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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: APRIL 30, 1997
GENERAL SCANNING INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 0-26646 04-2445884
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation or
organization)
500 ARSENAL STREET, 02172
WATERTOWN, MA (zip code)
(Address of principal
executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 924-1010
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
(I) GENERAL SCANNING INC. ADOPTS STOCK PURCHASE RIGHTS PLAN
On April 30, 1997, the Board of Directors of General Scanning Inc., a
Massachusetts corporation (the "Company"), declared a dividend distribution of
one preferred share purchase right (a "Right") for each outstanding share of
common stock, par value $.01 per share (the "Common Shares"), of the Company.
The dividend is payable on May 1, 1997 (the "Record Date") to the stockholders
of record on that date. Except as described below, each Right, when
exercisable, entitles the registered holder to purchase from the Company one
ten-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Shares"), of the Company at a price of $70
per one ten-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Rights certificates will be
distributed. Until the earlier to occur of (i) 10 business days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person", which does not include the Company, any subsidiary of
the Company, any employee benefit plan of the Company or any subsidiary of the
Company, an entity holding securities of the Company organized, appointed or
established by the Company or any of its subsidiaries for or pursuant to the
terms of any such plan, or any beneficial owner holding 20% or more of the
Company's Common Shares on the Record Date so long as such beneficial owner does
not acquire additional Common Shares representing more than 1% of the total
outstanding Common Shares on the Record Date) have acquired beneficial ownership
of 20% or more of the outstanding Common Shares (the date of such an
announcement being a "Shares Acquisition Date"), or (ii) 10 business days (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934 (the "Exchange Act"), as modified and used in Sections
13(d) and 14(d) thereof) becomes an Acquiring Person) following the commencement
of, or announcement of an
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intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
such outstanding Common Shares (the earliest of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate together with a copy of the Summary of Rights.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date, and the separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on May 1, 2007 (the "Final Expiration Date"), unless the Rights are
earlier redeemed by the Company, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
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The number of outstanding Rights and the number of one ten-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 10,000 times the dividend declared per Common Share. In the event
of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $10,000 per share but will be
entitled to an aggregate payment of 10,000 times the payment made per Common
Share. Each Preferred Share will have 10,000 votes, voting together with the
Common Shares. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive 10,000 times the amount received per Common Share. These
rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one ten-thousandth interest in a Preferred Share
purchasable upon exercise of each Right is intended to approximate the value of
one Common Share.
In the event that, after the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such, the
Company is involved in a merger or other business combination transaction in
which the Common Shares are exchanged or changed, or 50% or more of the
Company's consolidated assets or earning power are sold (in one transaction or a
series of transactions), proper provision will be made so that each holder of a
Right, other than an Acquiring Person, will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company (or, in
the event there is more than one acquiring company, the acquiring company
receiving the greatest portion of the assets or earning power transferred) which
at the time of such transaction would have a market value of two times the
exercise price of the Right.
In the event that (i) any person becomes an Acquiring Person, (ii) an
Acquiring Person engages in one or more "self-dealing" transactions as
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set forth in the Rights Agreement, or (iii) during such time as there is an
Acquiring Person, there shall be a reclassification of securities or a
recapitalization or reorganization of the Company or other transaction or series
of transactions involving the Company which has the effect of increasing by more
than 1% the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its subsidiaries beneficially owned by the
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights beneficially owned by any Acquiring Person, will thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right.
Upon occurrence of any of the events described in the two immediately
preceding paragraphs, any Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person shall immediately become null and void.
At any time after the occurrence of any such event and prior to the
acquisition by any person or group of 50% or more of the outstanding Common
Shares, the Continuing Directors (as defined below) may exchange the Rights
(other than Rights owned by an Acquiring Person and certain related persons
which have become void), in whole or in part, at an exchange ratio of one Common
Share, or one ten-thousandth of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one ten-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the earlier of (i) the tenth day after a Shares
Acquisition Date, or (ii) the expiration of the Rights, the Board of Directors
may redeem the Rights in whole, but not in part, at a price of $.001 per Right
(the "Redemption Price"). Under certain circumstances set forth in the Rights
Agreement, such a redemption would require the concurrence of the Company's
"Continuing Directors", that is, any director who is not an Acquiring Person or
an affiliate or associate of an Acquiring Person and who was in office prior to
the date of the Rights Agreement or
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subsequently nominated by a majority of the Continuing Directors. Thereafter,
the Rights may only be redeemed by the Continuing Directors in whole, but not in
part, at the Redemption Price, (a) under certain circumstances described in the
Rights Agreement involving a disposition of Common Shares by the Acquiring
Person such that the Acquiring Person's common share ownership is reduced to 10%
or less, or (b) if such redemption is incidental to a merger or other business
combination transaction or series of transactions involving the Company but not
involving an Acquiring Person and satisfying certain other conditions. The
redemption of the rights may be made effective at such time on such basis and
with such conditions as the Board of Directors or the Continuing Directors, as
the case may be, in their sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights could have certain anti-takeover effects. The Rights could
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors, in light of the ability of the Board of Directors to
redeem the Rights or amend the Rights Agreement as summarized above.
