EXHIBIT 10.24
KEY EMPLOYEE RETENTION AGREEMENT
THIS AGREEMENT dated May 1, 1997, by and between GENERAL SCANNING INC., a
Massachusetts corporation having its principal place of business in Watertown,
Massachusetts (the "Company"), and Xxxxx Xxxxxx of North Andover, Massachusetts
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(the "Employee")
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WITNESSETH THAT:
WHEREAS, the Employee has been for approximately 1 year, employed by the
Company; the Employee's experience and knowledge the affairs of the Company are
valuable to the Company; and the Company considers it essential to the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication of the Employee, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined below);
NOW, THEREFORE, the parties agree as follows:
1. Defined Terms. For purposes of this Agreement, the definitions of
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capitalized terms used in this Agreement are as follows:
(a) "Acquiring Person" shall mean any Person who acquires a beneficial
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ownership of twenty percent (20%) or more of the outstanding voting securities
of the Company, other than any existing Beneficial Owner on May 1, 1997 so long
as any such existing Beneficial Owner does not (either individually or as a
participant in any group of affiliates or associates, as such terms are defined
in Rule 12b-2 under the Exchange Act) acquire additional shares of the Company's
Common Stock representing more than 1% of the total outstanding Common Stock on
the Record Date.
(b) "Approved Change in Control" shall mean a Change in Control which shall
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have been approved, and/or recommended to the Company's shareholders, by a
majority of the Continuing Directors.
(c) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under
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the Exchange Act.
(d) "Board" shall mean the Board of Directors of the Company.
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(e) "Cause" for termination of the Employee's employment by the Company,
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after any Change in Control, shall mean any of the following:
(i) The willful and continued failure by the Employee to perform the
Employee's duties with the Company, which failure continues for more than ten
(10) days after written notice given to the Employee pursuant to
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a vote of at least two-thirds of the Continuing Directors, such vote to set
forth in reasonable detail the nature of such failure;
(ii) The willful engaging by the Employee in gross misconduct which
is demonstrably and materially injurious to the Company, financially or
otherwise; or
(iii) Conviction of the Employee by a court of competent jurisdiction
of, or the Employee's pleading nolo contendere to, any criminal offense
involving dishonesty or breach of trust or any felony or crime of moral
turpitude;
provided that, for purposes of clauses (i) and (ii) of this definition, no act
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or failure to act on the Employee's part shall be deemed "willful" unless done,
or omitted to be done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the best interest of
the Company.
(f) A "Change in Control" shall have occurred if any of the following
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conditions has been satisfied:
(i) Continuing Directors constitute two-thirds or less of the
membership of the Board;
(ii) any Acquiring Person becomes a Beneficial Owner of the
Company's voting securities;
(iii) there is a change in control of the Company that must be
reported in response to item 1(a) of Current Report on Form 8-K or item 6(e) of
Schedule 14A of Regulation 14A or any similar item, schedule, or form under the
Exchange Act; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company, or an agreement for the sale or disposition by the
Company of substantially all of the Company assets.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
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(h) "Company" shall have the meaning specified in the preamble and shall
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include any successor to its business and/or assets.
(i) "Continuing Director" shall mean any member of the Board, other than
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an Acquiring Person, (i) who has continuously been a member of the Board since
not later than the date of a Potential Change in Control or (ii) who is elected
to succeed a Continuing Director by a majority of the then Continuing Directors
or who is nominated by a majority of the then Continuing Directors.
