UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE) QUARTERLY REPORT / X / OR TRANSITION REPORT / /
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
July 31, 1999 Commission File No. 1-5865
GERBER SCIENTIFIC, INC.
---------------------------------
(Exact name of Registrant as
specified in its charter)
CONNECTICUT 06-0640743
------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
83 Gerber Road West, South Windsor, Connecticut 06074
- ------------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area (860) 644-1551
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 / /.
At July 31, 1999, 22,173,235 shares of common stock of the
Registrant were outstanding.
<PAGE 1>
GERBER SCIENTIFIC, INC.
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended July 31, 1999
PAGE
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statements of Earnings for the three months
ended July 31, 1999 and 1998 2
Balance Sheets at July 31, 1999 and
April 30, 1999 3-4
Statements of Cash Flows for the three months
ended July 31, 1999 and 1998 5
Notes to Financial Statements 6
Independent Accountants' Report 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
Exhibit Index 20
<PAGE 2>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------
Three Months
In thousands (except per share amounts) Ended July 31,
- --------------------------------------------------------------
1999 1998
----------------------
Revenue:
Product sales $125,856 $142,166
Service 13,620 11,493
-------- --------
139,476 153,659
-------- --------
Costs and Expenses:
Cost of product sales 72,621 83,868
Cost of service 7,305 6,687
Selling, general and administrative 37,228 41,756
Research and development expenses 8,598 7,628
-------- --------
125,752 139,939
-------- --------
Operating income 13,724 13,720
Other income 393 260
Interest expense (2,464) (3,158)
-------- --------
Earnings before income taxes 11,653 10,822
Provision for income taxes 4,100 4,100
-------- --------
Net earnings $ 7,553 $ 6,722
======== ========
Per share of common stock:
Basic $ .34 $ .30
Diluted $ .34 $ .29
Dividends $ .08 $ .08
Average shares outstanding:
Basic 22,118 22,673
Diluted 22,452 23,514
See Accompanying Notes
<PAGE 3-4>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------
July 31, April 30,
In thousands 1999 1999
- ---------------------------------------------------------------
Assets
Current Assets:
Cash and short-term cash investments $ 17,486 $ 26,523
Accounts receivable 108,388 103,118
Inventories 82,866 72,367
Prepaid expenses 17,125 23,690
-------- --------
225,865 225,698
-------- --------
Property, Plant and Equipment 156,810 152,374
Less accumulated depreciation 64,909 61,789
-------- --------
91,901 90,585
-------- --------
Intangible Assets 239,229 238,777
Less accumulated amortization 20,388 18,018
-------- --------
218,841 220,759
-------- --------
Other Assets 4,785 5,218
-------- --------
$541,392 $542,260
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ -- $ 193
Accounts payable 46,182 48,374
Accrued compensation and benefits 16,160 18,982
Other accrued liabilities 32,177 35,854
Deferred revenue 7,755 6,874
Advances on sales contracts 6,464 5,721
-------- --------
108,738 115,998
-------- --------
Noncurrent Liabilities:
Deferred income taxes 9,842 9,593
Long-term debt 172,195 173,338
-------- --------
182,037 182,931
-------- --------
Contingencies and Commitments
Shareholders' Equity:
Preferred stock, no par value;
authorized 10,000,000 shares; no
shares issued -- --
Common stock, $1.00 par value;
authorized 65,000,000 shares; issued
22,973,235 and 22,858,699 shares 22,973 22,859
Paid-in capital 42,345 40,255
Retained earnings 201,632 195,871
Treasury stock, at cost (800,000
shares) (16,450) (16,450)
Unamortized value of restricted stock
grants (531) (417)
Accumulated other comprehensive income 648 1,213
-------- --------
250,617 243,331
-------- --------
$541,392 $542,260
======== ========
See Accompanying Notes
<PAGE 5>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------
Three Months
In thousands Ended July 31,
- ---------------------------------------------------------------------
1999 1998
----------------------
Cash Provided by (Used for):
Operating Activities:
Net earnings $ 7,553 $ 6,722
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 6,096 5,662
Deferred income taxes 249 (591)
Other non-cash items 76 41
Changes in operating accounts, net of
effects of business acquisitions:
Receivables (5,270) (5,106)
Inventories (10,499) 4,355
Prepaid expenses 6,565 10,918
Accounts payable and accrued expenses (6,845) (6,004)
-------- --------
Provided by (Used for) Operating Activities (2,075) 15,997
-------- --------
Investing Activities:
Additions to property, plant and equipment (5,069) (2,465)
Business acquisitions -- (175,923)
Intangible and other assets 8 (129)
Other, net 590 610
-------- --------
(Used for) Investing Activities (4,471) (177,907)
-------- --------
Financing Activities:
Additions of long-term debt 10,606 181,686
Repayments of long-term debt (13,097) (7,383)
Net short-term financing -- (11,585)
Debt issue costs -- (705)
Proceeds from issuance of stock 1,765 1,051
Dividends on common stock (1,765) (1,811)
-------- --------
Provided by (Used for) Financing Activities (2,491) 161,253
-------- --------
(Decrease) in Cash and Short-Term
Cash Investments (9,037) (657)
Cash and Short-Term Cash Investments,
Beginning of Period 26,523 27,007
-------- --------
Cash and Short-Term Cash Investments, $ 17,486 $ 26,350
End of Period ======== ========
See Accompanying Notes
<PAGE 6>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month period ended July 31, 1999
are not necessarily indicative of the results that may be
expected for the year ended April 30, 2000.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended April 30, 1999.
NOTE 2. Inventories
The classification of inventories was as follows (in thousands):
July 31, 1999 April 30, 1999
------------- --------------
Raw materials and purchased $49,411 $42,097
parts
Work in process 33,455 30,270
------- -------
$82,866 $72,367
======= =======
NOTE 3. Segment Information
Three Months Ended
In thousands July 31,
- -------------------------------- ----------------------------
1999 1998
------------- -------------
Segment revenue:
Sign Making & Specialty Graphics $ 68,334 $ 72,559
Apparel & Flexible Materials 48,865 53,268
Ophthalmic Lens Processing 22,277 27,832
-------- --------
$139,476 $153,659
======== ========
Segment profit:
Sign Making & Specialty Graphics $ 8,866 $ 9,080
Apparel & Flexible Materials 5,144 5,521
Ophthalmic Lens Processing 1,251 1,659
-------- --------
$ 15,261 $ 16,260
======== ========
<PAGE 7>
A reconciliation of total segment profits to consolidated
earnings before income taxes is as follows:
Three Months Ended
In thousands July 31,
- -------------------------------- ---------------------------
1999 1998
------------ ------------
Segment profit $ 15,261 $ 16,260
Corporate expenses, net of
other income/expense (1,144) (2,280)
-------- --------
Earnings before interest and taxes 14,117 13,980
Interest expense (2,464) (3,158)
-------- --------
Earnings before income taxes $ 11,653 $ 10,822
======== ========
There were no material changes in segment assets or differences
in the basis of segmentation since the Company's last Annual
Report on Form 10-K. However, the measure of segment profit was
changed. In the Company's segment disclosures on Form 10-K for
the year ended April 30, 1999, and allocation of general corporate
expenses was included in the measure of segment profit. For the
three-month periods ended July 31, 1999 and 1998, segment profit
is reported as earnings before interest, taxes, and general corporate
expenses.
NOTE 4. Comprehensive Income
The Company's total comprehensive income was as follows (in
thousands):
Three Months Ended
July 31,
------------------
1999 1998
-------- --------
Net income $7,553 $6,722
Other comprehensive income (loss):
Foreign currency translation adjustments (565) 610
------ ------
Total comprehensive income $6,988 $7,332
====== ======
<PAGE 8>
NOTE 5. Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per share for the periods indicated:
Three Months Ended
July 31,
------------------------
1999 1998
---------- ----------
Numerator:
Net Income $ 7,553,000 $ 6,722,000
=========== ===========
Denominators:
Denominator for basic earnings
per share--weighted-average
shares outstanding 22,118,027 22,673,074
Effect of dilutive
securities:
Employee stock options 333,782 840,977
----------- -----------
Denominator for diluted
earnings per share-
adjusted weighted-average
shares outstanding 22,451,809 23,514,051
=========== ===========
Basic earnings per share $ .34 $ .30
=========== ===========
Diluted earnings per share $ .34 $ .29
=========== ===========
<PAGE 9>
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial statements
of Gerber Scientific, Inc. and subsidiaries at July 31, 1999 and
for the three-month periods ended July 31, 1999 and 1998, KPMG
LLP has made a review (based on procedures adopted by the
American Institute of Certified Public Accountants) and not an
audit, as set forth in their separate report dated August 18,
1999 appearing on page 10. That report does not express an
opinion on the interim unaudited consolidated financial
information. KPMG LLP has not carried out any significant or
additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly,
such report is not a "report" or "part of the Registration
Statement" within the meaning of Sections 7 and 11 of the
Securities Act of 1933 and the liability provisions of Section 11
of such Act do not apply.
<PAGE 10>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
We have made a review of the consolidated statements of earnings
and cash flows of Gerber Scientific, Inc. and subsidiaries for
the three-month periods ended July 31, 1999 and 1998 and the
consolidated balance sheet as of July 31, 1999 in accordance with
standards established by the American Institute of Certified
Public Accountants. We have previously audited, in accordance
with generally accepted auditing standards, and expressed our
unqualified opinion dated May 26, 1999 on the consolidated
financial statements for the year ended April 30, 1999 (not
presented herein). The aforementioned financial statements are
the responsibility of the Company's management.
A review of interim financial information consists principally of
applying analytical review procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
examination in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated statements of earnings and cash flows for the three-
month periods ended July 31, 1999 and 1998 or the consolidated
balance sheet as of July 31, 1999 for them to be in conformity
with generally accepted accounting principles. Also, in our
opinion the information in the accompanying consolidated balance
sheet as of April 30, 1999 is fairly presented, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ KPMG LLP
Hartford, Connecticut
August 18, 1999
<PAGE 11>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Sales for the first quarter ended July 31, 1999 were $139.5
million, a decrease of 9.2 percent from the same period last
year. The predominant causes of the decrease were lower revenues
in the Company's Ophthalmic Lens Processing operating segment,
the sale of certain distribution operations in the Sign Making
and Specialty Graphics operating segment in last year's second
quarter, and relatively weaker European currencies. Sales were
also adversely affected by the first quarter implementation of a
new enterprise resource planning (ERP) system for the Company's
Apparel and Flexible Materials operating segment.
The Company's backlog grew significantly in this year's first
quarter to $63.9 million at July 31, 1999, an increase of $17.4
million from the prior year comparable period and $13.1 million
higher than at the beginning of the current fiscal year. This
growth was caused by a higher level of orders received,
particularly for products recently introduced, and by the lower
first quarter shipments.
Operating income for the first quarter ended July 31, 1999 of
$13.7 million was substantially the same as the prior year
comparable period. Higher gross profit margins and lower
selling, general and administrative (S,G,&A) expenses this year
overcame the comparative sales shortfall. The Company's gross profit margin
percentage of 42.7 percent in this year's first quarter was 1.6
percentage points higher than the prior year margin of 41.1 percent.
This was caused by a current year sales mix favoring higher
margin products as well as higher levels of service revenue. The
effect of acquisition synergies and this year's lower level of
sales were principal reasons for the lower S,G,&A spending, along
with actions taken to resize the Ophthalmic Lens Processing
operating segment in last year's fourth quarter. The higher
level of research and development (R&D) expenses incurred in this
year's first quarter was associated with the strong new product
flow.
Lower interest expense and a lower tax rate caused net earnings
to rise for the three month period ended July 31, 1999 compared
with the same period last year. Diluted earnings per share
increased 17 percent to $0.34 in this year's first quarter from
$0.29 per share for the same period last year.
The Company's cash flow was adversely affected in this year's
first quarter by growth in working capital. This growth was
related to increased inventory associated with the introduction
of new products and inventory and receivable build-ups related
to the ERP system implementation noted above.
<PAGE 12>
FINANCIAL CONDITION
The Company's ratio of current assets to current liabilities was
2.1 to 1 at July 31, 1999 compared with 1.9 to 1 at April 30,
1999. Net working capital at July 31, 1999 was $117.1 million,
an increase of $7.4 million from the beginning of the current
fiscal year and largely attributable to higher inventory levels
resulting from new product introductions and ERP implementation
issues that adversely affected both inventory and accounts
receivable balances.
The Company's cash and investments totaled $17.5 million at
July 31, 1999 compared with $26.5 million at the end of the prior
fiscal year. Operating activities used $2.1 million in cash for
the three-month period ended July 31, 1999 compared with $16.0
million provided by operating activities for the same period last
year. Cash generated by earnings and the non-cash charges for
depreciation and amortization in this year's first three months
was offset by higher accounts receivable and inventory balances.
Lower accounts payable and accrued liabilities balances, due
largely to the timing of payments, also contributed to the cash
usage in the first quarter.
The principal non-operating use of cash in the three months ended
July 31, 1999 was for additions to property, plant, and equipment
of $5.1 million. The Company anticipates that capital
expenditures for the current fiscal year will be in the range of
$22 - $25 million and expects to fund these with cash on hand and
cash from operations. Cash was also used for payment of
dividends of $1.8 million in the first quarter.
