SEVERANCE, NON-COMPETE AND CONSULTING AGREEMENT
THIS
SEVERANCE,
NON-COMPETE AND
CONSULTING AGREEMENT (the "Agreement") is
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made and entered into as of July 1, 2004 (the "Effective
Date") by and among
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Craig Sloan (the "Consultant"), BMA
Consulting, Inc. ("BMA") and The GSI Group,
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Inc. (the "Company").
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WITNESSETH:
WHEREAS,
prior to the date
hereof, the Consultant has been employed as the
Chief Executive Officer of the
Company;
WHEREAS, the
Consultant and the Company have each determined that it is in
the best interests of the Consultant and
the Company that
the Consultant's
employment with the Company terminate,
effective July 1,
2004;
WHEREAS,
the Company desires to engage the services of the
Consultant,
acting through his wholly owned subsidiary BMA, to assist it
with long-range
strategy, strategic decisions regarding the Company and its businesses,
decisions regarding the capital structure of the
Company and other matters and
the Consultant desires to provide such consulting services to the
Company;
WHEREAS,
the Consultant has substantial and valuable
knowledge regarding
the Company and the industry in which it conducts business; and
WHEREAS,
the Consultant and the Company have reached
agreement as to the
terms and conditions under which the
Consultant will agree to remain available
to the Company for the purposes
described above notwithstanding the termination
of his employment relationship with the Company.
NOW, THEREFORE,
in consideration of the mutual covenants and agreements set
forth below and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
do hereby agree as
follows:
1. Termination
of Employment. The Consultant's
employment with the Company
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is hereby terminated, effective July 1, 2004. From and after such date,
the
Consultant is and will be considered an independent contractor under
this
Agreement. Nothing in this Agreement is intended to create any offer of
employment, partnership or joint venture.
The Consultant shall have no authority
to enter into any contracts or
agreements on behalf of the Company. In no event
will the Consultant represent to any third
party that he is an agent or employee
of the Company or connected with the Company in any
way other than under the
terms of this Agreement. The Consultant
will continue to serve on the Board of
Directors of the Company as its non-executive Chairman.
2. Agreement
Term. The initial term
of the consulting arrangement set forth
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in this Agreement shall be the period beginning on the Effective
Date and,
unless sooner terminated as provided herein, ending on October
31, 2007 (the
"Initial Term"). Thereafter, the Agreement shall automatically extend for
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additional periods of one year each (an "Additional
Term"), unless either the
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Consultant or the Company, as the case may
be, provides notice of termination to
the other party at least 90 days
before the last day of the Initial Term or the
then current Additional Term, as the case may
be. Following termination of the
consulting arrangement under this Agreement, the Consultant will
continue to
comply with the requirements of Sections 6 and 7 of this Agreement.
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Throughout the Agreement, the Initial Term and the Additional Terms are
collective referred to as the "Term."
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<PAGE>
3. Scope
of Services. The Consultant agrees to provide the following
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services during the Term of this Agreement:
(a) During
the Term, the Consultant shall devote his time, energies
and
talents as a senior advisor to the Company
for the purpose of assisting in the
development of long- range strategy, strategic
decisions regarding the Company
and its businesses, decisions regarding the
capital structure of the Company and
other matters as may be reasonably requested by the
Company (the "Consulting
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Services"). Additionally, Consulting Services shall include
direct interaction
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with the Company's Board of Directors
and/or various committees of the Board as
may be required from time to time.
Consultant shall provide such services at the
direction of the Chief Executive Officer of the Company.
(b) During
the Term, it is understood by the parties that
the Consultant
shall work primarily in the Assumption, Illinois area and that he will
frequently be required to travel to other locations to perform
Consulting
Services. The Company will make available necessary
resources at locations to
which the Consultant is required to travel.
(c) During
the Term, the Consultant shall devote 2/3 of his time to
providing the Consulting Services. For purposes of the
foregoing, "2/3 of his
time" shall, over the course of the Term,
equal approximately 1,200 man hours of
service annually, such time to be inclusive
of time spent traveling on behalf of
the Company. The Consultant agrees that he will not undertake other time
commitments that could materially interfere with his ability to provide
the
Consulting Services pursuant to this Agreement.
(d) During
the Term, to the extent not inconsistent with, or in
contravention of, the provisions of this Agreement, the Consultant
shall be
permitted to provide consulting services to,
or be employed by, other companies
or employers.
4. Compensation; Severance.
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(a) The Consultant
(through BMA) shall receive compensation from the Company
as follows (the "Consulting Fees"):
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(i) During
the Terms, the
Consultant shall be paid fees on monthly basis in
the amount of FORTY TWO THOUSAND DOLLARS
($42,000.00) per month. For purposes
of this Agreement, a proportionate portion of such Consulting Fees
shall be
deemed to be earned on a weekly basis throughout the Term.
Throughout this
Agreement, the term "Dollars" shall mean U.S. dollars.
(ii) The Company
shall pay and/or reimburse the Consultant for all customary
and reasonable travel and other out-of-pocket expenses
incurred in connection
with the performance of the Consulting Services. Such payment and/or
reimbursement shall be done promptly and generally in accordance with the
procedures as are applicable to senior executives of the Company.
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<PAGE>
(b) The Consultant is not entitled to paid vacation, paid holidays,
participation in group health insurance (except as
provided in subsection (c)
below), participation in any retirement programs, premium or
"overtime" pay,
workers' compensation, severance payments
(other than the severance payment set
forth in this Agreement), or any other
employment rights or benefits from the
Company. The Company has no obligation and will make no withholdings or
deductions from compensation for any federal or state taxes or the Federal
Insurance Contribution Act (FICA) or Federal Unemployment Contribution Act
(FUTA). It will be the Consultant's
responsibility to remit appropriate taxes to
the proper state and Federal, as well as any other, tax authorities.
(c) Beginning
on the Effective Date of the Consultant's termination
of
employment, the Consultant shall be entitled to
continue to participate in the
Company's welfare benefit plans (at the Consultant's cost
and expense) to the
extent and for the period permitted by COBRA.
(d) The Consultant shall be paid a severance payment
of $675,000 (equal to
18 months' salary), to be paid in a lump sum.
Such amount shall not be payable
unless the Initial Term is completed in full; provided, however, that
the
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Consultant shall nevertheless be entitled to
receive such severance payment on
October 31, 2007 in the event he fails to complete the Initial
Term due to
termination of this Agreement pursuant to Section 5(a) or 5(d) below.
This
payment shall be in addition to the Stock Buyback (as defined below).
(e) Within
30 days of the date of this Agreement, the Company shall
repurchase 948,052 shares of the voting
common stock of the Company owned by the
Consultant at a purchase price of $15.40 per share
(the "Stock Buyback"). The
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closing of the Stock Buyback will be held
at a mutually agreeable date, at which
time proper stock transfer documentation acceptable to the Company shall
be
delivered by the Consultant. The Consultant will retain all other
shares of
common stock of the Company held by him
that are not repurchased by the Company
pursuant to the Stock Buyback.
(f) The Consultant shall be eligible for an annual bonus with
respect to
each fiscal year (or part thereof) during the Term, in accordance
with the
provisions of this subsection 4(f) (the
Consultant's "Bonus"). Within the time
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period required by the Company's senior
credit facility (or, if no such facility
or time period exists, within 30 days of the end of each fiscal
year), the
Company (acting through its Chief Executive Officer and other members of
management and in consultation with the Board
of Directors) shall establish its
budgeted EBITDA for the following fiscal year. The
Company's budgeted EBITDA
shall be calculated as required by the Company's senior
credit facility from
time to time in effect (or, if there is no
such credit facility or such credit
facility does not define "EBITDA", such
calculation shall be done in accordance
with the Company's credit facility in
effect on the date hereof). Following the
final calculation of EBITDA with respect
to any fiscal year of the Company, the
Consultant shall be entitled to a lump sum bonus payment equal to
5% of the
amount (if any) by which the Company's EBITDA
in such fiscal year exceeded the
budgeted EBITDA with respect to such fiscal year. With respect to the
2004
fiscal year of the Company, the
Consultant shall be eligible to receive a bonus
of up to 5% of the amount (if any) by
which the Company's EBITDA for the period
from July 3, 2004 through December 31, 2004
exceeds $13.7 million, the Company's
budgeted EBITDA for the second half of
fiscal 2004. The Consultant shall also be
eligible for a discretionary bonus of up to
$250,000 with respect to any fiscal
year of the Company, at the discretion of the Board and
the Company's Chief
Executive Officer, based on the quality of
the Company's receivables and dealer
network, as well as other factors to be mutually determined.
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(g) Notwithstanding
anything in this
Agreement to the contrary, in no event
shall the Consultant be entitled to receive Consulting Fees and
Bonus in an
aggregate amount exceeding $900,000 in or
with respect to any fiscal year of the
Company.
(h) The Company will, to the maximum extent permitted by law, defend,
indemnify and hold harmless the Consultant and
the Consultant's heirs, estate,
executors and administrators against any costs, losses, claims, suits,
proceedings, damages or liabilities to which the
Consultant may become subject
which arise out of, are based upon or
relate