The form of Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights, which includes as Exhibit B the form of
Rights Certificate, is
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incorporated herein by reference. The foregoing description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement.
(II) GENERAL SCANNING ADOPTS KEY EMPLOYEE RETENTION AGREEMENTS
On May 1, 1997, the Company's Board of Directors adopted a Key Officer and
Manager Retention Program to assist the Company in retaining the commitment of
key officers and managers at a time when their services are especially needed
but their future is uncertain due to an unsolicited merger or acquisition offer.
Pursuant to the program, the Board authorized the Company to enter into Key
Employee Retention Agreements ("Retention Agreements") with certain executive
officers and managers of the Company approved by the Board's Compensation
Committee (initially not to exceed ten key employees). A copy of the form of
Retention Agreement is attached as an exhibit hereto. All capitalized terms
used in the following description and not otherwise defined herein shall have
the meanings assigned to them in the Retention Agreements.
The Retention Agreements have a term of one year, renewable for successive
one-year terms, unless a Change in Control occurs during any such one-year
period, in which case the term extends for up to two years after the Change in
Control. The Retention Agreements provide the key employees with certain
severance payments and benefits in the event that, following a Change in
Control, the employee's employment with the Company is terminated other than by
the Company for Cause, by reason of death or by the employee following certain
specified changes in the terms of employment ("Good Reason"). The severance
payments are substantially reduced in the event of a Change in Control approved
by the Continuing Directors. A Change in Control consists in any of (i) failure
of the Continuing Directors to constitute at least two-thirds of the Board, (ii)
the acquisition by certain persons of beneficial ownership of 20% or more of the
outstanding voting securities of the Company, (iii) a change in control required
to be reported under the Exchange Act, or (iv) adoption of a plan of liquidation
of the Company or agreement to sell substantially all of the Company's assets.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.: Description:
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<S> <C>
1 Rights Agreement, dated as of May 1, 1997,
including Exhibits thereto, between the Company
and American Stock Transfer & Trust Company, as
Rights Agent. Incorporated by reference from the
Company's Registration Statement on Form 8-A dated
May 23, 1997, to which it is an exhibit.
2 The Company's Press Release dated May 1, 1997
relating to adoption of the Company's new Stock
Purchase Rights Plan.
3 Form of Key Employee Retention Agreement.
</TABLE>
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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, thereto duly authorized.
GENERAL SCANNING INC.
By: Charles D. Winston
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Charles D. Winston
President and Chief Executive Officer
DATED: May 23, 1997
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EXHIBIT 2
General Scanning Adopts Shareholders Rights Plan
WATERTOWN, Mass., May 1 /PRNewswire/ -- General Scanning Inc. (Nasdaq:
GSCN) announced that, at its Board of Directors meeting yesterday, the Board
declared a special dividend distribution of one Preferred Share Purchase Right
for each outstanding share of General Scanning common stock. This dividend will
be distributed on May 1, 1997 to stockholders of record as of the close of
business on that date. Each Right would entitle a stockholder to buy 1/10,000th
of a share of a new series of junior participating preferred stock at an
exercise price of $70. The Rights will become exercisable only if a person or
group acquires 20% or more of General Scanning's common stock or announces a
tender offer the consummation of which would result in ownership of 20% or more
of the common stock, and may be exercised only after ten days (subject to
extension by action of the Directors) have expired following such acquisition or
commencement of a tender offer. The Company will be entitled, at the option of
the Board of Directors (in certain cases with the concurrence of the Continuing
Directors, as defined in the Rights Plan), to redeem the Rights at $.001 per
Right at any time within such ten days (or such extended period).
