EXHIBIT 10.1
July 14, 1999
Xxxxxxx Xxxxxxxx
Chairman & CEO
Gerber Scientific, Inc.
00 Xxxxxx Xxxx Xxxx
Xxxxx Xxxxxxx, XX 00000
Dear Xxxx:
Gerber Scientific, Inc. (the "Company") considers it
essential to the best interests of its stockholders to
xxxxxx the continuous employment of key management
personnel. In this connection, should the Company face a
possible Change in Control (as defined in Section 2 of this
Agreement), such as the acquisition of a substantial share
of the equity or voting securities of the Company, the Board
of Directors of the Company (the "Board") has determined
that it is imperative that it and the Company be able to
rely upon your continued services without concern that you
might be distracted by the personal uncertainties and risks
that the possibility of a Change in Control might entail.
Accordingly, the Board has determined that appropriate
steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company's management to their assigned duties without
distraction in the face of potentially disturbing
circumstances that could arise out of a possibility for a
Change in Control of the Company.
In order to induce you to remain in the employ of the
Company and its subsidiaries and in consideration of your
agreement set forth in Section 2(B) hereof, the Company
agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event
your employment with the Company and its subsidiaries is
terminated subsequent to a Change in Control under the
circumstances described below.
1. Term of Agreement
This Agreement shall commence on the date hereof and
shall continue in effect through April 30, 2002, provided,
however, the term of this Agreement shall automatically be
extended for one additional year commencing on May 1, 2002
and on each May 1 thereafter, unless, not later than April
30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement;
provided further that, notwithstanding any such notice by
the Company not to extend, if a Change in Control shall have
occurred during the original or any extended term of this
Agreement, this Agreement shall continue in effect for a
period of twenty-four (24) months beyond the expiration of
the term in effect immediately before such Change in
Control.
2. Change in Control
(A) No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as set
forth below. For purposes of this Agreement a "Change in
Control" of the Company shall mean the occurrence of any one
or more of the following events:
(i) the Company shall (1) merge or consolidate with or into
another corporation or entity or enter into a share exchange
between the Company or stockholders of the Company and
another individual, corporation or other entity and as a
result of such merger, consolidation or share exchange less
than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation or
entity shall then be owned in the aggregate by the former
stockholders of the Company; or (2) sell, lease, exchange or
otherwise dispose of more than 2/3s of the Company's
property and assets in one transaction or a series of
related transactions to one or more individuals,
corporations or other entities that are not subsidiaries of
the Company, assuming that if consummation of such
transaction is subject, at the time of such approval by
stockholders, to the consent of any government or
governmental agency, such consent by the government or
governmental agency is obtained (either explicitly or
implicitly by consummation of the transaction);
(ii) the stockholders of the Company adopt a plan of
complete liquidation of the Company;
(iii) any "person" (as such term is used in Sections
13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (other than the Employee, the
Company, any of the Company's subsidiaries, any employee
benefit plan of the Company and/or one or more of its
subsidiaries or any person or entity organized, appointed or
established pursuant to the terms of any such employee
benefit plan) becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of voting
securities of the Company representing thirty percent (30%)
or more of the total number of votes eligible to be cast at
any election of directors of the Company; provided, however,
that no Change in Control shall be deemed to have occurred
under this subparagraph (iii) if such "person" becomes a
holder of the Company's securities in one or more
transactions initiated or pursued by the Company unless
after such transaction(s) less than fifty percent (50%) of
the outstanding voting securities of the Company shall be
owned in the aggregate by the former stockholders of the
Company; or
(iv) as a result of, or in connection with, any tender
offer or exchange offer, share exchange, merger,
consolidation or other business combination, sale, lease,
exchange or other disposition of more than 2/3s of the
Company's assets, a contested election, or any combination
of the foregoing transactions, the persons who are directors
of the Company on the date hereof (the "Incumbent Board")
shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;
provided that any person becoming a director subsequent to
the date hereof whose election or nomination for election by
the Company's stockholders was approved by a vote of at
least three-quarters (3/4) of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
a proxy statement of the Company in which such person is
named as a nominee for director without any objection to
such nomination) shall be, for purposes herein, considered
as though such person were a member of the Incumbent Board.
(B) In exchange for the benefits under this Agreement, you
agree that, subject to the terms and conditions herein, in
the event of a potential Change in Control of the Company
occurring after the date hereof, you will not voluntarily
terminate your employment with the Company and its
subsidiaries until the earlier of (i) the date which is six
months after the occurrence of such potential Change in
Control of the Company or (ii) the occurrence of a Change in
Control of the Company. If more than one potential Change
in Control occurs during the term of this Agreement, the
provisions of the preceding sentence shall be applicable to
each potential Change in Control occurring prior to an
actual Change in Control. For the purposes of this
Agreement, a "potential Change in Control" of the Company
shall be deemed to have occurred if: (i) the Company enters
into an agreement, the consummation of which would result in
the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to
take or to consider taking actions which if consummated
would constitute a Change in Control; or (iii) the Board
adopts a resolution to the effect that, for purposes of this
Agreement, a potential Change in Control of the Company has
occurred.
3. Termination Following Change in Control
If any of the events described in Section 2 hereof
constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 4
hereof upon the subsequent termination of your employment
with the Company and its subsidiaries during the term of
this Agreement and within two (2) years of the Change in
Control, unless such termination is (x) a result of your
death, Disability, or Retirement; (y) by you for other than
Good Reason (as defined in Section 3(A)); or (z) by the
Company or any of its subsidiaries for Cause (as defined in
Section 3(C)). The benefits provided in Section 4 shall be
in lieu of any termination, separation, severance or similar
benefits under your employment agreement, if any, or under
the Company's termination, separation, severance or similar
plans or policies, if any (other than benefit plans of the
Company which incidentally provide for benefits in the event
of a change in control, as such term is defined in such
plans). If your employment is terminated as a result of your
death, Disability or Retirement, by you for other than Good
Reason or by the Company or any of its subsidiaries for
Cause, then you shall not be entitled to any termination,
separation, severance or similar benefits under this
Agreement, and you shall be entitled to benefits under your
employment agreement, if any, and/or under the Company's
termination, separation, severance or similar plans or
policies, if any, only in accordance with the terms of any
such employment agreement, plans and policies.
(A) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purposes of this
Agreement, "Good Reason" shall mean the occurrence, without
your express written consent, of any of the following
circumstances:
(i) a significant change in the nature or scope of your
authorities, duties or responsibilities from those
applicable to you immediately prior to the date on which a
Change in Control occurs;
(ii) a reduction in your base annual salary from that
provided to you immediately prior to the date on which a
Change in Control occurs;
(iii) a diminution in your eligibility to participate in
compensation plans and employee benefits and perquisites
which provide opportunities to receive overall compensation
and benefits and perquisites from the greater of:
- the opportunities provided by the Company (including
its subsidiaries) for executives with comparable duties; or
- the opportunities under any such plans and perquisites
under which you were participating immediately prior to the
date on which a Change in Control occurs;
(iv) a change in the location of your principal place of
employment by the Company (including its subsidiaries) by
more than fifty (50) miles from the location where you were
principally employed immediately prior to the date on which
a Change in Control occurs;
(v) a significant increase in the frequency or duration of
your business travel; or
(vi) a reasonable determination by the Board of Directors of
the Company that, as a result of a Change in Control and a
change in circumstances thereafter significantly affecting
your position, you are unable to exercise the authorities,
powers, functions or duties attached to your position
immediately prior to the date on which a Change in Control
occurs.
(B) Disability; Retirement.
(i) For purposes of this Agreement, "Disability" shall mean
permanent and total disability as such term is defined under
Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"). Any question as to the existence of
your Disability upon which you and the Company cannot agree
shall be determined by a qualified independent physician
selected by you (or, if you are unable to make such
selection, such selection shall be made by any adult member
of your immediate family or your legal representative) and
approved by the Company, said approval not to be
unreasonably withheld. The determination of such physician
shall be made in writing to the Company and to you and shall
be final and conclusive for all purposes of this Agreement.
(ii) For purposes of this Agreement, "Retirement" shall mean
your voluntary termination of employment with the Company at
or after the age of 65 in accordance with the Company's
retirement policies (excluding early retirement) generally
applicable to its salaried employees or in accordance with
any retirement arrangement established with your consent
with respect to you.
(C) Cause. For purposes of this Agreement, "Cause" shall
mean (a) the willful and continued failure by you to
substantially perform your duties with the Company (other
than any such failure from your incapacity due to physical
or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination in the manner
provided for in Section 3(D) by you for Good Reason) after
written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not
substantially performed your duties, or (b) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise. For purposes of this Section 3(C), no act, or
failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that, in the good
faith opinion of the Board you were guilty of conduct set
forth above in this Section 3(C) and specifying the
particulars thereof.
(D) Any termination of your employment by the Company or
any of its subsidiaries or by you shall be made by written
notice of termination to the other party. Such "Notice of
Termination" shall mean a written document specifying the
provision in this Agreement being relied upon and setting
forth a summary of the facts and circumstances which provide
the basis for termination of your employment. The "Date of
Termination" shall be the date upon which the Notice of
Termination is given.
4. Compensation upon Termination Following a Change in
Control
(A) If your employment shall be terminated for any reason
otherwise than (x) as a result of your death, Disability or
Retirement; (y) by you for other than Good Reason; or (z) by
the Company or any of its subsidiaries for Cause, within two
(2) years following a Change in Control (as defined in
Section 2), then you shall be entitled to the benefits
provided below:
(i) The Company or one of its subsidiaries shall pay you,
not later than the fifth business day following the Date of
Termination ("Payment Date"), the sum of your full base
salary through the Date of Termination, as earned by you but
not yet paid to you, at the salary level in effect on (x)
the Date of Termination or (y) the day immediately preceding
the date of the Change in Control, whichever is higher
("full base salary"), and your pro rata share of your annual
incentive bonus payment in effect on the Date of
Termination. The Company or one of its subsidiaries shall
also pay you all other amounts to which you are entitled
under any compensation plan of the Company applicable to
you, at the time such payments are due. For purposes of
this Section 4 and the other provisions of this Agreement,
"your annual incentive bonus payment in effect on the Date
of Termination" shall mean the target amount of your annual
incentive bonus payment (under the Company's Annual
Incentive Bonus Plan or any successor plan) for the year in
which the Notice of Termination is given. Your pro rata
share of your annual incentive bonus payment in effect on
the Date of Termination shall be that percentage of your
annual incentive bonus payment in effect on the Date of
Termination that is equal to the number of days in the
fiscal year completed prior to the Date of Termination
divided by 365.
(ii) On the Payment Date the Company shall also pay you a
severance payment equal to three (3) times the sum of (x)
your full base salary and (y) your annual incentive bonus
payment in effect on the Date of Termination.
(iii) The Company shall cause (x) all unvested stock
options or other stock grants held by you on the Date of
Termination immediately to vest and be fully exercisable as
of the Date of Termination, (y) any restrictions on all
restricted stock held by you on the Date of Termination
immediately to lapse and all shares of such stock to fully
vest as of the Date of Termination, and (z) any accrued
benefit or deferred arrangement of the Company that you
otherwise would become entitled to if you continued
employment with the Company immediately to vest as of the
Date of Termination.
(iv) The Company shall maintain in full force for three (3)
year(s) following the Date of Termination (the "Benefit
Period") all life insurance, health (medical and dental),
accidental death and dismemberment, pension and disability
plans and programs in which you are entitled to participate
immediately prior to the Date of Termination, or if your
continued participation is not possible under the general
terms and provisions of such plans and programs, the
Company shall provide you with benefits equivalent to those
provided by such plans and programs, provided that the
Company will not be required to maintain these plans and
programs, or the equivalent thereof, beyond your reaching
the age of 65 or upon your securing new full time employment
which makes such benefits available to you. Additional
years of service equal to the length of the Benefit Period
will be credited to you for purposes of calculating your
benefits under the Company's Pension Plans at the rate of
your full base salary and annual incentive bonus payment in
effect on the Date of Termination (as defined in Section
4(A)(i) hereof).
(v) The Company shall make available to you, at the
Company's expense, outplacement counseling services. You
may select the organization that will provide you with such
services, provided that the Company shall not be required to
pay more than $50,000 for any such services.
(B) There shall be no limit on the amount of payments due
you under Section 4(A) unless (i) your net income from the
payments made under Section 4(A) would be maximized, in
consideration of federal, state and local income and excise
taxes, from limiting the sum of payments (the "Total Lump
Sum Payment") in Section 4(A) to 2.99 times your prior five
years' average income, or "base amount" as defined in
Section 280G of the Internal Revenue Code, as amended (the
"Code"), and (ii) the Total Lump Sum Payment due to you is
more than 2.99 times your base amount but not more than 3.5
times your base amount. In such case, your Total Lump Sum
Payment will be reduced to 2.99 times your base amount.
