SEVERANCE, NON-COMPETE AND CONSULTING AGREEMENT
THIS SEVERANCE, NON-COMPETE AND CONSULTING AGREEMENT (the "Agreement") is
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made and entered into as of July 1, 2004 (the "Effective Date") by and among
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Xxxxx Xxxxx (the "Consultant"), BMA Consulting, Inc. ("BMA") and The GSI Group,
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Inc. (the "Company").
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WITNESSETH:
WHEREAS, prior to the date hereof, the Consultant has been employed as the
Chief Executive Officer of the Company;
WHEREAS, the Consultant and the Company have each determined that it is in
the best interests of the Consultant and the Company that the Consultant's
employment with the Company terminate, effective July 1, 2004;
WHEREAS, the Company desires to engage the services of the Consultant,
acting through his wholly owned subsidiary BMA, to assist it with long-range
strategy, strategic decisions regarding the Company and its businesses,
decisions regarding the capital structure of the Company and other matters and
the Consultant desires to provide such consulting services to the Company;
WHEREAS, the Consultant has substantial and valuable knowledge regarding
the Company and the industry in which it conducts business; and
WHEREAS, the Consultant and the Company have reached agreement as to the
terms and conditions under which the Consultant will agree to remain available
to the Company for the purposes described above notwithstanding the termination
of his employment relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
1. Termination of Employment. The Consultant's employment with the Company
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is hereby terminated, effective July 1, 2004. From and after such date, the
Consultant is and will be considered an independent contractor under this
Agreement. Nothing in this Agreement is intended to create any offer of
employment, partnership or joint venture. The Consultant shall have no authority
to enter into any contracts or agreements on behalf of the Company. In no event
will the Consultant represent to any third party that he is an agent or employee
of the Company or connected with the Company in any way other than under the
terms of this Agreement. The Consultant will continue to serve on the Board of
Directors of the Company as its non-executive Chairman.
2. Agreement Term. The initial term of the consulting arrangement set forth
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in this Agreement shall be the period beginning on the Effective Date and,
unless sooner terminated as provided herein, ending on October 31, 2007 (the
"Initial Term"). Thereafter, the Agreement shall automatically extend for
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additional periods of one year each (an "Additional Term"), unless either the
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Consultant or the Company, as the case may be, provides notice of termination to
the other party at least 90 days before the last day of the Initial Term or the
then current Additional Term, as the case may be. Following termination of the
consulting arrangement under this Agreement, the Consultant will continue to
comply with the requirements of Sections 6 and 7 of this Agreement.
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Throughout the Agreement, the Initial Term and the Additional Terms are
collective referred to as the "Term."
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3. Scope of Services. The Consultant agrees to provide the following
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services during the Term of this Agreement:
(a) During the Term, the Consultant shall devote his time, energies and
talents as a senior advisor to the Company for the purpose of assisting in the
development of long- range strategy, strategic decisions regarding the Company
and its businesses, decisions regarding the capital structure of the Company and
other matters as may be reasonably requested by the Company (the "Consulting
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Services"). Additionally, Consulting Services shall include direct interaction
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with the Company's Board of Directors and/or various committees of the Board as
may be required from time to time. Consultant shall provide such services at the
direction of the Chief Executive Officer of the Company.
(b) During the Term, it is understood by the parties that the Consultant
shall work primarily in the Assumption, Illinois area and that he will
frequently be required to travel to other locations to perform Consulting
Services. The Company will make available necessary resources at locations to
which the Consultant is required to travel.
(c) During the Term, the Consultant shall devote 2/3 of his time to
providing the Consulting Services. For purposes of the foregoing, "2/3 of his
time" shall, over the course of the Term, equal approximately 1,200 man hours of
service annually, such time to be inclusive of time spent traveling on behalf of
the Company. The Consultant agrees that he will not undertake other time
commitments that could materially interfere with his ability to provide the
Consulting Services pursuant to this Agreement.
(d) During the Term, to the extent not inconsistent with, or in
contravention of, the provisions of this Agreement, the Consultant shall be
permitted to provide consulting services to, or be employed by, other companies
or employers.