Once a person or group has acquired 20% or more of the outstanding common
stock of General Scanning, each Right not owned by such acquiring person or
group may entitle its holder to purchase, at the exercise price of $70, shares
of common stock of General Scanning or of any company that acquires more than
50% of General Scanning's business or into which General Scanning is merged (or,
in certain circumstances as determined by the Board, cash or other securities of
General Scanning or such successor or acquiring company), having a market value
at that time equal to twice the Right's exercise price. At any time after an
event triggering exercisability of the Rights and prior to the acquisition by
the acquiring person or group of 50% or more of the Company's outstanding common
stock, the Continuing Directors may exchange the Rights (other than those held
by such acquiring person or group) in whole or in part for common stock of the
Company at an exchange ratio of one share of common stock per Right.
The Rights will expire on May 1, 2007, unless redeemed prior to that date.
Distribution of the Rights is not taxable to stockholders.
Charles D. Winston, President and CEO of General Scanning, said: "This
Rights Plan is designed to help the Board of Directors assure that all General
Scanning stockholders are treated fairly in any unsolicited merger or
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other acquisition, and to assist the Board in maximizing shareholder value in
any such circumstance."
A detailed description of the Rights Plan will be mailed to General
Scanning's stockholders at the time of the distribution.
General Scanning Inc., headquartered in Watertown, Massachusetts, develops
and manufactures a broad line of laser systems for a wide range of applications
in the semiconductor, electronics, aircraft and medical industries. In
addition, the Company produces a line of laser subsystems and components which
are used in the Company's own systems as well as sold to other manufacturers of
laser systems. General Scanning also designs and manufactures under ISO 9001
certification a line of thermal printers for leading medical instrument
companies.
SOURCE General Scanning Inc.
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/CONTACT: Fran Crecco of General Scanning Inc., 617-924-1010, Ext. 205/
/General Scanning press releases available through Company News On
Call by fax, 800-758-5804, ext. 107189, or at http://www.prnewswire.com/
(GSCN)
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EXHIBIT 3
FORM OF KEY EMPLOYEE RETENTION AGREEMENT
THIS AGREEMENT dated May __, 1997, by and between GENERAL SCANNING INC., a
Massachusetts corporation having its principal place of business in Watertown,
Massachusetts (the "Company"), and ______________ of ______________,
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________________ (the "Employee")
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WITNESSETH THAT:
WHEREAS, the Employee has been for approximately _____ years, employed by
the Company; the Employee's experience and knowledge of the affairs of the
Company are valuable to the Company; and the Company considers it essential to
the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below);
NOW, THEREFORE, the parties agree as follows:
1. DEFINED TERMS. For purposes of this Agreement, the definitions of
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capitalized terms used in this Agreement are as follows:
(a) "Acquiring Person" shall mean any Person who acquires a beneficial
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ownership of twenty percent (20%) or more of the outstanding voting securities
of the Company, other than any existing Beneficial Owner on May 1, 1997 so long
as any such existing Beneficial Owner does not (either individually or as a
participant in any group of affiliates or associates, as such terms are defined
in Rule 12b-2 under the Exchange Act) acquire additional shares of the Company's
Common Stock representing more than 1% of the total outstanding Common Stock on
the Record Date.
(b) "Approved Change in Control" shall mean a Change in Control which shall
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have been approved, and/or recommended to the Company's shareholders, by a
majority of the Continuing Directors.
(c) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under
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the Exchange Act.
(d) "Board" shall mean the Board of Directors of the Company.
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(e) "Cause" for termination of the Employee's employment by the Company,
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after any Change in Control, shall mean any of the following:
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(i) The willful and continued failure by the Employee to perform
the Employee's duties with the Company, which failure continues for more than
ten (10) days after written notice given to the Employee pursuant to a vote of
at least two-thirds of the Continuing Directors, such vote to set forth in
reasonable detail the nature of such failure;
(ii) The willful engaging by the Employee in gross misconduct which
is demonstrably and materially injurious to the Company, financially or
otherwise; or
(iii) Conviction of the Employee by a court of competent jurisdiction
of, or the Employee's pleading nolo contendere to, any criminal offense
involving dishonesty or breach of trust or any felony or crime of moral
turpitude;
provided that, for purposes of clauses (i) and (ii) of this definition, no act
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or failure to act on the Employee's part shall be deemed "willful" unless done,
or omitted to be done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the best interest of
the Company.
