CEO Retirement Agreement

RETIREMENT AGREEMENT (the "Agreement"), by and between Dynatech Corporation, a Massachusetts corporation (the "Company"), and John F. Reno ("Executive") dated as of May 19, 1999.


W I T N E S S E T H :
- - - - - - - - - -


WHEREAS, Executive is currently employed as President and Chief Executive Officer of the Company and serves as Chairman of the Board of Directors of the Company pursuant to an Amended and Restated Employment Agreement, dated as of November 1, 1998, by and between the Company and Executive (the "Employment Agreement");


WHEREAS, Executive has options (collectively, the "Options") to purchase 7,687,120 shares of common stock (the "Common Stock"), no par value, of the Company (the "Option Shares") pursuant to the Employment Agreement and a Management Equity Agreement, dated as of May 21, 1998, between the Company, the Clayton, Dubilier & Rice Fund V Limited Partnership (the "Fund") and Executive (the "Equity Agreement");


WHEREAS, Executive has decided to retire from employment with the Company and each of its direct or indirect subsidiaries (the "Subsidiaries"), effective as of July 30, 1999 (the "Retirement Date");


WHEREAS, the Company and Executive wish to agree upon the consequences of Executive's retirement;


WHEREAS, pursuant to the terms of the Employment Agreement and the Equity Agreement, effective upon any termination of Executive's employment, the Company has the right to repurchase the Options and/or Option Shares;


WHEREAS, as of the Retirement Date, pursuant to the terms of the Equity Agreement, Executive's rights with respect to the portion of the Option covering 7,289,181 Option Shares (the "Vested Options") have become vested and Executive's


rights with respect to the remaining portion of the Option, covering 397,939 Option Shares (the "Unvested Options"), remain unvested; and


WHEREAS, pursuant to the terms of the Equity Agreement, effective upon the Retirement Date, the Unvested Options will terminate and will be canceled and the Company will have the right to repurchase the Vested Options.


NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company, the Fund and Executive hereby agree as follows:


1. Certain Definitions. For purposes of this Agreement, all capitalized
------------------- terms used herein without definition shall have the respective meanings assigned to such terms in the Employment Agreement.


2. Retirement; Resignation from Offices. In accordance with Section 7(h)
------------------------------------ of the Employment Agreement and in connection with his retirement, effective as of the date hereof, Executive hereby resigns from his positions as President and Chief Executive Officer of the Company and Chairman and member of the Board of Directors of the Company and from all other offices, positions and Board memberships with the Company or any Subsidiary currently held by Executive. Executive shall continue in the employment of the Company, without title, until the Retirement Date, having such duties as shall be assigned to him from time to time by the Chairman of the Board of the Company, which shall be commensurate with his position and status with the Company immediately prior to the date hereof. In furtherance of the foregoing, Executive hereby agrees to promptly deliver such letters of resignation as may reasonably be requested by the Company.


3. Payments and Benefits Pursuant to the Employment Agreement.
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(a) Termination of Employment Period. Effective on the Retirement Date,
-------------------------------- the Employment Period shall expire and all of the rights and obligations of the Company and Executive under the Employment Agreement will terminate, except as provided in this Section 3. With regard to the Employment Agreement, the provisions of each of Sections


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4(c) (relating to indemnity for ISO adjustment), 7(h) (Resignation upon Termination), 7(i) (Limits on Payments by the Company), 8 (Unauthorized Disclosure), 9 (Non-Competition), 10 (Non-Solicitation of Employees), 11 (Non- Solicitation of Customers), 12 (Return of Documents), 13 (Injunctive Relief with Respect to Covenants; Forum; Venue and Jurisdiction), 16 (Indemnification) and 17 (Miscellaneous) (A) shall survive Executive's termination of employment, the
- expiration of the Employment Period and the termination of the Employment Agreement, (B) are incorporated herein by reference and (C) shall continue in
- - full force and effect. With regard to the Equity Agreement, the provisions of each of Sections 3 (Tag-Along Rights), 4 (Take-Along Rights), 7 (Lock-Up Agreement) and 8 (Miscellaneous) and, to the extent any of the defined terms in the Equity Agreement are used in any of the foregoing Sections, the provisions of Section 1 (Definitions) (A) shall survive Executive's termination of
- employment, the expiration of the Employment Period and the termination of the Equity Agreement, (B) are incorporated herein by reference and (C) shall
- - continue in full force and effect. The parties agree and understand that references to the number of Shares (as defined in such Equity Agreement) in sections 3 and 4 of the Equity Agreement include Shares held by Executive's wife and by any and all trusts (including charitable trusts) established by Executive and to which Shares have been transferred by Executive and/or his wife in accordance with the Equity Agreement.


