,007
Accrued compensation and employee benefits 5,568 7,096
Income taxes payable 3,414 1,537
Current portion of long-term debt 2,831 --
-------------- -------------
Total current liabilities 32,523 30,811
-------------- -------------
Long-term Liabilities:
Long-term debt 8,741 146
Accrued pensions and benefits 13,228 12,177
Future lease costs of unused facilities 4,404 4,949
Other long-term liabilities 3,728 4,002
-------------- -------------
Total long-term liabilities 30,101 21,274
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Stockholders' Equity:
Common stock, $1 par value, 60,000,000 shares
authorized; 27,278,000 and 26,048,000 issued and
outstanding in 1997 and 1996, respectively 27,278 26,048
Additional paid-in capital 170,023 163,099
Accumulated deficit (94,544) (123,787)
Cumulative translation adjustment (2,464) (1,680)
-------------- -------------
Total stockholders' equity 100,293 63,680
-------------- -------------
$ 162,917 $ 115,765
============== =============
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------------
September 27, September 28,
1997 1996
------------- -------------
<S> <C> <C>
Operating activities:
Net income $ 29,243 $ 17,670
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 5,934 4,748
Loss on disposition of property, plant and equipment 265 --
Reserve for future lease costs of unused facilities (545) (1,245)
(Decrease) increase resulting from changes in
operating assets and liabilities:
Accounts receivable (16,212) (2,885)
Inventories (4,610) (4,910)
Other current assets (437) (3,378)
Deferred tax asset (5,394) (2,480)
Trade accounts payable 4,623 (1,723)
Accrued liabilities (4,892) (1,987)
Accrued compensation and employee benefits 83 (4,320)
Accrued income taxes 1,907 887
Other, net (549) (57)
------------- -------------
Net cash provided by operating activities 9,416 320
------------- -------------
Investing activities:
Purchases of property, plant and equipment (17,586) (5,436)
Purchase of subsidiaries -- (4,576)
Proceeds from sale of property, plant and equipment 133 587
------------- -------------
Net cash used in investing activities (17,453) (9,425)
------------- -------------
Financing activities:
Proceeds from issuance of debt 11,654 --
Repayment of debt (728) (111)
Net change in revolving line of credit -- (729)
Proceeds from employee stock option exercises 8,154 5,150
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Net cash provided by financing activities 19,080 4,310
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Effects of exchange rates on cash 1,017 171
-------------- -------------
Increase (decrease) in cash equivalents 12,060 (4,624)
Cash and equivalents at beginning of period 10,557 9,064
-------------- -------------
Cash and equivalents at end of period $ 22,617 $ 4,440
============== =============
</TABLE>
Supplemental disclosure of non-cash financing activity:
In conjunction with the purchase of Test Technology Associates, Inc. in the
first quarter of 1996, the Company had a minimum future obligation of $2.0
million which was classified as accrued liabilities and other long-term
liabilities.
The accompanying notes are an integral part of these
Consolidated Financial Statements.
4
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1: Accounting Comments
Reference is made to the Company's 1996 Annual Report and Form 10-K which
contains, at pages 27 through 39, financial statements and the notes thereto,
including a summary of significant accounting policies.
With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the Company believes that all
adjustments necessary for a fair presentation of the results for such interim
periods have been included. All adjustments are of a normal and recurring
nature.
The results of any interim period are not necessarily indicative of the results
for the entire year.
Note 2: Earnings per share
The Company computes net income per common and common equivalent shares using
the method prescribed in Accounting Principles Board Opinion No. 15, "Earnings
per Share". The Company will adopt SFAS No. 128, "Earnings per Share" in the
fourth quarter of 1997. Had the earnings per share calculation been applied on a
basis consistent with the provisions of SFAS No. 128, the Company's earnings per
share would have been reported as the pro forma amounts indicated below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- --------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Income available to common stockholders $ 9,605 $ 5,010 $ 29,243 $ 17,670
============== ============= ============= =============
Weighted average number of common shares
outstanding 26,992 22,115 26,636 21,826
============== ============= ============= =============
Basic earnings per share $ 0.36 $ 0.23 $ 1.10 $ 0.81
============== ============= ============= =============
Diluted earnings per share:
Income available to common stockholders $ 9,605 $ 5,010 $ 29,243 $ 17,670
============== ============= ============= =============
Weighted average number of common shares
outstanding 26,992 22,115 26,636 21,826
Weighted average incremental shares from
assumed conversions of stock options 2,220 1,914 1,315 1,777
-------------- ------------- ------------- -------------
29,212 24,029 27,951 23,603
============== ============== ============= =============
Diluted earnings per share $ 0.33 $ 0.21 $ 1.05 $ 0.75
============== ============= ============= =============
</TABLE>
5
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 3: Borrowings
Line of Credit (revolving credit agreement): On May 6, 1997 the Company modified
its $25 million credit facility. Borrowings under the credit facility will
expire on December 31, 1998 and are subject to compliance with specified
financial and operating covenants. Interest will be payable at the lesser of (i)
the prime interest rate, or (ii) under a LIBOR option, with borrowing spreads of
LIBOR plus 1.25% to LIBOR plus 1.75%. The unused commitment fee ranges from
0.250% to 0.625%, based upon the Company's financial performance. There were no
borrowings outstanding on the line of credit at September 27, 1997.
Long-term debt (facility agreement): On June 26, 1997, the Company entered into
a term loan which provided approximately $12 million for the purchase of
furniture and fixtures for the Company's new corporate headquarters and
manufacturing facility in Westford, Massachusetts. The term of the loan is five
years and expires June 26, 2002. Twenty equal quarterly principal payments of
$0.6 million are due commencing in September 1997. Interest is payable quarterly
in arrears at LIBOR plus 1.25%.
6
<PAGE>
GENRAD, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Results
Orders for the Company's products and services increased to $59.6 million and
$177.8 million for the three months and nine months ended September 27, 1997,
respectively, from $43.4 million and $134.9 million for the comparable periods
in 1996. For the three and nine months ended September 27, 1997, orders
increased across all geographies and most product lines with the most
significant increases coming from customers in the contract manufacturing,
transportation and telecommunication industries.
Backlog at the end of the 1997 third quarter was $30.0 million as compared to
$24.7 million at year-end 1996 and $27.2 million at the end of the 1996 third
quarter. Backlog at September 27, 1997 increased from the prior periods due to
the Company's continued growth in orders, primarily due to multi-million dollar
orders received during the third quarter for the GENEVA(R) product line. The
Company believes that a substantial portion of the 1997 third quarter backlog
will be shipped prior to the end of 1997.