4. Compensation; Severance.
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(a) The Consultant (through BMA) shall receive compensation from the Company
as follows (the "Consulting Fees"):
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(i) During the Terms, the Consultant shall be paid fees on monthly basis in
the amount of FORTY TWO THOUSAND DOLLARS ($42,000.00) per month. For purposes
of this Agreement, a proportionate portion of such Consulting Fees shall be
deemed to be earned on a weekly basis throughout the Term. Throughout this
Agreement, the term "Dollars" shall mean U.S. dollars.
(ii) The Company shall pay and/or reimburse the Consultant for all customary
and reasonable travel and other out-of-pocket expenses incurred in connection
with the performance of the Consulting Services. Such payment and/or
reimbursement shall be done promptly and generally in accordance with the
procedures as are applicable to senior executives of the Company.
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(b) The Consultant is not entitled to paid vacation, paid holidays,
participation in group health insurance (except as provided in subsection (c)
below), participation in any retirement programs, premium or "overtime" pay,
workers' compensation, severance payments (other than the severance payment set
forth in this Agreement), or any other employment rights or benefits from the
Company. The Company has no obligation and will make no withholdings or
deductions from compensation for any federal or state taxes or the Federal
Insurance Contribution Act (FICA) or Federal Unemployment Contribution Act
(FUTA). It will be the Consultant's responsibility to remit appropriate taxes to
the proper state and Federal, as well as any other, tax authorities.
(c) Beginning on the Effective Date of the Consultant's termination of
employment, the Consultant shall be entitled to continue to participate in the
Company's welfare benefit plans (at the Consultant's cost and expense) to the
extent and for the period permitted by COBRA.
(d) The Consultant shall be paid a severance payment of $675,000 (equal to
18 months' salary), to be paid in a lump sum. Such amount shall not be payable
unless the Initial Term is completed in full; provided, however, that the
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Consultant shall nevertheless be entitled to receive such severance payment on
October 31, 2007 in the event he fails to complete the Initial Term due to
termination of this Agreement pursuant to Section 5(a) or 5(d) below. This
payment shall be in addition to the Stock Buyback (as defined below).
(e) Within 30 days of the date of this Agreement, the Company shall
repurchase 948,052 shares of the voting common stock of the Company owned by the
Consultant at a purchase price of $15.40 per share (the "Stock Buyback"). The
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closing of the Stock Buyback will be held at a mutually agreeable date, at which
time proper stock transfer documentation acceptable to the Company shall be
delivered by the Consultant. The Consultant will retain all other shares of
common stock of the Company held by him that are not repurchased by the Company
pursuant to the Stock Buyback.
(f) The Consultant shall be eligible for an annual bonus with respect to
each fiscal year (or part thereof) during the Term, in accordance with the
provisions of this subsection 4(f) (the Consultant's "Bonus"). Within the time
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period required by the Company's senior credit facility (or, if no such facility
or time period exists, within 30 days of the end of each fiscal year), the
Company (acting through its Chief Executive Officer and other members of
management and in consultation with the Board of Directors) shall establish its
budgeted EBITDA for the following fiscal year. The Company's budgeted EBITDA
shall be calculated as required by the Company's senior credit facility from
time to time in effect (or, if there is no such credit facility or such credit
facility does not define "EBITDA", such calculation shall be done in accordance
with the Company's credit facility in effect on the date hereof). Following the
final calculation of EBITDA with respect to any fiscal year of the Company, the
Consultant shall be entitled to a lump sum bonus payment equal to 5% of the
amount (if any) by which the Company's EBITDA in such fiscal year exceeded the
budgeted EBITDA with respect to such fiscal year. With respect to the 2004
fiscal year of the Company, the Consultant shall be eligible to receive a bonus
of up to 5% of the amount (if any) by which the Company's EBITDA for the period
from July 3, 2004 through December 31, 2004 exceeds $13.7 million, the Company's
budgeted EBITDA for the second half of fiscal 2004. The Consultant shall also be
eligible for a discretionary bonus of up to $250,000 with respect to any fiscal
year of the Company, at the discretion of the Board and the Company's Chief
Executive Officer, based on the quality of the Company's receivables and dealer
network, as well as other factors to be mutually determined.
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(g) Notwithstanding anything in this Agreement to the contrary, in no event
shall the Consultant be entitled to receive Consulting Fees and Bonus in an
aggregate amount exceeding $900,000 in or with respect to any fiscal year of the
Company.