The Company's total long-term debt at July 31, 1999 was $172.2
million, down slightly from the April 30, 1999 balance of $173.5
million. Net debt (total debt less cash and investments) was
$154.7 million at July 31, 1999 versus $147.0 million at April
30, 1999, as cash was used in the first quarter to finance the
growth in inventories and accounts receivable. The ratio of net
debt to total capital increased slightly to 38.2 percent at July
31, 1999 from 37.7 percent at April 30, 1999.
RESULTS OF OPERATIONS
Combined sales and service revenue for the three-month period
ended July 31, 1999 was $139.5 million, which was $14.2 million
(9.2 percent) lower than the first quarter last year. The
decrease reflected lower product sales and higher service
revenue. The lower product sales were caused by lower shipments
of Ophthalmic Lens Processing equipment ($5.6 million), which had
been anticipated; the prior year sale of certain distribution
operations in the Sign Making and Specialty Graphics operating
segment ($2.5 million); and the impact on sales of relatively
weaker European currencies ($2.5 million). Sales were also
adversely affected by the first quarter ERP implementation
in the Apparel and Flexible Materials operating segment. Service
<PAGE 13>
revenue increased $2.1 million (18.5 percent). The largest
increase came from the Apparel and Flexible Materials operating
segment and was partly the result of incentives used to enhance
that segment's service business.
The consolidated gross profit margin in this year's first three
months was 42.7 percent, which was significantly higher than the
prior year margin of 41.1 percent. Gross profit margins on both
product sales and service were higher. The increase in product
gross profit margins was the result of a product mix favoring
higher margin products such as software in the Apparel and
Flexible Materials operating segment and newly introduced
digital imaging products in the Sign Making and Specialty
Graphics operating segment. The increase in service gross profit
margins related to the Apparel and Flexible Materials business
and was caused by the service revenue increase noted above.
S,G,&A expenses decreased $4.5 million (10.8 percent) in the
first quarter compared with the prior year. In addition to the
lower spending related to the lower revenue base, the Company
realized marketing synergies in the Sign Making and Specialty
Graphics operating segment through the acquisition of Spandex PLC
and in the Ophthalmic Lens Processing operating segment through
the acquisition of Coburn Optical Industries, Inc. The S,G,&A
reduction was also partly the result of management action taken
in the prior year to resize the Ophthalmic Lens Processing
operating segment. As a percentage of sales, S,G,&A expenses
decreased to 26.7 percent in this year's first quarter from 27.2
percent last year.
The Company continued to commit significant resources to research
and the development of new products. R&D spending increased
$1 million (12.7 percent) in the first quarter compared with last
year's first quarter. The increase was related to the stepped-up
flow of new products from each of the Company's operating
segments. As a percentage of sales, research and development was
6.2 percent in the first quarter compared with 5.0 percent last
year. In addition to the higher spending, the lower revenue base
in this year's first quarter contributed to the higher
percentage.
<PAGE 14>
Interest expense decreased $0.7 million to $2.5 million in the
first quarter ended July 31, 1999, the result of lower interest
rates and lower debt balances. Most of the Company's borrowings
were against a $235 million multi-currency revolving credit
facility. The interest rate on these borrowings is based on the
London Interbank Offered Rate (LIBOR) for the relevant currency
and term plus a margin based on the relationship of the Company's
consolidated total debt to EBITDA (earnings before interest,
taxes, depreciation, and amortization).
The provision rate for income taxes was 35.2 percent for the
three months ended July 31, 1999 compared with 37.9 percent in
the comparable prior year period and 35.8 percent for the full
prior fiscal year. The lower tax rate this year was primarily
the result of tax reduction strategies involving the Company's
wholly-owned foreign subsidiaries.
As a result of the above, net earnings increased in this year's
first quarter to $7.6 million or $.34 diluted earnings per share
from $6.7 million or $.29 diluted earnings per share in last
year's first quarter.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). The Statement establishes
accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset
or liability measured at fair value and that changes in fair
value be recognized currently in earnings, unless specific hedge
accounting criteria are met. In June 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which delays the required adoption of SFAS
133 to the Company's fiscal year 2002. The timing of adoption
and the effect of SFAS 133 on the Company's financial position or
results of operations have not yet been determined.
YEAR 2000
As disclosed in the Company's Annual Report on Form 10-K for the
year ended April 30, 1999, the Company recognizes the business
risks posed by the Year 2000 date issue and is actively working
to control the associated risks. The risks identified by the
Company's Year 2000 compliance program remain the same and the
Company's assessment and remediation plans have not changed
materially in terms of scope, timing, or estimated costs. The
Company has completed its Year 2000 awareness, assessment, and
renovation phases, and has substantially completed the
verification and validation phase.
<PAGE 15>
The Company believes its mission critical internal information
technology (IT) systems and non-IT systems are ready for the Year
2000. Contingency plans are being developed, particularly for
high risk areas such as those involving supplier management.
The Company has assessed its Year 2000 risks related to
significant relationships with third parties via ongoing
communication with its critical suppliers and customers. The
Company continues to monitor and work directly with its key
suppliers and customers to avoid any business interruptions.
Despite these efforts, the Company can provide no assurance that
supplier and customer Year 2000 readiness plans will be
successfully completed in a timely manner.
Year 2000 expenditures were not material and were funded by
operating cash flows. While management does not expect
significant disruptions of critical business processes caused by
internal Year 2000 issues, the likelihood of externally-caused
disruptions and the ability of the contingency plans to minimize
the effects of any such disruptions is not determinable. However,
the Company believes its Year 2000 remediation efforts, together
with the diverse nature of its businesses, help reduce the
potential impact of the Year 2000 to levels that will not have a
material adverse impact on its financial position, results of
operations, or cash flows.
FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains statements which, to the extent
they are not statements of historical or present fact, constitute
"forward-looking statements" under the securities laws. From
time to time, oral or written forward-looking statements may also
be included in other materials released to the public. These
forward-looking statements are intended to provide management's
current expectations or plans for the future operating and
financial performance of the Company, based on assumptions
currently believed to be valid. Forward-looking statements can
be identified by the use of words such as "believe," "expect,"
"plans," "strategy," "prospects," "estimate," "project,"
"anticipate," and other words of similar meaning in connection
with a discussion of future operating or financial performance.
These include, among others, statements relating to:
- - the effect of economic downturns or growth in particular
regions,
- - the effect of changes in the level of activity in particular
industries or markets,
- - the anticipated uses of cash,
- - the scope or nature of acquisition activity,
- - prospective product developments,
- - cost reduction efforts,
- - the outcome of contingencies,
- - the impact of Year 2000 conversion efforts, and
- - the transition to the use of the euro as a currency.
<PAGE 16>
All forward-looking statements involve risks and uncertainties
that may cause actual results to differ materially from those
expressed or implied in the forward-looking statements. For
additional information identifying factors that may cause actual
results to vary materially from those stated in the forward-
looking statements, see the Company's reports on Forms 10-K,
10-Q, and 8-K filed with the Securities and Exchange Commission
from time to time. The Company's Annual Report on Form 10-K for
fiscal year 1999 includes important information as to risk
factors in the "Business" section under the headings "Operating
Segments" and "Other Matters Relating to the Corporation's
Business as a Whole."
<PAGE 17>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
No material changes have occurred in the quantitative and
qualitative market risk disclosures for the Company from those
presented in the Company's Annual Report on Form 10-K for the
year ended April 30, 1999.
<PAGE 18>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10.1)* Change in Control Agreement, dated July 14,
1999, between the Company and Michael J.
Cheshire.
(10.2)* Form of Change in Control Agreement, dated
July 14, 1999, between the Company and its
Senior Vice Presidents including Fredric K.
Rosen, Charles M. Hevenor, Gary K. Bennett,
and Richard F. Treacy, Jr.
(10.3)* Form of Change of Control Agreement, dated
July 14, 1999, between each of the Company's
three domestic subsidiaries and their
respective Presidents including Fredric K.
Rosen and Charles M. Hevenor.
(10.4)* Change in Control Agreement, dated July 14,
1999, between the Company and David J. Gerber.
(10.5)* Severance Policy for Senior Officers of Gerber
Scientific, Inc. and its domestic
subsidiaries.
(10.6)* Consulting Agreement between the Company and
David J. Logan commencing August 10, 1999.
(10.7) Gerber Scientific, Inc. 2000-2004 Executive
Annual Incentive Bonus Plan.
(15)* Letter regarding unaudited interim financial
information.
(27)* Financial data schedule.
(b) Reports on Form 8-K
No Form 8-K was filed during the quarter for which this
report is filed.
*Filed herewith.
<PAGE 19>
SIGNATURE
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.
GERBER SCIENTIFIC, INC.
------------------------
(Registrant)
Date: September 7, 1999 By: / s / Gary K. Bennett
------------------ --------------------------------
Gary K. Bennett
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
<PAGE 20>
EXHIBIT INDEX
Exhibit
Index Page
Number ----
--------
(10.1)* Change in Control Agreement, dated July 14,
1999, between the Company and Michael J.
Cheshire.
(10.2)* Form of Change in Control Agreement, dated
July 14, 1999, between the Company and its
Senior Vice Presidents including Fredric K.
Rosen, Charles M. Hevenor, Gary K. Bennett,
and Richard F. Treacy, Jr.
(10.3)* Form of Change of Control Agreement, dated
July 14, 1999, between each of the Company's
three domestic subsidiaries and their
respective Presidents including Fredric K.
Rosen and Charles M. Hevenor.
(10.4)* Change in Control Agreement, dated July 14,
1999, between the Company and David J.
Gerber.
(10.5)* Severance Policy for Senior Officers of
Gerber Scientific, Inc. and its domestic
subsidiaries.
(10.6)* Consulting Agreement between the Company and
David J. Logan commencing August 10, 1999.
(10.7) Gerber Scientific, Inc. 2000-2004 Executive
Annual Incentive Bonus Plan (incorporated
herein by reference to Appendix A to the
Company's Definitive Proxy Statement filed
in connection with the Annual Meeting of
Shareholders to be held September 15, 1999,
File No. 1-5865).
(15)* Letter regarding unaudited interim financial
information.
(27)* Financial data schedule.
*Filed herewith.
EXHIBIT 10.1
July 14, 1999
Michael Cheshire
Chairman & CEO
Gerber Scientific, Inc.
83 Gerber Road West
South Windsor, CT 06074
Dear Mike:
Gerber Scientific, Inc. (the "Company") considers it
essential to the best interests of its stockholders to
foster the continuous employment of key management
personnel. In this connection, should the Company face a
possible Change in Control (as defined in Section 2 of this
Agreement), such as the acquisition of a substantial share
of the equity or voting securities of the Company, the Board
of Directors of the Company (the "Board") has determined
that it is imperative that it and the Company be able to
rely upon your continued services without concern that you
might be distracted by the personal uncertainties and risks
that the possibility of a Change in Control might entail.
Accordingly, the Board has determined that appropriate
steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company's management to their assigned duties without
distraction in the face of potentially disturbing
circumstances that could arise out of a possibility for a
Change in Control of the Company.
In order to induce you to remain in the employ of the
Company and its subsidiaries and in consideration of your
agreement set forth in Section 2(B) hereof, the Company
agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event
your employment with the Company and its subsidiaries is
terminated subsequent to a Change in Control under the
circumstances described below.
1. Term of Agreement
This Agreement shall commence on the date hereof and
shall continue in effect through April 30, 2002, provided,
however, the term of this Agreement shall automatically be
extended for one additional year commencing on May 1, 2002
and on each May 1 thereafter, unless, not later than April
30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement;
provided further that, notwithstanding any such notice by
the Company not to extend, if a Change in Control shall have
occurred during the original or any extended term of this
Agreement, this Agreement shall continue in effect for a
period of twenty-four (24) months beyond the expiration of
the term in effect immediately before such Change in
Control.
2. Change in Control
(A) No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as set
forth below. For purposes of this Agreement a "Change in
Control" of the Company shall mean the occurrence of any one
or more of the following events:
(i) the Company shall (1) merge or consolidate with or into
another corporation or entity or enter into a share exchange
between the Company or stockholders of the Company and
another individual, corporation or other entity and as a
result of such merger, consolidation or share exchange less
than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation or
entity shall then be owned in the aggregate by the former
stockholders of the Company; or (2) sell, lease, exchange or
otherwise dispose of more than 2/3s of the Company's
property and assets in one transaction or a series of
related transactions to one or more individuals,
corporations or other entities that are not subsidiaries of
the Company, assuming that if consummation of such
transaction is subject, at the time of such approval by
stockholders, to the consent of any government or
governmental agency, such consent by the government or
governmental agency is obtained (either explicitly or
implicitly by consummation of the transaction);
(ii) the stockholders of the Company adopt a plan of
complete liquidation of the Company;
(iii) any "person" (as such term is used in Sections
13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (other than the Employee, the
Company, any of the Company's subsidiaries, any employee
benefit plan of the Company and/or one or more of its
subsidiaries or any person or entity organized, appointed or
established pursuant to the terms of any such employee
benefit plan) becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of voting
securities of the Company representing thirty percent (30%)
or more of the total number of votes eligible to be cast at
any election of directors of the Company; provided, however,
that no Change in Control shall be deemed to have occurred
under this subparagraph (iii) if such "person" becomes a
holder of the Company's securities in one or more
transactions initiated or pursued by the Company unless
after such transaction(s) less than fifty percent (50%) of
the outstanding voting securities of the Company shall be
owned in the aggregate by the former stockholders of the
Company; or
(iv) as a result of, or in connection with, any tender
offer or exchange offer, share exchange, merger,
consolidation or other business combination, sale, lease,
exchange or other disposition of more than 2/3s of the
Company's assets, a contested election, or any combination
of the foregoing transactions, the persons who are directors
of the Company on the date hereof (the "Incumbent Board")
shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;
provided that any person becoming a director subsequent to
the date hereof whose election or nomination for election by
the Company's stockholders was approved by a vote of at
least three-quarters (3/4) of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
a proxy statement of the Company in which such person is
named as a nominee for director without any objection to
such nomination) shall be, for purposes herein, considered
as though such person were a member of the Incumbent Board.