(f) A "Change in Control" shall have occurred if any of the following
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conditions has been satisfied:
(i) Continuing Directors constitute two-thirds or less of the
membership of the Board;
(ii) any Acquiring Person becomes a Beneficial Owner of the
Company's voting securities;
(iii) there is a change in control of the Company that must be
reported in response to item 1(a) of Current Report on Form 8-K or item 6(e) of
Schedule 14A of Regulation 14A or any similar item, schedule, or form under the
Exchange Act; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company, or an agreement for the sale or disposition by the
Company of substantially all of the Company assets.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(h) "Company" shall have the meaning specified in the preamble and shall
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include any successor to its business and/or assets.
(i) "Continuing Director" shall mean any member of the Board, other than
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an Acquiring Person, (i) who has continuously been a member of the Board since
not later than the date of a Potential Change in Control or (ii) who is
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elected to succeed a Continuing Director by a majority of the then Continuing
Directors or who is nominated by a majority of the then Continuing Directors.
(j) "Date of Termination" shall have the meaning described in Section 6.2
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of this Agreement.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
(l) "Good Reason" for termination by the Employee of his/her employment
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shall mean the occurrence of any of the following acts by the Company, or
failures of the Company to act, unless (for any act or failure to act described
in paragraphs (i), (v), or (vi) below) such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination or (in
the case of paragraph (iii) below) such act is not objected to in writing by the
Employee within four months after notification of the Company's intention to
take the action contemplated by paragraph (iii):
(i) The assignment to the Employee of any duties inconsistent with
the Employee's status as an executive of the Company or a material alteration,
adverse to the Employee, in the nature, scope or status of the Employee's
responsibilities, title, authorities, powers, functions or duties normally
exercised by an executive in such capacity, unless such change in title, duties,
responsibilities, etc. is by mutual written agreement of the parties to this
Agreement;
(ii) A reduction by the Company in the Employee's annual base salary
as in effect on the date of this Agreement or as it may be increased, except for
across-the-board salary reductions similarly affecting all executives of the
Company and all executives of any Person in control of the Company;
(iii) The fact that the Company requires the Employee to be based
anywhere other than within 25 miles of the offices where the Employee was based
on the date of the Change in Control, except for required travel on the
Company's business to an extent substantially consistent with the Employee's
present business travel obligations;
(iv) The failure by the Company, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation (or to
pay to the Employee any portion of an installment of deferred compensation under
any deferred compensation program of the Company), within fourteen (14) days of
the date such compensation is due, or a material breach by the Company of any
other provision of this Agreement, which breach continues for more than fourteen
days following written notice given by the Employee to the Company, such written
notice to set forth in reasonable detail the nature of such breach;
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(v) The failure by the Company to continue in effect any
compensation plan in which the Employee participates immediately prior to the
Change in Control which is material to the Employee's total compensation;
(vi) The failure by the Company to continue to provide the Employee
with benefits substantially similar to those enjoyed by the Employee prior to
the Change in Control, including without limitation as applicable use of an
automobile, coverage of membership dues, provision of services, and benefits
under any of the Company's pension, life insurance, medical, health and
accident, or disability plans in which the Employee was participating at the
time of the Change in Control;
(vii) The failure by the Company to provide the Employee with the
number of paid vacation days to which the Employee is entitled on the basis of
years of service with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change in Control; or
(viii) Any purported termination of the Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 6.1 of this Agreement (notwithstanding that, for purposes of this
Agreement, no such purported termination shall be effective);
provided that (A) the Employee's right to terminate his/her employment for Good
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Reason shall not be affected by the Employee's incapacity due to physical or
mental illness; and (B) the Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason under this Agreement.
(m) "Notice of Termination" shall have the meaning stated in Section 6.1
---------------------
of this Agreement.
(n) "Person" shall have the meaning given in Section 3(a)(9) of the
------
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(o) "Potential Change in Control" has occurred if one of the following
---------------------------
conditions is satisfied:
(i) The Company enters into an agreement which would result in a
Change in Control;
(ii) The Company or any Person publicly announces an intention to
take or to consider taking actions which would constitute a Change in Control;
(iii) Any Person becomes the direct or indirect Beneficial Owner of
securities of the Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, other than
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any existing Beneficial Owner on May 1, 1997 so long as any such existing
Beneficial Owner does not (either individually or as a participant in any group
of affiliates or associates, as such terms are defined in Rule 12b-2 under the
Exchange Act) acquire additional shares of the Company's Common Stock
representing more than 1% of the total outstanding Common Stock on the Record
Date; or
(iv) The Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(p) "Severance Payments" shall mean those payments described in Section 5
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of this Agreement.
