<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 2, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-43089
THE GSI GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 37-0856587
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1004 E. ILLINOIS STREET, ASSUMPTION, ILLINOIS 62510
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. Common stock, par value
$0.01 per share, 2,000,000 shares outstanding as of May 14, 1999.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets................................................ 3
Statements of Operations...................................... 4
Statements of Cash Flows...................................... 5
Notes to Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 15
Item 3. Quantitative and Qualitative Disclosure About Market Risk....... 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................... 19
Item 2. Changes in Securities and Use of Proceeds....................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 19
</TABLE>
__________________
* No response to this item is included herein for the reason that it is
inapplicable.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
Assets 1999 1998
-------------------------------------------------------- ------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................................... $ 1,832 $ 1,192
Accounts receivable, net...................................................... 33,868 36,969
Inventories, net.............................................................. 54,296 49,219
Prepaids...................................................................... 3,102 2,820
Other......................................................................... 4,940 4,773
------------ ------------
Total current assets........................................................ 98,038 94,973
------------ ------------
Notes Receivable............................................................... 1,079 1,084
------------ ------------
Long-Term Retainage............................................................ 4,187 3,570
------------ ------------
Property, Plant and Equipment, net............................................. 50,841 50,257
------------ ------------
Other Assets:
Goodwill, net................................................................. 10,829 12,646
Other intangible assets, net.................................................. 7,309 7,541
Deferred financing costs, net................................................. 3,732 4,063
Other......................................................................... 731 514
------------ ------------
Total other assets.......................................................... 22,601 24,764
------------ ------------
Total assets................................................................ $ 176,746 $ 174,648
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------
Current Liabilities:
Accounts payable.............................................................. $ 16,910 $ 14,459
Payroll and payroll related expenses.......................................... 5,458 4,950
Deferred income taxes......................................................... 1,049 1,049
Billings in excess of costs................................................... 6,134 4,983
Accrued warranty.............................................................. 2,475 2,527
Accrued interest.............................................................. 4,501 1,807
Other accrued expenses........................................................ 4,839 5,742
Customer deposits............................................................. 9,274 5,631
Current maturities of long-term debt.......................................... 3,775 4,572
------------ ------------
Total current liabilities................................................... 54,415 45,720
------------ ------------
Long-Term Debt, less current maturities........................................ 139,703 134,216
------------ ------------
Deferred Income Taxes.......................................................... 1,608 1,678
------------ ------------
Commitments and Contingencies
Stockholders' Deficit:
Common stock, $.01 par value, voting (authorized 6,900,000 shares;
issued 6,633,652 shares; outstanding 1,800,000 shares)....................... 18 18
Common stock, $.01 par value, nonvoting (authorized 1,100,000 shares;
issued 1,059,316 shares; outstanding 200,000 shares)......................... 2 2
Paid-in capital............................................................... 2,473 2,473
Accumulated other comprehensive loss (cumulative currency
adjustment).................................................................. (7,273) (2,203)
Retained earnings............................................................. 11,333 18,277
Treasury stock, at cost, voting (4,833,652 shares)............................ (25,524) (25,524)
Treasury stock, at cost, nonvoting (859,316 shares)........................... (9) (9)
------------ ------------
Total stockholders' deficit................................................. $ (18,980) $ (6,966)
------------ ------------
Total liabilities and stockholders' equity.................................. $ 176,746 $ 174,648
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
3
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD ENDED
------------
APRIL 2, APRIL 3,
1999 1998
-------- --------
<S> <C> <C>
Net sales............................................................. $ 44,751 $ 52,161
Cost of sales......................................................... 36,187 40,154
Cost of sales - restructuring charges................................. 348 --
----------- -----------
Total cost of sales.................................................. 36,535 40,154
Gross profit....................................................... 8,216 12,007
Selling, general and administrative expenses.......................... 10,874 10,286
Amortization expense.................................................. 330 104
Restructuring charges................................................. 669 --
----------- -----------
Total operating expenses............................................. 11,873 10,390
Operating income (loss).............................................. (3,657) 1,617
Other income (expense):
Interest expense..................................................... (3,681) (2,910)
Interest income...................................................... 11 233
Other, net........................................................... 142 (26)
----------- -----------
Loss before income taxes........................................... (7,185) (1,086)
----------- -----------
Income taxes.......................................................... (241) (165)
----------- -----------
Net loss........................................................... $ (6,944) $ (921)
----------- -----------
Basic and diluted loss per share:
Net loss............................................................. $ (3.47) $ (0.46)
----------- -----------
Weighted average common shares outstanding............................ 2,000,000 2,000,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD ENDED
------------
APRIL 2, APRIL 3,
1999 1998
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................................... $ (6,944) $ (921)
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization............................................. 1,565 1,257
Amortization of deferred financing costs.................................. 171 96
Gain on sale of assets.................................................... (50) (1)
Deferred taxes......................................................... (70) --
Changes in assets and liabilities:
Accounts receivable..................................................... 122 (4,619)
Inventories............................................................. (7,197) (7,559)
Other current assets.................................................... (449) 1,514
Accounts payable........................................................ 4,269 448
Accrued expenses and payroll and payroll related expenses............... 3,398 5,279
Customer deposits....................................................... 3,643 4,781
Other................................................................... (279) --
----------- -----------
Net cash flows provided by (used in) operating activities.............. (1,821) 275
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures........................................................ (4,647) (2,669)
Proceeds from sale of fixed assets.......................................... 108 75
Payments received on notes receivable....................................... 5 --
Write-down of goodwill for Avemarau Equipamentos Agricolas Ltda.
related to the Brazilian Real devaluation.................................. (1,556) --
Other....................................................................... (344) --
----------- -----------
Net cash flows used in investing activities............................ (6,434) (2,594)
----------- -----------
Cash Flows From Financing Activities:
Payments on former shareholder loans........................................ -- (14,312)
Payments on long-term debt.................................................. (713) (85)
Deferred financing costs.................................................... -- (65)
Net borrowings under line-of-credit agreement............................... 8,097 --
Dividends................................................................... -- (1,791)
Write-down of note payable to former stockholders of Avemarau
Equipamentos Agricolas Ltda. related to the Brazilian Real devaluation..... 1,235 --
Other....................................................................... 276 --
----------- -----------
Net cash flows provided by (used in) financing activities.............. 8,895 (16,253)
----------- -----------
Increase (Decrease) In Cash and Cash Equivalents............................. $ 640 $ (18,572)
Cash and Cash Equivalents, beginning of period............................... 1,192 18,572
----------- -----------
Cash and Cash Equivalents, end of period..................................... $ 1,832 $ 0
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements
5
<PAGE>
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements reflect the consolidated results of
The GSI Group, Inc. and its subsidiaries. All intercompany transactions and
balances have been eliminated.
Certain reclassifications have been made to prior-year amounts to conform
to the current-year presentation.
Beginning with the first quarter of 1998, the Company adopted thirteen week
fiscal quarter periods for operational and financial reporting purposes. The
Company's year end will continue to be December 31.
Financial Information About Industry Segments
The Company operates in primarily one industry segment, which includes the
design, manufacture and sale of agricultural equipment.
Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"), which requires companies to report all changes in equity during a
period, except those resulting from investment by owners and distributions to
owners, in a financial statement for the period in which they are recognized.
The Company has chosen to disclose Comprehensive Income, which encompasses net
income and foreign currency translation adjustments, in the notes to financial
statements for interim periods.
The components of Comprehensive Income for the periods presented are as
follows:
<TABLE>
<CAPTION>
April 2, April 3,
1999 1998
--------------- ---------------
<S> <C> <C>
Net loss........................................... $ (6,944) $(921)
Cumulative translation adjustment.................. (5,070) (32)
--------------- ---------------
Comprehensive loss............................... $(12,014) $(953)
=============== ===============
</TABLE>
2. RESTRUCTURING CHARGES
During the first quarter of 1999, the Company recorded a restructuring
charge of approximately $1.0 million related to cost-cutting measures,
including primarily work force reductions and facility closures. The charges
associated with the reduction in work force include severance costs for
approximately 186 employees, of whom 52% effected cost of goods sold and 48%
effected operating expenses. The charges associated with facility closures
consist of remaining lease obligations and related expenses for the Company's
facilities in Nova Odessa, Brazil and Lenni, Pennsylvania. These lease
obligations and related expenses totaling $148,000 have been included in cost
of goods sold.
6
<PAGE>
3. DETAIL OF CERTAIN ASSETS
<TABLE>
<CAPTION>
AS OF
--------------------------------
APRIL 2, DECEMBER 31,
1999 1998
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Accounts Receivable
Trade receivables............................ $ 35,366 $ 38,764
Allowance for doubtful accounts.............. (1,498) (1,795)
------------- --------------
Total..................................... $ 33,868 $ 36,969
============= ==============
Inventories
Raw materials................................ $ 15,036 $ 11,817
Work-in-process.............................. 16,306 14,330
Finished goods............................... 22,954 23,072
------------- --------------
Total..................................... $ 54,296 $ 49,219
============= ==============
Property, Plant and Equipment
Land......................................... $ 925 $ 865
Buildings and improvements................... 21,047 18,866
Machinery and equipment...................... 43,125 41,237
Office equipment and furniture............... 6,242 5,322
Construction-in-progress..................... 6,628 10,104
------------- --------------
77,967 76,394
Accumulated depreciation..................... (27,126) (26,137)
------------- --------------
Property, plant and equipment, net........... $ 50,841 $ 50,257
============= ==============
Intangible Assets
Goodwill..................................... $ 11,538 $ 13,286
Accumulated amortization..................... (709) (640)
------------- --------------
Total..................................... $ 10,829 $ 12,646
============= ==============
Non-compete agreements....................... $ 8,227 $ 8,227
Accumulated amortization..................... (1,168) (991)
------------- --------------
Total..................................... $ 7,059 $ 7,236
============= ==============
Patents and other intangible assets.......... $ 333 $ 453
Accumulated amortization..................... (83) (148)
------------- --------------
Total..................................... $ 250 $ 305
============= ==============
Deferred Financing Costs
Deferred financing costs..................... $ 4,412 $ 4,612
Accumulated amortization..................... (680) (549)
------------- --------------
Total..................................... $ 3,732 $ 4,063
============= ==============
</TABLE>
7
<PAGE>
4. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid approximately $0.6 and $0.7 million in interest during the
first quarters ended April 2, 1999 and April 3, 1998, respectively. The Company
paid no income taxes during the first quarters of 1999 and 1998.
The following is a cash flow statement that isolates the cumulative
translation adjustment impact from the other components of cash flow. This
presentation is not in compliance with generally accepted accounting principles;
however, management desires to include this information because management
believes this presentation of cash flow information segregates the effect of the
Brazilian Real devaluation from the operating results of the Company.
<TABLE>
<CAPTION>
APRIL 2, APRIL 3,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss................................................................ $(6,944) $ (921)
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization......................................... 1,565 1,257
Amortization of deferred financing costs.............................. 171 96
Gain on sale of assets................................................ (50) (1)
Deferred taxes..................................................... (70) --
Changes in assets and liabilities, net of acquisitions:
Accounts receivable................................................. 2,484 (4,619)
Inventories......................................................... (5,077) (7,527)
Other current assets................................................ (449) 1,514
Accounts payable.................................................... 2,451 448
Accrued expenses and payroll and payroll related expenses........... 3,398 5,279
Customer deposits................................................... 3,643 4,781
Other............................................................... -- --
---------------- ----------------
Net cash flows provided by (used in) operating activities.......... 1,122 307
---------------- ----------------
Cash Flows From Investing Activities:
Capital expenditures.................................................... (2,841) (2,669)
Proceeds from sale of fixed assets...................................... 108 75
Payments received on notes receivable................................... 5 --
Other................................................................... (344) --
---------------- ----------------
Net cash flows provided by (used in) investing activities.......... (3,072) (2,594)
---------------- ----------------
Cash Flows From Financing Activities:
Payments on former shareholder loans.................................... -- (14,312)
Payments on long-term debt.............................................. (713) (85)
Deferred financing costs................................................ -- (65)
Net borrowings under line-of-credit agreement........................... 8,097 --
Dividends............................................................... -- (1,791)
Other................................................................... 276 --
---------------- ----------------
Net cash flows provided by (used in) financing activities.......... 7,660 (16,253)
---------------- ----------------
Cumulative translation adjustment impact (5,070) (32)
---------------- ----------------
Increase (Decrease) In Cash and Cash Equivalents......................... $ 640 $(18,572)
Cash and Cash Equivalents, beginning of period........................... 1,192 18,572
---------------- ----------------
Cash and Cash Equivalents, end of period................................. $ 1,832 $ 0
---------------- ----------------
</TABLE>
8
<PAGE>
5. LONG-TERM DEBT
Long-term debt at April 2, 1999 and December 31, 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Citizens National Bank IRB $ 1,834 $ 1,875
Various noncompete, license and patent agreements........................... 65 65
LaSalle National Bank revolving line of credit.............................. 7,904 --
LaSalle National Bank term note............................................. 31,900 32,500
Clark Products, Inc. promissory note........................................ 386 429
10.25% senior subordinated notes payable.................................... 98,574 98,533
Note payable to former stockholders of Avemarau Equipamentos Agricolas Ltda. 1,533 3,900
Various notes payable....................................................... 816 991
City of Assumption promissory note.......................................... 466 495
----------- -------------
Total............................................................. 143,478 138,788
Less -
Current maturities................................................ (3,775) (4,572)
----------- -------------
Total long-term debt.............................................. $139,703 $134,216
=========== =============
</TABLE>
The indenture governing the Company's senior subordinated notes provides for
certain restrictive covenants. The more significant of the covenants restrict
the ability of the Company to dispose of assets, incur additional indebtedness,
pay dividends or make distributions and other payments affecting subsidiaries.
On February 4, 1999, LaSalle National Bank and the Company amended the
existing credit facility (as amended, the "Credit Facility") to provide for
revolving loans up to a maximum of $27.5 million (limited based on a borrowing
base which includes accounts receivable, inventory and principal reductions of
the LaSalle National Bank term loan) and a $32.5 million term loan. The
borrowings bear interest at a floating rate per annum equal to (at the Company's
option) 1.75% to 3.00% over LIBOR or 0.25% to 0.50% over the banks floating rate
based on the senior debt to EBITDA ratio of the Company. The term loan is
payable in quarterly principal installments of $0.6 million plus interest over
three years and matures on February 1, 2002. As the principal amount
outstanding on the term loan is reduced, the availability on the revolving loans
is increased maintaining a total commitment of $60.0 million under the Credit
Facility. The Credit Facility requires the Company to maintain a certain senior
debt to EBITDA ratio, tangible net worth and certain levels of capital
expenditures. These covenants are retroactive and were reset in February 1999
for December 31, 1998. Borrowings under the Credit Facility are secured by
substantially all of the assets of the Company, including the capital stock of
any existing or future subsidiaries. The Credit Facility expires on February 1,
2002. The Company was in compliance with or obtained waivers for all covenants
under the Credit Facility as of April 2, 1999. LaSalle National Bank and the
Company have agreed in principle to amend certain covenants for the rest of 1999
as well as to provide a seasonal over-advance facility for the second and third
quarters of 1999.
6. COMMITMENTS AND CONTINGENCIES
The Company has two contracts with the Syrian government and one with the
Yemen Company for Industrial Development to manufacture and supervise the
assembly of grain handling systems. Other current assets and long-term
retainage include $6.5 million of retainage withheld until completion of the
projects and the meeting of certain performance criteria. These assets are
secured by letters of credit totaling $6.5 million and are expected to be
collected through the year 2001.
9
<PAGE>
7. BUSINESS SEGMENT
In January 1998, the Company adopted SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information." The Company has no
separately reportable segments in accordance with this standard. Under the
enterprise wide disclosure requirements of SAFS 131, the Company reports net
sales by each group of product lines. Amounts for the first quarters of 1999 and
1998 are as shown in the table below (in thousands).
<TABLE>
<CAPTION>
APRIL 2, APRIL 3,
1999 1998
------------- -------------
<S> <C> <C>
Grain product line....................... $23,019 $25,224
Swine product line....................... 8,836 17,485
Poultry product line..................... 12,824 9,452
------- -------
Net sales........................... $44,751 $52,161
======= =======
</TABLE>
For the first quarters of 1999 and 1998, sales in Brazil were $4.8 and
$0.4 million, respectively. Long-lived assets in Brazil were $4.2 and $0.5
million at April 2, 1999 and April 3, 1998, respectively.
10
<PAGE>
8. GUARANTOR SUBSIDIARIES
The Company's payment obligation under the senior subordinated notes are fully
and unconditionally guaranteed on a joint and several basis by DMC,
GSI/Cumberland de Mexico S. de R.L. de C.V., GSI/Cumberland BV, GSI/Cumberland
SA (Pty) Ltd., GSI/Cumberland Sdn. Bhd. and Cumberland do Brasil Ltda. (the
"Guarantor Subsidiaries"). The Guarantor Subsidiaries are direct wholly-owned
subsidiaries of the Company. The obligations of the Guarantor Subsidiaries
under their guarantees are subordinated to such subsidiaries' obligations under
their guarantee of the Credit Facility.
Presented below is unaudited condensed consolidating financial information for
The GSI Group, Inc. ("Parent Company") and the Guarantor Subsidiaries. In the
Company's opinion, separate financial statements and other disclosures
concerning the Guarantor Subsidiaries would not provide additional information
that is material to investors.