(h) The Company will, to the maximum extent permitted by law, defend,
indemnify and hold harmless the Consultant and the Consultant's heirs, estate,
executors and administrators against any costs, losses, claims, suits,
proceedings, damages or liabilities to which the Consultant may become subject
which arise out of, are based upon or relate to the Consultant's engagement with
the Company or any affiliate, including without limitation reimbursement for any
legal or other expenses reasonably incurred by the Consultant in connection with
investigation and defending against any such costs, losses, claims, suits,
proceedings, damages or liabilities; provided that the Consultant acted in good
faith and in a manner he reasonably believed was in the best interest of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
5. Termination and Rights Upon Termination. This consulting arrangement may
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be terminated by the Company or the Consultant without any breach of this
Agreement only under the circumstances described in this Section 5.
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(a) Death or Disability. The consulting arrangement will terminate upon the
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death of the Consultant or upon his becoming Disabled. For purposes of this
Agreement, the Consultant shall be considered "Disabled" during at any time
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which he has a physical or mental impairment which renders him incapable, after
reasonable accommodation, to perform his obligations hereunder. In the event of
termination under this subsection (a), the Consultant shall be entitled to
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payment of all earned but unpaid Consulting Fees through the date of
termination, but any prepaid but unearned Consulting Fees shall be promptly
returned to the Company.
(b) Termination by Consultant. The consulting arrangement may be terminated
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by the Consultant upon 90 days' notice in the event the Company is in material
default of its obligations under this Agreement. In the event of termination
under this subsection (b), including the Consultant giving timely notice under
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Section 2 of his intent to not renew this Agreement, Consultant shall be
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entitled to payment of all earned but unpaid Consulting Fees through the date of
termination, but any prepaid but unearned Consulting Fees shall be promptly
returned to the Company.
(c) Termination by the Company for Cause. The Company may terminate the
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consulting arrangement, at any time and without any notice period, for Cause.
The term "Cause" shall be as defined as:
(i) the willful and continued failure by the Consultant, or the failure of
the Consultant as a result of his negligence, to substantially perform his
obligations under the terms of this Agreement;
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(ii) the willful engaging by the Consultant in conduct which is demonstrably
and materially injurious to the Company, which conduct is not cured (or, if not
capable of being cured, ceased) within 30 days after notice to the Consultant;
(iii) the willful commission by the Consultant of any act of theft or
embezzlement against the Company or with respect to any client or customer of
the Company; or
(iv) any material breach by the Consultant of any of the provisions or
covenants contained in this Agreement.
In the event of termination under this subsection (c), Consultant shall be
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entitled to payment of all earned but unpaid Consulting Fees through the date of
termination.
(d) Termination by the Company other than for Cause. The Company may
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terminate the consulting arrangement, for any reason or no reason at the end of
the Term, upon 90 days notice, provided however, that the Company shall have the
right to terminate this consulting arrangement at any time, for reasons other
than Cause, provided that the Company compensates the Consultant as if such
termination was to become effective at the earlier of (i) the end of the then
current Term, or (ii) 18 months following the date notice is delivered.
6. Noncompetition.
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(a) The Consultant acknowledges that the Company is currently in the
business of manufacturing, marketing and distributing, directly and through its
subsidiaries, grain storage bins, swine containment systems, chicken containment
systems and related products to the agricultural industry (the "Existing Company
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Business"). The Existing Company Business and any related business that at any
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date in question the Company or any of its subsidiaries or affiliates is
actively conducting, has definitive plans to conduct, or has manifested an
intention to conduct or attempt to conduct in the future (where the Consultant
has provided services to the Company related to the activity in question) are
collectively hereafter referred to as "Company Business."
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(b) The Consultant further acknowledges that (i) his services to the
Company, its subsidiaries and affiliates are unique and extraordinary as
construed under Illinois law, (ii) the Company Business, and the services
provided are conducted throughout the United States of America and on an
international basis, (iii) the agreements contained in this Section 6 are
essential to protect the business and goodwill of the Company, (iv) work for, or
affiliation with, a Competitor, as defined below, will likely result in the
disclosure of the Company's confidential and proprietary information, and (v) he
has the means to support himself and his dependents other than by engaging in
the Company Business and the provisions of Section 6(c) will not impair such
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ability.