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(j) "Date of Termination" shall have the meaning described in Section 6.2
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of this Agreement.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
(1) "Good Reason" for termination by the Employee of his/her employment
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shall mean the occurrence of any of the following acts by the Company, or
failures of the Company to act, unless (for any act or failure to act described
in paragraphs (i), (v), or (vi) below) such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination or (in
the case of paragraph (iii) below) such act is not objected to in writing by the
Employee within four months after notification of the Company's intention to
take the action contemplated by paragraph (iii):
(i) The assignment to the Employee of any duties inconsistent with
the Employee's status as an executive of the Company or a material alteration,
adverse to the Employee, in the nature, scope or status of the Employee's
responsibilities, title, authorities, powers, functions or duties normally
exercised by an executive in such capacity, unless such change in title, duties,
responsibilities, etc. is by mutual written agreement of the parties to this
Agreement;
(ii) A reduction by the Company in the Employee's annual base salary
as in effect on the date of this Agreement or as it may be increased, except for
across-the-board salary reductions similarly affecting all executives of the
Company and all executives of any Person in control of the Company;
(iii) The fact that the Company requires the Employee to be based
anywhere other than within 25 miles of the offices where the Employee was based
on the date of the Change in Control, except for required travel on the
Company's business to an extent substantially consistent with the Employee's
present business travel obligations;
(iv) The failure by the Company, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation (or to
pay to the Employee any portion of an installment of deferred compensation under
any deferred compensation program of the Company), within fourteen (14) days of
the date such compensation is due, or a material breach by the Company of any
other provision of this Agreement, which breach continues for more than fourteen
days following written notice given by the Employee to the Company, such written
notice to set forth in reasonable detail the nature of such breach;
(v) The failure by the Company to continue in effect any
compensation plan in which the Employee participates immediately prior to the
Change in Control which is material to the Employee's total compensation;
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(vi) The failure by the Company to continue to provide the Employee
with benefits substantially similar to those enjoyed by the Employee prior to
the Change in Control, including without limitation as applicable use of an
automobile, coverage of membership dues, provision of services, and benefits
under any of the Company's pension, life insurance, medical, health and
accident, or disability plans in which the Employee was participating at the
time of the Change in Control;
(vii) The failure by the Company to provide the Employee with the
number of paid vacation days to which the Employee is entitled on the basis of
years of service with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change in Control; or
(viii) Any purported termination of the Employee's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements of
Section 6.1 of this Agreement (notwithstanding that, for purposes of this
Agreement, no such purported termination shall be effective);
provided that (A) the Employee's right to terminate his/her employment for Good
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Reason shall not be affected by the Employee's incapacity due to physical or
mental illness; and (B) the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason under this Agreement.
(m) "Notice of Termination" shall have the meaning stated in Section 6.1
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of this Agreement.
(n) "Person" shall have the meaning given in Section 3(a)(9) of the
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Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(o) "Potential Change in Control" has occurred if one of the following
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conditions is satisfied:
(i) The Company enters into an agreement which would result in a
Change in Control;
(ii) The Company or any Person publicly announces an intention to
take or to consider taking actions which would constitute a Change in Control;
(iii) Any Person becomes the direct or indirect Beneficial Owner of
securities of the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, other than any
existing Beneficial Owner on May 1, 1997 so long as any such existing Beneficial
Owner does not (either individually or as a participant in any group of
affiliates or associates, as such terms are defined in Rule 12b-2 under the
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Exchange Act) acquire additional shares of the Company's Common Stock
representing more than 1% of the total outstanding Common Stock on the Record
Date; or
(iv) The Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(p) "Severance Payments" shall mean those payments described in Section 5
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of this Agreement.
2. Term of Agreement. This Agreement shall commence as of May 1, 1997 and
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shall continue through April 30, 1998, provided that, commencing on May 1, 1998,
and on each subsequent May 1, the term of this Agreement automatically shall be
extended for one additional year unless, not later than the preceding December
31, the Company or the Employee shall have given notice not to extend this
Agreement or a Change in Control shall have occurred prior to such May 1. If a
Change in Control shall have occurred during the term of this Agreement,
however, this Agreement shall continue in effect for a period of not less than
twenty-four (24) months beyond the last day of the month in which such Change in
Control occurred.