2. TERM OF AGREEMENT. This Agreement shall commence as of May 1, 1997
-----------------
and shall continue through April 30, 1998, provided that, commencing on May 1,
1998, and on each subsequent May 1, the term of this Agreement automatically
shall be extended for one additional year unless, not later than the preceding
December 31, the Company or the Employee shall have given notice not to extend
this Agreement or a Change in Control shall have occurred prior to such May 1.
If a Change in Control shall have occurred during the term of this Agreement,
however, this Agreement shall continue in effect for a period of not less than
twenty-four (24) months beyond the last day of the month in which such Change in
Control occurred.
3. THE COMPANY'S COVENANTS SUMMARIZED; NOT AN EMPLOYMENT CONTRACT. In
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order to induce the Employee to remain in the employ of the Company and in
consideration of the Employee's covenants set forth in Section 4, the Company
agrees, under the conditions described in this Agreement, to pay the Employee
the Severance Payments described in Section 5 of this Agreement and the other
payments and benefits described in the event the Employee's employment with the
Company is terminated following a Change in Control and during the term of this
Agreement. No amount or benefit shall be payable under this Agreement unless
there shall be deemed to have been a termination of the Employee's employment
with the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment, and, except
as otherwise agreed in writing between the Employee and the Company, the
Employee shall not have any right to be retained in the employ of the Company.
4. EMPLOYEE'S COVENANTS. The Employee agrees that, subject to the terms
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and conditions of this Agreement, the Employee will remain in the employ of the
Company until the earliest of (i) the date of a Change in Control which is not
an Approved Change in Control, (ii) the first anniversary of the date of an
Approved Change in Control, (iii) the date of termination by the Employee of
his/her employment for Good Reason, by reason of death or Retirement, or (iv)
the termination by the Company of the Employee's employment for any reason.
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5. SEVERANCE PAYMENTS.
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5.1 BASIC SEVERANCE AMOUNT. The Company shall pay the Employee the
----------------------
payments described as follows in this Section 5, upon the payment date specified
in Section 5.3 after the termination of the Employee's employment following a
Change in Control during the term of this Agreement, unless the termination is
(i) by the Company for Cause, (ii) by reason of death, or (iii) by the Employee
without Good Reason. The Employee's employment shall be deemed to have been
terminated following a Change in Control by the Company without Cause or by the
Employee with Good Reason if the Employee's employment is terminated prior to a
Change in Control without Cause at the direction of a Person who has entered
into an agreement with the Company, the consummation of which will constitute a
Change in Control or if the Employee terminates his/her employment with Good
Reason prior to a Change in Control if the circumstances or event which
constitutes Good Reason occurs at the direction of such Person.
(a) In lieu of any further salary payments or severance benefits to the
Employee for periods subsequent to the Date of Termination, the Company shall
pay to the Employee a lump sum severance payment, in cash, equal to four times
the sum of (i) the Employee's annual base salary as in effect either, whichever
is higher, (A) immediately prior to the occurrence of the event or circumstance
upon which the Notice of Termination is based or (B) immediately prior to the
Change in Control and (ii) the average of the amounts paid as an annual bonus to
the Employee with respect to the three fiscal years immediately preceding
either, whichever is higher, (A) the occurrence of the event or circumstances
upon which the Notice of Termination is based or (B) the Change in Control.
(b) In lieu of any further life, disability, accident and health insurance
benefits due the Employee, the Company shall pay to the Employee a lump sum
amount, in cash, equal to the cost to the Company (as determined by the Company
in good faith with reference to its most recent actual experience) of providing
such benefits, to the extent that the Employee is eligible to receive such
benefits immediately prior to the Notice of Termination for a period of four
years commencing on the Date of Termination. (The sum of the payments which the
Employee may become entitled to receive pursuant to the preceding paragraph (a)
and this paragraph (b), as computed prior to any Gross-up Payment which may
become due in respect thereof pursuant to Section 5.2 below, shall be referred
to in this Section 5.1 as the "Severance Base Amount".)