(B) In exchange for the benefits under this Agreement, you
agree that, subject to the terms and conditions herein, in
the event of a potential Change in Control of the Company
occurring after the date hereof, you will not voluntarily
terminate your employment with the Company and its
subsidiaries until the earlier of (i) the date which is six
months after the occurrence of such potential Change in
Control of the Company or (ii) the occurrence of a Change in
Control of the Company. If more than one potential Change
in Control occurs during the term of this Agreement, the
provisions of the preceding sentence shall be applicable to
each potential Change in Control occurring prior to an
actual Change in Control. For the purposes of this
Agreement, a "potential Change in Control" of the Company
shall be deemed to have occurred if: (i) the Company enters
into an agreement, the consummation of which would result in
the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to
take or to consider taking actions which if consummated
would constitute a Change in Control; or (iii) the Board
adopts a resolution to the effect that, for purposes of this
Agreement, a potential Change in Control of the Company has
occurred.
3. Termination Following Change in Control
If any of the events described in Section 2 hereof
constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 4
hereof upon the subsequent termination of your employment
with the Company and its subsidiaries during the term of
this Agreement and within two (2) years of the Change in
Control, unless such termination is (x) a result of your
death, Disability, or Retirement; (y) by you for other than
Good Reason (as defined in Section 3(A)); or (z) by the
Company or any of its subsidiaries for Cause (as defined in
Section 3(C)). The benefits provided in Section 4 shall be
in lieu of any termination, separation, severance or similar
benefits under your employment agreement, if any, or under
the Company's termination, separation, severance or similar
plans or policies, if any (other than benefit plans of the
Company which incidentally provide for benefits in the event
of a change in control, as such term is defined in such
plans). If your employment is terminated as a result of your
death, Disability or Retirement, by you for other than Good
Reason or by the Company or any of its subsidiaries for
Cause, then you shall not be entitled to any termination,
separation, severance or similar benefits under this
Agreement, and you shall be entitled to benefits under your
employment agreement, if any, and/or under the Company's
termination, separation, severance or similar plans or
policies, if any, only in accordance with the terms of any
such employment agreement, plans and policies.
(A) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purposes of this
Agreement, "Good Reason" shall mean the occurrence, without
your express written consent, of any of the following
circumstances:
(i) a significant change in the nature or scope of your
authorities, duties or responsibilities from those
applicable to you immediately prior to the date on which a
Change in Control occurs;
(ii) a reduction in your base annual salary from that
provided to you immediately prior to the date on which a
Change in Control occurs;
(iii) a diminution in your eligibility to participate in
compensation plans and employee benefits and perquisites
which provide opportunities to receive overall compensation
and benefits and perquisites from the greater of:
- - the opportunities provided by the Company (including
its subsidiaries) for executives with comparable duties; or
- - the opportunities under any such plans and perquisites
under which you were participating immediately prior to the
date on which a Change in Control occurs;
(iv) a change in the location of your principal place of
employment by the Company (including its subsidiaries) by
more than fifty (50) miles from the location where you were
principally employed immediately prior to the date on which
a Change in Control occurs;
(v) a significant increase in the frequency or duration of
your business travel; or
(vi) a reasonable determination by the Board of Directors of
the Company that, as a result of a Change in Control and a
change in circumstances thereafter significantly affecting
your position, you are unable to exercise the authorities,
powers, functions or duties attached to your position
immediately prior to the date on which a Change in Control
occurs.
(B) Disability; Retirement.
(i) For purposes of this Agreement, "Disability" shall mean
permanent and total disability as such term is defined under
Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"). Any question as to the existence of
your Disability upon which you and the Company cannot agree
shall be determined by a qualified independent physician
selected by you (or, if you are unable to make such
selection, such selection shall be made by any adult member
of your immediate family or your legal representative) and
approved by the Company, said approval not to be
unreasonably withheld. The determination of such physician
shall be made in writing to the Company and to you and shall
be final and conclusive for all purposes of this Agreement.
(ii) For purposes of this Agreement, "Retirement" shall mean
your voluntary termination of employment with the Company at
or after the age of 65 in accordance with the Company's
retirement policies (excluding early retirement) generally
applicable to its salaried employees or in accordance with
any retirement arrangement established with your consent
with respect to you.
(C) Cause. For purposes of this Agreement, "Cause" shall
mean (a) the willful and continued failure by you to
substantially perform your duties with the Company (other
than any such failure from your incapacity due to physical
or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination in the manner
provided for in Section 3(D) by you for Good Reason) after
written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not
substantially performed your duties, or (b) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise. For purposes of this Section 3(C), no act, or
failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that, in the good
faith opinion of the Board you were guilty of conduct set
forth above in this Section 3(C) and specifying the
particulars thereof.
(D) Any termination of your employment by the Company or
any of its subsidiaries or by you shall be made by written
notice of termination to the other party. Such "Notice of
Termination" shall mean a written document specifying the
provision in this Agreement being relied upon and setting
forth a summary of the facts and circumstances which provide
the basis for termination of your employment. The "Date of
Termination" shall be the date upon which the Notice of
Termination is given.
4. Compensation upon Termination Following a Change in
Control
(A) If your employment shall be terminated for any reason
otherwise than (x) as a result of your death, Disability or
Retirement; (y) by you for other than Good Reason; or (z) by
the Company or any of its subsidiaries for Cause, within two
(2) years following a Change in Control (as defined in
Section 2), then you shall be entitled to the benefits
provided below:
(i) The Company or one of its subsidiaries shall pay you,
not later than the fifth business day following the Date of
Termination ("Payment Date"), the sum of your full base
salary through the Date of Termination, as earned by you but
not yet paid to you, at the salary level in effect on (x)
the Date of Termination or (y) the day immediately preceding
the date of the Change in Control, whichever is higher
("full base salary"), and your pro rata share of your annual
incentive bonus payment in effect on the Date of
Termination. The Company or one of its subsidiaries shall
also pay you all other amounts to which you are entitled
under any compensation plan of the Company applicable to
you, at the time such payments are due. For purposes of
this Section 4 and the other provisions of this Agreement,
"your annual incentive bonus payment in effect on the Date
of Termination" shall mean the target amount of your annual
incentive bonus payment (under the Company's Annual
Incentive Bonus Plan or any successor plan) for the year in
which the Notice of Termination is given. Your pro rata
share of your annual incentive bonus payment in effect on
the Date of Termination shall be that percentage of your
annual incentive bonus payment in effect on the Date of
Termination that is equal to the number of days in the
fiscal year completed prior to the Date of Termination
divided by 365.
(ii) On the Payment Date the Company shall also pay you a
severance payment equal to three (3) times the sum of (x)
your full base salary and (y) your annual incentive bonus
payment in effect on the Date of Termination.
(iii) The Company shall cause (x) all unvested stock
options or other stock grants held by you on the Date of
Termination immediately to vest and be fully exercisable as
of the Date of Termination, (y) any restrictions on all
restricted stock held by you on the Date of Termination
immediately to lapse and all shares of such stock to fully
vest as of the Date of Termination, and (z) any accrued
benefit or deferred arrangement of the Company that you
otherwise would become entitled to if you continued
employment with the Company immediately to vest as of the
Date of Termination.
(iv) The Company shall maintain in full force for three (3)
year(s) following the Date of Termination (the "Benefit
Period") all life insurance, health (medical and dental),
accidental death and dismemberment, pension and disability
plans and programs in which you are entitled to participate
immediately prior to the Date of Termination, or if your
continued participation is not possible under the general
terms and provisions of such plans and programs, the
Company shall provide you with benefits equivalent to those
provided by such plans and programs, provided that the
Company will not be required to maintain these plans and
programs, or the equivalent thereof, beyond your reaching
the age of 65 or upon your securing new full time employment
which makes such benefits available to you. Additional
years of service equal to the length of the Benefit Period
will be credited to you for purposes of calculating your
benefits under the Company's Pension Plans at the rate of
your full base salary and annual incentive bonus payment in
effect on the Date of Termination (as defined in Section
4(A)(i) hereof).
(v) The Company shall make available to you, at the
Company's expense, outplacement counseling services. You
may select the organization that will provide you with such
services, provided that the Company shall not be required to
pay more than $50,000 for any such services.
(B) There shall be no limit on the amount of payments due
you under Section 4(A) unless (i) your net income from the
payments made under Section 4(A) would be maximized, in
consideration of federal, state and local income and excise
taxes, from limiting the sum of payments (the "Total Lump
Sum Payment") in Section 4(A) to 2.99 times your prior five
years' average income, or "base amount" as defined in
Section 280G of the Internal Revenue Code, as amended (the
"Code"), and (ii) the Total Lump Sum Payment due to you is
more than 2.99 times your base amount but not more than 3.5
times your base amount. In such case, your Total Lump Sum
Payment will be reduced to 2.99 times your base amount.
(C) In the event that any payment or benefit received or to
be received by you pursuant to the terms of this Agreement
(the "Contract Payments") or in connection with your
termination of employment or contingent upon a Change in
Control of the Company pursuant to any plan or arrangement
or other agreement with the Company (or any affiliate)
("Other Payments" and, together with the Contract Payments,
the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Code, as
determined as provided below, and has not been subject to
the modified cap described in Section 4(B), the Company
shall pay to you, at the time specified in Section 4(C)(iii)
below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of the
Excise Tax on Contract Payments and Other Payments and any
federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 4(C), and any interest,
penalties or additions to tax payable by you with respect
thereto, shall be equal to the total present value of the
Contract Payments and Other Payments at the time such
Payments are to be made.
(i) For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such
Excise Tax,
- - the total amount of the Payments shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, except to the
extent that, in the opinion of independent tax counsel
retained by the Company's independent auditors and
reasonably acceptable to you ("Tax Counsel"), a Payment (in
whole or in part) does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are
not subject to the Excise Tax;
- - the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code (after applying the previous clause);
and
- - the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in
accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at
the highest marginal rates of federal income taxation
applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable
to individuals as are in effect in the state and locality of
your residence for tax purposes in the calendar year in
which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account
any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.
(iii) The Gross-Up Payments provided for in this Section
4(C) hereof shall be made upon the earlier of (x) the
payment to you of any Contract Payment or Other Payment or
(y) the imposition upon you or payment by you of any Excise
Tax.
(iv) If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax is less than the
amount taken into account under this Section 4(C), you shall
repay to the Company within five (5) business days of your
receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax
or a federal, state and local income tax deduction) plus any
interest received by you on the amount of such repayment.
If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax exceeds the
amount taken into account hereunder (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such
excess within five (5) business days of the Company's
receipt of notice of such final determination or opinion.
(D) The Company shall also pay to you all legal fees and
expenses, if any, reasonably incurred by you in connection
with seeking to obtain or enforce any right or benefit
provided by this Agreement.
(E) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by
another employer or by retirement benefits received after
the Date of Termination or otherwise.
5. Successors; Binding Agreement
(A) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
no succession had taken place. Failure of the Company to
obtain such assumption and agreement within thirty days
following the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the
same terms as you would be entitled hereunder if you had
terminated your employment for Good Reason following a
Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used
in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is
no such designee, to your estate.
6. Confidential Information
You shall hold in fiduciary capacity for the benefit of
the Company or its subsidiaries all secret or confidential
information, knowledge or data relating to the Company, the
subsidiaries and their respective businesses, which shall
have been obtained during your employment by the Company or
its subsidiary and which shall not be public knowledge
(other than by acts by you or your representatives in
violation of this Agreement). After termination of your
employment with the Company or its subsidiaries, you shall
not, without prior written consent of the Company or its
subsidiaries, communicate or divulge any such information,
knowledge or data to anyone other than the Company or its
subsidiaries or those designated by them. The preceding two
sentences shall not apply with respect to any information
you are required to disclose pursuant to a valid and
effective subpoena or order issued by a court of competent
jurisdiction or with respect to any information you are
reasonably required to disclose in enforcing the terms of
this Agreement. In no event shall an asserted violation of
this Section 6 constitute a basis for deferring or
withholding any amounts otherwise payable to you under this
Agreement, nor will any asserted violation of this Section 6
relieve you of your responsibilities under this Agreement.
7. Agreement Not to Compete
You agree that for a period of one year following the
Date of Termination, you will not engage, directly or
indirectly, whether as a principal, agent, distributor,
representative, consultant, employee, partner, stockholder,
limited partner or other investor (other than an investment
of not more than two percent (2%) of the stock or equity of
any corporation the capital stock of which is publicly
traded) or otherwise, in the same or a substantially similar
business as that conducted and carried on by the Company or
any of its subsidiaries and being directly competitive with
the Company or any of its subsidiaries on the Date of
Termination or at any time during such one-year period.
8. Notice
For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the address
set forth on the first page of this Agreement with respect
to the Company and on the signature page with respect to
you, provided that all notices to the Company shall be
directed to the attention of the President of the Company,
or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon
receipt.
9. Miscellaneous
No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge
is agreed to in writing and signed by you and such officer
as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any conditions or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement. Further, the
validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Connecticut. All references to sections of the Code or
Exchange Act shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding
required under federal, state or local law.
10. Validity
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11. Counterparts
This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return the original to me and
make a copy for your records. When executed and returned
this letter shall constitute the entire Agreement on this
subject between you and the Company.
Sincerely,
GERBER SCIENTIFIC, INC.
By: /s/ Becket Q. McNab
Name: Becket Q. McNab
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: /s/ Michael J. Cheshire
Michael Cheshire
____________________________________
Mailing Address
____________________________________
EXHIBIT 10.2
July 14, 1999
Senior Vice President
Gerber Scientific, Inc.
83 Gerber Road West
South Windsor, CT 06074
Dear Senior Vice President:
Gerber Scientific, Inc. (the "Company") considers it
essential to the best interests of its stockholders to
foster the continuous employment of key management
personnel. In this connection, should the Company face a
possible Change in Control (as defined in Section 2 of this
Agreement), such as the acquisition of a substantial share
of the equity or voting securities of the Company, the Board
of Directors of the Company (the "Board") has determined
that it is imperative that it and the Company be able to
rely upon your continued services without concern that you
might be distracted by the personal uncertainties and risks
that the possibility of a Change in Control might entail.
Accordingly, the Board has determined that appropriate
steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company's management to their assigned duties without
distraction in the face of potentially disturbing
circumstances that could arise out of a possibility for a
Change in Control of the Company.
In order to induce you to remain in the employ of the
Company and its subsidiaries and in consideration of your
agreement set forth in Section 2(B) hereof, the Company
agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event
your employment with the Company and its subsidiaries is
terminated subsequent to a Change in Control under the
circumstances described below.
1. Term of Agreement
This Agreement shall commence on the date hereof and
shall continue in effect through April 30, 2002, provided,
however, the term of this Agreement shall automatically be
extended for one additional year commencing on May 1, 2002
and on each May 1 thereafter, unless, not later than April
30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement;
provided further that, notwithstanding any such notice by
the Company not to extend, if a Change in Control shall have
occurred during the original or any extended term of this
Agreement, this Agreement shall continue in effect for a
period of twenty-four (24) months beyond the expiration of
the term in effect immediately before such Change in
Control.
2. Change in Control
(A) No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as set
forth below. For purposes of this Agreement a "Change in
Control" of the Company shall mean the occurrence of any one
or more of the following events:
(i) the Company shall (1) merge or consolidate with or into
another corporation or entity or enter into a share exchange
between the Company or stockholders of the Company and
another individual, corporation or other entity and as a
result of such merger, consolidation or share exchange less
than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation or
entity shall then be owned in the aggregate by the former
stockholders of the Company; or (2) sell, lease, exchange or
otherwise dispose of more than 2/3s of the Company's
property and assets in one transaction or a series of
related transactions to one or more individuals,
corporations or other entities that are not subsidiaries of
the Company, assuming that if consummation of such
transaction is subject, at the time of such approval by
stockholders, to the consent of any government or
governmental agency, such consent by the government or
governmental agency is obtained (either explicitly or
implicitly by consummation of the transaction);
(ii) the stockholders of the Company adopt a plan of
complete liquidation of the Company;
(iii) any "person" (as such term is used in Sections
13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (other than the Employee, the
Company, any of the Company's subsidiaries, any employee
benefit plan of the Company and/or one or more of its
subsidiaries or any person or entity organized, appointed or
established pursuant to the terms of any such employee
benefit plan) becomes the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of voting
securities of the Company representing thirty percent (30%)
or more of the total number of votes eligible to be cast at
any election of directors of the Company; provided, however,
that no Change in Control shall be deemed to have occurred
under this subparagraph (iii) if such "person" becomes a
holder of the Company's securities in one or more
transactions initiated or pursued by the Company unless
after such transaction(s) less than fifty percent (50%) of
the outstanding voting securities of the Company shall be
owned in the aggregate by the former stockholders of the
Company; or
(iv) as a result of, or in connection with, any tender offer
or exchange offer, share exchange, merger, consolidation or
other business combination, sale, lease, exchange or other
disposition of more than 2/3s of the Company's assets, a
contested election, or any combination of the foregoing
transactions, the persons who are directors of the Company
on the date hereof (the "Incumbent Board") shall cease to
constitute a majority of the Board of Directors of the
Company or any successor to the Company; provided that any
person becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's
stockholders was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent
Board (either by a specific vote or by approval of a proxy
statement of the Company in which such person is named as a
nominee for director without any objection to such
nomination) shall be, for purposes herein, considered as
though such person were a member of the Incumbent Board.
(B) In exchange for the benefits under this Agreement, you
agree that, subject to the terms and conditions herein, in
the event of a potential Change in Control of the Company
occurring after the date hereof, you will not voluntarily
terminate your employment with the Company and its
subsidiaries until the earlier of (i) the date which is six
months after the occurrence of such potential Change in
Control of the Company or (ii) the occurrence of a Change in
Control of the Company. If more than one potential Change
in Control occurs during the term of this Agreement, the
provisions of the preceding sentence shall be applicable to
each potential Change in Control occurring prior to an
actual Change in Control. For the purposes of this
Agreement, a "potential Change in Control" of the Company
shall be deemed to have occurred if: (i) the Company enters
into an agreement, the consummation of which would result in
the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to
take or to consider taking actions which if consummated
would constitute a Change in Control; or (iii) the Board
adopts a resolution to the effect that, for purposes of this
Agreement, a potential Change in Control of the Company has
occurred.
3. Termination Following Change in Control
If any of the events described in Section 2 hereof
constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 4
hereof upon the subsequent termination of your employment
with the Company and its subsidiaries during the term of
this Agreement and within two (2) years of the Change in
Control, unless such termination is (x) a result of your
death, Disability, or Retirement; (y) by you for other than
Good Reason (as defined in Section 3(A)); or (z) by the
Company or any of its subsidiaries for Cause (as defined in
Section 3(C)). The benefits provided in Section 4 shall be
in lieu of any termination, separation, severance or similar
benefits under your employment agreement, if any, or under
the Company's termination, separation, severance or similar
plans or policies, if any (other than benefit plans of the
Company which incidentally provide for benefits in the event
of a change in control, as such term is defined in such
plans). If your employment is terminated as a result of your
death, Disability or Retirement, by you for other than Good
Reason or by the Company or any of its subsidiaries for
Cause, then you shall not be entitled to any termination,
separation, severance or similar benefits under this
Agreement, and you shall be entitled to benefits under your
employment agreement, if any, and/or under the Company's
termination, separation, severance or similar plans or
policies, if any, only in accordance with the terms of any
such employment agreement, plans and policies.
(A) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purposes of this
Agreement, "Good Reason" shall mean the occurrence, without
your express written consent, of any of the following
circumstances:
(i) a significant change in the nature or scope of your
authorities, duties or responsibilities from those
applicable to you immediately prior to the date on which a
Change in Control occurs;
(ii) a reduction in your base annual salary from that
provided to you immediately prior to the date on which a
Change in Control occurs;
(iii) a diminution in your eligibility to participate in
compensation plans and employee benefits and perquisites
which provide opportunities to receive overall compensation
and benefits and perquisites from the greater of:
- - the opportunities provided by the Company (including
its subsidiaries) for executives with comparable duties; or
- - the opportunities under any such plans and perquisites
under which you were participating immediately prior to the
date on which a Change in Control occurs;
(iv) a change in the location of your principal place of
employment by the Company (including its subsidiaries) by
more than fifty (50) miles from the location where you were
principally employed immediately prior to the date on which
a Change in Control occurs;
(v) a significant increase in the frequency or duration of
your business travel; or
(vi) a reasonable determination by the Board of Directors of
the Company that, as a result of a Change in Control and a
change in circumstances thereafter significantly affecting
your position, you are unable to exercise the authorities,
powers, functions or duties attached to your position
immediately prior to the date on which a Change in Control
occurs.
(B) Disability; Retirement.
(i) For purposes of this Agreement, "Disability" shall mean
permanent and total disability as such term is defined under
Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"). Any question as to the existence of
your Disability upon which you and the Company cannot agree
shall be determined by a qualified independent physician
selected by you (or, if you are unable to make such
selection, such selection shall be made by any adult member
of your immediate family or your legal representative) and
approved by the Company, said approval not to be
unreasonably withheld. The determination of such physician
shall be made in writing to the Company and to you and shall
be final and conclusive for all purposes of this Agreement.
(ii) For purposes of this Agreement, "Retirement" shall mean
your voluntary termination of employment with the Company at
or after the age of 65 in accordance with the Company's
retirement policies (excluding early retirement) generally
applicable to its salaried employees or in accordance with
any retirement arrangement established with your consent
with respect to you.
(C) Cause. For purposes of this Agreement, "Cause" shall
mean (a) the willful and continued failure by you to
substantially perform your duties with the Company (other
than any such failure from your incapacity due to physical
or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination in the manner
provided for in Section 3(D) by you for Good Reason) after
written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not
substantially performed your duties, or (b) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise. For purposes of this Section 3(C), no act, or
failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that, in the good
faith opinion of the Board you were guilty of conduct set
forth above in this Section 3(C) and specifying the
particulars thereof.
(D) Any termination of your employment by the Company or
any of its subsidiaries or by you shall be made by written
notice of termination to the other party. Such "Notice of
Termination" shall mean a written document specifying the
provision in this Agreement being relied upon and setting
forth a summary of the facts and circumstances which provide
the basis for termination of your employment. The "Date of
Termination" shall be the date upon which the Notice of
Termination is given.
4. Compensation upon Termination Following a Change in
Control
(A) If your employment shall be terminated for any reason
otherwise than (x) as a result of your death, Disability or
Retirement; (y) by you for other than Good Reason; or (z) by
the Company or any of its subsidiaries for Cause, within two
(2) years following a Change in Control (as defined in
Section 2), then you shall be entitled to the benefits
provided below:
(i) The Company or one of its subsidiaries shall pay you,
not later than the fifth business day following the Date of
Termination ("Payment Date"), the sum of your full base
salary through the Date of Termination, as earned by you but
not yet paid to you, at the salary level in effect on (x)
the Date of Termination or (y) the day immediately preceding
the date of the Change in Control, whichever is higher
("full base salary"), and your pro rata share of your annual
incentive bonus payment in effect on the Date of
Termination. The Company or one of its subsidiaries shall
also pay you all other amounts to which you are entitled
under any compensation plan of the Company applicable to
you, at the time such payments are due. For purposes of
this Section 4 and the other provisions of this Agreement,
"your annual incentive bonus payment in effect on the Date
of Termination" shall mean the target amount of your annual
incentive bonus payment (under the Company's Annual
Incentive Bonus Plan or any successor plan) for the year in
which the Notice of Termination is given. Your pro rata
share of your annual incentive bonus payment in effect on
the Date of Termination shall be that percentage of your
annual incentive bonus payment in effect on the Date of
Termination that is equal to the number of days in the
fiscal year completed prior to the Date of Termination
divided by 365.
(ii) On the Payment Date the Company shall also pay you a
severance payment equal to two and one half (2 1/2) times
the sum of (x) your full base salary and (y) your annual
incentive bonus payment in effect on the Date of
Termination.
(iii) The Company shall cause (x) all unvested stock
options or other stock grants held by you on the Date of
Termination immediately to vest and be fully exercisable as
of the Date of Termination, (y) any restrictions on all
restricted stock held by you on the Date of Termination
immediately to lapse and all shares of such stock to fully
vest as of the Date of Termination, and (z) any accrued
benefit or deferred arrangement of the Company that you
otherwise would become entitled to if you continued
employment with the Company immediately to vest as of the
Date of Termination.
(iv) The Company shall maintain in full force for two and
one half (2 1/2) year(s) following the Date of Termination
(the "Benefit Period") all life insurance, health (medical
and dental), accidental death and dismemberment, pension and
disability plans and programs in which you are entitled to
participate immediately prior to the Date of Termination, or
if your continued participation is not possible under the
general terms and provisions of such plans and programs,
the Company shall provide you with benefits equivalent to
those provided by such plans and programs, provided that the
Company will not be required to maintain these plans and
programs, or the equivalent thereof, beyond your reaching
the age of 65 or upon your securing new full time employment
which makes such benefits available to you. Additional
years of service equal to the length of the Benefit Period
will be credited to you for purposes of calculating your
benefits under the Company's Pension Plans at the rate of
your full base salary and annual incentive bonus payment in
effect on the Date of Termination (as defined in Section
4(A)(i) hereof).
(v) The Company shall make available to you, at the
Company's expense, outplacement counseling services. You
may select the organization that will provide you with such
services, provided that the Company shall not be required to
pay more than $50,000 for any such services.
(B) There shall be no limit on the amount of payments due
you under Section 4(A) unless (i) your net income from the
payments made under Section 4(A) would be maximized, in
consideration of federal, state and local income and excise
taxes, from limiting the sum of payments (the "Total Lump
Sum Payment") in Section 4(A) to 2.99 times your prior five
years' average income, or "base amount" as defined in
Section 280G of the Internal Revenue Code, as amended (the
"Code"), and (ii) the Total Lump Sum Payment due to you is
more than 2.99 times your base amount but not more than 3.5
times your base amount. In such case, your Total Lump Sum
Payment will be reduced to 2.99 times your base amount.