Net product and service sales were $58.9 million and $172.4 million for the
three months and nine months ended September 27, 1997, respectively, as compared
to $46.2 million and $134.9 million for the comparable periods in 1996. Sales
increased in the third quarter ended September 27, 1997 from the comparable
period in 1996 as a result of increased shipments of Electronic Manufacturing
Systems (EMS) to customers in North America and Europe, partially offset by a
minimal decrease in Asian shipments. Sales increased for the nine months ended
September 27, 1997 from the comparable period in 1996 across all geographies and
product lines with the most significant contributions from EMS shipments in
North America.
Sales from international markets were 45.8% and 52.7% for the three months and
nine months ended September 27, 1997, respectively, as compared to 52.7% and
56.4% for the similar periods in 1996. International sales as a percentage of
total sales decreased for the three and nine months ended September 27, 1997
from the comparable periods in 1996, primarily as a result of strong sales in
North America of EMS products.
Product margins were 59.4% and 55.6% for the three months and nine months ended
September 27, 1997, respectively, as compared to 56.3% and 54.7% for the
comparable periods in 1996. Product margins increased due to a greater
proportion of sales from EMS from the comparable periods in 1996.
Service margins were 40.5% and 42.1% for the three months and nine months ended
September 27, 1997, respectively, as compared to 37.2% and 44.9% for the
comparable periods in 1996. Service margins increased in the third quarter ended
September 27, 1997 due to increased efficiencies in the field and programming
services businesses. Service margins decreased for the nine months ended
September 27, 1997 as a result of continuing competitive pricing pressures in
the maintenance business and an increase in infrastructure costs to support the
Company's growing programming service business.
Selling, general and administrative expenses increased in the three and nine
month periods ended September 27, 1997 to $16.8 million and $50.3 million,
respectively, from $13.7 million and $39.1 million in the comparable periods in
1996. The increase in these expenses is due primarily to additional selling and
personnel related costs for the Company's investment in infrastructure. Rent
expense increased in the third quarter of 1997 as a result of the relocation of
the Company's corporate headquarters and manufacturing facilities in June 1997.
7
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Results (continued)
Research and development expenses increased for the three and nine month periods
ended September 27, 1997 to $4.9 million and $14.2 million, respectively, from
$4.2 million and $12.6 million in the comparable periods in 1996. As a
percentage of product and service sales, research and development expenses
decreased to 8.4% and 8.2% for the three and nine month periods ended September
27, 1997, respectively, as compared to 9.0% and 9.4% in the comparable periods
of 1996, as a result of the overall increase in sales in 1997 as compared to
1996. The Company continues to invest in new product development and
enhancements to existing products.
Net interest expense decreased to $0.2 million in each of the three and nine
month periods ended September 27, 1997 from $1.1 million and $3.1 million in the
comparable periods in 1996. In the fourth quarter of 1996, the Company
announced its redemption of all $50 million of its 7 1/4% convertible
subordinated debentures. On the November 6, 1996 redemption date, the holders of
the debentures converted $49.6 million of principal into common stock at a price
of $14.375 per share and the remaining principal was redeemed in cash totaling
$0.4 million, including accrued interest and bond redemption costs. As a result,
a significant amount of the Company's interest expense was eliminated.
A net income tax benefit of $5.4 million was recorded in the first quarter of
1997 as compared to $2.5 million in the comparable period in 1996. The tax
benefit represents a reduction in the Company's valuation allowance for deferred
taxes and was recorded due to management's expectations of future income and
expected utilization of the Company's domestic net operating loss carryforwards.
Income tax expense increased for the three months ended September 27, 1997 to
$1.1 million from $0.3 million in the comparable period in 1996. Excluding the
deferred tax benefits, the income tax provision was $2.6 million for the nine
months ended September 27, 1997 as compared to $1.3 million for the comparable
period in 1996. Income taxes increased in 1997 as compared to 1996 due to an
increase in the estimate of foreign taxable income, which was taxed at higher
rates.
As a result of the above, the Company reported net income of $9.6 million for
three months and $29.2 million for the nine months ended September 27, 1997, as
compared to net income of $5.0 million and $17.7 million, respectively, for the
comparable periods in 1996.
8
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Sources of Capital
Net income of $29.2 million for the nine months ended September 27, 1997
included a $5.4 million non-cash benefit resulting from the net deferred tax
asset that was recorded in the first quarter of 1997. Increases in accounts
receivable and inventory used cash of $20.8 million as a result of increased
sales volume, timing of shipments and the maintenance of higher inventory levels
to meet increasing customer demands for shorter delivery periods. An increase in
current liabilities provided cash of $1.7 million which was attributable to the
timing of payments to employees, vendors and the remittance of taxes.
During the nine months ended September 27, 1997, cash used from investing
activities was $17.5 million as compared to $9.4 million for the comparable
period in 1996. The 1997 capital expenditures of $17.6 million were primarily
for the purchase of leasehold improvements, equipment and furniture for the new
corporate headquarters and manufacturing facility in Westford, Massachusetts.
Cash provided by financing activities was $19.0 million as compared to $4.3
million for the nine months ended September 27, 1997 and September 28, 1996,
respectively. The Company entered into a five year term loan to finance the
capital expenditures, noted in the previous paragraph, which accounted for the
net increase in long-term debt of $10.9 million for the nine months ended
September 27, 1997. Proceeds from employee stock option exercises provided cash
of $8.2 million for the nine months ended September 27, 1997.
The Company's primary source of liquidity is internally generated funds. The
Company also has an existing unsecured line of credit up to $25 million, against
which there were no borrowings outstanding on September 27, 1997. Borrowings
under the credit facility are subject to compliance with specified financial and
operating covenants. The credit facility expires on December 31, 1998. The
Company anticipates that in fiscal 1997 it will fund its working capital and
capital expenditure requirements, make interest payments on its borrowings and
meet its cash obligations from internally generated funds, and from the
available credit facility.
The Company buys and sells foreign currencies using forward contracts intended
to hedge payables and receivables denominated in foreign currencies. The Company
primarily operates in U.S. dollars and European currencies. At September 27,
1997, the Company had forward exchange contracts to sell approximately $17.4
million of foreign currencies.
Inflation during the periods presented did not have a significant effect on the
operations of the Company. The Company attempts to mitigate inflationary cost
increases by continuously improving manufacturing methods and technologies.
Factors That May Affect Future Results
This Quarterly Report contains certain forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to those discussed below.
The Company's future operating results are dependent upon the Company's ability
to develop, manufacture and market technologically innovative products that meet
customers' needs, fund its working capital, capital and financing requirements
and meet its cash obligations, including those arising from past restructurings.