---------------------
(c) Notwithstanding the foregoing provisions of this Section 5.1, in the
event of an Approved Change in Control, the payments which the Employee shall
become entitled to received pursuant to this Section 5.1 shall be reduced to the
higher of (i) an aggregate amount (which, when added together with all other
compensation required to be taken into account pursuant to Section 280G
<PAGE>
-7-
of the Code) equal to $1.00 less than the aggregate severance payments which
would result in any portion thereof becoming subject to the excise tax imposed
under Section 280G of the Code, or (ii) 50% of the Severance Base Amount;
provided that (A) in the event that the Employee obtains other full-time
- --------
employment within two years after the Date of Termination (the "Mitigation
----------
Period"), the aggregate severance payment to which the Employee is entitled
- ------
pursuant to this paragraph (c) shall be reduced by the amount of base salary
payable to the Employee as compensation for such new employment for the
remaining portion of the Mitigation Period following the commencement date of
such new employment; (B) in the event that the Employee shall reach age 65
during the Mitigation Period, the aggregate severance payment to which the
Employee would be entitled pursuant to the preceding provisions of this
paragraph (c) shall be reduced to the percentage thereof obtained by dividing
the number of days in the Mitigation Period prior to the Employee's 65th
birthday by 730; but (C) in no event shall the aggregate severance payment to
which the Employee shall become entitled pursuant to this paragraph (c) be
reduced below 25% of the Severance Base Amount.
5.2 TAX GROSS-UP. Anything in this Agreement to the contrary
------------
notwithstanding and except as provided in Section 5.1(c) or as set forth in
paragraph (b) of this Section 5.2, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 5.2) (a "Subject Payment") would be subject
---------------
to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, being hereinafter
collectively referred to as the "Excise Tax"), then the following provisions
----------
shall be applicable:
(a) The Employee shall be entitled to receive an additional payment (a
"Gross-up Payment") in an amount such that after payment by the Employee of all
- -----------------
taxes (including any interest or penalties imposed with respect to such taxes),
including without limitation any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-up Payment,
the Employee retains an amount of the Gross-up Payment equal to the Excise Tax
imposed upon the Subject Payments.
(b) Notwithstanding the foregoing paragraph (a), if it shall be determined
that the Employee is entitled to a Gross-up Payment, but that the Employee,
after taking into account the Subject Payments and the Gross-up Payment, would
not receive a net after-tax benefit of at least $50,000 (taking into account
both income taxes and any Excise Tax) as compared to the net after-tax proceeds
to the Employee resulting from an elimination of the Gross-up Payment and a
reduction of the Subject Payments, in the aggregate, to an amount (the "Reduced
-------
Amount") such that the receipt of Subject Payments
- ------
<PAGE>
-8-
would not give rise to any Excise Tax, then no Gross-up Payment shall be made to
the Employee and the Subject Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(c) All determinations required to be made under this Section 5.2,
including whether and when a Gross-up Payment is required and the amount of such
Gross-up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Arthur Andersen LLP or such other certified
public accounting firm as may be designated by the Company (the "Accounting
----------
Firm") which shall provide detailed supporting calculations both to the Company
and the Employee within fifteen (15) business days of the receipt of notice from
the Employee that there has been a Subject Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for any Acquiring Person, the Company shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee.
5.3 PAYMENT DATE; ESTIMATED PAYMENTS.
--------------------------------
(a) The Company shall make the payments provided for in Section 5.1 not
later than the fifth (5th) day following the Date of Termination.
(b) Any Gross-up Payment, as determined pursuant to Section 5.3, shall be
paid by the Company to the Employee within five (5) days of the receipt of the
Accounting Firm's determination.
(c) If the Company has been unable fully to determine the amounts of
payments due pursuant to Section 5.1, the Company shall pay to the Employee on
such day an estimate, as determined by the Employee, of the minimum amount of
such payments to which the Employee is clearly entitled. The Company shall pay
the remainder of such payments, together with interest at the rate provided in
Section 1274(d) of the Code, as soon as the amount is determined, but no later
than the thirtieth (30th) day after the Date of Termination.
(d) In the event that (i) the amount of the estimated payments exceeds the
amount the Company subsequently determines to have been due, or (ii) the amount
of severance payment paid to the Employee pursuant to Section 5.1(c) shall
exceed by virtue of proviso (A) to Section 5.1(c) the amount of aggregate
severance payment to which the Employee is entitled, then (in the case of either
of the preceding clauses (i) or (ii)) such excess shall constitute a loan by the
Company to the Employee, payable on the fifth (5th) business day after demand by
the Company, together with interest at the rate provided in the above-referenced
section of the Code.