Investments in subsidiaries are accounted for by the Parent Company using the
equity method of accounting. Earnings of subsidiaries are, therefore, reflected
in the Parent Company's investments in and advances to/from subsidiaries'
accounts and earnings. The elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
11
<PAGE>
8. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 2, 1999
(In thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 29 $ 1,803 $ -- $ 1,832
Accounts receivable, net..................................... 36,628 9,487 (12,247) 33,868
Inventories, net.............................................. 36,407 17,889 -- 54,296
Other current assets.......................................... 5,053 2,989 -- 8,042
----------- ------------ ------------ ----------
Total current assets.......................................... 78,117 32,168 (12,247) 98,038
Property, plant and equipment, net ................................ 37,535 13,306 -- 50,841
Goodwill .......................................................... 1,153 9,676 -- 10,829
Investment in and advances to/from subsidiaries ................... 51,386 (24,702) (26,684) --
Other long-term assets ............................................ 9,880 7,158 -- 17,038
----------- ------------ ------------ ----------
Total assets.................................................. $ 178,071 $ 37,606 $ (38,931) $ 176,746
----------- ------------ ------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................. $ 2,842 $ 933 $ -- $ 3,775
Accounts payable.............................................. 12,143 14,248 (9,481) 16,910
Accrued liabilities .......................................... 29,549 4,181 -- 33,730
----------- ------------ ------------ ----------
Total current liabilities .................................... 44,534 19,362 (9,481) 54,415
Long-term debt .................................................... 136,468 3,235 -- 139,703
Other long-term liabilities ....................................... ----------- ------------ ------------ ----------
Total liabilities............................................. 181,002 24,205 (9,481) 195,726
Stockholders' equity:
Common stock ................................................. 20 17,816 (17,816) 20
Additional paid-in capital 2,473 -- -- 2,473
Accumulated other comprehensive income........................ -- (7,273) -- (7,273)
Retained earnings (deficit)................................... 20,109 2,858 (11,634) 11,333
Treasury stock, at cost....................................... (25,533) -- -- (25,533)
----------- ------------ ------------ ----------
Total stockholders' equity (deficit).......................... (2,931) 13,401 (29,450) (18,980)
----------- ------------ ------------ ----------
Total liabilities and stockholders' equity ........................ $ 178,071 $ 37,606 $ (38,931) $ 176,746
=========== ============ ============ ==========
</TABLE>
12
<PAGE>
8. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 2, 1999
(In thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.......................................... $37,343 $ 9,806 $ (2,398) $ 44,751
Cost of sales...................................... 29,691 8,336 (1,492) 36,535
----------- -------------- ------------ ------------
Gross profit.................................. 7,652 1,470 (906) 8,216
Selling, general and administrative expenses....... 8,493 3,380 -- 11,873
----------- -------------- ------------ ------------
Operating income (loss)....................... (841) (1,910) (906) (3,657)
Interest expense................................... (3,603) (78) -- (3,681)
Other income (expense)............................. 114 39 -- 153
----------- -------------- ------------ ------------
Income (loss) before income taxes.................. (4,330) (1,949) (906) (7,185)
Provision (benefit) for income taxes............... 18 (259) -- (241)
----------- -------------- ------------ ------------
Income (loss) before equity in income of
consolidated subsidiaries....................... (4,348) (1,690) (906) (6,944)
Equity in income of consolidated subsidiaries...... (1,690) -- 1,690 --
----------- -------------- ------------ ------------
Net income (loss).................................. $(6,038) $ (1,690) $ 784 $ (6,944)
=========== ============== ============ ============
</TABLE>
13
<PAGE>
8. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED APRIL 2, 1999
(In thousands)
<TABLE>
<CAPTION>
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities.................... $ 601 $ (2,422) $ -- $ (1,821)
---------- ---------- -------------- ------------
Cash flows from investing activities:
Capital expenditures................................. (4,085) (562) -- (4,647)
Other................................................ (1,967) 180 -- (1,787)
---------- ---------- -------------- ------------
Net cash provided by (used in) investing activities.. (6,052) (382) -- (6,434)
---------- ---------- -------------- ------------
Cash flows from financing activities:
Advances (to) from affiliates........................ (2,813) 2,813 -- --
Net borrowings (payments) on debt.................... 6,403 981 -- 7,384
Other................................................ 1,511 -- -- 1,511
----------- ---------- -------------- ------------
Net cash provided by (used in) financing activities.. 5,101 3,794 -- 8,895
----------- ---------- -------------- ------------
Change in cash and cash equivalents..................... (350) 990 -- 640
Cash and cash equivalents, beginning of period.......... 379 813 -- 1,192
----------- ---------- -------------- ------------
Cash and cash equivalents, end of period................ $ 29 $ 1,803 -- $ 1,832
=========== ========== ============== ============
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of operations
of the Company should be read in conjunction with the Consolidated Financial
Statements and the notes included in Item 1 hereof.
GENERAL
The Company is a leading manufacturer and supplier of agricultural equipment
and services worldwide. The Company's grain, swine and poultry products are used
by producers and purchasers of grain, and by producers of swine and poultry.
Fluctuations in grain and feed prices directly impact sales of the Company's
grain equipment. Because the primary cost of producing swine and poultry is the
cost of the feed grain consumed by animals, fluctuations in the supply and cost
of grain to users of the Company's products in the past has impacted sales of
the Company's swine and poultry equipment. The Company believes that its
diversified product offerings mitigate some of the effects of fluctuations in
the price of grain since the demand for grain storage, drying and handling
equipment tends to increase during periods of higher grain prices, which
somewhat offsets the reduction in demand during such periods for the Company's
products by producers of swine and poultry. However, the Company believes that
low swine prices and environmental regulations will for the foreseeable future
continue to effect negatively the sales of its swine equipment, and, therefore,
its overall results of operations and financial condition.
Do to the seasonality of the Company's markets, the Company typically
experiences a loss in the first quarter. However, as a result of less than
anticipated sales in the first quarter of 1999 and forecasted continued weakness
in the sale of swine equipment throughout the remainder of the year, management
implemented a restructuring program in the first quarter of 1999. In connection
with the restructuring, the Company recorded a charge of approximately $1.0
million in the first quarter of 1999, the majority of which was for severance
costs.
Management believes that the restructuring program will significantly reduce
the Company's cost of operations and allow the Company to maintain its
competitiveness at lower sales levels. Management believes that the
restructuring will reduce the Company's operating costs by at least $20 million
on an annual basis, compared to operating costs incurred in the first quarter of
1999 prior to the restructuring. Certain portions of the Company's business are
experiencing increased sales activity over year ago levels. Most notably, both
the Company's domestic grain bin business and domestic poultry business
experienced record sales levels in the first quarter. Further, the Company's
Brazilian operation has experienced an increase in shipments (in Brazilian Real
terms) in the first quarter of 1999 compared with the first quarter of 1998.
Management believes that the weaker Real is providing increased export
opportunities to Brazilian producers of poultry and swine, and, as a result,
these producers are expanding their production capacity. Management believes
that its Malaysian operation will post higher sales volume in 1999, compared
with 1998 levels. As a result of the reduced cost structure and the anticipated
seasonal sales increases in the second and third quarters, management does not
believe that the financial performance experienced by the Company in the first
quarter of 1999 will be indicative of the Company's performance for the
remainder of the year.
Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers purchasing equipment during prime construction periods in the spring,
summer and fall. The Company's net sales and net income have historically been
lower during the first and fourth fiscal quarters as compared to the second and
third quarters.
In June 1998, the Company acquired a manufacturer and supplier of poultry
feeding equipment in Brazil. In the first quarter, the Brazilian Real
experienced a devaluation (1.21 Brazilian Reals/U.S. Dollar at December 31, 1998
as compared to 1.66 Brazilian Reals/U.S. Dollar at May 12, 1999). The effect of
the devaluation was a reduction in the Company's stockholders' equity and
results of operations. Further deterioration in the Brazilian economy could
negatively effect the performance of the Company's Brazilian operation.
The Company's international sales have historically comprised a significant
portion of net sales. In the first quarters of 1999 and 1998, the Company's
international sales accounted for 46% and 36% of net sales, respectively.
Although the Company's sales are primarily denominated in U.S. dollars, the
production costs, profit margins and
15
<PAGE>
competitive position of the Company are affected by the strength of the U.S.
dollar relative to the strength of the currencies in countries where its
products are sold. International operations generally are subject to various
risks that are not present in domestic operations, including restrictions on
dividends, restrictions on repatriation of funds, unexpected changes in tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations, political instability, fluctuations in currency exchange rates,
reduced protection for intellectual property rights in some countries, seasonal
reductions in business activity and potentially adverse tax consequences, any of
which could adversely impact the Company's international operations. For
example, the financial crises in many countries in Southeast Asia have caused
some agricultural producers to cancel orders or have led to the inability of
such producers to secure necessary lines of credit to buy agricultural
commodities and/or equipment. While this trend has not led to material
cancellations of orders by the Company's customers, the Company believes that it
has contributed to a decline in the number of new orders that the Company has
received from customers located in such regions.
The primary raw materials used by the Company to manufacture its products are
steel and polymers. Fluctuations in the prices of steel and, to a lesser extent,
polymer materials can impact the Company's cost of sales. During the first
quarter of 1999, the Company continued to benefit from modest price decreases in
steel and polymers. There can be no assurances that these price decreases will
continue or that prices for these materials will not increase in the future.
The Company currently operates as a subchapter S corporation and, accordingly,
is not subject to federal income taxation for the periods for which financial
information has been presented herein. Because the Company's stockholders are
subject to tax liabilities based on their pro rata shares of the Company's
income, the Company's policy is to make periodic distributions to its
stockholders in amounts equal to such tax liabilities.
RESULTS OF OPERATIONS
Quarter Ended April 2, 1999 Compared to Quarter Ended April 3, 1998
Net sales decreased 14.2% or $7.4 million to $44.8 million in the first
quarter of 1999 from $52.2 million in the same period of 1998. This decrease
was primarily driven by the reduced demand for hog equipment caused by
historically low swine prices. This decrease was partially offset by $4.4
million of increased sales from the Company's Brazilian operation.
Gross profit decreased to $8.2 million in the first quarter of 1999 or 18.4%
of net sales from $12.0 million or 23.0% of net sales in the same period of
1998. This decrease was caused by reduced sales, shipment of a low-margin
international project and restructuring charges. The restructuring charges
relate primarily to severance costs for terminated employees and the expenses
related to shutting down two manufacturing facilities.
Operating expenses increased 14.3% or $1.5 million to $11.9 million in the
first quarter of 1999 from $10.4 million in the same period of 1998. Of the
$1.5 million increase, $0.5 million was from the Company's Brazilian operation
and $0.7 million resulted from the restructuring charges for severance costs for
terminated employees.
Operating income decreased from $1.6 million in the first quarter of 1998 to
an operating loss of $3.7 million in the first quarter of 1999. This decrease
is attributable to the reduction in sales, reduced margins and an increase in
operating expenses.
Interest expense increased $0.8 million for the first quarter of 1999. This
increase was primarily due to the interest expense on the term note issued to
finance, among other things, the acquisition of the Company's Brazilian
operation.
Net loss increased $6.0 million to a loss of $6.9 million for the first
quarter of 1999 from a loss of $0.9 million in the same period of 1998.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded capital expenditures, working capital
requirements, debt service, stockholder dividends and stock repurchases from
cash flow from its operations, augmented by borrowings made under various credit
agreements and the sale of the Company's 10 1/4% senior subordinated notes.
The Brazilian Real experienced a 43% devaluation during the first quarter of
1999, from 1.21 Reals/U.S. Dollar at December 31, 1998 to 1.73 Reals/U.S. Dollar
at April 2, 1999. The impact of this devaluation on the balance sheet was to
decrease the Company's assets by approximately $8.4 million and decrease
liabilities by approximately $3.4 million, resulting in an approximate $5.0
million decrease in stockholders' equity.
The Company's working capital requirements for its operations are seasonal,
with investments in working capital typically building in the second and third
quarters and then declining in the first and fourth quarters. As of April 2,
1999, the Company had $43.6 million of working capital, a decrease of $5.6
million from working capital as of December 31, 1998. The decrease in working
capital was primarily due to increased customer deposits, accrued interest and
accounts payable partially offset by an increase in inventory.
Operating activities used $1.8 million and generated $0.3 million in cash flow
in the first quarter of 1999 and 1998, respectively. This $2.1 million decrease
in cash flow was primarily the result of a decrease in net income, other current
assets and accrued expenses of $9.9 million, partially offset by decreases in
accounts receivable and increases in accounts payable of $8.6 million, compared
to the first quarter of 1998.
Cash used in investing activities in the first quarter of 1999 consisted
primarily of $4.6 million of capital expenditures, $2.8 million of which was for
the purchase of machinery and equipment and $1.8 million of which was the impact
of the Brazilian Real devaluation on property, plant and equipment. Cash used
in investing activities in the first quarter of 1998 was $2.6 million. The cash
was used primarily for machinery and equipment purchases.
Cash provided by financing activities in the first quarter of 1999 consisted
primarily of $8.1 million from net borrowings under the line-of-credit facility
and a $1.2 million impact relating to the Brazilian Real devaluation. Cash used
in financing activities in the first quarter of 1998 was $16.3 million. The
cash was used primarily to retire former stockholder debt of $14.3 million and
to pay dividends of $1.8 million for stockholder tax liabilities.
During the first quarter of 1999, the Company's Credit Facility was amended to
provide for a $27.5 million revolving loan facility and a $32.5 million term
loan. As a part of this amendment, the financial covenants were eased and the
amortization of the term loan was reduced from $5.0 million per year to $2.4
million per year. The Company was in compliance with or obtained waivers for
all covenants under the Credit Facility as of April 2, 1999. LaSalle National
Bank and the Company have agreed in principle to amend certain covenants for the
rest of 1999 as well as to provide a seasonal over-advance facility for the
second and third quarters of 1999.
The Company believes that existing cash, cash flow from operations and
available borrowings under the proposed amendments to the Credit Facility will
be sufficient to support its working capital, capital expenditures and debt
service requirements for the foreseeable future.
YEAR 2000 ISSUES
The year 2000 issue is the result of computer programs using two digits rather
than four to define the applicable year. Such software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the Company's
operations (the "year 2000" or "Y2K" issue). If the Company or its significant
suppliers or customers fail to make necessary modifications, conversions and
contingency plans on a timely basis, the year 2000 issue could have a material
adverse effect on the Company's business, operations, cash flow and financial
condition. However, the effect cannot be quantified at this time because the
Company cannot accurately estimate the magnitude, duration or ultimate impact of
noncompliance by suppliers, customers and third parties that have no direct
relationship to the Company. The Company believes that its competitors face a
similar risk.
17
<PAGE>
In 1997, the Company began identifying non-compliant software and identified
three categories of software and systems that require attention:
(1) information technology ("IT") systems, such as mainframes, PCs,
networks and production control systems
(2) non-IT systems, such as equipment, machinery, climate control and
security systems, which may contain microcontrollers with embedded
technology, and
(3) supplier and customer IT and non-IT systems
The Company intends to modify or replace non-compliant IT and non-IT software
and systems. The failure to address these systems issues on a timely basis may
result in a disruption of the manufacturing process and the Company's ability to
efficiently conduct business. Currently, the Company's compliance projects are
at different phases of completion. Domestic IT system projects are
approximately 90% complete and domestic non-IT system projects are approximately
75% complete. All IT and non-IT system projects for the Company's international
subsidiaries are 100% complete. The Company's current target is to complete its
domestic IT and non-IT system projects by June 30, 1999. The Company has not
fully assessed the cost associated with these compliance projects. However,
based upon current information, the Company expects these costs to range from
$0.3 to $0.4 million.
The Company is also assessing the compliance of its major customers and
suppliers. The Company is in the process of conducting formal communications
with its significant suppliers and customers to determine the extent to which it
may be affected by those third parties' Y2K compliance plans. The Company
believes that customers and suppliers present the area of greatest risk in part
because of the Company's limited ability to influence actions of third parties
and in part because of the Company's inability to estimate the level and impact
of noncompliance by these third parties. Issues with a significant portion of
the Company's customers in processing and paying invoices could impact the
Company's cash flows and financial liquidity. A prolonged interruption in the
supply of essential services or products could adversely effect the Company's
operations and ability to generate revenues. In the event that the Company
identifies potential problems with a service provider or supplier, it will
attempt to obtain services and products from other available sources.
Finally, the Company is developing contingency plans that assume some
estimated level of noncompliance by, or business disruption to, suppliers and
customers. The contingency plans will include development of the capabilities
to process critical transactions manually. The Company intends to have
contingency plans finalized by the third quarter of 1999.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations or financial condition during recent periods.
Forward-Looking Statements
Certain statements contained in this Report are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are statements other than historical information or statements of
current condition. Some forward-looking statements may be identified by use of
terms such as "believes," "anticipates," "intends," or "expects." Forward-
looking statements are subject to risks, uncertainties and other factors that
could cause actual results to differ materially from future results expressed or
implied by such statements, and such statements should not be regarded as a
representation the stated objectives will be achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with adverse changes in
interest rates and foreign currency exchange rates, but does not hold any market
risk sensitive instruments for trading purposes. Principal exposed to interest
rate risk is limited to $39.8 million in variable rate debt. The Company
measures its interest rate risk by estimating the net amount by which potential
future net earnings would be impacted by hypothetical changes in market interest
rates related to all interest rate sensitive assets and liabilities.