3. The Company's Covenants Summarized: Not an Employment Contract.
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In order to induce the Employee to remain in the employ of the Company and in
consideration of the Employee's covenants set forth in Section 4, the Company
agrees, under the conditions described in this Agreement, to pay the Employee
the Severance Payments described in Section 5 of this Agreement and the other
payments and benefits described in the event the Employee's employment with the
Company is terminated following a Change in Control and during the term of this
Agreement. No amount or benefit shall be payable under this Agreement unless
there shall be deemed to have been a termination of the Employee's employment
with the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment, and, except
as otherwise agreed in writing between the Employee and the Company, the
Employee shall not have any right to be retained in the employ of the Company.
4. Employee's Covenants. The Employee agrees that, subject to the terms
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and conditions of this Agreement, the Employee will remain in the employ of the
Company until the earliest of (i) the date of a Change in Control which is not
an Approved Change in Control, (ii) the first anniversary of the date of an
Approved Change in Control, (iii) the date of termination by the Employee of
his/her employment for Good Reason, by reason of death or Retirement, or (iv)
the termination by the Company of the Employee's employment for any reason.
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5. Severance Payments.
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5.1 Basic Severance Amount. The Company shall pay the Employee the
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payments described as follows in this Section 5, upon the payment date specified
in Section 5.3 after the termination of the Employee's employment following a
Change in Control during the term of this Agreement, unless the termination is
(i) by the Company for Cause, (ii) by reason of death, or (iii) by the Employee
without Good Reason. The Employee's employment shall be deemed to have been
terminated following a Change in Control by the Company without Cause or by the
Employee with Good Reason if the Employee's employment is terminated prior to a
Change in Control without Cause at the direction of a Person who has entered
into an agreement with the Company, the consummation of which will constitute a
Change in Control or if the Employee terminates his/her employment with Good
Reason prior to a Change in Control if the circumstances or event which
constitutes Good Reason occurs at the direction of such Person.
(a) In lieu of any further salary payments or severance benefits to the
Employee for periods subsequent to the Date of Termination, the Company shall
pay to the Employee a lump sum severance payment, in cash, equal to four times
the sum of (i) the Employee's annual base salary as in effect either, whichever
is higher, (A) immediately prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or (B) immediately prior to the
Change in Control and (ii) the average of the amounts paid as an annual bonus to
the Employee with respect to the three fiscal years immediately preceding
either, whichever is higher, (A) the occurrence of the event or circumstances
upon which the Notice of Termination is based or (B) the Change in Control.
(b) In lieu of any further life, disability, accident and health insurance
benefits due the Employee, the Company shall pay to the Employee a lump sum
amount, in cash, equal to the cost to the Company (as determined by the Company
in good faith with reference to its most recent actual experience) of providing
such benefits, to the extent that the Employee is eligible to receive such
benefits immediately prior to the Notice of Termination for a period of four
years commencing on the Date of Termination. (The sum of the payments which the
Employee may become entitled to receive pursuant to the preceding paragraph (a)
and this paragraph (b), as computed prior to any Gross-up Payment which may
become due in respect thereof pursuant to Section 5.2 below, shall be referred
to in this Section 5.1 as the "Severance Base Amount".)
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(c) Notwithstanding the foregoing provisions of this Section 5.1, in the
event of an Approved Change in Control, the payments which the Employee shall
become entitled to received pursuant to this Section 5.1 shall be reduced to the
higher of (i) an aggregate amount (which, when added together with all other
compensation required to be taken into account pursuant to Section 280G
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of the Code) equal to $1.00 less than the aggregate severance payments which
would result in any portion thereof becoming subject to the excise tax imposed
under Section 280G of the Code, or (ii) 50% of the Severance Base Amount;
provided that (A) in the event that the Employee obtains other full-time
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employment within two years after the Date of Termination (the "Mitigation
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Period"), the aggregate severance payment to which the Employee is entitled
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pursuant to this paragraph (c) shall be reduced by the amount of base salary
payable to the Employee as compensation for such new employment for the
remaining portion of the Mitigation Period following the commencement date of
such new employment; (B) in the event that the Employee shall reach age 65
during the Mitigation Period, the aggregate severance payment to which the
Employee would be entitled pursuant to the preceding provisions of this
paragraph (c) shall be reduced to the percentage thereof obtained by dividing
the number of days in the Mitigation Period prior to the Employee's 65th
birthday by 730; but (C) in no event shall the aggregate severance payment to
which the Employee shall become entitled pursuant to this paragraph (c) be
reduced below 25% of the Severance Base Amount.