(C) In the event that any payment or benefit received or to
be received by you pursuant to the terms of this Agreement
(the "Contract Payments") or in connection with your
termination of employment or contingent upon a Change in
Control of the Company pursuant to any plan or arrangement
or other agreement with the Company (or any affiliate)
("Other Payments" and, together with the Contract Payments,
the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Code, as
determined as provided below, and has not been subject to
the modified cap described in Section 4(B), the Company
shall pay to you, at the time specified in Section 4(C)(iii)
below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of the
Excise Tax on Contract Payments and Other Payments and any
federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 4(C), and any interest,
penalties or additions to tax payable by you with respect
thereto, shall be equal to the total present value of the
Contract Payments and Other Payments at the time such
Payments are to be made.
(i) For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such
Excise Tax,
- the total amount of the Payments shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, except to the
extent that, in the opinion of independent tax counsel
retained by the Company's independent auditors and
reasonably acceptable to you ("Tax Counsel"), a Payment (in
whole or in part) does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are
not subject to the Excise Tax;
- the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code (after applying the previous clause);
and
- the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in
accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at
the highest marginal rates of federal income taxation
applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable
to individuals as are in effect in the state and locality of
your residence for tax purposes in the calendar year in
which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account
any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.
(iii) The Gross-Up Payments provided for in this Section
4(C) hereof shall be made upon the earlier of (x) the
payment to you of any Contract Payment or Other Payment or
(y) the imposition upon you or payment by you of any Excise
Tax.
(iv) If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax is less than the
amount taken into account under this Section 4(C), you shall
repay to the Company within five (5) business days of your
receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax
or a federal, state and local income tax deduction) plus any
interest received by you on the amount of such repayment.
If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax exceeds the
amount taken into account hereunder (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such
excess within five (5) business days of the Company's
receipt of notice of such final determination or opinion.
(D) The Company shall also pay to you all legal fees and
expenses, if any, reasonably incurred by you in connection
with seeking to obtain or enforce any right or benefit
provided by this Agreement.
(E) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by
another employer or by retirement benefits received after
the Date of Termination or otherwise.
5. Successors; Binding Agreement
(A) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
no succession had taken place. Failure of the Company to
obtain such assumption and agreement within thirty days
following the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the
same terms as you would be entitled hereunder if you had
terminated your employment for Good Reason following a
Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used
in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is
no such designee, to your estate.
6. Confidential Information
You shall hold in fiduciary capacity for the benefit of
the Company or its subsidiaries all secret or confidential
information, knowledge or data relating to the Company, the
subsidiaries and their respective businesses, which shall
have been obtained during your employment by the Company or
its subsidiary and which shall not be public knowledge
(other than by acts by you or your representatives in
violation of this Agreement). After termination of your
employment with the Company or its subsidiaries, you shall
not, without prior written consent of the Company or its
subsidiaries, communicate or divulge any such information,
knowledge or data to anyone other than the Company or its
subsidiaries or those designated by them. The preceding two
sentences shall not apply with respect to any information
you are required to disclose pursuant to a valid and
effective subpoena or order issued by a court of competent
jurisdiction or with respect to any information you are
reasonably required to disclose in enforcing the terms of
this Agreement. In no event shall an asserted violation of
this Section 6 constitute a basis for deferring or
withholding any amounts otherwise payable to you under this
Agreement, nor will any asserted violation of this Section 6
relieve you of your responsibilities under this Agreement.
7. Agreement Not to Compete
You agree that for a period of one year following the
Date of Termination, you will not engage, directly or
indirectly, whether as a principal, agent, distributor,
representative, consultant, employee, partner, stockholder,
limited partner or other investor (other than an investment
of not more than two percent (2%) of the stock or equity of
any corporation the capital stock of which is publicly
traded) or otherwise, in the same or a substantially similar
business as that conducted and carried on by the Company or
any of its subsidiaries and being directly competitive with
the Company or any of its subsidiaries on the Date of
Termination or at any time during such one-year period.
8. Notice
For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the address
set forth on the first page of this Agreement with respect
to the Company and on the signature page with respect to
you, provided that all notices to the Company shall be
directed to the attention of the President of the Company,
or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon
receipt.
9. Miscellaneous
No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge
is agreed to in writing and signed by you and such officer
as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any conditions or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement. Further, the
validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Connecticut. All references to sections of the Code or
Exchange Act shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding
required under federal, state or local law.
10. Validity
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11. Counterparts
This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return the original to me and
make a copy for your records. When executed and returned
this letter shall constitute the entire Agreement on this
subject between you and the Company.
Sincerely,
GERBER SCIENTIFIC, INC.
By: /s/ Xxxxxx X. XxXxx
Name: Xxxxxx X. XxXxx
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx Xxxxxxxx
____________________________________
Mailing Address
____________________________________