9
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Factors That May Affect Future Results (continued)
The market for the Company's products is characterized by rapid technological
change, evolving industry standards, changes in customers' needs, and frequent
new product introductions and is therefore highly dependent on timely product
innovation. Competition in the markets in which the Company operates is intense.
The introduction by the Company or its competitors of products embodying new
technology or the emergence of new industry standards or practices could render
the Company's existing products obsolete or otherwise unmarketable. The
Company's ability to develop and market products and services that successfully
meet changing market needs will impact future results. A portion of future
revenues will come from new products and services. The Company cannot determine
the ultimate effect that new products and services will have on revenues,
earnings and the Company's stock price.
The Company is dependent upon a number of suppliers for several key components
of its products. The loss of certain Company suppliers or substantial price
increases imposed by suppliers could have a material adverse effect on the
Company.
Although margins continue to be impacted by competitive pricing pressures, the
Company's manufacturing costs have decreased due to engineered cost reductions
and manufacturing efficiencies.
The Company is exposed to risks inherent in international trade and operations
as a result of its international sales and the operation of its manufacturing
facility in Manchester, England. Such trade and operations expose the Company to
continuing risks such as unpredictable and potentially inconsistent regulatory
requirements, political and economic changes, tariffs or other trade
restrictions, transportation delays, foreign currency fluctuations and labor
disruptions.
The Company may be subject to patent or product liability claims in the future.
A successful claim brought against the Company in excess of available insurance
coverage or any claim that results in significant adverse publicity may have a
material adverse effect on the Company's competitive position, financial
condition, results of operations or liquidity.
10
<PAGE>
(HERE)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) 10. Lease agreement dated July 26, 1996 between GenRad, Inc. and Michelson
Farm - Westford Technology Park Trust, incorporated by reference to
Exhibit 10 to the Company's report on Form 10-Q for the quarter ended
June 29, 1996.
10.1 Facility agreement dated June 26, 1997 between GenRad Limited and
BankBoston, N.A. London Branch, incorporated by reference to Exhibit
10.1 to the Company's report on Form 10-Q for the quarter ended June
28, 1997.
10.2 Amended and restated revolving credit agreement dated May 6, 1997
between GenRad, Inc. and BankBoston, N.A., incorporated by reference
to Exhibit 10.2 to the Company's report on Form 10-Q for the quarter
ended June 28, 1997.
10.3 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Kevin R. Cloutier ("Executive") effective as of the 9th day of
May, 1997.
10.4 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Paul Geere ("Executive") effective as of the 9th day of May, 1997.
10.5 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Lori B. Hannay ("Executive") effective as of the 9th day of May,
1997.
10.6 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Sarah H. Lucas ("Executive") effective as of the 9th day of May,
1997.
10.7 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and James F. Lyons ("Executive") effective as of the 8th day of May,
1997.
10.8 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Paul Pronsky ("Executive") effective as of the 9th day of May,
1997.
10.9 This is an AGREEMENT entered into between GenRad, Inc. (the "Company")
and Michael W. Schraeder ("Executive") effective as of the 9th day of
May, 1997.
11. Statement re: Computation of Earnings Per Share.
27. Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the quarter ended September
27, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GenRad, Inc.
By: /s/ Paul Pronsky, Jr.
------------------------------------------
Paul Pronsky, Jr.
Vice President and
Chief Financial Officer and Secretary
Date: October 28, 1997
12
EX 10.3
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Kevin R. Cloutier ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President, General Manager Electronic
Manufacturing Systems of the Company with responsibilities consistent with these
positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
$200,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive
<PAGE>
will receive such increases in base salary, if any, for each succeeding year as
the Board of Directors of the Company (the "Board") determines in its sole
discretion. Executive's Base Salary will not be decreased during the Term of the
Agreement except as part of a general reduction in which the base salaries of
all corporate officers of the Company have been decreased and will not be
decreased during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or
<PAGE>
liability to Executive hereunder other than for Base Salary earned and unpaid at
the time of termination and compensation for accrued vacation, and the term of
the Agreement will end when those amounts are paid.
"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, the Company will,
subject to Section 5 below, provide severance benefits to Executive as set
forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by the
Company to provide Executive with the compensation and benefits described
in Section 3, or (iii) relocation of Executive's principal place of work to
a location more than 50 miles from the previous location.
(b) Normal Severance Benefits. Except as provided in paragraph (c),
the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred
percent (100%) of his annual Base Salary in effect at the
time of his termination (or, if his Base Salary has been
reduced within 60 days of the termination, his Base Salary
in effect prior to the reduction).
(ii) The Company will continue for a period of one year from the
date of termination to provide Executive with the benefits
set forth in Section 3.3 above. To the extent that the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will pay
Executive cash amounts equal to the cost the Company would
have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
<PAGE>
purchase Company stock held by Executive will immediately
become exercisable.
(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead of the
benefits prescribed in paragraph (b), provide severance benefits to
Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred
percent (200%) of the sum of (A) Executive's annual Base
Salary in effect immediately prior to the termination (or,
if his Base Salary has been reduced within 60 days of the
termination or at any time after the Change of Control, his
Base Salary in effect prior to the reduction), plus (B) an
amount equal to the bonus earned by Executive for the fiscal
year completed immediately prior to the termination.
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided
for in Section 3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from
the date of termination to provide Executive with the
benefits set forth in Section 3.3 above. To the extent the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will either
arrange to provide Executive with substantially similar
benefits upon comparable terms or pay Executive cash amounts
equal to Executive's cost of obtaining such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of
<PAGE>
1986, as amended (the "Code"). If a reduction is made under this Section 5.1,
Executive will have the right to determine which payments and benefits will be
reduced.
5.2 The limitations of Section 5.1 will not apply if-
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a
<PAGE>
termination occurring during a Window Period, Executive will not for one year
following termination act as an executive officer for any company that directly
competes against the Company. The parties recognize and agree that should the
Company be required to pursue a claim against Executive under this Section 9,
the Company will likely be required to seek injunctive relief as well as damages
at law. Accordingly, Section 11, Arbitration, will not apply to any action by
the Company against Executive for violation of this Section 9. Executive agrees
for purposes of any disputes arising under this Section 9 to submit to the
exclusive jurisdiction of the federal and state courts in the Commonwealth of
Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
<PAGE>
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the Company is not the surviving corporation), lease or
otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by
the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Kevin Cloutier
11 April Lane
Westford, MA 01886
<PAGE>
Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Kevin R. Cloutier
------------------------------------
GENRAD, INC.
By /s/ James F. Lyons
----------------------------------
Its President
<PAGE>
EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the Company
may unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
<PAGE>
A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
<PAGE>
ADDENDUM TO THE GENRAD, INC.
