<PAGE>

                                                                    Exhibit 10.1


                             SETTLEMENT AGREEMENT
                                      AND
                               RELEASE OF CLAIMS

          THIS SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS ("Agreement") is made
and entered into to be effective the 1st day of June 2000, by and among THE GSI
GROUP, INC. ("GSI"), John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"), Howard
G. Buffett ("Buffett"), and John W. Funk ("Funk").

                                   RECITALS

          WHEREAS, GSI and Funk are involved in a dispute concerning certain
shareholder agreements dealing with their rights in matters relating to the
ownership of GSI stock and relating to the termination of Funk's employment as
an officer of GSI. GSI contends that Funk's shareholder rights are governed,
with certain exceptions, by a June 6, 1996 Stock Restriction and Buy-Sell
Agreement, as amended by the First and Second Amendments to that Agreement
(hereafter collectively referred to as "the 1996 Agreement"), as set forth in a
letter dated December 10, 1999 that was sent on GSI's behalf to representatives
of Funk (the "December 1999 Letter"). On April 11, 2000, GSI exercised its call
option to purchase all of Funk's GSI stock under the terms of the 1996
Agreement. GSI contends that, in April and May of 2000, it proceeded to take the
steps necessary and appropriate to effectuate the purchase of Funk's GSI stock
in accordance with the terms of the 1996 Agreement;

          WHEREAS, in letters from his representatives dated January 14, 2000,
February 15, 2000, and May 6, 2000, Funk advised GSI that he disagreed with
GSI's positions concerning the effect of his resignation and his rights as a
shareholder under various agreements between him and GSI. Funk further asserted
the position that, if GSI intended to purchase his GSI stock, it would have to
do so under the terms of a March 18, 1999 Amended and Restated Stock Restriction
and Buy Sell Agreement ("March 1999 Agreement"). Funk also contended that, under
the March 1999 Agreement, GSI was obligated to pay him monthly "bridge payments"
until it purchased all of his GSI stock and that GSI had failed to make such
payments since July 1999;

          WHEREAS, the foregoing disputes are collectively hereafter referred to
as the "Shareholder Agreement Disputes";

          WHEREAS, the parties to this Agreement desire to settle and resolve
upon the terms and conditions set forth herein and deem such settlement to be in
their own best interests in order to avoid the expense, inconvenience, and
distraction of burdensome litigation.
<PAGE>

          NOW, THEREFORE, in consideration of the foregoing and of the promises
and covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as
follows:

1.   STOCK PURCHASE AND SALE

     1.   Basic Transaction. Funk represents and warrants that he owns, and
          -----------------
          shall own as of the Closing Date (as defined below), free and clear of
          all encumbrances, 225,000 shares of GSI common stock represented by
          GSI Stock Certificates Nos. 14, 15, 16 and 21, and has and shall have
          as of the Closing Date the full authority to sell, transfer, assign,
          and convey all such shares to GSI free and clear of any encumbrances
          of any sort. On the terms and subject to the conditions set forth in
          this Agreement, at the Closing (as defined below), GSI will purchase
          from Funk, and Funk will sell, transfer, assign, convey and deliver to
          GSI all right, title and interest in and to any and all equity
          securities of GSI in which Funk has any interest, whether as
          beneficial owner or otherwise, including without limitation, the
          225,000 shares of GSI common stock represented by GSI stock
          certificate Nos. 14, 15, 16 and 21 (collectively, the "Funk Shares").

     2.   Purchase Price. On the terms and subject to the conditions set forth
          --------------
          in this Agreement, at the Closing, GSI will deliver to Funk $1,426,500
          (the "Purchase Price") by bank wire transfer of immediately available
          funds to an account designated in writing by Funk not later than two
          days prior to the Closing.

     3.   Closing. Subject to the provisions below, the consummation of the
          -------
          transactions contemplated by this Agreement (the "Closing") will take
          place at the offices of GSI, at 10:00 a.m., on June 7, 2000 or, if
          Funk has failed to satisfy such conditions on or before 10:00 a.m. on
          June 7, 2000, the second business day after the satisfaction or waiver
          of all of the closing conditions set forth below, or at such other
          place or on such other date as GSI and Funk may agree. The date on
          which the Closing actually takes place is referred to in this
          Agreement as the "Closing Date."

     4.   Deliveries at the Closing. At the Closing, (i) Funk will deliver to
          -------------------------
          GSI the various certificates, instruments and documents referred to
          below, (ii) Funk will deliver to GSI stock and any other appropriate
          certificates representing all of the Funk Shares, accompanied by duly
          executed assignment documents, and (iii) GSI will deliver to Funk the
          Purchase Price as specified above. Each of the parties will use its
          best efforts to take all action and to do all things necessary, proper
          or advisable to consummate and make effective the transactions
          contemplated by this Agreement (including satisfying the closing
          conditions set forth below).

     5.   Conditions to Obligation of GSI. The obligation of GSI to consummate
          -------------------------------
          the transactions to be performed by it in connection with the Closing
          is subject to satisfaction of the following conditions:

                                       2
<PAGE>

          1.   the representations and warranties of Funk set forth in this
               Agreement will be true and correct in all respects at and as of
               the Closing Date;

          2.   Funk will have performed and complied with all of his covenants
               hereunder in all respects through the Closing;

          3.   Funk will have delivered to GSI a certificate to the effect that
               each of the foregoing conditions are satisfied in all respects;

          4.   Funk will execute and deliver to GSI the Receipt, Acknowledgment
               and Additional Release by John W. Funk attached hereto as Exhibit
               A;

          5.   GSI will have received the resignation, effective as of the
               Closing, of Funk as a director of GSI;

          6.   there will not be any action, suit or proceeding pending or
               threatened before any court or quasi-judicial or administrative
               agency of any federal, state, local or foreign jurisdiction, or
               before any arbitrator, wherein an unfavorable injunction,
               judgment, order, decree, ruling or charge would (i) prevent
               consummation of any of the transactions contemplated by this
               Agreement, (ii) cause any of the transactions contemplated by
               this Agreement to be rescinded following consummation, (iii)
               affect materially and adversely the right of GSI to own the Funk
               Shares or to control GSI, or (iv) affect materially and
               adversely, including through the imposition of any divestiture
               requirement, the right of GSI to own its assets or to operate its
               business as presently operated and as presently proposed to be
               operated (and no such injunction, judgment, order, decree, ruling
               or charge will be in effect); and

          7.   all actions to be taken by Funk in connection with consummation
               of the transactions contemplated hereby and all certificates,
               instruments, and other documents required to effect the
               transactions contemplated hereby will be reasonably satisfactory
               in form and substance to GSI.

GSI may waive any condition specified in this section if it executes a writing
so stating at or prior to the Closing.

          1.   Funk shall resign his position as a director of GSI effective as
of the Closing.

          2.   Funk hereby agrees and acknowledges that neither this Agreement
nor any transaction described herein is intended to or shall be deemed in any
way to affect, reduce, or modify Funk's contractual obligations to Larry Sloan
under that certain Non Compete Agreement dated June 6, 1996, by and among Larry
Sloan, Jorge Andrade, Howard G. Buffett, John W. Funk, and John C. Sloan (the
"1996 Non Compete Agreement"). Funk further agrees and acknowledges that the GSI
Released Parties (as defined below) shall have no obligation to Funk under, with
respect to, or in connection with any obligation of Funk under the 1996 Non
Compete Agreement,

                                       3
<PAGE>

including without limiting the generality of the foregoing, any obligation to
pay a dividend to Funk or otherwise advance, remunerate, pay, or compensate Funk
for all or any portion of any payment due from Funk under the terms of the 1996
Non Compete Agreement.

          3.   GSI shall request in writing to any person or entity to whom Funk
has provided a personal guarantee of any obligations due from GSI to such person
or entity that Funk be released from such guarantee. GSI will review its records
to attempt to identify any such undertakings by Funk. Funk shall notify GSI by
June 15, 2000 of any such undertakings of which he is aware. It is expressly
agreed and acknowledged by Funk that GSI's obligations under this Paragraph do
not apply to the 1996 Non Compete Agreement. Funk hereby agrees and acknowledges
that other than making this request, GSI shall have no obligation to obtain a
release of Funk's obligations under any personal guarantee. GSI agrees that
nothing in this Agreement or Exhibit A is intended to affect any rights Funk may
have, if any, to obtain reimbursement from GSI (but not from any other GSI
Released Parties) in the event Funk is required to pay on any personal guarantee
of any corporate obligations of GSI that he has given to a third party.

          4.   GSI hereby agrees that it shall not affirmatively seek to
specifically exclude Funk from any insurance coverage otherwise generally
available to GSI's former directors, officers, or employees.

          5.   GSI hereby warrants and represents that, as of the effective date
of this Agreement, there are no agreements or negotiations ongoing or pending
for the sale of GSI to any third party. Funk hereby agrees and acknowledges that
he is not and has not relied upon GSI or any GSI Released Parties, as defined
herein, in any manner or for any other statement or information relating to the
value of GSI or the Funk Shares.

          6.   Funk hereby releases and forever discharges GSI, Sloan, Andrade,
and Buffett, and its and their respective spouses, officers, directors,
employees, attorneys, accountants, insurers, heirs, shareholders, partners,
agents, affiliates, subsidiaries, departments, divisions, predecessors,
successors, administrators, executors, representatives, and/or assigns, and any
other person or entity acting on behalf of GSI, Sloan, Andrade, or Buffett
(collectively all of the foregoing persons and entities, including GSI, Sloan,
Andrade, and Buffett, are referred to as the "GSI Released Parties"), from any
and all claims, demands, suits, covenants, contracts, agreements, obligations,
controversies, debts, costs, expenses, damages, judgments, orders, liabilities,
and/or causes of action, of whatever kind or nature, in law or equity, known or
unknown, vested or contingent, suspected or unsuspected, whether or not
concealed or hidden, which ever have or may have existed, or which do exist,
that may now or hereafter at any time

                                       4
<PAGE>

be made or brought against the GSI Released Parties by Funk or anyone on Funk's
behalf, arising out of or relating in any way to any relationship or transaction
between Funk and the GSI Released Parties on or prior to the date hereof,
including without limiting the generality of the foregoing, any and all claims
concerning defamation, libel, slander, breach of any contract, breach of
fiduciary duty, wrongful termination, fraud, failure to pay or wrongful payment
of dividends, shareholder derivative action, and corporate control or
management, and any claims or rights arising out of or relating to any
agreements or contracts between Funk and any of the GSI Released Parties,
including, but not limited to, any rights Funk might have or claim to have under
the 1996 Agreement; the September 1, 1998 Third Amendment to Stock Restriction
and Buy-Sell Agreement; the January 1, 1999 Amended and Restated Stock
Restriction and Buy-Sell Agreement; and the March 1999 Agreement.

          7.   With the exception of those claims identified in Paragraph 10
below, which are hereby expressly preserved and not released, GSI, on behalf of
itself in its own corporate capacity and, to the extent that it has the legal
capacity to do so, on behalf of its affiliates, subsidiaries, departments,
divisions, predecessors, successors, administrators, and/or assigns, hereby
releases and forever discharges Funk, his spouse, and his personal attorneys,
representatives, executors, administrators, heirs, and assigns from any and all
claims, demands, suits, covenants, contracts, agreements, obligations,
controversies, debts, costs, expenses, damages, judgments, orders, liabilities,
and/or causes of action, of whatever kind or nature, in law or equity, known or
unknown, vested or contingent, suspected or unsuspected, whether or not
concealed or hidden, which ever have or may have existed, or which do exist,
that may now or hereafter at any time be made or brought against Funk by GSI or
anyone on GSI's behalf, arising out of or relating in any way to any
relationship or transaction on or prior to the date hereof between Funk and the
GSI Released Parties.

          8.   With the exception of those claims identified in Paragraph 10
below, which are hereby expressly preserved and not released, Sloan, Andrade,
and Buffett hereby release and forever discharge Funk, his spouse, and his
personal attorneys, representatives, executors, administrators, heirs, and
assigns from any and all claims, demands, suits, covenants, contracts,
agreements, obligations, controversies, debts, costs, expenses, damages,
judgments, orders, liabilities, and/or causes of action, of whatever kind or
nature, in law or equity, known or unknown, vested or contingent, suspected or
unsuspected, whether or not concealed or hidden, which ever have or may have
existed, or which do exist, that may now or hereafter at any time be made or
brought against Funk that

                                       5
<PAGE>

arises out of or relates in any way to any relationship or transaction on or
prior to the date hereof between Funk and Sloan, Andrade, or Buffett.

          9.   It is expressly agreed and acknowledged by Funk that nothing in
Paragraphs 8 or 9 is intended to or shall be deemed to release or discharge any
claims, demands, suits, and/or causes of action that the GSI Released Parties
may now have or may in the future have against Funk, in the event any of the GSI
Released Parties becomes subject to a claim by any other party that arises out
of or relates in any way to any relationship or transaction on or prior to the
date hereof between Funk and the GSI Released Parties ("Third Party Claim"),
that arises out of or relates to the transaction or occurrence which forms the
basis of all or any portion of the Third Party Claim. GSI, Sloan, Andrade, and
Buffett hereby represent that, as of the date of this Agreement, no Third Party
Claim has been threatened or asserted against Funk, GSI, Sloan, Andrade, and/or
Buffett.

          10.  GSI hereby agrees that nothing in Paragraph 7 or Exhibit A shall
be deemed to affect any rights Funk may have, if any, to indemnification or
contribution from GSI or its corporate subsidiaries (but not from any other GSI
Released Parties), or coverage from GSI's insurers, with respect to claims
asserted against Funk in the future by a party other than a GSI Released Party,
which claims (i) are unrelated in any way either to the Shareholder Agreement
Disputes or the facts or circumstances concerning or relating to the Shareholder
Agreement Disputes; or (ii) do not arise out of or relate to any conduct by Funk
that involved a breach of Funk's fiduciary responsibilities to GSI as its
general counsel. Funk hereby acknowledges and agrees that Paragraph 7 shall be
deemed to release all other claims, including but not limited to any claim for
indemnification arising out of any future claim against Funk by any person or
entity which Funk might otherwise have against the GSI Released Parties that (i)
are related in any way either to the Shareholder Agreement Disputes or the facts
or circumstances concerning or relating to the Shareholder Agreement Disputes;
or (ii) arise out of or relate to any conduct by Funk that involved a breach of
Funk's fiduciary responsibilities to GSI as its general counsel.

          11.  Notwithstanding any other provision herein, nothing in this
Agreement shall be construed or deemed to release Funk or GSI from any claims
arising directly under the terms of this Agreement, including any breach of this
Agreement by Funk or GSI.

          12.  The parties hereto warrant and represent to the other that each
is now and shall be as of the Closing Date the sole and lawful owner of all
right, title, and interest in and to all matters released by him or it and that
he or it has not sold, assigned, transferred, pledged, or otherwise conveyed or
encumbered; or purported to

                                       6
<PAGE>

sell, assign, transfer, pledge or otherwise convey or encumber any released
matter or any part or portion of any released matter.

          13.  The parties hereto represent and warrant to each other that each
has full power and authority to enter into this Agreement and to take the
actions contemplated at the Closing.

          14.  The parties hereto acknowledge and agree that this is a
settlement agreement and is not in any respect to be deemed or construed to be
an admission or concession of any liability or wrongdoing whatsoever on the part
of any party hereto.

          15.  GSI and Funk acknowledge that in effecting and executing this
Agreement they were each represented by counsel and received legal advice
concerning their respective rights.

          16.  This written instrument, Exhibit A attached hereto, and the
ancillary documents to be executed or delivered in connection with the Closing
constitute and contain the entire agreement and understanding between the
parties hereto concerning the subject matter of this Agreement, and supersede
all prior and contemporaneous negotiations, proposed agreements, or
understandings, if any, between any of the parties concerning any of the
provisions of this Agreement. The parties hereto acknowledge that there are no
other warranties, promises, statements, or representations of any kind, express
or implied, upon which they have relied in entering into this Agreement.

          17.  The Funk Shares are unique property and, accordingly, this
Agreement shall be specifically enforceable and injunctive relief is appropriate
to restrain any actual or threatened breach hereof or to compel any performance
hereunder, in addition to any other appropriate or available remedy. Any such
party will be entitled to enforce such rights specifically, without posting a
bond or security, to recover damages by reason of any breach of any provision of
this Agreement, to compel performance hereunder, and to exercise all other
rights granted by law.

          18.  If either Funk or GSI shall fail to perform in all material
respects their respective obligations under Paragraph 1, then the performing
party shall give written notice of the alleged non-performance to the other
parties hereto. The party failing to perform shall have ten days to cure the
alleged non-performance. In the event any material non-performance is not cured,
the performing party shall be entitled to declare that the entire Agreement is
null and void and of no effect as to all of the parties hereto. If the
performing party elects to declare the Agreement null and void pursuant to this
Paragraph, such notice must be given within seven days after the

                                       7
<PAGE>

expiration of the ten-day cure period. The provisions of this Paragraph shall be
without prejudice to any rights that the parties may otherwise have at law or in
equity in the event of a breach.

          19.  GSI and Funk intend that, notwithstanding Funk's ownership of the
Funk Shares during the period January 1, 2000, through the date hereof, all tax
consequences, whether benefits or liabilities, arising in connection with
ownership of the Funk Shares during the calendar year 2000 shall inure to, and
be borne by, GSI. Accordingly, GSI hereby indemnifies and holds harmless Funk
and his successors and assigns from any and all tax liabilities for the calendar
year 2000 arising from Funk's ownership of the Funk Shares during the same
period. Likewise, Funk hereby agrees and promises to pay to GSI or its
successors or assigns the amount of any tax benefit received by Funk on account
of his ownership of the Funk Shares during the calendar year 2000. For purposes
of this Agreement, (i) Funk's tax liability and GSI's resulting indemnification
obligation, if any, shall be limited to any out-of-pocket tax payments made by
Funk to a taxing authority on account of his ownership of the Funk Shares during
the calendar year 2000, excluding any penalties, interest, or other costs or
expenses related to such tax payments, and (ii) Funk's tax benefit and his
resulting payment obligation to GSI shall be equal to GSI's losses or credits
allocated to Funk on account of his ownership of the Funk Shares during the
calendar year 2000, if any, multiplied by the combined federal and state tax
rate that would have been paid by Funk on that portion of his income offset by
any tax benefits attributable to the GSI losses or credits allocated to Funk
relating to calendar year 2000. For this purpose, the GSI losses or credits
shall be deemed to have been applied to that portion of Funk's gross income that
would have been taxed at the highest applicable rate(s). To permit GSI to
determine this percentage, Funk shall provide to GSI a copy of the pertinent
portions of his federal and state tax returns for the year 2000. Under all
circumstances, GSI shall, in its sole discretion, select the manner in which
GSI's income, losses, and credits shall be computed and allocated to its
shareholders. Any payments due to GSI or Funk under this Paragraph shall be due
and payable not later than 30 days after GSI has mailed to Funk a copy of its
tax return setting forth the amount of any income, losses, or credits allocated
to Funk on account of his ownership of the Funk Shares during the calendar year
2000.

          20.  Funk shall execute and deliver to GSI all such instruments and
documents of further assurance or otherwise as shall be reasonably deemed
required or necessary to effectuate the terms of this Agreement and the sale of
the Funk Shares.

                                       8
<PAGE>

          21.  This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.

          22.  The recitals and prefatory phrases and paragraphs above set forth
are fully incorporated herein.

          23.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rule of
strict construction will be applied against any party. The use of the word
"including" in this Agreement means "including without limitation" and is
intended by the parties to be by way of example rather than limitation.

                           ________________________

          THE GSI GROUP, INC., JOHN C. SLOAN, JORGE ANDRADE, HOWARD G. BUFFETT,
AND JOHN W. FUNK, BEFORE SIGNING THEIR NAMES BELOW, DECLARE THAT THEY HAVE
COMPLETELY READ, OR HAD READ TO THEM, THIS SETTLEMENT AGREEMENT AND RELEASE OF
CLAIMS; AND FURTHER, THAT BEFORE SIGNING THIS SETTLEMENT AGREEMENT AND RELEASE
OF CLAIMS, THEY FULLY UNDERSTOOD ITS TERMS, CONTENT, AND LEGAL EFFECT.

DATED:     June     , 2000
                ----                -----------------------------------
                                    JOHN W. FUNK

Subscribed and sworn to before me
this      day of June, 2000.
     ----

------------------------------
Notary Public
--------------------------------------------------


DATED: June     , 2000                            THE GSI GROUP, INC.
            ----

Subscribed and sworn to before me       By:
                                           -----------------------------------
this      day of June, 2000.
     ----

                                    Its:
                                        ---------------------------------
------------------------------
Notary Public

--------------------------------------------------

                                       9
<PAGE>

DATED: June     , 2000
            ----                    -----------------------------------
                                    JOHN C. SLOAN

Subscribed and sworn to before me
this      day of June, 2000.
     ----


------------------------------
Notary Public

--------------------------------------------------


DATED: June     , 2000
            ----                    -----------------------------------
                                    JORGE ANDRADE


Subscribed and sworn to before me
this      day of June, 2000.
     ----


------------------------------
Notary Public

--------------------------------------------------


DATED: June     , 2000
            ----                    -----------------------------------
                                    HOWARD G. BUFFETT

Subscribed and sworn to before me
this      day of June, 2000.
     ----


------------------------------
Notary Public

                                       10
<PAGE>

           EXHIBIT A  to Settlement Agreement and Release of Claims

                         RECEIPT,  ACKNOWLEDGMENT AND
                         -----------------------------
                      ADDITIONAL RELEASE BY JOHN W. FUNK
                      ----------------------------------

     In consideration of and pursuant to (i) the agreement by The GSI Group,
Inc., a Delaware corporation ("GSI"), to purchase, and the agreement by John W.
Funk ("Funk") to sell, all of the issued and outstanding shares of GSI owned by
Funk, (ii) the execution and delivery of that certain Settlement Agreement and
Release of Claims by and among GSI, John C. Sloan ("Sloan"), Jorge Andrade
("Andrade"), Howard G. Buffett "Buffett"), and Funk, dated as of June 1, 2000
("Settlement Agreement and Release of Claims"), and (iii) other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Funk and GSI hereby execute this Receipt, Acknowledgment and
Additional Release by John W. Funk (this "Receipt").

     Funk Receipt. Funk hereby acknowledges receipt of the amount of $1,426,500
     ------------
from GSI, which funds Funk accepts (i) in exchange for the Funk Shares (as
defined below in Section 2.a), (ii) in full satisfaction of GSI's obligations to
Funk under any and all shareholder agreements ("Shareholder Agreements") to
which GSI and Funk are a party, and (iii) in full satisfaction of all other GSI
shareholders' obligations to Funk under any such Shareholder Agreements,
including, without limitation, the following:

          Voting Buy-Sell Agreement
          -------------------------

               a.   Stock Restriction and Buy-Sell Agreement, dated June 6,
                    1996, by and between John C. Sloan, Jorge Andrade, John Funk
                    and Howard Buffett and The GSI Group, Inc.

               b.   First Amendment to Stock Restriction and Buy-Sell Agreement,
                    dated July 15, 1996.

               c.   Second Amendment to Stock Restriction and Buy-Sell
                    Agreement, dated October 2, 1997.

               d.   Third Amendment to Stock Restriction and Buy-Sell Agreement,
                    dated September 1, 1998.

               e.   Amended and Restated Stock Restriction and Buy-Sell
                    Agreement, dated January 1, 1999.

               f.   Amended and Restated Stock Restriction and Buy-Sell
                    Agreement, dated March 18, 1999.

          Voting Cross Purchase Agreement
          -------------------------------

               g.   Stock Restriction and Cross Purchase Agreement, dated June
                    6, 1996, by and between John C. Sloan, Jorge Andrade, John
                    Funk and Howard Buffett.

               h.   First Amendment to Stock Restriction and Cross Purchase
                    Agreement, dated July 15, 1996.

               i.   Second Amendment to Stock Restriction and Cross Purchase
                    Agreement, dated October 2, 1997.

               j.   Amended and Restated Stock Restriction and Cross Purchase
                    Agreement, dated January 1, 1999.

          Voting Trust Agreement
          ----------------------

               k.   Shareholders' Trust Agreement, dated July 15, 1996, by and
                    among John C. Sloan,

                                       11
<PAGE>

                    Jorge Andrade, John Funk and Howard Buffett and Stewart
                    Dolin.

          Voting Contribution Agreement
          -----------------------------

               l.   Contribution Agreement, dated June 6, 1996, by and among
                    John C. Sloan, Jorge Andrade, John Funk and Howard Buffett.

          Voting Stock Purchase Agreement
          -------------------------------

               m.   Stock Purchase Agreement, dated March 18, 1999, by and
                    between Jorge Andrade, Howard Buffett, John Funk, Craig
                    Sloan and The GSI Group, Inc.

          Voting Stockholder Agreement
          ----------------------------

               n.   Stockholder Agreement, dated March 18, 1999, by and among
                    The GSI Group, Inc., Jorge Andrade, Howard Buffett, John
                    Funk and Craig Sloan.

          Non-Voting Buy-Sell Agreement
          -----------------------------

               o.   Stock Restriction and Buy-Sell Agreement Non-Voting Shares,
                    dated January 1, 1997, by and between The GSI Group, Inc.,
                    John C. Sloan, Jorge Andrade, John Funk and Howard Buffett
                    and the persons identified on Exhibit A thereto.

               p.   Stock Restriction and Buy Sell-Agreement Non-Voting Shares,
                    dated May 30, 1997.

               q.   Amended and Restated Stock Restriction and Buy-Sell
                    Agreement -Non-Voting, dated March 31, 1999.

          Notwithstanding the foregoing, nothing herein shall be deemed to
terminate, modify or release Funk from any obligations under that certain Non
Compete Agreement dated June 6, 1996, by and among Funk, Larry Sloan, Jorge
Andrade, Howard G. Buffett, and John C. Sloan.

     Funk Representations and Warranties. Funk represents, warrants and
     -----------------------------------
covenants that:

          By four Assignments Separate from Certificate executed and delivered
     to GSI as of the date hereof, and by the delivery to GSI as of the date
     hereof of GSI Stock Certicate Nos. 14, 15, 16, and 21, representing 225,000
     shares of GSI stock (the "Funk Shares"), Funk has sold, transferred and
     assigned to GSI each and every share of GSI stock or security of any class
     or denomination in which Funk has any ownership interest whatsoever,
     whether as beneficiary, legal titleholder or otherwise;

          Funk is the true and lawful owner of the Funk Shares which are the
     subject hereof and the Funk Shares are free and clear of all claims and
     liabilities of any and every kind and nature whatsoever, including, without
     limitation, claims, liens, security interests, rights of spouses or other
     stockholders of GSI, pledges, options, rights, encumbrances and other
     restrictions of any nature whatsoever (collectively, "Rights of Third
     Parties"). Funk has all necessary, capacity, power and authority to execute
     this Receipt and to sell the Funk Shares to GSI free and clear of all
     Rights of Third Parties. There is no agreement between Funk and any other
     person relating to the Funk Shares or restricting the transfer of the Funk
     Shares. Funk owns no securities of GSI other than the Funk Shares and
     hereby irrevocably waives any and all rights to acquire at any time any
     additional shares or securities of GSI or any interest in any such shares
     or securities. This

                                       12
<PAGE>

     Receipt and all other agreements contemplated hereby each constitutes a
     valid and binding obligation of Funk, enforceable in accordance with its
     terms.

          Funk has (i) had adequate opportunity to consult legal counsel of his
     choice regarding this Receipt, (ii) executed and delivered this Receipt
     pursuant to his free will and with the intention that this Receipt be a
     general release to the full extent provided herein, (iii) not sold,
     assigned or otherwise transferred any rights or remedies arising from or in
     connection with the GSI Released Matters (as defined below).

     Additional Funk Release. Funk hereby forever releases and fully discharges
     -----------------------
GSI, Sloan, Andrade, and Buffett, and its and their respective spouses,
officers, directors, employees, attorneys, accountants, insurers, heirs,
shareholders, partners, agents, affiliates, subsidiaries, departments,
divisions, predecessors, successors, executors, administrators, and/or assigns,
and any other person or entity acting on behalf of GSI, Sloan, Andrade, or
Buffett (collectively all of the foregoing persons and entities, including GSI,
Sloan, Andrade, and Buffett, are referred to as the "GSI Released Parties") from
and against all direct or indirect demands, claims, payments, obligations,
actions or causes of action, assessments, losses, liabilities, damages
(including without limitation special, consequential, exemplary, punitive and
similar damages), reasonable costs and expenses paid or incurred, or diminutions
in value of any kind or character (whether or not known or asserted prior to the
date hereof, fixed or unfixed, conditional or unconditional, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise), that the undersigned now has or ever had against the GSI Released
Parties or the assets of any of the GSI Released Parties as a result of acts or
omissions occurring on or before the date of this Receipt that arise from or are
in connection with (i) any prior authorization, designation, issuance, sale,
transfer, assignment or other conveyance of stock of GSI, any reclassification,
redesignation, dividend or distribution of or upon the stock of GSI, any
amendment to the certificate of incorporation or bylaws including those
affecting the amount, rights, powers or preferences of stock of GSI, or any
failure to properly approve or effect same, (ii) any organization or any merger,
consolidation, share exchange, reorganization, recapitalization, sale of assets
or like event, or any failure properly to approve, effect or consummate same, by
or involving or relating to GSI, occurring prior to the date hereof, (iii) the
dissolution, liquidation or winding up of any GSI predecessors, or any failure
properly to approve or effect said dissolution, liquidation or winding up, and
(iv) any failure of GSI to afford the undersigned any appraisal, preemptive,
first refusal or other rights whether accorded by statute or other law, or the
articles of incorporation, certificate of incorporation or bylaws of GSI or any
GSI predecessors, in connection with any of the matters described in the
foregoing clauses (i), (ii) or (iii) occurring prior to the date hereof,
provided, however, that this release shall not apply under any circumstances to
--------  -------
any claims arising under or preserved pursuant to this Receipt, the Settlement
Agreement and Release of Claims, and the documents executed or delivered in
connection therewith (the matters listed in the foregoing clauses (i), (ii),
(iii) and (iv) are collectively referred to herein as the "GSI Released
Matters").

     Limited Indemnity.  Funk hereby agrees to indemnify and hold harmless the
     -----------------
GSI Released Parties from and against any and all claims, causes of action,
losses, damages, costs, expenses (including, without limitation, attorneys' fees
and costs) and liability arising out of any breach by Funk of his
representations, warranties and covenants set forth in this Receipt.

                                       13
<PAGE>

     GSI Receipt. GSI hereby acknowledges receipt from Funk of GSI Stock
     -----------
Certificate Nos. 14, 15, 16, and 21, together with each executed Assignment
Separate From Certificate relating thereto.

     Choice of Law. This Receipt shall be governed by and construed in
     -------------
accordance with the laws of the State of Illinois.

     7.   Binding Agreement. This Receipt shall be binding upon and inure to the
          -----------------
benefits of the parties hereto, their respective personal representatives,
executors, administrators, predecessors, successors, heirs and assigns.

     8.   Settlement Agreement Controls. In the event of a conflict between the
          -----------------------------
provisions of this Receipt and the provisions of the Settlement Agreement and
Release of Claims, the Settlement Agreement and Release of Claims shall prevail
with respect to such conflict.

                                       14
<PAGE>

     IN WITNESS OF THE FOREGOING, each of the undersigned has executed and
delivered this Receipt, Acknowledgment and Additional Release by John W. Funk as
of               , 2000.
   --------------


                                  THE GSI GROUP, INC., a Delaware corporation


                                  By:
                                      -----------------------------------
-----------------------------------   Name:
JOHN W. FUNK                                --------------------------
                                      Title:
                                            --------------------------





Subscribed and sworn to before me
this       day of         , 2000.
     -----        --------



-----------------------------------
                  Notary Public

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