EXHIBIT 10.3
July 14, 1999
Subsidiary President
Xxxxxx Scientific Domestic Subsidiary
Dear Subsidiary President:
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 two and one half (2 1/2) 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 two and one
half (2 1/2) 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: _________________
Name: Xxxxxx X. XxXxx
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: ________________________________
Subsidiary President
________________________________
Mailing Address
________________________________