5.2 Tax Gross-Up. Anything in this Agreement to the contrary
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notwithstanding and except as provided in Section 5.1(c) or as set forth in
paragraph (b) of this Section 5.2, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 5.2) (a "Subject Payment") would be subject
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to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, being hereinafter
collectively referred to as the "Excise Tax"), then the following provisions
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shall be applicable:
(a) The Employee shall be entitled to receive an additional payment (a
"Gross-up Payment") in an amount such that after payment by the Employee of all
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taxes (including any interest or penalties imposed with respect to such taxes),
including without limitation any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-up Payment,
the Employee retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Subject Payments.
(b) Notwithstanding the foregoing paragraph (a), if it shall be determined
that the Employee is entitled to a Gross-up Payment, but that the Employee,
after taking into account the Subject Payments and the Gross-up Payment, would
not receive a net after-tax benefit of at least $50,000 (taking into account
both income taxes and any Excise Tax) as compared to the net after-tax proceeds
to the Employee resulting from an elimination of the Gross-up Payment and a
reduction of the Subject Payments, in the aggregate, to an amount (the "Reduced
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Amount") such that the receipt of Subject Payments
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would not give rise to any Excise Tax, then no Gross-up Payment shall be made to
the Employee and the Subject Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(c) All determinations required to be made under this Section 5.2,
including whether and when a Gross-up Payment is required and the amount of such
Gross-up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Xxxxxx Xxxxxxxx LLP or such other certified
public accounting firm as may be designated by the Company (the "Accounting
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Firm") which shall provide detailed supporting calculations both to the Company
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and the Employee within fifteen (15) business days of the receipt of notice from
the Employee that there has been a Subject Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for any Acquiring Person, the Company shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee.
5.3 Payment Date; Estimated Payments.
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(a) The Company shall make the payments provided for in Section 5.1 not
later than the fifth (5th) day following the Date of Termination.
(b) Any Gross-up Payment, as determined pursuant to Section 5.3, shall be
paid by the Company to the Employee within five (5) days of the receipt of the
Accounting Firm's determination.
(c) If the Company has been unable fully to determine the amounts of
payments due pursuant to Section 5.1, the Company shall pay to the Employee on
such day an estimate, as determined by the Employee, of the minimum amount of
such payments to which the Employee is clearly entitled. The Company shall pay
the remainder of such payments, together with interest at the rate provided in
Section 1274(d) of the Code, as soon as the amount is determined, but no later
than the thirtieth (30th) day after the Date of Termination.
(d) In the event that (i) the amount of the estimated payments exceeds the
amount the Company subsequently determines to have been due, or (ii) the amount
of severance payment paid to the Employee pursuant to Section 5.1(c) shall
exceed by virtue of proviso (A) to Section 5.1(c) the amount of aggregate
severance payment to which the Employee is entitled, then (in the case of either
of the preceding clauses (i) or (ii)) such excess shall constitute a loan by the
Company to the Employee, payable on the fifth (5th) business day after demand by
the Company, together with interest at the rate provided in the above-referenced
section of the Code.
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6. Termination Procedures and Compensation During Dispute.
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6.1 Notice of Termination. For purposes of this Agreement, a "Notice of
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Termination" shall mean a notice which shall indicate the specific termination
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provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated.