The Company mitigates its foreign currency exchange rate risk principally by
establishing local production facilities in the markets it serves and by
invoicing customers in the same currency as the source of the products. The
Company also monitors its foreign currency exposure in each country and
implements strategies to respond to changing economic and political
environments. The Company's exposure to foreign currency exchange rate risk
relates primarily to the financial position and the results of operations of its
Brazilian subsidiary. The Company's exposure to such exchange rate risk as it
relates to the Company's financial position and results of operations would be
adversely impacted by further devaluation of the Brazilian Real per U.S. dollar.
These amounts are difficult to accurately estimate due to factors such as the
inherent fluctuation of inter-company account balances, balance sheet accounts
and the existing economic uncertainty and future economic conditions in the
international marketplace.
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<PAGE>
PART III
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company which, in the
opinion of management, would have a material adverse affect on the Company's
business, financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
A list of the exhibits included as part of this Form 10-Q is set forth in the
Index to Exhibits that immediately precedes such exhibits, which is incorporated
herein by reference.
(B) REPORTS ON FORM 8-K:
The GSI Group, Inc. did not file any Current Reports on Form 8-K during its
fiscal quarter ended April 2, 1999.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
The GSI Group, Inc.
By: /s/ John W. Funk
--------------------------------
John W. Funk, Director, Chief
Financial Officer, Secretary and
General Counsel (Authorized
Signatory and Principal Financial
Officer)
Date: May 17, 1999
20
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT DESCRIPTION
- ---------- --------------------
<S> <C>
10.1 Amended and Restated Stock Restriction and Buy-Sell Agreement dated March 18, 1999 by and
among Jorge Andrade, Howard Buffett, John Funk, Craig Sloan and The GSI Group, Inc.
10.2 Amended and Restated Employment Agreement dated March 18, 1999 between The GSI Group, Inc.
and Jorge Andrade.
10.3 Amended and Restated Employment Agreement dated March 18, 1999 between The GSI Group, Inc.
and Howard Buffett.
10.4 Amended and Restated Employment Agreement dated March 18, 1999 between The GSI Group, Inc.
and John Funk.
10.5 Amended and Restated Employment Agreement dated March 18, 1999 between The GSI Group, Inc.
and Craig Sloan.
10.6 Stockholder Agreement dated March 18, 1999 between The GSI Group, Inc., Jorge Andrade,
Howard Buffett, John Funk and Craig Sloan
10.7 Amended and Restated Stock Restriction and Buy Sell Agreement - Non Voting dated as of March
31, 1999 by and among The GSI Group, Inc., Jorge Andrade, Howard Buffett, John Funk, Craig
Sloan and the nonvoting shareholders of The GSI Group, Inc.
27.1 Financial Data Schedule
</TABLE>
____________
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<PAGE>
Exhibit 10.1
AMENDED AND RESTATED STOCK RESTRICTION AND BUY SELL AGREEMENT
This agreement is made this 18th day of March, 1999 by and among The GSI Group,
Inc., a Delaware corporation ("GSI" or the "Company"), Jorge Andrade, an
individual residing at 3209 Falcon Point, Springfield, Illinois 62707
("Andrade"), Howard Buffett, an individual residing at 407 Southmoreland,
Decatur, Illinois 62521 ("Buffett"), John Funk, an individual residing at 152
Southmoreland, Decatur, Illinois 62521 ("Funk"), and Craig Sloan, an individual
residing at #10 DuClaire, Decatur, Illinois 62521 ("Sloan")
This agreement and the shareholders agreement entered into on the date hereof
replace all prior stock restriction and buy sell agreements and stock
restriction and cross purchase agreements and any amendments thereto relating to
the parties hereto and their voting stock.
The parties intend for this agreement to address the rights the stockholders and
the corporation have upon the death, disability or termination of employment
from GSI of a stockholder. The shareholders agreement addresses corporate
governance matters that were contained previously in the stock restriction and
buy sell agreement.
This agreement is written in plain English instead of complicated legalese to
make sure the stockholders and their families and advisors can read and
understand its provisions. The phrase "stockholder" as used in this agreement
refers to each of Andrade, Buffett, Funk and Sloan as long as he owns stock and,
collectively, the "stockholders". Reference to "stock" is to shares of GSI
voting and nonvoting stock. The phrase "event" refers to the death, permanent
disability or termination of employment (whether by firing or resignation) of a
stockholder.
It is our primary goal for all parties to this agreement to be treated fairly
and with respect regarding the matters addressed herein. We would also like to
avoid disputes arising out of confusion or lack of clarity.
1. Share Price. We agree that the price per share of the voting common stock
-----------
of GSI is $37.50 for all purchases and sales of stock except as specifically
provided for in paragraph 6(a) below. We will not change this price until March
2000 unless we all agree in writing between now and then that the price should
be adjusted. The price may be changed in March 2000 and every March thereafter
(but at no other time) if Sloan plus all but one of the other stockholders agree
to change it after considering GSI's prior year's
1
<PAGE>
performance, valuations of our competitors, future prospects for the business
and any other factors we think are relevant.
2. Death. If a stockholder dies, the life insurance owned by the trust that we
-----
established in 1996 will pay the surviving stockholders the death benefit. Each
of the surviving stockholders must use the death benefit he receives to purchase
his pro rata share of the dead stockholder's shares from his estate. This will
be true even if a stockholder is not an employee of GSI when he dies. This
purchase will take place within 30 days after the surviving stockholders receive
the payment from the insurance company of the life insurance proceeds and will
be all cash.
a. Life Insurance Proceeds Not Enough to Buy All Stock. If the life
---------------------------------------------------
insurance proceeds aren't enough to purchase all the dead stockholder's GSI
stock, each of the surviving stockholders will have the right to buy from the
estate up to his pro rata portion (based on those electing to purchase) of the
remaining stock owned by the estate. The surviving stockholders will have three
months after the payment by the insurance company of the life insurance proceeds
to buy and pay for the additional stock. GSI will have the right to buy any
stock not purchased by the surviving stockholders.
After subtracting the stock that is paid for with the insurance proceeds,
no less than the first 30% in value of the dead stockholder's remaining GSI
stock must be paid for in cash, with the balance in the form of a promissory
note. The form of the note is attached to this agreement as Exhibit A. The
note will be payable in monthly installments over a five year period at an
annual interest rate equal to LaSalle National Bank's prime rate at the time of
the purchase.
Any stock purchased by means of delivering a promissory note shall be
pledged to the dead shareholder's estate as collateral for payment of the note.
This means that if the surviving stockholder fails to make the note payments on
time, the surviving stockholder will forfeit to the estate the additional stock
that was purchased from the estate. The purchaser of stock will agree to sign
any documentation necessary to perfect the pledge and to deposit the share
certificates with a third party escrow agent.
b. Life Insurance Proceeds More Than Enough to Buy Stock. If the life
-----------------------------------------------------
insurance proceeds are more than the total value of the dead shareholder's
stock, the surviving stockholders will contribute as capital to GSI the amount
left over. If GSI or a stockholder has purchased some or all of the dead
stockholder's stock prior to his death through delivery of a promissory note,
the excess life insurance proceeds will be used to prepay the note.
c. Death of Sloan. If Sloan dies and, after the stockholders purchase his
--------------
stock using the proceeds from the life insurance, Sloan's estate or heirs (the
"Estate") still own over $10 million worth of stock, the Estate will have the
right to sell GSI to the highest bidder after 18 months after Sloan's death.
The surviving stockholders will be allowed to purchase the remaining stock
during this 18 month period for no less than 80% cash at
2
<PAGE>
closing with the balance payable pursuant to a promissory note payable in equal
monthly installments over a five year period at an interest rate of the prime
rate of LaSalle National Bank at the date of Sloan's death. The remaining stock
will be pledged to the Estate pending the payment in full of this note. The
Estate will be allowed to sell the remaining stock during this 18 month period
but GSI and the remaining stockholders will be allowed to match the terms of the
sale but shall not be required to pay more than 80% of the purchase price in
cash with the balance financed as described above. If the Estate obtains
identical offers from bona fide purchasers, GSI shall be allowed to elect the
purchaser of stock.
3. Permanent Disability. If a stockholder (other than Sloan) becomes
--------------------
permanently disabled while still an employee, the remaining stockholders will
have the right to buy from the disabled stockholder up to their respective pro
rata portion of the disabled stockholder's stock. The remaining stockholders
will have three months after the stockholder is determined to be permanently
disabled to buy and pay for the stock. GSI will have the right to buy any stock
not purchased by the remaining stockholders.
The first 10% in value of stock purchased must be in the form of cash at
closing. The remaining 90% may be in the form of the note attached to this
agreement as Exhibit A. The note will be payable in monthly installments over a
ten year period at an annual interest rate equal to LaSalle National Bank's
prime rate at the time of the purchase.
Any stock purchased by means of delivering a promissory note shall be
pledged to the disabled shareholder as collateral for payment of the note. This
means that if the remaining stockholder fails to make the note payments on time,
the remaining stockholder will forfeit to the disabled stockholder the stock
that was purchased from the disabled stockholder. The purchaser of stock will
agree to sign any documentation necessary to perfect the pledge and to deposit
the share certificates with a third party escrow agent.
a. Determining When a Stockholder is Permanently Disabled. A stockholder
------------------------------------------------------
is permanently disabled if he hasn't been able to perform his duties as an
employee, officer and/or director of GSI for 6 consecutive months. If we can't
agree about whether a stockholder is permanently disabled, the stockholder will
be considered to be permanently disabled when at least two out of three medical
doctors (one chosen by GSI, one chosen by the stockholder and one chosen by the
two doctors if they disagree) agree that the stockholder is physically or
mentally incapable on a permanent basis of performing the duties which he is
currently assigned by GSI under the terms of his Employment Agreement. GSI and
the stockholder must choose their doctors in a timely manner. The doctors named
by GSI and the stockholder must be considered experts in the disability that the
stockholder has.
4. Termination of Employment. If a stockholder (other than Sloan) is fired or
-------------------------
resigns from GSI, the remaining stockholders will have the right to buy from the
exiting stockholder up to their respective pro rata portion of the exiting
stockholder's stock. The
3
<PAGE>
remaining stockholders will have three months after the stockholder leaves GSI
to buy and pay for the stock. GSI will have the right to buy any stock not
purchased by the remaining stockholders.
The first 30% in value of stock purchased must be in the form of cash at
closing (unless a stockholder is terminated "for cause", and then it's the first
10%). The balance may be in the form of the note attached to this agreement as
Exhibit A. The note will be payable in monthly installments over a five year
period (ten year period if the termination is "for cause") at an annual interest
rate equal to LaSalle National Bank's prime rate at the time of the purchase.
Any stock purchased by means of delivering a promissory note shall be
pledged to the exiting shareholder as collateral for payment of the note. This
means that if a remaining stockholder fails to make the note payments on time,
the remaining stockholder will forfeit to the exiting stockholder the stock that
was purchased from the exiting stockholder. The purchaser of stock will agree
to sign any documentation necessary to perfect the pledge and to deposit the
share certificates with a third party escrow agent.
The definition of "for cause" termination shall be the definition from the
stockholder's employment agreement.
If Sloan quits, is fired or becomes permanently disabled, the other
stockholders and GSI will have the right to buy all his stock but if they choose
not to, the stockholders agree to sell GSI to the highest bidder within 18
months of the event.
5. Right of First Refusal. If a stockholder receives a bona fide offer to sell
----------------------
all or any portion of his stock to a third party, he must notify the other
stockholders and GSI in writing of all of the terms of the offer. The other
stockholders and GSI will have the right to buy his stock at the lesser of the
Purchase Price or the price of the bona fide offer. If the other stockholders
or GSI want to purchase his stock, they must do it within sixty days from the
date they receive notice of the offer. The terms of the purchase will be cash
at closing for the first 30% in value of the stock being sold and, for the
balance, delivery of a promissory note in the form of the note attached to this
agreement as Exhibit A. The note will be payable in monthly installments over a
five year period at an annual interest rate equal to LaSalle National Bank's
prime rate at the time of the purchase. GSI has the first right to purchase,
then the other stockholders. If GSI or the other stockholders want to buy the
stock, the stockholder must sell to them within the 60 day period. If they
don't buy all of the offered stock in the 60 day period, the stockholder can
sell his stock to the person who made the bona fide offer but at the same price
and other terms as set forth in the original offer. This purchase must take
place within 60 days after the other stockholders and GSI choose not to or fail
to purchase the stock. If it doesn't, the bona fide offer is null and void.
4
<PAGE>
The stockholders cannot sell their stock under this Section to anyone who would
cause GSI to lose its S election.
If the stock is purchased by someone not a party to this agreement, that person
must become a party to this agreement at the time of his purchase of stock. The
proposed new purchaser must also do whatever is necessary to maintain GSI's S
election. If he doesn't, he cannot buy the stock.
Sloan can only sell voting shares under this section if, after giving effect to
such sale, he would still own a majority of the voting stock of GSI.
If on the date of an event (other than a "for cause" termination), GSI has
outstanding debt that is guaranteed personally by Sloan, Andrade and Funk, each
of the remaining stockholders who has personally guaranteed debt agrees to use
good faith efforts to obtain the release of the selling stockholder's personal
guaranty, but shall not be required to offer a pledge of his residence or his
spouse's guaranty to secure such release. The ability to secure the release
will not effect GSI's option to purchase the stockholder's stock.
6. GSI's Right to Purchase Stock. GSI should not buy more stock than it is
------------------------------
able to afford. We all agree that GSI can only afford to buy stock when the
purchase price per share is equal to or less than five times GSI's trailing four
quarters EBITDA less debt divided by total shares outstanding: ((5 x EBITDA)
- - debt)/total shares outstanding. The average balance on any lines of credit
over the trailing four quarters shall be included in debt.
The term "EBITDA" shall mean, for the period of four consecutive fiscal quarters
most recently ended on or prior to the date of determination, GSI's earnings
before interest, taxes, depreciation and amortization, and notwithstanding any
non-cash charge for increase in value of stock appreciation rights (or similar
rights), but accounting for same as a charge against earnings when paid,
determined in accordance with GAAP. Prior to the first anniversary of the
consummation of an acquisition, the historical financial results of the acquired
entity or assets for the relevant period will be included for purposes of
calculating EBITDA (but without any adjustment to such historical results for
cost savings or other synergies).
Because of certain restrictions in the high yield indenture, GSI will only be
allowed to consummate its purchase of stock at the end of any calendar year
(although the decision to purchase (which is binding on GSI) may be made at any
time, subject to GSI being able to afford such purchase). If GSI has the
opportunity to buy stock from more than one stockholder, it must exercise its
options on a pro rata basis. This means that if two stockholders become
disabled in one year and one's stock is worth $10 million and the other's is
worth $5 million and the high yield indenture restricts the corporation's
purchases to $6 million, GSI, if it chooses to exercise any options, would
purchase $4 million of stock from the first stockholder and $2 million from the
second stockholder at the end of that year.
5
<PAGE>
a. What Happens if an Event Takes Place When GSI Can't Afford to Purchase
----------------------------------------------------------------------
Stock. If a stockholder experiences an event during a period when GSI can't
- -----
afford to purchase stock, GSI will automatically begin (without any need for
approval or any other action) to pay the stockholder or his representative an
amount equal to what was paid as his salary as originally set forth in his June
6, 1996 employment agreement on a monthly basis until all his stock is
purchased. If, three years after the event, GSI still can't afford to purchase
the stock, the amount paid pursuant to the previous sentence will double until
all his stock is purchased. These payments will continue until all of the
affected stockholder's stock has been purchased. Such payments do not in any
way reduce the purchase price payable to the stockholder or his estate for his
stock, and are made without any obligation on the part of the affected
stockholder or his estate (including without limitation any performance of
services). These payments will be made solely in consideration of the delay in
GSI's ability to purchase the stockholder's stock. For GSI to purchase stock
during the period when it can't afford to, all the stockholders must agree. If
three years after the event GSI still hasn't purchased all the stockholder's
stock, the purchase price of the remaining shares will be allowed to adjust to
the then current purchase price but only if it is greater than the purchase
price in effect at the time of the event. This is the only way that the
purchase price of shares of stock changes for a stockholder after an event takes
place for such stockholder. Once GSI can afford to purchase stock, paragraph b
shall apply.
b. What Happens When GSI Can Afford to Purchase Stock. Whenever GSI can
--------------------------------------------------
afford to purchase stock, the decision as to whether GSI will purchase stock
will be made by the affirmative vote of any one of the four stockholders or his
representative at a duly called and held meeting of stockholders, which all of
the stockholders agree to call upon any one stockholder's or his
representative's request. During this period, if GSI exercises its option, it
must purchase all of a stockholder's stock, unless GSI and the holder of the
stock agree otherwise.
7. Rights of Stockholder After Event Takes Place. As long as a stockholder or
---------------------------------------------
his estate, heirs or legal representatives own stock, such stockholder or his
estate, heirs or legal representative shall be allowed one seat on the board of
directors regardless of the number of heirs. Once all his stock is purchased
and paid for (either by delivery of cash or a note as provided for in this
agreement), he will resign from the board. As long as a non employee director
is on the board, the board will hold regular monthly meetings to discuss the
operations and financial condition of the business. On the date of the event,
the affected shareholder will resign from any offices he holds with GSI or any
related entity and will resign as a director from any related entity.