EXECUTIVE SEVERANCE AGREEMENT
Whereas: certain of the Executives were not executives for the full year 1996
and as a result received compensation other than salary and bonuses, and in some
cases prorated bonuses, and
Whereas: the intent is that all Executives covered by this form of agreement
should be treated equally regarding paragraph 4.4 (c), therefore
If a termination occurs during calendar 1997, the amount of the bonus for
purposes of calculating severance benefits under paragraph 4.4(c)(i) will be
$100,000.
By /s/ Kevin R. Cloutier
------------------------------------
Kevin R. Cloutier
May 9, 1997
GenRad, Inc.
By /s/ James F. Lyons
------------------------------------
James F. Lyons
Its President
May 9, 1997
EX 10.4
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Paul Geere ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President, Advanced Diagnostic Systems of
the Company with responsibilities consistent with these positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
120,000 (pound) (UK-sterling) per year, payable in accordance with the
applicable payroll practices of the Company. The Company will review Executive's
base salary annually, and Executive will receive such increases in base salary,
if any, for each succeeding year
<PAGE>
Severance Agreement
Page 2 of 10
as the Board of Directors of the Company (the "Board") determines in its sole
discretion. Executive's Base Salary will not be decreased during the Term of the
Agreement except as part of a general reduction in which the base salaries of
all corporate officers of the Company have been decreased and will not be
decreased during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.
<PAGE>
Severance Agreement
Page 3 of 10
"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, the Company will,
subject to Section 5 below, provide severance benefits to Executive as set
forth below in this Section 4.4.
"Good Reasons" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by the
Company to provide Executive with the compensation and benefits described
in Section 3, or (iii) relocation of Executive's principal place of work to
a location more than 50 miles from the previous location.
(b) Normal Severance Benefits. Except as provided in paragraph (c),
the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred percent
(100%) of his annual Base Salary in effect at the time of his
termination (or, if his Base Salary has been reduced within 60
days of the termination, his Base Salary in effect prior to the
reduction).
(ii) The Company will continue for a period of one year from the date
of termination to provide Executive with the benefits set forth
in Section 3.3 above. To the extent that the Company is unable to
provide such benefits to Executive under its existing plans and
arrangements, it will pay Executive cash amounts equal to the
cost the Company would have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately become
exercisable.
<PAGE>
Severance Agreement
Page 4 of 10
(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead of the
benefits prescribed in paragraph (b), provide severance benefits to
Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred percent
(200%) of the sum of (A) Executive's annual Base Salary in effect
immediately prior to the termination (or, if his Base Salary has
been reduced within 60 days of the termination or at any time
after the Change of Control, his Base Salary in effect prior to
the reduction), plus (B) an amount equal to the bonus earned by
Executive for the fiscal year completed immediately prior to the
termination.
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided for
in Section 3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from the
date of termination to provide Executive with the benefits set
forth in Section 3.3 above. To the extent the Company is unable
to provide such benefits to Executive under its existing plans
and arrangements, it will either arrange to provide Executive
with substantially similar benefits upon comparable terms or pay
Executive cash amounts equal to Executive's cost of obtaining
such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately become
exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.
<PAGE>
Severance Agreement
Page 5 of 10
5.2 The limitations of Section 5.1 will not apply if--
(i) the present value, net of all federal, state and other income
and excise taxes, of all payments and benefits to which Executive
is entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to
<PAGE>
Severance Agreement
Page 6 of 10
pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their fights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the
<PAGE>
Severance Agreement
Page 7 of 10
Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Paul Geere
22 Court Crescent
Bassaleg
New Port, Gwent
NP1 9NH
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Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Paul Geere
-----------------------------------
GENRAD, INC.
BY /s/ James F. Lyons
--------------------------------
Its President
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EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the Company
may unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
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A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Lori B. Hannay ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President, Human Resources of the Company
with responsibilities consistent with these positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
$150,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any, for
each succeeding year as the Board of
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Directors of the Company (the "Board") determines in its sole discretion.
Executive's Base Salary will not be decreased during the Term of the Agreement
except as part of a general reduction in which the base salaries of all
corporate officers of the Company have been decreased and will not be decreased
during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.
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"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, the Company will,
subject to Section 5 below, provide severance benefits to Executive as set
forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by the
Company to provide Executive with the compensation and benefits described
in Section 3, or (iii) relocation of Executive's principal place of work to
a location more than 50 miles from the previous location.
(b) Normal Severance Benefits. Except as provided in paragraph (c),
the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred
percent (100%) of his annual Base Salary in effect at the
time of his termination (or, if his Base Salary has been
reduced within 60 days of the termination, his Base Salary
in effect prior to the reduction).
(ii) The Company will continue for a period of one year from the
date of termination to provide Executive with the benefits
set forth in Section 3.3 above. To the extent that the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will pay
Executive cash amounts equal to the cost the Company would
have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
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(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead of the
benefits prescribed in paragraph (b), provide severance benefits to
Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred
percent (200%) of the sum of (A) Executive's annual Base
Salary in effect immediately prior to the termination (or,
if his Base Salary has been reduced within 60 days of the
termination or at any time after the Change of Control, his
Base Salary in effect prior to the reduction), plus (B) an
amount equal to the bonus earned by Executive for the fiscal
year completed immediately prior to the termination.
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided
for in Section 3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from
the date of termination to provide Executive with the
benefits set forth in Section 3.3 above. To the extent the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will either
arrange to provide Executive with substantially similar
benefits upon comparable terms or pay Executive cash amounts
equal to Executive's cost of obtaining such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.
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5.2 The limitations of Section 5.1 will not apply if--
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to
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pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the
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Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Lori B. Hannay
84 Barnard Road
Marlborough, MA 01752
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Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Lori B. Hannay
------------------------------------
GENRAD, INC.
By /s/ James F. Lyons
---------------------------------
Its President
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EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's Common
Stock; provided, however, that the Board of Directors of the Company may
unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason to
constitute at least a majority of such Board; provided, however, that any
individual becoming a director after the Effective Date whose election or
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the Continuing Directors will be deemed to be a
Continuing Director, but excluding for this purpose any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-l1 of
Regulation 14A promulgated under the Securities and Exchange Act of 1934 (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer of
ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially all
of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
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A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
EX 10.6
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Sarah H. Lucas ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President, Chief Strategic Officer of the
Company with responsibilities consistent with these positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
$200,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any, for
each succeeding year as the Board of
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Directors of the Company (the "Board") determines in its sole discretion.
Executive's Base Salary will not be decreased during the Term of the Agreement
except as part of a general reduction in which the base salaries of all
corporate officers of the Company have been decreased and will not be decreased
during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.