(C) In the event that any payment or benefit received or to
be received by you pursuant to the terms of this Agreement
(the "Contract Payments") or in connection with your
termination of employment or contingent upon a Change in
Control of the Company pursuant to any plan or arrangement
or other agreement with the Company (or any affiliate)
("Other Payments" and, together with the Contract Payments,
the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Code, as
determined as provided below, and has not been subject to
the modified cap described in Section 4(B), the Company
shall pay to you, at the time specified in Section 4(C)(iii)
below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of the
Excise Tax on Contract Payments and Other Payments and any
federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 4(C), and any interest,
penalties or additions to tax payable by you with respect
thereto, shall be equal to the total present value of the
Contract Payments and Other Payments at the time such
Payments are to be made.
(i) For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such
Excise Tax,
- - the total amount of the Payments shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, except to the
extent that, in the opinion of independent tax counsel
retained by the Company's independent auditors and
reasonably acceptable to you ("Tax Counsel"), a Payment (in
whole or in part) does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are
not subject to the Excise Tax;
- - the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code (after applying the previous clause);
and
- - the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in
accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at
the highest marginal rates of federal income taxation
applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation applicable
to individuals as are in effect in the state and locality of
your residence for tax purposes in the calendar year in
which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account
any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.
(iii) The Gross-Up Payments provided for in this Section
4(C) hereof shall be made upon the earlier of (x) the
payment to you of any Contract Payment or Other Payment or
(y) the imposition upon you or payment by you of any Excise
Tax.
(iv) If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax is less than the
amount taken into account under this Section 4(C), you shall
repay to the Company within five (5) business days of your
receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax
or a federal, state and local income tax deduction) plus any
interest received by you on the amount of such repayment.
If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the
opinion of Tax Counsel that the Excise Tax exceeds the
amount taken into account hereunder (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such
excess within five (5) business days of the Company's
receipt of notice of such final determination or opinion.
(D) The Company shall also pay to you all legal fees and
expenses, if any, reasonably incurred by you in connection
with seeking to obtain or enforce any right or benefit
provided by this Agreement.
(E) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by
another employer or by retirement benefits received after
the Date of Termination or otherwise.
5. Successors; Binding Agreement
(A) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
no succession had taken place. Failure of the Company to
obtain such assumption and agreement within thirty days
following the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the
same terms as you would be entitled hereunder if you had
terminated your employment for Good Reason following a
Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used
in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is
no such designee, to your estate.
6. Confidential Information
You shall hold in fiduciary capacity for the benefit of
the Company or its subsidiaries all secret or confidential
information, knowledge or data relating to the Company, the
subsidiaries and their respective businesses, which shall
have been obtained during your employment by the Company or
its subsidiary and which shall not be public knowledge
(other than by acts by you or your representatives in
violation of this Agreement). After termination of your
employment with the Company or its subsidiaries, you shall
not, without prior written consent of the Company or its
subsidiaries, communicate or divulge any such information,
knowledge or data to anyone other than the Company or its
subsidiaries or those designated by them. The preceding two
sentences shall not apply with respect to any information
you are required to disclose pursuant to a valid and
effective subpoena or order issued by a court of competent
jurisdiction or with respect to any information you are
reasonably required to disclose in enforcing the terms of
this Agreement. In no event shall an asserted violation of
this Section 6 constitute a basis for deferring or
withholding any amounts otherwise payable to you under this
Agreement, nor will any asserted violation of this Section 6
relieve you of your responsibilities under this Agreement.
7. Agreement Not to Compete
You agree that for a period of one year following the
Date of Termination, you will not engage, directly or
indirectly, whether as a principal, agent, distributor,
representative, consultant, employee, partner, stockholder,
limited partner or other investor (other than an investment
of not more than two percent (2%) of the stock or equity of
any corporation the capital stock of which is publicly
traded) or otherwise, in the same or a substantially similar
business as that conducted and carried on by the Company or
any of its subsidiaries and being directly competitive with
the Company or any of its subsidiaries on the Date of
Termination or at any time during such one-year period.
8. Notice
For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the address
set forth on the first page of this Agreement with respect
to the Company and on the signature page with respect to
you, provided that all notices to the Company shall be
directed to the attention of the President of the Company,
or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon
receipt.
9. Miscellaneous
No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge
is agreed to in writing and signed by you and such officer
as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any conditions or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not
expressly set forth in this Agreement. Further, the
validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Connecticut. All references to sections of the Code or
Exchange Act shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding
required under federal, state or local law.
10. Validity
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11. Counterparts
This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return the original to me and
make a copy for your records. When executed and returned
this letter shall constitute the entire Agreement on this
subject between you and the Company..
Sincerely,
GERBER SCIENTIFIC, INC.
By:_____________________
Name: Becket Q. McNab
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: ____________________________
Senior Vice President
____________________________
Mailing Address
____________________________
EXHIBIT 10.3
July 14, 1999
Subsidiary President
Gerber Scientific Domestic Subsidiary
Dear Subsidiary President:
Gerber Scientific, Inc. (the "Company") considers it
essential to the best interests of its stockholders to foster the
continuous employment of key management personnel. In this
connection, should the Company face a possible Change in Control
(as defined in Section 2 of this Agreement), such as the
acquisition of a substantial share of the equity or voting
securities of the Company, the Board of Directors of the Company
(the "Board") has determined that it is imperative that it and
the Company be able to rely upon your continued services without
concern that you might be distracted by the personal
uncertainties and risks that the possibility of a Change in
Control might entail.
Accordingly, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management
to their assigned duties without distraction in the face of
potentially disturbing circumstances that could arise out of a
possibility for a Change in Control of the Company.
In order to induce you to remain in the employ of the
Company and its subsidiaries and in consideration of your
agreement set forth in Section 2(B) hereof, the Company agrees
that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with
the Company and its subsidiaries is terminated subsequent to a
Change in Control under the circumstances described below.
1. Term of Agreement
This Agreement shall commence on the date hereof and shall
continue in effect through April 30, 2002, provided, however, the
term of this Agreement shall automatically be extended for one
additional year commencing on May 1, 2002 and on each May 1
thereafter, unless, not later than April 30 of the preceding
year, the Company shall have given notice that it does not wish
to extend this Agreement; provided further that, notwithstanding
any such notice by the Company not to extend, if a Change in
Control shall have occurred during the original or any extended
term of this Agreement, this Agreement shall continue in effect
for a period of twenty-four (24) months beyond the expiration of
the term in effect immediately before such Change in Control.
2. Change in Control
(A) No benefits shall be payable hereunder unless there shall
have been a Change in Control of the Company, as set forth below.
For purposes of this Agreement a "Change in Control" of the
Company shall mean the occurrence of any one or more of the
following events:
(i) the Company shall (1) merge or consolidate with or into
another corporation or entity or enter into a share exchange
between the Company or stockholders of the Company and another
individual, corporation or other entity and as a result of such
merger, consolidation or share exchange less than fifty percent
(50%) of the outstanding voting securities of the surviving or
resulting corporation or entity shall then be owned in the
aggregate by the former stockholders of the Company; or (2) sell,
lease, exchange or otherwise dispose of more than 2/3s of the
Company's property and assets in one transaction or a series of
related transactions to one or more individuals, corporations or
other entities that are not subsidiaries of the Company, assuming
that if consummation of such transaction is subject, at the time
of such approval by stockholders, to the consent of any
government or governmental agency, such consent by the government
or governmental agency is obtained (either explicitly or
implicitly by consummation of the transaction);
(ii) the stockholders of the Company adopt a plan of complete
liquidation of the Company;
(iii) any "person" (as such term is used in Sections 13(d) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (other than the Employee, the Company, any of
the Company's subsidiaries, any employee benefit plan of the
Company and/or one or more of its subsidiaries or any person or
entity organized, appointed or established pursuant to the terms
of any such employee benefit plan) becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
voting securities of the Company representing thirty percent
(30%) or more of the total number of votes eligible to be cast at
any election of directors of the Company; provided, however, that
no Change in Control shall be deemed to have occurred under this
subparagraph (iii) if such "person" becomes a holder of the
Company's securities in one or more transactions initiated or
pursued by the Company unless after such transaction(s) less than
fifty percent (50%) of the outstanding voting securities of the
Company shall be owned in the aggregate by the former
stockholders of the Company; or
(iv) as a result of, or in connection with, any tender offer or
exchange offer, share exchange, merger, consolidation or other
business combination, sale, lease, exchange or other disposition
of more than 2/3s of the Company's assets, a contested election,
or any combination of the foregoing transactions, the persons who
are directors of the Company on the date hereof (the "Incumbent
Board") shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;
provided that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the
Company's stockholders was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of a proxy statement of
the Company in which such person is named as a nominee for
director without any objection to such nomination) shall be, for
purposes herein, considered as though such person were a member
of the Incumbent Board.
(B) In exchange for the benefits under this Agreement, you agree
that, subject to the terms and conditions herein, in the event of
a potential Change in Control of the Company occurring after the
date hereof, you will not voluntarily terminate your employment
with the Company and its subsidiaries until the earlier of (i)
the date which is six months after the occurrence of such
potential Change in Control of the Company or (ii) the occurrence
of a Change in Control of the Company. If more than one
potential Change in Control occurs during the term of this
Agreement, the provisions of the preceding sentence shall be
applicable to each potential Change in Control occurring prior to
an actual Change in Control. For the purposes of this
Agreement, a "potential Change in Control" of the Company shall
be deemed to have occurred if: (i) the Company enters into an
agreement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential Change in
Control of the Company has occurred.
3. Termination Following Change in Control
If any of the events described in Section 2 hereof
constituting a Change in Control shall have occurred, you shall
be entitled to the benefits provided in Section 4 hereof upon the
subsequent termination of your employment with the Company and
its subsidiaries during the term of this Agreement and within two
(2) years of the Change in Control, unless such termination is
(x) a result of your death, Disability, or Retirement; (y) by you
for other than Good Reason (as defined in Section 3(A)); or (z)
by the Company or any of its subsidiaries for Cause (as defined
in Section 3(C)). The benefits provided in Section 4 shall be in
lieu of any termination, separation, severance or similar
benefits under your employment agreement, if any, or under the
Company's termination, separation, severance or similar plans or
policies, if any (other than benefit plans of the Company which
incidentally provide for benefits in the event of a change in
control, as such term is defined in such plans). If your
employment is terminated as a result of your death, Disability or
Retirement, by you for other than Good Reason or by the Company
or any of its subsidiaries for Cause, then you shall not be
entitled to any termination, separation, severance or similar
benefits under this Agreement, and you shall be entitled to
benefits under your employment agreement, if any, and/or under
the Company's termination, separation, severance or similar plans
or policies, if any, only in accordance with the terms of any
such employment agreement, plans and policies.
(A) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purposes of this Agreement,
"Good Reason" shall mean the occurrence, without your express
written consent, of any of the following circumstances:
(i) a significant change in the nature or scope of your
authorities, duties or responsibilities from those applicable to
you immediately prior to the date on which a Change in Control
occurs;
(ii) a reduction in your base annual salary from that provided to
you immediately prior to the date on which a Change in Control
occurs;
(iii) a diminution in your eligibility to participate in
compensation plans and employee benefits and perquisites which
provide opportunities to receive overall compensation and
benefits and perquisites from the greater of:
- - the opportunities provided by the Company (including its
subsidiaries) for executives with comparable duties; or
- - the opportunities under any such plans and perquisites under
which you were participating immediately prior to the date on
which a Change in Control occurs;
(iv) a change in the location of your principal place of
employment by the Company (including its subsidiaries) by more
than fifty (50) miles from the location where you were
principally employed immediately prior to the date on which a
Change in Control occurs;
(v) a significant increase in the frequency or duration of your
business travel; or
(vi) a reasonable determination by the Board of Directors of the
Company that, as a result of a Change in Control and a change in
circumstances thereafter significantly affecting your position,
you are unable to exercise the authorities, powers, functions or
duties attached to your position immediately prior to the date on
which a Change in Control occurs.
(B) Disability; Retirement.
(i) For purposes of this Agreement, "Disability" shall mean
permanent and total disability as such term is defined under
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"). Any question as to the existence of your
Disability upon which you and the Company cannot agree shall be
determined by a qualified independent physician selected by you
(or, if you are unable to make such selection, such selection
shall be made by any adult member of your immediate family or
your legal representative) and approved by the Company, said
approval not to be unreasonably withheld. The determination of
such physician shall be made in writing to the Company and to you
and shall be final and conclusive for all purposes of this
Agreement.
(ii) For purposes of this Agreement, "Retirement" shall mean your
voluntary termination of employment with the Company at or after
the age of 65 in accordance with the Company's retirement
policies (excluding early retirement) generally applicable to its
salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(C) Cause. For purposes of this Agreement, "Cause" shall mean
(a) the willful and continued failure by you to substantially
perform your duties with the Company (other than any such failure
from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice
of Termination in the manner provided for in Section 3(D) by you
for Good Reason) after written demand for substantial performance
is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have
not substantially performed your duties, or (b) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes
of this Section 3(C), no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by
you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that, in the good faith opinion of the
Board you were guilty of conduct set forth above in this Section
3(C) and specifying the particulars thereof.