8. Follow Along Rights and Obligations. Stockholders owning greater than 50%
-----------------------------------
of the voting stock of GSI can sell all their stock as long as the other
stockholders have the right to sell their stock too on the same terms and
conditions. Stockholders owning greater than 50% of the voting stock of GSI can
sell all their stock and require the other stockholders to sell their stock on
the same terms and conditions. Stockholders owning
6
<PAGE>
greater than 50% of the voting stock of GSI can also cause GSI to register their
shares under the Securities Act of 1933, as amended.
9. Prohibition on Transfer. A stockholder cannot sell, pledge, hypothecate,
-----------------------
transfer, encumber, assign, give away or in any way dispose of his shares of
stock nor shall such shares of stock be transferrable, voluntarily or
involuntarily, by operation of law or otherwise, except in strict compliance
with the covenants, terms and conditions set forth in this Agreement and the
Contribution Agreement dated June 6, 1996 between Sloan, Buffett, Funk and
Andrade. Any attempt to do so in violation of this Agreement shall not be
recognized by the Corporation and shall be null and void and of no force or
effect whatsoever.
10. Closing and Sale. Upon the closing of the sale and purchase, the selling
----------------
stockholder, GSI and the remaining stockholders will sign and deliver to each
other the various documents, which shall be required to complete the
transactions.
11. Miscellaneous.
-------------
a. Termination of this Agreement. This agreement will terminate if any of
-----------------------------
the following events happen: i. adoption of a plan of dissolution of GSI, as
long as the plan is carried out diligently and all assets remaining after
payment of or provision for liabilities are distributed to the stockholders
within a reasonable time thereafter; or ii. all stockholders agree in writing,
or iii. permanent cessation of the business of GSI, or iv. sale of all or
substantially all of the assets or business of GSI, or v. a single stockholder
becomes the legal and beneficial owner of all the issued and outstanding shares,
or vi. a public offering takes place. Termination of this agreement for any
reason will not affect any right or remedy existing before the effective date of
the termination.
b. Piggyback Registration Rights. If GSI wants to make a public offering
-----------------------------
of shares, each stockholder will be notified and will be allowed to have
included in the offering as many of his shares as the underwriter of the
offering shall permit at no cost or expense to the stockholder. If the
underwriter permits less than all of the shares to be registered, the number of
shares allowed to be registered by each stockholder will be reduced on a pro
rata basis. GSI will furnish each stockholder with at least thirty days prior
written notice of the filing of the initial registration statement and any
future registration statements. A stockholder must notify GSI in writing within
twenty days after his receipt of the notice if he wants to participate in the
offering.
c. Entire Agreement. Except for the Contribution Agreement and the Stock
----------------
Purchase Agreement dated the date hereof among the parties hereto, the terms,
conditions and covenants contained herein are the full and complete terms of the
agreement between the parties hereto regarding the subject matter hereof and
supersede any and all prior agreements by and among GSI and the stockholders
concerning the ownership, sale or other disposition of the shares. No
alterations, amendments or modifications of this agreement (other than Section
1, which has its own rules) shall be binding on the parties
7
<PAGE>
hereto unless reduced to writing and approved by Sloan and, at a minimum, all
but one of the other stockholders. No alterations, amendments or modifications
to this agreement shall effect a stockholder after that stockholder experiences
an event.
d. Binding Effect. This agreement shall be binding on the parties hereto
--------------
and their respective heirs, legal representatives, successors and assigns. All
persons bound by this agreement shall execute the instruments and perform the
acts as may be reasonably necessary or desirable to effectuate the terms and
provisions of this agreement.
e. Adoption by the Corporation. By signing this agreement, the
---------------------------
shareholders hereby unanimously approve the entering into of this agreement by
GSI and hereby direct Sloan to execute this agreement on behalf of GSI.
f. Reference in Will. Each stockholder will reference this agreement in
-----------------
his will and will direct his executor or trustee to comply with all of the terms
and provisions contained in this agreement.
g. Notices. Notices given in connection with this agreement will be
-------
deemed to have been given only if in writing and personally delivered, sent by
first class registered or certified mail, postage repaid, return receipt
requested; sent by facsimile, as long as a hard copy is mailed on that date to
the party for whom the notice is intended or sent by other means at least as
fast and reliable as first class mail. The address to which notices should be
sent are:
Name Address
---- -------
GSI The GSI Group, Inc.
P.O. Box 20
Assumption, IL 62510
Attn: CEO
Andrade Jorge Andrade
3209 Falcon Point
Springfield, IL 62707
Buffett Howard Buffett
407 Southmoreland Place
Decatur, IL 62521
Funk John Funk
152 Southmoreland
Decatur, IL 62521
Sloan John C. Sloan
#10 DuClaire
8
<PAGE>
Decatur, IL 62521
or to such other address as the person to whom notice is given may have
furnished to the other in writing in accordance herewith. A written
communication given by any other means shall be deemed duly given when actually
received by the addressee.
h. Specific Performance. The shares cannot be readily purchased or sold in
--------------------
the open market, and for that reason, among others, the parties will be
irreparably damaged if this agreement is not specifically enforced. If any
dispute arises concerning whether a proposed sale or disposition of the shares
would violate this agreement, the parties agree that an injunction may be issued
restraining any sale or disposition pending the determination of such
controversy. If any controversy concerning the right or obligation to purchase
or sell any of the shares arises, the right or obligation shall be enforceable
in a court of equity by a decree of specific performance. This remedy shall by
cumulative and not exclusive, and shall be in addition to any other remedy which
the parties may have at law, in equity or otherwise.
i. Governing Law. This agreement will be interpreted, governed and construed
-------------
in all respects by the internal laws of the State of Illinois, and any action
commenced to enforce any of the provisions hereof shall have as its venue
Christian County, Illinois.
j. Payment of Legal Costs and Expenses. If any action is commenced to
-----------------------------------
challenge or enforce the terms and provisions hereof, the party who is
successful in such action based upon a final, unappealable court order, shall be
reimbursed by the unsuccessful party for his fees, costs and expenses
(including, without limitation, reasonable attorneys' and accountants' fees,
costs and expenses) incurred in connection with the legal proceeding.
k. Gender. Any pronouns, wherever used herein, shall include the
------
corresponding masculine, feminine or neuter pronouns and the plural shall
include the singular, and vice versa.
l. Headings. Article and paragraph headings are included herein solely for
---------
convenience and shall not be construed to modify or explain any of the
substantive
9
<PAGE>
provisions hereof.
IN WITNESS WHEREOF, GSI has caused this agreement to be signed by its
duly authorized officer, and the stockholders have signed their names, all on
the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
-------------------------
ITS CEO
/s/ Jorge Andrade
----------------------------
JORGE ANDRADE
/s/ Howard Buffett
----------------------------
HOWARD BUFFETT
/s/ John Funk
----------------------------
JOHN FUNK
/s/ Craig Sloan
----------------------------
CRAIG SLOAN
10
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 18, 1999,
amends and restates the Employment Agreement entered into on the 6th day of
June, 1996, between The GSI Group, Inc., a Delaware corporation with its
principal place of business in Assumption, Illinois (the "Company"), and Jorge
Andrade (the "Employee").
WHEREAS, the parties hereto desire to enter into this Agreement to define and
set forth the terms and conditions of the employment of the Employee by the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Employee
as follows:
1. Position, Employment Period. The Company hereby employs the Employee as its
President and Chief Operating Officer and Employee agrees to serve in such
capacity, for the period beginning the date hereof and ending on the date on
which the Employee's employment with the Company is terminated in accordance
with paragraph 9 below (the "Employment Period").
2. Performance of Duties. The Employee agrees that during the Employment
Period he shall devote his full business time to the business affairs of the
Company and shall perform his duties faithfully, efficiently and to the best of
his ability subject to the direction of the Board of Directors of the Company
and as set forth in the By Laws of the Company; provided that the foregoing
shall not limit or prevent the Employee from serving on the board of directors
of charitable organizations or other business corporations not in competition
with the Company, or on the board of directors of any corporation on which the
Employee is serving as of the date of this Agreement. The Employee shall not be
assigned duties and responsibilities that are not generally within the scope and
character associated with or required of other executives of similar rank and
position in similarly situated companies. The Employee shall be indemnified by
the Company to the fullest extent permitted under applicable law.
3. Compensation and Benefits. Subject to the following provisions of this
Agreement, during the Employment Period the Employee shall receive an annual
salary, payable in monthly or more frequent installments, in an amount not less
than $160,000 per annum, subject to such increases as may from time to time be
determined by the Board of Directors of the Company. He shall be entitled to
such vacations as he, in his reasonable judgement, requires without unduly
interfering with his duties and responsibilities at the Company. He shall be
entitled to such other perquisites as may be customarily granted by the Company
to executives of similar rank and position including, but not limited to, a
secretary and a cellular phone and all expenses associated therewith, each to be
used for Company business. The Company shall reimburse the Employee for his
business expenses in accordance with its then prevailing policy. The Employee
shall be entitled to participate, to the extent he is eligible, in any profit
sharing, retirement, insurance or other benefit plan maintained by the Company.
If, after December 6, 1999, the Employee is terminated by the Company and such
termination is not for Cause, the Employee shall be entitled to receive,
immediately upon such termination, at a minimum the greater of (i) eighteen
months salary at the Employee's then current rate or (ii) $450,000. If this
agreement terminates on June 6, 2001 and Employee is still employed by the
Company, Employee will be entitled to
1
<PAGE>
receive the greater of two years salary or $600,000 payable in equal monthly
installments over a two year period as severance payment if the Employee is
terminated any time after such date by the Company and such termination is not
for Cause.
4. Competing Businesses. During the period of his employment under this
Agreement and for a period of two years thereafter, the Employee shall not be
employed by or otherwise engage in or be interested in any business in
competition with the Company, except that the Employee's investment in any such
business shall not be considered a violation of this paragraph if the stock of
such business is traded on a national securities exchange and the Employee owns
less than 1% of the equity thereof; provided that the foregoing (a) shall not
limit or prevent the Employee from (i) serving on the board of directors of any
corporation on which the Employee is serving, or (ii) investing in any business
in which the Employee has an investment, each as of the date of termination of
his employment, and (b) shall be null and void if the Employee is terminated by
the Company without Cause.
5. Confidentiality. During and after the Employment Period, the Employee will
not divulge or appropriate to his own use or to the use of a business in
competition with the Company, any secret or confidential information or
knowledge pertaining to the business of the Company, or of any of its
subsidiaries, obtained by him in any way while he was employed by the Company.
6. Remedies. If at any time the Employee violates to a material extent any of
the covenants or agreements set forth in paragraphs 4 and 5, the Company shall
have the right to terminate all of its obligations to make further payment under
this Agreement. The Employee acknowledges that the Company would be irreparably
injured by a violation of paragraph 4 or 5 and agrees that the Company shall be
entitled to an injunction restraining the Employee from any actual or threatened
breach of paragraph 4 or 5 and to any other appropriate equitable remedy without
any bond or other security being required.
7. Attorneys' Fees and Costs. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment.
8. Amendment and Termination. This Agreement may be amended or canceled by
mutual agreement of the parties without the consent of any other person and, so
long as the Employee lives, no person, other than the parties hereto and any
legal representative of the Employee if he is Permanently Disabled, shall have
any rights under or interest in this Agreement or the subject matter hereof.
The Employment Period shall terminate as of the earliest of:
(a) June 6, 2001;
(b) the last day of the month in which the date of the Employee's
death occurs; or
(c) 90 days after the date on which the Company gives notice to the
Employee if such termination is for Cause or due to Employee being Permanently
Disabled; or
(d) the day on which Employee gives notice of his resignation from
the Company.
For purposes of this Agreement, "Cause" means termination upon (a) willful and
substantial failure by the Employee to perform his duties with the Company
(other than due to disability); (b) willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or that
demonstrates gross unfitness for service; (c) the Employee's conviction of a
felony which impairs his
2
<PAGE>
ability substantially to perform his duties with the Company or other felony
involving dishonesty or breach of trust; or (d) any material breach by the
Employee of the terms of this Agreement. The Employee will not be subject to
termination for "Cause" unless (i) the Company has followed the procedures set
forth below and (ii) the Employee is given an opportunity to cure, if possible,
any of the actions or omissions forming the basis for such termination, within
thirty (30) days of the adoption of the resolution set forth below. In the event
that the Company fails to comply with either of these conditions, any
termination of the Employment Period shall be deemed to be without Cause.
Notwithstanding anything else in this Agreement, the Company shall not terminate
the Employment Period (whether with or without Cause) unless such termination is
authorized by a resolution adopted by the Company's board of directors at a
meeting duly called and held following due notice that termination of the
Employment Period of the Employee shall be considered at such meeting. The
Company shall (a) give the Employee at least five (5) days prior written notice
of any such meeting and the purpose thereof, which notice shall, in the case of
any anticipated termination for Cause, specify the actions or omissions
anticipated to form the basis for such termination, and (b) afford the Employee
and his counsel an opportunity to be heard before the board of directors at such
meeting.
A business that is "in competition" with the Company for purposes of this
Agreement shall mean an entity that is engaged in the same or similar business
as the Company and derives at least fifty percent (50%) of its revenue from the
manufacture of grain storage systems, poultry feeding equipment and/or swine
producing equipment.
9. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the Company
at its principal executive offices or to the Employee at the last address filed
by him in writing with the Company, as the case may be.
10. Non-Assignment. The interests of the Employee under this Agreement are not
subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
11. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns and upon any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.
3
<PAGE>
12. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the laws of
the State of Illinois.
IN WITNESS WHEREOF, the Employee has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
-------------------------
ITS CHIEF EXECUTIVE OFFICER
/s/ Jorge Andrade
----------------------------
JORGE ANDRADE
4
<PAGE>
Exhibit 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 18, 1999,
amends and restates the Employment Agreement entered into on the 6th day of
June, 1996, between The GSI Group, Inc., a Delaware corporation with its
principal place of business in Assumption, Illinois (the "Company"), and Howard
G. Buffett (the "Employee").
WHEREAS, the parties hereto desire to enter into this Agreement to define and
set forth the terms and conditions of the employment of the Employee by the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Employee
as follows:
1. Position, Employment Period. The Company hereby employs the Employee as its
Chairman of the Board and Employee agrees to serve in such capacity, for the
period beginning the date hereof and ending on the date on which the Employee's
employment with the Company is terminated in accordance with paragraph 9 below
(the "Employment Period").
2. Performance of Duties. The Employee agrees that during the Employment
Period he shall devote his full business time to the business affairs of the
Company and shall perform his duties faithfully, efficiently and to the best of
his ability subject to the direction of the Board of Directors of the Company
and as set forth in the By Laws of the Company; provided that the foregoing
shall not limit or prevent the Employee from serving on the board of directors
of charitable organizations or other business corporations not in competition
with the Company, or on the board of directors of any corporation on which the
Employee is serving as of the date of this Agreement. The Employee shall not be
assigned duties and responsibilities that are not generally within the scope and
character associated with or required of other executives of similar rank and
position in similarly situated companies. The Employee shall be indemnified by
the Company to the fullest extent permitted under applicable law.
3. Compensation and Benefits. Subject to the following provisions of this
Agreement, during the Employment Period the Employee shall receive an annual
salary, payable in monthly or more frequent installments, in an amount not less
than $300,000 per annum, subject to such increases as may from time to time be
determined by the Board of Directors of the Company. He shall be entitled to
such vacations as he, in his reasonable judgement, requires without unduly
interfering with his duties and responsibilities at the Company. He shall be
entitled to such other perquisites as may be customarily granted by the Company
to executives of similar rank and position including, but not limited to, a
secretary and a cellular phone and all expenses associated therewith, each to be
used for Company business and other matters, both related and unrelated to the
Company. The Employee shall have the option of traveling first class in all
Company-related travel, with the exception of travel within the continental
United States with other non-senior management of the Company. The Company
shall reimburse the Employee for his business expenses in accordance with its
then prevailing policy. The
1
<PAGE>
Employee shall be entitled to participate, to the extent he is eligible, in any
profit sharing, retirement, insurance or other benefit plan maintained by the
Company. If, after December 6, 1999, the Employee is terminated by the Company
and such termination is not for Cause, the Employee shall be entitled to
receive, immediately upon such termination, a minimum of eighteen months salary
at the Employee's then current rate payable in equal monthly installments. If
this agreement terminates on June 6, 2001 and Employee is still employed by the
Company, Employee will be entitled to receive two years salary payable in equal
monthly installments as severance payment if the Employee is terminated any time
after such date by the Company and such termination is not for Cause.
4. Competing Businesses. During the period of his employment under this
Agreement and for a period of two years thereafter, the Employee shall not be
employed by or otherwise engage in or be interested in any business in
competition with the Company, except that the Employee's investment in any such
business shall not be considered a violation of this paragraph if the stock of
such business is traded on a national securities exchange and the Employee owns
less than 1% of the equity thereof; provided that the foregoing (a) shall not
limit or prevent the Employee from (i) serving on the board of directors of any
corporation on which the Employee is serving, or (ii) investing in any business
in which the Employee has an investment, each as of the date of termination of
his employment, and (b) shall be null and void if the Employee is terminated by
the Company without Cause.
5. Confidentiality. During and after the Employment Period, the Employee will
not divulge or appropriate to his own use or to the use of a business in
competition with the Company, any secret or confidential information or
knowledge pertaining to the business of the Company, or of any of its
subsidiaries, obtained by him in any way while he was employed by the Company.