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(c) While the Consultant is engaged by the Company, and for a period of two
years following the Consultant's date of termination, the Consultant agrees that
he will not directly or indirectly, whether as an employee, officer, director,
agent, security holder, creditor, consultant, or otherwise, (i) engage in any
activity that is in competition with the Company Business at the effective date
of such termination or (ii) assist, perform services for, establish or open, or
have any equity interest (other than ownership of 5% or less of the outstanding
stock of any corporation listed on the New York Stock Exchange or quoted on
Nasdaq National Market) in, any Competitor. "Competitor" means any person other
than the Company or any subsidiary or affiliate of the Company, that engages in
any business in the United States and any other country where the Consultant was
assisting the Company develop business within 6 months prior to the date of his
termination, which business is substantially the same as or in competition with
the Company Business at the effective date of such termination.
(d) While the Consultant is engaged by the Company, and for a period of two
years following the Consultant's date of termination, the Consultant agrees that
he will not directly or indirectly (i) take any action or make any statements to
any person (including, without limitation, clients, employees or other
professionals in the insurance business or legal profession) that demean,
disparage or criticize the Company or any of its subsidiaries or affiliates in
any manner, (ii) recruit, solicit, engage or employ or induce, or attempt to
induce, any professional employee of the Company or its subsidiaries or
affiliates to terminate his or her employment, or (iii) solicit or attempt to
solicit any member/customer of the Company or any of its subsidiaries or
affiliates to establish a business relationship for himself or any person or
entity other than the Company or any of its subsidiaries or affiliates.
(e) During any period in which Section 6(d) is in effect, the Company and
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its subsidiaries shall not take any action or make any statement to any person
or entity (including, without limitation, members/customers, employees or other
professionals in the insurance business or legal profession) that demean,
disparage or criticize the Consultant in any manner.
7. Confidential Information. The Consultant agrees that, during the Term of
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this Agreement and at all times thereafter:
(a) The Consultant shall keep secret all Confidential Information and
Intellectual Property which he may obtain during the term of this Agreement and
shall not reveal or disclose it, directly or indirectly, except with the
Company's prior written consent. The Consultant shall make use of the
Confidential Information or Intellectual Property for his own purposes or for
the benefit of anyone other than the Company and shall protect it against
disclosure, misuse, espionage, loss and theft.
(b) The Consultant acknowledges and agrees that all Intellectual Property
created by the Consultant at the request of the Company is and shall be owned by
the Company. The Consultant hereby assigns and shall assign to the Company all
ownership rights that he may possess in any such Intellectual Property. The
Consultant agrees to fully cooperate with the Company, at the Company's expense,
in securing, enforcing and otherwise protecting throughout the world the
Company's interests in such Intellectual Property, including, without
limitation, by signing all documents reasonably requested by the Company.
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(c) At the termination of this Agreement, the Consultant shall promptly
deliver to the Company all memoranda, notes, manuals, notebooks, computer
diskettes, passwords, encryption keys, electronic mail and other written or
electronic records (and all copies thereof) relating to the business of the
Company, whether or not constituting or relating to Confidential Information or
Intellectual Property, that he may then possess or have control over. If the
Company requests, the Consultant shall provide written certification all such
materials have been returned.
(d) To the extent that any court of competent jurisdiction, federal or state
securities agency or other governmental authority seeks to have the Consultant
disclose Confidential Information, it/he shall promptly inform the Company, and
he shall take such reasonable steps to prevent disclosure of Confidential
Information until the Company has been informed of such requested disclosure,
and the Company has had an opportunity to respond to such court, agency or other
governmental authority. To the extent that the Consultant obtains information on
behalf of the Company or any of its subsidiaries or affiliates that may be
subject to attorney-client privilege as to the Company's or any such
subsidiary's or affiliate's attorneys, the Consultant shall take reasonable
steps to maintain the confidentiality of such information and to preserve such
privilege.
(e) For purposes of this Agreement, the following terms shall be defined as
set forth below:
(i) "Confidential Information" shall mean all information, in any form or
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medium, that relates to the business, strategic plans, competitive plans and
conditions, marketing, costs, prices, products, processes, services, methods,
computer programs and systems, personnel, customers, claims, research or
development of the Company and its subsidiaries or affiliates and all other
information related to the Company and its subsidiaries or affiliates which is
not readily available to the public.
