SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Gerber Scientific, Inc.
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(Name of Registrant as Specified In Its Charter)
Same
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[LOGO OF GERBER
SCIENTIFIC INC. GERBER SCIENTIFIC, INC.
APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 27, 1996
TO OUR SHAREHOLDERS:
The annual meeting of shareholders of Gerber Scientific, Inc. will be held
on Friday, September 27, 1996, at 2:30 p.m., Eastern Daylight Saving Time, at
the Sheraton Hotel at Bradley International Airport, Windsor Locks, Connecticut,
for the following purposes, as more fully set forth in the attached Proxy
Statement:
1. To elect one Director; and
2. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed August 1, 1996, as the record date for the
determination of shareholders entitled to notice of and the right to vote at the
annual meeting. Only persons who are shareholders of record on such date shall
be entitled to notice of and the right to vote at the meeting.
Shareholders are cordially invited to attend the meeting in person, but if
unable to attend, are requested to date and sign the enclosed form of proxy and
return it in the envelope provided. Any shareholder executing a proxy may revoke
it at any time before it is voted at the annual meeting, provided that written
notice of such revocation or a properly executed proxy bearing a later date
shall have been received by the Company's Secretary prior to its exercise.
By Order of the Board of Directors
/s/ David J. Gerber
David J. Gerber
Secretary
Dated at South Windsor, Connecticut,
this 14th day of August, 1996
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GERBER SCIENTIFIC, INC.
83 GERBER ROAD WEST
SOUTH WINDSOR, CONNECTICUT 06074
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Gerber Scientific, Inc. (the "Company"),
for use at the annual meeting of shareholders to be held on Friday, September
27, 1996, and at any adjournment thereof. The cost of solicitation of proxies
will be borne by the Company. In addition to use of the mails, proxies may be
solicited by Directors, officers, and employees of the Company by telephone or
otherwise, without additional compensation. The Company also intends to use the
services of Georgeson & Company, Inc., of New York, New York, to aid in the
solicitation of proxies. It is estimated that their charges and expenses will
not exceed $17,000. The Company expects to reimburse brokers and other
custodians, nominees, and fiduciaries for their reasonable expenses in
forwarding proxy material to beneficial owners of shares and soliciting their
proxies.
Abstentions and broker non-votes are not counted in the calculation of the
vote but do count toward a quorum. A proxy may be revoked at any time prior to
voting, but no revocation will be effective until written notice thereof or a
properly executed proxy bearing a later date has been received by the Company's
Secretary. The Company's mailing address is 83 Gerber Road West, South Windsor,
Connecticut 06074. Proxies will be voted as directed, and in the absence of such
direction will be voted FOR the nominee for Director described herein. This
Proxy Statement and the accompanying form of proxy are being first mailed to
shareholders on or about August 14, 1996.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
The Board of Directors has fixed the close of business on August 1, 1996, as
the record date for the determination of shareholders entitled to notice of and
the right to vote at the annual meeting. On the record date there were
23,228,000 shares of the Company's common stock, $1.00 par value, issued,
outstanding, and entitled to vote. Each shareholder of record at the close of
business on August 1, 1996, will be entitled to one vote for each share of
common stock then held.
The following table presents certain information regarding the beneficial
and record owners of more than five percent of the Company's common stock who
were known to the Company as of August 1, 1996.
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OWNED OF CLASS
- ------------------- ------------ --------
H. Joseph Gerber . . . . . . . . . . . . . . . . . 3,178,365(1) 13.7%
83 Gerber Road West, South Windsor, CT 06074
Norwest Corporation . . . . . . . . . . . . . . . . 2,788,875 12.0%
Norwest Center, Sixth and Marquette, Minneapolis, MN 55479
David L. Babson & Co. . . . . . . . . . . . . . . . 1,437,300 6.2%
One Memorial Drive, Cambridge, MA 02142
(1) Mr. H. Joseph Gerber died on August 8, 1996, while this Proxy Statement was
in preparation. The above shareholdings are as of August 1, 1996. Shares
totaling 3,178,365 were owned beneficially and of record. They included
103,475 shares owned beneficially by his wife, Sonia K. Gerber, as to which
Mr. Gerber had disclaimed any beneficial ownership, and options to purchase
5,220 shares which were exercisable within 60 days of August 1, 1996. Except
for shares owned beneficially by Mrs. Gerber and shares which could have
been acquired by the exercise of stock options, Mr. Gerber retained sole
voting and investment power with respect to all shares he owned. As a result
of his death and in accordance with the Company's 1992 Employee Stock Plan,
Mr. Gerber's estate may exercise, within two years from the date of death,
all unexpired stock options which Mr. Gerber held. This includes the 5,220
shares as reported in the table concerning beneficial ownership of the
Company's common stock by Directors and executive officers under the section
"Election of Directors", as well as 100,000 additional shares which became
immediately exercisable upon his death.
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ELECTION OF DIRECTORS
One Director is to be elected at the annual meeting. The Board of Directors
of the Company is divided into three classes, and one class is elected each year
for a three-year term. The term of the Class III Director expires this year. The
terms of the three Class I Directors and the two Class II Directors expire in
1997 and 1998, respectively. The By-Laws of the Company presently provide for a
Board of Directors of not less than three nor more than seven Directors.