(D) Any termination of your employment by the Company or any of
its subsidiaries or by you shall be made by written notice of
termination to the other party. Such "Notice of Termination"
shall mean a written document specifying the provision in this
Agreement being relied upon and setting forth a summary of the
facts and circumstances which provide the basis for termination
of your employment. The "Date of Termination" shall be the date
upon which the Notice of Termination is given.
4. Compensation upon Termination Following a Change in Control
(A) If your employment shall be terminated for any reason
otherwise than (x) as a result of your death, Disability or
Retirement; (y) by you for other than Good Reason; or (z) by the
Company or any of its subsidiaries for Cause, within two (2)
years following a Change in Control (as defined in Section 2),
then you shall be entitled to the benefits provided below:
(i) The Company or one of its subsidiaries shall pay you, not
later than the fifth business day following the Date of
Termination ("Payment Date"), the sum of your full base salary
through the Date of Termination, as earned by you but not yet
paid to you, at the salary level in effect on (x) the Date of
Termination or (y) the day immediately preceding the date of the
Change in Control, whichever is higher ("full base salary"), and
your pro rata share of your annual incentive bonus payment in
effect on the Date of Termination. The Company or one of its
subsidiaries shall also pay you all other amounts to which you
are entitled under any compensation plan of the Company
applicable to you, at the time such payments are due. For
purposes of this Section 4 and the other provisions of this
Agreement, "your annual incentive bonus payment in effect on the
Date of Termination" shall mean the target amount of your annual
incentive bonus payment (under the Company's Annual Incentive
Bonus Plan or any successor plan) for the year in which the
Notice of Termination is given. Your pro rata share of your
annual incentive bonus payment in effect on the Date of
Termination shall be that percentage of your annual incentive
bonus payment in effect on the Date of Termination that is equal
to the number of days in the fiscal year completed prior to the
Date of Termination divided by 365.
(ii) On the Payment Date the Company shall also pay you a
severance payment equal to two and one half (2 1/2) times the sum
of (x) your full base salary and (y) your annual incentive bonus
payment in effect on the Date of Termination.
(iii) The Company shall cause (x) all unvested stock options
or other stock grants held by you on the Date of Termination
immediately to vest and be fully exercisable as of the Date of
Termination, (y) any restrictions on all restricted stock held by
you on the Date of Termination immediately to lapse and all
shares of such stock to fully vest as of the Date of Termination,
and (z) any accrued benefit or deferred arrangement of the
Company that you otherwise would become entitled to if you
continued employment with the Company immediately to vest as of
the Date of Termination.
(iv) The Company shall maintain in full force for two and one
half (2 1/2) year(s) following the Date of Termination (the
"Benefit Period") all life insurance, health (medical and
dental), accidental death and dismemberment, pension and
disability plans and programs in which you are entitled to
participate immediately prior to the Date of Termination, or if
your continued participation is not possible under the general
terms and provisions of such plans and programs, the Company
shall provide you with benefits equivalent to those provided by
such plans and programs, provided that the Company will not be
required to maintain these plans and programs, or the equivalent
thereof, beyond your reaching the age of 65 or upon your securing
new full time employment which makes such benefits available to
you. Additional years of service equal to the length of the
Benefit Period will be credited to you for purposes of
calculating your benefits under the Company's Pension Plans at
the rate of your full base salary and annual incentive bonus
payment in effect on the Date of Termination (as defined in
Section 4(A)(i) hereof).
(v) The Company shall make available to you, at the Company's
expense, outplacement counseling services. You may select the
organization that will provide you with such services, provided
that the Company shall not be required to pay more than $50,000
for any such services.
(B) There shall be no limit on the amount of payments due you
under Section 4(A) unless (i) your net income from the payments
made under Section 4(A) would be maximized, in consideration of
federal, state and local income and excise taxes, from limiting
the sum of payments (the "Total Lump Sum Payment") in Section
4(A) to 2.99 times your prior five years' average income, or
"base amount" as defined in Section 280G of the Internal Revenue
Code, as amended (the "Code"), and (ii) the Total Lump Sum
Payment due to you is more than 2.99 times your base amount but
not more than 3.5 times your base amount. In such case, your
Total Lump Sum Payment will be reduced to 2.99 times your base
amount.
(C) In the event that any payment or benefit received or to be
received by you pursuant to the terms of this Agreement (the
"Contract Payments") or in connection with your termination of
employment or contingent upon a Change in Control of the Company
pursuant to any plan or arrangement or other agreement with the
Company (or any affiliate) ("Other Payments" and, together with
the Contract Payments, the "Payments") would be subject to the
excise tax (the "Excise Tax") imposed by Section 4999 of the
Code, as determined as provided below, and has not been subject
to the modified cap described in Section 4(B), the Company shall
pay to you, at the time specified in Section 4(C)(iii) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of the Excise Tax on
Contract Payments and Other Payments and any federal, state and
local income tax and Excise Tax upon the payment provided for by
this Section 4(C), and any interest, penalties or additions to
tax payable by you with respect thereto, shall be equal to the
total present value of the Contract Payments and Other Payments
at the time such Payments are to be made.
(i) For purposes of determining whether any of the Payments will
be subject to the Excise Tax and the amounts of such Excise Tax,
- - the total amount of the Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to
the Excise Tax, except to the extent that, in the opinion of
independent tax counsel retained by the Company's independent
auditors and reasonably acceptable to you ("Tax Counsel"), a
Payment (in whole or in part) does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax;
- - the amount of the Payments that shall be treated as subject
to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code
(after applying the previous clause); and
- - the value of any noncash benefits or any deferred payment or
benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at the
highest marginal rates of federal income taxation applicable to
individuals in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in
effect in the state and locality of your residence for tax
purposes in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes
that can be obtained from deduction of such state and local
taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal
rates.
(iii) The Gross-Up Payments provided for in this Section 4(C)
hereof shall be made upon the earlier of (x) the payment to you
of any Contract Payment or Other Payment or (y) the imposition
upon you or payment by you of any Excise Tax.
(iv) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of
Tax Counsel that the Excise Tax is less than the amount taken
into account under this Section 4(C), you shall repay to the
Company within five (5) business days of your receipt of notice
of such final determination or opinion the portion of the Gross-
Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being
repaid by you if such repayment results in a reduction in Excise
Tax or a federal, state and local income tax deduction) plus any
interest received by you on the amount of such repayment. If it
is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax exceeds the amount taken into account
hereunder (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess within five (5) business days of the
Company's receipt of notice of such final determination or
opinion.
(D) The Company shall also pay to you all legal fees and
expenses, if any, reasonably incurred by you in connection with
seeking to obtain or enforce any right or benefit provided by
this Agreement.
(E) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another
employer or by retirement benefits received after the Date of
Termination or otherwise.
5. Successors; Binding Agreement
(A) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no succession had taken place. Failure
of the Company to obtain such assumption and agreement within
thirty days following the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you had terminated
your employment for Good Reason following a Change in Control,
except that for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
6. Confidential Information
You shall hold in fiduciary capacity for the benefit of the
Company or its subsidiaries all secret or confidential
information, knowledge or data relating to the Company, the
subsidiaries and their respective businesses, which shall have
been obtained during your employment by the Company or its
subsidiary and which shall not be public knowledge (other than
by acts by you or your representatives in violation of this
Agreement). After termination of your employment with the Company
or its subsidiaries, you shall not, without prior written consent
of the Company or its subsidiaries, communicate or divulge any
such information, knowledge or data to anyone other than the
Company or its subsidiaries or those designated by them. The
preceding two sentences shall not apply with respect to any
information you are required to disclose pursuant to a valid and
effective subpoena or order issued by a court of competent
jurisdiction or with respect to any information you are
reasonably required to disclose in enforcing the terms of this
Agreement. In no event shall an asserted violation of this
Section 6 constitute a basis for deferring or withholding any
amounts otherwise payable to you under this Agreement, nor will
any asserted violation of this Section 6 relieve you of your
responsibilities under this Agreement.
7. Agreement Not to Compete
You agree that for a period of one year following the Date
of Termination, you will not engage, directly or indirectly,
whether as a principal, agent, distributor, representative,
consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than two
percent (2%) of the stock or equity of any corporation the
capital stock of which is publicly traded) or otherwise, in the
same or a substantially similar business as that conducted and
carried on by the Company or any of its subsidiaries and being
directly competitive with the Company or any of its subsidiaries
on the Date of Termination or at any time during such one-year
period.
8. Notice
For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the address set forth on
the first page of this Agreement with respect to the Company and
on the signature page with respect to you, provided that all
notices to the Company shall be directed to the attention of the
President of the Company, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
9. Miscellaneous
No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is
agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any conditions or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. Further, the
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of
Connecticut. All references to sections of the Code or Exchange
Act shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state
or local law.
10. Validity
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full
force and effect.
11. Counterparts
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return the original to me and make
a copy for your records. When executed and returned this letter
shall constitute the entire Agreement on this subject between you
and the Company.
Sincerely,
GERBER SCIENTIFIC, INC.
By: _________________
Name: Becket Q. McNab
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: ________________________________
Subsidiary President
________________________________
Mailing Address
________________________________
EXHIBIT 10.4
July 14, 1999
David Gerber
Vice President, Business Development & Technology
Gerber Scientific, Inc.
83 Gerber Road West
South Windsor, CT 06074
Dear David:
Gerber Scientific, Inc. (the "Company") considers it
essential to the best interests of its stockholders to foster the
continuous employment of key management personnel. In this
connection, should the Company face a possible Change in Control
(as defined in Section 2 of this Agreement), such as the
acquisition of a substantial share of the equity or voting
securities of the Company, the Board of Directors of the Company
(the "Board") has determined that it is imperative that it and
the Company be able to rely upon your continued services without
concern that you might be distracted by the personal
uncertainties and risks that the possibility of a Change in
Control might entail.
Accordingly, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management
to their assigned duties without distraction in the face of
potentially disturbing circumstances that could arise out of a
possibility for a Change in Control of the Company.
In order to induce you to remain in the employ of the
Company and its subsidiaries and in consideration of your
agreement set forth in Section 2(B) hereof, the Company agrees
that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with
the Company and its subsidiaries is terminated subsequent to a
Change in Control under the circumstances described below.
1. Term of Agreement
This Agreement shall commence on the date hereof and shall
continue in effect through April 30, 2002, provided, however, the
term of this Agreement shall automatically be extended for one
additional year commencing on May 1, 2002 and on each May 1
thereafter, unless, not later than April 30 of the preceding
year, the Company shall have given notice that it does not wish
to extend this Agreement; provided further that, notwithstanding
any such notice by the Company not to extend, if a Change in
Control shall have occurred during the original or any extended
term of this Agreement, this Agreement shall continue in effect
for a period of twenty-four (24) months beyond the expiration of
the term in effect immediately before such Change in Control.
2. Change in Control
(A) No benefits shall be payable hereunder unless there shall
have been a Change in Control of the Company, as set forth below.
For purposes of this Agreement a "Change in Control" of the
Company shall mean the occurrence of any one or more of the
following events:
(i) the Company shall (1) merge or consolidate with or into
another corporation or entity or enter into a share exchange
between the Company or stockholders of the Company and another
individual, corporation or other entity and as a result of such
merger, consolidation or share exchange less than fifty percent
(50%) of the outstanding voting securities of the surviving or
resulting corporation or entity shall then be owned in the
aggregate by the former stockholders of the Company; or (2) sell,
lease, exchange or otherwise dispose of more than 2/3s of the
Company's property and assets in one transaction or a series of
related transactions to one or more individuals, corporations or
other entities that are not subsidiaries of the Company, assuming
that if consummation of such transaction is subject, at the time
of such approval by stockholders, to the consent of any
government or governmental agency, such consent by the government
or governmental agency is obtained (either explicitly or
implicitly by consummation of the transaction);
(ii) the stockholders of the Company adopt a plan of complete
liquidation of the Company;
(iii) any "person" (as such term is used in Sections 13(d) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (other than the Employee, the Company, any of
the Company's subsidiaries, any employee benefit plan of the
Company and/or one or more of its subsidiaries or any person or
entity organized, appointed or established pursuant to the terms
of any such employee benefit plan) becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
voting securities of the Company representing thirty percent
(30%) or more of the total number of votes eligible to be cast at
any election of directors of the Company; provided, however, that
no Change in Control shall be deemed to have occurred under this
subparagraph (iii) if such "person" becomes a holder of the
Company's securities in one or more transactions initiated or
pursued by the Company unless after such transaction(s) less than
fifty percent (50%) of the outstanding voting securities of the
Company shall be owned in the aggregate by the former
stockholders of the Company; or
(iv) as a result of, or in connection with, any tender offer or
exchange offer, share exchange, merger, consolidation or other
business combination, sale, lease, exchange or other disposition
of more than 2/3s of the Company's assets, a contested election,
or any combination of the foregoing transactions, the persons who
are directors of the Company on the date hereof (the "Incumbent
Board") shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;
provided that any person becoming a director subsequent to the
date hereof whose election or nomination for election by the
Company's stockholders was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of a proxy statement of
the Company in which such person is named as a nominee for
director without any objection to such nomination) shall be, for
purposes herein, considered as though such person were a member
of the Incumbent Board.
(B) In exchange for the benefits under this Agreement, you agree
that, subject to the terms and conditions herein, in the event of
a potential Change in Control of the Company occurring after the
date hereof, you will not voluntarily terminate your employment
with the Company and its subsidiaries until the earlier of (i)
the date which is six months after the occurrence of such
potential Change in Control of the Company or (ii) the occurrence
of a Change in Control of the Company. If more than one
potential Change in Control occurs during the term of this
Agreement, the provisions of the preceding sentence shall be
applicable to each potential Change in Control occurring prior to
an actual Change in Control. For the purposes of this
Agreement, a "potential Change in Control" of the Company shall
be deemed to have occurred if: (i) the Company enters into an
agreement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential Change in
Control of the Company has occurred.