6. Remedies. If at any time the Employee violates to a material extent any of
the covenants or agreements set forth in paragraphs 4 and 5, the Company shall
have the right to terminate all of its obligations to make further payment under
this Agreement. The Employee acknowledges that the Company would be irreparably
injured by a violation of paragraph 4 or 5 and agrees that the Company shall be
entitled to an injunction restraining the Employee from any actual or threatened
breach of paragraph 4 or 5 and to any other appropriate equitable remedy without
any bond or other security being required.
7. Attorneys' Fees and Costs. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment.
8. Amendment and Termination. This Agreement may be amended or canceled by
mutual agreement of the parties without the consent of any other person and, so
long as the Employee lives, no person, other than the parties hereto and any
legal representative of the Employee if he is Permanently Disabled, shall have
any rights under or interest in this Agreement or the subject matter hereof.
The Employment Period shall terminate as of the earliest of:
(a) June 6, 2001;
(b) the last day of the month in which the date of the Employee's
death occurs;
(c) 90 days after the date on which the Company gives notice to the
Employee if such termination is for Cause or due to Employee being Permanently
Disabled; or
2
<PAGE>
(d) the day on which Employee gives notice of his resignation from
the Company.
For purposes of this Agreement, "Cause" means termination upon (a) willful and
substantial failure by the Employee to perform his duties with the Company
(other than due to disability); (b) willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or that
demonstrates gross unfitness for service; (c) the Employee's conviction of a
felony which impairs his ability substantially to perform his duties with the
Company or other felony involving dishonesty or breach of trust; or (d) any
material breach by the Employee of the terms of this Agreement. The Employee
will not be subject to termination for "Cause" unless (i) the Company has
followed the procedures set forth below and (ii) the Employee is given an
opportunity to cure, if possible, any of the actions or omissions forming the
basis for such termination, within thirty (30) days of the adoption of the
resolution set forth below. In the event that the Company fails to comply with
either of these conditions, any termination of the Employment Period shall be
deemed to be without Cause.
Notwithstanding anything else in this Agreement, the Company shall not terminate
the Employment Period (whether with or without Cause) unless such termination is
authorized by a resolution adopted by the Company's board of directors at a
meeting duly called and held following due notice that termination of the
Employment Period of the Employee shall be considered at such meeting. The
Company shall (a) give the Employee at least five (5) days prior written notice
of any such meeting and the purpose thereof, which notice shall, in the case of
any anticipated termination for Cause, specify the actions or omissions
anticipated to form the basis for such termination, and (b) afford the Employee
and his counsel an opportunity to be heard before the board of directors at such
meeting.
A business that is "in competition" with the Company for purposes of this
Agreement shall mean an entity that is engaged in the same or similar business
as the Company and derives at least fifty percent (50%) of its revenue from the
manufacture of grain storage systems, poultry feeding equipment and/or swine
producing equipment.
9. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the Company
at its principal executive offices or to the Employee at the last address filed
by him in writing with the Company, as the case may be.
10. Non-Assignment. The interests of the Employee under this Agreement are not
subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
11. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns and upon any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.
12. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
3
<PAGE>
IN WITNESS WHEREOF, the Employee has hereunto set his hand, and the Company
has caused these presents to be executed in its name and on its behalf, all as
of the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
-------------------------
ITS CHIEF EXECUTIVE OFFICER
/s/ Howard G. Buffett
----------------------------
HOWARD G. BUFFETT
4
<PAGE>
Exhibit 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 18, 1999,
amends and restates the Employment Agreement entered into the 6th day of June,
1996, between The GSI Group, Inc., a Delaware corporation with its principal
place of business in Assumption, Illinois (the "Company"), and John W. Funk (the
"Employee").
WHEREAS, the parties hereto desire to enter into this Agreement to define and
set forth the terms and conditions of the employment of the Employee by the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Employee
as follows:
1. Position, Employment Period. The Company hereby employs the Employee as its
Executive Vice President, General Counsel and Secretary and Employee agrees to
serve in such capacity, for the period beginning the date hereof and ending on
the date on which the Employee's employment with the Company is terminated in
accordance with paragraph 9 below (the "Employment Period").
2. Performance of Duties. The Employee agrees that during the Employment
Period he shall devote his full business time to the business affairs of the
Company and shall perform his duties faithfully, efficiently and to the best of
his ability subject to the direction of the Board of Directors of the Company
and as set forth in the By Laws of the Company; provided that the foregoing
shall not limit or prevent the Employee from serving on the board of directors
of charitable organizations or other business corporations not in competition
with the Company, or on the board of directors of any corporation on which the
Employee is serving as of the date of this Agreement. The Employee shall not be
assigned duties and responsibilities that are not generally within the scope and
character associated with or required of other executives of similar rank and
position in similarly situated companies. The Employee shall be indemnified by
the Company to the fullest extent permitted under applicable law.
3. Compensation and Benefits. Subject to the following provisions of this
Agreement, during the Employment Period the Employee shall receive an annual
salary, payable in monthly or more frequent installments, in an amount not less
than $150,000 per annum, subject to such increases as may from time to time be
determined by the Board of Directors of the Company. He shall be entitled to
such vacations as he, in his reasonable judgement, requires without unduly
interfering with his duties and responsibilities at the Company. He shall be
entitled to such other perquisites as may be customarily granted by the Company
to executives of similar rank and position including, but not limited to, a
secretary and a cellular phone and all expenses associated therewith, each to be
used for Company business. The Company shall reimburse the Employee for his
business expenses in accordance with its then prevailing policy. The Employee
shall be entitled to participate, to the extent he is eligible, in any profit
sharing, retirement, insurance or other benefit plan maintained by the Company.
If, after December 6, 1999, the Employee is terminated by the Company and such
termination is not for Cause, the Employee shall be entitled to receive,
immediately upon such termination, at a minimum the greater of (i) eighteen
months salary at the Employee's then current rate or (ii) 375,000. If this
agreement terminates on June 6, 2001 and Employee is still employed by the
Company, Employee will be entitled to receive the greater of two years salary or
$500,000 payable in equal monthly installments over a two year period as
severance payment if the Employee is terminated any time after such date by the
Company and such termination is not for Cause.
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4. Competing Businesses. During the period of his employment under this
Agreement and for a period of two years thereafter, the Employee shall not be
employed by or otherwise engage in or be interested in any business in
competition with the Company, except that the Employee's investment in any such
business shall not be considered a violation of this paragraph if the stock of
such business is traded on a national securities exchange and the Employee owns
less than 1% of the equity thereof; provided that the foregoing (a) shall not
limit or prevent the Employee from (i) serving on the board of directors of any
corporation on which the Employee is serving, or (ii) investing in any business
in which the Employee has an investment, each as of the date of termination of
his employment, and (b) shall be null and void if the Employee is terminated by
the Company without Cause.
6. Confidentiality. During and after the Employment Period, the Employee will
not divulge or appropriate to his own use or to the use of a business in
competition with the Company, any secret or confidential information or
knowledge pertaining to the business of the Company, or of any of its
subsidiaries, obtained by him in any way while he was employed by the Company.
7. Remedies. If at any time the Employee violates to a material extent any of
the covenants or agreements set forth in paragraphs 4 and 5, the Company shall
have the right to terminate all of its obligations to make further payment under
this Agreement. The Employee acknowledges that the Company would be irreparably
injured by a violation of paragraph 4 or 5 and agrees that the Company shall be
entitled to an injunction restraining the Employee from any actual or threatened
breach of paragraph 4 or 5 and to any other appropriate equitable remedy without
any bond or other security being required.
8. Attorneys' Fees and Costs. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment.
9. Amendment and Termination. This Agreement may be amended or canceled by
mutual agreement of the parties without the consent of any other person and, so
long as the Employee lives, no person, other than the parties hereto and any
legal representative of the Employee if he is Permanently Disabled, shall have
any rights under or interest in this Agreement or the subject matter hereof.
The Employment Period shall terminate as of the earliest of:
(a) June 6, 2001;
(b) the last day of the month in which the date of the Employee's
death occurs;
(c) 90 days after the date on which the Company gives notice to the
Employee if such termination is for Cause or due to Employee
being Permanently Disabled; or
(d) the day on which Employee gives notice of his resignation from
the Company.
For purposes of this Agreement, "Cause" means termination upon (a) willful and
substantial failure by the Employee to perform his duties with the Company
(other than due to disability); (b) willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or that
demonstrates gross unfitness for service; (c) the Employee's conviction of a
felony which impairs his ability substantially to perform his duties with the
Company or other felony involving dishonesty or breach of trust; or (d) any
material breach by the Employee of the terms of this Agreement. The
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<PAGE>
Employee will not be subject to termination for "Cause" unless (i) the Company
has followed the procedures set forth below and (ii) the Employee is given an
opportunity to cure, if possible, any of the actions or omissions forming the
basis for such termination, within thirty (30) days of the adoption of the
resolution set forth below. In the event that the Company fails to comply with
either of these conditions, any termination of the Employment Period shall be
deemed to be without Cause.
Notwithstanding anything else in this Agreement, the Company shall not terminate
the Employment Period (whether with or without Cause) unless such termination is
authorized by a resolution adopted by the Company's board of directors at a
meeting duly called and held following due notice that termination of the
Employment Period of the Employee shall be considered at such meeting. The
Company shall (a) give the Employee at least five (5) days prior written notice
of any such meeting and the purpose thereof, which notice shall, in the case of
any anticipated termination for Cause, specify the actions or omissions
anticipated to form the basis for such termination, and (b) afford the Employee
and his counsel an opportunity to be heard before the board of directors at such
meeting.
A business that is "in competition" with the Company for purposes of this
Agreement shall mean an entity that is engaged in the same or similar business
as the Company and derives at least fifty percent (50%) of its revenue from the
manufacture of grain storage systems, poultry feeding equipment and/or swine
producing equipment.
10. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the Company
at its principal executive offices or to the Employee at the last address filed
by him in writing with the Company, as the case may be.
11. Non-Assignment. The interests of the Employee under this Agreement are not
subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
12. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns and upon any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.
13. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the Employee has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
-----------------------------------
ITS CHIEF EXECUTIVE OFFICER
/s/ John W. Funk
-------------------------------------
JOHN W. FUNK
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<PAGE>
Exhibit 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 18, 1999,
amends and restates the Employment Agreement entered into the 6th day of June,
1996, between The GSI Group, Inc., a Delaware corporation with its principal
place of business in Assumption, Illinois (the "Company"), and John C. Sloan
(the "Employee").
WHEREAS, the parties hereto desire to enter into this Agreement to define and
set forth the terms and conditions of the employment of the Employee by the
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Company and the Employee
as follows:
1. Position, Employment Period. The Company hereby employs the Employee as its
Chief Executive Officer and Employee agrees to serve in such capacity, for the
period beginning the date hereof and ending on the date on which the Employee's
employment with the Company is terminated in accordance with paragraph 9 below
(the "Employment Period").
2. Performance of Duties. The Employee agrees that during the Employment
Period he shall devote his full business time to the business affairs of the
Company and shall perform his duties faithfully, efficiently and to the best of
his ability subject to the direction of the Board of Directors of the Company
and as set forth in the By Laws of the Company; provided that the foregoing
shall not limit or prevent the Employee from serving on the board of directors
of charitable organizations or other business corporations not in competition
with the Company, or on the board of directors of any corporation on which the
Employee is serving as of the date of this Agreement. The Employee shall not be
assigned duties and responsibilities that are not generally within the scope and
character associated with or required of other executives of similar rank and
position in similarly situated companies. The Employee shall be indemnified by
the Company to the fullest extent permitted under applicable law.
3. Compensation and Benefits. Subject to the following provisions of this
Agreement, during the Employment Period the Employee shall receive an annual
salary, payable in monthly or more frequent installments, in an amount not less
than $170,000 per annum, subject to such increases as may from time to time be
determined by the Board of Directors of the Company. He shall be entitled to
such vacations as he, in his reasonable judgement, requires without unduly
interfering with his duties and responsibilities at the Company. He shall be
entitled to such other perquisites as may be customarily granted by the Company
to executives of similar rank and position including, but not limited to, a
secretary and a cellular phone and all expenses associated therewith, each to be
used for Company business. The Company shall reimburse the Employee for his
business expenses in accordance with its then prevailing policy. The Employee
shall be entitled to participate, to the extent he is eligible, in any profit
sharing, retirement, insurance or other benefit plan maintained by the Company.
If, after December 6, 1999, the Employee is terminated by the Company and such
termination is not for Cause, the Employee shall be entitled to receive,
immediately upon such termination, at a minimum the greater of (i) eighteen
months salary at the Employee's then current rate or (ii) $594,682. If this
agreement terminates on June 6, 2001 and Employee is still employed by the
Company, Employee will be entitled to receive the greater of two years salary or
$800,000 payable in equal monthly installments over a two year period as
severance payment if the Employee is terminated any time after such date by the
Company and such termination is not for Cause.
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4. Competing Businesses. During the period of his employment under this
Agreement and for a period of two years thereafter, the Employee shall not be
employed by or otherwise engage in or be interested in any business in
competition with the Company, except that the Employee's investment in any such
business shall not be considered a violation of this paragraph if the stock of
such business is traded on a national securities exchange and the Employee owns
less than 1% of the equity thereof; provided that the foregoing (a) shall not
limit or prevent the Employee from (i) serving on the board of directors of any
corporation on which the Employee is serving, or (ii) investing in any business
in which the Employee has an investment, each as of the date of termination of
his employment, and (b) shall be null and void if the Employee is terminated by
the Company without Cause.
5. Confidentiality. During and after the Employment Period, the Employee will
not divulge or appropriate to his own use or to the use of a business in
competition with the Company, any secret or confidential information or
knowledge pertaining to the business of the Company, or of any of its
subsidiaries, obtained by him in any way while he was employed by the Company.
6. Remedies. If at any time the Employee violates to a material extent any of
the covenants or agreements set forth in paragraphs 4 and 5, the Company shall
have the right to terminate all of its obligations to make further payment under
this Agreement. The Employee acknowledges that the Company would be irreparably
injured by a violation of paragraph 4 or 5 and agrees that the Company shall be
entitled to an injunction restraining the Employee from any actual or threatened
breach of paragraph 4 or 5 and to any other appropriate equitable remedy without
any bond or other security being required.
7. Attorneys' Fees and Costs. In the event of any dispute arising out of the
subject matter of this Agreement, the prevailing party shall recover, in
addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment.
8. Amendment and Termination. This Agreement may be amended or canceled by
mutual agreement of the parties without the consent of any other person and, so
long as the Employee lives, no person, other than the parties hereto and any
legal representative of the Employee if he is Permanently Disabled, shall have
any rights under or interest in this Agreement or the subject matter hereof.
The Employment Period shall terminate as of the earliest of:
(a) June 6, 2001;
(b) the last day of the month in which the date of the Employee's
death occurs;
(c) 90 days after the date on which the Company gives notice to the
Employee if such termination is for Cause or due to Employee being Permanently
Disabled; or
(d) the day on which Employee gives notice of his resignation from
the Company.
For purposes of this Agreement, "Cause" means termination upon (a) willful and
substantial failure by the Employee to perform his duties with the Company
(other than due to disability); (b) willful engaging by the Employee in conduct
which is demonstrably and materially injurious to the Company or that
demonstrates gross unfitness for service; (c) the Employee's conviction of a
felony which impairs his ability substantially to perform his duties with the
Company or other felony involving dishonesty or
2
<PAGE>
breach of trust; or (d) any material breach by the Employee of the terms of this
Agreement. The Employee will not be subject to termination for "Cause" unless
(i) the Company has followed the procedures set forth below and (ii) the
Employee is given an opportunity to cure, if possible, any of the actions or
omissions forming the basis for such termination, within thirty (30) days of the
adoption of the resolution set forth below. In the event that the Company fails
to comply with either of these conditions, any termination of the Employment
Period shall be deemed to be without Cause.
Notwithstanding anything else in this Agreement, the Company shall not terminate
the Employment Period (whether with or without Cause) unless such termination is
authorized by a resolution adopted by the Company's board of directors at a
meeting duly called and held following due notice that termination of the
Employment Period of the Employee shall be considered at such meeting. The
Company shall (a) give the Employee at least five (5) days prior written notice
of any such meeting and the purpose thereof, which notice shall, in the case of
any anticipated termination for Cause, specify the actions or omissions
anticipated to form the basis for such termination, and (b) afford the Employee
and his counsel an opportunity to be heard before the board of directors at such
meeting.
A business that is "in competition" with the Company for purposes of this
Agreement shall mean an entity that is engaged in the same or similar business
as the Company and derives at least fifty percent (50%) of its revenue from the
manufacture of grain storage systems, poultry feeding equipment and/or swine
producing equipment.
9. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail to the Company
at its principal executive offices or to the Employee at the last address filed
by him in writing with the Company, as the case may be.
10. Non-Assignment. The interests of the Employee under this Agreement are not
subject to the claims of his creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
11. Successors. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns and upon any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.
12. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the Employee has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
----------------------------------------
ITS CHIEF EXECUTIVE OFFICER
/s/ Craig Sloan
----------------------------------------
JOHN C. SLOAN
3
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Exhibit 10.6
STOCKHOLDER AGREEMENT
This agreement is made this 18th day of March, 1999 by and among The GSI Group,
Inc., a Delaware corporation ("GSI" or the "Company"), Jorge Andrade, an
individual residing at 3209 Falcon Point, Springfield, Illinois 62707
("Andrade"), Howard Buffett, an individual residing at 407 Southmoreland,
Decatur, Illinois 62521 ("Buffett"), John Funk, an individual residing at 152
Southmoreland, Decatur, Illinois 62521 ("Funk"), and Craig Sloan, an individual
residing at #10 DuClaire, Decatur, Illinois 62521 ("Sloan").
This agreement and the amended and restated stock restriction and buy sell
agreement entered into on the date hereof (the "buy sell agreement") replace all
prior stock restriction and buy sell agreements and stock restriction and cross
purchase agreements and any amendments thereto relating to the parties hereto
and their voting stock. As used herein, "stockholders" refers to each of
Andrade, Buffett, Funk and Sloan as long as he owns stock.
This stockholders agreement addresses corporate governance matters that were
contained in previous stock restriction and buy sell agreements. The amended and
restated stock restriction and buy sell agreement addresses the rights and
obligations the stockholders and GSI have upon the death, disability or
termination of employment from GSI of a stockholder and other matters related to
GSI stock.
This agreement is written in plain English instead of complicated legalese to
make sure the stockholders and their families and advisors can read and
understand its provisions.
It is our primary goal for all parties to this agreement to be treated fairly
and with respect regarding the matters addressed herein. We would also like to
avoid disputes arising out of confusion or lack of clarity.
1. S Corporation Status. The stockholders agree to take all action necessary
--------------------
to allow GSI to retain its tax status as an S Corporation ("S Corporation")
under Subchapter S (Section 1361 et seq) of the Internal Revenue Code of 1986,
as amended (the "Code"). The stockholders agree to refrain from taking any
action that would cause GSI to lose its S Corporation status. As long as GSI is
an S Corporation, GSI will fund the tax liability, including estimated tax
payments, incurred by each stockholder as a result of his ownership of GSI
stock. As provided in the amended and restated stock restriction and buy sell
agreement, no transfer of stock shall be effective until it is determined that
the recepient will not disallow GSI's S Corporation status.
2. Actions Requiring Shareholder Approval. Regardless of what is provided for
--------------------------------------
in Delaware law, GSI's Certificate of Incorporation or GSI's By-Laws, GSI cannot
take the
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following actions without prior written approval of Sloan plus, at a minimum,
two other stockholders:
a. authorization of additional shares, except for a public offering of
stock, which shall require only the prior written approval of a majority of the
shares,
b. termination of GSI's S Corporation status,
c. buying or selling any business segment that has a value in excess of
$250,000, except for the sale of all or substantially all of the business or
assets of GSI, which shall require only the prior written approval of a majority
of the shares.
d. the adoption or approval of a stock option or equity based incentive
plan for the benefit of employees of GSI, and
e. an amendment to GSI's Certificate of Incorporation or By-Laws.
3. Actions Requiring Board Approval. Regardless of what is provided for in
--------------------------------
Delaware law, GSI's Certificate of Incorporation or GSI's By-Laws, GSI cannot
take the following actions without prior written approval of a majority of the
board of directors:
a. incurring capital expenditures in a year in excess of the budgeted
capital expenditures,
b. entering into operating leases in a year in excess of that year's
operating lease budget,
c. removal or significant change in the duties and responsibilities of
an officer who is also a stockholder,
d. declaration of a stock or cash dividend,
e. incurring, guaranteeing or otherwise becoming liable for indebtedness
for borrowed money in an amount in excess of $500,000, or any action to prepay
any existing indebtedness by an amount in excess of $500,000,
f. determination to change GSI's independent auditing firm and
g. hiring or firing any person having an annual salary of greater than
$85,000.
4. Board of Directors. The Board shall consist of Andrade, Buffett, Funk and
------------------
Sloan. On the date that these individuals or their estates no longer own GSI
stock, he or his representative shall resign from the board. Each director
shall receive $10,000 as a result of serving on the board and $5,000 per meeting
(up to a maximum of 8 meetings) per year. The directors shall also vote in
favor of a $300,000 dividend every year (in addition
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<PAGE>
to any dividend declared and paid in connection with S Corporation tax liability
as set forth in Section 1 above). Vacancies on the board shall be filled by the
unanimous decision of the directors then in office. A director elected to fill a
vacancy shall have the same remaining term as that of his predecessor. At the
next election, the position shall be filled by the unanimous decision of the
stockholders and until such decision is reached, that board seat shall remain
vacant.
5. Board Deadlock. If the board is deadlocked, the shareholder with the
--------------
largest percentage of stock shall resolve the deadlock.
6. Successor CEO. If Sloan dies while still CEO, whoever is then President
-------------
will become CEO until the next election of officers.
7. Termination of Employment. To terminate a stockholder from employment, all
-------------------------
the other stockholders must agree if the grounds for termination are with
"cause" as that term is defined in that stockholder's employment agreement or if
the grounds are "permanent disability", as defined in the buy sell agreement.
Termination of a stockholder from employment for other grounds requires only the
vote of Sloan and one other stockholder, provided that this provision does not
effect any rights or obligations of the terminated stockholder..
8. Miscellaneous.
-------------
a. Termination of this Agreement. This agreement will terminate if any
-----------------------------
of the following events happen:
i. adoption of a plan of dissolution of GSI, as long as the
plan is carried out diligently and all assets remaining after payment of or
provision for liabilities are distributed to the stockholders within a
reasonable time thereafter; or
ii. all stockholders agree in writing, or
iii. permanent cessation of the business of GSI, or
iv. sale of all or substantially all of the assets or business
of GSI, or
v. a single stockholder becomes the legal and beneficial owner
of all the issued and outstanding shares, or
vi. a public offering takes place.
Termination of this agreement for any reason will not effect any right or remedy
existing before the effective date of the termination.
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b. Entire Agreement. The terms, conditions and covenants contained
herein are the full and complete terms of the agreement between the parties
hereto regarding the subject matter hereof and supersede any and all prior
agreements by and among GSI and the stockholders concerning the subject matter
hereof. No alterations, amendments or modifications of this agreement shall be
binding on the parties hereto unless reduced to writing and approved by Sloan
and, at a minimum, all but one of the other stockholders. No alterations,
amendments or modifications to this agreement shall effect a stockholder after
that stockholder experiences an event (as defined in the buy sell agreement).
c. Binding Effect. This agreement shall be binding on the parties hereto
and their respective heirs, legal representatives, successors and assigns. All
persons bound by this agreement shall execute the instruments and perform the
acts as may be reasonably necessary or desirable to effectuate the terms and
provisions of this agreement.
d. Adoption by the Corporation. By signing this agreement, the
shareholders hereby unanimously approve the entering into of this agreement by
GSI and hereby direct Sloan to execute this agreement on behalf of GSI.
e. Notices. Notices given in connection with this agreement will be
deemed to have been given only if in writing and personally delivered, sent by
first class registered or certified mail, postage repaid, return receipt
requested; sent by facsimile, as long as a hard copy is mailed on that date to
the party for whom the notice is intended or sent by other means at least as
fast and reliable as first class mail. The address to which notices should be
sent are:
Name Address
---- -------
GSI The GSI Group, Inc.
P.O. Box 20
Assumption, IL 62510
Attn: CEO with a copy to the
General Counsel
Andrade Jorge Andrade
3209 Falcon Point
Springfield, IL 62707
Buffett Howard Buffett
407 Southmoreland Place
Decatur, IL 62521
Funk John Funk
152 Southmoreland
Decatur, IL 62521
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Sloan John C. Sloan
#10 DuClaire
Decatur, IL 62521
or to such other address as the person to whom notice is given may have
furnished to the other in writing in accordance herewith. A communication given
by any other means shall be deemed duly given when actually received by the
addressee.
f. Governing Law. This agreement will be interpreted, governed and
construed in all respects by the internal laws of the State of Illinois, and any
action commenced to enforce any of the provisions hereof shall have as its venue
Christian County, Illinois.
g. Payment of Legal Costs and Expenses. If any action is commenced to
challenge or enforce the terms and provisions hereof, the party who is
successful in such action based upon a final, unappealable court order, shall be
reimbursed by the unsuccessfuly party for his fees, costs and expenses
(including, without limitation, reasonable attorneys' and accountants' fees,
costs and expenses) incurred in connection with the legal proceeding.
h. Gender. Any pronouns, wherever used herein, shall include the
corresponding masculine, feminine or neuter pronouns and the plural shall
include the singular, and vice versa.
i. Headings. Article and paragraph headings are included herein solely
for convenience and shall not be construed to modify or explain any of the
substantive provisions hereof.
IN WITNESS WHEREOF, GSI has caused this agreement to be signed by its
duly authorized officer, and the stockholders have signed their names, all on
the day and year first above written.
THE GSI GROUP, INC.
BY /s/ Craig Sloan
----------------------------
ITS CEO
/s/ Howard Buffett /s/ Jorge Andrade
- ------------------------ ------------------------------
HOWARD BUFFETT JORGE ANDRADE
/s/ John Funk /s/ Craig Sloan
- ------------------------ ------------------------------
JOHN FUNK CRAIG SLOAN
5
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Exhibit 10.7
THE GSI GROUP, INC.
AMENDED AND RESTATED STOCK RESTRICTION AND BUY-SELL AGREEMENT - NON-VOTING
SHARES
THIS AMENDED AND RESTATED STOCK RESTRICTION AND BUY-SELL AGREEMENT is
made as of the 31st day of March 1999 and amends and restates the original Stock
Restriction and Buy-Sell Agreement dated as of January 1, 1997 by and between
John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"), John Funk ("Funk") and
Howard Buffett ("Buffett"), The GSI Group, Inc., a Delaware corporation (the
"Corporation"), and the persons identified on Exhibit A attached hereto.
RECITALS
The Voting Shareholders are owners and holders of all of the issued and
outstanding voting common stock ("Voting Shares") of the Corporation.
The Non-Voting Shareholders are owners and holders of issued and
outstanding Shares of common stock of the Corporation.
The parties hereto believe that in the interest of their continued
success, it is desirable to maintain continuity in the management, policies and
ownership of the Corporation, provide for the purchase of Shares upon the
occurrence of certain contingencies and provide certain other agreements as more
fully set forth herein.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements hereinafter contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
1
INCORPORATION OF RECITALS AND DEFINITIONS
1.1. Incorporation of Recitals. The Recitals are incorporated herein and
-------------------------
constitute covenants, representations and warranties of the parties hereto.
1.2 Definitions. For purposes of this Agreement:
-----------
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(a) The term "and/or" shall mean one or the other or both, or any one or
more or all, of the things or persons in connection with which the conjunction
is used.
(b) The term "Approved Sale" shall mean the sale of the Corporation to an
Independent Third Party (whether by merger, consolidation, sale of all or
substantially all of its assets or sale of a majority of the Voting Shares)
approved by the Corporation's Board of Directors and/or the Controlling
Shareholder(s).
(c) The term "Controlling Shareholders" shall mean the Voting
Shareholders owning more than fifty percent (50%) of the outstanding Voting
Shares.
(d) The term "Independent Third Party" means any person who, immediately
prior to the contemplated transactions, does not own in excess of 5% of the
Voting Shares, who is not controlling, controlled by or under common control
with any such 5% owner of the Voting Shares, and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner.
(e) The term "Non-Voting Shareholder" shall mean any person or entity
that at any time may become a party hereto by reason of his, her or its
ownership of Shares.
(f) The term "Shares" shall mean all shares of the Corporation's non-
voting common stock now owned or hereafter acquired by any Shareholder,
including but not limited to, newly authorized non-voting shares, non-voting
shares issued out of authorized but unissued stock, non-voting shares issued or
credited in connection with any stock dividend, stock split or other capital
readjustment, as well as any voting trust certificates (there being none at this
date) representing any shares of non-voting stock issued by the Corporation and
owned by the Non-Voting Shareholder which are part of any voting trust or
similar agreement.
(g) The term "Shareholders" and/or "Shareholder" shall mean the Voting
Shareholders, Non-Voting Shareholders and/or any other person or entity that at
any time may become a party hereto by reason of his, her or its ownership of
Shares or Voting Shares.
(h) The term "Voting Shareholder" shall mean any person or entity that is
the record owner of Voting Shares.
(i) The term "Event" shall mean an event which triggers the right to
purchase or sell Shares hereunder and shall specifically refer to:
(i) the death of a Non-Voting Shareholder;
(ii) the termination of employment of a Non-Voting Shareholder,
(iii) the Effective Date of Permanent Disability or
(iv) the delivery by the Offering Shareholder of a Notice of an
Offer (as such terms are defined in Section 3.1 below).
2
<PAGE>
ARTICLE
2
RESTRICTION ON SHARES
2.1. Prohibition on Transfer. Except as expressly permitted herein,
-----------------------
none of the Non-Voting Shareholders shall at any time sell, pledge, hypothecate,
transfer, encumber, assign, give away or in any way dispose of any Shares now
owned or hereafter acquired by him, nor shall such Shares be transferable,
voluntarily or involuntarily, by operation of law or otherwise, except in strict
compliance with the covenants, terms and conditions set forth in this Agreement.
Any attempt to do so in violation of this Agreement shall not be recognized by
the Corporation and shall be null and void and of no force or effect whatsoever.
The Shareholders acknowledge and agree that the rights afforded Sloan pursuant
to the terms of any documents and/or agreements pertaining to the sale of Shares
by Sloan to any given Non-Voting Shareholder shall, with respect to the Shares
acquired by such Non-Voting Shareholder from Sloan, supersede the rights and
obligations of the parties hereunder.
2.2 Restriction on Certificates. The Corporation shall cause to be
---------------------------
placed on each certificate of its Shares which may now or hereafter be issued to
a Non-Voting Shareholder (except certificates evidencing Shares sold free of the
restrictions of this Agreement), a notice in the following form:
"The shares of stock evidenced by this Certificate are subject to the
terms and conditions of a certain Stock Restriction and Buy-Sell Agreement,
dated as of January 1, 1997, as amended (the "Agreement"), between the
Corporation and the Shareholders. A copy of the Agreement is on file at the
offices of the Corporation, reference to all the terms and conditions thereof
being hereby made. No sale or transfer of the Shares evidenced hereby may be
effected, except pursuant to the terms and conditions of the Agreement."
If such legend is placed on the reverse side rather than the face of any
such certificate, there shall be placed on the face of such certificate a legend
in the following form:
"For restrictions on transfer, see notice on reverse side hereof."
2.3 Wrongful Transfer. Subject to Section 2.1, no sale, pledge,
-----------------
hypothecation, transfer, encumbrance, assignment, gift or other disposition by a
Non-Voting Shareholder of any of his Shares shall be effective, unless and
until: (i) he has first complied with all the provisions of this Agreement, and
(ii) such transferee shall take such Shares subject to the terms of this
Agreement, shall agree in writing to become a
3
<PAGE>
party to this Agreement and be bound by all of the terms, conditions and
provisions hereof. If a Non-Voting Shareholder fails to comply with this
Agreement, the Voting Shareholders and/or the Corporation shall have the right
to compel such Non-Voting Shareholder or any transferee to transfer and deliver
his or its Shares in accordance with the provisions of this Agreement.
2.4 Maintenance of S Corporation Status.
-----------------------------------
(a) Each Non-Voting Shareholder agrees that he or she will take all
action necessary to permit the Corporation to retain its tax status as an S
Corporation ("S Corporation") under Subchapter S (Section 1361 et seq) of the
Internal Revenue Code of 1986, as amended (the "Code"), including, but not
limited to, the execution and delivery of any and all consents and other
documents required at any time for the continuance of S Corporation status, or
required to carry out, effectuate, implement or exercise any and all other
elections available to, or powers exercisable by, a corporation having elected S
Corporation status. Unless and until the Controlling Shareholders direct
otherwise in writing, the Non-Voting Shareholders shall not take any action
which will cause the Corporation not to be taxed as an S Corporation.
(b) Subject to the limitations of the Delaware General Corporation Law
("DGCL"), as long as the Corporation remains an S Corporation, the Voting
Shareholders agree to take all actions necessary to cause the directors of the
Corporation to declare and pay to the Shareholders dividends each year in an
amount not less than all federal and state income taxes, including but not
limited to estimated tax payments, payable by the Shareholders each year with
respect to the income of the Corporation, based upon the maximum marginal
federal and state individual income tax rates applicable to any Shareholder.
(c) Upon any transfer of the Shares permitted hereunder, the Corporation
may require arrangements reasonably satisfactory to it to assure that any
transferee shall take any and all action necessary to maintain the election
under Section 1362(a) of the Code.
2.5. Take-Along Rights. The Controlling Shareholders agree that if they
-----------------
sell or transfer, in the aggregate, a majority of the Voting Shares to a third
party, they will first give written notice (the "Take-along Notice") to the Non-
Voting Shareholders stating all of the material terms of the offer. Each of the
Non-Voting Shareholders may then participate pro rata in such transfer based on
his proportionate holdings of Shares in relation to the total number of
outstanding shares (both voting and non-voting) of the common stock of the
Corporation. If a Non-Voting Shareholder wishes to participate in such
transaction, he will give the Corporation and the Voting Shareholders written
notice within five (5) days of receipt of the Take-along Notice, and the sale
transaction will not close prior thereto. The foregoing notwithstanding, the
provisions of this Section 2.5 shall not apply to (i) any transfers of Voting
Shares among or between the Voting Shareholders and/or their respective family
members, in trust or otherwise, either during their lifetimes or after their
deaths, and (ii) the pledge or hypothecation of Voting Shares.