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"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, the Company will,
subject to Section 5 below, provide severance benefits to Executive as set
forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain Executive
in the positions described in Section 2 or assignment to Executive of
duties materially inconsistent with such positions, (ii) failure by the
Company to provide Executive with the compensation and benefits described
in Section 3, or (iii) relocation of Executive's principal place of work to
a location more than 50 miles from the previous location.
(b) Normal Severance Benefits. Except as provided in paragraph (c),
the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred
percent (100%) of his annual Base Salary in effect at the
time of his termination (or, if his Base Salary has been
reduced within 60 days of the termination, his Base Salary
in effect prior to the reduction).
(ii) The Company will continue for a period of one year from the
date of termination to provide Executive with the benefits
set forth in Section 3.3 above. To the extent that the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will pay
Executive cash amounts equal to the cost the Company would
have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
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(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead of the
benefits prescribed in paragraph (b), provide severance benefits to
Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred
percent (200%) of the sum of (A) Executive's annual Base
Salary in effect immediately prior to the termination (or,
if his Base Salary has been reduced within 60 days of the
termination or at any time after the Change of Control, his
Base Salary in effect prior to the reduction), plus (B) an
amount equal to the bonus earned by Executive for the fiscal
year completed immediately prior to the termination.
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided
for in Section 3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from
the date of termination to provide Executive with the
benefits set forth in Section 3.3 above. To the extent the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will either
arrange to provide Executive with substantially similar
benefits upon comparable terms or pay Executive cash amounts
equal to Executive's cost of obtaining such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.
<PAGE>
Severance Agreement
Page 5 of 10
5.2 The limitations of Section 5.1 will not apply if--
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to
<PAGE>
Severance Agreement
Page 6 of 10
pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the
<PAGE>
Severance Agreement
Page 7 of 10
Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Sarah H. Lucas
401 Heath Street
Chestnut Hill, MA 02167
<PAGE>
Severance Agreement
Page 8 of 10
Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Sarah H. Lucas
------------------------------------
GENRAD, INC.
By /s/ James F. Lyons
---------------------------------
Its President
<PAGE>
Severance Agreement
Page 9 of 10
EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the Company
may unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
<PAGE>
Severance Agreement
Page 10 of 10
A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
EX 10-7
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
James F. Lyons ("Executive") effective as of the 8th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Termination of Employment; Severance Benefits.
1.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. Upon such termination, the parties will be
required to discharge the applicable obligations described in this Section 1 and
elsewhere in this Agreement.
1.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 1.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 1.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company and approved by the Executive or his
conservator to be probable that such incapacity will continue for an additional
60 consecutive days.
1.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 1.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 1.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation.
"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
1.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If the Company terminates
Executive's employment without Cause, or if Executive terminates his
<PAGE>
employment for Good Reason, the Company will, subject to Section 2 below,
provide severance benefits to Executive as set forth below in this Section
1.4.
"Good Reasons" means (i) failure by the Company to maintain Executive
as Chief Executive Officer of the Company or assignment to Executive of
duties materially inconsistent with the position of Chief Executive
Officer, (ii) reduction of Executive's base salary or the failure by the
Company to provide Executive with the incentive compensation opportunity or
the material Company benefits now provided to Executive, or (iii)
relocation of Executive's principal place of work to a location more than
50 miles from its present location.
(b) Severance Benefits. The Company will provide severance benefits as
follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to three hundred percent
(300%) of the sum of (A) Executive's annual Base Salary in effect
immediately prior to the termination (or, if his Base Salary has
been reduced within 120 days of the termination, his Base Salary
in effect prior to the reduction), plus (B) an amount equal to
the bonus earned by Executive for the fiscal year completed
immediately prior to the termination.
(ii) The Company will continue for a period of three years from the
date of termination to provide Executive with the benefits
provided to Executive as of the date of termination or at any
time within 120 days of the termination. To the extent the
Company is unable to provide such benefits to Executive under its
existing plans and arrangements, it will either arrange to
provide Executive with substantially similar benefits upon
comparable terms or pay Executive cash amounts equal to
Executive's cost of obtaining such benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately become
exercisable.
-2-
<PAGE>
2. Limitations on Severance Benefits.
2.1 Except as provided in Section 2.2 below, the payments and benefits to
which Executive will be entitled under Section 1 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 2.1, Executive will have the right to determine which
payments and benefits will be reduced.
5.2 The limitations of Section 2.1 will not apply if--
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
2.3 Determinations under this Section 2 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
3. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
4. Fees and Expenses. The Company shall pay all legal fees and expenses
incurred by Executive in seeking to obtain or enforce any right or benefit
provided by this Agreement, provided that Executive prevails in any such contest
or dispute.
5. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service, and his entitlement thereto will neither be
governed by any duty to mitigate his damages by seeking further employment nor
offset by any compensation that he may receive from other employment.
6. Arbitration. Any dispute or controversy between the parties involving
the construction or application of any terms, covenants or conditions of this
Agreement, or any claim arising out of or relating to this Agreement, that is
not resolved within
-3-
<PAGE>
ten days by the parties will be settled by arbitration in Boston, Massachusetts,
in accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 6.
7. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 1 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 1.4(b)(iii) will be exercisable by the beneficiary, or if none, the
estate.
8. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the Company is not the surviving corporation), lease or
otherwise, by agreement in form and substance satisfactory to Executive, to
assume this Agreement expressly. This Agreement is not otherwise assignable by
the Company.
9. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
10. Amendment or Modification; Waiver. This Agreement may not be amended
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement will be deemed a waiver of a subsequent
breach.
11. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
-4-
<PAGE>
12. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
13. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
14. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: Chief Financial Officer
If to Executive:
James F. Lyons
Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ James F. Lyons
-----------------------------------------
James F. Lyons
GENRAD, INC.
/s/ Paul Pronsky
By
-----------------------------------------
Its Vice President - CFO
-5-
EX 10.8
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Paul Pronsky ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President and Chief Financial Officer of
the Company with responsibilities consistent with these positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
$200,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any, for
each succeeding year as the Board of
<PAGE>
Severance Agreement
Page 2 of 10
Directors of the Company (the "Board") determines in its sole discretion.
Executive's Base Salary will not be decreased during the Term of the Agreement
except as part of a general reduction in which the base salaries of all
corporate officers of the Company have been decreased and will not be decreased
during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual performance
bonus. Executive's bonus for any year ending during a Window Period will not be
less than 100 percent of his bonus for the completed year immediately preceding
the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.
<PAGE>
Severance Agreement
Page 3 of 10
"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without
Cause, or if Executive terminates his employment for Good Reason, the
Company will, subject to Section 5 below, provide severance benefits
to Executive as set forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain
Executive in the positions described in Section 2 or assignment to
Executive of duties materially inconsistent with such positions, (ii)
failure by the Company to provide Executive with the compensation and
benefits described in Section 3, or (iii) relocation of Executive's
principal place of work to a location more than 50 miles from the
previous location.
(b) Normal Severance Benefits. Except as provided in paragraph
(c), the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred
percent (100%) of his annual Base Salary in effect at the
time of his termination (or, if his Base Salary has been
reduced within 60 days of the termination, his Base Salary
in effect prior to the reduction).
(ii) The Company will continue for a period of one year from the
date of termination to provide Executive with the benefits
set forth in Section 3.3 above. To the extent that the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will pay
Executive cash amounts equal to the cost the Company would
have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
<PAGE>
Severance Agreement
Page 4 of 10
(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead
of the benefits prescribed in paragraph (b), provide severance
benefits to Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred
percent (200%) of the sum of (A) Executive's annual Base
Salary in effect immediately prior to the termination (or,
if his Base Salary has been reduced within 60 days of the
termination or at any time after the Change of Control, his
Base Salary in effect prior to the reduction), plus (B) an
amount equal to the bonus earned by Executive for the fiscal
year completed immediately prior to the termination.
(ii) The Company will also pay to Executive within 30 days of the
termination a pro-rata portion of his target bonus (provided
for in Section 3.2 above) for the year of termination.
(iii) The Company will continue for a period of three years from
the date of termination to provide Executive with the
benefits set forth in Section 3.3 above. To the extent the
Company is unable to provide such benefits to Executive
under its existing plans and arrangements, it will either
arrange to provide Executive with substantially similar
benefits upon comparable terms or pay Executive cash amounts
equal to Executive's cost of obtaining such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options to
purchase Company stock held by Executive will immediately
become exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.
<PAGE>
Severance Agreement
Page 5 of 10
5.2 The limitations of Section 5.1 will not apply if-
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to
<PAGE>
Severance Agreement
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pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the
<PAGE>
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Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Paul Pronsky
84 S. Mill Drive
South Glastonbury, CT 06073
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Severance Agreement
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Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Paul Pronsky
------------------------------------
GENRAD, INC.
By /s/ James F. Lyons
---------------------------------
Its President
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EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the Company
may unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
<PAGE>
Severance Agreement
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A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 1 2b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
EX 10.9
GENRAD, INC.
SEVERANCE AGREEMENT
This is an AGREEMENT entered into between GenRad, Inc. (the "Company") and
Michael W. Schraeder ("Executive") effective as of the 9th day of May, 1997.
Executive is a key executive of the Company and a vital part of its
management. In consideration of Executive's continued employment with the
Company, the parties agree as follows:
1. Term; Window Period. The term during which this Agreement (the
"Agreement") will be in effect (the "Term of the Agreement") will begin on May
9, 1997 (the "Effective Date") and, except as provided below, will terminate on
the date which is two years from the date the Company advises the Executive in
writing that it is terminating this Agreement. If a Change of Control (as
defined in Exhibit A) occurs during the Term of the Agreement, the Agreement
will remain in effect until all obligations hereunder have been discharged. The
period starting on the date of such a Change of Control and ending on the third
anniversary of the Change of Control will be a "Window Period" during which
special provisions of this Agreement will apply.
2. Positions and Duties. Subject to the provisions of the Agreement:
2.1 Executive will serve as Vice President, Worldwide Sales of the Company
with responsibilities consistent with these positions.
2.2 Executive will be a full-time employee of the Company and, except for
reasonable work-related travel, will perform his duties at the Company's
headquarters location or, if different, the location at which he now principally
performs his employment duties for the Company.
2.3 Executive will devote his entire business time and attention and his
best efforts to the duties and services of his positions. However, Executive may
serve on boards of directors of other businesses and attend to personal
investments and community and charitable service, provided that such activities
are not competitive with the business of the Company and do not interfere with
the performance of Executive's duties to the Company.
3. Compensation and Benefits. During the term of the Agreement, the Company
will provide compensation and benefits to Executive as follows:
3.1 Base Salary. Executive's base salary as of the Effective Date will be
$200,000.00 per year, payable in accordance with the applicable payroll
practices of the Company. The Company will review Executive's base salary
annually, and Executive will receive such increases in base salary, if any, for
each succeeding year as the Board of
<PAGE>
Severance Agreement
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Directors of the Company (the "Board") determines in its sole discretion.
Executive's Base Salary will not be decreased during the Term of the Agreement
except as part of a general reduction in which the base salaries of all
corporate officers of the Company have been decreased and will not be decreased
during a Window Period without Executive's prior written agreement.
3.2 Performance Bonus. Executive will be eligible for an annual
performance bonus. Executive's bonus for any year ending during a Window Period
will not be less than 100 percent of his bonus for the completed year
immediately preceding the Change of Control.
3.3 Other Benefits. Executive will be entitled to participate in all
policies and arrangements (or in any successor or supplemental plans, policies
or arrangements) generally made available to officers of the Company. Such
benefits shall not be reduced during the Window Period.
4. Termination of Employment; Severance Benefits.
4.1 Terminability of Employment. Either the Company or Executive may at any
time terminate Executive's employment with the Company after giving 30 days'
written notice to the other party. However, if Executive's employment terminates
during the Term of the Agreement, the parties will be required to discharge the
applicable obligations described in this Section 4 and elsewhere in this
Agreement. If Executive's employment terminates at any time other than during
the Term of the Agreement, Executive will have no rights under the Agreement.
4.2 Termination upon Death or Disability. If Executive ceases to be an
employee of the Company as a result of death or disability, the Executive will
be entitled to receive the severance benefits set forth in Section 4.4. However,
nothing in this Agreement is intended to interfere with the rights of Executive
and his family or beneficiaries under other applicable plans, policies or
arrangements of the Company. For purposes of this Section 4.2, the Company may
terminate Executive's employment for "disability" if, because of physical or
mental incapacity, Executive is unable for a period of 30 consecutive days to
perform each of the material duties of his position and if determined by a
qualified physician chosen by the Company (and, if during a Window Period,
approved by the Executive or his conservator) to be probable that such
incapacity will continue for an additional 60 consecutive days.
4.3 Termination by the Company for Cause or by Executive Without Good
Reason. If the Company terminates Executive's employment for Cause (as defined
in this Section 4.3) or if Executive terminates his employment other than for
Good Reason (as defined in Section 4.4), the Company will have no further
obligation or liability to Executive hereunder other than for Base Salary earned
and unpaid at the time of termination and compensation for accrued vacation, and
the term of the Agreement will end when those amounts are paid.