3. Termination Following Change in Control
If any of the events described in Section 2 hereof
constituting a Change in Control shall have occurred, you shall
be entitled to the benefits provided in Section 4 hereof upon the
subsequent termination of your employment with the Company and
its subsidiaries during the term of this Agreement and within two
(2) years of the Change in Control, unless such termination is
(x) a result of your death, Disability, or Retirement; (y) by you
for other than Good Reason (as defined in Section 3(A)); or (z)
by the Company or any of its subsidiaries for Cause (as defined
in Section 3(C)). The benefits provided in Section 4 shall be in
lieu of any termination, separation, severance or similar
benefits under your employment agreement, if any, or under the
Company's termination, separation, severance or similar plans or
policies, if any (other than benefit plans of the Company which
incidentally provide for benefits in the event of a change in
control, as such term is defined in such plans). If your
employment is terminated as a result of your death, Disability or
Retirement, by you for other than Good Reason or by the Company
or any of its subsidiaries for Cause, then you shall not be
entitled to any termination, separation, severance or similar
benefits under this Agreement, and you shall be entitled to
benefits under your employment agreement, if any, and/or under
the Company's termination, separation, severance or similar plans
or policies, if any, only in accordance with the terms of any
such employment agreement, plans and policies.
(A) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For the purposes of this Agreement,
"Good Reason" shall mean the occurrence, without your express
written consent, of any of the following circumstances:
(i) a significant change in the nature or scope of your
authorities, duties or responsibilities from those applicable to
you immediately prior to the date on which a Change in Control
occurs;
(ii) a reduction in your base annual salary from that provided to
you immediately prior to the date on which a Change in Control
occurs;
(iii) a diminution in your eligibility to participate in
compensation plans and employee benefits and perquisites which
provide opportunities to receive overall compensation and
benefits and perquisites from the greater of:
- - the opportunities provided by the Company (including its
subsidiaries) for executives with comparable duties; or
- - the opportunities under any such plans and perquisites under
which you were participating immediately prior to the date on
which a Change in Control occurs;
(iv) a change in the location of your principal place of
employment by the Company (including its subsidiaries) by more
than fifty (50) miles from the location where you were
principally employed immediately prior to the date on which a
Change in Control occurs;
(v) a significant increase in the frequency or duration of your
business travel; or
(vi) a reasonable determination by the Board of Directors of the
Company that, as a result of a Change in Control and a change in
circumstances thereafter significantly affecting your position,
you are unable to exercise the authorities, powers, functions or
duties attached to your position immediately prior to the date on
which a Change in Control occurs.
(B) Disability; Retirement.
(i) For purposes of this Agreement, "Disability" shall mean
permanent and total disability as such term is defined under
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"). Any question as to the existence of your
Disability upon which you and the Company cannot agree shall be
determined by a qualified independent physician selected by you
(or, if you are unable to make such selection, such selection
shall be made by any adult member of your immediate family or
your legal representative) and approved by the Company, said
approval not to be unreasonably withheld. The determination of
such physician shall be made in writing to the Company and to you
and shall be final and conclusive for all purposes of this
Agreement.
(ii) For purposes of this Agreement, "Retirement" shall mean your
voluntary termination of employment with the Company at or after
the age of 65 in accordance with the Company's retirement
policies (excluding early retirement) generally applicable to its
salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(C) Cause. For purposes of this Agreement, "Cause" shall mean
(a) the willful and continued failure by you to substantially
perform your duties with the Company (other than any such failure
from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice
of Termination in the manner provided for in Section 3(D) by you
for Good Reason) after written demand for substantial performance
is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have
not substantially performed your duties, or (b) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes
of this Section 3(C), no act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by
you not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that, in the good faith opinion of the
Board you were guilty of conduct set forth above in this Section
3(C) and specifying the particulars thereof.
(D) Any termination of your employment by the Company or any of
its subsidiaries or by you shall be made by written notice of
termination to the other party. Such "Notice of Termination"
shall mean a written document specifying the provision in this
Agreement being relied upon and setting forth a summary of the
facts and circumstances which provide the basis for termination
of your employment. The "Date of Termination" shall be the date
upon which the Notice of Termination is given.
4. Compensation upon Termination Following a Change in Control
(A) If your employment shall be terminated for any reason
otherwise than (x) as a result of your death, Disability or
Retirement; (y) by you for other than Good Reason; or (z) by the
Company or any of its subsidiaries for Cause, within two (2)
years following a Change in Control (as defined in Section 2),
then you shall be entitled to the benefits provided below:
(i) The Company or one of its subsidiaries shall pay you, not
later than the fifth business day following the Date of
Termination ("Payment Date"), the sum of your full base salary
through the Date of Termination, as earned by you but not yet
paid to you, at the salary level in effect on (x) the Date of
Termination or (y) the day immediately preceding the date of the
Change in Control, whichever is higher ("full base salary"), and
your pro rata share of your annual incentive bonus payment in
effect on the Date of Termination. The Company or one of its
subsidiaries shall also pay you all other amounts to which you
are entitled under any compensation plan of the Company
applicable to you, at the time such payments are due. For
purposes of this Section 4 and the other provisions of this
Agreement, "your annual incentive bonus payment in effect on the
Date of Termination" shall mean the target amount of your annual
incentive bonus payment (under the Company's Annual Incentive
Bonus Plan or any successor plan) for the year in which the
Notice of Termination is given. Your pro rata share of your
annual incentive bonus payment in effect on the Date of
Termination shall be that percentage of your annual incentive
bonus payment in effect on the Date of Termination that is equal
to the number of days in the fiscal year completed prior to the
Date of Termination divided by 365.
(ii) On the Payment Date the Company shall also pay you a
severance payment equal to two (2) times the sum of (x) your full
base salary and (y) your annual incentive bonus payment in effect
on the Date of Termination.
(iii) The Company shall cause (x) all unvested stock options
or other stock grants held by you on the Date of Termination
immediately to vest and be fully exercisable as of the Date of
Termination, (y) any restrictions on all restricted stock held by
you on the Date of Termination immediately to lapse and all
shares of such stock to fully vest as of the Date of Termination,
and (z) any accrued benefit or deferred arrangement of the
Company that you otherwise would become entitled to if you
continued employment with the Company immediately to vest as of
the Date of Termination.
(iv) The Company shall maintain in full force for two (2) year(s)
following the Date of Termination (the "Benefit Period") all life
insurance, health (medical and dental), accidental death and
dismemberment, pension and disability plans and programs in which
you are entitled to participate immediately prior to the Date of
Termination, or if your continued participation is not possible
under the general terms and provisions of such plans and
programs, the Company shall provide you with benefits equivalent
to those provided by such plans and programs, provided that the
Company will not be required to maintain these plans and
programs, or the equivalent thereof, beyond your reaching the age
of 65 or upon your securing new full time employment which makes
such benefits available to you. Additional years of service
equal to the length of the Benefit Period will be credited to you
for purposes of calculating your benefits under the Company's
Pension Plans at the rate of your full base salary and annual
incentive bonus payment in effect on the Date of Termination (as
defined in Section 4(A)(i) hereof).
(v) The Company shall make available to you, at the Company's
expense, outplacement counseling services. You may select the
organization that will provide you with such services, provided
that the Company shall not be required to pay more than $50,000
for any such services.
(B) There shall be no limit on the amount of payments due you
under Section 4(A) unless (i) your net income from the payments
made under Section 4(A) would be maximized, in consideration of
federal, state and local income and excise taxes, from limiting
the sum of payments (the "Total Lump Sum Payment") in Section
4(A) to 2.99 times your prior five years' average income, or
"base amount" as defined in Section 280G of the Internal Revenue
Code, as amended (the "Code"), and (ii) the Total Lump Sum
Payment due to you is more than 2.99 times your base amount but
not more than 3.5 times your base amount. In such case, your
Total Lump Sum Payment will be reduced to 2.99 times your base
amount.
(C) In the event that any payment or benefit received or to be
received by you pursuant to the terms of this Agreement (the
"Contract Payments") or in connection with your termination of
employment or contingent upon a Change in Control of the Company
pursuant to any plan or arrangement or other agreement with the
Company (or any affiliate) ("Other Payments" and, together with
the Contract Payments, the "Payments") would be subject to the
excise tax (the "Excise Tax") imposed by Section 4999 of the
Code, as determined as provided below, and has not been subject
to the modified cap described in Section 4(B), the Company shall
pay to you, at the time specified in Section 4(C)(iii) below, an
additional amount (the "Gross-Up Payment") such that the net
amount retained by you, after deduction of the Excise Tax on
Contract Payments and Other Payments and any federal, state and
local income tax and Excise Tax upon the payment provided for by
this Section 4(C), and any interest, penalties or additions to
tax payable by you with respect thereto, shall be equal to the
total present value of the Contract Payments and Other Payments
at the time such Payments are to be made.
(i) For purposes of determining whether any of the Payments will
be subject to the Excise Tax and the amounts of such Excise Tax,
- - the total amount of the Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to
the Excise Tax, except to the extent that, in the opinion of
independent tax counsel retained by the Company's independent
auditors and reasonably acceptable to you ("Tax Counsel"), a
Payment (in whole or in part) does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, or
such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax;
- - the amount of the Payments that shall be treated as subject
to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code
(after applying the previous clause); and
- - the value of any noncash benefits or any deferred payment or
benefit shall be determined by Tax Counsel in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income tax at the
highest marginal rates of federal income taxation applicable to
individuals in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in
effect in the state and locality of your residence for tax
purposes in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes
that can be obtained from deduction of such state and local
taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal
rates.
(iii) The Gross-Up Payments provided for in this Section 4(C)
hereof shall be made upon the earlier of (x) the payment to you
of any Contract Payment or Other Payment or (y) the imposition
upon you or payment by you of any Excise Tax.
(iv) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of
Tax Counsel that the Excise Tax is less than the amount taken
into account under this Section 4(C), you shall repay to the
Company within five (5) business days of your receipt of notice
of such final determination or opinion the portion of the Gross-
Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being
repaid by you if such repayment results in a reduction in Excise
Tax or a federal, state and local income tax deduction) plus any
interest received by you on the amount of such repayment. If it
is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax exceeds the amount taken into account
hereunder (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess within five (5) business days of the
Company's receipt of notice of such final determination or
opinion.
(D) The Company shall also pay to you all legal fees and
expenses, if any, reasonably incurred by you in connection with
seeking to obtain or enforce any right or benefit provided by
this Agreement.
(E) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another
employer or by retirement benefits received after the Date of
Termination or otherwise.
5. Successors; Binding Agreement
(A) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no succession had taken place. Failure
of the Company to obtain such assumption and agreement within
thirty days following the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you had terminated
your employment for Good Reason following a Change in Control,
except that for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
6. Confidential Information
You shall hold in fiduciary capacity for the benefit of the
Company or its subsidiaries all secret or confidential
information, knowledge or data relating to the Company, the
subsidiaries and their respective businesses, which shall have
been obtained during your employment by the Company or its
subsidiary and which shall not be public knowledge (other than
by acts by you or your representatives in violation of this
Agreement). After termination of your employment with the Company
or its subsidiaries, you shall not, without prior written consent
of the Company or its subsidiaries, communicate or divulge any
such information, knowledge or data to anyone other than the
Company or its subsidiaries or those designated by them. The
preceding two sentences shall not apply with respect to any
information you are required to disclose pursuant to a valid and
effective subpoena or order issued by a court of competent
jurisdiction or with respect to any information you are
reasonably required to disclose in enforcing the terms of this
Agreement. In no event shall an asserted violation of this
Section 6 constitute a basis for deferring or withholding any
amounts otherwise payable to you under this Agreement, nor will
any asserted violation of this Section 6 relieve you of your
responsibilities under this Agreement.
7. Agreement Not to Compete
You agree that for a period of one year following the Date
of Termination, you will not engage, directly or indirectly,
whether as a principal, agent, distributor, representative,
consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than two
percent (2%) of the stock or equity of any corporation the
capital stock of which is publicly traded) or otherwise, in the
same or a substantially similar business as that conducted and
carried on by the Company or any of its subsidiaries and being
directly competitive with the Company or any of its subsidiaries
on the Date of Termination or at any time during such one-year
period.
8. Notice
For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the address set forth on
the first page of this Agreement with respect to the Company and
on the signature page with respect to you, provided that all
notices to the Company shall be directed to the attention of the
President of the Company, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
9. Miscellaneous
No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is
agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any conditions or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. Further, the
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of
Connecticut. All references to sections of the Code or Exchange
Act shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state
or local law.
10. Validity
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full
force and effect.
11. Counterparts
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return the original to me and make
a copy for your records. When executed and returned this letter
shall constitute the entire Agreement on this subject between you
and the Company.
Sincerely,
GERBER SCIENTIFIC, INC.