6.2 Date of Termination. The term "Date of Termination," with respect to
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any purported termination of the Employee's employment after a Change in Control
and during the term of this Agreement, shall mean the date specified in the
Notice of Termination. In the case of termination by the Company, the date
shall not be less than thirty (30) days after the date such Notice of
Termination is given, except in the case of a termination for Cause. In the case
of termination by the Employee, the date shall not be less than fifteen (15)
days nor more than sixty (60) days after the date such Notice of Termination is
given.
6.3 Dispute Concerning Termination. If within fifteen (15) days after any
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Notice of Termination is given or, if later, prior to the Date of Termination,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order of decree of a court of
competent jurisdiction provided that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence.
6.4 Compensation During Dispute. If a purported termination occurs
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following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 6.3 above, the Company shall
continue to pay the Employee the full compensation in effect when the notice
giving rise to the dispute was given (including without limitation salary) and
continue the Employee as a participant in all compensation, benefit and
insurance plans in which the Employee was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 6.3 above. Amounts paid under this Section 6.4 are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
7. No Mitigation. If the Employee's employment by the Company is
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terminated during the term of this Agreement, the Employee is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Employee by the Company pursuant to Section 5 or Section 6.4 above.
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Further, the amount of any payment or benefit provided for in Section 5 or
Section 6.4 above (except to the extent specifically set forth in the proviso to
Section 5.1(c) above) shall not be reduced by any compensation earned by the
Employee as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Employee to the
Company, or otherwise.
8. Successors; Binding Agreement.
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8.1 Assumption and Performance of Agreement. The Company will require that
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any successor to the business and/or its assets must expressly assume and agree
to perform this Agreement as if no such succession had taken place. Failure to
do so shall entitle the Employee to compensation from the Company in the same
amount and on the same terms to which the Employee would be entitled if the
Employee were to terminate his/her employment for Good Reason after a Change in
Control, except that the effective date for the succession shall be the Date of
Termination.
8.2 Successors. This Agreement shall inure to the benefit of and be
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enforceable by the Employee's personal or legal representative, executor,
administrator, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to him (excluding
amounts which, by their own terms, terminate upon the death of the Employee) if
the Employee had continued to live, all such amounts, unless otherwise provided
in the Agreement, shall be paid in accordance with the terms of this Agreement
to the executor, personal representative or administrator of the Employee's
estates.
9. Notices. For the purpose of this Agreement, notices and all other
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communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance with
the Agreement, except that notice of change of address shall be effective only
upon actual receipt:
If to the Company:
General Scanning Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chairman of the Board
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If to the Employee:
Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxx Xxxxxxx, XX 00000
10. Miscellaneous. No provision of this Agreement may be modified, waived
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or discharged unless such is agreed to in writing and signed by the Employee and
such officer of the Company as may be specifically designated by the Board.
Except as expressly provided in this Agreement, no waiver by any party at of a
breach by the other party of, or compliance with, any condition 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 with respect to the subject
matter of this Agreement have been made by any party which are not expressly set
forth in this Agreement. This Agreement shall be construed as an instrument
executed under seal. All references to sections of the Code shall be deemed also
to refer to any successor provisions to such sections. Any payments provided for
in this Agreement shall be paid (subject to Section 5.2) net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Employee has agreed. The obligations of the Company
under Sections 5, 6, 7 and 12 of this Agreement shall survive the expiration of
the term of this Agreement.
11. Enforceability. The invalidity or unenforceability of any
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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.
12. Settlement of Disputes; Arbitration. All claims by the Employee for
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benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set forth
the specific reasons for the denial and the specific provision of this Agreement
relied upon. Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts, in accordance with the rules of the American Arbitration
Association. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, the Employee shall be entitled to seek specific
performance of the Employee's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
13. Applicable Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company and by the Employee as of the date first written above.
GENERAL SCANNING INC.
By: Xxxx Xxxxxx
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Title: Vice President
THE EMPLOYEE
/s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