The following information is provided for the nominee for the Class III
Director, who, if elected, will serve for a term expiring at the 1999 annual
meeting, and also for the Class I and Class II Directors whose terms are
continuing. A Director receiving a plurality of the votes will be elected.
Unless otherwise directed in the proxy, it is intended that all shares
represented by proxies will be voted for the election of the nominee named
below. In the event that the nominee is unable to stand for election (which is
not anticipated), it is intended that all proxies, unless otherwise specified,
will be voted for such substitute nominee as the Board of Directors may propose,
or the Board may reduce the number of Directors to eliminate the vacancy.
H. JOSEPH GERBER
Mr. H. Joseph Gerber had been nominated for re-election as a Director at the
1996 annual meeting. However, Mr. Gerber died on August 8, 1996. Mr. Gerber was
the founder of the Company and had served as a Director since the Company's
inception in 1948. In 1988, Mr. Gerber was elected to be Chairman of the Board
of Directors. Mr. Gerber had been President of the Company until August, 1996.
Mr. Gerber was a "control person" of the Company, as defined by the Rules and
Regulations of the Securities and Exchange Commission. (See "Voting Rights and
Principal Shareholders.") Mr. Gerber was an honorary trustee of Rensselaer
Polytechnic Institute, a trustee of the Hartford Graduate Center, a member of
the National Academy of Engineering, and a member of the Connecticut Academy of
Science and Engineering. At its future meetings, the Board of Directors will
consider the issue of additional Directors, but the Board has, for the present
time, determined that six Directors are adequate under current business
circumstances for management of the Company and, accordingly, has fixed the
number of directorships at six Directors.
NOMINEE FOR DIRECTOR TO BE ELECTED AT THE 1996 ANNUAL MEETING (CLASS III)
A. Robert Towbin, 61, has been a Director of the Company since 1992. Mr.
Towbin is Managing Director, Unterberg Harris, of New York, New York. Mr. Towbin
was the vice chairman and a director of the U.S. Russia Investment Fund from
May, 1995 to August, 1995; president, chief executive officer, and a director of
the Russian-American Enterprise Fund from January, 1994 to May, 1995, and
managing director, Lehman Brothers, from January, 1987 to December 1993. Mr.
Towbin is also a director of Columbus New Millenium Fund (London), K&F
Industries, Inc., Bradley Real Estate, Inc., and Globalstar Telecommunications,
Ltd.
DIRECTORS SERVING UNTIL THE 1997 ANNUAL MEETING (CLASS I)
Stanley Simon, 79, has been a Director of the Company since 1967. Since
1958, Mr. Simon has been the owner and principal of Stanley Simon and
Associates, of New York, New York, a financial and management consulting firm.
Mr. Simon is also a trustee of Vornado Realty Trust Co., and a director of
General Microwave, Inc. and J. Baker, Inc.
Edward E. Hood, Jr., 65, has been a Director of the Company since 1994. Mr.
Hood was vice chairman and executive officer of General Electric Company of
Fairfield, Connecticut, from 1979 to 1993. Mr. Hood is also a director of
Lockheed Martin Corp., The Lincoln Electric Co., and FlightSafety International,
Inc., chairman emeritus and an honorary trustee of Rensselaer Polytechnic
Institute, and a trustee of North Carolina State University.
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William Jerome Vereen, 55, has been a Director of the Company since 1994.
Mr. Vereen is President, Chief Executive Officer, Treasurer, and Acting Chairman
of the Board of Directors of Riverside Manufacturing Company, of Moultrie,
Georgia. Mr. Vereen is also a director of Georgia Power Company and Blue
Cross/Blue Shield of Georgia, and is an advisory director for Southern Region,
NationsBank of Georgia N.A.
DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING (CLASS II)
George M. Gentile, 60, has been a Director of the Company since 1989. In
August, 1996, the Board of Directors appointed Mr. Gentile as President, acting
Chief Executive Officer, and Chief Operating Officer of the Company. Previous to
that time, Mr. Gentile was Senior Vice President, Finance and served in that
capacity since 1977. He has been employed by the Company in numerous key
financial and management positions since 1963, and presently serves as a
director of several of the Company's subsidiaries.
David J. Gerber, 35, the son of the Company's founder, H. Joseph Gerber, has
been a Director of the Company since 1992. Mr. Gerber has been an attorney in
the Company's legal department since 1989, and in February, 1995, Mr. Gerber was
appointed the Secretary of the Company.
Other than the relationships described above or as indicated under
"Directors' Compensation" below, there is no significant business relationship
between the Company and any of the companies mentioned above as the principal
employer of the nominee or continuing Director, or which the nominee or
continuing Director also serves as a director. Other than as set forth above,
the nominee is not in any way related to any continuing Director, no continuing
Director is in any way related to the nominee or any other continuing Director,
and neither the nominee nor any continuing Director is in any way related to any
executive officer of the Company or its subsidiaries. There is no arrangement or
understanding between the nominee and any other person pursuant to which he was
selected as a nominee.
Any shareholder wishing to nominate other persons for Director of the
Company must do so in writing to the Secretary of the Company for receipt by the
close of business on the tenth day following the mailing of this Proxy Statement
by the Company or the public announcement of the date of the annual meeting of
shareholders.
The following information concerning the beneficial ownership of the
Company's common stock by each of the Directors and the nominee, by each of the
executive officers named in the Summary Compensation Table, and by all Directors
and executive officers as a group is provided as of August 1, 1996.
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES OWNED(1) CLASS
- ------------------------ --------------- -----
H. Joseph Gerber . . . . . . . . . . . . . . . . 3,178,365(2) 13.7%
David J. Gerber . . . . . . . . . . . . . . . . 99,271(3) *
George M. Gentile . . . . . . . . . . . . . . . 79,531(4) *
Stanley Simon . . . . . . . . . . . . . . . . . 24,125(5) *
A. Robert Towbin . . . . . . . . . . . . . . . . 29,000(6) *
Edward E. Hood, Jr. . . . . . . . . . . . . . . 3,000(7) *
William Jerome Vereen . . . . . . . . . . . . . 5,000(8) *
Fredric K. Rosen . . . . . . . . . . . . . . . . 42,500(9) *
Ronald B. Webster . . . . . . . . . . . . . . . 31,600(10) *
Richard F. Treacy, Jr. . . . . . . . . . . . . . 24,125(11) *
All Directors and executive officers as a
group (12 persons) . . . . . . . . . . . . . . 3,518,217(12) 15.2%
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- --------
* Less than 1%
(1) Unless otherwise indicated below, each Director and executive officer has
sole voting and investment power with respect to such shares.
(2) See footnote (1) under "Voting Rights and Principal Shareholders."
(3) Includes 30,746 shares held in trust, and 1,000 shares covered by stock
options which are exercisable within 60 days.
(4) Includes 52,500 shares covered by stock options which are exercisable
within 60 days.
(5) Includes 14,000 shares covered by stock options which are exercisable
within 60 days.
(6) Includes 4,000 shares covered by stock options which are exercisable within
60 days.
(7) Includes 2,000 shares covered by stock options which are exercisable within
60 days.
(8) Includes 1,000 shares which he holds as trustee for his children and 2,000
shares covered by stock options which are exercisable within 60 days.
(9) Includes 4,000 shares owned beneficially by his wife, as to which he
disclaims any beneficial ownership, and options to purchase 15,000 shares
which are exercisable within 60 days.
(10) Includes 29,000 shares covered by stock options which are exercisable
within 60 days.
(11) Represents stock options which are exercisable within 60 days.
(12) Includes 158,770 shares covered by stock options which are exercisable
within 60 days.
DIRECTORS' COMPENSATION
Effective February, 1995, each non-employee Director receives an annual
Director's fee of $16,000 for membership on and services to the Board, an
attendance fee of $1,000 for each meeting of the Board attended in person, and
annual compensation of $1,000 for membership on and services to each Committee
of the Board. During the year ended April 30, 1996, Messrs. Hood, Simon, Towbin,
and Vereen, the non-employee Directors, each earned fees of $22,000 for their
services as Directors and Committee members. At the election of the recipient,
fees may be deferred pursuant to the Gerber Scientific, Inc. Agreement for
Deferment of Directors Fees. The plan permits any non-employee Director to defer
all or a portion of the fees paid to non-employee Directors until a future time
selected by such Director. Deferred fees are credited with interest by the
Company at market rates. During the year ended April 30, 1996, the firm of
Stanley Simon and Associates received a consulting fee of $11,690. No other
Directors received fees for their services as Directors or Committee members
during the year ended April 30, 1996.
In 1992, shareholders approved the 1992 Non-Employee Director Stock Option
Plan (the "Director Option Plan"), pursuant to which Directors of the Company
who are not (and have not been during the past twelve months) employees of the
Company are automatically granted 1,000 non-qualified options to purchase shares
of the Company's common stock on May 1 of each year. These options are granted
at 100% of the fair market value (as that term is defined in the Director Option
Plan) of a share of the Company's common stock on the date of grant. The
purpose of the Director Option Plan is to provide an incentive to non-employee
Directors, to encourage ownership of the Company's common stock, and to enable
the Company to attract and maintain qualified non-employee Directors whose
services are considered important to the success of the Company. Up to 75,000
shares of common stock (subject to proportionate adjustment in certain events)
are available for grant under the plan. The Director Option Plan is administered
by the members of the Board who are employees of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has three standing committees: the Audit and Finance Committee,
the Management Development and Compensation Committee, and the Business
Development Committee. It does not have a nominating committee.
The Audit and Finance Committee, composed of Messrs. Hood, Simon (Chairman),
Towbin, and Vereen, held two meetings during the fiscal year ended April 30,
1996. The principal functions of the Audit and Finance Committee are to review
the selection and qualifications of the Company's
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independent auditors and make recommendations to the Board, to review with
the independent auditors and the internal auditors the scope and adequacy of
their examinations and audits, and to review and approve non-audit services
performed by the independent auditors.
The Management Development and Compensation Committee, composed of Messrs.
Hood (Chairman), Simon, Towbin, and Vereen, held two meetings and acted by
unanimous written consent on one occasion during the fiscal year ended April 30,
1996. The principal functions of the Management Development and Compensation
Committee are to establish and determine salaries and other compensation to be
paid to executive officers; to establish and determine terms and conditions of
bonus and stock option plans; to establish and administer performance goals and
other criteria for payment of any compensation of executive officers which is
intended to be performance based for purposes of Section 162(m) of the Internal
Revenue Code (the "Code"); to amend the Company's employee stock option plans,
subject to shareholder and other approvals as may be required by applicable law;
and to make recommendations to the Board of Directors concerning training and
other development of the Company's management personnel.
The Business Development Committee, composed of Messrs. Hood, Simon, Towbin,
and Vereen (Chairman), held two meetings during the fiscal year ended April 30,
1996. The principal function of the Business Development Committee is to
evaluate opportunities presented by the management of the Company for
development of existing and new business for the Company and its subsidiaries.
The Board of Directors held five meetings and acted by unanimous written
consent on 23 occasions during the year ended April 30, 1996. All of the
Directors attended 75% or more of the aggregate of their respective Board and
Committee meetings.
SECTION 16(A) REPORTING
The Company believes that all required reports pursuant to Section 16(a) of
the Securities Exchange Act of 1934 have been timely filed by all officers,
Directors, and shareholders of the Company, with the exception of one late Form
4 filed by Mr. William Jerome Vereen to report a single open market purchase.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Development and Compensation Committee is composed of Messrs.
Hood, Simon, Towbin, and Vereen. During the fiscal year ended April 30, 1996,
Stanley Simon and Associates of New York, New York, a financial and management
consulting firm owned by Mr. Simon, received $11,690 in consulting fees.
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Management Development and Compensation Committee of the Board of
Directors of Gerber Scientific, Inc. (the "Committee") consists of four
non-employee Directors of the Company: Mr. Edward E. Hood, Jr., Chairman; Mr.
Stanley Simon; Mr. A. Robert Towbin; and Mr. William Jerome Vereen.
The Committee is authorized to establish and determine salaries and other
compensation to be paid to executive officers; to establish and determine terms
and conditions of bonus and stock option plans; to establish and administer
performance goals and other criteria for payment of any compensation to
executive officers which is to be contingent on performance criteria; to amend
the Company's employee stock plans, subject to shareholder and other approvals
as may be required by applicable law; and to make recommendations to the Board
of Directors concerning training and other development of Company personnel. All
decisions by the Committee relating to compensation of executive officers may
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be reviewed and approved by the full Board prior to taking effect, except for
actions taken by the Committee pursuant to the Company's employee stock plans.
Executive Compensation Philosophy
The Company's executive compensation philosophy emphasizes three guiding
principles:
0 Aligning the financial interests of executives with long-term total
shareholder returns;
0 Providing a competitive executive compensation package that enables the
Company to attract and retain talented executives; and,
0 Basing a major portion of each executive's annual cash compensation on the
annual profitability of the Company or subsidiary for which the executive
is primarily responsible.
Executive Compensation Program
The Company's executive compensation program has three major components:
executives' base salaries, an incentive plan for awarding annual cash bonuses,
and a long-term incentive plan for awarding stock options and associated cash
"performance units."
BASE SALARY - In fiscal year 1996, the Company, with the assistance of
external compensation consultants from KPMG Peat Marwick LLP, developed
executive salary ranges from competitive salary data on comparable executive
positions as disclosed in proxy reports from a comparison group of thirteen U.S.
companies of similar revenue and asset size to the Company. Each of these
thirteen companies engage in technology-based manufacturing as reported in
published surveys covering the same industry sector. The thirteen comparison
companies differ from the companies contained in the Dow Jones Diversified
Technology Index selected for the comparative total shareholder return graph
shown below in this Proxy Statement. The Diversified Technology Index generally
represents companies of substantially larger revenue and asset size which were,
therefore, deemed inappropriate for purposes of external salary comparison. The
Committee's salary policy targets executive salaries within a range between the
median and seventy-fifth percentile of surveyed salaries in order to be fully
competitive in the hiring and retention of high caliber executives.
Within these salary ranges so developed, the Committee determined base
salaries of the Company's executive officers, including those named in the
Summary Compensation Table (the "Named Executives"), based on the Committee's
overall subjective assessment of several factors. These factors included: (1)
the performance of the Company or applicable subsidiary, (2) the executive's
individual accomplishments, (3) the executive's managerial capabilities, (4) the
executive's current salary placement within the developed salary ranges, and (5)
other subjective factors deemed relevant by the Committee. There was no specific
weighting of these factors. The Committee's base salary determinations
considered performance evaluations of each executive. These evaluations were
completed by the Company's President and the Senior Vice President, Finance,
except that the evaluation of the Senior Vice President, Finance was completed
by the President, and the evaluation of the President was completed by the
Committee.
ANNUAL INCENTIVE BONUS PLAN - In fiscal year 1996, cash bonuses were awarded
to employees of the Company and its subsidiaries, including the Named
Executives, pursuant to the Company's annual incentive bonus plan. Bonuses under
the plan are paid from bonus pools which are funded on the basis of formulas
determined at the beginning of the year by the Committee and submitted to the
full Board of Directors for approval. Separate bonus pools are provided for
employees of the Company and for employees of each of its subsidiaries, with
each pool being funded based on a percentage of the pre-tax, pre-bonus profits
of the applicable entity plus a percentage of the improvement, if any, in
profits over a threshold level based on the highest annual profits achieved by
the entity during the prior three years.
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Such respective percentages in 1996, as in 1995, were 0.75% and 2.25% for the
corporate-level pool and 1% and 3% for each subsidiary-level pool. For
fiscal year 1996, profits used for purposes of determining the profit
improvement between current and past years excluded interest income and expense,
as well as bonuses and taxes. The Committee believes that this approach
emphasizes improvement in core operating earnings of the Company. Profit figures
may be adjusted by the Committee to offset the effect of certain income or
expense items.
Target and maximum amounts for cash bonus awards in fiscal 1996 were
determined at the beginning of the fiscal year as a percentage of each
participant's salary. For the Named Executives, the target amount was 50% of
base salary and the maximum attainable amount was 75%, based on market-based
award guidelines developed by the Committee's external compensation consultants
from the same market sources used for developing the executive salary range and
adopted by the Committee and approved by the Board of Directors. For other
participants, the target and maximum attainable amount depended on the
employee's position and market-based bonus award guidelines. Awards are made
under the plan only to the extent that the applicable bonus pool, as described
above, has been funded.
LONG-TERM INCENTIVE PLAN - In fiscal year 1996, the Committee made stock
option and related cash "performance unit" grants to the Named Executives, other
Company executives, and certain key managers under the Company's 1992 Employee
Stock Plan, as amended and restated effective April 28, 1995 (the "Employee
Plan") approved by Company shareholders at the 1995 Annual Meeting. The
Committee intends to consider such grants to this group every two years to
reflect competitive award opportunities for similar executive positions in
comparable companies, but may also make grants at any time in its discretion.
The 1996 grant amounts were determined using grant range guidelines developed by
executive level drawn from the same market sources used for developing the
executive salary ranges. Within these competitive long-term grant ranges, the
Committee considers several factors in making individual grants, including: (1)
previous grants to the executive, (2) the Company's performance and applicable
subsidiary performance (for subsidiary-based executives) since the last grant,
and (3) the Committee's subjective assessment of the executive's overall
contribution to the Company's success since the last grant. No particular
weighting is given to these factors. Option and performance unit grants are
intended to provide a form of long-term incentive that links management rewards
to the creation of shareholder value over a period of time which is longer than
the annual profit incentive bonus. The option and performance unit grants also
facilitate the accumulation by each executive of an equity interest in the
Company.
Under the Employee Plan, incentive and non-qualified stock options to
purchase up to a maximum of 3,000,000 shares of the Company's common stock
(subject to proportionate adjustment in certain events) over the ten year
duration of the plan may be granted to key employees of the Company and its
subsidiaries, including the Named Executives. The exercise price of stock
options equals 100% of the fair market value of a share of the Company's common
stock on the grant date (or, 110% of the fair market value in the case of grants
of incentive stock options to Mr. H. Joseph Gerber, who owns more than 10% of
the Company's outstanding common stock). No option may be exercised later than
ten years from the grant date (or, five years from the grant date in the case of
incentive stock options granted to Mr. Gerber). The options granted to executive
officers during the last fiscal year will not vest until the sixth anniversary
of the grant date unless certain pre-set earnings-per-share ("EPS") growth goals
are achieved at an earlier date. Depending upon the compound EPS growth achieved
in the period measured from fiscal year 1995 to the end of each of the fiscal
years 1997 through 2001, the accelerated vesting for the options granted in
fiscal year 1996 can range from 20% to 100% of any unvested options.
The cash performance units granted in fiscal year 1996 are payable on
attainment of the same multi-year performance goals, as approved by the
Committee at the time of the grant, for compound annual growth in the Company's
EPS. The first point for determination of this goal attainment will be at the
end of fiscal year 1997, with a possible vesting range of 0% to 100% of the
total performance units granted contingent upon the EPS growth achieved. Any
performance units not earned at that time will
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remain subject to the same pre-established compound EPS growth goals measured
from fiscal year 1995 to the end of each of the fiscal years 1998 through 2001,
until the performance units are all earned or are forfeited because the EPS
growth goals are not met. If earned, the cash value of each performance unit
equals the exercise price of a related stock option and the associated income
taxes on a "grossed-up" basis. The performance unit value is payable only if the
holder simultaneously exercises a related stock option.
Compensation of the Chief Executive Officer
The fiscal year 1996 base salary of the Chief Executive Officer of the
Company was based on the salary range guidelines and the Committee's subjective
assessment of factors described above in this report under the caption "Base
Salary." Mr. H. Joseph Gerber's fiscal year 1996 base salary was established at
$486,000, a 3.6 percent increase over the $469,000 rate in effect for the
preceding fiscal year. This increase was determined subjectively and was based
in part on the Company's significant improvement in earnings in fiscal year
1995. It was further based on the Committee's subjective assessment of Mr.
Gerber's continued extraordinary leadership of the Company, including
significant technical and managerial contributions.
The fiscal year 1996 annual cash bonus awarded to Mr. Gerber was based on
the Company's annual incentive bonus plan pertaining to the corporate bonus pool
described above in this report under the caption "Annual Incentive Bonus Plan."
For Mr. Gerber, as with the other Named Executives, the target amount was 50% of
base salary and the maximum attainable amount was 75%. Mr. Gerber's annual cash
bonus was $189,418 for fiscal year 1996, a decrease from the $293,041 amount
paid for the preceding fiscal year. This decrease was due primarily to the
smaller year-to-year improvement in pre-tax profits of the Company in fiscal
year 1996 and a corresponding decrease in the bonus pool. Mr. Gerber's grant
under the amended and restated Employee Plan consisted of 100,000 non-qualified
stock options and 25,000 performance units in accordance with the competitive
grant guidelines described in this report under the caption "Long-Term Incentive
Plan."
Policy on Deductibility of Executive Compensation
The Committee's policy on deductibility of executive compensation is made
with reference to Section 162(m) of the Code and regulations thereunder, which
would disallow a deduction by the Company generally on compensation in excess of
$1 million for any of the Named Executives, except for compensation which is
"performance based" compensation within the meaning of Section 162(m).
Compensation which is payable because of the attainment of pre-established
performance goals is expected to qualify as Section 162(m) performance-based
compensation if (1) the performance goals are established by a compensation
committee comprised solely of two or more outside directors, and (2) the
material terms of the performance goals have been disclosed to and approved by
shareholders prior to payment.
While the Committee generally intends to provide for the deductibility of
all executive compensation expenses, the Committee recognizes that circumstances
may arise in which the interests of the Company and shareholders are best served
by decisions which limit this deductibility, and the Committee will act in its
best judgment in such circumstances.
Management Development and Compensation Committee
Mr. Edward E. Hood, Jr., Chairman
Mr. Stanley Simon
Mr. A. Robert Towbin
Mr. William Jerome Vereen
8
<PAGE>
EXECUTIVE COMPENSATION AND TRANSACTIONS
The following table shows compensation for services during the years ended
April 30, 1996, 1995, and 1994 for the President and the four other most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------- ----------------------- ---------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
UNDERLYING LONG- ALL OTHER
OTHER RESTRICTED OPTIONS/ TERM COMPEN-
NAME AND ANNUAL COM- STOCK SARS INCENTIVE SATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) PENSATION ($) AWARDS ($)(1) (#)(2) PLAN($)(3) ($)(4)
------------------ ---- --------- --------- ------------- ------------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. Joseph Gerber . . . . . . 1996 $484,692 $189,418 $0 $0 100,000 $0 $500
President 1995 465,885 293,041 0 0 0 0 500
1994 440,039 181,736 0 0 0 0 500
George M. Gentile . . . . . 1996 293,692 164,775 0 0 50,000 0 500
Senior Vice President, 1995 276,165 173,708 0 0 0 0 500
Finance (5) 1994 260,934 107,766 0 0 2,500 0 500
Fredric K. Rosen . . . . . . 1996 248,461 47,041 0 0 40,000 0 500
Senior Vice President 1995 228,421 226,684 0 0 0 0 500
1994 215,360 34,089 0 0 0 0 500
Ronald B. Webster . . . . . 1996 253,923 190,442 0 0 40,000 0 500
Senior Vice President 1995 239,408 166,388 0 0 0 0 500
1994 226,015 131,767 0 0 0 0 500
Richard F. Treacy, Jr. . . . 1996 169,231 66,135 0 0 20,000 0 500
Senior Vice President, 1995 158,269 99,551 0 0 7,500 0 500
and General Counsel 1994 143,846 59,408 0 0 1,500 0 500
</TABLE>
- --------
(1) The Company does not offer any such restricted stock award plan.
(2) The securities underlying the options are shares of the Company's common
stock; the Company does not grant stock appreciation rights (SARs).
(3) The Company did not have a long-term incentive plan in effect for the
years 1994 and 1995. There were no long-term incentive plan payouts in 1996.
(4) Each executive officer received $300 in matching contributions under the
Company's 401(k) defined contribution plan and $200 as a Christmas bonus.
(5) In August, 1996, the Board of Directors appointed Mr. Gentile as
President, acting Chief Executive Officer, and Chief Operating Officer of
the Company.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------- ------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE (2) EXPIRATION
NAME GRANTED (#)(1) IN FISCAL YEAR ($ PER SHARE) DATE 5%(3) 10%(3)
---- -------------- ---------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
H. Joseph Gerber. . . . . 100,000 14.6% $15.75 5/20/05 $991,000 $2,510,000
George M. Gentile. . . . . 50,000 7.3% $15.75 5/20/05 495,000 1,255,000
Fredric K. Rosen. . . . . 40,000 5.8% $15.75 5/20/05 396,000 1,004,000
Ronald B. Webster. . . . . 40,000 5.8% $15.75 5/20/05 396,000 1,004,000
Richard F. Treacy, Jr.. . 20,000 2.9% $15.75 5/20/05 198,000 502,000
</TABLE>
- ------
(1) These options become exercisable in six years, or earlier if certain
pre-established performance goals are attained. In conjunction with these
option grants, cash performance units were also granted. The performance
units are payable on attainment of the same pre-established performance
goals. Their value equals the exercise price of a related stock option and
the associated income taxes on a "grossed-up" basis. The performance units
are paid only if the holder simultaneously exercises a related stock option.
The performance units granted to the Named Executives equaled 25% of the
number of stock options granted.
(2) All stock options were granted at the fair market value of the common stock
on the date of grant. These options were granted on May 21, 1995.
(3) Pursuant to Securities and Exchange Commission rules, columns (f) and (g)
show gains that might exist for the options over a period of ten years at 5%
and 10% annual compounded appreciation in the stock price. This method of
valuation is hypothetical; if the stock price does not increase above the
exercise price, the compensation to the Named Executive will be zero. If
this same methodology was used to determine the potential realizable gain
for all shareholders over this same period (May 21, 1995 through May 20,
2005), the gain based on 5% annual appreciation would be approximately
$235,000,000 and the gain based on 10% annual appreciation would be
approximately $597,000,000. The potential gain related to the options
granted to all of the Named Executives above represents approximately 1.1%
of the total potential gain to shareholders using this valuation method.
These are assumed rates of appreciation and are not intended to forecast
future appreciation of the Company's common stock. Actual gains, if any, on
option exercises and share holdings are dependent on the future performance
of the Company's stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR-END (#) YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Joseph Gerber. . . . 34,780 $103,471 5,220 100,000 $28,058 $112,500
George M. Gentile . . . 0 0 40,000 51,250 291,725 60,006
Fredric K. Rosen. . . . 0 0 11,250 43,750 75,994 70,331
Ronald B. Webster . . . 0 0 29,000 40,000 194,125 45,000
Richard F. Treacy, Jr.. 0 0 21,000 29,500 156,904 59,954
</TABLE>
(1) These amounts represent the difference between the exercise price of the
stock options and the closing price of the Company's common stock on April
30, 1996 ($16.875) for all options held by each Named Executive. The stock
option exercise prices ranged from $7.25 to $15.75. All stock options are
granted at the fair market value of the common stock on the date of grant
except in the case of incentive stock option grants to Mr. Gerber, which are
at 110% of the fair market value on the date of grant.
10
<PAGE>
PERFORMANCE GRAPH
The following graph and table compare the performance of the Company's
common stock with that of the S&P 500(R) and the Dow Jones Diversified
Technology Index for the past five years. The graph plots the growth in value of
an initial $100 investment over the indicated time periods, with dividends
reinvested.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning April 30, 1991
Assuming Reinvestment of Dividends
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Apr-91 Apr-92 Apr-93 Apr-94 Apr-95 Apr-96
- --------------------------------------------------------------------------------
Gerber Scientific, Inc. $100 $111 $124 $148 $154 $172
- --------------------------------------------------------------------------------
S&P 500(R) $100 $114 $125 $131 $154 $201
- --------------------------------------------------------------------------------
Dow Jones Diversified
Technology Index $100 $111 $134 $142 $173 $216
- --------------------------------------------------------------------------------
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the caption "Report of the Management
Development and Compensation Committee of the Board of Directors on Executive
Compensation" will not be deemed to be filed or to be proxy soliciting material
or incorporated by reference in any prior or future filings by the Company under
the Securities Act of 1933 or the Securities Exchange Act of 1934.
11
<PAGE>
PENSION PLANS
The Company maintains a non-contributory qualified defined benefit pension
plan, the Gerber Scientific, Inc. and Participating Subsidiaries Pension Plan
(the "Pension Plan") and a supplemental pension benefit plan (the "Supplemental
Pension Benefit Plan"), covering full-time domestic employees. Effective May 1,
1995, retirement benefits under the Pension Plan are based on an employee's
years of service and average annual compensation during the employee's five
consecutive highest-paid years in the last ten years of service. Compensation
for this purpose includes salary and other compensation paid by the Company and
reportable on form W-2, but excludes fringe benefits (cash and noncash)
including compensation related to stock option plans which is reported in the
Summary Compensation Table in this Proxy Statement. The Code limits the amount
of compensation that may be considered and the annual benefits which may be
payable from the Pension Plan. Retirement benefits in excess of these
limitations are provided under the Company's Supplemental Pension Benefit Plan
which is a non-qualified arrangement.
The following table shows the estimated annual benefits payable to a
participant attaining age 65 in 1996 under the Pension Plan and the Supplemental
Pension Benefit Plan for specified years of service at age 65. The table assumes
that the given level of compensation is the compensation for the last calendar
year in the five-year averaging period, and uses a 4.5 percent per year salary
progression to determine five-year average compensation. The benefits shown in
the table are the plan formula benefits which include and reflect a reduction
for Social Security benefits. Each of the benefits shown is payable as a
straight life annuity. Benefits are reduced if a survivor's benefit is payable.
On retirement at ages earlier than 65, benefits may be reduced depending upon
age and service at retirement.