4
<PAGE>
2.6 Drag-Along Rights. In the event of any Approved Sale, each of the
-----------------
Non-Voting Shareholders agrees to sell his Shares on the terms and conditions
approved by the Corporation's Board of Directors and/or the Controlling
Shareholders. Each Non-Voting Shareholder will not exercise any statutory
dissenters' rights with regard to an Approved Sale and will take all necessary
and desirable actions in connection with the consummation of the Approved Sale.
The foregoing notwithstanding, the right of the Corporation and/or the
Controlling Shareholders to consummate any Approved Sale structured as a sale of
common stock is subject to the satisfaction of the condition that, upon the
consummation of the Approved Sale, each Non-Voting Shareholder will receive the
same form and amount of consideration per Share as the Voting Shareholders
receive for their Voting Shares, or if the Voting Shareholders are given an
option as to the form and amount of consideration to be received, the Non-Voting
Shareholders will be given the same option.
ARTICLE
3
PURCHASE OF SHARES - RIGHT OF FIRST REFUSAL
3.1 Notice of Transfer. If a Non-Voting Shareholder ("Offering
------------------
Shareholder") receives during his lifetime a bona fide offer ("Offer") to sell
or otherwise transfer up to ten percent of his original Shares in any calendar
year ("Offered Shares") to any other Non-Voting Shareholder, the Offering
Shareholder shall give at least sixty (60) days prior written notice to the
Corporation and the Voting Shareholders of his intention to so transfer his
Shares (the "Notice"). The Notice shall state (i) the number of Offered Shares;
(ii) the name of the Non-Voting Shareholder who is the proposed transferee (the
"Transferee"); (iii) whether or not the transfer is for valuable consideration
and, if so, the consideration (the "Offered Price"); (iv) the date upon which
the proposed transfer to the Transferee is to be consummated; and (v) all other
material terms of the proposed transfer. A copy of any written agreement
(whether executed or not) evidencing the Offer shall be attached to the Notice.
3.2 Rights of First Offer. From and after the date of the Notice
---------------------
("Notice Date"), the Corporation and the Voting Shareholders shall have options
to purchase the Offered Shares, upon the terms set forth in Section 3.3 hereof,
exercisable in the order of priority and within the time periods set forth
below:
(a) Within twenty one (21) days after the Notice Date (the "Sloan's
Option Period"), Sloan shall have the option to acquire all or any portion of
the Offered Shares (the "Sloan's Option"). Sloan shall exercise Sloan's Option,
if at all, by giving written notice to that effect to the Offering Shareholder,
the other Voting Shareholders and the Corporation within Sloan's Option Period.
5
<PAGE>
(b) Within twenty one (21) days following the first to occur of (i) the
expiration of Sloan's Option Period without Sloan exercising his option or (ii)
Sloan's written notice to the Offering Shareholder, the other Voting
Shareholders and the Corporation that he will not purchase any or all of the
Offered Shares (the "Voting Shareholders' Option Period"), the Voting
Shareholders, other than Sloan, shall have the option to acquire all of the
Offered Shares not being purchased by Sloan (the "Voting Shareholders' Option").
In the event that more than one of such Voting Shareholders elects to purchase
the Offered Shares, then unless otherwise agreed, each electing Voting
Shareholder must purchase that percentage of the Offered Shares as is equal to
his proportionate ownership of all of the electing Voting Shareholders' then
respective Shares unless an electing Voting Shareholder chooses to purchase less
than his maximum number of such Shares, in which case the other electing Voting
Shareholders may purchase, in addition to their own pro rata allotment, such
electing Voting Shareholders' unpurchased allotment on a pro rata basis. The
Voting Shareholders shall exercise the Voting Shareholders' Option, if at all,
by giving written notice to that effect to Sloan, the Corporation and the
Offering Shareholder within the Voting Shareholders' Option Period.
(c) Within fourteen (14) days following the first to occur of (i) the
expiration of the Voting Shareholders' Option Period without Sloan and/or the
other Voting Shareholders exercising their options; or (ii) written notice to
the Corporation that neither Sloan nor the other Voting Shareholders intend to
purchase all of the Offered Shares (the "Corporation's Option"), the Corporation
shall have the option to acquire all of the Offered Shares not being purchased
by Sloan or the other Voting Shareholders. The Corporation shall exercise the
Corporation's Option, if at all, by giving written notice to that effect to the
Offering Shareholder and the Voting Shareholders within the Corporation's Option
Period.
The exercise of the aforesaid option must, in the aggregate, include all
of the Offered Shares or the exercise of such option(s) shall be null and void.
On the closing date of the transfer of Offered Shares, the Offering
Shareholder shall be obligated to prepay a pro rata portion of the outstanding
principal of the promissory note owed by such Offering Shareholder to Sloan that
was entered into in connection with the Offering Shareholder's initial purchase
of Shares (the "Sloan Note").
3.3 Purchase Price and Terms. In the event Sloan's Option, the Voting
------------------------
Shareholders' Option and/or the Corporation's Option is exercised, the
party(ies) exercising such option(s) shall purchase the Offered Shares at the
lower of (i) the Offered Price or (ii) the Purchase Price (as hereinafter
defined), upon the same terms and conditions provided in the Notice. The
Closing of such purchase shall occur in the manner described in Section 7.2(a)
hereof.
3.4 Failure to Exercise Rights of First Offer Options. If Sloan, the
-------------------------------------------------
Voting Shareholders and/or the Corporation fail to exercise their respective
Options in accordance with Section 3.2 hereof to purchase in the aggregate all
of the Offered Shares,
6
<PAGE>
the Offered Shares may be transferred to the Transferee as provided in the
Notice. The effectiveness of such transfer is conditioned upon the Transferee
then being a Non-Voting Shareholder immediately prior to such transfer and his
reaffirming in writing his agreement to be bound by all of the terms, conditions
and provisions hereof. If the transfer does not occur in accordance with the
terms disclosed in the Notice, such transfer shall be automatically null and
void without any further action being required on the part of the Corporation or
the Voting Shareholders, and any attempt to transfer the Offered Shares
thereafter without first complying with the terms of this Article 3 shall be
deemed a wrongful transfer within the meaning of Section 2.3 hereof.
ARTICLE
4
PURCHASE OF SHARES
4.1. Purchase Upon Death, Permanent Disability or Termination of
-----------------------------------------------------------
Employment of Non-Voting Shareholder. If a Non-Voting Shareholder dies (the
- ------------------------------------
"Decedent"), becomes Permanently Disabled (as defined below)(the "Disabled
Shareholder"), or his employment by the Corporation terminates (the "Terminating
Shareholder")(a Decedent, Disabled Shareholder or Terminating Shareholder is
sometimes hereinafter referred to as a "Departed Shareholder"), the Shares owned
by the Departed Shareholder shall be subject to the following rights and
obligations, and the Non-Voting Shareholders, for themselves and their
respective heirs, successors, representatives and assigns, agree as follows:
(a) Within sixty (60) days following: (i) the date of the Decedent's
death, (ii) the Effective Date of Permanent Disability (as defined below) of the
Disabled Shareholder, or (iii) the last date of employment of the Terminating
Shareholder, as the case may be ("Sloan's Purchase Option Period"), Sloan shall
have the option to acquire all or any portion of the Shares owned by the
Departed Shareholder ("Sloan's Purchase Option"), at the price and on the terms
set forth in Articles 5, 6 and 7 hereof. Sloan shall exercise Sloan's Purchase
Option, if at all, by giving written notice to that effect to the Departed
Shareholder, the other Voting Shareholders and the Corporation within Sloan's
Purchase Option Period.
(b) Within thirty (30) days following the first to occur of (i) the
expiration of Sloan's Purchase Option Period without Sloan exercising his option
or (ii) Sloan's written notice to the Departed Shareholder, the other Voting
Shareholders and the Corporation that he will not purchase any or all of the
Departed Shareholder's Shares (the "Voting Shareholders' Purchase Option
Period"), the Voting Shareholders, other than Sloan, shall have the option to
acquire all of the Departed Shareholder's Shares not being purchased by Sloan
(the "Voting Shareholders' Purchase Option"), at the price and on the terms set
forth in Articles 5, 6 and 7 hereof. In the event that one or more of such
Voting Shareholders elects to purchase the Departed Shareholder's Shares, then,
unless otherwise
7
<PAGE>
agreed, each electing Voting Shareholder must purchase that percentage of the
Departed Shareholder's Shares as is equal to his proportionate ownership of all
of the electing Voting Shareholders' Voting Shares. The Voting Shareholders
shall exercise the Voting Shareholders' Purchase Option, if at all, by giving
written notice to that effect to Sloan, the Corporation and the Departed
Shareholder within the Voting Shareholders' Purchase Option Period.
(c) Other than as set forth in the next sentence, the Corporation shall
have the option to purchase, and, upon the exercise of such option, the Departed
Shareholder or his legal representative shall be required to sell, all of the
Shares owned by the Departed Shareholder which are not purchased by Sloan and/or
the other Voting Shareholders pursuant to Sections 4.1(a) or (b) above, at the
price and on the terms set forth in Articles 5, 6 and 7 hereof. The Corporation
shall be obligated to purchase a Decedent's Shares to the extent the Corporation
receives proceeds from a life insurance policy on such Decedent.
(d) Notwithstanding the foregoing provisions of this paragraph 4.1 but
subject in all events, however, to the rights and obligations to sell Shares
otherwise set forth herein, any Senior Terminating Shareholder (as defined
below) who resigns prior to January 1, 2002, may irrevocably elect to defer the
purchase and sale of his Shares (due to such termination of employment), such
that with respect to determining the Purchase Price for such Senior Terminating
Shareholder's Shares, the Event shall be deemed to have occurred either on
January 1, 2002 or on the fifth (5th) anniversary of the last day of such Senior
Terminating Shareholder's employment by the Corporation. The Senior Terminating
Shareholder shall give written notice of such election to the Voting
Shareholders and the Corporation within thirty (30) days following the last day
of his employment , which notice shall express such irrevocable election and
shall specify whether the Event shall be deemed to occur on January 1, 2002 or
on the fifth (5th) anniversary of the last date of his employment. In such
circumstance, Sloan's Purchase Option Period, the Voting Shareholder's Purchase
Option Period and the respective rights and obligations of the Voting
Shareholders, the Corporation and such Senior Terminating Shareholder with
respect to the purchase and sale of his Shares shall pertain as if the date
designated by such Senior Terminating Shareholder for the Event was the last day
of his employment. As used herein, the term "Senior Terminating Shareholder"
means a Terminating Shareholder who was either (i) 62 years of age, or (ii)
employed by the Corporation for a period of at least twenty (20) years, at the
time he first acquired Shares.
4.2 Definition of Permanent Disability. A Non-Voting Shareholder
----------------------------------
shall be deemed to be "Permanently Disabled" upon the first to occur of the
following events:
(a) if by reason of injury, sickness or other incapacity he is
unable, for a period of six (6) consecutive months or for six (6) months during
any nine (9) consecutive month period, to discharge his regular duties and
responsibilities as an employee and/or officer of the Corporation. If the
parties shall at any time be unable to
8
<PAGE>
agree on whether a Non-Voting Shareholder is or has been so disabled, the
Corporation and the Non-Voting Shareholder shall promptly and jointly appoint a
medical doctor or if they are unable to so agree, they shall each promptly
appoint a medical doctor to make such determination, and the collective decision
of such medical doctors shall be binding on all parties hereto. If such doctors
are unable to agree, they shall promptly appoint a third medical doctor to make
such determination, and the decision of such third medical doctor shall be
binding on all parties hereto; or
(b) the failure or refusal of a Non-Voting Shareholder to submit to
any examination or to appoint a medical doctor pursuant to subsection (a) of
this Section 4.2 within sixty (60) days after the date on which the Shareholder
receives a notice from the Voting Shareholders and/or the Corporation to do so;
or
(c) the adjudication of such Non-Voting Shareholder as an incompetent
or a disabled person by a court of competent jurisdiction.
4.3 Definition of Effective Date of Permanent Disability. If a Non-Voting
----------------------------------------------------
Shareholder is deemed to be Permanently Disabled pursuant to Section 4.2 hereof,
then the "Effective Date of Permanent Disability" shall be the first to occur of
the following:
(a) the date upon which the examining doctor(s) shall determine that
the Non-Voting Shareholder is Permanently Disabled; or
(b) the sixtieth (60) day immediately succeeding the day on which a
Non-Voting Shareholder receives a notice from the Corporation to submit to an
examination pursuant to Section 4.2(a) hereof, if the Shareholder fails or
refuses to submit to such examination or fails or refuses to appoint a medical
doctor; or
(c) the sixtieth (60) day immediately succeeding the date of the
adjudication described in Section 4.2(c) hereof unless prior to the expiration
of such period the adjudication has been reversed; or
(d) the first day of the seventh (7th) consecutive month or the first
day of the seventh (7th) month during any nine (9) consecutive month period of
the Non-Voting Shareholder's inability to perform his regular duties and
responsibilities as an employee and/or officer of the Corporation as a result of
his injury, sickness or other incapacity.
4.4 Definition of Cause. As used herein, "Cause" shall mean one or more
-------------------
of the following as determined by the Board of Directors in its sole discretion:
(i) commission of any dishonest act by a Non-Voting Shareholder in connection
with his or her employment by the Corporation or any act of willful misconduct
which has affected or can be reasonably expected to affect the business or
reputation of the Corporation in a materially adverse manner; or (ii) diversion
of any material corporate opportunity of the Corporation for the Non-Voting
Shareholder's direct or indirect benefit.
9
<PAGE>
4.5 Sloan Purchase Obligation. Sloan shall be obligated to purchase a
Shareholder's Shares if on the date of an Event the Purchase Price in effect is
less than $6.34 plus interest accrued and paid under the Sloan Note (the "Sloan
Purchase Price"). Sloan shall purchase such Shares at the Sloan Purchase Price
and such purchase and sale shall take place within 60 days of the date of the
Event.
ARTICLE
5
DETERMINATION OF THE PURCHASE PRICE
The parties hereto recognize the problems relative to determining the value of
the Corporation. As a result, the parties hereto agree that the purchase price
(the "Purchase Price") for each Share to be purchased pursuant to Articles 3 or
4 hereof shall be Thirty Seven and 50/100 Dollars ($37.50) per Share. The
Purchase Price shall be conclusive and binding on the parties hereto.
Notwithstanding the foregoing, the Purchase Price to be paid for the Shares to
be purchased upon (i) the exercise of rights of first offer under Section 3.2
hereof; (ii) the voluntary resignation of a Terminating Shareholder, other than
a Senior Terminating Shareholder who elects to defer the Event pursuant to
paragraph 4.1(d) hereof, occurring prior to January 1, 2002; (iii) the
termination of a Terminating Shareholder without Cause prior to January 1, 2002;
or (iv) the termination of a Terminating Shareholder with Cause, shall be an
amount equal to the initial purchase price per Share (plus any interest accrued
and paid to Sloan under the Sloan Note). The parties expressly acknowledge that
the Purchase Price for Shares purchased following the voluntary resignation of a
Terminating Shareholder occurring from and after January 1, 2002 shall be
determined in accordance with Article 5 hereof.
Any changes to the "Purchase Price" as set forth in the buy sell agreement
between the Voting Shareholders and the Corporation governing the purchase and
sale of Voting Shares among them shall be reflected in this Agreement.
ARTICLE
6
PAYMENT OF THE PURCHASE PRICE AND OTHER MATTERS
6.1. Payment. The Purchase Price for the Shares purchased hereunder
-------
shall be paid in full in cash at the closing, except that at the option of each
purchasing party, up to seventy percent (70%) of the Purchase Price may be
deferred as provided herein, provided that at least thirty percent (30%) of the
Purchase Price is paid in cash at closing.
10
<PAGE>
Notwithstanding the foregoing, if the Event resulting in a sale of Shares is a
Non-Voting Shareholder becoming Permanently Disabled (as defined in Section 4.2
hereof) or a Shareholder being terminated for Cause (as defined in Section 4.4
hereof), up to ninety percent (90%) of the Purchase Price may be deferred as
provided herein, provided that at least ten percent (10%) of the Purchase Price
is paid in cash at closing.
6.2. Promissory Note. The deferred portion of the Purchase Price shall
---------------
be evidenced by a promissory note ("Note") of the purchasing party made payable
to the order of the selling party. The Note shall be in the form of Exhibit B
attached hereto and shall be dated as of the closing. Except as otherwise set
forth below, the principal balance shall be paid over a time not exceeding sixty
(60) months and each installment of the principal balance shall include
interest, accruing from the date of the Note, at a rate announced from time to
time by the LaSalle National Bank as its prime rate (the "Interest Rate");
provided, however, that if the Event resulting in a sale of Shares is a Non-
Voting Shareholder becoming Permanently Disabled (as defined in Section 4.2
hereof) or a Non-Voting Shareholder being terminated for Cause (as defined in
Section 4.5 hereof), the principal balance shall be paid over a time not
exceeding one hundred and twenty (120) months.
.
ARTICLE
7
THE CLOSING
7.1 Location. Unless otherwise agreed by the parties, the closing of
--------
the sale and purchase of the Shares under Article 3 or 4 hereof shall take place
at such location as the parties to such sale shall agree upon.