By: /s/ Becket Q. McNab
Name: Becket Q. McNab
Title: Vice President
Human Resources
AGREED TO THIS ____ DAY OF __________, 1999
By: /s/ David Gerber
David Gerber
_________________________________
Mailing Address
_________________________________
EXHIBIT 10.5
SEVERANCE POLICY FOR SENIOR OFFICERS OF
GERBER SCIENTIFIC, INC. AND ITS DOMESTIC SUBSIDIARIES
A. Definitions.
The capitalized terms used in this document shall have
the following meanings:
"Board" shall mean the Board of Directors of Gerber
Scientific, Inc.
"Cause" shall mean (a) the willful and continued failure
by the Covered Officer substantially to perform the
Covered Officer's duties with the Company (other than
such failure resulting from the Covered Officer's
incapacity due to physical or mental illness) or (b) the
willful engaging by the Covered Officer in conduct that
is demonstrably and materially injurious to the Company,
monetarily or otherwise, as determined in the Company's
sole discretion.
"Chief Executive Officer" shall mean the Chief Executive
Officer of Gerber Scientific, Inc.
"Committee" shall mean the Management Development and
Compensation Committee of the Board of Directors of
Gerber Scientific, Inc.
"Company" shall mean Gerber Scientific, Inc. and its
domestic subsidiaries, Gerber Technology, Inc., Gerber
Scientific Products, Inc., and Gerber Coburn Optical,
Inc.
"Corporate Directors" shall mean employees of Gerber
Scientific, Inc. who have been designated the employment
title of "Director" or "Corporate Director".
"Corporate Vice Presidents" shall mean vice presidents
of Gerber Scientific, Inc. other than Senior Vice
Presidents.
"Covered Officer" or "Covered Officers" shall refer to
all Corporate Directors and all corporate officers of
the Company that hold positions at the level of vice
president or above.
"Disability" shall mean permanent and total disability
as defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended.
"Retirement" shall mean a Covered Officer's voluntary
termination of employment with the Company in accordance
with the Company's retirement policy on or after age 65.
"Senior Vice Presidents" shall mean Senior Vice
Presidents of Gerber Scientific, Inc.
"Severance Period" shall mean the length of the period,
commencing on the Termination Date, during which
severance benefits shall be payable under this Severance
Policy to a Covered Officer as provided by the following
table:
Severance
Officers Period in
Years
Chief Executive Officer 2
Senior Vice Presidents 1 1/2
Corporate Vice Presidents 1
Subsidiary Vice Presidents and 1/2
Corporate Directors
"Subsidiary Vice Presidents" shall mean vice presidents
of Gerber Technology, Inc., Gerber Scientific Products,
Inc. and Gerber Coburn Optical, Inc.
"Termination Date" shall mean the date on which the
Covered Officer's employment is terminated.
B. Who is eligible for severance benefits under this
Severance Policy?
(1) Only Covered Officers are eligible for benefits under
this Severance Policy. Subject to the terms and conditions of
this Severance Policy, if a Covered Officer's employment
shall be terminated for any reason other than
(a) as a result of the Covered Officer's death,
Disability, or Retirement;
(b) by the Covered Officer for any reason; or
(c) by the Company for Cause,
then the Covered Officer shall be entitled to the
benefits provided under this Severance Policy.
(2) Notwithstanding the above, no benefits shall be payable
under this Severance Policy if:
(a) as a result of a Covered Officer's
termination, such Covered Officer is entitled
to receive compensation under any Change-in-
Control Agreement with the Company;
(b) such Covered Officer is receiving any pension
benefits under any of the Company's pension
plans at the time when severance benefits
would otherwise be payable to such Covered
Officer; or
(c) such Covered Officer is offered another
position with the Company that is comparable
in status and compensation to the position
held by such Covered Officer on the
Termination Date.
C. What payments and benefits are payable under this
Severance Policy, and when will they be paid?
Subject to the terms and conditions of this Severance
Policy, the Company will provide the following payments
and benefits to any Covered Officer who is eligible to
receive payments and benefits under this Severance
Policy:
(1) The Covered Officer shall receive, within five (5)
business days after the Termination Date, all salary earned
by, but not yet paid to, such Covered Officer through the
Termination Date and any other deferred compensation earned
prior to the Termination Date. In addition, the Covered
Officer shall be entitled to any annual incentive bonus
payment that, on the Termination Date, has been earned by,
but not yet paid to, the Covered Officer. Such amount shall
be paid to the Covered Officer at the time such amount would
have been paid to the Covered Officer had he or she continued
to be employed by the Company.
(2) The Covered Officer shall, during the Severance
Period, continue to receive
(i) 100% of his or her then current base
salary, such amount to be payable in weekly,
biweekly, or monthly installments in accordance
with the Company's then normal employee payroll
practices; and
(ii) the pro-rata portion of such Covered
Officer's target amount (on the Termination Date)
of his or her annual incentive bonus (under the
Company's Annual Incentive Bonus Plan or any
successor Plan). Such amounts shall be paid to the
Covered Officer at the time that incentive bonuses
are normally paid to the Company's employees.
[Example: If a Severance Period ends at the end
of the third month of the Company's fiscal year,
the Covered Officer would receive 100% of the
target amount (on the Termination Date) of the
bonus for the last completed fiscal year, and 25%
of the target amount (on the Termination Date) for
the fiscal year in which the Severance Period
ended. Such amounts would be payable when bonuses
are normally payable for such years.]
(3) The Covered Officer shall, during the Severance Period,
continue to receive from the Company at the Company's cost,
but subject to any applicable employee contributions, the
health (medical and dental) insurance coverage under the
health insurance plan provided to the Covered Officer
immediately prior to the Termination Date, provided that (i)
the Covered Officer's continued participation is possible
under the general terms and provisions of such plan, (ii) the
Company shall have the right to amend or terminate the Plan
at any time with respect to all Company Employees and the
Covered Officer, and (iii) the Company will not provide this
coverage to the Covered Officer after the Covered Officer's
65th birthday. Notwithstanding the foregoing, the Covered
Officer's employment is terminated for all purposes on the
Termination Date and the Covered Officer's rights under COBRA
or any similar law shall commence on the Termination Date.
The Company shall, for a period of 60 days following the
commencement of the Severance Period, continue to provide the
Covered Officer with the same life insurance benefits
provided to the Covered Officer immediately prior to the
Termination Date, provided that such benefits shall cease at
the end of such sixty day period. No short term or long term
disability insurance shall be provided to the Covered Officer
by the Company during the Severance Period and no additional
years of service will be credited to the Covered Officer
during the Severance Period for purposes of calculating
benefits under any of the Company's pension plans. Options
granted by the Company under any of the Company's stock
option plans will not vest after the Termination Date.
Options may only be exercised after the Termination Date to
the extent that the applicable stock option plan and grant
agreement permit such exercise.
(4) If at any time during the Severance Period, a
Covered Officer obtains full-time employment with a
company which is not engaged in a business that is
competitive to the business conducted or carried on
by the Company, the Covered Officer will receive,
in lieu of all severance payments and benefits
which would otherwise have been payable under this
Severance Policy had such employment not been
obtained, a lump sum payment in an amount equal to
one half (50%) of the amount of current base salary
(excluding bonus) which, absent such employment,
would have been payable to such Covered Officer
pursuant to Section C (2) of this Severance Policy.
Such lump sum payment shall be payable within
thirty (30) business days after the Covered Officer
notifies the Vice President of Human Resources of
the Company, or his or her designees of the Company
of the commencement of such full-time employment.
(5) In the event that a Covered Officer is terminated by
the Company under circumstances that would qualify the
Covered Officer to receive severance benefits under this
Severance Policy but such Covered Officer dies before or
while receiving the benefits, the Company will pay the
severance benefits to the Covered Officer's estate or
beneficiary, provided that the estate or beneficiary
satisfies the conditions that would have been applicable to
the Covered Officer.
D. Can a Covered Officer's right to severance benefits
be forfeited?
Yes. Notwithstanding anything to the contrary in this
Severance Policy, the Company shall have no obligation
to, and shall make no severance payment to, any Covered
Officer who, directly or indirectly:
(1) is competing or preparing to compete with the business
of the Company;
(2) is disclosing or has disclosed to any unauthorized
person or entity any secret or confidential information,
knowledge or data relating to the Company which is not public
knowledge (or is, or becomes, public knowledge by reason or
in consequence of such Covered Officer's unauthorized
actions), including confidential information of any customers
or clients of the Company;
(3) is appropriating or has appropriated any such
information, secret or data for his or her own use or
benefit;
(4) is soliciting or has solicited, hired or induced any
person who is, or has been within the previous six (6)
months, employed by the Company, to leave the Company;
(5) is soliciting or otherwise attempting to divert the
business or patronage of any customer or client or any
prospective customer or client of the Company;
(6) is engaging in or is about to engage in any other action
that is found by the Committee, in the Committee's sole
discretion, to be an action that is, in any way, detrimental
to the Company and its stockholders; or
(7) is engaged in full-time employment (except to the extent
benefits are payable under Section C(4) above).
E. What are the other terms and conditions of this
Severance Policy?
As a condition of receiving severance benefits under
this Severance Policy, a Covered Officer shall be
required to execute a written agreement with the Company
(i) releasing the Company from and against any and all
claims which the Covered Officer may have against the
Company relating in any way to the Covered Officer's
employment or the termination thereof including, without
limitation, any and all claims of discrimination or
unlawful discharge, and (ii) covenanting not to sue the
Company in any state or federal court in the United
States or elsewhere, or in any administrative agency
which has authority to award damages, in respect of any
such claim.
The Committee has full and complete discretion to
interpret this Severance Policy, and the Committee's
findings shall be binding on any employee claiming
benefits hereunder.
This Severance Policy does not contain any promise or
representation concerning the duration of any Covered
Officer's employment with the Company.
This Severance Policy and these procedures do not
constitute contracts between the Covered Officer and the
Company, and this Severance Policy and the policies and
procedures contained therein may be terminated or
altered in whole or in part by the Committee at any time
in the Committee's sole discretion. However, the
Committee will not change this Severance Policy without
ninety (90) days notice if the planned change would
create a material diminution in the severance benefit to
Covered Officers.
Unless otherwise stated in this document, this Severance
Policy shall not prevent or limit a Covered Officer's
continuing or future participation in any plan, program,
policy or practice provided by the Company and for which
the Covered Officer may qualify. Further, nothing in
this Severance Policy will limit or otherwise affect the
rights a Covered Officer may have under any contract or
agreement with the Company.
EXHIBIT 10.6
August 10, 1999
Mr. David J. Logan
P. O. Box 60
Great Barrington, MA 01230
Dear Dave:
The purpose of this letter is to offer to extend your
consulting agreement with Gerber Scientific, Inc., for an
additional period of three (3) years with certain amendments
as stated below.
First, your compensation under the contract is to be
increased to One Hundred Thirty-Five Thousand Dollars
($135,000.00) per annum payable monthly in accordance with
the terms of the original July 1990 agreement.
Second, paragraph E. of the July 1990 letter agreement
whereby Gerber continues your participation under the terms
of its medical and relevant plans is to be deleted for this
and any subsequent renewal terms. As we have discussed,
under the terms of the Gerber plans, you are no longer
eligible to participate in those plans after your 65th
birthday. You are, of course, eligible for Medicare and you
may purchase supplementary medical insurance under one of
several independent plans. Your compensation, above, has
been adjusted to reflect the increased cost to you to
independently maintain such supplementary insurance which
is, of course, your sole responsibility.
Except as amended above, all terms and conditions of the
original agreement dated July 18, 1990, including the
statement of your duties and responsibilities shall remain
in full force and effect.
Once agreed to by you and approved by Mike Cheshire in the
space(s) provided below, this contract extension shall be
effective July 19, 1999 without regard to the date(s) of
actual signatures.
Sincerely,
/s/ Richard F. Treacy, Jr.
Richard F. Treacy, Jr.
Accepted and Agreed:
/s/ David J. Logan
David J. Logan
Date:
Approved:
/s/ Michael J. Cheshire
Michael J. Cheshire
Chairman & CEO
Date:
EXHIBIT 15
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
Re: Registration Statements on Form S-8,
File No. 2-93695, No. 33-58668,
No. 333-261777, No. 333-42879,
No. 333-81447, and No. 333-83463
Registration Statement on Form S-3,
File No. 33-58670
With respect to the subject Registration Statements, we
acknowledge our awareness of the use therein of our report dated
August 18, 1999 related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act, such reports
are not considered a part of a Registration Statement prepared or
certified by an accountant or a report prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Act.
/s/ KPMG LLP
Hartford, Connecticut
September 7, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and statement of earnings of Gerber Scientific, Inc.
as of and for the three-month period ended July 31, 1999 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> APR-30-2000
<PERIOD-END> JUL-31-1999
<CASH> 17,486
<SECURITIES> 0
<RECEIVABLES> 108,388
<ALLOWANCES> 0
<INVENTORY> 82,866
<CURRENT-ASSETS> 225,865
<PP&E> 156,810
<DEPRECIATION> 64,909
<TOTAL-ASSETS> 541,392
<CURRENT-LIABILITIES> 108,738
<BONDS> 0
0
0
<COMMON> 22,973
<OTHER-SE> 227,644
<TOTAL-LIABILITY-AND-EQUITY> 541,392
<SALES> 139,476
<TOTAL-REVENUES> 139,476
<CGS> 79,926
<TOTAL-COSTS> 125,752
<OTHER-EXPENSES> (393)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,464
<INCOME-PRETAX> 11,653
<INCOME-TAX> 4,100
<INCOME-CONTINUING> 7,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,553
<EPS-BASIC> .34
<EPS-DILUTED> .34
</TABLE>