(b) Payment of Accrued Obligations. Executive shall be entitled to
------------------------------ payment of his Base Salary (at the current annual rate thereof of $530,000) through the Retirement Date and to any benefits payable to or in respect of Executive under any applicable employee benefit plan, policy or practice of the Company in accordance with the generally applicable provisions thereof, based on Executive's employment with the Company prior to the Retirement Date, other than any such plan, policy or practice providing for severance or termination benefits. On the Retirement Date, Executive shall be paid the amount of $152,000 in lieu of a pro-rated annual bonus for the period from April 1, 1999 through the Retirement Date.


(c) Continued Payments of Base Salary. Subject to Section 3(g), the
--------------------------------- Company shall continue to make periodic payments to Executive of his Average Base Salary in accordance with the Company's regular payroll practices from the Retirement Date until


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May 31, 2001 (the "Salary Continuance Period"). The Average Base Salary is equal to $520,000.


(d) Continued Payments in Respect of Bonus. Subject to Section 3(g), the
-------------------------------------- Company shall pay to Executive, in 22 monthly installments, commencing on August 31, 1999 and on the last day of the next 21 succeeding months, an amount equal to one-twelfth of the Average Annual Bonus (the "Bonus Payment"). The Average Annual Bonus is equal to $920,814, so that, subject to Section 3(g), each monthly payment will be $76,734.50.


(e) Continued Welfare Benefits. During the period commencing on the
-------------------------- Retirement Date and ending on the earlier of (i) Executive's 65th birthday and (ii) the date of Executive's death (the "Benefits Continuation Period"), subject - --- to Section 3(g), Executive shall be entitled to continue his current participation in each of the Company's medical benefits plans in which Executive is an active participant immediately prior to the Retirement Date in accordance with the terms and conditions of each such plan (including, without limitation, the provisions thereof regarding deductibles and co-payments) as in effect from time to time during the Benefits Continuation Period. Medical coverage shall also be made available to Executive=s dependents, during the Benefits Continuation Period, to the extent available under, and subject to the terms and conditions of, each such medical plan as in effect from time to time. Notwithstanding the foregoing, to qualify for the medical benefits made available hereunder, Executive must pay any premiums and make any contributions that he would have been required to pay or make under the terms of such plan as in effect from time to time during the Benefits Period if Executive were then still a senior officer of the Company. If such continued participation is either not legally permissible or otherwise allowed under the terms of the applicable plan or any insurance policy or other arrangement under which such benefits are provided, the Company will provide equivalent coverage from its general assets or another available source.


(f) Other Benefits. Set forth on Schedule A are statements of the amount
-------------- credited to Executive's account on the date specified therein under the Company's 401(k) Savings Plan and the Company's Supplemental 401(k) Savings Plan. The Company confirms that


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Executive is fully vested in Executive's account balance under each such savings plan and supplemental savings plan. Nothing is this Agreement shall modify or reduce Executive's accrued benefits under all employee pension benefit plans from those in effect immediately prior to the date hereof.


(g) Mitigation. If Executive obtains new employment (including self-
---------- employment and services as a consultant) that is not of a type prohibited by Section 9 of the Employment Agreement (Non-Competition), (i) during the Salary Continuation Period, any salary continuation payments or Bonus Payments to which Executive is entitled pursuant to Section 3(c) or 3(d) shall be reduced by the amount of any compensation earned by Executive (whether paid currently or deferred) from any subsequent employer or other Person for which Executive performs services, including but not limited to consulting services, and (ii)
-- during the Benefits Continuation Period, the continued medical benefits coverage to which Executive is entitled pursuant to Section 3(e) shall be secondary to any other medical benefit coverage available to Executive from any subsequent employer or other Person for which Executive performs services, including, but not limited to, consulting services, at any time after the Retirement Date. Notwithstanding subclause (i) in the preceding sentence, no offset shall be made to any payment under Section 3(c) or 3(d) for any compensation paid for services (A) as a non-employee director of a corporation (or any comparable position in - another business organization) under any arrangement which is generally applicable to all non-employee directors of such corporation (or to all persons holding comparable positions in any such other business organization) or (B) by
- any organization which is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code").