7.2 Time.
----
(a) Article 3 Transfer. In the case of a purchase under Article 3,
the closing shall take place in accordance with the terms of the Notice,
provided that (i) if the Corporation elects to purchase Shares, such closing
shall not occur before the later to occur of (x) the first business day in
January of the year following the year in which the Notice is received by the
Corporation and the Voting Shareholders or (y) thirty (30) days after the
expiration of the Corporation's Option Period, or (ii) if Sloan and/or the other
Voting Shareholders are purchasing the Offered Shares, such closing shall occur
within thirty (30) days after the Voting Shareholders' Option Period if the
Shares are to be purchased by Sloan and/or the other Voting Shareholders and not
the Corporation.
(b) Article 4 Transfer. In the case of a purchase of Shares under
Article 4, the closing shall take place (i) within ninety (90) days after the
date of the notice exercising the options set forth in Sections 4.1 or 4.2;
provided that, with regard to purchases by the
11
<PAGE>
Corporation, under neither scenario shall the closing take place prior to the
first business day in the calendar year after the year in which the Event takes
place.
7.3 Execution and Delivery of Documents. Upon the closing of the sale
-----------------------------------
and purchase, the selling Non-Voting Shareholder and the purchasing party shall
execute and deliver to each other the various documents which shall be required
to carry out their undertakings hereunder, including, without limitation, the
payment of cash and the execution and delivery of the Note and any collateral
instruments.
7.4. Resignation as Officer. Upon the closing of the sale and purchase,
----------------------
the selling Non-Voting Shareholder shall resign as an officer of the
Corporation, if he holds any such position.
ARTICLE
8
TERMINATION OF AGREEMENT
8.1 Events Causing Termination. This Agreement and all restrictions on
--------------------------
transfer created hereby shall terminate on the occurrence of any of the
following events:
(a) Upon the adoption of a plan of dissolution of the Corporation,
provided said plan is carried out diligently and all assets remaining after
payment of or provision for liabilities are distributed to the Shareholders
within a reasonable time thereafter; or
(b) The execution of a written instrument to that effect signed by the
Controlling Shareholders and the Corporation; or
(c) Permanent cessation of the business of the Corporation; or
(d) The sale of substantially all of the assets or business of the
Corporation; or
(e) The Voting Shareholder becoming the legal and beneficial owner of
all then issued and outstanding Shares; or
(f) The consummation of a firm underwritten public offering (a "Public
Offering") of securities of the Corporation..
8.2 Effect of Termination. The termination of this Agreement for any
---------------------
reason shall not effect any right or remedy existing hereunder prior to the
effective date of such termination.
12
<PAGE>
ARTICLE
9
MISCELLANEOUS
9.1 Piggyback Registration Rights. The Corporation agrees that, at any
-----------------------------
time during the term of this Agreement, if the Corporation shall seek a Public
Offering, each Non-Voting Shareholder shall be notified and shall be entitled to
elect to have included in such proposed registration, without cost or expense,
such number of Shares as the underwriter for the offering shall permit;
provided, however, that in the event the underwriter shall permit less than all
of the Shares to be registered, the number of shares included in such
registration shall be reduced on a pro rata basis among the Non-Voting
Shareholders (the "Piggy-Back Rights"). In the event of such a proposed
registration, the Corporation shall furnish the Non-Voting Shareholders with no
less than thirty (30) days written notice prior to the proposed filing of the
registration statement. Such notice shall continue to be given by the
Corporation to such Non-Voting Shareholders for each proposed registration by
the Corporation until such time as all of the Shares have been registered. Such
Non-Voting Shareholders shall exercise their Piggy-Back Rights by giving written
notice within twenty (20) days of the receipt of the Corporation's notice of
intention to file a registration statement.
9.2 Restrictive Covenants.
(a) Each of the Non-Voting Shareholders agree that during the Non-Voting
Shareholder's employment and for a period of three (3) years after the
termination of his employment for any reason whatsoever or for no reason,
whether voluntary or involuntary, the Non-Voting Shareholder will not, except on
behalf of the Corporation:
(i) directly or indirectly, contact, solicit or direct any person, firm
or corporation to contact or solicit any of the Corporation's customers or
prospective customers (as hereinafter defined) for the purpose of selling or
attempting to sell, any products and/or services that are the same as or similar
to the products and services provided by the Corporation to its customers. In
addition, each Non-Voting Shareholder will not disclose the identity of any such
customers or prospective customers to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever; and
(ii) directly or indirectly, whether as an investor (excluding
investments representing less than one percent (1%) of the common stock of a
public company), lender, owner, stockholder, officer, director, consultant,
employee, agent, salesperson or in any other capacity, whether part-time or
full-time, become associated with any business involved in the design,
manufacture, marketing, sale, or servicing of products then constituting one
percent (1%) or more of the annual sales of the Corporation; and
13
<PAGE>
(iii) solicit or accept if offered to him, with or without solicitation,
on his own behalf or on behalf of any other person, the services of any person
who is an employee of the Corporation, nor solicit any of the Corporation's
employees to terminate employment with the Corporation; and
(iv) act as a consultant, advisor, officer, manager, agent, director,
partner, independent contractor, owner, or employee for or on behalf of any of
the Corporation's customers or prospective customers (as hereinafter defined),
with respect to or with regard to any aspect of the Corporation's business
and/or any other business activities in which the Corporation engages during the
term of the Non-Voting Shareholder's employment with the Corporation.
(b) As used herein, "customer" shall be defined as any person, firm or
entity that purchased any type of product and/or service from the Corporation or
is or was doing business with the Corporation within the twelve (12) month
period immediately preceding termination of the Non-Voting Shareholder's
employment; and "prospective customer" shall be defined as any person, firm or
entity contacted or solicited by the Corporation or the Non-Voting Shareholder
(whether directly or indirectly) or who contacted the Corporation or the Non-
Voting Shareholder (whether directly or indirectly) within the twelve (12) month
period immediately preceding termination of the Non-Voting Shareholder's
employment for the purpose of having such persons, firms, or entities become a
customer of the Corporation.
(c) Each of the Non-Voting Shareholders acknowledges and agrees that
any violation of the terms of the Confidentiality Agreement between him and the
Corporation, including, without limitation, such Non-Voting Shareholder's
divulging or imparting any confidential information of the Corporation to any
competitor of the Corporation or any third party, or using such confidential
information for himself, shall afford the Corporation all of the rights and
remedies set forth in paragraph 9.2(d) hereof.
(d). It is agreed that any breach or anticipated or threatened breach of
any of the Non-Voting Shareholder's covenants contained in this paragraph 9.2
will result in irreparable harm and continuing damages to the Corporation and
its business and that the Corporation's remedy at law for any such breach or
anticipated or threatened breach will be inadequate and, accordingly, in
addition to any and all other remedies that may be available to the Corporation
at law or in equity in such event, any court of competent jurisdiction may issue
a decree of specific performance or issue a temporary and permanent injunction,
without the necessity of the Corporation posting bond or furnishing other
security and without proving special damages or irreparable injury, enjoining
and restricting the breach, or threatened breach, of any such covenant. In
addition to, and not in lieu of, the foregoing rights and remedies, the
Corporation shall be entitled to receive from the breaching Non-Voting
Shareholder an amount equal to the unpaid balance, if any, of the Purchase Price
due to the breaching Non-Voting Shareholder (as of the date such breach first
occurred) with respect to the purchase of his Shares, and such amount may be set
off from any monies due such breaching Non-Voting Shareholder by the
14
<PAGE>
Corporation, which amount shall constitute liquidated damages and not a penalty.
In the event the maker of the Note is someone other than the Corporation, the
breaching Non-Voting Shareholder shall be deemed to have irrevocably assigned to
the Corporation all of his right, title and interest in and to the Note,
including, without limitation, the balance of any and all amounts remaining
unpaid thereunder, and no additional amounts shall be owed to such breaching
Non-Voting Shareholder under the Note.
(e) Anything contained in this paragraph 9.2 to the contrary
notwithstanding, a Terminating Shareholder whose employment terminates
(including, without limitation, upon his resignation) on or after January 1,
2002 other than for Cause, shall have the right and option to be free of the
restrictive covenants imposed by paragraph 9.2(a) of this Agreement following
his employment, provided such Terminating Shareholder elects to receive, in lieu
of the Purchase Price, an amount for his Shares equal to the amount the
Terminating Shareholder paid to acquire such Shares. The Terminating
Shareholder shall irrevocably make such election by giving written notice
thereof to the Voting Shareholders and the Corporation within thirty (30) days
following the last date of such Terminating Shareholder's employment , which
notice must expressly state that the Terminating Shareholder has irrevocably
elected to receive an amount for his Shares equal to the amount such Terminating
Shareholder paid to acquire same in lieu of the Purchase Price. In such event,
such Terminating Shareholder shall be deemed to be released from the restrictive
covenants set forth in paragraph 9.2 hereof, provided that such Terminating
Shareholder proceeds to sell his Shares in strict accordance with the other
terms of this Agreement. The Non-Voting Shareholders acknowledge that the
foregoing right and option shall not be available to any Non-Voting Shareholder
whose employment terminates (i) due to his resignation or termination without
Cause prior to January 1, 2002, or (ii) at any time for Cause.
9.3 Effect of Improper Transfer. If a transfer or attempted transfer
---------------------------
violates any provision of this Agreement or if the transferor, after the
transfer, reacquires all or any portion of the transferred Shares, such
transfers or attempted transfers shall be null and void and the Shares
transferred or attempted to be transferred shall remain subject to this
Agreement as if no transfer had been made.
9.4 Entire Agreement. The terms, conditions and covenants contained
----------------
herein are the full and complete terms of the agreement between the parties
hereto regarding the subject matter hereof and supersede any and all prior
agreements by and among the Corporation and the Shareholders concerning the
ownership, sale or other disposition of the Shares. No alterations, amendments
or modifications of such terms shall be binding on the parties hereto unless
reduced to writing and approved by the Board of Directors of the Corporation
without the need for approval of the Shareholders.
9.5 Binding Effect. This Agreement binding upon and inures to the
--------------
benefit of the Corporation, its successors, transferees and assigns and to the
Shareholders and their respective heirs, personal representatives, successors,
permitted transferees and permitted assigns. All persons bound hereby shall
execute such instruments and perform such acts
15
<PAGE>
as may be reasonably necessary or desirable to effectuate the terms and
provisions of this Agreement. Wherever used in this Agreement, Non-Voting
Shareholder shall refer to the Non-Voting Shareholders originally named above
and any persons who subsequently acquire the Shares for so long as they shall
have any interest in the Shares, and thereafter to his or their respective
heirs, personal representatives, successors, transferees and assigns.
9.6 Adoption by Corporation. The Voting Shareholders will cause the
-----------------------
Board of Directors to adopt appropriate minutes and resolutions recognizing,
confirming, ratifying and adopting the terms of this Agreement and any
amendments to the By-Laws consistent with the provisions herein.
9.7 Reference in Will. Each Non-Voting Shareholder shall make reference
-----------------
to this Agreement in any will or codicil that he may hereafter execute and shall
direct the executor therein to comply with all of its terms and provisions.
9.8 Notices. Any and all notices given in connection with this
-------
Agreement shall be deemed adequately given only if in writing and personally
delivered, sent by first class registered or certified mail, postage prepaid,
return receipt requested; sent by facsimile, provided a hard copy is mailed on
that date to the party for whom such notices are intended or sent by other means
at least as fast and reliable as first class mail. A written notice shall be
deemed to have been given to the recipient party on the earlier of (i) the date
it shall be delivered to the address required by this Agreement; (ii) the date
delivery shall have been refused at the address required by this Agreement;
(iii) with respect to notices sent by mail, the date as of which the postal
service shall have indicated such notice to be undelivered at the address
required by this Agreement, or (iv) with respect to telefacsimile, the date on
which the telefacsimile is sent. Any and all notices referred to in this
Agreement, or which any party desires to give to the other, shall be addressed
as follows:
Name Address
To the Corporation The GSI Group, Inc.
P.O. Box 20
Assumption, IL 62510
Attn: John C. Sloan, CEO
with a copy to John Funk, Executive Vice
President and General Counsel
To Sloan: John C. Sloan
#10 DuClaire
Decatur, Il 62521
To Andrade: Jorge Andrade
16
<PAGE>
3209 Falcon Point
Springfield, IL 62707
To Funk: John Funk
152 Southmoreland Place
Decatur, IL 62521
To Buffett: Howard Buffett
407 Southmoreland Place
Decatur, IL 62521
To the Non-Voting Shareholders: at their respective addresses as set
forth on Exhibit A attached hereto
or to such other address as the person to whom notice is to be given may have
furnished to the other in writing in accordance herewith. A communication given
by any other means shall be deemed duly given when actually received by the
addressee.
9.9 Specific Performance. The Shares cannot be readily purchased or
--------------------
sold in the open market, and for that reason, among others, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Should any dispute arise concerning whether a proposed sale or
disposition of the Shares would violate this Agreement, the parties agree that
an injunction may be issued restraining any sale or disposition pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to purchase or sell any of the Shares, such right or
obligation shall be enforceable in a court of equity by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which the parties may have at law, in
equity or otherwise.
9.10 Construction of Terms. Unless otherwise specifically provided, a
---------------------
reference to a particular "section", "Section", or "Article" shall mean the
section, Section or Article in this Agreement.
9.11 Governing Law. This Agreement shall be interpreted, governed and
-------------
construed in all respects by the internal laws of the State of Illinois, and any
action commenced to enforce any of the provisions hereof shall have as its venue
Christian County, Illinois.
9.12 Payment of Legal Costs and Expenses. In the event any action is
-----------------------------------
commenced to challenge or enforce the terms and provisions hereof, the party who
is successful in such action based upon a final, unappealable court order, shall
be reimbursed by the unsuccessful party for his fee, costs and expenses
(including without limitation reasonable attorneys' and accountants' fees, costs
and expenses) incurred in connection with the legal proceeding.
17
<PAGE>
9.13 Gender. Unless the context otherwise requires, any pronouns,
------
wherever used herein, shall include the corresponding masculine, feminine or
neuter pronouns and the plural shall include the singular, and vice versa.
9.14 Headings. Article and paragraph headings are included herein
--------
solely for convenience and shall not be construed to modify or explain any of
the substantive provisions hereof.
9.15 Counterparts. This Agreement may be executed and delivered in two
------------
or more substantially identical counterparts, each of which shall be an original
document as to the person or persons signing it and all of which together shall
constitute a single binding agreement.
9.16 Invalid Provision. If any provision of this Agreement is finally
-----------------
determined by any court of competent jurisdiction to be effective only if said
provision is modified to limit its duration, area, scope or applicability and if
such determination is upheld on appeal or no appeal from such determination is
taken, then the parties hereto agree that they shall amend and modify such
provisions to restrict the duration, area, scope, or applicability thereof to
the minimum extent required to make such provision enforceable, and they further
hereby consent to the entry by a court of an order to so restrict such
provision. If any provision of this Agreement shall be held invalid, the
remainder of this Agreement shall continue in full force and effect.
9.17 No Right to Continued Employment. Nothing contained herein or by
--------------------------------
virtue of the ownership of Shares by any or all of the Non-Voting Shareholders
shall create, or be deemed to create, any right of employment in any Non-Voting
Shareholder, limit or restrict the Corporation's or any given Non-Voting
Shareholder's right to terminate such Non-Voting Shareholder's employment or
evidence any agreement or understanding that any given Non-Voting Shareholder
will remain employed by the Corporation for any particular length of time.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and attested by its duly authorized officer, and the Shareholders have
signed their names, all on the day and year first above written.
THE GSI GROUP, INC.
BY_______________________________
ITS CHIEF EXECUTIVE OFFICER
______________________________
JORGE ANDRADE
18
<PAGE>
______________________________
HOWARD G. BUFFETT
______________________________
JOHN W. FUNK
______________________________
CRAIG SLOAN
______________________________
GENE WISEMAN
______________________________
AL DEUTSCH
______________________________
CHRIS VAN ROSSEM
______________________________
DAVID VETTEL
______________________________
DONALD GALVIN
______________________________
RUSS MELLO
______________________________
KEVIN SLOAN
______________________________
DALE COLEE
______________________________
STEVE BASHAM
______________________________
DOUG MEYER
______________________________
GENE POLLOCK
______________________________
DAVE ANDRICKS
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM CONSOLIDATED
BALANCE SHEET CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-02-1999
<CASH> 1,832
<SECURITIES> 0
<RECEIVABLES> 35,366
<ALLOWANCES> 1,498
<INVENTORY> 54,296
<CURRENT-ASSETS> 8,042
<PP&E> 77,967
<DEPRECIATION> 27,126
<TOTAL-ASSETS> 176,746
<CURRENT-LIABILITIES> 54,415
<BONDS> 139,703
0
0
<COMMON> 20
<OTHER-SE> (19,000)
<TOTAL-LIABILITY-AND-EQUITY> 176,746
<SALES> 44,751
<TOTAL-REVENUES> 44,751
<CGS> 36,535
<TOTAL-COSTS> 36,535
<OTHER-EXPENSES> 11,720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,681
<INCOME-PRETAX> (7,185)
<INCOME-TAX> (241)
<INCOME-CONTINUING> (6,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,944)
<EPS-PRIMARY> 3.47
<EPS-DILUTED> 3.47
</TABLE>