<PAGE>
-9-
6. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
6.1 NOTICE OF TERMINATION. For purposes of this Agreement, a "Notice of
--------------------- ---------
Termination" shall mean a notice which shall indicate the specific termination
- -----------
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated.
6.2 DATE OF TERMINATION. The term "Date of Termination," with respect to
------------------- ---- -- -----------
any purported termination of the Employee's employment after a Change in Control
and during the term of this Agreement, shall mean the date specified in the
Notice of Termination. In the case of termination by the Company, the date
shall not be less than thirty (30) days after the date such Notice of
Termination is given, except in the case of a termination for Cause. In the
case of termination by the Employee, the date shall not be less than fifteen
(15) days nor more than sixty (60) days after the date such Notice of
Termination is given.
6.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days after any
------------------------------
Notice of Termination is given or, if later, prior to the Date of Termination,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order of decree of a court of
competent jurisdiction provided that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence.
6.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
---------------------------
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 6.3 above, the Company shall
continue to pay the Employee the full compensation in effect when the notice
giving rise to the dispute was given (including without limitation salary) and
continue the Employee as a participant in all compensation, benefit and
insurance plans in which the Employee was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 6.3 above. Amounts paid under this Section 6.4 are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
7. NO MITIGATION. If the Employee's employment by the Company is
-------------
terminated during the term of this Agreement, the Employee is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Employee by the Company pursuant to Section 5 or Section 6.4 above.
<PAGE>
-10-
Further, the amount of any payment or benefit provided for in Section 5 or
Section 6.4 above (except to the extent specifically set forth in the proviso to
Section 5.1(c) above) shall not be reduced by any compensation earned by the
Employee as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Employee to the
Company, or otherwise.
8. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
8.1 ASSUMPTION AND PERFORMANCE OF AGREEMENT. The Company will require
---------------------------------------
that any successor to the business and/or its assets must expressly assume and
agree to perform this Agreement as if no such succession had taken place.
Failure to do so shall entitle the Employee to compensation from the Company in
the same amount and on the same terms to which the Employee would be entitled if
the Employee were to terminate his/her employment for Good Reason after a Change
in Control, except that the effective date for the succession shall be the Date
of Termination.
8.2 SUCCESSORS. This Agreement shall inure to the benefit of and be
----------
enforceable by the Employee's personal or legal representative, executor,
administrator, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to him (excluding
amounts which, by their own terms, terminate upon the death of the Employee) if
the Employee had continued to live, all such amounts, unless otherwise provided
in the Agreement, shall be paid in accordance with the terms of this Agreement
to the executor, personal representative or administrator of the Employee's
estates.
9. NOTICES. For the purpose of this Agreement, notices and all other
-------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by Untied States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance with
the Agreement, except that notice of change of address shall be effective only
upon actual receipt:
If to the Company:
General Scanning Inc.
500 Arsenal Street
Watertown, MA 02172
Attn: Chairman of the Board
<PAGE>
-11-
If to the Employee:
10. MISCELLANEOUS. No provision of this Agreement may be modified, waived
-------------
or discharged unless such is agreed to in writing and signed by the Employee and
such officer of the Company as may be specifically designated by the Board.
Except as expressly provided in this Agreement, no waiver by any party at of a
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations with respect to the subject
matter of this Agreement have been made by any party which are not expressly set
forth in this Agreement. This Agreement shall be construed as an instrument
executed under seal. All references to sections of the Code shall be deemed
also to refer to any successor provisions to such sections. Any payments
provided for in this Agreement shall be paid (subject to Section 5.2) net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Employee has agreed. The obligations of the
Company under Sections 5, 6, 7 and 12 of this Agreement shall survive the
expiration of the term of this Agreement.
11. ENFORCEABILITY. The invalidity or unenforceability of any provision
--------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Employee for
-----------------------------------
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set forth
the specific reasons for the denial and the specific provision of this Agreement
relied upon. Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts, in accordance with the rules of the American Arbitration
Association. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, the Employee shall be entitled to seek specific
performance of the Employee's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
13. APPLICABLE LAW. The validity, interpretation, construction and
--------------
performance of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
<PAGE>
-12-
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company and by the Employee as of the date first written above.
GENERAL SCANNING INC.
By:
-------------------------------------
Title:
THE EMPLOYEE
----------------------------------------
Name:
