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Personal and Confidential
-------------------------


April 21, 1999

Mr. Kurt Pelsue
c/o GSI Lumonics Inc.
500 Arsenal Street
Watertown, MA, 02472, U.S.A.

Dear Mr. Pelsue:

GSI Lumonics recognizes that uncertainties relating to job security could result
in the resignation or possible distraction of key management personnel to the
detriment of the Company and its shareholders.  Accordingly, the Company wishes
to clarify certain arrangements that will apply in the event your employment by
the Company is terminated, especially in circumstances relating to a Change of
Control.  In particular, the Company believes it important, should a proposal be
received that could result in a change in the ownership of the Company, that
your employment with the Company or its affiliates be continued during the
pendency of such proposal and that you be able to assess and advise the Company
and its shareholders and to take such other action regarding such proposal as
the Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.

Therefore, this letter agreement ("Agreement") sets forth the severance and
termination benefits which the Company agrees will be provided to you in the
event your employment with the Company is terminated without Cause either prior
to or following a Change of Control.  Please note that this Agreement revokes
and supersedes all other prior agreements between you and the Company dealing
with the benefits to be given to you in the event your employment with the
Company is terminated without Cause either prior to, or following, a Change of
Control.

1.     Definitions
       -----------

1.1  For the purposes of this Agreement only, the term:

       (a)  "Base Salary" means your annual salary in effect prior to the date
            of delivery of a Notice of Termination (without regard to any
            reduction in that salary in the sixty days prior to the date of
            delivery of such Notice).
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       (b)  "Beneficial Owner of Shares" means a Person who has any beneficial
            interest in or control or direction over the Shares or has a right
            to control or direct voting or disposition of Shares held in a trust
            or has the right to acquire any beneficial interest in Shares,
            whether issued or unissued conditionally or unconditionally, within
            sixty days whether by exercise of an option, warrant, right,
            subscription privilege, agreement, revocation or a trust or
            otherwise.

       (c)  "Board" means the Board of Directors of the Company.

       (d)  "Cause" means (i) the wilful and continued failure by you to perform
            substantially your duties with the Company (other than any such
            failure resulting from your incapacity due to physical or mental
            illness) after a written demand for substantial performance is
            delivered to you by the Company which specifically identifies the
            manner in which the Company believes that you have not substantially
            performed your duties, or (ii) the wilful engaging by you in illegal
            conduct which is materially and demonstrably injurious to the
            Company.  For the purposes of this definition, no act, or failure to
            act, on your part, shall be considered "wilful" unless done or
            omitted to be done by you and without reasonable belief that such
            action or omission was in, or not opposed to, the best interests of
            the Company.

       (e)  "Change of Control" means any one of the following events:

            (i)   any Person or group of Persons, other than Sumitomo Heavy
                  Industries Ltd. or its affiliates, acting jointly and in
                  concert, becomes the Beneficial Owner, directly or indirectly,
                  of thirty percent or more of the Shares but not including any
                  Person whose ownership of such a percentage of Shares results
                  solely from a share repurchase by the Company, or a subsidiary
                  thereof (unless such Person or Persons substantially purchase
                  any additional Shares).

            (ii)  a Person or group of Persons acting jointly and in concert,
                  who is the registered owner or Beneficial Owner of five
                  percent or greater of the Shares (a) indicates in an
                  information circular sent to shareholders of the Company or
                  otherwise indicates in writing, that such Person or Persons
                  intends to nominate, or (b) at a meeting of the Company's
                  shareholders nominates, individuals for election to the
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                  Board who have not been approved by the Board and who, if
                  elected, would constitute a majority of the members on the
                  Board who are not full-time employees of the Company or its
                  subsidiaries and a majority of such nominees are so elected.

            (iii) the Company ceases to control in fact, directly or
                  indirectly, all or substantially all of the assets employed in
                  carrying on the business of the Company.

       (f)  "Company" means GSI Lumonics Inc. and includes any corporation or
            other entity which is the surviving or continuing entity in respect
            of any amalgamation, merger, consolidation, dissolution or form of
            business combination.

       (g)  "Compensation Type Benefit" means the benefits referred to in
            paragraph 1(r)(c) of this agreement.

       (h)  "Date of Termination" means the date specified in Section 6 of this
            Agreement.

       (i)  "Disability" means your inability to perform your duties for a
            period of six consecutive months or for a total of eight months in
            any period of twelve consecutive months.

       (j)  "Notice of Termination" means a notice given in accordance with this
            Agreement.

       (k)  "Payment Factor" means the number of complete years, subject to a
            minimum of 12 and a maximum of 24, that you have been a full time
            employee of the Company.

       (l)  "Payment Period" means the period of time commencing on the first
            day of the month following the Date of Termination and continuing
            for that number of months equal to the Payment Factor.

       (m)  "Person" or "Persons" means and include any individual, corporation,
            partnership, unincorporated organization or syndicate or
            association, trust, trustee, executor, administrator or other legal
            representative other than the Company, a subsidiary of the Company
            or any employee benefit plans, sponsored by the Company or a
            subsidiary of the Company.
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       (n)  "Retirement" means Termination on or after your normal retirement
            date, including early retirement with your written consent.

       (o)  "Shares" means the issued and outstanding Common Shares in the
            Capital Stock of the Company.

       (p)  "Successor" means any Person that concurrently with or subsequent to
            a Change of Control succeeds to, or has the practicability to
            control (either immediately or with the passage of time), the
            Company's business directly, by merger or consolidation, or
            indirectly, by purchase, of Shares, or substantially all of its
            assets.

       (q)  "Termination" means Termination by the Company without cause of your
            employment with the Company including Constructive Termination and
            excluding Termination because of your death, Disability or
            Retirement.

       (r)  "Total Compensation" means 1/12th of the total of the following:

            (a)   your Annual Base Salary for the year in which Termination
                  occurs; plus

            (b)   an amount equal to the average of your target bonus for the
                  year in which Termination occurs and the actual bonuses paid
                  or payable to you for each of the previous two years; plus

            (c)   an amount equal to the annual additional cost to the Company
                  of any other compensation type benefits which you are entitled
                  to receive for the year in which Termination occurs including
                  but not limited to automobile allowance (including insurance
                  and repair allowance), health benefits and retirement savings
                  plan allowance.

2.     Agreement to Provide Services: Right to Terminate
       -------------------------------------------------

2.1   Except as otherwise provided in paragraph 2.2 below, the Company or you
      may terminate your employment at any time.

2.2   In the event a take-over bid (as defined in Securities Act (Ontario) (the
      "Act") is made by a Person or Persons acting jointly and in concert
      (utilized herein as defined in the Act) in respect of any securities of
      the Company prior to the first occurrence of a Change of Control, you
      agree
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      that you will not leave the employ of the Company (other than as a result
      of Disability or upon Retirement) until the earliest of (a) one hundred
      and twenty days after the commencement of such take-over bid, or (b) such
      take-over bid has been abandoned or ended, or (c) the first occurrence of
      a Change of Control.

3.    Term of the Agreement
      ---------------------

3.1   This Agreement shall commence on the date hereof and shall continue to be
      in effect for a minimum period of three years to be calculated from May 1,
      1999 and shall, automatically be extended for additional periods of one
      year unless at least ninety days prior to the expiration of the then
      current period, the Company or you shall have given written notice that
      this Agreement shall not be extended.

3.2   It is further provided that notwithstanding paragraph 3.1 this Agreement
      shall continue to be in effect for a minimum period of twenty-four months
      from the first occurrence of a Change of Control.

4.    Termination Benefits
      --------------------

4.1   You shall be entitled to the benefits provided in Schedule "A" hereof in
      the event of Termination.

5.    Notice of Termination
      ---------------------

5.1   Any purported Termination, at any time, by the Company or by you shall be
      communicated by written Notice of Termination to the other party hereto
      and shall indicate with reasonable particularity reasons for such
      Termination.

6.    Date of Termination
      -------------------

6.1  "Date of Termination" shall mean:

       (a)  if your employment is terminated by the Company for Cause, the date
            specified in the Notice of Termination;

       (b)  if you terminate your employment, the date specified in the Notice
            of Termination which shall not be earlier than sixty days after the
            date on which the Notice of Termination is given; or

       (c)  if your employment is terminated by the Company for any reason other
            than Cause, the date specified in the Notice of Termination, which
            shall not be earlier than sixty days after the date on which the
            Notice of Termination is given.
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7.    Payment
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7.1   The amount of any payment that you are entitled to pursuant to this
      Agreement shall not be reduced, offset or subject to recovery by the
      Company by reason of any compensation earned by you as the result of
      employment by another employer after the Date of Termination.

7.2   Any amounts payable to you pursuant to this Agreement shall be paid to you
      as follows:

       (a)  50% of the amount payable shall be paid to you thirty days after the
            Date of Termination;

       (b)  the balance of the amount payable to you shall be paid in equal
            consecutive monthly instalments which shall be payable, without
            interest, on the first day of each month during the Payment Period.

8.    Additional Rights
      -----------------

8.1   You agree that the benefits to which you are entitled under the provisions
      of this Agreement are in lieu of and replace any statutory entitlements to
      notice of termination or termination pay in lieu of notice and severance
      pay and are in lieu of and replace any common law entitlements to notice
      of termination or pay in lieu thereof and you waive all your rights under
      any applicable statute or at common law to reasonable notice.

8.2   You agree that in the event you decide to exercise any recourse provided
      to you by any applicable statute, by so doing you waive your right to any
      of the benefits which you may be entitled to under this Agreement. You
      also agree to reimburse the Company forthwith for the entire cost to the
      Company of any such benefit paid to you prior to the exercise by you of
      such recourse.

9.    Successors: Binding Agreement
      -----------------------------

9.1   This Agreement shall inure to the benefit of and be enforceable by your
      personal or legal representatives, executors, administrators, successors
      or heirs. If you should die while any amount would still be payable to you
      hereunder if you had continued to live, all such amounts shall be
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      paid in accordance with the terms of this Agreement to a beneficiary
      designated by you in writing or barring such designation to your estate.

10.   Fees and Expenses
      -----------------

10.1  The Company shall pay, to a maximum of $5,000 in your local currency, the
      reasonable legal and accounting fees and related expenses actually
      incurred by you in connection with (a) your seeking general taxation and
      financial advice with respect to the receipt of payments hereunder or (b)
      your seeking to obtain or enforce any right or benefit provided by this
      Agreement provided however, you shall be required to repay any such
      amounts to the Company to the extent that a court issues a final and non-
      appealable order setting forth the determination that the position taken
      by you was frivolous or advanced by you in bad faith.

10.2  Following Termination, the Company shall pay, to a maximum of $15,000 in
      ----------------------
      your local currency, the reasonable fees and related expenses actually
      incurred by you in connection with individual career, executive consulting
      and employment search services provided the Company has approved, in
      advance, the consulting organization(s) retained by you to provide this
      service.

11.   General
      -------

11.1  Confidentiality/Non-Competition Notwithstanding any provision of this
      -------------------------------
      Agreement, any provision governing an obligation of confidentiality on
      your part to the Company or an obligation not to compete with the Company
      that is contained in any other agreement that you may have with the
      Company shall continue to be of full force and effect.

11.2  Taxes and Other Amounts All payments to be made to you under this
      -----------------------
      Agreement shall be subject to required withholding of income tax and other
      amounts under federal, provincial and local legislation.

11.3  Survival The respective obligations of and benefits afforded to the
      --------
      Company and you as provided in this Agreement that have accrued shall
      survive the subsequent termination of this Agreement.

11.4  Notice 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 postage prepaid and
      addressed, in the case of the Company, to the address set forth on the
      first page of this Agreement or, in the case of the undersigned employed,
      to the address set forth below his/her signature provided that all notices
      of the Company shall be directed to the

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      attention of the Chairman of the Board or to such other address as either
      party may have furnished to the other in writing in accordance herewith,
      except that notice of change of address shall be effective only upon
      receipt.

11.5  Miscellaneous No provision of this Agreement may be modified, waived or
      -------------
      discharged unless such modification, waiver or discharge is agreed to in
      writing signed by you, by the Chairman of the Board, and either the Chief
      Executive Officer or President of the Company. No waiver by either party
      hereto at any time of any breach by the other party hereto of 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, oral or otherwise, express or implied, with respect to
      the subject matter hereof have been made by either party which are not
      expressly set forth in this Agreement. The validity, interpretation,
      construction and performance of this Agreement shall be governed by the
      laws of the Province of Ontario.

11.6  Severance The invalidity or unenforceability of any provision of this
      ---------
      Agreement shall not affect the validity or enforceability of any other
      provision of this Agreement, which shall remain in full force and effect.

11.7  Counterparts This Agreement may be executed in counterparts, each of which
      ------------
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.

Sincerely,

GSI LUMONICS INC.


by:     "Charles D. Winston"
        ------------------------------------

        Chief Executive Officer


by:     "R.J. Atkinson"
        -----------------------------------

        Chairman
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                  Agreed to this       day of          , 19
                                -------      ----------    ----

                                  "Kurt Pelsue"
                          ----------------------------
                                    Signature

                                   Kurt Pelsue
                          ----------------------------
                                   Print Name




                          ----------------------------
                          Address
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                                  SCHEDULE "A"
                                  ------------

                             (Termination Benefits)

You are entitled to:

1.  an amount equal to your Total Compensation multiplied by the Payment Factor.
Provided that:

     (a)  if Termination takes place within 24 months of the first occurrence of
          a Change of Control, the Payment Factor shall be increased by 12; and

     (b)  the Company may, at its option, elect to continue to provide you,
          during the Payment Period with any of the Compensation Type Benefits.
          If the Company makes such election, the amount payable to you pursuant
          to this Agreement shall be reduced by the increased cost to the
          Company during the Payment Period of providing you with each
          Compensation Type Benefit that is to be continued.

2.  The immediate vesting, on the Date of Termination, of all options previously
    granted to you by the Company that have not then vested, provided that all
    such options shall expire 6 months after the Date of Termination.