(ii) "Intellectual Property" shall mean any of the following which are
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created by the Consultant at the request of the Company: (A) any idea, know-how,
invention, discovery, design, development, software, device, technique, method
or process (whether or not patentable or reduced to practice or including
Confidential Information) and related patents and patent applications and
reissues, reexaminations, renewals, continuations-in-part, continuations, and
divisions thereof; (B) any copyrightable work (whether or not including
Confidential Information) and related registrations and applications for
registration; (C) any trademarks, trade secrets and other proprietary rights;
and (D) any improvements, updates and modifications of the foregoing made from
time to time.
8. Reasonableness and Reformation of Covenants. The Consultant acknowledge
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that the covenants in Sections 6 and 7 are reasonable under the circumstances,
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protect the Company's legitimate business interests in its customer
relationships and proprietary information, create no undue hardships on the
Consultant, and have no effect on any public interest. The Consultant further
acknowledges that continuation of the compensation to be paid under this
Agreement is dependent on continued compliance with, and constitutes adequate
compensation for, the restrictions imposed under Sections 6 and 7, and will be
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sufficient to provide a livelihood for the Consultant. In the event the
Consultant breaches the covenants in Sections 6 and 7, the Company shall be
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relieved of any further obligation to pay amounts remaining to be paid under
this Agreement. If a court of competent jurisdiction shall find and determine
that any covenant or undertaking by the Consultant in Sections 6 and 7 is
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unreasonably broad or vague, the parties authorize the court to reformulate the
covenant or undertaking to comply with applicable law and agree to be bound by
the reformulated provision.
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9. Equitable Remedies. The Consultant acknowledges that the Company would be
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irreparably injured by a violation of Sections 6, 7 and 8, and he agrees that
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the Company, in addition to any other remedies available to it for such breach
or threatened breach, shall be entitled to the following remedies, including but
not limited to a preliminary injunction, temporary restraining order, or other
equivalent relief, restraining the Consultant from any actual or threatened
breach of either Sections 6, 7 and 8. If a bond is required to be posted in
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order for the Company to secure an injunction or other equitable remedy, the
parties agree that said bond need not be more than a nominal sum. The parties
hereby agree that if the scope of enforceability of the restrictive covenants in
Section 6 is in dispute, a court or other trier of fact
may modify and enforce the covenant to the extent that it believes it to be
reasonable under the conditions existing at this time.
10. Consultant Conflicts. The Consultant warrants that he is not bound by
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another employment agreement, consulting agreement, non-compete agreement, or
confidentiality agreement with other individuals, companies or entities that
would conflict with his entering into this Agreement.
11. Assignment. The rights and obligations under this Agreement may not be
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assigned by the Company or the Consultant, except that any successor to the
Company shall succeed to the Company's rights and obligations under this
Agreement.
12. Notices. All notices to the Company required under this Agreement shall
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be given in writing to the President of the Company. All notices to the
Consultant required under this Agreement shall be given in writing to the
Consultant at the last location indicated on the Company's records.
13. Choice of Law. This Agreement will be governed by and interpreted under
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the laws of the State of Illinois, irrespective of any conflict of law
provisions of any state. All disputes shall be arbitrated or litigated
(whichever is applicable) in Chicago, Illinois. The Consultant, BMA and the
Company hereby submit to the personal jurisdiction of the United States District
for the Central District of Illinois or the Illinois Supreme Court, for the
purposes of the enforcement of the provisions of this Agreement.
14. Entire Agreement. Unless otherwise specifically noted herein, this
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Agreement constitutes the entire agreement between the parties concerning the
subject matter hereof and supercedes all prior or contemporaneous agreements, if
any, between the parties relating to this consulting arrangement.
15. Amendment. This Agreement may be amended, supplemented or changed only
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by a writing to that effect signed by the parties.
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IN WITNESS WHEREOF, each of the Consultant and the Company has caused these
presents to be executed in its name and on its behalf on this 8th day of July,
2004, all as of the Effective Date.
XXXXX XXXXX
BMA CONSULTING, INC.
By
Its
THE GSI GROUP, INC.
By
Its
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