<PAGE>
Severance Agreement
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"Cause" mean (a) willful malfeasance or gross negligence in the performance
by Executive of his duties, resulting in harm to the Company, (b) fraud or
dishonesty by Executive with respect to the Company, or (c) Executive's
conviction of a felony.
4.4 By the Company Without Cause or by Executive for Good Reason.
(a) Entitlement to Severance Benefits. If, during the Term of the
Agreement, the Company terminates Executive's employment without
Cause, or if Executive terminates his employment for Good Reason, the
Company will, subject to Section 5 below, provide severance benefits
to Executive as set forth below in this Section 4.4.
"Good Reason" means (i) failure by the Company to maintain
Executive in the positions described in Section 2 or assignment to
Executive of duties materially inconsistent with such positions, (ii)
failure by the Company to provide Executive with the compensation and
benefits described in Section 3, or (iii) relocation of Executive's
principal place of work to a location more than 50 miles from the
previous location.
(b) Normal Severance Benefits. Except as provided in paragraph
(c), the Company will provide severance benefits as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to one hundred
percent (100%) of his annual Base Salary in effect at
the time of his termination (or, if his Base Salary has
been reduced within 60 days of the termination, his
Base Salary in effect prior to the reduction).
(ii) The Company will continue for a period of one year from
the date of termination to provide Executive with the
benefits set forth in Section 3.3 above. To the extent
that the Company is unable to provide such benefits to
Executive under its existing plans and arrangements, it
will pay Executive cash amounts equal to the cost the
Company would have incurred to provide these benefits.
(iii) Notwithstanding any contrary provisions of the plans
or arrangements under which they are granted, all
options to purchase Company stock held by Executive
will immediately become exercisable.
<PAGE>
Severance Agreement
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(c) Severance Benefits Following a Change of Control. If the
termination occurs during a Window Period, the Company will, instead
of the benefits prescribed in paragraph (b), provide severance
benefits to Executive as follows:
(i) The Company will pay to Executive within 30 days of the
termination a lump-sum cash amount equal to two hundred
percent (200%) of the sum of (A) Executive's annual
Base Salary in effect immediately prior to the
termination (or, if his Base Salary has been reduced
within 60 days of the termination or at any time after
the Change of Control, his Base Salary in effect prior
to the reduction), plus (B) an amount equal to the
bonus earned by Executive for the fiscal year completed
immediately prior to the termination.
(ii) The Company will also pay to Executive within 30 days
of the termination a pro-rata portion of his target
bonus (provided for in Section 3.2 above) for the year
of termination.
(iii) The Company will continue for a period of three years
from the date of termination to provide Executive with
the benefits set forth in Section 3.3 above. To the
extent the Company is unable to provide such benefits
to Executive under its existing plans and arrangements,
it will either arrange to provide Executive with
substantially similar benefits upon comparable terms or
pay Executive cash amounts equal to Executive's cost of
obtaining such benefits.
(iv) Notwithstanding any contrary provisions of the plans or
arrangements under which they are granted, all options
to purchase Company stock held by Executive will
immediately become exercisable.
5. Limitations on Severance Benefits.
5.1 Except as provided in Section 5.2 below, the payments and benefits to
which Executive will be entitled under Section 4 of this Agreement will be
reduced to the extent necessary to prevent Executive from becoming liable for
the excise tax levied on certain "excess parachute payments" under section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"). If a reduction is
made under this Section 5.1, Executive will have the right to determine which
payments and benefits will be reduced.
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Severance Agreement
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5.2 The limitations of Section 5.1 will not apply if--
(i) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive is
entitled hereunder without such limitations, exceeds
(ii) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Executive
would be entitled hereunder if such limitations applied.
5.3 Determinations under this Section 5 will be made by the firm of
certified public accountants then serving as the Company's auditor unless
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by Executive after
consultation with the Company. The determinations of such firm will be binding
upon the Company and Executive.
6. Withholding. All payments required to be made by the Company to
Executive under this Agreement will be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as may be required
by law.
7. Fees and Expenses. In the event of Executive's termination of employment
during a Window Period, the Company will pay any and all fees and expenses
(including legal fees and other costs of arbitration or litigation) that may be
incurred by Executive in enforcing his rights under this Agreement. If the
termination of employment does not occur during a Window Period, the Company
will pay that amount of such fees and expenses that bears the same ratio to the
total fees and expenses as the dollar amount of payments and benefits determined
to be payable to Executive bears to the total dollar amount of payments and
benefits in dispute.
8. No Duty to Mitigate. Benefits payable under this Agreement as a result
of termination of Executive's employment will be considered severance pay in
consideration of his past service and his continued service from the Effective
Date, and his entitlement thereto will neither be governed by any duty to
mitigate his damages by seeking further employment nor offset by any
compensation that he may receive from other employment.
9. Confidentiality and Exclusivity. Executive agrees to maintain the
confidentiality of the Company's (and its related entities and projects) books,
records, financial information, technical information, business plans and/or
strategies, and other confidential matters unless required to make disclosure in
the performance of his duties for the Company or as a result of a legal
proceeding or other legally mandated cause. In the event of termination without
Good Reason by Executive, other than such a termination occurring during a
Window Period, Executive will not for one year following termination act as an
executive officer for any company that directly competes against the Company.
The parties recognize and agree that should the Company be required to
<PAGE>
Severance Agreement
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pursue a claim against Executive under this Section 9, the Company will likely
be required to seek injunctive relief as well as damages at law. Accordingly,
Section 11, Arbitration, will not apply to any action by the Company against
Executive for violation of this Section 9. Executive agrees for purposes of any
disputes arising under this Section 9 to submit to the exclusive jurisdiction of
the federal and state courts in the Commonwealth of Massachusetts.
10. Indemnification. To the extent permitted by law, the Company will
defend, indemnify and hold Executive harmless from and against any and all
losses, liabilities, damages, expenses (including attorneys' fees and costs),
actions, causes of action or proceedings arising directly or indirectly from
Executive's performance of this Agreement or services as an employee of the
Company. Executive may retain his own counsel to defend himself in such actions,
and the Company will pay for the reasonable costs and expense of such counsel.
This indemnification is in addition to any right of indemnification to which
Executive may be entitled under the Company's Articles of Organization and
By-laws and any insurance policies that may be maintained by the Company.
11. Arbitration. Except as otherwise provided in Section 9, any dispute or
controversy between the parties involving the construction or application of any
terms, covenants or conditions of this Agreement, or any claim arising out of or
relating to this Agreement, or any claim arising out of or relating to
Executive's employment by the Company that is not resolved within ten days by
the parties will be settled by arbitration in Boston, Massachusetts, in
accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. The Company and Executive agree that
the arbitrator(s) will have no authority to award punitive or exemplary damages
or so-called consequential or remote damages such as damages for emotional
distress. Any decision of the arbitrator(s) will be final and binding upon the
parties. Upon request, the arbitrator(s) shall submit written findings of fact
and conclusions of law. The parties agree and understand that they hereby waive
their rights to a jury trial of any dispute or controversy relating to the
matters specified above in this Section 11.
12. Rights of Survivors. If Executive dies after becoming entitled to
benefits under Section 4 following termination of employment but before all such
benefits have been provided, (a) all unpaid cash amounts will be paid to the
beneficiary that have been designated by Executive in writing (the
"beneficiary"), or if none, to Executive's estate, (b) all applicable insurance
coverage will be provided to Executive's family as though Executive had
continued to live, and (c) any stock options that become exercisable under
Section 4.4(b)(iii) or Section 4.4(iv) will be exercisable by the beneficiary,
or if none, the estate.
13. Successors. This Agreement will inure to and be binding upon the
Company's successors. The Company will require any successor to all or
substantially all of the business and/or assets of the Company by sale, merger
or consolidation (where the
<PAGE>
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Company is not the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement is not otherwise assignable by the Company.
14. Subsidiaries. For purposes of this Agreement, employment by a
corporation or other entity that is controlled directly or indirectly by the
Company will be deemed to be employment by the Company. Thus, references in the
Agreement to "Company" include such corporations or other entities where
appropriate in the context.
15. Amendment or Modification; Waiver. Except as provided in clause (1) of
Exhibit A, this Agreement may not be amended unless agreed to in writing by
Executive and the Company. No waiver by either party of any breach of this
Agreement will be deemed a waiver of a subsequent breach.
16. Severability. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
17. Controlling Law. This Agreement will be controlled and interpreted
pursuant to Massachusetts law without regard to the conflict of laws principles
thereof.
18. Superseded Agreement. This Agreement supersedes any prior or
contemporaneous agreement between the parties with respect to the subject matter
hereof.
19. Notices. Any notices required or permitted to be sent under this
Agreement are to be delivered by hand or mailed by registered or certified mail,
return receipt requested, and addressed as follows:
If to the Company:
GenRad, Inc.
300 Baker Avenue
Concord, MA 01742-2174
Attn: President
If to Executive:
Michael W. Schraeder
4802 Stahl Court
Orlando, FL 32817
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Either party may change its address for receiving notices by giving notice
to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
/s/ Michael W. Schraeder
------------------------------------
GENRAD, INC.
By /s/ James F. Lyons
---------------------------------
Its President
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EXHIBIT A
"Change of Control" means the occurrence of any of the following events:
(1) any Person becomes the owner of 20% or more of the Company's
Common Stock; provided, however, that the Board of Directors of the Company
may unilaterally amend this clause (1) to increase the 20% threshold to any
percentage up to, but not exceeding, 50%; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Continuing Directors") cease for any reason
to constitute at least a majority of such Board; provided, however, that
any individual becoming a director after the Effective Date whose election
or nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the Continuing Directors will be deemed to
be a Continuing Director, but excluding for this purpose any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities and Exchange Act
of 1934 (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction that will result in the transfer
of ownership of more than 50% of the Company's Common Stock; or
(4) liquidation or dissolution of the Company or sale of substantially
all of the Company's assets.
In addition, for purposes of this definition the following terms have the
meanings set forth below:
"Common Stock" means the then outstanding Common Stock of the Company plus,
for purposes of determining the stock ownership of any Person, the number of
unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term "Common Stock"
does not include shares of preferred stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board expressly so determines in any future transaction or transactions.
<PAGE>
A Person will be deemed to be the "owner" of any Common Stock of which such
Person would be the "beneficial owner", as such term is defined in Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
"Person" has the meaning used in Section 13(d) of the Exchange Act, except
that "Person" does not include (i) the Executive, an Executive Related Party, or
any group of which the Executive or Executive Related Party is a member, or (ii)
the Company or a wholly-owned subsidiary of the Company or an employee benefit
plan (or related trust) of the Company or of a wholly-owned subsidiary.
An "Executive Related Party" means any affiliate or associate of the
Executive other than the Company or a subsidiary of the Company. The terms
"affiliate" and "associate" have the meanings given in Rule 12b-2 under the
Exchange Act; the term "registrant" in the definition of "associate" means, in
this case, the Company.
<TABLE>
<CAPTION>
EXHIBIT 11
GENRAD, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended Nine Months Ended
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Primary:
Weighted average number of
shares outstanding 26,992,000 22,115,000 26,636,000 21,826,000
Shares deemed outstanding from the
assumed exercise of stock options 2,220,000 1,914,000 1,862,000 1,897,000
-------------- --------------- --------------- ---------------
Total: 29,212,000 24,029,000 28,498,000 23,723,000
============== =============== =============== ===============
Earnings applicable to common shares $ 9,605,000 $ 5,010,000 $ 29,243,000 $ 17,670,000
============== =============== =============== ===============
Earnings per share of common stock $ 0.33 $ 0.21 $ 1.03 $ 0.74
============== =============== =============== ===============
Fully Diluted:
Weighted average number of
shares outstanding 26,992,000 22,115,000 26,636,000 21,826,000
Shares deemed outstanding from the
assumed exercise of stock options 2,460,000 2,125,000 2,340,000 2,125,000
-------------- --------------- --------------- ---------------
Total: 29,452,000 24,240,000 28,976,000 23,951,000
============== =============== =============== ===============
Earnings applicable to common shares $ 9,605,000 $ 5,010,000 $ 29,243,000 $ 17,670,000
============== =============== =============== ===============
Earnings per share of common stock $ 0.33 $ 0.21 $ 1.01 $ 0.74
============== =============== =============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 1997 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 27, 1997 FOR GENRAD, INC.
AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<EXCHANGE-RATE> 1
<CASH> 22,617
<SECURITIES> 0
<RECEIVABLES> 64,740
<ALLOWANCES> 1,158
<INVENTORY> 23,884
<CURRENT-ASSETS> 114,848
<PP&E> 78,818
<DEPRECIATION> 47,716
<TOTAL-ASSETS> 162,917
<CURRENT-LIABILITIES> 32,523
<BONDS> 0
0
0
<COMMON> 27,278
<OTHER-SE> 73,015
<TOTAL-LIABILITY-AND-EQUITY> 162,917
<SALES> 47,474
<TOTAL-REVENUES> 58,870
<CGS> 19,263
<TOTAL-COSTS> 26,039
<OTHER-EXPENSES> 21,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 315
<INCOME-PRETAX> 10,668
<INCOME-TAX> 1,063
<INCOME-CONTINUING> 9,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,605
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