4. Options; Exercise and Repurchase and Cancellation.
-------------------------------------------------


(a) Outstanding Options. Each of the Options that are currently
------------------- outstanding and that constitute Vested Options is listed on Schedule B under the heading "Vested Options." Each of the Options that are currently outstanding and that constitute Unvested Options is listed on Schedule B under the heading "Unvested Options."


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(b) Exercise. At the date of the wire transfer set forth in Section
-------- 4(f), Executive shall be deemed to exercise the Options listed on Schedule B under the heading "Options to be Exercised," each of which constitutes part of the Vested Options. Payment of the aggregate exercise price in respect of such Vested Options ($399,971.07) shall be paid by a debit against the amount to be transferred pursuant to such Section 4(f). The Company and, by signing the acknowledgment of this Agreement where noted below, the Fund each waives its rights under the Equity Agreement to purchase the Option Shares issuable in respect of the exercise of such Options to be Exercised and the 407,680 shares of Common Stock issued to Executive upon the exercise of Options in 1998. Executive agrees that he shall not exercise any Vested Options not listed under the heading "Options to be Exercised" on Schedule B. The portion of Executive's Vested Options not listed under the heading "Options to be Exercised" on Schedule B shall hereafter be referred to as the Remaining Vested Options.


(c) Election to Repurchase. The Company hereby notifies Executive that,
---------------------- in connection with Executive's termination of employment, the Company hereby exercises its right pursuant to Section 5 of the Equity Agreement to purchase the Remaining Vested Options.


(d) Purchase and Sale of the Vested Options. Effective as of the date of
--------------------------------------- the wire transfer determined under Section 4(f) below, Executive hereby agrees to sell to the Company and the Company hereby agrees to purchase from Executive the Remaining Vested Options, at the purchase price set forth in Section 4(e) below, payable as set forth in Section 4(f) below.


(e) Purchase Price. The Company and Executive each agrees that the
-------------- aggregate purchase price for the Remaining Vested Options is $14,427,039.30 (the "Purchase Price"), based on a price per share of $3.25, which is the price determined by the Company's Board of Directors in accordance with the terms and provisions of the Equity Agreement. The portion of the Purchase Price payable in respect of each separate option that is part of the Remaining Vested Options is equal to the product of (i) the excess of (A) such per share price over (B) the exercise price per Option Share under the Option multiplied by (ii) the
-- number of Options Shares covered by the relevant Option.


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(f) Payment of Purchase Price. The Company shall, not later than the
------------------------- Retirement Date, wire to an account identified to the Company by Executive in writing an amount equal to (x) the Purchase Price reduced by (y) all applicable
- - federal, state and local income and employment taxes required to be withheld from such payment. Schedule B hereto reflects the amount to be paid in respect of the purchased options and the amount of any taxes to be withheld therefrom. The amount of any such wire transfer shall be reduced by the amount payable by Executive in respect of the exercise price of the Vested Options to be exercised in accordance with Section 4(b).


(g) Cancellation of Unvested Options. Executive hereby acknowledges and
-------------------------------- agrees that his rights with respect to the Unvested Options which have not become vested on or prior to the Retirement Date shall automatically be canceled and terminated effective as of the Retirement Date.


5. Executive's Cooperation. Executive hereby agrees that, from time to
----------------------- time upon the reasonable request of the Company, Executive shall assist the Company in connection with any pending or future dispute, litigation, arbitration or similar proceeding or investigation instituted or commenced by the Company or any Subsidiary or instituted or commenced by any other person against or involving the Company or any Subsidiary.


6. Termination of Agreements. Effective as of the Retirement Date, the
------------------------- Employment Agreement and the Equity Agreement will each terminate in its entirety without any further liability or obligation on the part of the Company, any of the Subsidiaries, the Fund or Executive thereunder, except for the provisions of the Employment Agreement and the Equity Agreement that are incorpo ...