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 45 50
- ------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$125,000 $ 22,000 $ 29,334 $ 36,667 $ 44,016 $ 52,601 $ 61,186 $ 69,771 $ 78,356
150,000 27,151 36,202 45,252 54,318 64,620 74,922 85,224 95,526
175,000 32,302 43,070 53,837 64,620 76,639 88,658 100,677 112,696
200,000 37,453 49,938 62,422 74,922 88,658 102,394 116,130 129,865
225,000 42,604 56,806 71,007 85,224 100,677 116,130 131,582 147,035
250,000 47,755 63,674 79,592 95,526 112,696 129,865 147,035 164,205
300,000 58,057 77,410 96,762 116,130 136,733 157,337 177,941 198,545
400,000 78,661 104,882 131,102 157,337 184,809 212,281 239,753 267,225
500,000 99,265 132,354 165,442 198,545 232,885 267,225 301,565 335,905
600,000 119,869 159,825 199,782 239,753 280,961 322,169 363,377 404,584
700,000 140,473 187,297 234,122 280,961 329,037 377,113 425,188 473,264
800,000 161,077 214,769 268,461 322,169 377,113 432,056 487,000 541,944
</TABLE>
As of normal retirement age (65) or attained age, if later, the years of
service credited for retirement benefits for the Company's Named Executives in
the Summary Compensation Table would be as follows: 48 years for H. Joseph
Gerber; 39 years for George M. Gentile; 17 years for Fredric K. Rosen; 44 years
for Ronald B. Webster; and 24 years for Richard F. Treacy, Jr. Consistent with
applicable tax laws which require that pension benefits commence upon attainment
of a certain age, Mr. H. Joseph Gerber began receiving such benefits in 1995.
The current compensation covered by the plans for the Named Executives does
not differ substantially from that set forth in the annual compensation columns
of the Summary Compensation Table.
12
<PAGE>
401(K) PLAN
The Company's 401(k) deferred compensation plan (the "401(k) Plan") covers
full-time domestic employees who have attained age 21 and have one year of
service. Under the 401(k) Plan, participating employees may contribute from 2%
to 15% of their salary on a "pre-tax" basis, subject to a calendar year
limitation of $9,240 in 1995 ($9,500 in 1996), plus up to 10% of their salary on
an "after-tax" basis. The Company matches 50% of the first 6% of a participant's
pre-tax contribution, up to a maximum annual Company contribution of $300 per
participant. Upon termination of service, disability, death, or retirement, a
participant is entitled to receive the value of his/her account, including any
investment earnings or losses.
INDEPENDENT AUDITORS
The Board of Directors has approved the appointment of KPMG Peat Marwick LLP
as independent auditors to audit the financial statements of the Company for the
fiscal year ending April 30, 1997. This firm has served as independent auditors
for the Company for many years. The audit services rendered to the Company by
KPMG Peat Marwick LLP during the year ended April 30, 1996, included examination
of the annual financial statements of the Company, review of quarterly reports,
and consultation on various accounting and tax matters.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
annual meeting and will have the opportunity to make a statement if they wish.
They will also be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholder proposals for the 1997 annual meeting must be received by the
Company no later than April 30, 1997, for inclusion in the 1997 Proxy Statement
and form of proxy.
OTHER BUSINESS
The Board of Directors and management do not know of any matters to come
before the annual meeting of shareholders other than those set forth in the
accompanying Notice. If any other matters properly come before the meeting,
however, it is the intention of the persons named in the enclosed form of proxy
to vote on such matters in accordance with their best judgment and in the best
interests of the Company.
By Order of the Board of Directors
/s/ /David J. Gerber
David J. Gerber
Secretary
Dated at South Windsor, Connecticut,
this 14th day of August, 1996
13
<PAGE>
GERBER SCIENTIFIC, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING SEPTEMBER 27, 1996
The undersigned shareholder(s) of Gerber Scientific, Inc. hereby appoint(s)
George M. Gentile and Stanley Simon, and each of them, with full and individual
power of substitution, proxies and attorneys, and hereby authorize(s) them to
represent and to vote all shares of Common Stock of Gerber Scientific, Inc.
which the undersigned shareholder(s) is/are entitled to vote at the Annual
Meeting of Gerber Scientific Inc., to be held at the Sheraton Hotel at Bradley
International Airport, Windsor Locks, Connecticut, on September 27, 1996, at
2:30 p.m., Eastern Daylight Saving Time, and at any adjournment thereof, with
all powers which the undersigned shareholder(s) would possess if personally
present, upon the foregoing matter and upon such other business as may properly
come before the Annual Meeting or any adjournment thereof.
(To be signed, dated, and voted on reverse side)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
<PAGE>
This proxy, when properly executed, will be voted Please mark [x]
in the manner directed herein by the undersigned. your vote as
If no direction is made, this proxy will be VOTED FOR: indicated in
this example
1. Election of the Class III Director: A. Robert Towbin
FOR the nominee WITHHOLD
listed above AUTHORITY
to vote for the
nominee listed above.
[____] [____]
The undersigned shareholder(s) hereby acknowledge(s) receipt of
the Notice of Annual Meeting of Shareholders and the Proxy
Statement, each dated August 14, 1996.
Dated: __________________________________________, 1996
Signed:________________________________________________
_______________________________________________________
Please date and sign exactly as names(s) appear(s) on Proxy,
Joint owners should both sign. Executors, Administrators,
Trustees, etc. should so indicate when signing. Corporations
should show full corporate name and title of signing officer,
Partnerships should show full partnership name and be signed
by an authorized person.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
